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Revised Integrated MPSA for Non-Reservation Area
MINERAL PRODUCTION SHARING AGREEMENT

MPSA No. 095-97-V 

This MINERAL PRODUCTION SHARING AGREEMENT (this "Agreement") is made and entered into in Makati, Metro Manila, Philippines, this Nov. 20 1997 by and between: 

THE REPUBLIC OF THE PHILIPPINES, hereinafter referred to as the GOVERNMENT, represented in this act by the Secretary of the Department of Environment and Natural Resources, with offices at Department of Natural Resources Building, Visayas Avenue, Diliman, Quezon City, Metro Manila

and

BASE METALS MINERAL RESOURCES CORPORATION (BMMRC), a corporation duly organized and existing under the laws of the Republic of the Philippines,hereinafter referred to as CONTRACTOR, with offices at the 4th and 6th Floor, Trans Phil House 1177 Chino Roces, Ave. cor Bagtikan St. Makati City 1231 and represented in this act by its Chairman, Frank N. Lubbock, as authorized by its Board under Annex "A" which forms an integral part hereof.

WITNESSETH:

WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in Article XII, Section 2 thereof that all lands of the public domain, waters, minerals, coal,petroleum, and other natural resources are owned by the State and that their exploration,development and utilization shall be under the full control and supervision of the State;

WHEREAS, the Constitution further provides that the State may directly undertake such activities, or it may enter into a Co-Production, Joint Venture, or Mineral Production Sharing Agreement with Filipino citizens, or cooperatives, partnerships, corporations or associations at least sixty per centum of whose capitalization is owned by such citizens;

WHEREAS, pursuant to Republic Act No. 7942, otherwise known as "The Philippine Mining Act of 1995", which took effect on 09 April 1995, the Secretary of the Department of Environment and Natural Resources is authorized to enter into Mineral Production Sharing Agreement in furtherance of the objectives of the Government and the Constitution to bolster the national economy through sustainable and systematic development and utilization of mineral lands; 

WHEREAS, the government desires to avail itself of the financial resources, technical competence and skill which Contractor is capable of applying to the mining operations of the project contemplated herein; WHEREAS, the contractor desires to join and assist the Government in the sustainable development and utilization for commercial purposes of certain gold and silver and other minerals existing in the Contract Area (as hereinafter defined) and any other Minerals which may be discovered in such Contract Area;
Itevised lntegrated MPSA for Non-Reservation Areas

WHEREAS, the contractor has, or has access to all the financing,technical competence,
technology and environmental management skills required to piomptly and efiectively
carry out the objectives of this Agreement.

Now, THEREFORE, for and in consideration of the premises, the mutual covenants,
terms and conditions hereinafter set forth, it is hereby stipulated and agreed as follows:

SECTION

I

SCOPE
1.1

This Agreement is a Mineral Production Sharing Agreement entered into
pursuant to the provisions of the Act (R.A No. 7942) and its Revised
Implementing Rules and Regulations. The primary purpose of this
agreement is to provide for the exploration, sustainable development and
commercial utilization of gold and silver and other mineral deposits
existing within the Contract Area, with all necessary services, technology
and financing to be fumished or arranged for by the Contractor ln
accordance with the provisions of this Agreement. The Contractor shall
not, by virtue of this Agreement, acquire any title over the contracVmining
area without prejudice to the acquisition by the Contractor of the
land/surface rights through any mode ofacquisition provided for by law.


1.2 The Contractor shall undertake and execute, for and on behalf ol the
Govemment, sustainable mining operations in accordance with the
provisions of this Agreement, and is hereby constituted and appointed,
for
the purpose of this Agreement, as the exc-lusive entity to conduct mining
operations in the Conhact Area.

1.3 The Contractor shall assume all the exploration risk such that if no
minerals in commercial quantity are developed and produced, it will not
be entitled for reimbursement.

1.4 During the term of this Agreement, the total value of production and
sale
of minerals derived from the mining operations contemplated herein shall
be accounted for and divided between the Government and the contractor
in accordance with Section VIII hereof.

SECTION

II

DEFINITIONS
As used in this Agreement, the following words and terms whether
singular or plural, shall have the following respective meaning

2.1

"The Act" refers to R.A. No. 7942, otherwise known as the ..philippine
Mining Act of 1995"

2.2

Agreement means this Mineral production Sharing Agreement

2.3

Associated Minerals mean other ores/minerals which occur together
with the principal ore/ mineral



Revised Integrated MPSA for Non-Reservation Areas

 2.4 Bangko Sentral means the Bangko Sentral ng Pilipinas

2.5 Budget means an estimate of expenditures to be made by Contractor in mining operations contemplated hereunder to accomplish the Work Program for each particular period.

2.6 Calendar Year or Year means a period of twelve (12) consecutive months
starting with the first day of January and ending on December 31, while "Calendar
Quarter" means a period of three consecutive months with the first calendar
quarter starting with the first day of January.
 
2.7 Commercial Production means the production of sufficient quantity of minerals to sustain economic viability of mining operations reckoned from the date of commercial operation as declared by the Contractor or as tested in the feasibility study, whichever comes first
 
2.8 Constitution or Philippine Constitution means the 1987 Constitution of the
Republic of the Philippines adopted by the Constitutional Convention of 1986 on
October 15, 1986 and ratified by the People of the Republic of the Philippines on
February 2,1987.
 
