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This MINERAL PRODUCTION SHARING AGREEMENT is made and entered

into in Quezon City, Phitippines, this day of Jul 28 20017 by

and between:


of



to as the

GOVERNMENT, represented in this act by the Secretary of the Department of

Environment and Natural Resources, with offices at the Department of

Environment and Natural Resources Building, Visayas Avenue, Diliman,

Quezon City

THE REPUBLIC OF THE PHILIPPINES, herein referred



and



TRANS-ASIA



OIL AND ENERGY DEVELOPMENT



CORPORATION, A

corporation duly organized and exisling under lhe laws of the Republic of the

Philippines, herein referred to as the CONTRACTOR, with office at 1 1rh Floor,

PHINMA Plaza, 39 Plaza Drive, Rockwell Center, Makati City, and represented

in this act by its President and Chief Executive Officer, Mr. Francisco L. Viray,

as authorized by its Board of Directors (please refer to ANNEX "A")

WTNESSETH:

WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in

Article Xll, Section 2 thereof that all lands of the public domain, waters,

minerals, coal, petroleum and other natural resources are owned by the State

and that their exploration, development and utilization shall be under the full

control and supervision of the State



WHEREAS, the Constitution further provides that the State may directly

undertake such activities, or it may enter into a Co-Production, Joint Venture, or

Mineral Production Sharing Agreement with Filipino citizens, or cooperatives,

partnerships, corporations or associations at least sixty per centum of whose

capitalization is owned by such citizens;

WHEREAS, pursuant to Republic Act No 7942, otherwise known as "The

Philippine Mining Act of 1995,' which took effect on 09 April 1995, the

Secretary of the Department of Environment and Natural Resources is

authorized to enter into lvlineral Production Sharing Agreements in furtherance

of the objectives of the Government and the Constitution to bolster the national

economy through sustainable and systematic development and utilization of

mineral lands;



WHEREAS, the Government desires to avail itself of the financial resources,

technical competence and skill, which the Contractor is capable of applying to

the mining operations of the project contemplated herein;

WHEREAS, the Contractor desires to join and assist the Government in the

initial rational exploration and possible development and utilization for



commercial purposes of gold, silver, copper, iron and other associated mineral

deposits existing in the Contract Area (as herein defined);



WHEREAS, lhe Contractor has access to all the flnancing, lechnical

competence, technology and environmental managemenl skills required to

promptly and effectively carry out the objectives of this Agreement;



NOW, THEREFORE, for and in consideration of the foregoing premises, the

mutual covenants, terms and conditaons hereinafter set forlh, it is hereby

stipulated and agreed as follows:



section



SCOPE



1.1.



This Agreement is a Mineral Production Sharing Agreement entered into

pursuant to the provisions of the Act and its implementing rules and

regulations. The primary purpose of this Agreement is to provide for the

rational exploration. development and commercial utilization of gold,

silver, copper, iron other associated mineral deposits existing within the

Contract Area, with all necessary services, technology and financing to

be furnished or arranged by the Contractor in accordance with the

provisions of this Agreement. The Contractor shall not, by virtue of this

Agreement, acquire any title over the ContracvMining Area without

prejudice to lhe acquisition by the Contractor of the land/surface rights

through any mode of acquisition provided for by law.



1.2. fhe



Contractor shall undertake and execute, for and on behalf of the

Government, sustainable mining operations in accordance with the

provisions of this Agreement, and is hereby constituted and appointed,

for the purpose of this Agreement, as the exclusive entity to conduct

mining operations in the Contract Area.



1.3.



The Contractor shall assume all the exploration risk such that if no



1.4.



During the term of this Agreement, the total value of production and sale

of minerals derived from the mining operations contemplated herein shall

be accounted for and divided between the Governmeni and the

Contractor in accordance with Section Vlll hereof.



minerals in commercial quantity are developed and produced, it will not

be entitled to reimbursement.



sEcTloN ll

DEFINITIONS



As used in this Agreement, the following words and terms, whether singular or

plural, shall have the following respective meaning:



2.1. Act



relers to Republic Act No. 7942, otheMise known as the "Philippine

Mining Act of 1995."



Agreement



means this lMineral Production Sharing Agreement.



Associated Minerals mean other ores/minerals, which occur together

with the principal ore/mineral.

Banqko



Sentral



means Bangko Sentral ng Pilipinas.



Ellgqt



means an estimate of expenditures to be made by Contractor in

mining operations contemplated hereunder to accomplish the Work

Program for each particular period.



Bureau



2.7.



means Mines and Geosciences Bureau.



Calendar Year or Year means a period of twelve 12) consecutive

months starting with the first day of January and ending on December

31, while "Calendar Quarter" means a period of three consecutive

months with the first calendar quarter starting with the first day of

January.



2.8.



Commercial Production means the production of sufficient quantity of

minerals lo sustain economic viability of mining operations reckoned

from the date of commercial operation as declared by the Contractor or

as stated in the feasibility study, whichever comes first.



2.9.



Constitution or Philippine Constitution means the '1987 Constitution of

the Republic of the Philippines adopted by lhe Constitutional Convention

of 1986 on October '15, 1986 and ratified by the People of the Republic

of the Philippines on February 2, 1987.



2.'10. Contract Area means the area onshore or otfshore delineated under

the Mineral Production Sharing Agreement subject to the relinquishment

obligations of the Contractor and properly defined by latitude and

longitude or bearing and distance.



2.'l'1. Contract Year means a period of twelve (12) consecutive months

counted from the Effective Date of this Agreement or from the

anniversary of such Etfective Date.



2.12. Contractor means Trans-Asia Oil and Energy Development Corporation

or its assignee(s) of interest under this Agreement: Provided, That the

assignment of any of such interest is accomplished pursuant to the

pertinent provisions of the implementing rules and regulations of the Act.



