NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more hereMINERAL PRODUCTION SHARING AGREEMENT
No. 235-2007- IVB
This MINERAL PRODUCTION SHARING AGREEMENT is made and entered
into in Quezon City, Philippines, this _______ day of JUN 08 2007 by
THE REPUBLIC OF THE PHILIPPINES, herein referred to as the
GOVERNMENT,represented in this act by the Secretary of the Department of
Environment and Natural Resources, with offices at the Department of
Environment and Natural Resources Building, Visayas Avenue, Diliman,
BERONG NICKEL CORPORATION, a corporation duly organized and existing
under the laws of the Republic of the Philippines, herein referred to as the
CONTRACTOR, with office at 7th Floor, Quad Alpha Centrum, 125 Pioneer St.
Mandaluyong City, and represented in this act by its President, Mr. Frank N.
Lubbock, as authorized by its Board of Directors (please refer to ANNEX "A")
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 Agreements in furtherance
of the objectives of the Government and the Constitution to bolster the national
economy through sustainable and systematic development and utilization of
WHEREAS, the Government desires to avail itself of the financial resources,
technical competence and skill, which the 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
initial rational exploration and possible development and utilization for
commercial purposes of nickel, iron, cobalt, chromite and other associated
mineral deposits existing in the Contract Area (as herein defined);
WHEREAS, the Contractor has access to all the financing, technical
competence, technology and environmental management skills required to
promptly and effectively carry out the objectives of this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants, terms and conditions hereinafter set forth, it is hereby
stipulated and agreed as follows:
1.1. This Agreement is a Mineral Production Sharing Agreement entered into
pursuant to the provisions of the Act and its implementing rules and
regulations. The primary purpose of this Agreement is to provide for the
rational exploration, development and commercial utilization of nickel
iron, cobalt, chromite and other associated mineral deposits existing
within the Contract Area, with all necessary services, technology and
financing to be furnished or arranged by the Contractor in accordance
with the provisions of this Agreement. The Contractor shall not, by virtue
of this Agreement, acquire any title over the Contract/Mining Area
without prejudice to the acquisition by the Contractor of the land/surface
rights through any mode of acquisition provided for by law.
1.2. The Contractor shall undertake and execute, for and on behalf of the
Government, 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 exclusive entity to conduct
mining operations in the Contract 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 to 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.
As used in this Agreement, the following words and terms, whether singular or
plural, shall have the following respective meaning:
2.1. Act refers to Republic Act 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.
2.4. Bangko Sentral means 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. Bureau means Mines and Geoscienes Bureau.
2.7. 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
2.8. 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 stated in the feasibility study, whichever comes first.
2.9. 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.
2.10. Contract Area 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 or bearing and distance.
2.11. 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.
2.12. Contractor means Berong Nickel Corporation or its assignee(s) of
interest under this Agreement: Provided, That the assignment of any of
such interest is accomplished pursuant lo the pertinent provisions of the
implementing rules and regulations of the Act.
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.
2.24. Mine Development refers lo work undertaken to prepare an ore body
or a mineral deposit for mining, including the construction of necessary
infrastructure and related facilities.
2.25. Minerals mean all naturally occurring inorganic substances in solid,
liquid, gas or any intermediate slate excluding energy materials such as
coal, petroleum, natural gas, radioactive materials and geothermal
2.26. Mineral Products mean materials derived from mineral ores/rocks and
prepared into marketable state by metallurgical processes which include
benericiation, cyanidation, leaching, smelting, calcination and other
2.27. 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/Regional Director concerned for purposes of development
and/or utilization and sites for support facilities.
2.28. Mining Operations means mining activities involving exploration,
feasibility study, environmental impact assessment, development,
utilization, mineral processing and mine rehabilitation.
2.29. Notice means notice in writing, telex or telecopy (authenticated by
answer back or confirmation received) addressed or sent as provided in
Section 16.2 of this Agreement.
2.30. Ore means naturally occurring substance or material from which a
mineral or element can be mined and/or processed for profit.
