PHILIPPINES MINING RIGHTS

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The Philippine is potential with Gold, Nickel, Copper & Chromite.
It is interesting to understand about mining rights in Philippine and compare it with new Indonesian Mining Licenses.

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PHILIPPINES MINING RIGHTS

  1. 1. PERHAPI Association of Indonesian Mining Professionals Sustainability Mining in Philippines (KEBERLANJUTAN PERTAMBANGAN DI FILIPINA) by: Perisai Ginting - PT INCO by: Perisai Ginting - PT INCO
  2. 2. PERHAPI Association of Indonesian Mining Professionals OUTLINE BACKGROUND PHILIPPINE MINING INDUSTRY MINING RIGHTS & PSC MINING RIGHTS vs. IUP MINING RIGHTS Social Development & Management Program ENVIRONMENTAL TAXATION BASIC & ADDITIONAL SHARES OF GOVERNMENT FROM MINING MINING RIGHTS INCENTIVE MINING CONTRIBUTION TO PHILIPPINE ECONOMICS SUMMARY
  3. 3. PERHAPI Association of Indonesian Mining Professionals LATAR BELAKANG MASALAH (BACKGROUND) Dari total daratan Filipina 30 juta Ha, 9 juta Ha diantaranya potensial dengan mineralisasi Emas, Nikel, Tembaga & Chromite. Industri pertambangan Filipina terus berkembang setiap tahunnya yang ditandai dengan bertambahnya perjanjian investasi antara pemerintah Filipina dengan investor. Penambahan investasi ini juga diiringi dengan bertambahnya jumlah konflik antara perusahaan tambang dengan komunitas lokal. Kontribusi nilai ekspor di bidang pertambangan masih dapat ditingkatkan, saat ini masih rendah (7%) Gross Value Added di bidang pertambangan di Filipina masih rendah sekitar 2-3 % dari GDP. Berdasarkan survey terakhir oleh “National Statistics Office” ada 5 juta rakyat Filipina yang mengangur (unemployed) dan rata-rata 1.8 juta rakyat Filipina yang memasuki dunia kerja setiap tahunnya. Sementara tingkat penyerapan tenaga kerja di dunia pertambangan Filipina rendah, hanya 0.4% dari total pekerja atau sekitar 125,000 orang.
  4. 4. PERHAPI Association of Indonesian Mining Professionals RIM OF FIRE
  5. 5. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MAP
  6. 6. PERHAPI Association of Indonesian Mining Professionals 11 Copper Projects Tampakan Copper Project Amacan Gold Project Far Southeast Copper Project Rapu-Rapu Polymetallic Boyongan Copper Project Didipio Cu-Au Project Carmen Copper Project Sto Tomas II Copper Project Batong Buhay Copper Project Kingking Cu-Au Project Colet Copper Project 6 Gold Projects Itogon Gold Project Diwalwal Gold Project Canatuan Gold Project Siana Gold Project MasbateGold Project Teresa Gold Project 6 Nickel Projects Mindoro Nickel Project ACT Nickel Project Palawan HPP Project Hallmark Nickel Project Nonoc Nickel Project Berong Nickel Project 1 Cement Project Akle Cement Project 24 Priority Projects
  7. 7. PERHAPI Association of Indonesian Mining Professionals OFFSHORE MINERAL RESOURCES
  8. 8. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE & INDONESIA
  9. 9. PERHAPI Association of Indonesian Mining Professionals CONTOH KONFLIK
  10. 10. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING VALUE
  11. 11. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING PRODUCTION
  12. 12. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING SECTOR PERFORMANCE
  13. 13. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING VALUE
  14. 14. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE INVESTMENT VALUE
  15. 15. PERHAPI Association of Indonesian Mining Professionals VAT Turkey Top 10 Countries for Mining Investment 2008 Investment Share Rank in 2007 (US$ Billion) (Percent) 1. Australia 53 13 1 2. Canada 44 11 2 3. Brazil 39 10 3 4. Russia 35 9 7 5. Chile 28 7 4 6. Peru 28 7 6 7. South Africa 22 6 5 8. Unites States 18 4 8 9. The Philippines 11 3 9 10. Papua New 8 2 12 Guinea TOTAL 286 68
  16. 16. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING INDUSTRY STATISTICS (a)
  17. 17. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING INDUSTRY STATISTICS (b)
  18. 18. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS IN PHILIPPINE* EXPLORATION PERMIT (EP): grant exclusive right to explore and eventually enter into mineral agreement or FTAA MINERAL AGREEMENTS • MINERAL PRODUCTION SHARING AGREEMENT (MPSA) • JOINT VENTURE AGREEMENT • CO-PRODUCTION AGREEMENT FINANCIAL OR TECHNICAL ASSISTANCE AGREEMENT (FTAA): • involves large-scale mining operation with minimum committed investment of $50 Million for infrastructure and development • Needs approval by the President of the Republic of the Philippines MINERAL PROCESSING PERMIT (MPP) • Refers to Republic Act No. 7942, otherwise known as the “Philippine Mining Act of 1995” • 100% foreign participation is allowed under EP, FTAA and MPP except for MA which requires at least 60% Filipino ownership.
