Investor’s Prospectus on Philippine Mining              Minerals Development Council                Republic of the Philip...
Contents    Foreword                                                                 3    The Minerals Development Council...
ForewordG    LOBAL demand continues to push up the     prices of certain mineral commoditiesto historic highs. And the Phi...
The Minerals                                     LIST OF ACRONYMSDevelopment Council                                      ...
Why Invest in the Philippines: A SummaryT   HE PHILIPPINES is a natural gateway    to the other Asia-Pacific economies,and ...
They can be differentiated from previous          Investors from various lands will find the Filipino    discoveries that w...
Country Information                                                                         Baguio City, at an elevation o...
Urban-Rural Ratio:                                                                   GNP Growth:    (source: National Stat...
the fourth most in the world’s hotspots after        Welfarethe Tropical Andes (130), Madagascar and             Social se...
is all-weather, the road network is sufficient        services in Luzon, the most populous island of     to integrate the e...
Constitutional and Legal FrameworkT   HE 1987 CONSTITUTION espouses the    Regalian doctrine, which holds the Stateto be t...
National Policy to Promote and Revitalize Mining     I N 2003, President Gloria Macapagal-Arroyo       announced a policy ...
Geology and MineralizationT   HE PHILIPPINES is a collage of metamorphic    terranes, magmatic arcs, ophioliticcomplexes, ...
from late Early Cretaceous (Albian) in Cebu        Gold and copper deposits in the Philippines     to Late Miocene-Pliocen...
Investing in the Philippine Mining IndustryN    EDA estimates the country’s mineral wealth     to be in the range of US$84...
A legally organized foreign-owned                    Acquiring Mining Rights     corporation shall be deemed a qualified   ...
Exploration PermitAn Exploration Permit (EP) allows a qualifiedperson to undertake exploration activitiesfor mineral resour...
A Mineral Agreement is exclusive to Filipino        A qualified person may apply for or hold at     individuals and corpora...
Financial or Technical Assistance Agreement   FTAA Contractors are allowed to recover theirThe Financial or Technical Assi...
Other Requirements in                               In compliance with this provision, proponents     Acquiring Mining Rig...
Free, Prior and Informed Consent from              For areas occupied by IPs, the applicant andIndigenous Peoples / Certifi...
enhancement strategies, post-exploration land       Contractors are also required to submit an     use potential for distu...
Contingent Liability and Rehabilitation Fund      Final Mine Rehabilitation and/The Contingent Liability and Rehabilitatio...
engineer, a geologist, or a metallurgical          mining and milling costs (DMMC) to fund     engineer with at least five ...
Special Private Land Timber Permit                  Water RightsThe Special Private Land Timber Permit (SPLTP)      A mini...
Incentives for Mining Investors     Incentives Provided by the     Mining Act of 1995     Recovery of Pre-Operating Expens...
Investment Guarantees                                 Just compensation shall be determined and                           ...
Income Tax Holiday (ITH)                              Mining ActivitiesThe following BOI-registered enterprisesare exempt ...
Exemption from Wharfage Dues and Export            Importation of consigned equipment for aTax, Duty, Impost and Fees - Al...
Appendices     A. Registration with the Securities and Exchange Commission                                    START       ...
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
Investor's Prospectus on Philippine Mining
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Investor's Prospectus on Philippine Mining


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Investor's Prospectus on Philippine Mining

Minerals Development Council

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Investor's Prospectus on Philippine Mining

  1. 1. Investor’s Prospectus on Philippine Mining Minerals Development Council Republic of the Philippines 2007
  2. 2. Contents Foreword 3 The Minerals Development Council 4 List of Acronyms 4 Why Invest in the Philippines: A Summary 5 Country Information 7 Constitutional and Legal Framework 11 National Policy to Promote and Revitalize Mining 12 Geology and Mineralization 13 Investing in the Philippine Mining Industry 15 Getting Started 15 Acquiring Mining Rights 16 Other Requirements in Acquiring Mining Rights 20 Requirements Before and During Mining Operations 21 Incentives for Mining Investors 26 Incentives Provided by the Mining Act of 1955 26 Incentives Provided by the Board of Investments 27 Appendices A. Registration with the Securities and Exchange Commission 30 B. Registration with the Department of Trade and Industry 31 C. Registration with the Board of Investments 32 D. Registration of Mining Securities 33 E. Requirements and Flowchart for Mining Rights Applications 35 1. Exploration Permit 35 2. Mineral Production Sharing Agreement 36 3. Financial or Technical Assistance Agreement 37 4 Mineral Processing Permit 39 5. Flowchart for Mining Rights Applications 40 F. Procedures and Requirements for Other Related Documents 41 1. Social Acceptability Endorsements from Local Government Units 41 2. Basic Free, Prior and Informed Consent Process 41 3. Environmental Compliance Certificate 42 4. Timber Rights 44 5 Foreshore Lease Agreement 45 6. Water Rights 46 G. Directory 472
  3. 3. ForewordG LOBAL demand continues to push up the prices of certain mineral commoditiesto historic highs. And the Philippines, richly Its publisher, the Minerals Development Council (MDC), a multi-agency body directly under the Office of the President, facilitatesendowed with mineral resources, beckons to the investments, harmonizes policies and addressesworld as a prime source of valuable minerals. the industry’s issues and concerns. The private sector, thru the Chamber of Mines of theFrom mere tolerance of mining, Philippine Philippines, is also represented in the MDC.policy in 2003 shifted to vigorous promotion.The National Policy Agenda on Revitalized Coupled with boosting mining investments,Mining (Executive Order 270 of January 16, the Government pursues a vigorous campaign2004) established principles to encourage to protect the environment and the rights oflocal and foreign investments; it ensures affected communities. This ensures that thethat the mining industry contributes to the industry will develop with—not against —thecountry’s sustainable development, with ample environment and the local communities.environmental protection and social equity.The ensuing Minerals Action Plan further sets Our mining industry attracted US$694Mforth specific activities addressing the concerns in investments in the past two and a halfof all stakeholders—local governments, years. Another US$348M in investmenthost communities, civil society groups, inflows are expected this year, andindigenous peoples, and the private sector. significant additional infusions are projected from 2008 to 2010. ThousandsIn 2004, the Supreme Court upheld the of jobs are being created along the way.constitutionality of the Philippine Mining Actof 1995, ending years of uncertainty on the We envision not just attracting new investors, butallowable participation and rights of foreign- also making certain that they will stay and, at theowned corporations. The Supreme Court ruled opportune time, look beyond mining, towardsthat given the inadequacy of Filipino capital our country’s other investment opportunities,and technology in large-scale exploration, not the least of which is ecotourism. The samedevelopment and utilization activities, the areas opened for mining, once rehabilitated,State may secure the help of foreign companies will become productive habitats for healthy newthrough financial or technical assistance. The communities—living proofs that responsibleforeign contractor “may be given reasonable mining is worth investing in and, operational, marketing, audit and In the meantime, we shall continue to enhanceother prerogatives to protect its investments our policy package, to make it even moreand to enable the business to succeed.” attuned to the aspirations of all stakeholders.This Investor’s Prospectus on Philippine Mining ANGELO T. REYESbespeaks the commitment of the Philippine Chairman, Minerals Development CouncilGovernment and private sector to boost Secretary, Department of Environmentthe revitalization of the mining industry. and Natural Resources 3
