NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here


made and entered into


day of


as the

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

Environment and Natural Resources, with office at the Department of Environment

and Natural Resources Building, Visayas Avenue, Diliman, Quezon City



SAN JUANICO RESOURCES CORPORATION, a corporation duly organized and

existing under the laws of the Republic of the Philippines, herein referred to as the

CONTRACTOR, with office at 29h Floor, RCBC Towe|1, Ayala Avenue, Makati

City, and represented in this act by its President, Mr. Cesario P. Magsaysay, as

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



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

Article 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 Statei

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, otheMise known as "The

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

the Department of Environment and Natural Resources is authorized to enter into

Mineral Production Sharing Agreements in furtherance of the objectives of the

Government and the Constitution to bolster the national economy through

sustainable and systematic development and utilization of mineral lands,

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

technical competence and skill, which lhe 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 nlckel, chromite and other associated mineral deposirs existing in the

Contract Area (as herein deflned);

c!^ zil




WHEREAS, the Contractor has access to all lhe Ilnancing, technical competence,

technology and environmental managemenl skills required to prompfly and

effectively carry out the objectives of this Agreement;

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

mutual covenants, terms and conditions hereinafter set forth, it is hereby

stipulated and agreed as follows:





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, developmenl and commercial ulilizalion of nickel,

chromite and other associated mineral deposlls 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 ContracuMining Area without prejudice to the acquisition

by the Contractor of the land/surface rights through any mode of acquisition

provided for by law.

'1.2. The Contractor shall undertake and execute, for and on behalf of the

Government, responsible mining operations in accordance with the

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

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

operations in the Contract Area.


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

in commercial quantity are developed and produced, it will not be entitled to



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

minerals derived from the mining operations contemplated herein shall be

accounted for and divided between the Government and the Contractor in

accordance with Section Vlll hereof.



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

plural, shall have the following respective meaning:

2.1. Ad

refers to Republic Act No. 7942, otheMise known as the 'Philippine

Mining Act of 1995."

2.2. Aoreement means this Mineral Production Sharing Agreement.

2.3. Associated Minerals mean other ores/minerals, which occur together

the principal ore/mineral.






means Bangko Sentral ng Pilipinas.

Budqet means an estimate of expenditures to be made by Contractor in

mining operations contemplated hereunder to accomplish the Work

Program for each particular period.

2.6. Bureau means Mines and Geosciences



Calendar Year or Year meansa 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.


Commercial Production means the production of sutflcient quantity of

minerals to sustain economic viability of mining operations reckoned from

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

stated in the feasibility study, whichever comes first.


Constitution or Philippine Constitution means the 1987 Constitution ofthe

Republic of the Philippines adopted by the Constitutional Convention of

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

Philippines on February 2, 1987.

2.10. Contract Area means the area onshore or offshore delineated under the

Mineral Production Sharing Agreement subject to the relinquishment

obligations of the Contractor and properly defined by latitude and longitude

or bearing and distance.

2.11. Contract Year means a period

of twelve (12) consecutive months counted

from the Effective Date of this Agreement or from the anniversary of such

Effective Date.

2.12. Contractor means San Juanico Resources Corporation or its assignee(s)

of interest under this Agreement: Provided, That the assignment of any of

such interest is accomplished pursuanl to the pertinent provisions of the

implementing rules and regulations oI the Act.

2.13. Declaration of Minino Proiect Feasibilitv means a document proclaiming the

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

acceptable, environmentally safe and economically sound methods

specified in the Project Feasibility Study.

2.14. Deoa(ment or DENR means the Department of Environment and Natural


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


means the date of execution of this Agreement by the

Contractor and by the Secretary on behalf of the Government.

2.16. Effective



means all facets


man's surroundings: physical,

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

2.18. Exoloration means searching or prospecting for mineral resources by

geological, geophysical and geochemical surveys, remote sensing, test

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

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

mineral resources and the feasibility of mining them for prolit.

2.19. Exploration Period shall mean the period from the Effective Date of this

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

not to exceed a total term of sax (6) years for nonmetallic minerals and eight

(8) years for metallic minerals, subject to the pertinent provisions of the

implementing rules and regulations of the Act.

2.20. Force


means acts or circumstances beyond the reasonable

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

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

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

epidemics, earthquake, storm, flood or other adverse weather conditions,

explosion, fire, adverse action by the Government or by any of its

instrumentality or subdivision thereof, act of God or any public enemy and

any cause as herein described over which the affected party has no

reasonable control.