  19. 19. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS IN PHILIPPINE Permit Qualified Person Nationality Maximum Onshore Area) Maximum offshore Area Financial Capability Term (single province) (entire country) entire country, beyond 500m (minimum initial)*** from mean low tide level) 2 years, renewable for like periods, but not to exceed total term Exploration Permit Individual Filipino 1,620 hectares 3,420 hectares 8,100 hectares P2.5m of 6 years Corporation, 2 years, renewable for Partnership, like periods, but not Association, Could be Partially or P10m capital, of w/c P2.5m to exceed total term Exploration Permit Cooperative Fully Foreign-Owned 16,200 hectares 32,400 hectares 81,000 hectares Paid up** of 6 years Mineral Production 25 years, renewable Sharing Agreement Individual Filipino 810 hectares 1,620 hectares 4,050 hectares P2.5m for another 25 years* Corporation, Partnership, Mineral Production Association, At least 60% Filipino P10m capital, of w/c P2.5m 25 years, renewable Sharing Agreement Cooperative owned 8,100 hectares 16,200 hectares 40,500 hectares Paid up for another 25 years* 25 years, renewable Financial or for another 25 years. Technical Assistance Further extention Agreement Individual Filipino 81,000 hectares 324,000 hectares P2.5m negotiable P10m capital, of w/c P2.5m Corporation, paid up. For large scale, 25 years, renewable Financial or Partnership, current minimum investment for another 25 years. Technical Assistance Association, Could be Partially or commitment is US$50m, of Further extention Agreement Cooperative Fully Foreign-Owned 81,000 hectares 324,000 hectares which US$4m is paid up negotiable
  20. 20. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS & IUPK (a) Luas WIUPK • IUPK Eksplorasi – Mineral logam: ≤ 100.000 ha – Batubara: ≤ 50.000 ha • IUPK Operasi Produksi – mineral logam: ≤ 25.000 ha – Batubara: ≤ 15.000 ha • Exploration Permit (EP): ≤ 81.000 ha (for corporation and ≤ 8.100 ha (for individual) • FTAA (foreign ownership): – ≤ 81.000 ha onshore (minimum investment US $ 50 Million) – ≤ 324.000 ha offshore • Mineral Agreement (Philippine based company): – Individual: 810-1.620 ha – Corporation: 8.100 – 16.200 ha
  21. 21. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS & IUPK (b) Jangka waktu maksimal • IUPK Eksplorasi: – mineral logam - ≤ 8 tahun – Batubara – ≤ 7 tahun • IUPK Operasi Produksi: 20 tahun dan dapat diperpanjang 2x10 tahun • Exploration Permit (EP): – mineral logam : ≤ 6 tahun – Mineral non logam: ≤ 4 tahun • FTAA: 25-50 tahun • Mineral Agreement: 25-50 tahun
  22. 22. PERHAPI Association of Indonesian Mining Professionals EXPLORATION PERMIT (EP) Require: • Approval from local legislative council (Sanggunian) • Certification Precondition from National Comission on Indigenous People (NCIC): processing documents less than 100 days • Certificate of Environmental Management and Community Relation Record (CEMCRR) • Submit Environmental Work Program (EnWP) • Environmental Compliance Certificate (ECC): Processing documents 4 months • Environmental Protection & Enhancement Program (EPEP) • Final Mine Rehabilitation & Decommissioning Plan (FMRDP) • Contingent Liability & Rehabilitation Fund (CLRF) mm
  23. 23. PERHAPI Association of Indonesian Mining Professionals FTAA Not allowed for cement raw materials, marble, granite, sand, gravel, construction aggregates Require approval from local legislative council (Sanggunian) Require Certification Precondition from National Comission on Indigenous People (NCIC)
  24. 24. PERHAPI Association of Indonesian Mining Professionals MINERAL AGREEMENT Require approval from local legislative council (Sanggunian) Require Certification Precondition from National Comission on Indigenous People (NCIC) Document Processing Time for MPSA: 6 months
  25. 25. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS APPLICATION FLOW CHART
  26. 26. PERHAPI Association of Indonesian Mining Professionals MINERAL PROCESSING PERMIT Open both domestic & foreign corporation 5 to 25 years Require approval from local legislative council (Sanggunian) Require Certification Precondition from National Comission on Indigenous People (NCIC)
  27. 27. PERHAPI Association of Indonesian Mining Professionals FISCAL REGIME 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, in addition to a Royalty of not less than five percent (5%) of the gross output, as well as other taxes, duties and fees levied by existing laws. The Excise Tax shall be paid to the nearest Bureau of Internal Revenue Office in the province concerned while the Royalty shall be paid directly to the Mines and Geosciences Bureau. 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;
  28. 28. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS Social Development & Management Program (a) SURVEY FRASER INSTITUTE
  29. 29. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS Social Development & Management Program (b) Allot 1% from direct mining and milling cost Programs: • Tilapia raising • Mushroom culture • Backyard gardening • Cattle and goad gardening • Pig dispersal • Training on beauty culture: baking, food processing • Community Based Forest Management • Steep Agricultural Land Technology
  30. 30. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS Social Development & Management Program (c)
  31. 31. PERHAPI Association of Indonesian Mining Professionals MINING RIGHTS Social Development & Management Program (d) Indigenous people entitled to get at least 1% royalty from the gross mining output of the project and can negotiate for more.