2.9 Contract Area means means the area onshore or offshore delineated under the Mineral Production Sharing Agreement subject to the relinquishment obligations of the Contractor and properly defined by latitude and longitude.
 
2.10 Contract Year means a period of twelve (12) consecutive months counted from
the Effective Date of this Agreement or from the anniversary of such Effective
Date
 
2.11 Contractor means Base Metals Mineral Resources Corporation (BMMRC for brevity) or its assignee or assignees of interest under this Agreement provided the assignment of any of such interest is accomplished pursuant to the provision of the Implementing Rules and Regulations (DAO 96-40) or in accordance with Section 11.2 (1).
 
2.12 Declaration of Mining Feasibility means a document proclaiming the presence of
minerals in specific site that are recoverable by socially acceptable,
environmentally safe and economically sound methods specified in the Mine Development Plan

2.13 Department or DENR means the Department of Environmental and Natural Resources

2.14 Director means the Director of Mines and Geosciences Bureau
 
2.15 Effective Date means the date of execution of this Agreement by the Contractor and by the Secretary in behalf of the Government
 
2.16 Environment means physical factors of the surroundings of human beings, including lang, water, atmosphere, climate, sound, odors, taste and biological factors of animals and plants and the social factors of aesthetics.
 
2.17 Exploration means the examination and investigation of lands and offshore areas supposed to contain valuable minerals by drilling, trenching, shaft sinking, tunnelling, test pitting and other means, for the purpose of determining the existence of mineral deposits and the extent, quality, and quantity of mineral resources and the feasibility of mining them for profit.
 

Revised Inregrared MPSA for Non-Reservation Areas

2.18

Exoloration Period shall mean the time period from the effective date of
this Agreement which shall be for two (2) years, renewable for like
periods but not to exceed a total term of six (6) years: provided
that the contractor has complied with all the requirements of the Revised
Implementing Rules and Regulations.

2.19

Force Majeure means acts or circumstances beyond the reasonable control
of contractor including but not limited to, war, rebellion, insurrection,
riots, civil disturbance,s, blockade, sabotage, embargo, strike, and lockout,
any dispute with surface owners and other laboidisputes, epidemics,
earthquake, storm, flood, or other adverse weather conditions, explosion,
fire, adverse action by.the govemment, or by any of its instrumeniality or
subdivision thereof, Act of God or any public enemy and uny .urr. u,
herein described over which the affected party has no reasonable control.

2.20

Foreierl Exchan& mgans any currency other than the currency of the
Republic of the philippines acceptable to the Govemment and the
Contractor.

2.21

Government means the Government of the Republic of the Philippines or
any of its agencies and instrumentalities.

2.22

Gross output means the actual market value of the minerals or mineral
products from each mine or mineral land operated as a separate
entity, without any deduction for mining, processing, refining, transporting,
handling, marketing, or any other expenses., provided, that if the minerals
or mineral products are sold or consigned abroad by the contractor
under C.I.F. terms, the actual cost of ocean freight and insurance shall
be deducted: Provided further, That in the case of mineral concentrates
which are not traded in commodity exchanges in the Philippines
or abroad such as copper concentrate, the actual market value shall be
the world price quotation of the refined mineral products contained
thereof prevailing-in the said commodity exchanges, after deducting the smelting
refining,treatment, insurance, transportation and other charges
incurred in the process of converting mineral concentrates into
refined metal traded in those commodity exchanges.

2.23 Mine Development refers to steps necessarily taken to reach an orebody or mineral deposit for mining, including the construction of necessary infrastructure and related facilities.
 
2.24 Minerals mean all naturally occurring inorganic substances in solid, liquid, gas or any intermediate state excluding energy materials such as coal, petroleum, natural gas, radioactive materials and geothermal energy.
 
2.25 Mineral Products mean materials things produced and prepared in a marketable state by metallurgical process which include benefication, cyanidation, leaching, smelting, calcination and other similar processess.

2.26 Mining Area means that portion of the Contract Area identified by the Contractor as defined and delineated in a Survey Plan duly approved by the Director/Concerned Regional Offices for purposes of development and/or utilization and sites for support facilities.

Revised Integrated MPSA for Non-Reservation Areas

2.27 Mining Operations means mining activities involving exploration, feasibility study, environmental impact assessment, development, utilization, mineral processing and mine rehabilitation.
 
2.28 Notice means notice in writing or by telex ortelecopy (authenticated by answer back or confirmation received) addressed or sent as provided in Section 16.2 of this agreement.
 
2.29 Ore means naturally occurring substance or material from which a mineral or element can be mined and/or processed for profit.
 
2.29 Pollution means any alteration of the physical, chemical and/or biological properties of any water, air and/or land resources of the Philippines, or any discharge thereto of any liquid, gaseous or solid wastes or any production of unnecessary noise or any emission of objectionable odor, a will or is likely to create or render such water, air, and land resources harmful, detrimental or injurious to public health, safety or welfare or which will adversely affect their utilization for domestic, commercial, industrial, agricultural, recreational or other legitimate purposes.
 
2.30 Secretary means the Secretary of the Department of Environment and Natural
Resources (DENR)
 
2.31 Work Program means a document which represents the plan of major mining activities and the corresponding expenditures and budget of the contractors in its contract area during a given period of time, including the plan and expenditures for environmental protection and rehabilitation, development of host and neighboring communities and of local geoscience and mineral technology, as submitted and approved in accordance with the Revised Implementing Rules and Regulations.