2.13. Declaration of Mininq Proiect Feasibilitv means a document proclaiming

the presence of minerals in a specific site, which are recoverable by

socially acceptable, environmenlally safe and economically sound

methods specified in the Mine Development Plan.



2.14. Department or DENR means the Department of Environment and

Natural Resources.



2.15. Director means the Director of Mines and Geosciences Bureau.



Date means the date of execution of this Agreement by the

Contractor and by the Secretary on behalf of the Government.



2.'16. Effective

2.'17.



Environment means all facets of man,s surroundings: physical,

ecological, aesthetic, cultural, economic, historic, institutional and social.



2.18. Exploration means searching or prospecting for mineral resources by

geological, geophysical and geochemical surveys, remote sensing, tejt



pitting, trenching, drilling, shaft sinking, tunneling or any other means for

the purpose of determining the existence, enent, quality and quantity of

mineral resources and the feasibility of mining them for profit.



Period shall mean the period from the Effective Date of

this Agreement, which shall be for two (2) years, renewable for like

periods but not to exceed a total term of six (6) years for nonmetallic

minerals and eight (8) years for metallic minerals, subject to the pe(inent



2.19. Exploration



provisions of the implementing rules and regulations of the Act.



2.20. Force Maieure means acls or circumstances beyond the reasonable

control of the Contractor including, but not limited to war, rebellion,

insurrection, riots, civil disturbances, blockade, sabotage, embargo,

strike, lockout, any dispute with surface owners and other labor disputes,

epidemics, earthquake, storm, flood or other adverse weather

conditions, explosion, fire, adverse action by the Government or by any

of its instrumentality or subdivision thereof, act of God or any public

enemy and any cause as herein described over which the affected party

has no reasonable control.



2.21. Foreion Exchanoe means any currency other than the currency of the

Republic of the Philippines acceptable to the Government and the

Contractor.



2.22. Government means the Government of the Republic of the Philippines

or any of its agencies and instrumentalities.



2.23. Gross Outout means the actual market value of the minerals or mineral

products from each mine or mineral land operated as a separate entity,

without any deduction for mining, processing, refining, transporting,

handling, marketing or any other expenses: Provided, That if the

minerals or mineral products are sold or consigned abroad by the

Contraclor under C.l.F. terms, the actual cost of ocean freight and

insurance shall be deducted: Provided further. That in the case of

mineral concentrates which are not traded in commodity exchanges in

the Philippines or abroad such as copper concentrate, the actual market

value shall be the world price quotation of the refined maneral products

contained thereof prevailing in the said commodity exchanges, after

deducting the smelting, refining, treatment, insurance, transportation and

other charges incurred in the process of converting mineral concentrates

into refined metaltraded in those commodity exchanges.



2.24. Mine Develooment refers to work undertaken to prepare an ore body

or a mineral deposit for mining, including the construction of necessary

infrastructure and related facilities.






2.25. Minerals mean all naturally occurring inorganic substances in solid,



liquid, gas or any intermediate state excluding energy materials such as

coal, petroleum, natural gas, radioactive materials and geothermal

energy.



2.26. Mineral Products mean materials derived from mineral ores/rocks and



prepared into marketable state by metallurgical processes which include

benellciation, cyanidation, leaching, smelting, calcination and other

similar processes.



2.27. Minino Area means that portion of the Conlract Area identified by the

Contractor as defined and delineated in a Survey Plan duly approved by



the Director/Regional Director concerned for purposes of development

and/or utilization and sites for support facilities.



2.28. Minino Operations means mining activities involving exploration,

feasibility study, environmenlal impact assessment, development,

utilization, mineral processing and mine rehabilitation.



means notice in writing, telex or telecopy (authenticated by

answer back or confirmation received) addressed or sent as provided in

Section 16.2 of this Agreement.



2.30. Ore



means naturally occurring substance or material from which a

mineral or element can be mined and/or processed for profit.



2.31.



Pollution means any alteration of the physical, chemical and/or

biological properties of any water, air and/or land resources of the

Philippines, or any discharge thereto of any liquid, gaseous or solid

wastes or any production of unnecessary noise or any emission of

objectionable odor, as will or is likely to create or render such water, air,

and land resources harmful, detrimental or injurious to public health,

safety or welfare or which will adversely affect their utilization for

domestic, commercial, industrial, agricultural, recreational or other

legitimate purposes.



2.32. Secretarv means the Secretary of the Department of Environment and

Natural Resources.

means the Republic of the Philippines



2.34. Work Prooram means a document which presents the plan of major

mining operations and the corresponding expenditures of the Contractor

in its Contract Area during a given period of time, including the plan and

expenditures for development of host and neighboring communities and

of local geoscience and mining technology, as submitted and approved

in accordance with the implementing rules and regulations of the Act.



sEcTtoN

TERM OF AGREEMENT

3.1



.



This Agreement shall have a term of twenty five (25) years from Effective

Date, and may be renewed thereafter for another term not exceeding

twenty five (25) years. The renewal of this Agreement, as well as the

changes in the terms and conditions thereof, shall be upon mutual

consent by the parties. ln the event the Government decides to allow

mining operations thereafter by other Contractor, this must be through

competitive public bidding. After due publication of notice, the

Contractor shall have the right to equal the highest bid upon

reimbursement of all reasonable expenses of the highest bidder.

SECTION IV

CONTRACT AREA



4.1.



Size, Shape, and Location of Contract



Area -



This Agreement covers a



Contract Area of approximately Three Hundred Thirty-Three and t

'1983/10,000 (333.1983) hectares, situated in Jose Panganiban. js

Camarines Norte, and bounded by the following geographical \

coordinates (please refer to ANNEX "B" - 1,50,000 scale Location

Map/Sketch Plan):

Lot 'l - Area = 4.8753 has

Corner



Lonqitude



Corner



Lonqitude



42



14''t6 56



302-



122"39 55 110"



Co



rner



Lonqitude



7



11



sEcTroN v

EXPLORATION PERIOD

Timetable for Exploration - The Contractor shall commence Exploration

activities not later than three (3) months after the Effective Date for a

period of two (2) years, renewable for like periods but not to exceed a

total term of six (6) years for nonmetallic minerals and eight (8) years for

metallic minerals, subject to annual review and approval by the Director

in accordance with the implementing rules and regulations of the Act.