2.31. 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, as 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
2.32. Secretary means the Secretary of the Department of Environment and
2.33. State means the Republic of the Philippines
2.34. Work Program means a document which presents the plan of major
mining operations and the corresponding expenditures of the Contractor
in its Contract Area during a given period of time, including the plan and
expenditures for development of host and neighboring communities and
of local geoscience and mining technology, as submitted and approved
in accordance with the implementing rules and regulations of the Act.
TERM OF AGREEMENT
3.1. This Agreement shall have a term of twenty five (25) years from 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 thereof, 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 of all reasonable expenses of the highest bidder.
4.1.Size, Shape, and Location of Contract Area - This Agreement covers a
Contract Area of approximately Two Hundred Eighty Eight (288.00)
hectares, situated in Barangay Berong, Municipality of Quezon, Province
of Palawan and bounded by the following geographical coordinates
(please refer to ANNEX "B" - 1:50,000 scale Location Map/Sketch Plan):
Corner Latitude Longitude
1 9° 24' 09.604" 118° 14' 00.455"
2 9° 24' 09.539" 118° 13' 30.958"
3 9° 24' 19.304" 118° 13' 30.936"
4 9° 24' 19.282" 118° 13' 21.103"
5 9° 24' 38.811" 118° 13' 21.060"
6 9° 24' 38.680" 118° 12' 22.063"
7 9° 24' 28.916" 118° 12' 22.086"
8 9° 24' 28.871" 118° 12' 02.420"
9 9° 24' 38.635" 118° 12' 02.398"
10 9° 24' 38.680" 118° 12' 22.063"
11 9° 24' 38.811" 118° 13' 21.060"
12 9° 24' 48.576" 118° 13' 21.038"
13 9° 24' 48.598" 118° 13' 30.871"
14 9° 24' 58.363" 118° 12' 22.063"
15 9° 24' 38.811" 118° 13' 21.060"
16 9° 25' 48.576" 118° 13' 21.038"
17 9° 25' 48.598" 118° 13' 30.871"
18 9° 24' 38.680" 118° 12' 22.063"
19 9° 24' 38.811" 118° 13' 21.060"
20 9° 23' 48.576" 118° 13' 21.038"
21 9° 23' 48.598" 118° 13' 30.871"
5.1. Timetable for Exploration - The 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 exceed a
total term of six (6) years for nonmetallic minerals and eight (8) years for
metallic minerals, subject to annual review and approval by the Director
in accordance with the implementing rules and regulations of the Act.
The one (1)-year term of the Temporary Exploration Permit No. TEP-
IVB-008-2005 and issued on November 15, 2005 is considered as part
of the Exploration Period (please refer to ANNEX "C").
5.2. Renewal of Exploration Period - In case the Contractor opts for a
renewal of its Exploration Period, it shall file prior to the expiration
thereof, a renewal application in the Mines and Geosciences Bureau
Central Office, accompanied by the mandatory requirements stipulated
in the implementing rules and regulations of the Act. The Director may
grant the renewal of the Exploration Period on condition that the
Contractor has substantially complied with the terms and conditions of
In cases where further exploration is warranted beyond the six (6) - or
eight (8)-year period and on condition that the Contractor has
substantially implemented the Exploration and Environmental Work
Programs as verified by the Bureau, the Director may further grant
renewal of the Exploration Period: Provided, That the Contractor shall be
required to set up a performance surety equivalent to the expenditure
requirement of the Exploration and Environmental Work Programs.
5.3. Work Programs and Budgets - The Contractor shall strictly comply with
the approved Exploration and Environmental Work Programs together
with their corresponding Budgets (please refer to ANNEXES 'D" and
The amount to be spent by the Contractor in conducting Exploration
activities under the terms of this Agreement during the Exploration
Period shall be in the aggregate of not less than that specified for each
of the Contract Years, as follows:
For the Exploration Work Program:
1st Contract Year : PhP 70,520,280.00
2nd Contract Year : PhP 20,544,190.00
Total : PhP 91,064,470.00
For the Environmental Work Program : PhP 8,278,590.00
In the event of renewal of the Exploration Period, the amount to be spent
every year shall first be agreed upon by the parties.
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 Contract
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 from the amount required to be
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.
5.4. 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 a Declaration of Mining Project Feasibility by the Director, 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.