  4. 4. The Minerals LIST OF ACRONYMSDevelopment Council A & D Alienable and Disposable (lands) ICC Indigenous Cultural Community AEPEP Annual Environmental IP Indigenous PeoplesThe Minerals Development Council was created Protection and IPP Investment Priorities Planon October 11, 2005 by President Gloria Enhancement Program IPRA Indigenous People’s Rights ActMacapagal-Arroyo through Executive Order No. ADLE Additional Deduction ITH Income Tax Holiday for Labor Expense JVA Joint Venture Agreement469. At the time, the Philippines was hosting BIR Bureau of Internal Revenue LGUs Local Government Unitsthe 6th Asia-Pacific Mining Conference. BOI Board of Investments MA Mineral Agreement CARL Comprehensive MEPEO Mine EnvironmentalThe inter-agency MDC is composed of key Agrarian Reform Law Protection and Enhancement Office CENRO Community Environment MDC Minerals Development Councilofficials of the Department of Environment and Natural Resources Office/Officer MGB Mines and Geosciences Bureauand Natural Resources, Presidential Adviser CLOA Certificate of Land Ownership Award MMT Multi-partite Monitoring Teamfor Multilateral Development, Department of CLRF Contingent Liability MOA Memorandum of Agreement Rehabilitation Fund MPP Mineral Processing PermitAgrarian Reform, Department of Agriculture, CP Certification Precondition MPSA Mineral ProductionDepartment of Finance, Department of the CPA Co-Production Agreement Sharing AgreementInterior and Local Government, Department CRMD Company Registration MRF Mine Rehabilitation Fundof Labor and Employment, Department of and Monitoring Department MTF Monitoring Trust Fund DA Department of Agriculture MWTRF Mine Wastes andNational Defense, Department of Trade and DENR Department of Environment Tailings Reserve FundIndustry, National Anti-Poverty Commission, and Natural Resources NCIP National CommissionNational Commission of Indigenous Peoples, DILG Department of the Interior on Indigenous PeoplesNational Economic and Development Authority, and Local Government NEDA National Economic DMMC Direct Mining and Milling Costs and Development AuthorityPhilippine Information Agency, Presidential DTI Department of Trade and Industry NGOs Non-Government OrganizationsManagement Staff, and the Chamber of Mines ECA Environmentally Critical Area NIPAS National Integratedof the Philippines. The DENR Secretary is the ECC Environmental Compliance Certificate Protected Areas System ECP Environmentally PAWB Protected Areas and Wildlife BureauChairman while the Presidential Adviser for Critical Project PENRO Provincial Environment andMultilateral Development is the Vice Chairman. EEZ Exclusive Economic Zone Natural Resources Office/Officer EIA Environmental Impact Assessment PD Presidential DecreeThe Council’s primary responsibility is EIS Environmental Impact System PEA Public Estates Authority EMB Environmental Management Bureau PERD Project Evaluationto advance the government policy of EO Executive Order and Registration Departmentresponsible and sustainable development EP Exploration Permit PEZA Philippine Economic Zone Authorityof the State’s mineral resources. EPEP Environmental Protection POs People’s Organizations and Enhancement Program PPA Philippine Ports Authority EnWP Environmental Work Program PSE Philippine Stock ExchangeIt is empowered to enlist the assistance EWP Exploration Work Program RA Republic Actof any agency or instrumentality of the FLA Foreshore Lease Agreement RCF Rehabilitation Cash Fundgovernment, including government owned FMRDP Final Mine Rehabilitation RED Regional Executive Director and/or Decommissioning Plan SEZA Special Economic Zone Actor controlled corporations, to harmonize FMRDF Final Mine Rehabilitation SEC Securities and Exchange Commissionand synchronize requirements and and/or Decommissioning Fund SDMP Social Developmentprocedures in order to facilitate the inflows FPIC Free, Prior and Informed Consent and Management Programof investments into the mining industry. FTAA Financial or Technical SHP Safety and Health Program Assistance Agreement HLURB Housing and Land Use Regulatory Board4
  5. 5. Why Invest in the Philippines: A SummaryT HE PHILIPPINES is a natural gateway to the other Asia-Pacific economies,and enjoys flourishing trade links with Existing mining laws are attractive to investors. They allow co-production, joint venture, mineral production sharing, andthe region. The Philippines is a stable financial or technical assistance agreementsdemocracy, with a free market economy. for large-scale mining projects.The Philippines is among the top three The current policy of revitalizing mining hasinvestment destinations in the Asia-Pacific spurred renewed interest in the industry. Theregion, along with Hong Kong and Taiwan, in presence of major players like Xstrata, Sumitomothe 2006 rankings made by the Netherlands- Mining, Anglo American Gold, BHP Billiton,based ING Investment Management. Japan’s CVMR, Phelps Dodge, Coral Bay, Anglo Goldprestigious Nikkei Weekly in its May 21, 2007 Ashanti and Crew Minerals, attests to the allureissue also cited the Philippines and Vietnam as of Philippine mining. Given these advances, thethe new favorite investment sites in Asia; the country’s private and government sectors arePhilippines earned its high rating by posting taking stock of the bullish metals market andeconomic growth averaging 4.37% annually the surging minerals demand of industrializingfrom 2001 to 2006, the country’s best six-year countries, notably China and India, and theaverage in the last 18 years. The outlook for recovery of the Japanese economy. With2007 is highly positive: GDP is expected to grow the rest of the world’s significant economiesby 5.5%, interest rates are forecast to remain likewise on an upswing, the prospects arestable, and inflation is foreseen to ease further. bright indeed for Philippine minerals.The Philippine government has deregulated The London-based Mining Journal reportedthe telecommunications, shipping, oil in its March 2006 special edition:and energy, banking and insuranceindustries, and has a continuing economic Over the past decade, and despite stiff competition from other countries for theand financial reform program. exploration dollar, the Philippines has progressed significantly, and explorationStraddling the well-defined belt of volcanoes activity has resulted in the discoverycalled the circum-Pacific Ring of Fire, the of a new generation of potentially world-class deposits, such as TampakanPhilippines has the greatest number of (copper), Far Southeast (copper-gold),proven deposits of metallic and non-metallic Boyongan (copper) and many others.minerals among Southeast Asian countries. 5
  6. 6. They can be differentiated from previous Investors from various lands will find the Filipino discoveries that were of low grade and shallow- people a happy mix of Asian and Western seated. They are relatively higher in value cultures. Among Asian countries, the Philippines and have the potential to better to absorb the is perceived to be the most westernized. But social and environmental costs of mining. the tapestry of Philippine culture also threads other than Spanish and American—Malay, The Philippines covers some 30 Mha [million Chinese, Arabian, Indian, and Japanese. These hectares] but only about 1.5% are presently are the major cultures that streamed into covered by mining permits, and some 30% of Philippine history, along with influences from the remaining area is regarded by the Mines the English, the French, the Germans and and Geosciences Bureau to be geologically the Dutch. Still, 110 ethno-linguistic groups prospective for metallic minerals. There are scattered throughout the archipelago retain an estimated 9 Mha where there are potential their distinctive identities and dialects. additional sites for metallic minerals. There is a large pool of Filipino professional geologists and mining engineers who have extensive experience in mineral exploration and mining operations. A continuing training program is also in the works to address an increasing demand for skilled workers. English is spoken and understood throughout the archipelago. The Philippines offers foreign investors a high standard of living at low cost. First- rate housing, hotels, schools and recreation facilities are found in Metro Manila and in major cities all over the country. Repatriation of the earnings and capital of foreign investors is guaranteed.6
  7. 7. Country Information Baguio City, at an elevation of 1,500 meters, has a mean annual temperature of 18.3°C, earningLocation its popularity as the country’s summer capital.Western Pacific Ocean, just north of the equator,southeast of the Asian mainland, with Taiwan The country’s average monthly relativeto the north and Indonesia to the south. humidity varies between 71% in March and 85% in September.GeographyThe Philippines is an archipelago consisting Mean annual rainfall ranges from 965 to 4,064of 7,107 islands, with a total land area of millimeters annually. Baguio City, eastern299,764 sq. km. It is the world’s second largest Samar and eastern Surigao receive the greatestarchipelago after Indonesia. The interiors amount of rainfall, while the southern portionare mountainous, skirted by lowlands and of Cotabato receives the least. At Generalalluvial plains. The highest point is Mt. Apo on Santos City in South Cotabato, the averageMindanao Island, at 2,954 meters above sea level. annual rainfall is only 978 millimeters.According to the Philippine Institute of Based on temperature and rainfall, the country’sVolcanology and Seismology, there are more climate can be divided into two major seasons:than 400 volcanoes throughout the archipelago, (1) the rainy season from June to November,of which 22 are active, 27 are potentially during the southwest monsoon, and (2)active, and more than 350 are inactive. the dry season from December to May. The dry season may be further divided into (a)There are three major island groups: the cool dry season (December to February)Luzon, Visayas, and Mindanao. The City coinciding with the northeast monsoon, andof Manila is the national capital. (b) and the hot dry season (March to May).Coastline Straddling the typhoon belt, the Philippines Official Philippine figure: 17,500 kilometers experiences 15-20 typhoons yearly, usually from July to October, generally moving U.S. figure: 36,289 kilometers northwesterly from the Marianas and Caroline Islands in the Pacific, sparing Mindanao Island.Climate(main source: Philippine Atmospheric, Geophysical & Astronomical Services Administration) DemographyTropical marine, characterized by relatively (source: National Statistical Coordination Board)high temperature, high humidity andabundant rainfall, similar in many respects Population:to the climate of Central America. 2000 Census: 76.5 millionThe mean annual temperature is 26.6°C, except 2007, Projected: 88.7 millionin Baguio City. The coolest month is Januarywith a mean temperature of 25.5°C; the warmestis May, with a mean temperature of 28.3°C. 7