Renewal of Exploration Period - ln case the Contractor opts for a

renewal of its Exploration Period, it shall file prior to the expiration

thereof, a renewal application in the Mines and Geosciences Bureau

Central Office, accompanied by the mandatory requirements stipulated

in the implementing rules and regulations of the Act. The Director may

grant the renewal of the Exploration Period on condition that the



Contractor has substantially complied with the terms and conditions of

the Agreement



ln cases where further exploration is warranted beyond the six (6) - or

eight (8)-year period and on condition that the Contractor has

substantially implemented the Exploration and Environmental Work

Programs as verified by the Bureau, the Director may further grant

renewal of the Exploralion Period: Provided, That the Contractor shall be

required to set up a performance surety equivalent to the expenditure

requirement of the Exploration and Environmental Work Programs.



5.3.



Work Programs and Budgets - The Contractor shall strictly comply with

the approved Exploration and Environmental Work Programs together

with their corresponding Budgets (please refer to ANNEXES "C" and



"D)



The amount to be spent by the Contractor in conducting Exploration

aclivities under the terms of this Agreement during the Exploration

Period shall be in the aggregate of not less than that specified for each

of the Contract Years. as follows



For the Exploration Work Program:



1st Contract Year

2nd Contract Year



ln the event of renewal of the Exploration Period, the amount to be spent

every year shall first be agreed upon by the parties.



ln the event of termination of this Agreement, the Contractor shall only

be obliged to expend the pro-rata amount for the period of such Contract

Year prior to termination. lf during any Contract Year, the Contractor

should expend more than the amount to be expended as provided

above, the excess may be subtracted from the amount required to be

expended by the Contractor during the succeeding Contract Years, and

should the Contractor. due to unforeseen circumstances or with the

consent of the Government, expend less during a year, then the

deficiency shall be applied to the amount to be expended during the

succeeding Contract Years



5.4.



Relinquishment of Total/Portion of the Contract Area - During the

Exploration Period, the Contractor may relinquish totally or partially the

original Contract Area After the Exploration Period and priorloorupon

approval of a Declaration of l\.4ining Project Feasibility by the Director, the

iontractor shall finally relinquish any portion of the Contract Area not

necessary for mining operations and not covered by any Declaration of

Mining Project Feasibility



5.5.



Final N4ining Area - The Director may allow the Contractor to hold more

than one (1) final Mining Area subject to the maximum limits set under

the implementing rules and regulatjons of the Act: Provided, That each

final Mining Area shall be covered by a Declaration of Mining project

Feasibility.



Declaration of Mining Project Feasibility - Within the term of the

Exploration Period, the Contractor shall file in the Regional Offlce

concerned, the Declaration of Mining Project Feasibility of the Contract

Area/final lvlining Area supported by Nlining Project Feasibility Study,

Three (3)-Year Development and Construction or Commercial Operation

Work Program, complete geologic report, an application for survey and

the pertinent Environmental Compliance Certiflcate, among other

applicable requirements. Failure of the Contractor to submit the

Declaration of Mining Project Feasibility during the Exploration period

shall be considered a substantial breach of this Agreement.

Survey of the Contract Area - The Contractor shall cause the survey of

Minang Area through an

application for survey, complete with requirements, filed in the Regional

Office concerned simultaneous with the submission of the Declaration of

Mining Feasibility. Survey returns shall be submitted to the Regional

Director concerned for approval within one ('1) year from receipt of the

Order of Survey complete with the mandatory requirements stated in the

implementing rules and regulations of the Act.



the perimeter of the Contract Area/final



Reporting



a.



During the Exploration Period, the Contractor shall submit to the

Director, through the Regional Director concerned, quarterly and

annual accomplishment reports under oath on all activities

conducled in the Contract Area from the Effective Date of this

Agreement. The quarterly report shall be submitted not later than

fifteen (15) days at the end of each Calendar Quarter while the

annual accomplishment report shall be submitted not later than

thirty (30) days from the end of each Calendar Year. Such

information shall include detailed financial expenditures, raw and

processed geological, geochemical, geophysical and radiometric

data plotted on a map at a minimum 1:50,000 scale, copies of

originals of assay results. duplicated samples, field data, copies of

originals from drilling reports, maps, environmental work program

implementation and detailed expenditures showing discrepancies/

deviations with approved exploration and environmental plans and

budgets as well as all other information of any kind collected

during the exploration activities. All information submitted to the

Bureau shall be subject to the confidentiality clause of this

Agreement.

Final Report - The Contractor shall submit to the Director, through

the Regional Director concerned, a final report under oath upon

the expiration of the Exploration Period which shall be in the form

and substance comparable to published professional reports of

respectable international institutions and shall incorporate all the

findings in the Contract Area including location of samples,



10



-#



h'r



assays, chemical analysis, and assessment of mineral potentials

together with a geologic map of '1150,000 scale at the minimum

showing the results of the exploration. Such report shall also

include detailed expenditures incurred during the Exploration

Period. ln case of diamond drilling, the Contractor shall, upon

request of the Director/Regional Director concerned, submit to the

Regional Office concerned a quarter of the core samples, which

shall be deposated in the Regional Office Core Library for

safekeeping and reference.

Relinquishment Report - The Contractor shall submit a separate

relinquishment report with a detailed geologic report of the

relinquished area accompanied by maps at a scale of 1:50,000

and results of analyses and detailed expenditures, among others.