SECTION III
 
TERM OF AGREEMENT
 
3.1 The initial term of this agreement shall be twenty-five (25) contract years from the effective date, and may be renewed thereafter for another term not exceeding twenty-five (25) years. The renewal of this Agreement, as well as the changes in the terms and conditions shall be upon mutual consent by the parties. In the event the Government decides to allow mining operations thereafter by other Contractor, this must be through competitive public bidding. After due publication of notice, the Contractor shall have the right to equal the highest bid upon reimbursement or all reasonable expenses of the highest bidder.

SECTION IV

CONTRACT AREA

4.1 Size, Shape and Location of Contract Area. This Agreement covers a total area of Two Hundred Eighty Nne and 9466/10,000 hectares (289,9466 has), situated at Barangays Bangon, Syndicate and Panique,
Revised Integrated MPSA for Non-Reservation Areas

Municipality of Aroroy, Province of Masbate and bounded by the following geographical coordinates (Please refer to ANNEX "B"):

Point Latitude Longitude
1 12 29'30" 123 23'00"
2 12 29'30" 123 24'30"
3 12 27'30" 123 24'30"
4 12 27'30" 123 23'00"

SECTION V

EXPLORATION PERIOD
 
5.1 Timetable for Exploration - Contractor shall commence Exploration activities not later than three (3) months after the Effective Date for a period of two (2) years renewable for like periods but not to a exceed a total term of six (6) years, subject to annual review by the Director to evaluate compliance with the terms and conditions of this Agreement.

At anytime during the exploration period, the COntractor may submit a Declaration of Mining Feasibility in accordance with Section 5.5 on the basis of its past exploration work on the contract area.
 
5.2 Work Programs and Budgets - The Contractor shall strictly comply with the Exploration and Environmental Work Program together with their corresponding Budgets (Please refer to ANNEXES "C" and "D")
 
The amount to be spent by the Contractor in conducting Exploration Operations pursuant to the terms of this AGreement during the Exploration period shall, in aggregate, be not less than that hereinafter specified for each of the below specified COntract years as follows:

For the EXploration Work Program:
 
1st Contract Year ; PHP 7,306,200.00
2nd Contract Year : 14,494,700.00
TOTAL : PHP 21,800,900.00
 
Total Estimated Budget for the
Environmental Work Program: PHP 1,000,000.00
Revised Integralcd MPSA for Non-Rcservation Areas


In the event of extension, the amount to be spent every year shall first be
agreed upon by the parties. The previous exploration expenditure of
Contractor in the amount of US$ 5 Million is hereby recognized, which
amount of work can be the basis of a Declaration of Mining Feasibility of
the project at anytime during the exploration period. If the Declaration of
Mining Feasibility is submitted, the Contractor shall not be required to
spend the budget herein, provided Contractor proceeds with the
development of the mine.

In the event of termination of this Agreement, the Contractor shall only be
obliged to expend the pro-rata amount for the period of such Coniract
Year prior to termination. If during any Contract year, the Contractor
should expend more than the amount to be expended as provided above,
the excess may be subtracted liom the amount required tobe expended by
the Contractor during the succeeding Contract years, and should the
Contractor, due to unforeseen circumstances or with the consent of the
Government expend less during a year, then, the deficiency shall be
applied to the amount to be expended during the succeeding Contract
Years.

5.3

Relinquishment of Total./Portion of the Contract Area - During the
Exploration Period, the Contractor may relinquish totally or partially the
original Contract Area. After the Exploration period and prior to or upon
approval of the Declaration of Mining project Feasibility, the Contractor
shall finally relinquish any portion of the contract area not necessary for
mining operations and not covered by any declaration of mining project
feasibility.

Each mining area after final relinquishment shall not be more than five
thousand (5,000) hectares for metallic minerals or two thousand (2,000)
hectares for non-metallic minerals.

The Contractor may be allowed by the Director, with the approval of
the Secretary, to hold a larger mining area depending upon the nature
of the deposit subject to technical verification and evaluation by the
Bureau as to the technical/financial capability of the Contractor.

5.4 Survey of Contract Area - The previously approved survey plan of the Contract Area is hereby recognized and no new survey shall be required.

5.5 Declaration of Mining Project Feasibility - During the Exploration Period, the Contractor shall submit to the Regional Director, copy furnished the Director, a Declaration of Mining Project Feasibility together with a Mining Project Feasibility Study, a Three (3) Year Development and Construction or Commercial Operation Work Program, a complete geologic report of the area and an Environmental Compliance Certificate. Failure of the Contractor to submit a Declaration of Mining Feasibility during the Exploration Period shall be considered a substantial breach of this Agreement.

5.6 Reporting

a.) Periodic Reports - During the Exploration Period, the Contractor shall submit to the Regional Director, copy furnished the Director, quarterly and annual accomplishment reports under oath on all activities conducted in the Contract Area from the Effective Date of this Agreement. The quarterly report shall be submitted not later





Revised Integrated MPSA for Non-Reservation Areas

than fifteen (15) days at the end of each Calendar quarter while the
annual accomplishment report shall be submitted not later than thirty
(30) days fiom the end of each Calendar year. Such information
shall include detailed financial expenditures, raw and processed
geological, geochemical, geophysical and radiometric data plotted in
a 1:50,000 scale at a minimum, copies of originals of assay results,
duplicated samples, field data, copies of originals from drilling
reports, maps, environmental work program implementation and
detailed expenditures showing discrepancies/deviations with
approved exploration and environmental plans and budgets as well
as all other information of any kind collected during the-exploration
activities. All information submitted to the Bureau-shall b! subject
to the confidentiality clause of this Agreement.