  32. 32. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING CONFLICT
  33. 33. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE CRIMES
  34. 34. PERHAPI Association of Indonesian Mining Professionals ENVIRONMENTAL MINING RIGHTS Spend at least 10% of exploration costs and the estimated project development cost on environment- related infrastructure Spend 3-5% of direct mining and milling costs on annual environment protection Test runs under the supervision of the DENR to prove that the mining operation does not harm the environment Spend another 1% of direct mining and milling costs to finance social development projects, such as for education, health, sanitation and livelihood
  35. 35. PERHAPI Association of Indonesian Mining Professionals TAXES & FEES There are three levels of payment: 1) national government (through the Bureau of Internal Revenue, Bureau of Customs, Mines & Geosciences Bureau and other national government agencies imposing taxes or fees) 2) local government (specifically where the mining activity is conducted) 3) communities and people directly affected by the mining project.
  36. 36. PERHAPI Association of Indonesian Mining Professionals Payments to the National Government Excise tax on minerals — 2% of the gross output of mining operations Corporate income tax — maximum of 32% of taxable income for corporations Customs duties and fees on imported capital equipment — the rate is set by the Tariff and Customs Code (3-7% for chemicals; 3-10% for explosives; 3-15% for mechanical and electrical equipment; and 3-10% for vehicles, aircraft and vessels) VAT on imported equipment, goods and services — 10% of value Royalties due the government on minerals extracted from mineral reservations (ie, previously explored by government), if applicable — 5% of the actual market value of the minerals extracted or produced Documentary stamp tax — the rate depends on the type of transaction Capital gains tax on traded stocks — 5-10% of the value of the shares Withholding tax on interest payments on foreign loans — 15% of the amount of interest Withholding tax on dividend payments to foreign stockholders — 15% of the dividend Wharfage and port fees Licensing fees (for example, radio permit, firearms permit, professional fees) Other national taxes and fees
  37. 37. PERHAPI Association of Indonesian Mining Professionals Payments to Local Governments Local business tax — a maximum of 2% of gross sales or receipts (the rate varies among local government units) Real property tax — 2% of the fair market value of the property, based on an assessment level set by the local government Special education levy — 1% of the basis used for the real property tax Occupation fees — P75 per hectare per year; P100 per hectare per year if located in a mineral reservation Community tax — maximum of P10,500 per year All other local government taxes, fees and imposts as of the effective date of the agreement — the rate and the type depend on the local government. Example: Renewal fee, charged every 2 years for EP, MPSA or FTAA: P60 per hectare per renewal period (per DAO 2005-08)
  38. 38. PERHAPI Association of Indonesian Mining Professionals Other Payments Royalty to indigenous cultural communities, if any — minimum 1% of gross output from mining operations Special allowance — payment to claim owners and surface rights holders
  39. 39. PERHAPI Association of Indonesian Mining Professionals TAXATION COMPETITIVE Exploration permit holders and other contractors not yet in the commercial production stage are not required to pay income sales and excise taxes but are required: to pay licence fees, duties, occupation and other special fees. The list of taxes and fees is lengthy and weighty. Not surprisingly, industry participants have grumbled about the tax burden on mining, although the government maintains that its combination of taxes and incentives is competitive with other countries’ tax treatment of mining.