SECTION VI



DEVELOPMENT AND CONSTRUCTION PERIOD

Timetable - The Contractor shall complete the development of the mine

including the construction of production facilities within thirty six (36)

months from the submission and approval of the Declaration of Mining

Project Feasibility, subject to such extension based on justifiable

reasons as the Director may approve, upon recommendation of the

Regional Director concerned

Reporting



a.



Annual - The Contractor shall submit, within sixty (60) days after

December 31 of each year, to the Director, lhrough the Regional

Director concerned, an annual report, which states the major

activities, achievements and detailed expenditures during the year

covered, including maps, assays, rock and mineral analyses and

geological and environmental progress reports during the

Development and Construction Period.



b.



Final Report - Within six (6) months from the completion of the

development and conslruction activities, the Contractor shall

submit a final report to the Director, through the Regional Director

concerned. Such report shall integrate all information in maps of

appropriate scale and quality. as well as in monographs or reports

in accordance with international standards.



SECTION VII

OPERATING PERIOD

7 .',| .



Timetable - The Contractor shall submit, within thirty (30) days before

completion of mine development and construction of production facilities,

to the Director, through the Regional Director concerned, a Three-Year



--t-



11



w



Commercial Operation Work Program. The Contractor shall commence

commercial utilization immediately upon approval of the aforesaid Work

Program. Failure of the Contractor to commence Commercial

Production within the period shall be considered a substantial breach of

the Agreement.

7



.2.



Commercial Operation Work Program and Budget - During the

Operating Period, the Contractor shall submit to the Director, through the

Regional Director concerned, Work Programs and Budgets covering a

period of three (3) years each, which shall be submitted not later than

thirty (30) days before the expiration of the period covered by the

previous Work Program.

The Contractor shall conduct lvlining Operations and other activities for

the duration of the Operating Period in accordance with the duly

approved Work Programs and correspondrng Budqets



7



.3.



7.4



Expansion and l\ilodification of Facilities - The Contractor may make

expansions, modifications, improvements, and replacements of the

mining lacilities and may add new facilities as the Contractor may

consider necessary for the operations: Provided, That such plans shall

be embodied in an appropriate Work Program approved by the Director.

Reporting



a.



Quarterly Reports - Beginning with the first Calendar Quarter

following the commencement of the Operating Period, the

Contractor shall submit, within thirty (30) days after the end of

each Calendar Quarter, to the Director, through the Regional

Director concerned. a Quarterly Report stating the tonnage of

production in terms of ores, concentrates, and their corresponding

grades and other types of productsi value, destination of sales or

exports and to whom sold, terms of sales and expenditures.



b.



-



During the Operating Period, the Contractor

shall submit within sixty (60) days from the end of each Calendar

Year, to the Director, through the Regional Director concerned, an

Annual Report indicating in sufficient detaill



Annual Repo(s



b.1. The total tonnage of ore reserves,



whether proven,



probable, or inferred, the total tonnage of ores, kind by

kind, broken down between tonnage mined, tonnages

transported from the minesite and their corresponding

destination, tonnages stockpiled in the mine and elsewhere

in the Philippines, tonnages sold or committed for export

(whether actually shipped from the Philippines or not),

tonnages actually shipped from the Philippines (with full

details as to purchaser, destination and terms of sale), and

if known to the Contractor, tonnages refined, processed or

manufactured in the Philippines with full specifications as

to the intermediate products, by-products or final products

and of the terms at which they were disposed:



b.2.



Work accomplished and work in progress at the end of the

year in question with respect to all the installations and

facilities related to the utilization program, including the

investment actually made or committedi and



b.3.



Profile of work force, including management and staff,

stating particularly their nationalities, and for Filipinos, their

place of origin (i.e , barangay. town, province, region).



The Contractor shall also comply with other reporting requirements

provided for in the implementing rules and regulations of the Act.



SECTION VIII



FISCAL REGIME



81.



General Principle - The fiscal regime of this Agreement shall be

governed by the principle according to which the Government expects a

reasonable return in economic value for the utilization of non-renewable

mineral resources under its national sovereignty while the Contractor

expects a reasonable return on its investment with special account to be

taken for the high risk of exploration, the terms and conditions prevailing

elsewhere in the industry and any special efficiency to be gained by a

particularly good performance of the Contractor.



Registration Fees - Within fifteen (15) days upon receipt of the notice of

approval of the Agreement from the Regional Office concerned, the

Contractor shall cause the registration of this Agreement with the saad

Regional Office and pay the registration fee at the rate provided in the

existing rules and regulations. Failure of the Contractor to cause the

registration of this Agreement within the prescribed period shall be

sufficient ground for cancellation of the same.



- Prior to registration of this Agreement and at the

year thereafter, the Contraclor shall pay to the

every

same dale

Occupation Fees



Municipal/City Treasurer concerned an occupation fee over the Contract

Area at lhe annual rate provided in the existing rules and regulations. lf

the fee is not paid on the date specified, the Contractor shall pay a

surcharge of twenty five percent (25%) of the amount due in addition to

the occupation fees.

Share of the Government - The Government Share shall be the excise

tax on mineral products at the time of removal and at the rate provided

for in Republic Act No. 7729 amending Section 15'l (a) of the National

lnternal Revenue Code. as amended, as well as other taxes, duties and

fees levied by existing laws. The Excise Tax shall be timely and

completely paid to the nearest Bureau of lnternal Revenue Office in the

province concerned.



For purposes of determining the amount of the herein Government

Share, the Contractor shall strictly comply with the auditing and



L



accounting requirements prescribed under existing laws and regulations.



t{f



The Government Share shall be allocated in accordance with Sections

290 and 292 of Republic Act No. 7160, otherwase known as "The Local

Government Code of 1991."