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

Republic of the Philippines acceptable to the Government and the


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

any of its agencies and instrumentalities.

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

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

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

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

or mineral products are sold or consigned abroad by the Contractor under

C.l.F. terms, the actual cost of ocean freight and insurance shall be

deducted: Provided fu(her. That in the case of mineral concentrates which

are not traded in commodity exchanges in the Philippines or abroad such

as copper concentrate, the actual market value shall be the world price

quotation of the refined mineral products contained thereof prevailing in the

said commodity exchanges, after deducting the smelting,


treatment, insurance, transportation and other charges incurred in the

process of converting mineral concentrates into refined metal traded in

those commodity exchanges.

2.24. Mine 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

beneficiation, cyanidation, leaching, smelting, calcination and other similar


2.27. Minina


means that portion of the Contract Area identilied 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 Ooerations means mining activities involving exploration,

feasibility study, environmental 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.



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 ofthe 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.




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.





Size, Shape, and Location of Contract Area

This Agreement covers a

Contract Area of approximately Three Thousand Four Hundred Thirty-Two

and 873/'10,000 (3,432.0873 Has.) hectares, situated in Candelaria,

Zambales, and bounded by the following geographical coordinates

(please refer to ANNEX "B" - 1:50,000 scale Location Map/Sketch Plan):



Timetable for Exploration - The Contraclor 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


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 Exploration

Period: Provided, That the Contractor shall be required to set up a

performance surety equivalent to the expenditure requirement of the

Exploration and Environmental Work Programs.


Work Programs and Budgets - The Contractor shall stricfly compty with the

approved Exploration and Environmental Work programs together with

their corresponding Budgets (please refer to ANNEXES,,C,,and iD,,).

The amount to be spent by the Contractor in conducting Exploration

activities under the terms of this Agreement during the Exploration period

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

Contract Years, as follows:

For the Exploration Work Program:

1st Contract

2nd Contract



For the Environmental Work














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 evenl of termination of this Agreement, the Contractor shall only be

obliged to expend the pro-rala 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 Contracl


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

Exploration Period, the Contractor may relinquish totally or partially the

original Contract Area. After the Exploration Period and prior to or upon

approval of a Declaration of lvlining Project Feasibility by the Director, the

Contractor shall ,inally relinquish any portion of the Contract Area not

necessary for mining operations and not covered by any Declaration of

Mining Project Feasibility.

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

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

implementing rules and regulations of the Act: Provided that each tinal

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 ,ile in the Regional Office concerned, the

Declaration of Mining Project Feasibility of the Contract Area/finat Mining

Area supported by Project Feasibility Study, Three (3)-Year Devetopment

and Construction or Commercial Operalion Work Program, complete

geologic report, an application for survey and the pertinent Environmental

ComplianceCe(ificate,among other applicable requirements. Failure

Contraclor to- - submit



of the




N\ \"\8








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 the

perimeter of the Contract Area/final Mining Area through an application for

survey, complete with requirements, liled 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.



During the Exploration Period, the Contractor shall submit to the

Director, through the Regional Oirector concerned, quarterly and

annual accomplishment reports under oath on all activities

conducted in the Contract Area from the Effective Date of this

Agreement. The quarterly report shall be submitted not later than

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

annual accomplishment report shall be submitted not later than thirty

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

shall include detailed financial expenditures, raw and processed

geological, geochemical, geophysical and radiometric data plotted

on a map at a minimum 1:50,000 scale, copies of originals of assay

results, duplicated samples, field data, copies of originals from

drilling reports, maps, environmental work program implementation

and detailed expenditures showing discrepancies/ deviations with

approved exploration and environmental plans and budgets as well

as all other information of any kind collected during the exploration

activities. All information submitted to the Bureau shall be subject to

the confidentiality clause of this Agreement.


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

Iindings in the Contract Area including location of samples, assays,

chemical analysis, and assessment of mineral potentials together

with a geologic map of 1:50,000 scale at the minimum showing the

results of the exploration. Such report shall also include 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 deposited 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.




- 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.




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

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

Director concerned, an annual report, which states the major

activities, achievements and detailed expenditures during the year

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

geological and environmental progress reports during the

Development and Construction Period.


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

development and construction activities, the Contractor shall submit

a flnal 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.