  8. 8. Urban-Rural Ratio: GNP Growth: (source: National Statistics Office) 4th Quarter 2006 5.9% The urban population comprised 48.05% of Annual 2006 6.2% the population, based on the 2000 Census (2005 5.6%) Literacy: Inflation Rate: (2000=100, April 2007) Overall literacy was estimated in 2003 at 93.4% for the total population (92.6% Headline 2.3% for males, and 94.3% for females). Core 2.6% Employment: According to the National Statistics Office, (source: National Statistics Office, January 2007 Labor Force Survey) slowdowns in the annual inflation rates Labor Force 56,145,000 of all the major commodity groups except clothing contributed to the headline inflation Employment rate 92.2% downtrend at 2.2% in March 2007. The core Unemployment 7.8% inflation rate also eased to 2.6% from 3.0% Underemployment 21.5% the previous month. The March inflation rate is the lowest in 20 years since April 1987. Religions: (source: Department of Tourism) The National Economic and Development Filipinos are predominantly Roman Authority (NEDA) adds that this development Catholic (82.9%). Other significant religious brings inflation for the first quarter of 2007 groups: Protestants (5.4%), Muslims to 2.9%, significantly down from the 7.3% (4.6%), Philippine Independent Church in the same period in 2006, and way below (2.6%) and Iglesia ni Cristo (2.3%). the 4-5% target for 2007 of the Development Budget Coordination Committee. Economic Indicators (source: National Statistical Coordination Board) Environment and Natural Resources GDP, 2006: US$116.90 billion The Philippines is one of the world’s 25 leading biodiversity hotspots, which are priority areas GDP Growth: for biodiversity conservation, based on rankings 2001 1.8% made by Conservation International. Together, these 25 hotspots, although comprising only 2002 4.4% 1.4% of the earth’s land area, contain 44% of the 2003 4.9% world’s plant species and 35% of all terrestrial 2004 6.2% vertebrate species. The Philippine hotspot covers 2005 5.0% 20,803 square kilometers out of the archipelago’s total of almost 300,000 square km. The country 2006 5.4% has a total of 25,995 sq. km. of protected areas. In the hotspot, there are 7,620 plant species and 1,114 terrestrial vertebrate species; of the latter, 103 endemic species are under threat,8
  9. 9. the fourth most in the world’s hotspots after Welfarethe Tropical Andes (130), Madagascar and Social security is compulsory for allIndian Ocean Islands (123), and the Atlantic employees, public and private.Forest (116). In addition to the 103 endemicspecies (birds, 56; mammals, 47) of terrestrial Governmentvertebrates, the Philippines also has 48 species The Philippines is an independent democraticof amphibians on the list of threatened species. and republican state. Its government consists of three co-equal branches: theMajor mineral resources include chromite, coal, executive, the legislature and the judiciary.cobalt, copper, gold, gypsum, iron, nickel, silver Executive power is vested in the President;and sulfur. There are also deposits of bauxite, legislative power in the bicameral Congress;lead, mercury, molybdenum, and zinc. and judicial power in the Supreme Court and other courts established by law.Regular HolidaysNew Year’s Day (January 1); Holy Thursday The President is elected by direct vote of(movable, March or April); Good Friday the people for a single term of six years. In(movable, March or April); Eidul Fitre (movable the Congress, the Members of the House ofdate); Araw ng Kagitingan / Bataan Day (April Representatives have three-year terms, while9); Labor Day (May 1); Independence Day (June those of the Senate serve for six years. Local12); National Heroes Day (last Sunday of August); government officials have three-year terms. TheBonifacio Day (November 30); Christmas Day most recent elections for the Congress and local(December 25); and Rizal Day (December 30) government officials were held in May 2007. The magistrates of the Supreme Court and of theSpecial Holidays lower courts are appointed by the President fromAll Saints’ Day (November 1) and Last the nominees of the Judicial and Bar Council,day of the year (December 31) without need for congressional confirmation.Time Zone As of March 2007, the Philippines consisted8 hours ahead of Greenwich Mean Time of the following geopolitical subdivisions: 17 administrative regions, 81 provinces, 118 cities,Languages 1,510 municipalities, and 41,995 barangays.The two official languages are Filipino and Provinces are headed by governors, and citiesEnglish. The Philippines is the third-largest and municipalities by mayors. The barangay isEnglish-speaking country in the world. the basic political unit and is administered by aSpanish is spoken by a small minority set of elective officials headed by the chairman,of Filipinos of Spanish ancestry. locally known as the punong barangay. Infrastructures The country has 199,950 kilometers of highways, of which 39,590 kms are paved; existing national roads account for 28,978 kms. Although less than half of this network 9
  10. 10. is all-weather, the road network is sufficient services in Luzon, the most populous island of to integrate the entire archipelago. The the archipelago, is underway. The Philippine expansion of the nautical highway system National Railways, which handles commuter through the development of new airports and and cargo traffic, has only 479 kms of routes at ports in all the roll-on and roll-off routes has present, but the rehabilitation of the country’s considerably enhanced the movement of people north and south lines is almost complete. and goods. Water and power supply, roads, airports and seaports, and telecommunications Maritime Transport systems are being continuously upgraded and The country has 87 completed sea ports. Ten expanded. There are established government- ports are undergoing major development. managed export processing zones. Telephone and international direct dialing services are The government has launched a high priority provided mainly by several telecommunication program geared to meet the increasing demand companies reaching almost all the provinces for public transport services. In terms of sea in the country and other parts of the world. transport, the roll on, roll off project of the government has made it easier to link the The National Power Corporation and several various islands from the north to south. independent private power generating companies service the power needs of the entire archipelago. Out of 24 major ports nationwide, only two The country still relies mainly on imported crude (the Manila International Container Terminal oil to meet its energy requirements. However, and the Batangas Port) are capable of handling consumption of crude oil is decreasing as the post-Panamax vessels. Major development works, country develops more indigenous sources however, are ongoing in the Port of Manila of energy such as hydropower, geothermal, (North and South Harbors) and in ports in Subic, coal, natural gas, wind power, solar power Lucena, Dingalan, Iloilo, Cagayan de Oro, Davao, and biofuels. The Philippines is the world’s General Santos, Ozamis, and Zamboanga. second largest producer of geothermal energy. Air Transport Transportation (source: Air Transportation Office) Land Transportation The Philippines has 85 national airports of There is a well developed network of public various types, including eight international land transportation throughout the islands. airports. The four regular international airports Buses and jeepneys ply the principal roads of are in Manila, Clark, Subic and Mactan (Cebu), cities and towns. The jeepney, an ubiquitous and the four alternate international airports are means of transportation in the Philippines, is in Laoag, Davao, General Santos and Zamboanga. a distinctive Filipino invention that evolved Philippine Airlines is the nation’s flag carrier from the leftover MacArthur jeeps of World and other airline companies now service War II. Metro Manila has three rail lines for several provinces. Aircraft charter companies urban mass transit under the Light Rail Transit rent and lease small planes and helicopters for Authority, a government owned corporation. inter-island flights for passengers and cargo. Outside Metro Manila, railway transportation has limited coverage but the expansion of railroad10
