Nevada family: 68 Legarda Road, Baguio City

Republic of the Philippines

The contract was signed on January 19 2009.

The concession area is located in the municipality of Tuba, Province of Benguet. - Sec. 4.1

Heirs of Baldomero Nevada, Sr., Trinidad Nevada and Baldomero Nevada, Jr., represented by Philex Mining Corporation

copper, gold, and other associated mineral deposits in the contract area

Mineral Production Sharing Agreement No. 276-2009-CAR

After 25 years, this contract may be renewed for a term not more than 25 years. - Sec. 3.1

Jose L. Atienza, Jr., Secretary, Department of Environment and Natural Resources

Jose Ernesto C. Villaluna, Jr., President, Philex Mining Corporation

The concession area is 80.6688 hectares.- Sec. 4.1

Department of Environment and Natural Resources

This contract has a term of 25 years from effective date.- Sec. 3.1

This contract is a Mineral Production Sharing Agreement. - Sec. 1.1

The contractor must first secure an Environmental Compliance Certificate (ECC), the prerequisite of which is the submission of an environmental impact assessment. - Sec. 7.3

The contractor shall set up an Environmental and Safety Office at the mine site to monitor the implementation of its EPEP. The contractor shall monitor the environmental, safety and health conditions at the contract area and shall follow the “Mine Safety and Health Standards.” - Secs. 7.8, 7.9

The contractor shall manage its mining operations in a technically, financially, socially, culturally, and environmentally responsible manner to promote welfare of the country and attain the sustainable development objective of R.A. 7942. The contractor shall follow the standards of environmental protections during its mining operations. As much as possible, it shall control pollution and transform mined-out areas or materials into economically and socially productive forms during mining operations. Prior to the development phase, the contractor must first secure an environmental compliance certificate (ECC). Within 30 days from receipt of the ECC, the contractor shall submit an Environmental Protection and Enhancement Program (EPEP) covering all areas to be affected by mining, allocating about 10% of the total project cost for its initial environment-related capital expenditures depending on the environmental/geological condition, nature and scale of operations, and technology used. Thereafter, within 30 days prior to January 1, the contractor must submit an annual EPEP (AEPEP), to be implemented for the new year. It shall be based on the approved EPEP. It shall allocate 3%-5% of its direct mining and milling costs depending on the environmental/geological condition, nature and scale of operations, and technology used. The contractor shall establish a trust fund called Mine Rehabilitation Fund (MRF), as a deposit to answer for its EPEP and AEPEP compliance. The MRF shall be used for the physical and social rehabilitation of areas affected by mining activities, as well as for research on the social, technical, and preventive aspects of rehabilitation. The contractor shall also create a Mine Waste and Tailings Reserve Fund, from mine waste and tailings fees (MWTF) paid based on the amounts of mine waste and mill tailings generated during the conduct of mining operations. This reserve fund shall be for compensation for damages caused by the mining operations. The contractor shall also 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. Thereafter, the contractor shall submit a final mine rehabilitation plan and/or decommissioning plan, with financial and other requirements as stated in the implementing rules of RA 7942.

The contractor may use the water resources in the contract area, subject to applicable laws, rules and regulations, as well as right of third parties to use the same.

The contractor shall keep accurate technical records about its mining operations and shall furnish the Mines and Geosciences Bureau (MBG) of all data and information gathered from the contract area. The contractor shall also maintain financial books of accounts and marketing accounts. These records, books, and accounts shall be open for inspection by the government. The contract area shall also be open for inspection by the government. (Sec. 8.1.f, g, h)

The contractor shall allot annually at least 1% of the direct mining and milling costs for the development of the host and neighboring communities, such as social infrastructure, livelihood programs, education, water, electricity, medical services, traditional income sources and community activities. These expenses may be charged against its required royalty payments, if the host happens to be an indigenous cultural community, and shall be incorporated in the Mining Project Feasibility Study. Sec. 8.1.j.3, j.5)

The contractor shall pay all the required national and local taxes and fees. - Sec. 8.1.m

The government share shall be the excise tax on the mineral products extracted. The contractor shall pay excise taxes at the rates prescribed in RA 7729, to the nearest BIR office in the province where the mine is located. This government share shall be divided as prescribed by the Local Government Code. In computing the excise tax due, the contractor must strictly follow auditing and accounting requirements as prescribed by laws and regulations. - Sec. 6.4

The contractor is not restricted from selling to its affiliates, but must do so at arm's length standard.