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

completion of mine development and construction of production facilities, to

the Director, through the Regional Director concerned, a Three-year

Commercial Operation Work Program. The Contractor shall commence

commercial utilization immediately upon approval of the aforesaid Work

Program. Failure of the Contractor lo commence Commercial production

within the period shall be considered a substantial breach of the



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 l\4ining Operations and other activities for the

duration of the Operating Period in accordance with the duly approved

Work Programs and corresponding Budgets.


Expansion and Modification of Facilities - The Contractor may make

expansions, modifications, improvements, and replacements of the mining

facilities and may add new facilities as the Contractor mav consider

necessary for the operations: provided, That such plans shall be embodied

in an appropriate Work Program approved by the Director.



Quarterly Reports


Beginning with

the first Calendar euarter

following the commencement of the Operating period, the Contractor

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

Quarter, to the Director, through the Regional Director concerned, a

Ouarterly Report stating the tonnage of production in terms of ores,

concentrates, and their corresponding grades and other types of

products; value, destination of sales or exports and to whom sold;

terms of sales and expenditures.


Annual Reports - During the Operating period, the Contractor shall

submit within sixty (60) days from the end of each Calendar year, to

the Director, through the Regional Director concerned, an Annual

Report indicating in sufficient detail:


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 futt details as to purchaser,

destination and terms of sale), and if known to the Contractor,

tonnages refined, processed



Philippines with full specifications as to the intermediate

products, by-products or final products and of the terms at

which they were disposed;




Work accomplished and work in progress at the end of the

year in question with respect to all the installations and

facilities related to the utilization program, including the

investment actually made or committed; and


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


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






General Principle - The ,iscal 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 inveslment with special account lo be taken for the

high risk of exploration, the terms and conditions prevailing elsewhere in

the industry and any special efficiency lo 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 said

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

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

registration of this Agreement within the prescribed period shall be

sufficient ground for cancellation of the same.


Occupation Fees - Prior to registration of this Agreement and at the same

date every year thereafter, the Contractor shall pay to the Municipaucity

Treasurer concerned an occupation fee over the Contract Area at the

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 151 (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 accounting

requirements prescribed under existing laws and regulations.

The Government Share shall be allocated in accordance with Sections 290

and 292 ol Republic Act No. 7160, otheMise 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 marketing

contracts or foreign exchange and commodity hedging contracts, which the

Governmenl acknowledges lo be acceptable notwithstanding that the sale

price of the minerals and by-products may from time to time be lower, or

the terms and conditions of sales are less favorable, than that available

elsewhere. The Contractor shall seek to strike a balance between long-term

sales or marketing contracts or foreign exchange and commodity hedging

contracts comparable to policies followed by independent producers in the

international mining industry.

The Contractor shall likewise seek a balanced distribution among

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

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


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

shipment of mineral producl is made, existing and future marketing

contrac(s)/sales agreement(s) shall be submitted to the Director, copt

furnished the Regional Director concerned, for registration. At the sam;

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

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

The Contractor shall reflect in its Monthly/euarterly Report on production,

Sales and lnventory of Minerals, as well as in the lntegrated Annual Report,


corresponding registration number(s)

of the


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


Associated Minerals - lf minerals other than nickel, chromite and other

associated mineral deposifs are discovered in commercial quantities in the

Contract Area, the value thereof shall be added to the value of the principal

mineral in computing lhe Government share.

sEcTtoN tx


Submission to Government - Within the periods stated herein, the

Contractor shall prepare and submit to the Director, through the Regional

Director concerned, a Work Program and corresponding Budget for the

Contract Area stating the l\4ining Operations and expenditures which the

Contractor proposes to carry out during the period covered with the details

and particulars set fodh elsewhere in this Agreement or in the supporting



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

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

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

thereof, provide a Notice to the Contractor specifying in reasonable detail

its reasons therefore. Promptly thereafter, the Governmenl and Contractor

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

Governmenl. ln any event, the revision of any portion of said Work

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

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

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

from receipt thereof to notiry 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,

a copy each of the Work

Programs, for information.

through the Regional Director concerned,


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

not be unreasonably withheld



a technically,

financially, socially, culturally and environmentally responsible manner to

achieve the sustainable development objectives and responsibiiities as

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

10.1. The Contractor shall manage its lvlining Operations in

'10.2. The Contractor shall ensure that the standards of environmental protection

are met in the course of the Mining Operations. To the extent possible,

control of pollution and the transformation of the mined-out areas or

materials into economically and socially productive forms must be done

sjmultaneously with mining.