b) Final Report - The Contractor shall submit to the Regional Director,
copy furnished the Director, a final report under oath upon the
expiration of the Exploration period which shall be in the form and
substance comparable to published professional reports of
respectable intemational institutions and shall incorporate all the
findings in the Contract Area including location of samples, assays,
chemical analysis, and assessment of mineral potentials together
with, a geologic map of l:50,000 scale at the minimum showing the
results of the exploration. Such report shall also include detailed
expenditures incurred during the Exploration period. In case of
diamond drilling, the Conhactor shall, upon request of the
Director/concemed Regional Director, submit to.the Regional Office
a quarter of the core samples which shall be depoiited in the
Regional Office Core Library for safe keeping and reference.

c) Relinquishment Report
The Contractor shall submit a separate
relinquishment report with a detailed geologic report
of the relinquished area accompanied by maps at a scale of 1:50,000
and results of analyses and detailed expenditures, among others.

SECTION VI

DEVELOPMENT AND CONSTRUCTION PERIOD

6.1 Timetable - The Contractor shall complete the development of the mine including the construction of production facilities within thirty six (36) months from the submission of the Declaration of Mining Project Feasibility or issuance of the Environmental Compliance Certificate, whichever shall be later, subject to such extension based on justifiable reasons as the Secretary may approve, upon recommendation of the REgional Director, through the Director.

6.2 Reporting

a.) Annual - The Contractor shall submit, within sixty (60) days after December 31 of each year, to the Regional Director, copy furnished the Director, an annual report which states the major activities, achievements and detailed expenditures during the year covered, including maps, assays, rock and mineral analyses and progress geological and environmental reports during the development and construction period.

Revised lntegratcd MPSA for Non-Reservation Areas

b) Final Report - Within six (6) months from the completion of the
development and construction activities, the Contractor shall submit
a final report to the Regional Director, copy fumished the Director.
Such report shall integrate all information in maps of appropriate
scale and quality as well as in monographs or reports accordance
with intemational standards.


SECTIONVII
OPERATING PERIOD

7.1 Timetable - The Contractor shall submit with thirty (30) days from the completion of the construction facilities a Commercial Production Work Program for a period of three (3) years. The contractor shall commence Commercial PRoduction immediately upon the approval of the said work program. Failure of the COntractor to commence Commercial Production within the period shall be a considered a substantial breach of the Agreement.
 
7.2 Commercial Operation Work Program and Budget - During the operating period, the Contractor shall submit to the Government Commercial PRoduction WOrk Programs covering a period of three (3) years each which shall be submitted not later than thirty (30) days before the expiration of the period covered by the previous Commercial PRoduction Work Program.
 
The Contractor shall conduct Mining Operations and other activities for the durating of the production period in accordance with the duly approved Work Programs and any modification thereof approved by the Secretary.
 
7.3 Expansion and Modification of Facilities - The Contractor may make expansions, modifications, improvements, and replacements of the mining facilities and may add new facilities as the Contractor may consider necessary for the operations, provided such plans shall be embodied in an appropriate Work Program approved by the Secretary.

7.4 Reporting
 
a) Quarterly Reports - Beginning with the first Calendar Quarter following the commencement of the Production Period, the Contractor shall submit within thirty (30) days after the end of each Calendar Quarter, a quarterly report stating the tonnage of production in terms of ores, concentrates, and their corresponding grades and other types of products, value, destination of sales or exports and to whom sold, terms of sales and expenditures.
 
b) Annual Reports - During the Production Period, the Contractor shall submit within sixty (60) days from the end of each Calendar Year an Annual Report indicating in sufficient detail:
 
b.i) The total tonnage of ore reserves whether proven, probable or inferred; the total tonnage of ores, kind-by-kind, broken down
Revised Integrated MPSA for Non-Reservation Areas

between tonnage mined, tonnages transported from the minesite and
their corresponding destination, tonnages stockpiled in the mine and
elsewhere in the Philippines, lonnages sold or committed for export
(whether actually shipped from the Philippines or not), tonnages
actually shipped from the Philippines (with full details as to
purchaser, destination and terms of sale), and if known to the
Contractor, tonnages refined, processed or manufactured in the
Philippines with full specifications as to the intermediate products,
by-products or final products and of the terms at which they were
disposed;

b.2) Work accomplished and work in progress at the end of the year in
question with respect to all the installations and facilities related to
the utilization program, including the investment actually made or
committed;

b.3) Profile of work force, including management and staff, stating
particularly their nationalities, and for Filipinos, their place of origii
(i.e., barangay, town, province, region); and

b.4) Ownership of the Contractor, particularly with respect to nationality.

  
Section VIII
 
FISCAL REGIME
 
8.1 General Principles - The financial regime of this agreement shall be governed by the priniciple according to which the government expects a reasonable return in economic value for the utilization of non-renewable natural resources under its national sovereignty while the contractors expect a reasonable return on its investment with special account to be taken for the high risks of exploration. The terms and conditions prevailing elsewhere in the industry and any special efficiency to be gained by particularly good performance of the contractors.
 
8.2 Registration Fees - Withing fifteen (15) days upon receipt of the notice of approval of the MPSA from the Regional Office, the Contractor shall cause the registration of this Agreement at the concerned Regional Office and pay the registration fee in the amount of P100 and an additional P10 for P.D. 1856. Failure of the Contractor to cause the registration of this Agreement within the prescribed period shall be sufficient ground for cancellation of the same.
 