Pricing of Sales - The Contractor shall dispose of the minerals and byproducts produced at the highest market price prevailing in the locality:

The Contractor shall also pay the lowest achievable marketing

commissions and related fees and shall negotiate for more

advantageous terms and conditions subject to the right to enter into

long-term sales or marketrng contracts or forergn exchange and

commodity hedging contracts, which the Government acknowledges to

be acceptable notwithstanding that the sale price of the minerals and byproducts may from time to time be lower, or the terms and conditions of

sales are less favorable, than that available elsewhere. The Contractor

shall seek to strike a balance between long-term sales or marketing

conlracts or foreign exchange and commodity hedging contracts

comparable to policies tollowed by independent producers in the

international mining industry



The Contractor shall likewise seek



a



balanced distribution among

consumers. lnsofar as sales to Contractor's affiliate(s) are concerned,

prices shall be at arm's length standard, and competing offers for large

scale and long-term contracts shall be procured Before any sale and/or

shipment of mineral product is made, existing and future marketing

contract(s)/sales agreement(s) shall be submitted to the Director, copy

furnished the Regional Director concerned, for registration. At the same

time, the Contractor shall regularly inform the Director in writing of any

revisions, changes or additions in said contract(s)/agreement(s).



The Contractor shall reflect in its Monthly/Quarterly Report on



Production, Sales and lnventory of Minerals, as well as in the lntegrated

Annual Report, the corresponding registration number(s) of the

marketing contract(s)/agreement(s) governing the export or sale of

minerals.

Associated lvtinerals - lf minerals other than gold, silver. copper, iron and

other associated mineral deposits are discovered in commercial

quantities in the Contract Area, the value thereof shall be added to the

value of the principal mineral in computing the Government share



Submission to Government - Within the periods stated herein, the

Contractor shall prepare and submit to the Director, through the

Regional Director concerned, a Work Program and corresponding

auig"t tor. the Contract Area stating the Mrning Operations and

exoJndrtures whtch the Contractor proposes lo carry out dunng th€

perrod covered wlth the detarls and pa(iculars set forth elsewhere in thls

Agreement or in the supporting documents'



Government's Examination and Revision of Work Program - Should the

Government decide to propose a revision to a certain specific feature in

the Work Program or Budget, it shall, within thirty (30) days atter receipt

thereof, provide a Notice to the Contractor specifying in reasonable

detail its reasons therefore Promptly thereafter. the Government and

Contractor will meet and endeavor to agree on the revision proposed by

the Government. ln any event, the revision of any porlion of said Work

Program or Budget in which the Government shall fail to notify the

Contractor of the proposed revision shall, insofar as possible, be carried

oul as prescribed herein. lf the Government should fail within sixty (60)

days from receipt thereof to notify Contractor of the proposed revisions.

the Work Program and Budget proposed by the Contractor shall be

deemed to be approved.



Contractor's Changes to Work Program - lt is recognized by the

Government and the Contractor that the details of any Work Program

may require changes in the light of changing circumstances. The

Contractor may make such changes. Provided, That it shall not change

the general objective of the Work Program: Provided further, That

changes which entail a negative variance of at least twenty percent

(20%) shall be subject to the approval of the Director.



ln case of any positive variance. the Contractor shall submit to the

Director, through the Regional Director concerned, a copy each of the

Work Programs, for information

The Government's approval of a proposed Work Program and Budget

will not be unreasonably withheld.



SECTION X



ENVIRONiiIENTAL PROTECTION AND MINE SAFETY AND HEALTH



10.1. The Conlractor shall manage its Mining Operations in a technically,

financially, socially, culturally and environmentally responsible manner to

achieve the sustainable development objectives and responsibilities as

provided for under the implementing rules and regulations of the Act.



10.2. The Contractor shall ensure that the standards



of



environmental

protection are met in the course of the lvlining Operations. To the extent

possible, control of pollution and the transformation of the mined-out

areas or materials into economically and socially productive forms must

be done simultaneously with mining.



10.3. The Contractor shall submit an Environmenlal Work Program durang the

Exploration Period as prescribed in the implementing rules and

regulations of the Act.



10.4. An Environmental Compliance Certificate (ECC) shall be secured first by

the Contractor prior to the conduct of any development works,



construction of production facilities and/or mine production activities in

the Contract Area.



10.5 The Contractor shall submit within thirty (30) calendar days after the

issuance and receipt of the ECC, an Environmental Protection and

Enhancement Program (EPEP) using l\4cB Form No. 16-2 covering all

areas to be affected by development, utilization and processing activities

under this Agreement. The Contractor shall allocate for its initial

environment-related capital expenditures approximately ten percent

(10%) of the total project cost or in such amount depending on the

environmental/geological condition, nature and scale of operations and

technology to be employed in the Contract Area



10.6. The Contractor shall submit, within thirty (30) days prior to the beginning

of every calendar year, an Annual Environmental Protection and

Enhancement Program (AEPEP) using MGB Form 16-3, which shall be

based on the approved EPEP. The AEPEP shall be implemented during

the year for which it was submitted. To implement its AEPEP, the

Contractor shall allocate annually three to five percent (30/c5%) of its

direct mining and milling costs depending on the environmental/geologic

condition, nature and scale of operations and technology employed in

the Contract Area.



10.7. The Contractor shall establish a Contingent Liability and Rehabilitation

Fund (CLRF) which shall be in the form of the Mine Rehabilitation Fund

(NIRF) and the Mine Waste and Tailings Fee (NIWTF).



The MRF shall be based on the financial requirements of the approved

EPEP as a reasonable environmental deposit to ensure satisfactory

compliance with the commitments/strategies of the EPEP/AEPEP and

availability of funds for the performance of the EPEP/AEPEP during the

specific project phase. The MRF shall be deposited as Trust Fund in a

government depository bank and shall be used for physical and social

rehabilitation of areas afiected by mining activities and for research on

the social, technical and preventive aspects of rehabilitation.

The MWTF shall be collected based on the amounts of mine waste and

mill tailings generated during the conduct of Mining Operations. The

MWTF collected shall accrue to a Mine Waste and Tailings Reserve

Fund and shall be deposited in a government depository bank for

payment of compensation for damages caused by the Mining

Operations.