  40. 40. PERHAPI Association of Indonesian Mining Professionals BASIC & ADDITIONAL SHARES OF GOVERNMENT FROM MINING SHARES: BASIC SHARES: TAXES & FEES ADDITIONAL SHARES: charged after reaching post-recovery period or after 5 years commencement of commercial production cash flow-based option — a 50:50 sharing in the cumulative present value of cash flows (calibrated annually; any shortfall in the government share to be paid up annually by the contractor); profit-based option — an amount equivalent to 25% of the additional or excess profits (ie, after tax income) of the enterprise reckoned against a benchmark return on investments (currently 0.4 or 40% benchmark); net mining revenue-based option — an amount that will result in a 50:50 sharing of the cumulative net mining revenue from the end of the recovery period up to the taxable year in question (also calibrated annually; any shortfall in the government share to be paid up annually by the contractor).
  41. 41. PERHAPI Association of Indonesian Mining Professionals INCENTIVE MINING RIGHTS (a) Holders of MPSAs and FTAAs can avail of the incentives below, as provided for by the Omnibus Investment Code of 1987: Tax Exemption: Income Tax Holiday, Exemption from taxes and duties on imported spare parts, Exemption from wharfage dues, export tax, impost and fees Tax Credits: Tax Credits on raw materials and supplies Additional Deductions on Taxable Income: Additional Deduction for Labour Expense, Additional deduction necessary for major infrastructure works Non-Fiscal Incentives: Employment of foreign nationals, Simplification of customs importation procedures, Importation of consigned equipment for a period of ten years Other Incentives: Incentives for pollution control devices, Incentives for income tax carry forward of losses, Incentives for income tax accelerated depreciation on fixed assets, Investment guarantees (such as investment repatriation, earnings remittance, freedom from expropriation and confidentiality of information) Source: Mines & Geosciences Bureau
  42. 42. PERHAPI Association of Indonesian Mining Professionals INCENTIVE MINING RIGHTS (Under new Mining Act of 1995) Income Tax Holiday – Full exemption from income tax for either four or six years from start of commercial operations depending on whether the project is considered pioneer or non-pioneer. Exemption period can be extended for another year in each of the following cases: the project uses indigenous raw materials, the project meets the BOI-prescribed ratio of capital equipment to number of workers the net foreign exchange savings or earnings amount to at least $500,000 annually during the first three (3) years of the project. In any case, the total period of exemption shall not exceed eight (8) years. Any project established in less developed areas shall be entitled to six (6) years holiday.
  43. 43. PERHAPI Association of Indonesian Mining Professionals INCENTIVE MINING RIGHTS (c) 100% foreign ownership of mining projects Companies can repatriate all profits, equipment & investment Excise duties cut from 5% to 2% Recovery of Pre-Operating Expenses for FTAA Pollution Control Device Losses can be carried forward against income tax Income Tax-Accelerated Depreciation Incentive • Fiscal incentive: (Under Omnibus Investment Code of 1987) – Tax exemption, tax credit on raw materials and supplies, additional deduction from taxable income, Tax holiday of from 5 to 10 years – Tariff free importation of equipment and tools • Non-fiscal incentives:(Under Omnibus Investment Code of 1987) – Employment of foreign nationals – Simplication of custom importation procedures – Importation of consigned equipment for a period of 10 years • Investment guarantee : full repatriation of investment • Full remittance of earnings • Foreign loans & contracts • Freedom from expropriation • Requisition of investment • Confidentiality
  44. 44. PERHAPI Association of Indonesian Mining Professionals MINING CONTRIBUTION TO PHILIPPINE & INDONESIA ECONOMICS (a)
  45. 45. PERHAPI Association of Indonesian Mining Professionals MINING CONTRIBUTION TO PHILIPPINE ECONOMICS (b)
  46. 46. PERHAPI Association of Indonesian Mining Professionals MINING CONTRIBUTION TO PHILIPPINE ECONOMICS (c)
  47. 47. PERHAPI Association of Indonesian Mining Professionals MINING CONTRIBUTION TO PHILIPPINE ECONOMICS (d)
  48. 48. PERHAPI Association of Indonesian Mining Professionals COST EXTERNALIZATION IN PHILIPPINE MINING
  49. 49. PERHAPI Association of Indonesian Mining Professionals POLICY POTENTIAL INDEX (PPI)
  50. 50. PERHAPI Association of Indonesian Mining Professionals Taxation Regime PT Inco
  51. 51. PERHAPI Association of Indonesian Mining Professionals Coal Royalty & Taxes in Different Countries of the World Country Royalty Rate Corporate Tax Customs (%) Rate (%) (%) China 0.5-4 30 0 Indonesia Up to 13.5 30 0 Laos 2.5 20-33 0 Malaysia 5 34 - Mongolia 2.5 40 0-5 Vietnam 1-8 25 0 Peru 0 30 0 Australia 2.5-7.5 30 5 Brazil 3 30 - Chili 0 35 - Pakistan 1 35 5 Ghana 3-12 - - Uzbekistan 5.4 - - Different countries practice different royalty rates but the difference is not significant and is within the range of 1-8%. It is true that Indonesia has the highest royalty rate (13.5%, as per amended laws of 1996) in the world but Indonesian coal is at relatively shallower depth (in some instances at the surface and exposed in water courses), of good quality and moreover easy to transport to the international market directly by sea going large vessels.