8.3 Occupation Fees - Upon registration of this Agreement and at the same date every year thereafter, the Contractor shall pay to the concerned Municipal/City Treasurer an Occupation Fee over the Contract Area at the annual rate of fifty pesos (P50.00) per hectare or fraction thereof. If the fee is not paid on the date specified, the Contractor shall pay a surcharge of twenty five per centum (25%) of the amount due in addition to the occupation fees. 
Revised Integrated MPSA for Non-Reservation Areas

8.4 Share of the Government - The government share shall be the excise tax on mineral products at the time of removal and at the rate provided for in Republic Act No. 7729 amending Section 151 (a) of the National Internal Revenue Code, as amended, as well as other taxes duties and fees levied by existing laws.

For purposes of determining the amount of the herein government share, the Contractor shall strictly comply with the auditing and accounting requirements prescribed, under existing laws and regulations.

The government share shall be allocated in accordance with Sections 290 and 292 of R.A. No. 7160, otherwise known as "The Local Government Code of 1991".

8.5 Pricing of Sales - The contractors shall endeavor to obtain the best achievable price for its production and pay the lowest achievable marketing commissions and related fees. Contractors shall seek to a strike a balance between long-term and short-term sales comparable to policies followed by independent producers in the international mining industry.
 
The contractors shall likewise seek a b balanced distribution among consumers, Insofar as ales to contractors' affiliate are concerned, prices shall be at arms-length standard and competing offers for large scale and long-term contracts shall be procured. The Bureau shall be furnished a copy of the said Sales Agreement subject to confidentiality between the Bureau and the Contractor.

8.6 Associated Minerals - If minerals other than gold are discovered in commercial quantities in the contract area, the value thereof shall be added to the value of the principal mineral in computing the share of the government.

Section IX
 
WORK PROGRAMS
 
9.1 Submission to Government - Within the periods stated herein, the COntractor shall prepare and submit to the Secretary through the concerned Regional Director, copy furnished the Director, a Work Program and corresponding Budget for the Contract Area stating the mining operations and expenditures which the Contractor proposes to carry out during the period covered with the details and particulars set forth elsewhere in this Agreement or in the supporting documents.
 
 
9.2 Examination Revision - Should the government wish to propose a revision as to certain specific features of said work program or budget, it shall within sixty (60) days after receipt thereof provide notice to contractors specifying in reasonable detail its reasons therefor, any portion of said work program or budget as to which the government shall fail to notify contractors of proposed revision shall insofar as possible be carried out as prescribed herein, promptly upon service of such notice to contractors, the government and contractors will meet and endeavor to agree on the revision proposed by the government. IN any event, any portion of said Work Program or Budget as to which the Government shall fail to notify the Contractor of proposed revision shall insofar as possible be carried out as prescribed herein. If the Government should fail within sixty (60) days from receipt thereof to

 
 

Revised Integrated MPSA for Non-Reservation Area

notify Contractor of the proposed revisions, the Work Program and Budget proposed by the Contractor shall be deemed to be approved.

9.3 Contractor's Changes to Work Program - It is recognized by the government and contractors that the details of any work program may require changes in the light of changing circumstances, contractors may make such changes provided they do not change the general objective of any work program. Contractors shall promptly advise the secretary of such changes. IF the changes will entail a variance of at least twenty per centum (20%) of the budget, then the change shall be subject to the approval of the secretary
 
9.4 The government's approval of a proposed work program and budget and amendments thereto will not be unreasonably withheld.

SECTION X

ENVIRONMENTAL PROTECTION AND MINE SAFETY AND HEALTH

10.1 Consistent with the basic policy of: the state to
assure the availability, sustainability and
equitable distribution of the country's natural
resources, the Department adopts the policy that
mining activities attendant to permits, agreements
and leases shall be managed in a technically,
financially, socially, culturally and
environmentally responsible manner to achieve,
generally, the welfare of the country and,'
particularly, the sustainable development
objectives and responsibilities as provided for
under these Implementing Rules and Regulations.


10.2 The Contractor shall prepare a plan of mining so
 that its damage to the environment will be
minimal. To the extent possible, control of
pollution and the transformation of the mined-out
areas or materials into economically and socially
productive forms must be done simultaneously with
mining.


10.3 The Contractor shall submit an Environmental Work Program during the Exploration Period as prescribed in SEction 168 in the revised implementing rules and regulations of the Act.

10.4 An Environmental Compliance Certificate (ECC)
shall be secured first by the Contractor prior to
the conduct of any mine development work in the
Contract Area.
 
10.5 The Contractor shall submit within thirty (30)
Calendar days after the issuance and receipt of
the ECC, an Environmental Protection and
Enhancement Program (EPEP) using MGB Form No. 19-1
covering all areas to be affected by mining
development, utilization and processing under this
Contract.
 
10.6 The contractor shall submit within thirty (30)
days prior to the beginning of every calendar year
an Annual. Environmental Protection and Enhancement
Program (AEPEP) using MGB Form 19-3, which shall  
be based on the approved EPEP . The AE1PEF shall
be implemented during the year for which it was
submitted. To implement its AEPEP, the Contractor shall allocate annually three to five percent (3%- 5%) of its direct mining and milling cost depending on the environment/geologic




Revised Integrated MPSA for Non-Reservation Areas

conditions, nature and scale of operations and technology employed in the Contract Area.