10.8. The Contractor shall set up mitigating measures such as mine waste and

mill tailings disposal system, mine rehabilitation or plan, water quality

monitoring, etc to minimize land degradation' air and water pollution,

acid rock drainage and changes in hydrogeology.



10.9. The Contractor shall set up an Environmental and Safety Office at its

minesite manned by qualified personnel to plan, implement and monitor

its approved EPEP.



10.10. The Contractor shalt be responsible in the monitoring of environmental'

safety and health conditions in the Contract Area and shall strictly



-={-



comply with all the rules and regulations embodied under DAO No.

2000-98, otherwise known as the "Mine Safety and Health Standards."

10.1'1.The Contractor shall be responsible for the submission of a final mine

rehabilitation and/or decommissioning plans, including its financial

requirements and incorporating the details and particulars set forth in the

implementing rules and regulations of the Act.



sEcTtoN xt

RIGHTS AND OBLIGATIONS OF THE PARTIES



11.'1. Obligations of the Contractor:



a.



To exclusively conduct sustainable Mining Operations within the

Contract Area in accordance with the provisions of the Act and its

implementing rules and regulations;



b.



To construct and operate any facilities specified under the Mineral

Agreement or approved Work Program;



c.



To determine the exploration, mining and treatment process to be

utilized in the Mining Operations:



d.



To extract, remove, use and dispose of any tailings as authorized

by an approved Work Program,



e.



To secure all permits necessary or desirable for the purpose of

Mining Operations;



f.



To keep accurale lechnical records about the Mining Operations,

as well as financial and marketing accounts, and make them

available to Government representatives authorized by the

Director for the purpose of assessing the performance and

compliance of the Contractor with the terms of this Agreement.

Authorized representatives of other Government Agencies may

also have access to such accounts in accordance with existing

laws, rules and regulations;



g.



To furnish the Bureau all the data and information gathered from

the Contract Area and that all the books of accounts and records

shall be open for inspectioni



h.



To allow access to Government during reasonable hours



i.



To hold the Government free and harmless from all claims and



in



inspecting the Contract Area and examining pertinent records for

purposeJ of monitoring compliance with the terms of this

Agreement;

accounts of all kinds, as well as demands and actions arising out

of the accidents or iniuries lo persons or properties caused by

the Contractor and indemnify the

Mining Operations



of



-=+_ \t



17



Government



for any



expenses



or costs incurred by the



Government by reason of any such claims, accounts, demands or

aclions:

ln the development of the community:



j.1.



j.2.



j.3.



To recognize and respect the rights, customs and traditions

of indigenous cultural communities over their ancestral

lands and to allocate royalty payment of not less than one

percent (1%) of the value of the gross oulput of minerals

sold,

To coordinate with proper authorities in the development of

the mining community and for those living in the host and

neighboring communities through social infrastructure,

livelihood programs, education, water, electricity and

medical services. Where traditional self-sustaining income

and the community activities are identified to be present,

the Contractor shall assist in the preservation and/or

enhancement of such activities:



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

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;



for



j.4. To give preference to



Filipino citizens who have

neighboring

communities, in the

domicile

in

the

established

hiring of personnel for its mining operations. lf necessary

skills and expertise are currently not available, the

Contractor must immediately prepare and unde(ake a

training and recruitment program at its expense, and



,.5.



To incorporate in the Mining Project Feasibility Study the

planned expenditures necessary to implement (.1)to 0.3)

of this Section;



ln the development of lvlining Technology and Geosciences:



k.1.



ln the course of its operations, to produce geological,

geophysical, geochemical and other types of maps and

reports that are appropriate in scale and in format and

substance which are consistent with the internationally



accepted standards and practaces. Such maps shall be

made available to the scientific community in the most

convenient and cost effective forms, subiect to the

condition that the Contractor may delay release of said

information for a reasonable period of time which shall not

exceed three (3) Years;



k.2.



To



systematically keep the data generated from the

Contracv l\.4ining Area such as cores, assays and other

related information, including economic and financial data

and make them accessible to students. researchers and



other persons responsible for developing



mining,



geoscience and processing technology subject to the

condition that the Contractor may delay release of data to

the science and technology community within a reasonable

period of time which shall not exceed three (3) years,

k.3.



To transfer to the Government or local mining company the

appropriate technology it may adapt in the exploration,

development and commercial utilization of the minerals in

the Contract Area:



To allocate research and development budget for the

advancement of mining technology and geosciences in

coordination with the Bureau, research institutions,

academe, etc.; and



To replicate data, maps and reports cited in (k.1) and (k.2)

and furnish the Bureau for archiving and systematic

safekeeping which shall be made available to the science

and technology community for conducting research and

undertaking other activities which contribute to the



development of mining, geoscience and processing

technology and the corresponding national pool of

manpower talents: Provided however, that the release of

data, maps and the like shall be similarly constrained in

accordance with (k 1) and (k.2) above;



11



.2.



l.



To incorporate in the



m.



To pay all other taxes and fees mandated by existing laws, rules

and regulations.



Study the planned

plans and programs

all

the

expenditures necessary to implement

set forth in this Agreement; and

N,4ining Feasibility



Rights of the Contractorl



a. To conduct Mining Operations within the confines of its

ContracUMining Area in accordance with the terms and conditions

hereof and without interfering with the rights of other

Contractors/LesseesiOperators/ Permittees/Permat Holders;



b.



Possession of the contract Area. with full right of ingress and

egress and the right to occupy the same, sub,ect to surface and

easement rights;



c.



To use and have access to all



declassified geological,

geophysical, drilling, production and other data relevant to the

mining operations;



[^



=+<.-



l,rf



d.



To sell, assign, transfer, convey or otheMise dispose of all its

rights, interests and obligations under lhe Agreement subject to

the approval of the Government;



e.