The surface fee is akin to occupation fees for MPSAs. The contractor shall pay occupation fees per hectare to the Municipal/City Treasurer concerned at the annual rate prescribed in the rules. Late payments get a surcharge of 25%. - Sec. 6.3

The contractor shall coordinate with the proper authorities in the development of the mining community as well as the host and neighboring communities, through social infrastructure, livelihood programs, education, water, electricity, and medical services. The contractor shall also assist in the preservation and/or enhancement of traditional self-sustaining livelihood activities, if any. Sec. 8.1. j.2

The contractor shall give preference to Filipino citizens who are residing near the mine site for its mining operations (Sec. 8.1.j.4). It shall aim to “Filipinize” its personnel, such that by Year 10 to 15, 100% of unskilled, skilled and clerical staff shall be Filipino, 95% for professionals, and 90% for management (Sec. 10.1) The contractor shall not discriminate on the basis of gender, respecting the right of women workers to participate in policy and decision-making processes affecting their rights and benefits (Sec. 10.3). Be that as it may, the contractor is allowed to bring into the Philippines foreign technical and specialized personnel to work on foreign mining technologies requiring highly specialized training and experience. While they are employed in the Philippines, the contractor shall conduct a training program for Filipinos to replace them in the future. The foreigners may also bring the immediate members of their families during their employment, subject to immigration laws, rules and regulations. (Sec. 8.2.e)

The contractor shall pay royalties to the indigenous cultural communities for the mining of their ancestral lands, at the rate of 1% of the value of the gross output of minerals sold which amounts shall be incorporated in the Mining Project Feasibility Study. (Sec. 8.1. j.1, j.5)

If the Filipino residents of the area lack skills and expertise, the contractor shall undertake a training and recruitment program at its own expense (Sec. 8.1.j.4). For commercial production, the contractor shall conduct an extensive training program to Filipino nationals to equip them for all levels of employment. Cost and expenses shall be included in the Operating Expenses (Sec. 10.1 and 10.2)

The contractor may install infrastructure it needs for the operation of the mine. All movable units shall remain its property which may be removed and re-exported. If the contractor voluntarily abandons or withdraws from the mining operations, it has 1 year to remove its improvements; otherwise, all social infrastructures and facilities shall be donated tax free to the government, for the use and maintenance by the host and neighboring communities (Secs. 9.1, 9.2) The contractor may make expansions, modifications, improvements, and replacements of the mining facilities, and may add new facilities necessary for mining operations, as long as these are stated in its work program as approved by the Director. (Sec. 5.3)

The contractor shall continue commercial operations immediately upon approval and registration of this contract. It shall submit to the Director, through the Regional Director concerned, a 3-year work program and budget, and every 3 years thereafter, to be submitted within 30 days before the end of the previous work program. The contractor shall follow this work program and budget for its mining operations and other activities. It commits to spend not less than the following amounts: PhP4,373,000.00 for the 1st year; PhP4,426,000.00 for the 2nd year; and P4,512,000.00 for the 3rd year. The contractor may make slight changes to its work program as long as it is within its general objectives. Lessening the budget by more than 20% shall require the approval of the Director. Increasing the budget shall require submission of the revised work program. - Secs. 5.1, 5.2

The parties have 1 year to settle any dispute amicably and in good faith. Disputes that were not resolved in a year shall be settled by a tribunal of 3 arbitrators: the first to be appointed by the contractor, the second to be appointed by the Secretary of the DENR, and the third to be appointed by the first 2 so appointed and who shall be the Chairman of the tribunal. Phillipine law shall apply, specifically, R.A. 876 (Arbitration Act) and other pertinent laws. The parties shall share 50%-50% of the fees and expenses of the arbitrators and the costs of the arbitration. They shall shoulder their own costs and attorney’s fee. - Sec. 11

The contractor may assign its rights, interests and obligations in this contract to another entity, subject to the approval of the government. - Sec. 8.2.d

