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MINERAL PRODUCTION SHARING AGREEMENT
This MINERAL PRODUCTION SHARING AGREEMENT is made and entered into
in Quezon City, Philippines, this ______ day of AUG 26 2008 by and
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 office at the Department of Environment
and Natural Resources Building, Visayas Avenue, Diliman, Quezon City
FILIPINAS MINING CORPORATION, hereinafter collectively referred to as the
CONTRACTOR, a corporation duly organized and existing under the laws of the
Republic of the Philippines, with office at No. 551 Ma. Cristina Street, Ayala
Alabang Village, Muntinlupa City, Metro Manila, and represented in this act by its
President, Ms. Carmen Luz Herlihy, 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, 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 mineral lands;
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, chromite and other associated mineral deposits existing in the
Contract Area (as herein defined);
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, 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,
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, responsible 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
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 Geosciences 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 January.
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
2.12. Contractor means Filipinas Mining Corporation or its assignee(s) of
interest under this Agreement: Provided, That the assignment of any of
such interest is accomplished pursuant to the pertinent provisions of the
implementing rules and regulations of the Act.
2.13. Declaration of Mining Project Feasibility means a document proclaiming the
presence of minerals in a specific site, which are recoverable by socially
acceptable, environmentally safe and economically sound methods
specified in the Project Feasibility Study.
2.14. Department or DENR means the Department of Environment and Natural
2.15. Director means the Director of Mines and Geosciences Bureau.
2.16. Effective Date means the date of execution of this Agreement by the
Contractor and by the Secretary on behalf of the Government.
2.17. Environment means all facets of man's surroundings: physical,
ecological, aesthetic, cultural, economic, historic, institutional and social.
2.18. Exploration means searching or prospecting for mineral resources by
geological, geophysical and geochemical surveys, remote sensing, test
pitting, trenching, drilling, shaft sinking, tunneling or any other means for
the purpose of determining the existence, extent, quality and quantity of
mineral resources and the feasibility of mining them for profit.
2.19. Exploration Period shall mean the 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 for nonmetallic minerals and eight
(8) years for metallic minerals, subject to the pertinent provisions of the
implementing rules and regulations of the Act.
2.20. Force Majeure means acts or circumstances beyond the reasonable
control of the Contractor including, but not limited to war, rebellion,
insurrection, riots, civil disturbances, blockade, sabotage, embargo, strike,
lockout, any dispute with surface owners and other labor disputes,
epidemics, earthquake, storm, flood or other adverse weather conditions,
explosion, fire, adverse action by the Government or by any of its
instrumentality or subdivision thereof, act of God or any public enemy and
any cause as herein described over which the affected party has no
2.21. Foreign Exchange means any currency other than the currency of the
Republic of the Philippines acceptable to the Government and the
2.22. Government means the Government of the Republic of the Philippines or
any of its agencies and instrumentalities.
2.23. 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.l.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.
2.24. Mine Development refers to 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 state excluding energy materials such as coal,
petroleum, natural gas, radioactive materials and geothermal energy.
2.26. Mineral Products mean materials derived from mineral ores/rocks and
prepared into marketable state by metallurgical processes which include
beneficiation, cyanidation, leaching, smelting, calcination and other similar
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 legitimate purposes.
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, ad 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 Nine Hundred Fifty-One and 5734/10,000
(951.5734) hectares, situated in Sta. Cruz, Zambales, and bounded by the
following geographical coordinates (please refer to ANNEX "B" - 1:50,000
scale Location Map/Sketch Plan):
Corner Latitude Longitude
1 15-48' 12.30" 120-00'00.00"
2 15-48' 12.30" 120-00'33.22"
3 15-48' 41.46" 120-00'33.22"
4 15-48' 41.46" 120-00'43.30"
5 15-48' 21.90" 120-00'43.30"
6 15-48' 21.90" 120-01'03.42"
7 15-48' 31.70" 120-01'03.37"
8 15-48' 31.70" 120-00'53.29"
9 15-49' 10.90" 120-00'53.30"
10 15-49' 10.70" 120-01'03.30"
11 15-49' 01.00" 120-01'03.30"
12 15-49' 01.00" 120-01'13.50"
13 15-49' 10.70" 120-01'13.50"
14 15-49' 10.70" 120-01'43.80"
15 15-49' 01.00" 120-01'43.80"
16 15-49' 01.00" 120-01'33.70"
17 15-48' 51.30" 120-01'33.70"
18 15-48' 51.30" 120-01'13.50"
19 15-48 31.60" 120-01'13.50"
20 15-48' 31.60" 120-01'23.70"
21 15-48' 21.80" 120-01'23.70"
22 15-48' 21.80" 120-01'13.50"
23 15-48' 12.10" 120-01'13.50"
24 15-48' 12.10" 120-01'23.70"
25 15-48' 02.40" 120-01'23.70"
26 15-48' 02.40" 120-01'33.80"
27 15-48' 31.60" 120-01'33.80"
28 15-48' 31.60" 120-01'23.70"
29 15-48' 41.40" 120-01'23.70"
30 15-48' 41.40" 120-01'43.70"
31 15-47' 52.60" 120-01'43.70"
32 15-47' 52.60" 120-02'24.20"
33 15-47' 42.80" 120-02'24.20"
34 15-47' 42.80" 120-02'34.20"
35 15-47' 23.00" 120-02'34.20"
36 15-47'23.30" 120-02'44.50"
37 15-47'33.00" 120-02'44.50"
38 15-47'33.00" 120-02'54.50"
39 15-47'23.00" 120-02'54.50"
40 15-47'23.00" 120-03'24.60"
41 15-47'00.00" 120-03'24.60"
42 15-47'00.00" 120-01'54.40"
43 15-47'04.00" 120-01'54.50"
44 15-47'04.00" 120-01'44.30"
45 15-47'13.40" 120-01'44.30"