10.3. The Contractor shall submit an Environmental Work Program during the

Exploration Period as prescribed in the implementing rules and regulations

of the Act.

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

the Contractor prior to the conduct of any development works, construction

of production facilities and/or mine production activities in the Contract


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

issuance and receipt of the ECC, an Environmental Protection and

Enhancement Program (EPEP) using MGB Form No. '16-2 covering all

areas to be affected by development, utilization and processing activities

under this Agreement. The Contractor shall allocate for its initial

environment-related capital expenditures approximately ten percent (10%)

of the total project cost or in such amount depending on the

environmental/geological condition, nature and scale of operations and

technology to be employed in the Contract Area.

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

every calendar year, an Annual Environmental Protection



Enhancement Program

using MGB Form 16-3, which shall be

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

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

Contractor shall allocate annually three to five percent (3%-5%) of its direct

mining and milling costs depending on the environmental/geologic

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

(MRF) and the Mine Waste and Tailings Fee (MWTF).

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

EPEP as a reasonable environmental deposit to ensure satisfactory

compliance with the commitments/strategies of the EpEp/AEpEp and

availability of funds for the performance of the EpEp/AEpEp during the

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

government depository bank and shall be used for physical and social

rehabilitation of areas affected by mining activities and for research on the

social, technical and preventive aspects of rehabilitation.

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

tailings generated during the conduct of Mining Operations. The MWTF

collected shall accrue to a Mine Waste and Tailings Reserve Fund and

shall be deposited in a government depository bank for payment of

compensation for damages caused by the Mining Operations.

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

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

monitoring, etc. to minimize land degradation, air and water pollution, acid

rock drainage and changes in hydrogeology.

10.9. The Conlractor shall set up an Environmental and Safety Offlce at its

minesile manned by qualified personnel to plan, implement and monitor its

approved EPEP.

10.10.The Contractor shall be responsible in the monitoring of environmental,

safety and health conditions in the Contract Area and shall strictly comply

with all the rules and regulations embodied under DAO No. 2000-98,

otheMise known as the "Mine Safety and Health Standards."

10.11.The Contractor shall be responsible for the submission of a final mine

rehabilitation and/or decommissioning plans, including its financial

requirements and incorporating the details and particulars set forth in the

implementing rules and regulations of the Act.

sEcTtoN xt



'1.1. Obligations of the Contractor:


To exclusively conduct sustainable Mining Operations within the


To construct and operate any facilities specified under the Mineral

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

implementing rules and regulations;

Agreement or approved Work Program;


To determine the exploration, mining and treatment process to be

utilized in the Mining Operations;

To elrtract, remove, use and dispose of any tailings as authorized by

an aPProved Work Program;

To secure all permits necessary or desirable for the purpose of

Mining Operations;

To keep accurate technical records about the Mining Operations, as

well as financial and marketing accounts, and make them available

to Government representatives authorized by the Director for the

purpose of assessing the performance and compliance of the

Contractor with

the terms of this Agreement.


represenlatives of other Government Agencies may also have

access to such accounts in accordance with existing laws, rules and



To furnish the Bureau all the data and information gathered from the

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

be open for inspection;

To allow access to

Government during reasonable hours in

inspecting the Contract Area and examining pertinent records for

purposes of monitoring compliance with the terms of this Agreement,

To hold the Government free and harmless from all claims


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

the accidents or injuries to persons or properties caused by Mining

Operations of the Contractor and indemniry the Government for any

expenses or costs incurred by the Government by reason of any

such claims, accounts, demands or actionsi

ln the developmenl of the community:



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

(170) of the value of the gross output 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

preservation and/or

Contractor shall assist

enhancement of such activities;

in the


To allot annually a minimum of one percent (10lo) of the direct

mining and milling costs necessary to implement the activities

undertaken in the development of the host and neighboring

communities. Expenses for community development may be

charged against the royalty payment of at least one percent


of the gross output intended for the concerned

indigenous cultural community;


To give preference to Filipino citizens who have established

domicile in the neighboring communities, in the hiring of

personnel for its mining operations. lf necessary skills and

expertise are currently not available, the Contractor musl

immediately prepare and undertake a training and recruitment

program at its expense; and


To incorporate in the Mining Project Feasibility Study the

planned expenditures necessary to implement 0.1) to (j.3) of

this Sectionl

ln the development of Mining Technology and Geosciences:

k.1. ln the course of its operations, to produce


geophysical, geochemical and other types of maps and

repo(s that are appropriate in scale and in format and

substance which are consistent with the internationally

accepted standards and practices. Such maps shall be made

available lo the scientific community in the most convenient

and cost effective forms, subject to the condition that the

Contractor may delay release of said information for a

reasonable period of time which shall not exceed three (3)