  11. 11. Constitutional and Legal FrameworkT HE 1987 CONSTITUTION espouses the Regalian doctrine, which holds the Stateto be the owner of mineral lands, minerals, On December 1, 2004, the Supreme Court upheld the constitutionality of the Philippine Mining Act of 1995 against a concerted challengeand mineral resources. Thus, the exploration, by various interest groups. The Court saiddevelopment and utilization of mineral resources in part: “The Constitution should be read inare under the full control and supervision of the broad, life-giving strokes. It should not be usedState. Among the mining countries, only the to strangulate economic growth or to serveUnited States does not adhere to this doctrine. narrow, parochial interests. Rather, it should be construed to grant the President and CongressThe Philippine Mining Act of 1995 (Republic sufficient discretion and reasonable leewayAct No. 7942) specifies the Department of to enable them to attract foreign investmentsEnvironment and Natural Resources (DENR) and expertise.” The Court also affirmed theas the primary agency responsible for the constitutionality of the law’s Implementingconservation, management, development, and Rules and Regulations insofar as they relate toproper use of the State’s mineral resources, and its financial or technical assistance agreements.Mines and Geosciences Bureau (MGB) as directlyin charge of the administration and dispositionof mineral lands and mineral resources.The Mining Act introduced a new system ofmineral resources exploration, development,utilization and conservation, with due regardto other laws (e.g., Presidential Decree 1586, onenvironmental impact statement and other issuesrelated to environmental management; RA No.7586 or the National Integrated Protected AreasSystem (NIPAS) Act of 1992; RA No. 7160 or theLocal Government Code of 1991; and RA No.7916 or the Special Economic Zone Act of 1995). 11
  12. 12. National Policy to Promote and Revitalize Mining I N 2003, President Gloria Macapagal-Arroyo announced a policy shift “from tolerance to promotion of the mining industry.” This was • Safeguard the ecological integrity of areas affected by mining, including biodiversity and small-island ecosystems; followed on January 16, 2004 by Executive • Pursue mining within the framework Order No. 270, setting forth the National of multiple land use and sustainable Policy Agenda on Revitalizing Mining, utilization of minerals; which was amended on April 16, 2004. • Remediate and rehabilitate abandoned mines; EO 270 emphasized that the exploration, development and utilization of the country’s • Ensure equitable sharing of economic mineral resources should be pursued within and social benefits from mining; the framework of sustainable development • Enhance public awareness and respect and must therefore contribute to economic for the rights of communities; and growth, environmental protection, and social • Institutionalize continuous and equity and development. The twelve (12) meaningful consultation process with principles that guide the revitalization program the industry and other stakeholders. for mining are summarized as follows: The Minerals Action Plan (MAP) issued on • Recognize the critical role of September 13, 2004 added flesh to the foregoing investments in the minerals industry guiding principles, by identifying specific mining • Institute clear, stable and predictable issues and concerns and the strategies and investment and regulatory policies; activities formulated to address them. The MAP, a product of a series of consultations, is now • Pursue value-adding of minerals being implemented by government agencies, and mineral products; the private sector, and other stakeholders. • Recognize and formalize the small-scale mining sector; • Adopt efficient technologies in the extraction and utilization of minerals; • Integrate environmental protection, mitigation and progressive rehabilitation in mining projects;12
  13. 13. Geology and MineralizationT HE PHILIPPINES is a collage of metamorphic terranes, magmatic arcs, ophioliticcomplexes, sedimentary basins and continental Many areas of this mobile belt are underlain by ophiolitic complexes. Usually occurring together with pre-Cenozoic schists and phyllites, theblock of Eurasian affinity subjected to tectonic ophiolitic rocks represent basement on whichprocesses such as subduction, collision and magmatic arcs have developed. The ages ofmajor strike slip faulting. The subduction the ophiolitic complexes range from Jurassiczones are represented on the east by the to early Paleogene. One of the best studiedwest dipping Philippine Trench traversing complete ophiolite sequence is the Zambalesthe eastern seaboard of the Philippines from Ophiolite where tectonized peridotites progressMindanao up to a point in Luzon and the East to layered and isotropic gabbro, sheeted dikeLuzon Trough. East dipping subduction zones complex, pillow basalts and finally pelagicinclude the Manila Trench, Negros Trench and sedimentary rocks. Other ophiolitic complexesCotabato Trench. The southern termination include those in Isabela, Polillo Island, easternof the Manila Trench is characterized by Rizal, Camarines Norte, Caramoan Peninsula,the transformation of the subduction of the Mindoro, southern Palawan, Panay Island, BoholSouth China Sea Plate into an arc-continent Island, Leyte Island, Samar Island, Dinagat Islandcollisional deformation within Mindoro Island. Group, north-central Zamboanga, Mindanao Central Cordillera and Pujada Peninsula.The continental block is represented by Ultramafic rocks of these ophiolites are hostsnorthern Palawan, southern Mindoro, Romblon to significant deposits of chromite and nickel.Island Group and Buruanga Peninsula in Laterites over these rocks also contain economicPanay Island, known collectively as the North deposits of secondary nickel minerals. On thePalawan Block. Rock suites in this block other hand, massive sulphide and manganeseinclude schists that are characteristically deposits are associated with the volcanic andrich in quartz and chert formations that sedimentary carapace of the ophiolite.have been dated Late Permian to Jurassic. Ancient magmatic arcs in the mobile belt areThe rest of the archipelago is considered as characterized by thick volcanic flows intercalatedthe Philippine Mobile Belt. Approximately with pyroclastic and sedimentary rocks andco-axial with the mobile belt is the Philippine intrusions of diorite, quartz diorite and andesiticFault, a major strike slip fault that apparently to dacitic rocks. Some intrusions, however, havedeveloped partially in response to the a more alkalic character such as the syenites inkinematic forces from the subduction from Isabela and monzonites in Quirino and Nuevathe east and west of the mobile belt. Vizcaya. The ages of the diorite intrusions vary, 13
  14. 14. from late Early Cretaceous (Albian) in Cebu Gold and copper deposits in the Philippines to Late Miocene-Pliocene (Black Mountain tend to be clustered in certain areas such as Quartz Diorite in Baguio District). Younger Luzon Central Cordillera, Camarines Norte, volcanic rocks, occurring as flows, intrusions Surigao and Davao, although large deposits and volcanic edifices disposed in linear belts may also be found elsewhere, as in Zambales are associated with active subduction processes. (Dizon mine), Cebu (Atlas mine) and South These are best exemplified by the Bataan volcanic Cotabato (Tampakan project). Many copper-gold belt and Bicol volcanic chain. Sedimentary deposits are associated with intrusions (mostly basins located between arcs include the Ilocos- diorite and quartz diorite, but also monzonites Central Valley Basin, Cagayan Valley Basin, and syenites) as well as Pliocene-Pleistocene southeast Luzon Basin, Visayan Sea Basin, volcanism (Lepanto mine at Mankayan, Agusan-Davao Basin and Cotabato Basin. Benguet). Iron deposits are also associated with Neogene intrusions of diorite and quartz diorite.14
  15. 15. Investing in the Philippine Mining IndustryN EDA estimates the country’s mineral wealth to be in the range of US$840 billion. In 2004, total approved investments in the mining industry amounted to PhP1,512 million. The figure rose to PhP8,294 millionThe MGB in 1996 estimated that the country in 2005, posting a growth rate of 448.5%.has 7.1 billion tons of metallic mineralreserves and 51 billion tons of nonmetallics, For the medium term, the government’sprimarily limestone and marble. Of the responsible mining targets are US$4-6metallic reserves, copper accounts for 4.8 billion investments for the development ofbillion tons, and gold for 110,000 tons. 18-23 areas for large-scale mining, which are expected to create 239,000 direct andThe Foreign Chambers of Commerce of the indirect jobs. In two international miningPhilippines (consisting of the American, events in 2005, investment commitmentsAustralia-New Zealand, Canadian, European, totaling US$1.9 billion were solicited.Japanese, and Korean chambers), and thePhilippine Association of Multinational Getting StartedCompanies Regional Headquarters, haveprojected the following benefits of mining Who are qualified to enter the mining business?to the Philippine economy: five-year capitalinvestments of US$3.2 billion, export earnings Under the Mining Act of 1995 and itsof US$1.2 billion/year, tax revenues of PhP21 Implementing Rules and Regulations, abillion/year, direct employment for 6,000 and qualified person means any Filipino citizenindirect employment for 24,000 people, and of legal age and with capacity to contract;community development worth PhP312 million/ or a corporation, partnership, associationyear. These business organizations remarked: “By or cooperative organized or authorized forinternational standards, the Philippines is under- the purpose of engaging in mining, withexplored. During recent years, the discovery the technical and financial capability toof the Boyongan, Didipio, Tampakan, Victoria undertake mineral resources development,and Far South East deposits has significantly and duly registered in accordance with law,reinforced the appetite of exploration companies at least sixty percent (60%) of the capitalto find new “world-class” ore bodies in the of which is owned by Filipino citizens.Philippines.” They described the new ore-bodiesbeing found as having “huge potential.” 15