5.5. Final Mining Area - The Director may allow the Contractor to hold more
than one (1) final Mining Area subject to the maximum limits set under
the implementing rules and regulations of the Act: Provided, That each
final Mining Area shall be covered by a Declaration of Mining Project
5.6. Declaration of Mining Project Feasibility - Within the term of the
Exploration Period, the Contractor shall file in the Regional Office
concerned, the Declaration of Mining Project Feasibility of the Contract
Area/final Mining Area supported by Mining Project Feasibility Study,
Three (3)-Year Development and Construction or Commercial Operation
Work Program, complete geologic report, an application for survey and
the pertinent Environmental Compliance Certificate, among other
applicable requirements. Failure of the Contractor to submit the
Declaration of Mining Project Feasibility during the Exploration Period
shall be considered a substantial breach of this Agreement.
5.7. Survey of the Contract Area - The Contractor shall cause the survey of
the perimeter of the Contract Area/final Mining Area through an
application for survey, complete with requirements, filed in the Regional
Office concerned simultaneous with the submission of the Declaration of
Mining Feasibility. Survey returns shall be submitted to the Regional
Director concerned for approval within one (1) year from receipt of the
Order of Survey complete with the mandatory requirements stated in the
implementing rules and regulations of the Act.
a. During the Exploration Period, the Contractor shall submit to the
Director, through the Regional Director concerned, 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 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 from the end of each Calendar Year. Such
information shall include detailed financial expenditures, raw and
processed geological, geochemical, geophysical and radiometric
data plotted on a map at a minimum 1:50,000 scale, 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 be subject to the confidentiality clause of this
b. Final Report - The Contractor shall submit to the Director, through
the Regional Director concerned, 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 international 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 1:50,000 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 Contractor shall, upon
request of the Director/Regional Director concerned, submit to the
Regional Office concerned a quarter of the core samples, which
shall be deposited in the Regional Office Core Library for
safekeeping 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.
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 and approval of the Declaration of Mining
Project Feasibility, subject to such extension based on justifiable
reasons as the Director may approve, upon recommendation of the
Regional Director concerned.
a. Annual - The Contractor shall submit, within sixty (60) days after
December 31 of each year, to the Director, through the Regional
Director concerned, an annual report, which states the major
activities, achievements and detailed expenditures during the year
covered, including maps, assays, rock and mineral analyses and
geological and environmental progress reports during the
Development and Construction Period.
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 Director, through the Regional Director
concerned. Such report shall integrate all information in maps of
appropriate scale and quality, as well as in monographs or reports
in accordance with international standards.
7.1. Timetable - The Contractor shall submit, within thirty (30) days before
completion of mine development and construction of production facilities,
to the Director, through the Regional Director concerned, a Three-Year
Commercial Operation Work Program. The Contractor shall commence
commercial utilization immediately upon approval of the aforesaid Work
Program. Failure of the Contractor to commence Commercial
Production within the period shall be considered a substantial breach of
7.2. Commercial Operation Work Program and Budget - During the
Operating Period, the Contractor shall submit to the Director, through the
Regional Director concerned, Work Programs and Budgets covering a
period of three (3) years each, which shall be submitted no later than
thirty (30) days before the expiration of the period covered by the
previous Work Program.
The Contractor shall conduct Mining Operations and other activities for
the duration of the Operating Period in accordance with the duly
approved Work Programs and corresponding Budgets.
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, That such plans shall
be embodied in an appropriate Work Program approved by the Director.
a. Quarterly Reports - Beginning with the first Calendar Quarter
following the commencement of the Operating Period, the
Contractor shall submit, within thirty (30) days after the end of
each Calendar Quarter, to the Director, through the Regional
Director concerned, 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 Operating Period, the Contractor
shall submit within sixty (60) days from the end of each Calendar
Year, to the Director, through the Regional Director concerned, an
Annual Report indicating in sufficient detail:
b.1. The total tonnage of ore reserves, whether proven,
probable, or inferred, the total tonnage of ores, kind by
kind, broken down between tonnage mined, tonnages
transported from the minesite and their corresponding
destination, tonnages stockpiled in the mine and elsewhere
in the Philippines, tonnages 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; and
b.3. Profile of work force, including management and staff,
stating particularly their nationalities, and for Filipinos, their
place of origin (i.e., barangay, town, province, region).