10.7 The Contractor shall establish a Mine
Rehabilitation Fund (MRF) based on the financial
requirements of the approved EPEP as a reasonable
environmental deposit to ensure satisfactory
compliance with the commitments/strategies of the
EPEP/AEPEP and availability of funds for the
performance of the EPEP/AEPEP durintj the specific
project phase. The MRF shall be depqsited as Trust
Fund in a government depository bank and shall be
used for physical and social rehabilitation of
areas affected by mining activities and for
research on the social, technical hnd preventive
aspects of rehabilitation. 

10.8 The Contractor shall set-up mitigating measures
such as mine waste and mill tailings disposal
system, mine rehabilitation decommissioning, water
quality monitoring, etc. to minimize land
degradation, air and water pollution, acid rock
drainage and-changes in hydrogeology.


10.9 The Contractor shall set-up an Environmental and
 Safety Unit manned by qualified personnel tc plan,
implement and monitor its approved EPEP.
 
10.10 The Contractor shall be responsible :.n the
monitoring of environmental safety and health of
the contract area and shall strictly comply with
all the rules and regulations embodied under Mines
Administrative Order No. 51, Series of 1991,
otherwise known as the "Mine Safety Rules and
Regulations".
 
10.11 The Contractor shall submit to the Bureau a
Safety and Health Program covering its area of
operation within fifteen (15) days before? the
start of every Calendar Year, copy furnished
Regional Office. 

Section XI
 
Rights and Obligation of the Parties
 
11.1 Obligations of the Contractor

a.) To exclusively conduct sustainable mining operations within the Contract Area in accordance with the provisions of the Act and its revised implementing rules and regulations

b.) To construct and operate any facilities specified under the Mineral Agreement or approved Work Program

c.) To determine the exploration, mining and treatment process to be utilized in the mining operations

d.) To extract, remove, use and dispose of any tailings as authorized by an approved Work Program

e.) To secure all permits necessary or desirable for the purpose of mining operations;

 

Revised Integrated MPSA for Non-Reservation Areas

f.) To keep accurate technical records about the mining operations as
well as financial and marketing accounts and make them available to
Govemment representatives authorized by the Director for the
purpose of assessing the performance and compliance of the
Contractor with the terms of this Agreement. Authorized
representatives of other Govemment Agencies may also have access
to such accounts in accordance with existing Laws, Rules and
Regulations;

g) To furnish the Bureau all the data and information gathered on the
Contract Area and that all the books of accounts and records shall be
open for inspection;

h) To hold the Government free and harmless from all claims and
accounts of all kinds, as well as demands arid actions arising out of
the accidents or injuries to persons or properties caused by Mining
Operations of the Contractor and indemnify the Govemment for any
expenses or cost incuned by the Govemment by reason ofany such
claims accounts, demands or actions;

.
i) In the development of the community:

i.1) To recognize and respect the rights, customs and traditions of
indigenous tribal communities over their ancestral lands and to
allocate royalty payment of not less than one percent (1%) ol the
value ofthe gross output of minerals sold;

i.2) To coordinate with proper authorities in the development of the
mining community and for those living in the host and neighboring
communities through social infrastructure, livelihood programs-,
education, water, electricity and medical services. Where
traditional self-sustaining income and the community activities are
identified to be present, the Contractor shall assist in the
preservation and/or enhancement of such activities;

i.3) To allot annually a minimum of one percent (1 %) of the direct mining and
milling costs necessary to implement the activities undertaken
the development of.the host and neighboring communities. Expenses foi
community development maybe charged against the royalty
payment of one percent (1%) of the gross output intended for the indigenous
cultural community;
 
i.4) To give preference to Filipino citizens, who have established
domicile in the neighboring communities, in the hiring of personnel for its mining
operations. If necessary skills and expertise are currently not available
the Contractor must immediately prepare and undertake a
training recruitment program at its expense;

i.5) To incorporate in the mine feasibility study the planned expenditures
necessary to implement (i.1) to (i.3) of this section;
 
j. In the development of Mining Technology and Geosciences:

j.1) In the course of its operations, to produce geological, geophysical,
and other types of maps and reports are appropriate
in scale and in format and substance which are consistent with the
internationally accepted standards and practices such maps shall be made

Revised Integrated MPSA for Non-Reservation Areas

available to the scientific community in the most convenient and cost
effective forms, subject to the condition that the Contractor may delay
release of said information for a reasonable period of time which shall not
exceed three (3) years;

j.2) To systematically keep the data generated from the contract mining area
such as cores, assays and other related information, including economic
and financial data and make them accessible to students, researchers and
other persons responsible for developing mining, geoscience and
processing technology subject to the condition that the Contractor may
delay release of data to the science and technology community within a
reasonable period of time which shall not exceed three (3) years

j.3) To transfer to the Govemment or local mining company the appropriate
technology it may adapt in the exploration, developmeni and commercial
utilization of the minerals in the Contract Area;
 
j.4) To allocate research and development budget for the advancement of
mining technology and geosciences in coordination with Bureau, Research
Institutions, Academe, etc.;

j.5) To replicate data, maps and reports cited in [.1) and (.2) and fumish the
Bureau for archiving and systematic safekeeping which sha be made
available to the science and technology community for conducting
research and undertaking other activities which iontribute to thi
development of mining, geoscience and processing technology and the
corresponding nationar poor of manpower talents: provided, ho-wever, rhat
the release of data, maps and the like shall be similarly constrained in
accordance with (.1) and (.2) above;

k) To pay all other taxes and fees mandated by existing laws, rules
regulations.