  16. 16. A legally organized foreign-owned Acquiring Mining Rights corporation shall be deemed a qualified person only for the purposes of applying for Types of Mining Rights and receiving the grant of an exploration Under RA No. 7942 or the Philippine Mining permit, financial and technical assistance Act of 1995, the following mining rights agreement or mineral processing permit. can be acquired by a qualified person for the exploration, development, utilization How are corporations set up and processing of mineral resources: in the Philippines? All entities/persons who wish to do • Exploration Permit (EP); business in the Philippines are required to • Mineral Agreements (such as Mineral register with the Securities and Exchange Production Sharing Agreement, Joint Venture Commission (SEC). The SEC is the primary Agreement, and Co-Production Agreement); government agency responsible for registering, regulating and supervising corporations and • Financial or Technical Assistance partnerships, including foreign corporations. Agreement (FTAA); and • Mineral Processing Permit (MPP) The SEC’s Company Registration and Monitoring Department (CRMD) will guide the investor thru Exploration can be undertaken only either the steps of verifying the proposed company through an EP or an FTAA. For projects that name, drawing up the articles of incorporation have concluded a Mining Project Feasibility and by-laws, depositing the paid-up capital, Study, the proponent may apply for an MPSA. submission of the documents for processing, Projects that require processing only of minerals paying the filing fees and then claiming may apply for a Mineral Processing Permit. pertinent certificates or licenses. Six (6) sets of accomplished forms and documents, including the additional requirements for foreign-owned corporations, should be submitted to the CRMD for processing. Assuming all required documents are submitted and all information therein provided is in order, application for registration of new corporation with the SEC are processed within 24 hours from date of filing. For convenience, the applicant may register online through the internet via the SEC i- Register. The system enables the applicant to verify and reserve corporate names as well as apply for registration, 24 hours, seven days a week. Applicants need only to access the SEC website at and follow the instructions provided.16
  17. 17. Exploration PermitAn Exploration Permit (EP) allows a qualifiedperson to undertake exploration activitiesfor mineral resources in certain areas open tomining. The EP has a term of two (2) years,renewable for like periods but not to exceed atotal term of four (4) years for the explorationof non-metallic minerals or six (6) years forthe exploration of metallic minerals. Themaximum area that each qualified personmay apply for or hold at any one time is: QUALIFIED PERSON ONSHORE ONSHORE OFFSHORE (in any one province) (in the entire Philippines) (in the entire Philippines beyond 500 meters from the mean low tide level) Individual 20 meridional 40 meridional blocks 100 meridional blocks blocks or 1,620 or 3,240 hectares or 8,100 hectares hectares Corporation/ 200 meridional 400 meridional 1,000 meridional blocks Partnership/ blocks or 16,200 blocks or 32,400 or 81,100 hectares Association/ hectares hectares CooperativeNote: One (1) meridional block is equivalent to approximately 81 hectares.EP holders may submit a Declaration ofMining Project Feasibility and apply for anMA or an FTAA, and proceed to development/construction and commercial utilization.Mineral AgreementsA Mineral Agreement is an agreement betweena Contractor and the Government whereinthe Government grants to the Contractor theexclusive right to conduct mining operationswithin, but not title over, the contract area.Mining operations that are allowed underMineral Agreements include exploration,development and utilization of mineral resources. 17
  18. 18. A Mineral Agreement is exclusive to Filipino A qualified person may apply for or hold at individuals and corporations. It has a term of any one time under a Mineral Agreement twenty-five (25) years, renewable for another the following maximum areas: twenty-five (25) years under the same terms and conditions, without prejudice to changes Onshore mutually agreed upon by the Government and the Contractor. After the renewal period, the i. In any one province: operation of the mine may be undertaken by the Government or through a Contractor. Individual 10 Meridional Blocks or 810 hectares There are three (3) modes of Corporation/ Partnership/ As- 100 Meridional Blocks or Mineral Agreements, namely: sociation/Cooperative 8,100 Hectares. • Mineral Production Sharing Agreement (MPSA). A mineral agreement wherein ii. In the entire Philippines: Government shares in the production of the Contractor, whether in kind or in value, as Individual 20 Meridional Blocks or owner of the minerals, and the Contractor gets 1,620 Hectares the rest. In return, the Contractor provides the necessary financing, technology, management Corporation/ Partnership/ As- 200 Meridional Blocks or sociation/Cooperative 16,200 Hectares and personnel for the mining project. Offshore, in the entire Philippines, • Co-Production Agreement (CPA). An beyond five hundred meters (500 m) agreement wherein the Government from the mean low tide level: provides inputs to the mining operations other than the mineral resources; and 50 Meridional Blocks or Individual 4,050 Hectares • Joint Venture Agreement (JVA). An agreement wherein the Government and the Corporation/ Partnership/ As- 500 Meridional Blocks or Contractor organize a joint venture company, sociation/Cooperative 40,500 Hectares with both parties having equity shares. The For the Exclusive Economic A larger area to be deter- Government is entitled to a share in the gross Zone mined by the Secretary output of the mining project aside from its earnings in the equity of the company.18
  19. 19. Financial or Technical Assistance Agreement FTAA Contractors are allowed to recover theirThe Financial or Technical Assistance pre-operating expenses, which shall be for aAgreement (FTAA) is an agreement for the period of five (5) years or until the date of actuallarge-scale exploration, development and recovery, whichever comes earlier, or for a longerutilization of minerals. An FTAA requires period for projects requiring large investmentsa minimum authorized capital of Four with high production rates and extensive mineMillion Dollars (US$ 4,000,000) and a life, as determined by the MGB and uponcapital investment of Fifty Million Dollars negotiation with the FTAA Negotiating Panel(US$ 50,000,000) for infrastructure and and with the approval by the DENR Secretary.development in the contract area. From the approval of the Declaration of Mining Project Feasibility up to the end of the recoveryThe FTAA is available to both domestic period, corporate income tax, customs dutiesand foreign corporations. It has a term of and fees on imported capital equipment, value-25 years, renewable for another 25 years. added tax on imported goods and services,The FTAA prescribes minimum exploration withholding tax on interest payments onground expenditures during the exploration foreign loans and on dividends to foreignand pre-feasibility periods. The maximum stockholders, and other national taxes, exceptarea that a Qualified Person may apply for excise tax on minerals, shall not be collectedor hold in the entire Philippines are: from the Contractor. After the recovery period, the Contractor is required to pay all applicable • Onshore - 81,000 hectares; taxes, fees, royalties and other related payments to the national and local governments. • Offshore - 324,000 hectares; or • Combination of 81,000 hectares onshore Mineral Processing Permit and 324,000 hectares offshore. A Mineral Processing Permit (MPP) is the permit granted to a qualified person forFTAAs are not allowed for cement raw the processing of minerals. The Mining Actmaterials, marble, granite, sand and defines mineral processing as the milling,gravel and construction aggregates. beneficiation, leaching, smelting, cyanidation, calcination or upgrading of ores, minerals,FTAA Contractors who have determined rocks, mill tailings, mine wastes and/or othera viable mining project can be pursued metallurgical by-products or by similar meansare required to submit a Declaration of to convert the same into marketable products.Mining Project Feasibility. The approval ofthis Declaration shall authorize the FTAA An MPP is open to both domestic andContractor to proceed to development/ foreign corporations. It has a term of fiveconstruction and commercial utilization. (5) years renewable for like terms but not to exceed a total of twenty five (25) years. The major requirement in applying for an MPP is the proof of supply of minerals from a holder of a valid mining right. 19