46 15-47'13.40" 120-01'34.00"
47 15-47'04.00" 120-01'34.00"
48 15-47'04.00" 120-01'23.80"
49 15-47'33.00" 120-01'23.80"
50 15-47'33.00" 120-01'03.70"
51 15-47'23.20" 120-01'03.70"
52 15-47'23.20" 120-01'13.80"
53 15-47'13.50" 120-01'13.80"
54 15-47'13.50" 120-00'43.40"
55 15-47'06.00" 120-00'43.40"
56 15-47'06.00" 120-00'33.30"
56-A 15-47'25.40" 120-00'33.30"
56-B 15-47'25.40" 120-00'40.20"
56-C 15-47'35.30" 120-00'40.20"
56-D 15-47'35.30" 120-00'33.30"
57 15-47'52.70" 120-00'33.30"
58 15-47'43.00" 120-00'23.20"
59 15-47'52.70" 120-01'23.20"
60 15-47'52.70" 120-00'33.30"
61 15-48'02.30" 120-00'33.22"
62 15-48'02.30" 120-00'00.00"
5.1. Time table 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.
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 the Agreement.
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 "C" and "D").
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 7,330,000.00
2nd Contract Year : PhP 7,200,000.00
Total : PhP 14,530,000.00
For the Environmental Work Program : PhP 1,500,000.00
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
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 Feasibility
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 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
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 Agreement.
b. Final Report - The Contractor shall submit to the Director, through
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 desired
expenditures incurred during the Exploration period. In case of
the diamond drilling, the Contractor shall, upon request of the
Director/Regional Director concerned, submit to the Regional office
9concerned 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
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 theAgreement.
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 not 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 province concerned.
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
12contracts 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 minerals.
8.6. Associated Minerals - If minerals other than nickel, 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
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
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
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
14condition, nature and scale of operations and technology employed in the
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 Operations.
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
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 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
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 Agreement;
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 actions;
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 sold;
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
16charged 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
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)
k.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;
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
k.4. To allocate research and development budget for the
advancement of mining technology and geosciences in
coordination with the Bureau, research institutions, academe,
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 Project 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 and
11.2. Rights of the Contractor:
a. To conduct Mining Operations within the confines of its
Contract/Mining Area in accordance with the terms and conditions
hereof and without interfering with the rights of other
Contractors/Lessees/Operators/ Permittees/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 easement
c. To use and have access to all declassified geological, geophysical,
drilling, production and other data relevant to the mining operations;
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
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 Agreement;
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 hereunder.
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 "Filipinization:"
19 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 00 95
13.2. Cost and expenses of training such Filipino personnel and the Contractor's
own employees shall be included in the 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.
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
15.7. The withdrawal by the contractor from the Mineral Agreement shall not
release it from any and ail 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
a. Failure of the Contractor without valid reason to commence
Commercial Production within the period prescribed; and/or
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 cancer tax incentives and credits if the
contractor fails to abide by the terms and conditions of said incentives and
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:
Filipinas Mining Corporation
No 551 Ma. Cristina Street
Ayala Alabang Village
Muntinlupa City, Metro Manila
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
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 here under shall be excused to the extent
attributable to 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
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
JOSE L. ATIENZA, JR.
Department of Environment and Natural Resources
FILIPINAS MINING CORPORATION
CARMEN LUZ HERLIHY
SEAN MICHAEL LUZ HERLIHY
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
JOSE L. ATIENZA, JR., with Community Tax Certificate No. 16461275
issued on February 05, 2008 at QUEZON CITY, in his capacity as Secretary
of the Department of Environment and Natural Resources, and SEAN MICHAEL
LUZ HERLIHY, with Community Tax Certificaie No. 10344966 issued
on January 07, 2008 at Manila, in his capacity as duly authorized
representative of Filipinas Mining Corporation, both known to me and to me
known to be the same persons who executed the foregoing instrument consisting
of twenty-four (24) 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 27th day of August 2008
ANSELMO C. ABUNGAN
UNTIL December 31, 2008
PTR No. 9915246 1/21/08 QC
Doc. No. 175
Page No. 35
Book No. VIII
Series of 2008