11.2

Rights of the Contractor
The Contractor shall have the right:

a) To conduct mining operations within the confines of its
contract Mining Area in accordance with the terms and conditions hereof
and that it shall not interfere with the rights of other contractors/
Lessees/Operators/permittees;

b) Of possession of the Contract Area, with full right of ingress
egress and the right to occupy the same, subject to surface and
easement rights;

c) To use and have access to all declassified geological, geophysical,
drilling, production and other data relevant to mining operations

d) To sell, assign, transfer, convey or otherwise dispose
of all its rights, interest and obligations under the Agreement
subject to the approval of the Government;

C) To employ or bring into the Philippines foreign technical and specialized personnel, including the immediate members of their families as maybe required in the operations of the Contractor, subject to applicable laws and regulations; provided, that if the
Revised lntegrated MPSA For Non-Reservation Areas

employment connection of such foreign persons with the Contractor
ceases, the applicable laws and regulations on immigration shall
apply to them. Everytime foreign technologies are utilized and where
alien executives are employed, an effective program of training
understudies shall be undertaken. Alien employment shall be limited
to technologies requiring highly specialized training and experience
subject to the required approval under existing laws, rules and
regulations;

f.) To enjoy easement rights and use of timber, water and other natural
resources in the Contract Area subject to pertinent laws, rules and
regulations and the rights of third parties;

g) Of repatriation of capital and remittance of profits, dividends
and interest on loans, subject to existing laws and Bangko Sentral rules
and.

h) To import when necessary all equipment, spare parts and raw
materials required in the operations in accordanie wit-h existing laws
and regulations.

i.) assign its right, title and interest in this Agreement for the
purpose of securing financing for the project with right ol further
assignment by the financial institution in favor of a qualified third
party subject to the approval of the Secretary, which consent and
approval shall not be unreasonably withheld; provided, that each
assignment shall be deemed automatically approved, if not acted
upon by the Secretary within thirty (30) working days from the
receipt of the application; provided further, that, notwithstanding
such assignment, the Contractor shall continue to be bound to
perform its obligations and responsibilities under this agreement;
Provided further, that the assignment shall not adversely affect the
rigtits of the Govemment under this agreement.

11.3 Obligation of the Government
The Govemment shall:

a) Ensure that the Conkactor has the Govemment,s full cooperation in
the exercise of the rights $anted to it under this Agreement

b)Use its best efforts. to ensure the timely issuance of necessary permits
and similar authorizing documents for use of surface of the contract
Area; and

c) To cooperate with the Contractor in its efforts to obtain financing
contemplated herein from banks or other financial institutional
provided that such financing arrangements will in no event
reduce Contractor's obligation on Government rights hereunder.

SECTION XII

ASSETS AND EQUIPMENT


Revised Integrated MPSA for Non-Reservation Areas

Contractor shall acquire for the Mining Operations only such assets that
are reasonably estimated to be required in carrying out such Mining
Operations.

12.2 All materials, equipment, plant and other installations erected or placed on
the Contract Area of a movable nature by the Contractor shall remain the
property of the Contractor and shall have the right to remove and re-export
such materials and equipment, plant and other installations from the
Philippines, subject to existing rules and regulations. In case of cessation
of Mining Operations on public lands occasioned by its voluntary
abandonment or withdrawal, the contractor shall have a period of one (1)
year from the time of cessation within which to remove its improvements;
otherwise, all social infrastructures and facilities shall be turned over or
donated tax free to the proper government authorities, national or local, to
ensllre that said infrastructures and facilities are continuously maintained
and utilized by the host and neighboring communities.

SECTION XIII

EMPLOYMENT AND TRAINING OF PHILIPPINE PERSONNEL
´
13.1 The Contractors agree to employ to the extent possible, qualified Filipino personnel in its mining operations; and after commercial production commences shall, in consultation and with the consent of the secretary, undertake a elaborate and extensive training programme for employment of suitable Filipino nationals at all levels of employment. The objectve of said programm shall be to reach within the time-table set forth below the following targets of "Filipinization":
 
 Unskllled  Skilled  Clerical Professional  Management
 
Year 1  100%  100%  100%  70% 60%
Year 3  100%  100%  100% 80% 65%
Year 5  100% 100%  100% 85% 70%
Year 7  100%  100%  100% 90% 80%
Year 10  100%  100%  100% 100% 90%
Year 15  100%  100%  100% 100% 95%
 
13.2 Costs and expense of training of contractors' Filipino personnel and employees shall be included in operating expenses.

13.3 The Contractor shall not discriminate on the basis of gender and shall respect the right of women workers to participate in policy and decision-making processes affecting their rights and benefits.

Section XIV
 
Arbitration
 
13.1 The Government and the Contractors shall consult with each other in good faith and shall exhaust all available remedies to settle any and all disputes or disagreements arising out of or relating to the validity, interpretation, enforceability, or performance of this agreement before resulting to arbitration as provided for in Section 14.2 below.
Revised Integaled MPSA for Non-Reservation Areas

14.2 Any disagreement or dispute which can not be settled amicably within a
period of one (l) year from the time the issue was raised by a party shall
be settled by a tribunal of three (3) arbitrators, one to be appointed by the
Contractor, another to be appointed who shall serve as Chairman. The
first two appointed arbitrators shall continue to consider names of
qualified persons until agreement on a mutually acceptable Chairman of
the tribunal is needed. Such arbitration shall be initiated and conducted
pursuant to Republic Act No. 876, otherwise known as the "Arbitration
Act".