  20. 20. Other Requirements in In compliance with this provision, proponents Acquiring Mining Rights applying for mining applications intended for exploration activities are required to conduct Proof of Consultation from consultation with all LGUs concerned, or Local Government Units the legislative councils (Sanggunian) at the The Local Government Code of 1991 or RA No. provincial, city/municipal, and barangay 7160 requires the national government agency (village) levels (respectively, the Sangguniang involved in the planning or implementation of Panlalawigan, Sangguniang Panlungsod/Bayan, projects or programs that may cause pollution, and the Sangguniang Barangay). The presiding climatic change, depletion of non-renewable officers of these legislative councils are the vice- resources, loss of cropland, rangeland or forest governor at the provincial level and the vice- cover, and extinction of animal or plant species, mayors at the city and municipal levels. The to consult with the local government units proof of consultation or project presentation (LGUs) and explain the goals and objectives shall be in the form of the following: of the projects or programs, their impact upon the people and the community in terms of i. Copies of the pertinent Exploration and environmental or ecological balance, and the Environmental Work Programs duly received measures that will be undertaken to prevent or by the Secretary of all the Sanggunians minimize the adverse effects. Under this law, concerned or the Office of the Vice- no projects or programs shall be implemented Mayor or Vice-Governor concerned; or unless the consultation is complied with and the prior approval of the Sanggunian (or local legislative council) is obtained. ii. A certification of project presentation by all the Provincial Governors, Vice- Governors, Municipal/ City Mayors or Vice-Mayors concerned, or the Secretaries of all the Sanggunians concerned.20
  21. 21. Free, Prior and Informed Consent from For areas occupied by IPs, the applicant andIndigenous Peoples / Certification representatives from the NCIP will conductPrecondition from the National consultations and consensus-building to obtainCommission on Indigenous Peoples the consent of the IPs. The FPIC is manifested through a Memorandum of Agreement with theThe Indigenous Peoples’ Rights Act (IPRA) of IPs, traditionally represented by their elders. The1997 grants to the indigenous peoples (IP) CP is then issued by the NCIP stating that thecertain preferential rights to their ancestral FPIC has been obtained from the IPs and all resources found therein. Requirements Before andAncestral domains are defined as areas During Mining Operationsgenerally belonging to IPs, subject to propertyrights within ancestral domains already Environmental Protectionexisting or vested upon the effectivity of The Mining Act of 1995 requires the followingthe IPRA, comprising lands, inland waters, documents/measures to ensure that thecoastal areas, and natural resources, held environment is protected during exploration,under a claim of ownership, occupied or mine development/construction, commercialpossessed by IPs by themselves or through production and mine decommissioning --their ancestors, communally or individuallysince time immemorial, continuously to the Certificate of Environmental Managementpresent, except when interrupted by war, and Community Relations Recordforce majeure or displacement by force, deceit, The Certificate of Environmental Managementstealth, or as a consequence of government and Community Relations Record (CEMCRR)projects or any voluntary dealings entered refers to the applicant’s documented proofinto by the government and private persons, of its past environmental and communityand which are necessary to ensure their relations. This document contains informationeconomic, social and cultural welfare. on the company’s regard for the environment in its previous resource-use projects. TheUnder the IPRA, no concession, license, lease or information shall include proof of theagreement shall be issued by any government applicant’s technical and financial capabilityagency without the Certification Precondition to undertake resource protection and(CP) from the National Commission on restoration/rehabilitation of degraded areas,Indigenous Peoples (NCIP). The CP states that and proof of its past community relations.the Free, Prior and Informed Consent (FPIC)has been obtained from the concerned IPs. Environmental Work ProgramFor areas not occupied by IPs, a Certificate of Apart from the Exploration Work ProgramNon-Overlap is issued instead by the NCIP. (EnWP), applicants for mining contracts which shall undertake exploration activities are required to submit an EnWP. This document describes the company’s environmental protection and 21
  22. 22. enhancement strategies, post-exploration land Contractors are also required to submit an use potential for disturbed lands, and monitoring Annual EPEP (AEPEP) at least thirty (30) days and reporting mechanisms. It also includes prior to the start of each calendar year. a public information component to educate the community about the project. Applicants Final Mine Rehabilitation and/ are required to furnish all concerned local or Decommissioning Plan government units with a copy of their EnWP. The Final Mine Rehabilitation and/or Decommissioning Plan (FMRDP) ensures Environmental Compliance Certificate a smooth transition from active mining to The Philippine Environmental Impact eventual closure of the mine. The plan, Statement (EIS) System under Presidential which is formulated in consultation with the Decree 1586 requires all government and communities and local government units, must private entities to prepare an EIS for every be submitted as an integral part of the EPEP. project or activity which significantly affects Using risk-based methodologies/ approaches, the environment. PD 1586 mandates that the FMRDP shall consider all mine closure environmentally critical projects (ECPs) and scenarios and shall contain cost estimates for projects within environmentally critical areas the implementation of the FMRDP, taking in (ECAs) shall require an EIS. Mining projects consideration expected inflation, technological are considered ECPs and are thus required to advances, the unique circumstances faced by submit their EIS. Upon evaluation of their the mining operation, among others. Such EIS, mining projects are issued Environmental estimates shall be based on the cost of having Compliance Certificates (ECCs), which contain the decommissioning and/or rehabilitation the major elements of the environmental and works done by third party contractors. Further, social management plan that the companies these estimates, on a per year basis, shall cover need to implement to keep their adverse the full extent of work necessary to achieve the environmental impacts within acceptable limits. objectives of mine closure such as, but shall not be limited to, decommissioning, rehabilitation, Environmental Protection maintenance and monitoring, and employee and Enhancement Program and other social costs, including residual The Environmental Protection and Enhancement care, if necessary, over a ten year period. Program (EPEP) provides the operational link between the ECC and the environmental protection and enhancement commitments of the company. It provides a description of the expected and considered-as-acceptable impacts and sets out the environmental protection and enhancement strategies during the life of the mine based on best practices in mine environmental management. The EPEP also includes the post-mining land use potential for various types of disturbed land.22