To employ or bring into the Philippines foreign technical and

specialized personnel, including the immediate members of their

families as may be required in the operations of the Contractor,

subject to applicable laws and regulations: Provided, That if the

employment connection of such foreign persons with the

Contractor ceases, the applicable laws and regulations on

immigration shall apply to them. Every time foreign technologies

are utilized and where alien executives are employed, an effective

program of training understudies shall be undertaken. The alien

employment shall be limited to technologies requiring highly

specialized training and experience subject to the required

approval under existing laws, rules and regulations;



l.



To enjoy easement rights and use of timber, water and olher

natural resources in the Contract Area subiect to pertinent laws,

rules and regulations and the rights of third parties;



g.



Repatriation of capital and remittance of profits, dividends and

interesl on loans, subject to existing laws and Bangko Sentral ng

Pilipinas rules and regulations; and



h.



To import when necessary all equipment, spare parts and raw

materials required in the operations in accordance with existing

laws and regulations.



1



1.3. Obligations of the Government:



To ensure that the



Contractor has the Government's full

cooperation in the exercise of the rights granted to it under this

Agreement;



To use its best efforts to ensure the timely issuance of necessary

permits and similar authorizing documents for use of the surface

of the Contract Area: and

To cooperate with the Contractor in its efforts to obtain flnancing

contemplated herein from banks or other financial institutions:

Provided, That such financing arrangements will in no event



reduce



the



Contractor's obligation



on



Government rights



hereunder.



SECTION XII



ASSETS AND EQUIPMENT

12.1



.



The Contractor shall acquire for the Mining operations only such assets

that are reasonably estimated to be required in carrying out such Mining

Operations.



12.2. All materials, equipment, plant and other installations of a movable

nature erected or placed on the Contract Area by the Contractor shall

remain the property of the Contractor The Contractor shall have the

right to remove and re-export such materials and equipment, plant and

other installations from the Philippines, subject to existing rules and

regulations. ln case of cessation of Mining Operations on public lands

occasioned by its voluntary abandonment or withdrawal, the Contractor

shall have a period of one (1) year from the time of cessalion within

which to remove its improvements; otherwise, all social infrastruclures

and facilities shall be turned over or donated tax free to the proper

government authorities. national or local,

ensure that said

infrastructures and facilities are continuously maintained and utilized by

the host and neighboring communities.



to



sEcTtoN



x



t



EMPLOYMENT AND TRAINING OF PHILIPPINE PERSONNEL



13.1. The Contractor agrees to employ, to the extent possible, qualified

Filipino personnel in all types of mining operations for which they are

qualified; and after Commercial Production commences shall, in

consultation and with consent of the Government, prepare and

undertake an extensive training programme suitable to Filipino nationals

in all levels of employment. The objective of said programme is to

reach within the timetable set forth below the following targets of



"Filipinization:'



l\4anagement



13.2. Cost and expenses of training such Filipino personnel and the

Contractor's own employees shall be included in the Operating

Expenses.



13.3. The Contractor shall not discriminate on the basis of gender and shall

respect lhe right of women workers to participate in policy and decisionmaking processes affecting their rights and benefits



I



lS



SECTION XIV



ARBITRATION



'14.1. The Government and the Contractor shall consult with each other in

good faith and shall exhaust all available remedies to settle any and all

disputes or disagreements arising out of or relating to the validity,

interpretations, enforceability, or performance of this Agreement before

resorting to arbitration as provided for in Section '14.2. below.



'14.2. Any disagreement or dispute which can not be settled amicably within a

period of one ('l ) year from the time the issue is raised by a Party shall

be settled by a tribunal of three (3) arbitrators. This tribunal shall be

constituted as followsr one to be appointed by the Contractor and the

other lo be appointed by the Secretary. The first two appointed

arbitrators shall consider names of qualified persons until agreement on

a mutually acceptable Chairman of the tribunal is selected. Such

arbitration shall be initiated and conducted pursuant to Republic Act No.

876, otheMise known as the "Arbitration Act."

ln any event, the arbitration shall be conducted applying the substantive

laws of the Republic of the Philippines.



14.3. Each party shall pay fifty percent (50%) of the fees and expenses of the

Arbitrators and the costs of arbitration. Each party shall pay its own

costs and attorney's fee.

SECTION XV



SUSPENSION OR TERMINATION OF CONTRACT,

TAX INCENTIVES AND CREDITS



15.1. This Agreement may be suspended for failure of the Contractor: (a) to

comply with any provision or requirement of the Act and/or its

implementing rules and regulations; (b) to pay on time the complete

taxes, fees and/or other charges demandable and due the Governmenl.



15.2. This Agreement terminates or may be terminated for the following

causes: (a) expiration of its term, whether original or renewali (b)

withdrawal from the Agreement by the Contractor; (c) violation by the

Contractor of the Agreement's terms and conditions; (d) failure to pay

taxes, fees/or charges or financial obligations for two (2) consecutive

years; (e) false statement or omission of facts by the Contractor; and (0

lny other cause or reason provided under the Act and its implementing

rules and regulations, or any other relevant laws and regulations.



15.3. All statements made in this Agreement shall be considered as conditions

and essential parts hereof, and any falsehood in said statements or



omission of facts which may alter, change or affect substantially the fact

set forth in said statements shall be a ground for its revocation and

termination.



'15.4. The Contractor may, by giving due notice al any trme dunng the term of

this Agreement, apply'for its cancellation due to causes which in the

opinioi of the Contractor, render continued mining operation no longer

feasible or viable. ln this case, the Secretary shall decide on the



application within thirty (30) days from notice: Provided, That the

Conlractor has met all the financial, liscal and legal obligations



15.5. No delay or omissions or course of dealing by the Government shall

impaar any of its rights under this Agreement, except in the case of a

written waiver. The Government's right to seek recourse and relief by all

other means shall not be construed as a waiver of any succeeding or

other default unless the contrary intention is reduced in writing and

signed by the party authorized to exercise the waiver.