In any event, the arbitration shall be conduced applying the substantive
laws of the Republic of the Philippines.

14.3 Each party shall pay fifty per centum (50%) of the fees and expenses of
the Arbitrators and the costs of arbitration. Each party shall pay its own
costs and attomey's fee.

SECTION XV
SUSPENSION OR TERMINATION OF CONTRACT,
TAX INCENTIVES AND CREDITS

15.1 This Contract may be suspended for failure of the Contractor: (a) to
comply with any provision or requirement of the Philippine Mining Act of
1995 and/or its Implementing Rules and Regulations; (b) to pay taxes, fees
and,/or other charges demandable and due the Govemment.

15.2 This Agreement terminates or may be terminated for the following causes:
(a) expiration of its term whether original or renewal; (b) withdrawal
from the agreement by the contractor; (c) violation by the contractor of the
Agreement's terms and conditions; (d) failure to pay taxes, fees/or charges
or financial obligations for two(2) consecutive years; (e) false statement
or omission of facts by the Contractor; and (f) any other cause
or reason provided under the Act and its Implementing Rules and
Regulations, or any other relevant laws and regulations.

15.3 All statements made in this Agreement shall be considered
as conditions and essential parts hereof, and any falsehood in said statements
or omission of facts which may alter, change or affect substantially the fact set forth in said statements shall be a ground for its revocation and termination

15.4 The contractor may be giving due notice at any time
during the term of this Agreement, apply for its cancellation due'to causes
which, in the opinion of the Contractor, render continued mining
operation no longer feasible or viable. In this case, the Secretary
shall decide on the application within thirty (30) days from notice, provided
that the Contractor has met all the financial, fiscal and legal obligations

15.5 No delay or omissions or course of dealing by the Government shall
impair any of its rights under this Agreement in the case of a
written waiver. The Government's right to seek
recourse and relief by all other means shall not be construed as-a waiver
of any succeeding or other default unless the contrary intention is reduced
writing and the party authorized to exercise the waiver.

Revised Integrated MPSA for Non-Reservation Areas

15.6 In case of termination, the Contractor shall pay all the fees and other
liabilities due up to the end of the year in which'the termination becomes
effective. The Contractor shall immediately carry out the restoration of
the Contract Area in accordance with good mining industry practice.

15.7 The withdrawal by the contractor from the Mineral agreement shall
not release it from any and all financial, environmental, legal and fiscal
obligations under this Agreement;

15.8 The following acts or omission, inter alia shall constitute breach of
contract upon which the Government may exercise its right to terminate
the Contract:

a) Failure of the Contractor without valid reason to commence
Commercial Production within the period prescribed; and

b) Failure of the Contractor to conduct quarrying operations and other
activities in accordance with the approved Work programs and/or
any modification thereofas approved by the Secretary.

15.9 The Government may suspend and cancel tax incentives and credits
if the contractor fails to abide by the terms and conditions ofsaid incentives and
credits.

SECTION XVI
OTHER PROVISIONS

16.1 Any terms and conditions resulting from repeal or amendment of any
existing laws or regulation or from the enactment of a law, regulation
or administrative order shall be considered a part of this agreement.

16.2 Notice -

All notices, demands, and other communications required or permitted hereunder shall be made in writing or by teller or telecopy and shall be deemed to have been duly given in the case of telex or telecopy notice if answer back or confirmation received, or if delivered by hand upon receipt of ten days after being deposited in the mail, airmail postage prepaid and addressed as follows:
 
If to the Government -
 
The Secretary of the Department of Environment and Natural Resources
Department of Environment and Natural Resources Building
Visayas Avenue, Diliman
Quezon CIty
 
If to the Contractors -
 
FRNAK N. LUBBOCK
Chairman of the Board
Base Metals Mineral Resources Corporation
4th & 6th Floor, Trans-Phil House Bldg.
1177 Chino Roces Avenue, Cor. Bagtikan St.
Makati City 1231
 

Either party may substitute or change such address on notice thereof to the other party.
 
 
16.3 Governing Law - This agreement and the relation between the parties hereto shall be governed by and construed in accordance with the laws of the Republic of the Philippines
 
16.4 Suspension of Obligations
 
(A) Any failure or delay on the part of any party in the performance of its obligations or duties hereunder shall be excused to the extent attribute to force majeure.
 
(B) If mining operations are delayed curtailed or prevented by such force majeure causes, then the time for enjoying the rights and carrying out the obligations thereby affected and all rights and obligations hereunder shall be extended for a period equal to the period thus involved.
 
(C) The party whose ability to perform its obligations is affected (I) shall promptly give notice to the other in writing of any such delay or failure in performance. The expected duration thereof and its anticipated effect on the party expected to perform and (II) shall use its best efforts to remedy such delay, except that neither party shall be under any obligation to settle a labor dispute.
 
16.5 Amendments -

This agreement shall not be annulled, amended or modified in any respect except by mutual consent in writing of the parties

IN WITNESS THEREOF, the parties hereto have executed this Agreement, as of the day and year first above written


THE REPUBLIC OF THE PHILIPPINES
BY:

VICTOR O. RAMOS
Secretary
Department of Environment and Natural Resources
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