  23. 23. Contingent Liability and Rehabilitation Fund Final Mine Rehabilitation and/The Contingent Liability and Rehabilitation or Decommissioning FundFund (CLRF) is the financial mechanism for A Final Mine Rehabilitation andmulti-partite monitoring, progressive mine Decommissioning Fund (FMRDF) shall berehabilitation and compensation for damages. established by a mining contractor to ensure thatThe CLRF is composed of the following: the full cost of the approved FMRDP is accrued before the end of the operating life of the mine. • Mine Rehabilitation Fund (MRF), which is The FMRDF shall be deposited in a Government used for the regular monitoring of mining depository bank and shall be used solely for operations, physical rehabilitation of mining- the implementation of the approved FMRDP. affected areas, and research on the technical and preventive aspects of rehabilitation. Monitoring Mechanisms It is further broken down as follows: Mining projects are regularly monitored by the government, through the Environmental • Monitoring Trust Fund (RCF) to cover Management Bureau (EMB) and the MGB, to the expenses incurred by the multi-partite determine their compliance to their approved monitoring team for the monitoring ECC, work programs and to environmental of the mining project. It may include laws, rules, regulations and standards. Mining costs for travel, laboratory expenses for projects are also required to undertake their the analysis of environmental samples, own monitoring or engage the services of payments to consultants, etc.; and an independent third party. A Multipartite • Rehabilitation Cash Fund (RCF) for Monitoring Team (MMT) is also commissioned the implementation of activities under by the Mine Rehabilitation Fund Committee the EPEP, which is placed at an amount to monitor on a quarterly basis, the company’s equivalent to 10% of the total EPEP costs, compliance with the ECC and the approved EPEP. or PhP 5 million, whichever is lower. The MMT is a multi-sectoral team composed of • Mine Waste and Tailings Reserve representatives from the MGB Regional Office, Fund (MWTRF), which is utilized the DENR Regional Office, the company, a as compensation for damages from non-government organization (NGO), the host mine wastes and tailings; and community, and indigenous peoples (IPs), if any. • Environmental Trust Fund (ETF), which is allocated as compensation for damages other Mine Environmental Protection than those caused by mine wastes and tailings. and Enhancement Office Contractors are required to incorporate a Mine Environmental Protection and Enhancement Office (MEPEO) in their mine organizational structure. The MEPEO is tasked to set the environmental priorities and identify the resources needed to implement environmental management programs. The MEPEO should be headed by either a licensed mining 23
  24. 24. engineer, a geologist, or a metallurgical mining and milling costs (DMMC) to fund engineer with at least five years’ experience the SDMP projects (90% of the DMMC) and in actual mining environment work. the development of mining technology and geosciences (10% of the DMMC). The SDMP is Safety and Health Standards implemented through an Annual SDMP which is To ensure that the health and safety standards submitted by the mining contractor detailing the within the mining operations are complied projects for implementation for a certain year. with, mining contractors are required to submit a Safety and Health Program Timber Rights (SHP). The SHP details the activities such as Timber rights refer to the auxiliary mining occupational safety and health management, rights granted to contractors under the Mining environmental risk management including Act of 1995. A contractor may be allowed to emergency response, health control and cut trees or timber within his mining area as services, provision for personal protective may be necessary for his mining operations, equipment, management and employee training, subject to forestry laws, rules and regulations. monitoring and reporting, etc. Contractors The timber rights provided by existing laws, are also required to submit an Annual SHP. rules and regulations are as follows: Social Development Private Land Timber Permit Social Acceptability Endorsements The Private Land Timber Permit (PLTP) is a from Local Government Units permit issued to landowners for the cutting, For mining applications for immediate gathering and utilization of naturally grown development and/or utilization activities and trees in private lands. This is granted to any approval of Declaration of Mining Project person, association or corporation who is Feasibility under the Development and an owner of private land covered by either Construction / Operating Periods of MAs and administrative or judicial titles such as Free FTAAs, prior approval or endorsement in the Patents, Homestead and Sales Patents and form of a Resolution or Certification by at least Torrens Titles obtained under Land Registration a majority of the Sanggunians (local legislative Act No. 496 or Commonwealth Act 141 (the councils) concerned shall be required. Public Land Act), or by Certificates of Land Ownership Award (CLOA) covering certified Social Development and Management A&D lands issued to farmer-beneficiaries of the Program (SDMP) Comprehensive Agrarian Reform Program under The Social Development and Management RA 6657 (Comprehensive Agrarian Reform Law). Program (SDMP) is the primary tool for the development and implementation of community All cutting permit applications shall be programs and projects in consultation and in issued by the DENR Regional Executive partnership with the host and neighboring Director (RED) for volumes not exceeding communities. It is a five (5) year program which 50 cubic meters and by the DENR Secretary aims to create responsible, self-reliant and for volumes exceeding 50 cubic meters. resource-based communities. The company is required to allot one percent (1%) of its direct24
  25. 25. Special Private Land Timber Permit Water RightsThe Special Private Land Timber Permit (SPLTP) A mining contractor is also granted wateris a permit issued to a landowner specifically rights for mining operations upon approvalfor the cutting, gathering and utilization of of its application by the appropriatepremium hardwood species, both planted and government agency in accordance withnaturally grown. The qualification requirements existing laws, rules and regulations.for grantees are similar with those for the PLTP. Water rights pertain to the privilege grantedAll cutting permit applications shall be issued by the government to appropriate and useby the DENR RED for volumes not exceeding water. Except as otherwise provided, no10 cubic meters and by the DENR Secretary person, including government instrumentalitiesfor volumes in excess of 10 cubic meters. or government-owned or controlled corporations, shall appropriate water withoutSpecial Tree Cutting Permit a water right which shall be evidenced byThe Special Tree Cutting Permit (STCP) is a a document known as the water permit.permit for the purpose of tree cutting/pruning/thinning/ sanitation and other silvicultural Approved applications shall be issued watertreatments in reforestation areas, cutting of permits subject to such conditions as thetrees affected by development projects or National Water Resources Board (NWRB) maycutting of naturally grown trees along banks impose. Such permit must bear the seal ofof creeks, rivers or streams for public safety. the Board and the signature of the Executive Director. A copy of said permit shall beForeshore Lease Agreement furnished the office where the applicationThe Foreshore Lease Agreement (FLA) covers was filed. Disapproved applications shallforeshore lands, as well as marsh lands or be returned to applicants through the officelands covered with water bordering upon the where the same was filed, within 30 days ofshores or banks of navigable lakes or rivers for such disapproval, stating the reason therefor.commercial, industrial or other productivepurposes other than agriculture. The FLA Water permits shall continue to be valid asshall be for a period of twenty-five (25) years, long as water is beneficially used. However,renewable for another twenty-five (25) years the permit may be suspended on the groundsat the option of the lessor. Under the 1987 of non-compliance with approved plans andConstitution, an individual may lease not specifications or schedules of water distribution;more than 500 hectares and a corporation use of water for a purpose other than that formay lease not more than 1,000 hectares. which it was granted; non-payment of water charges; wastage; failure to keep records of waterThe Foreshore Lease application or renewal diversion, when required; and violation of anythereof shall be filed with the DENR Community term or condition of any permit or of rulesEnvironment and Natural Resources Office and regulations promulgated by the Board.(CENRO) which has jurisdiction over the area. 25
  26. 26. Incentives for Mining Investors Incentives Provided by the Mining Act of 1995 Recovery of Pre-Operating Expenses Income Tax-Accelerated Depreciation FTAA Contractors are allowed to recover their pre-operating expenses under the Implementing Fixed assets may be depreciated as follows: Rules and Regulations of the Mining Act of 1995, which states that the collection of government’s i. To the extent of not more than twice share in the FTAA shall commence after the as fast as the normal rate of depreciation, contractor has fully recovered its pre-operating, or at the normal rate of depreciation if exploration and development expenses. The the expected life is ten years or less; or period of recovery, which is reckoned from the start of commercial operation, shall not ii. Depreciated over any number of years exceed five (5) years or until the date of between five years and the expected life actual recovery, whichever comes earlier. if the latter is more than ten (10) years. The depreciation thereon shall be allowed Pollution Control Devices as deduction from taxable income. Pollution control devices are not subject to real property and other taxes or assessments except mine wastes and tailings fees. iii. Amortization of Exploration and Development Expenses – the contractor Income Tax-Carry Forward of Losses may deduct exploration and development A net operating loss without the benefit of expenditures accumulated at cost as of the incentives incurred in any of the first ten years date of the Exploration Permit as well as of operations may be carried over as a deduction exploration and development expenditures from taxable income for the next five years paid or incurred during the taxable year, immediately following the year of such loss. The provided that the total amount deductible for entire amount of the loss shall be carried over exploration and development expenditures to the first of the five taxable years following shall not exceed twenty-five percent (25%) the loss, and any portion of such loss which of the net income from mining operations. exceeds the taxable income of such first year shall be deducted in like manner from the taxable income of the next remaining four years.26