The contract may be suspended for the following reasons: (a) the contractor failed to comply with any provision or requirement of R.A. 7942 and/or its implementing rules and regulations; (b) the contractor failed to completely pay on time its taxes, fees, and/or other charges to the government. The contract may end for the following reasons: (a) the term of 25 years expired, or if renewed, the renewal term expired; (b) the contractor withdraws from the contract; (c) the contractor violates the terms and conditions of the contract; (d) the contractor fails to pay taxes, fees, charges, or other financial obligations for 2 consecutive years; (e) contractors makes a false statement or omits facts; (f) contractor commits other causes provided in R.A. 7942 and its implementing rules and regulations, or violates other relevant laws and regulations. Any falsehood or omission of fact by the contractor that substantially affects the essence of the provisions shall be a ground for the revocation and termination of the contract. The contractor may apply for the cancellation of the contract for the reason that continued mining operation is no longer feasible or viable. It has to submit a notice of cancellation, and the Secretary shall decide on it within 30 days, provided that the contractor has met all its financial, fiscal and legal obligations. The withdrawal of the contractor shall not release it from any financial, environmental, legal and fiscal obligations under the contract. The contractor shall pay all the fees and other liabilities up to the end of the year that the termination becomes effective. The contractor shall immediately restore the contract area in accordance with good mining industry practice. The government may terminate the contract for breach of contract by the contractor, as follows: (a) the contractor fails to begin commercial production within the period prescribed, without valid reason; (b) the contractor fails to conduct mining operations and other activities per its approved Work Program. The government may suspend or cancel the contractor’s tax incentives and credits if the contractor fails to abide by their terms and conditions. The government has the right to seek recourse and relief under the contract. If it delays or omits a course of action, it does not mean it foregoes its right, unless it issues a written waiver saying so. If it chooses one course of action, it does not mean it abandons other courses of action, unless it issues a written waiver saying so. The waiver must be signed by an authorized person. - Sec. 12

The governing law is Philippine law. Art. XII, Sec. 2 of the 1987 Constitution allows the exploration, development, and utilization of mining areas under the full control and supervision of the government. This contract is executed under Republic Act No. 7942, or the Philippine Mining Act of 1995, with its implementing rules and regulations, as well as relevant laws and regulations.(Sec. 13.3)

The contractor may suspend mining operations for reason of force majeure as defined in R.A. 7942. Any failure or delay by the contractor shall be excused to the extent attibutable to the force majeure. The contractor shall give a written notice of suspension of operations to the MGB Director, subject to the latter’s approval. The notice shall state the delay or failure of performance, its expected duration and anticipated effect, and efforts to remedy the situation. If the force majeure happens to be a labor dispute, both parties are not obligated to settle it. The term of the contract shall be extended for the same amount of time that the mining operations were suspended or delayed due to the force majeure. - Sec. 13.4

The contractor shall also help in the development of mining technology and geosciences, by producing geological, geophysical, geochemical and other types of maps and reports that are appropriate in scale and in format, following internationally accepted standards and practices. These maps shall be produced and released not later than 3 years, and made available to the scientific community at the most convenient and cost-effective forms. The contractor shall also submit copies to the MGB for archiving and systematic safekeeping. The technical, economic, financial, and related data generated from the mining area shall be made accessible by students, researchers, and other persons responsible for the development of mining, geoscience, and processing technology. The contractor has 3 years within which to release these generated data. The contractor shall also allocate research and development budget for the advancement of mining technology and geosciences, in coordination with the MGB, research institutions, academe, etc. These amounts shall be incorporated in the Mining Project Feasibility Study. The contractor shall also transfer the technology it adapted to the government or local mining company. - Sec. 8.1.k

The contractor must also submit annual reports to the Director, through the Regional Director, within 60 days from the end of each calendar year. It shall contain the total tonnage of ores and ore reserves; details and type of ore; what stage in production; location; whether sold or committed for export; shipping details and terms of sale; and whether refined, processed or manufactured in the Philippines, with full specifications of the intermediate products, by-products or final products, and their terms of disposal. It shall also contain the work accomplished as well as work in progress in relation to the work program, including the investment actually made or committed. The annual report must also contain the profile of the workforce, management, and staff, stating their nationalities, and for Filipinos, their place of origin (barangay, town, province, region). (Sec. 5.4.b)