The Contractor shall also comply with other reporting requirements
provided for in the implementing rules and regulations of the Act.
8.1. General Principle - The fiscal regime of this Agreement shall be
governed by the principle according to which the Government expects a
reasonable return in economic value for the utilization of non-renewable
mineral resources under its national sovereignty while the Contractor
expects a reasonable return on its investment with special account to be
taken for the high risk of exploration, the terms and conditions prevailing
elsewhere in the industry and any special efficiency to be gained by a
particularly good performance of the Contractor.
8.2. Registration Fees - Within fifteen (15) days upon receipt of the notice of
approval of the Agreement from the Regional Office concerned, the
Contractor shall cause the registration of this Agreement with the said
Regional Office and pay the registration fee at the rate provided in the
existing rules and regulations. 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 - Prior to registration of this Agreement and at the
same date every year thereafter, the Contractor shall pay to the
Municipal/City Treasurer concerned an occupation fee over the Contract
Area at the annual rate provided in the existing rules and regulations. If
the fee is not paid on the date specified, the Contractor shall pay a
surcharge of twenty five percent (25%) of the amount due in addition to
the occupation fees.
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. The Excise Tax shall be timely and
completely paid to the nearest Bureau of Internal Revenue Office in the
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 Republic Act No. 7160, otherwise known as "The Local
Government Code of 1991."
8.5. Pricing of Sales - The Contractor shall dispose of the minerals and by-
products produced at the highest market price prevailing in the locality:
The Contractor shall also pay the lowest achievable marketing
commissions and related fees and shall negotiate for more
advantageous terms and conditions subject to the right to enter into
long-term sales or marketing contracts or foreign exchange and
commodity hedging contracts, which the Government acknowledges to
be acceptable notwithstanding that the sale price of the minerals and by-
products may from time to time be lower, or the terms and conditions of
sales are less favorable, than that available elsewhere. The Contractor
shall seek to strike a balance between long-term sales or marketing
contracts or foreign exchange and commodity hedging contracts
comparable to policies followed by independent producers in the
international mining industry.
The Contractor shall likewise seek a balanced distribution among
consumers. Insofar as sales to Contractor's affiliate(s) are concerned,
prices shall be at arm's length standard, and competing offers for large
scale and long-term contracts shall be procured. Before any sale and/or
shipment of mineral product is made, existing and future marketing
contract(s)/sales agreement(s) shall be submitted to the Director, copy
furnished the Regional Director concerned, for registration. At the same
time, the Contractor shall regularly inform the Director in writing of any
revisions, changes or additions in said contract(s)/agreement(s).
The Contractor shall reflect in its Monthly/Quarterly Report on
Production, Sales and Inventory of Minerals, as well as in the Integrated
Annual Report, the corresponding registration number(s) of the
marketing contract(s)/agreement(s) governing the export or sale of
8.6. Associated Minerals - If minerals other than nickel, iron, cobalt, chromite
and other associated mineral deposits 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 Government share.
9.1. Submission to Government - Within the periods stated herein, the
Contractor shall prepare and submit to the Director, through the
Regional Director concerned, 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. Government's Examination and Revision of Work Program - Should the
Government decide to propose a revision to a certain specific feature in
the Work Program or Budget, it shall, within thirty (30) days after receipt
thereof, provide a Notice to the Contractor specifying in reasonable
detail its reasons therefore. Promptly thereafter, the Government and
Contractor will meet and endeavor to agree on the revision proposed by
the Government. In any event, the revision of any portion of said Work
Program or Budget in which the Government shall fail to notify the
Contractor of the 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 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 the Contractor that the details of any Work Program
may require changes in the light of changing circumstances. The
Contractor may make such changes: Provided, That it shall not change
the general objective of the Work Program: Provided further, That
changes which entail a negative variance of at least twenty percent
(20%) shall be subject to the approval of the Director.
In case of any positive variance, the Contractor shall submit to the
Director, through the Regional Director concerned, a copy each of the
Work Programs, for information.
9.4. The Government's approval of a proposed Work Program and Budget
will not be unreasonably withheld.