  27. 27. Investment Guarantees Just compensation shall be determined and paid either at the time or immediately afterA contractor is also entitled to the following: cessation of the state of war or national emergency. Payments received as compensationi. Repatriation of investments. The right for the requisitioned property may be remittedto repatriate the entire proceeds of the in the currency in which the investmentsliquidation of the foreign investment in were originally made and at the exchangethe currency in which the investment was rate prevailing at the time of remittance.originally made and at the exchange rateprevailing at the time of repatriation. vi. Confidentiality - Any confidential information supplied by the contractor pursuant to theii. Remittance of earnings. The right to Mining Act shall be treated as such by the DENRremit earnings from the investment in the and the government, and for the duration ofcurrency in which the foreign investment the term of the project to which it relates.was originally made and at the exchangerate prevailing at the time of remittance. Incentives Provided by the Board of Investmentsiii. Foreign loans and contracts. The rightto remit at the exchange rate prevailing Under the Omnibus Investments Code (Executiveat the time of remittance such sums as Order No. 226), an investor may enjoy certainmay be necessary to meet the payments of benefits and incentives, provided he investsinterest and principal on foreign loans and in preferred areas of investments found in theforeign obligations arising from FTAAs. current Investment Priorities Plan (IPP), which is issued annually by the Board of Investmentsiv. Freedom from expropriation. The right to be (BOI). The IPP is a list of promoted areas offree from expropriation by the government, investments eligible for government incentives.of the property represented by investments or Sectors promoted under special laws, includingloans, or of the property of the enterprise, except mining, quarrying and minerals processing,for public use or in the interest of national also enjoy incentives under the IPP.welfare or defense and upon payment of justcompensation. In such cases, foreign investors BOI-registered enterprises are given aor enterprises shall have the right to remit sums number of incentives in the form of taxreceived as compensation for the expropriated exemptions and concessions. These are:property in the currency in which the investmentwas originally made and at the exchange Fiscal Incentivesrate prevailing at the time of remittance. Fiscal incentives include: income tax holiday; exemption from taxes and dutiesv. Requisition of investment. The right to be free on imported spare parts; exemption fromfrom requisition of the property represented wharfage dues and export tax, duty, impostby the investment or of the property of the and fees; tax exemption on breeding stocksenterprise, except in case of war or national and genetic materials; tax credits; andemergency and only for the duration thereof. additional deductions from taxable income. 27
  28. 28. Income Tax Holiday (ITH) Mining ActivitiesThe following BOI-registered enterprisesare exempt from the payment of income • The exploration and development oftaxes, reckoned from the scheduled mineral resources are not entitled to an ITH;start of commercial operations: • Mining and/or quarrying w/o mineral processing is not entitled to an ITH; • New projects with a pioneer • Mining and processing of status, for six years; aggregates is not entitles to ITH. • New projects with a non- pioneer status, for four years; • Expansion projects, for three years. Newly registered pioneer and non-pioneer As a general rule, exemption is limited enterprises and those located in LDAs to incremental sales revenue/volume; may avail themselves of a bonus year • New or expansion projects in less developed in each of the following cases: areas (LDAs), for six years, regardless of status; • Modernization projects, for three years. • the indigenous raw materials used in As a general rule, exemption is limited the manufacture of the registered product to incremental sales revenue/volume. must at least be fifty percent (50%) of the total cost of raw materials for the preceding years prior to the extension unless theThe ITH is limited in the following cases: BOI prescribes a higher percentage; orExport traders may be entitled to the ITH only • the ratio of total imported and domesticon their income derived from the following: capital equipment to the number of workers for the project does not exceed • Export of new products, i.e. those which US$10,000 for every worker; or have not been exported in excess of • the net foreign exchange savings or earnings US$100,000 in any of the two years preceding amount to at least US$500,000 annually the filing of application for registration, or during the first three years of operation. In no • Export to new markets, i.e., to a country case shall the registered pioneer firm avail of where there has been no recorded import the ITH for a period exceeding eight years. of a specific export product in any of the two years preceding the filing of Exemption from Taxes and Duties on Imported Spare the application for registration. Parts - A registered enterprise with a bonded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes on its importation of required supplies/spare parts for consigned equipment or those imported with incentives.28
  29. 29. Exemption from Wharfage Dues and Export Importation of consigned equipment for aTax, Duty, Impost and Fees - All enterprises period of 10 years from date of registration,registered under the IPP will be given a ten- subject to posting of a re-export bond.year period from the date of registration toavail of the exemption from wharfage Privilege to operate a bonded manufacturing/dues and any export tax, impost and fees trading warehouse subject to Customson its non-traditional export products. rules and regulations.Tax Credits. Tax credit on raw materials and A mining contractor may avail of either thesupplies A tax credit equivalent to the national incentive on Income Tax Carry Forward of Lossesinternal revenue taxes and duties paid on raw under the Mining Act or the Income Tax Holidaymaterials, supplies and semi-manufacture provided under the Omnibus Investments Code.of export products and forming part thereof If the contractor opts to avail of the Income Taxshall be granted to a registered enterprise. Holiday incentive, then it foregoes the incentive on Income Tax Carry Forward, and vice versa.Additional Deductions from Taxable IncomeAdditional deduction for labor expense (ADLE) Incentives on Income Tax Accelerated Depreciationfor the first five years from registration, from provided under the Mining Act may be availedtaxable income equivalent to fifty percent (50%) of simultaneously with the Income Tax Holidayof the wages of additional skilled and unskilled provided under the BOI registration.workers in the direct labor force. The incentiveshall be granted only if the enterprise meetsa prescribed capital-to-labor ratio and shallnot be availed of simultaneously with theITH. This additional deduction shall bedoubled if the activity is located in an LDA.Non-fiscal IncentivesEmployment of foreign nationals. A registeredenterprise may be allowed to employ foreignnationals in supervisory, technical or advisorypositions for five years from the date ofregistration. The position of President, GeneralManager and Treasurer of foreign-ownedregistered enterprises or their equivalent arenot subject to the foregoing limitation.Simplification of customs procedures forthe importation of equipment, spareparts, raw materials and supplies, andexports of processed products. 29
  30. 30. Appendices A. Registration with the Securities and Exchange Commission START Company representative submits necessary documents to Company Registration and Monitoring Dept. (CRMD), which checks documents for completeness Representative pays SEC cashier a filing fee of 1/5 of 1% of authorized capital stock of proposed corporation (Basic Fee) plus Legal Research Fee of 1% of Basic Fee Documents are forwarded to Financial Analysis & Audit Divi- sion of the CRMD for review of financial and accounting aspects Applicant makes necessary changes Are documents and/or submits in order? additional documents Documents are forwarded to the Corporate and Partnership Registration Division of the CRMD, which ensures compliance with Philippine laws Documents are forwarded to the Assistant Director of the CRMD for approval and to the Director of the CRMD for final signature on the Certificate of Registration Approved papers are brought to Releasing Department for pickup END30