15.6. ln case of termination, the Contractor shall pay all the fees and other

liabilities due up to the end of the year in which the termination becomes

effective. The Contractor shall immediately carry out the restoration of

the Contract Area in accordance with good mining industry practice.



15.7. The withdrawal by the Contractor from the Mineral Agreement shall not

release it from any and all financial, environmental, legal and fiscal

obligations under this Agreement.



15.8. The following acts or omission, inter alia shall constitute breach of

contract, upon which the Government may exercise its right to terminate

the Agreement:



a.

b.



Failure of the Contractor without valid reason to commence

Commercial Production within the period prescribed; and/or

Failure of the Contractor to conduct mining operations and other

activities in accordance with the approved Work Programs and/or

any modification thereof as approved by the Director.



15.9. The Government may suspend and cancel tax incentives and credits if

the Contractor fails to abide by the terms and conditions of said

incentives and credits.



SECTION XVI

OTHER PROVISIONS



16.1. Any terms and conditions resulting from repeal or amendment of any

existing laws or regulation or from the enactment of a law, regulation or

administrative order shall be considered a part of this Agreement



16.2. Notice

All notices, demands and other communications required or permitted

hereunder shall be made in writing, telex or telecopy and shall be

deemed to have been duly given notice, in the case of telex or telecopy,

if answered back or confirmation received, or if delivered by hand, upon

receipl or ten days after being deposited in the mail, airmail postage

prepaid and addressed as follows:



lf to the Government.



THE SECRETARY

Departmenl of Environmenl and Natural Resources

DENR Building, Visayas Avenue

Diliman, Quezon City

lf to the Contractor:



THE PRESIDENT

Trans-Asia Oil & Energy Development Corporation

'l1rh Floor. PHINMA Plaza

39 Plaza Drive. Rockwell Center

Makati City

Either party may substitute or change such address on notice thereof to



the other party: Provided, That the Contractor shall, in case of any



change of address during the term of this Agreement, notify the Director

in writing. Failure to do such notification shall be deemed as waiver by

the Contractor to be informed about any communications as provided in

Section 16.2 above.



16.3. Governing Law

This Agreement and the relation between the parties hereto shall be

governed by and construed in accordance with the laws of the Republic

6t tne enitiipines. The contractor hereby agrees and obliges itself to I

comply with the provisions of the Act, its implementing rules and I

reguiaiions and other relevant laws and



regulations.



16.4. Suspension of Obligation



a.



Any failure or delay on the part of any party an the performance of

its obligation or duties hereunder shall be excused to the extent

attribu6bb lo Force Majeure as defined in the Act: Provided'

That the suspension of Mining Operations due lo Force Maieure

causes shall be subject to approval by the Director.



b.



lf Mining Operations are delayed, curtailed or prevented by such



c.



Force Maieure causes, then the time for enjoying the rights and

carrying out the obligations thereby atfected, the term of this

Agr6erient and all rights and obligations .hereunder shall be

eilended for a period equal to the period involved'



The Party, whose ability to perform its obligations is affected by

such Force Maieure causes' shall promptly give Notice to the

other in writing of any such delay or failure of performance' lhe

use

eipecteO aura'iion thereol and its anticipated etfect and shall

be

its'efforts to remedy such delay, except that neither Party.shall

That

the

Provided'

obligation to settle a labor dispute:

,nd"r

"ny



-42-



24



{



suspension of obligation by the Contractor shall be subject to prior

aPProval by the Director



16.5. Amendments

This Agreement shall not be annulled, amended or modified

respect except by mutual consent in writang of the herein parties.



lN WTNESS WHEREOF, the Parties hereto have executed this Agreement, as

of the day and year first above written



Presidend and Chief Executive Officer



(Signature over Printed Name)



Republic of the Philippines)

Quezon City



Before me, a Notary Public for and in the City of Quezon, personally appeared

ANGELO T. REYES, with Community Tax Certificate No. lq94o,g



issued on hdr\ lL tz@)

al fAdutd ot1/ in his capacity as

Secretary of the Oepartment of Environment and Natural Resources, and

MR. FRANCISCO L. VIRAY, with Community Tax Certificate No.

105o169fr issued on Mrrh 2.2@1 at ,^ANTL

his capacity as President and Chief Executive Officer of Trans-Asia Oil and

Energy Developmenl Corporation , both known to me and to me known to be



the same persons who executed the foregoing instrument consisting of twentysix (26) pages, including this acknowledgment page, and acknowledged to me

that the same is their voluntary acts and deeds.



Doc. No.

Page No.

Book No.

Series of



Juan J. DlAz, of legal age, with offlce address at 11s Floor, Phinma Plaza, 39 Plaza Drive,

Rock\ /ell Center, Makati City after having been s,/vorn to, does hereby certify fiat:



1.



2.



He is the



Corporate Secretary



ol



TMNS-ASIA



oll



AND



ENERGY

DEVELOPMENT CORPORATION, a coryoration duly organized and existing under

and by virtue of the lau/s of fie Philippines, with offices at 116 Floor, Phinma Plaza,

39 Plaza Drive, Rockwell Center, Makati City;



Al a regular meeting of the Board of Directors of said Corporatjon held on May 21,

2007, at lviich a quorum was in attendance and acting throughout the following

Resolution was duly adopted:



.RESOLVED,



hat Dr. Francisco L. Viray, President and CEo,



Mr.



Raymundo A, Reyes, Jr., Vice President for Exploraton, and either of them

be and are hereby authorized on behalf of this Corporation, to sign, execute

and deliver the Mineral Pmduction Sharing Agreement wifi he Philippine

governrnent covering an area in Jose Panganiban, Camarines Norte, and

any and all papers and docurnen$ relalive thereto hr and on behalf of this



Corporalion.'



Makati City, May 22, 2007.



May 2007 at Makati City, affiant

issued on February 28,2007 at