ENVIRONMENTAL PROTECTION AND MINE SAFETY AND HEALTH
10.1. The Contractor shall manage its Mining Operations in a technically,
financially, socially, culturally and environmentally responsible manner to
achieve the sustainable development objectives and responsibilities as
provided for under the implementing rules and regulations of the Act.
10.2. The Contractor shall ensure that the standards of environmental
protection are met in the course of the Mining Operations. 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 the 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 development works,
construction of production facilities and/or mine production activities 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. 16-2 covering all
areas to be affected by development, utilization and processing activities
under this Agreement. The Contractor shall allocate for its initial
environment-related capital expenditures approximately ten percent
(10%) of the total project cost or in such amount depending on the
environmental/geological condition, nature and scale of operations and
technology to be employed in the Contract Area.
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 16-3, which shall be
based on the approved EPEP. The AEPEP 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 costs depending on the environmental/geologic
condition, nature and scale of operations and technology employed in
the Contract Area.
10.7. The Contractor shall establish a Contingent Liability and Rehabilitation
Fund (CLRF) which shall be in the form of the Mine Rehabilitation Fund
(MRF) and the Mine Waste and Tailings Fee (MWTF).
The MRF shall be 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 during the
specific project phase. The MRF shall be deposited 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 and preventive aspects of rehabilitation.
The MWTF shall be collected based on the amounts of mine waste and
mill tailings generated during the conduct of Mining Operations. The
MWTF collected shall accrue to a Mine Waste and Tailings Reserve
Fund and shall be deposited in a government depository bank for
payment of compensation for damages caused by the Mining
10.8. The Contractor shall set up mitigating measures such as mine waste and
mill tailings disposal system, mine rehabilitation or plan, 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 Office at its
minesite manned by qualified personnel to plan, implement and monitor
its approved EPEP.
10.10. The Contractor shall be responsible in the monitoring of environmental,
safety and health conditions in the Contract Area and shall strictly
comply with all the rules and regulations embodied under DAO No.
2000-98, otherwise known as the "Mine Safety and Health Standards."
10.11.The Contractor shall be responsible for the submission of a final mine
rehabilitation and/or decommissioning plans, including its financial
requirements and incorporating the details and particulars set forth in the
implementing rules and regulations of the Act.
RIGHTS AND OBLIGATIONS 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
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
f. To keep accurate technical records about the Mining Operations,
as well as financial and marketing accounts, and make them
available to Government 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 Government 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 from
the Contract Area and that all the books of accounts and records
shall be open for inspection;
h. To allow access to Government during reasonable hours
in inspecting the Contract Area and examining pertinent records for
purposes of monitoring compliance with the terms of this
i. To hold the Government free and harmless from all claims and
accounts of all kinds, as well as demands and actions arising out
of the accidents or injuries to persons or properties caused by
Mining Operations of the Contractor and indemnify the
Government for any expenses or costs incurred by the
Government by reason of any such claims, accounts, demands or
j. In the development of the community:
j.1. To recognize and respect the rights, customs and traditions
of indigenous cultural communities over their ancestral
lands and to allocate royalty payment of not less than one
percent (1%) of the value of the gross output of minerals
j.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;
j.3. To allot annually a minimum of one percent (1%) of the
direct mining and milling costs necessary to implement the
activities undertaken in the development of the host and
neighboring communities. Expenses for community
development may be charged against the royalty payment
of at least one percent (1%) of the gross output intended
for the concerned indigenous cultural community;
j.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 and recruitment program at its expense; and
j.5. To incorporate in the Mining Project Feasibility Study the
planned expenditures necessary to implement (j.1) to (j.3)
of this Section:
k. In the development of Mining Technology and Geosciences:
k.1. In the course of its operations, to produce Geological,
geophysical, geochemical and other types of maps and
reports that are appropriate in scale and in format and
substance which are consistent with the internationally
accepted standards and practices. Such maps shall be
made 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;
k.2. To systematically keep the data generated from the
Contract Mining Area such as cotes, 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 d€lav release of data to
the science and technology community within a reasonable
