2nd Floor, Solid Mills Building, dela Rosa St., Legaspi Village, Makati City

Republic of the Philippines

June 4, 1998

The concession area is located at Barangay Rio Tuba, Bataraza, Palawan – Sec. 4.1

Rio Tuba Nickel Mining Corporation

Mineral Production Sharing Agreement No. 114-98-IV

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

The contractor shall be mining for nickel, cobalt, chromite and other mineral deposits in the contract area - Sec. 1.1

Victor O. Ramos, Secretary, Department of Environment and Natural Resources

Manuel B. Zamora, Jr., President, Rio Tuba Nickel Mining Corporation

The concession area is 990 hectares. – Sec. 4.1

Department of Environment and Natural Resources

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

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

The contractor shall set up an Environmental and Safety Office at the mine site to monitor the implementation of its EPEP (Sec. 10.8). The contractor shall monitor the environmental, safety and health conditions in the contract area and shall follow the “revised Mine Safety Rules and Regulations.” - Secs. 8.8 and 8.9

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 prepare a mining plan designed to minimize damage to the environment. 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. 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. 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 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. - Sec. 9.2.f

The contractor shall keep accurate technical records about its mining operations as well as financial and marketing accounts, and shall make them available to authorized government representatives for the purpose of checking whether the contractor is following the terms of this contract. They may also ask for other documents as covered by other rules and regulations The contractor shall furnish the Bureau all data and information gathered from the contract area, and shall allow inspection of the contract area and its books of accounts and records during business hours. (Secs. 9.1.f to h)

The contractor shall allot annually at least 1% of the direct mining and milling costs for the development of technology and the host and neighboring communities. These expenses may be charged against its required royalty payments, if the host happens to be an indigenous cultural community.

The contractor shall pay all the required national and local taxes and fees. – Sec. 9.1.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. – Sec. 6.5

The surface fee is akin to occupation fees for MPSAs. The contractor shall pay occupation fees at the rate of P50.00 per hectare to the Municipal/City Treasurer concerned. 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. 9.1.j.2

The contractor shall give preference to Filipino citizens who are residing near the mine site for its mining operations (Sec. 9.1.j.4). It shall aim to “Filipinize” its personnel, such that by Year 1 to 15, 100% of unskilled, skilled, clerical, professional, and management employees shall be Filipino (Sec. 11.1). 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. 9.2.e). 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. 11.3).

The contractor shall recognize and respect the rights, customs, and traditions of indigenous tribal communities over their ancestral lands. It shall pay royalties at the rate of not less than 1% of the value of the gross output of minerals sold. (Sec. 9.1. j.1)

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. 9.1.j.4). For commercial production, the contractor shall conduct an extensive training program to Filipino nationals to equip them for all levels of employment (Sec. 11.1). Cost and expenses shall be included in the Operating Expenses (Sec. 11.2).

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 on public lands, 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. 10.1 and 10.2). 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 Secretary. (Sec. 7.4)

The contractor shall continue the development and commercial utilization immediately upon approval and registration of this contract, following its Work Program and Budget and Environmental Compliance Certificate. Any changes must be approved by the Secretary (Sec. 5.1). The Work Program and Budget must cover 3 years of operation, and new ones must be submitted 30 days before the new period starts. The contractor commits to spend not less than the following amounts: PhP 254 million for the 1st year; PhP 257 million for the 2nd year; and PhP 281 million for the 3rd year (Sec. 5.3). The Work Program contains the proposed mining operations and expenditures, and must be submitted to the Secretary, through the Regional Director, copy-furnished the Director (Sec. 7.1). If the government wants to change an item in the work program, it shall notify the contractor within 30 days from receipt, with reasons for such change. The parties shall then agree on the changes. After 60 days from receipt, with no notices given, the work program is deemed approved (Sec. 7.2). The contractor may make slight changes to its work program as long as it is within its general objective. Changing items by more than 20% shall require the approval of the Secretary (Sec. 7.3).

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, and the third to be appointed by the first 2 so appointed and who shall be the Chairman of the tribunal. The decision of a majority of the arbitrators shall be final and binding, which decision may be recognized and enforced by the regular courts. 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 (Secs. 12.1 to 3)

The contractor may assign its rights, interests and obligations in this contract to another entity, subject to the approval of the government. – Sec. 9.2.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 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. All statements in this contract are important. Any falsehood or omission of fact by the contractor that substantially affects the essence of the statement shall be a ground for the 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 DENR Secretary shall decide on it within 30 days, provided that the contractor has met all its financial, fiscal and legal obligations. The government has the right to seek relief under the contract. No delay or omission by the government shall deny it, unless it issues a written waiver saying so. If the government 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. In case of termination, 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 withdrawal of the contractor shall not release it from any financial, environmental, legal and fiscal obligations under the contract The government may terminate the contract by reason of breach. The following, among others, are considered breach of contract by the contractor: (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 follow their terms and conditions. – Secs. 13.1 to 9

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. 14.3

Failures and delays caused by force majeure may be excused. If the mining operations were suspended or delayed due to force majeure, the term of the contract shall be extended for the same period. The party affected shall immediately give a written notice to the other party of such failure or delay, the expected duration thereof, and its anticipated effect. Both parties shall remedy the situation as much as possible, except that if the force majeure happens to be a labor dispute, both parties are not obligated to settle it. – Secs. 14.4.a to c

The contractor shall also help in the development of mining technology and geosciences. It shall produce geological, geophysical, geochemical and other types of maps and reports that are appropriate in scale, format and substance, 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 keep technical, economic, financial, and related data generated from the mining area and shall make these available to 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 transfer its mining technology to the government or local mining company. The contractor shall also allocate research and development budget for the advancement of mining technology and geosciences, in coordination with the Bureau, research institutions, academe, etc. The contractor shall also submit copies of these compiled data, maps and reports to the Bureau for archiving and systematic safekeeping, which shall be made available to the scientific community for research and development activities, as well as improvement of the skills set of Filipino nationals. The contractor has the same 3 years within which to release these generated data. These expenditures shall be incorporated in the Mining Project Feasibility Study.

The contractor must submit quarterly reports containing the tonnage of production stating what ore, concentrate, grade, or type of product; value, destination of sales or exports, names of buyers; and terms of sale and expenditures. It must be submitted to the Secretary, through the Regional Director and copy furnished the Director, within 30 days after the end of each calendar quarter (Sec. 5.5.a). The contractor must also submit annual reports to the Secretary, through the Regional Director and copy furnished the Director, within 60 days after 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 or transit; 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 vis-a-vis the work program, including the investment actually made or committed. It shall also contain the profile of the workforce, management, and staff, stating their nationalities; and for Filipinos, their place of origin (barangay, town, province, region). It shall also state who are the owners of the contractor and state their nationalities (Secs. 5.5.b.1 to 4)