  52. 52. PERHAPI Association of Indonesian Mining Professionals Mining Law Update in Turkey Pertumbuhan PDB (%) Inflasi (%) 2007 2008 2007 2008 China 11.5 10.6 3.4 3.2 Korea Selatan 4.9 5.0 1.6 2.5 Taiwan 5.4 4.4 0.2 0.8 Hongkong 6.0 5.3 2.1 2.4 Singapura 7.9 6.6 2.5 2.2 Indonesia 6.2 6.4 6.7 6.6 Thailand 4.6 5.0 4.2 4.0 Malaysia 5.7 5.8 2.2 2.4 Filipina 6.7 6.3 2.9 3.3 Vietnam 8.4 8.7 8.6 8.1 10 Negara ASEAN 6.0 6.1 5.0 5.0 10 Negara Asia 8.7 8.2 3.1 3.2
  53. 53. PERHAPI Association of Indonesian Mining Professionals PHILIPPINE MINING PROJECTS
  54. 54. PERHAPI Association of Indonesian Mining Professionals SUMMARY-1 Filipina di bawah pemerintahan Arroyo tampil lebih stabil. Undang-Undang Tambang 1995 (1995 Mining Law) telah membawa perubahan yang signifikan yang mengijinkan 100% investasi asing di bawah perjanjian yang dikenal sebagai Financial or Technical Assistance Agreement (FTAA) dan juga memperkenalkan Mineral Production Sharing Agreement (MPSA). Pemerintah dan investor menginginkan MPSA karena: Menarik investasi yang akan menggairahkan perekonomian dan juga memastikan keamaman Negara yaitu mengurangi ketergantungan terhadap impor energi Usaha eksplorasi dan ekstraksi mineral yang dibutuhkan tidak memerlukan dukungan dana karena semua sumber daya disediakan oleh investor Pemerintah mempunyai kesempatan untuk membuat perjanjian jangka panjang (long- term agreements) dengan investor sehingga dapat mengukur pertumbuhan pemasukan (budget income) Lebih memudahkan dalam hal pembayaran pajak karena pemerintah mendapat porsi dari produksi Diinginkan oleh investor karena memperoleh kepastian untuk pajak. Sampai Juni 2008 ada 265 perusahaan yang sudah memperoleh MPSA dengan total luas area 428,000 Ha. Pada tahun 2008 Filipina masuk ke dalam 10 besar negara dengan investasi tambang terbesar di dunia dengan jumlah 11 Milliar dólar (11 Billion US$). Walaupun mendapat beberapa perdebatan dengan pihak anti-mining, industri pertambangan di Filipina telah memberikan kontribusi yang semakin meningkat bagi GDP Filipina dari 0.7% di 2003 dan menjadi 1.2% pada tahun 2007 dan menjadi 3.0% pada 2008. Sementara kontribusi terhadap ekspor juga meningkat dari 1.8% di 2003 menjadi 5.2% di tahun 2007 dan mnejadi 7.1% pada 2008.
  55. 55. PERHAPI Association of Indonesian Mining Professionals SUMMARY-2 Negara Kazakhstan menjadi negara dengan tingkat penyerapan tenaga kerja di bidang pertambagan 5% Negara Papua New Guinea mempunyai kontribusi sebesar 20% dari dunia pertambangan untuk GDP SURVEY Policy Current Mineral “Best Practices” Room to Composite COUNTRY Political Potential Index Mineral Potential Improvement PPI & BMPI Index (PPI) (CMPI) Index (BMPI) Indonesia 14.2%/62 48%/48 100%/1 52%/11 65%/20 Filipina 19.4%/60 44%/52 100%/1 56%/1 68%/18 Turkey 35.7%/47 64%/32 92%/29 28%/27 70%/13 Quebec (Canada) 97%/1 88%/2 98%/1 10%/58 98%/1

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