period of time which shall not exceed three (3) years;
k.3. To transfer to the Government or local mining company the
appropriate technology it may adapt in the exploration,
development and commercial utilization of the minerals in
the Contract Area;
k.4. To allocate research and development budget for the
advancement of mining technology and geosciences in
coordination with the Bureau, research institutions,
academe, etc.; and
k.5. To replicate data, maps and reports cited in (k.1) and (k.2)
and furnish the Bureau for archiving and systematic
safekeeping which shall be made available to the science
and technology community for conducting research and
undertaking other activities which contribute to the
development of mining, geoscience and processing
technology and the corresponding national pool of
manpower talents: Provided, however, that the release of
data, maps and the like shall be similarly constrained in
accordance with (k.1) and (k.2) above;
l. To incorporate in the Mining Feasibility Study the planned
expenditures necessary to implement all the plans and programs
set forth in this Agreement; and
m. To pay all other taxes and fees mandated by existing laws, rules
1.2. Rights of the Contractor:
a. To conduct Mining Operations within the confines of its
Contract/Mining in accordance with the terms and conditions
hereof and without interfering with the rights of other
Contractors/Lessees/Operators/ Permitees/Permit Holders;
b. Possession of the Contract Area, with full right of ingress and
egress and the right to occupy the same, subject to surface and
c. To use and have access to all declassified geological,
geophysical, drilling, production and other data relevant to the
d. To sell, assign, transfer, convey or otherwise dispose of all its
rights, interests and obligations under the Agreement subject to
the approval of the Government,
e. To employ or bring into the Philippines foreign technical and
specialized personnel, including the immediate members of their
families as may be required in the operations of the Contractor,
subject to applicable laws and regulations: Provided, That if the
employment connection of such foreign persons with the
Contractor ceases, the applicable laws and regulations on
immigration shall apply to them. Every time foreign technologies
are utilized and where alien executives are employed, an effective
program of training understudies shall be undertaken. The 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. Repatriation of capital and remittance of profits, dividends and
interest on loans, subject to existing laws and Bangko Sentral ng
Pilipinas rules and regulations; and
h. To import when necessary all equipment, spare parts and raw
materials required in the operations in accordance with existing
laws and regulations.
11.3. Obligations of the Government:
a. To ensure that the Contractor has the Government's full
cooperation in the exercise of the rights granted to it under this
b. To use its best efforts to ensure the timely issuance of necessary
permits and similar authorizing documents for use of the 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 institutions:
Provided, That such financing arrangements will in no event
reduce the Contractor's obligation on Government rights
ASSETS AND EQUIPMENT
12.1. The Contractor shall acquire for the Mining Operations only such assets
that are reasonably estimated to be required in carrying out such Mining
12.2. All materials, equipment, plant and other installations of a movable
nature erected or placed on the Contract Area by the Contractor shall
remain the property of the Contractor. The Contractor 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 ensure that said
infrastructures and facilities are continuously maintained and utilized by
the host and neighboring communities.
EMPLOYMENT AND TRAINING OF PHILIPPINE PERSONNEL
13.1. The Contractor agrees to employ, to the extent possible, qualified
Filipino personnel in all types of mining operations for which they are
qualified; and after Commercial Production commences shall, in
consultation and with consent of the Government, prepare and
undertake an extensive training programme suitable to Filipino nationals
in all levels of employment. The objective of said programme is to
reach within the timetable set forth below the following targets of
Unskilled Skilled Clerical Professional Management
(%) (%) (%) (%) (%)
Year 1 100 100 100 75 75
Year 3 100 100 100 80 80
Year 5 100 100 100 90 90
Year 7 100 100 100 95 95
Year 10 100 100 100 95 95
Year 15 100 100 100 95 95
13.2. Cost and expenses of training such Filipino personnel and the
Contractor's own employees shall be included in the Operating
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.
14.1. The Government and the Contractor 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,
interpretations, enforceability, or performance of this Agreement before
resorting to arbitration as provided for in Section 14.2. below.
14.2. Any disagreement or dispute which can not be settled amicably within a
period of one (1) year from the time the issue is raised by a Party shall
be settled by a tribunal of three (3) arbitrators. This tribunal shall be
constituted as follows: one to be appointed by the Contractor and the
other to be appointed by the Secretary. The first two appointed
arbitrators shall consider names of qualified persons until agreement on
a mutually acceptable Chairman of the tribunal is selected. 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 conducted applying the substantive
laws of the Republic of the Philippines.
14.3. Each party shall pay fifty percent (50%) of the fees and expenses of the
Arbitrators and the costs of arbitration. Each party shall pay its own
costs and attorney's fee.
SUSPENSION OR TERMINATION OF CONTRACT,
TAX INCENTIVES AND CREDITS
15.1. This Agreement may be suspended for failure of the Contractor: (a) to
comply with any provision or requirement of the Act and/or its
implementing rules and regulations; (b) to pay on time the complete
taxes, fees and/or other charges demandable and due the Government.
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
15.4. The Contractor may, by 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, except 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 in writing and
signed by the party authorized to exercise the waiver.
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
a. Failure of the Contractor without valid reason to commence
Commercial Production within the period prescribed;
b. Failure of the Contractor to conduct mining operations and other
activities in accordance with the approved Work Programs and/or
any modification thereof as approved by the Director.
15.9. The Government may suspend and cancel tax incentives and credits if
the Contractor fails to abide by the terms and conditions of said
incentives and credits.
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.
All notices, demands and other communications required or permitted
hereunder shall be made in writing, telex or telecopy and shall be
deemed to have been duly given notice, in the case of telex or telecopy,
if answered back or confirmation received, or if delivered by hand, upon
receipt or ten days after being deposited in the mail, airmail postage
prepaid and addressed as follows:
If to the Government:
Department of Environment and Natural Resources
DENR Building, Visayas Avenue
Diliman, Quezon City
If to the Contractor:
Berong Nickel Corporation
7th Floor, Quad Alpha Centrum
125 Pioneer St., Mandaluyong City
Either party may substitute or change such address on notice thereof to
the other party: Provided, That the Contractor shall, in case of any
change of address during the term of this Agreement, notify the Director
in writing. Failure to do such notification shall be deemed as waiver by
the Contractor to be informed about any communications as provided in
Section 16.2 above.
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. The Contractor hereby agrees and obliges itself to
comply with the provisions of the Act, its implementing rules and
regulations and other relevant laws and regulations.
16.4. Suspension of Obligation
a. Any failure or delay on the part of any party in the performance of
its obligation or duties hereunder shall be excused to the extent
attributable lo Force Majeure as defined in the Act: Provided,
That the suspension of Mining Operations due to Force Majeure
causes shall be subject to approval by the Director.
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, the term of this
Agreement and all rights and obligations hereunder shall be
extended for a period equal to the period involved.
c. The Party, whose ability to perform its obligations is affected by
such Force Majeure causes, shall promptly give Notice to the
other in writing of any such delay or failure of performance, the
expected duration thereof and its anticipated effect and shall use
its efforts to remedy such delay, except that neither Party shall be
under any obligation to settle a labor dispute: Provided, That the
suspension of obligation by the Contractor shall be subject to prior
approval by the Director.
This Agreement shall not be annulled, amended or modified in any
respect except by mutual consent in writing of the herein parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as
of the day and year first above written
THE REPUBLIC OF THE PHILIPPINES
ANGELO T. REYES
Department of Environment and Natural Resources
BERONG NICKEL CORPORATION
MR. FRANK N LUBBOCK
SIGNED IN THE PRESENCE OF:
(Signature over Printed Name)
(Signature over Printed Name)
Republic of the Philippines)
Quezon City )SS
Before me a Notary public for and in the City of Quezon, personally appeared
ANGELO T. REYES, with Community Tax Certificate No. 15154888
issued on Jan. 18, 2007 in Taguig, in his capacity as
Secretary of the Department of Environment and Natural Resources and MR.
FRANK N. LUBBOCK, with Community Tax Certificate No.
___________ issued on August 15, 2000 in Manila Phil, in
his capacity as President of Berong Nickel Corporation, both known to me and
to me known to be the same persons who executed the foregoing instrument
consisting of twenty five (25) pages, including this acknowledgment page, and
acknowledged to me that the same is their voluntary acts and deeds.
IN WITNESS WHEREOF, I have hereunto set my hand and affix my notarial
seal, this 22nd day of June 2007
ANSELMO C. ABUNGAN
Until Dec. 31, 2008
PTR No. 8437675 01/04/07 QC
IBP No. 677439 12/28/06
Doc. No. 56
Page No. 12
Book No. VIII
Series Of 2007