To systematically keep the data generated from the Contracu

Mining Area such as cores, assays and other related

information, including economic and financial dala and make

them accessible to students, researchers and other persons


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;



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;

k.4. To

allocate research and development budget for the

advancemenl of mining technology and geosciences in

coordination with the Bureau, research institutions, academe,

etc.t and


To replicate data, maps and reports cited in (k.'l) 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




mining, geoscience and


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;





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


incorporate in the Prolect Feasibility Study the planned

expenditures necessary to implement all the plans and programs set

forth in this Agreementi and

1.2. Rights of the Contractor:

a. To conduct Mining Operations within the




ContracvMining Area in accordance with the terms and conditions

hereof and without interfering with the rights


Contractors/Lessees/Operators/ Permittees/Permit Holders;



Possession of the Contract Area, with full right of ingress and egress

and the right to occupy the same, subject to surface and easement



To use and have access to all declassified geological, geophysical,

drilling, production and other data relevant to the mining operations;


To sell, assign, transfer, convey or otherwise dispose of all its rights,

interests and obligations under the Agreement subject to the

aPproval of the Government;


To employ or bring into the Philippines foreign technical


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 sub.iect to the required approval under existing laws,

rules and regulations;


To enjoy easement rights and use of timber, water and other natural

resources in the Contract Area subject to pertinent laws, rules and

regulations and the rights of third parties;


Repatriation of capital and remittance of profits, dividends and

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

Pilipinas rules and regulationsi and



To import when necessary all equipment, spare parts and


materials required in the operations in accordance with existing laws

and regulations.

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

lhe Contract Area: and


To cooperate with the Contractor in its efforts to obtain financing

contemplated herein from banks or other financial institutions:

Provided, That such financing arrangements will in no event reduce

the Contractor's obligation on Government rights hereunder.



121. fhe

Contractor shall acquire for the Mining Operations only such assets

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


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

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

property of the Contractor. The Contractor shall have the righl 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 ('l)

year from the time of cessation within which to remove its improvements;

otherwise, all social infrastructures and facilities shall be turned over or

donated tax free to the proper government authorities, national or local, to

ensure that said infrastructures and facilities are continuously maintained

and utilized by the host and neighboring communities.





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

personnel in all types of mining operations for which they are qualilied; 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:"

Unskilled Skilled Clerical Professional













(%'t ("/,)



































'13.2. Cost and expenses of training such Filipino personnel and the Contractor's

own employees shall be included in the Operating Expenses.

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

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



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

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

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

enforceability, or performance of this Agreement before resorting to

arbitration as provided for in Section 14.2. below.

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


period of one (1) year from the time the issue is raised by a Party shall be

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

constituted as follows: one to be appointed by the Contractor and the other

to be appointed by the Secretary. The first two appointed arbitrators shall

consider names of qualified persons until agreement on a mutually

acceptable Chairman of the tribunal is selected. Such arbitration shall be

initiated and conducted pursuant to Republic Act No. 876, otheMise known

as the 'Arbitration Act."

ln any evenl, 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.




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

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

rules and regulations; (b) to pay on time the complete taxes, fees and/or

other charges demandable and due the Government.

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

(a) expiration of its term, whether original or renewal; (b) withdrawal from

the Agreement by the Contractor; (c) violation by the Contractor of the

Agreement's terms and conditions; (d) failure to pay taxes, fees/or charges

or financial obligations for two (2) consecutive years; (e) false statement or

omission of facts by the Contractor; and (f) any other cause or reason

provided under the Act and its implementing rules and regulations, or any

other relevant laws and regulations.

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

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

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

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


15.4. The Contractor may, by giving due notice at any time during the term of this

Agreement, apply for its cancellation due to causes which, in the opinion of

the Contractor, render continued mining operation no longer feasible or

viable. ln this case, the Secretary shall decide on the application within

thirty (30) days from notice: Provided, That the Contractor has met all the

financial, fiscal and legal obligations.


No delay or omissions or course of dealing by the Government shall impair

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

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 Contraclor 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



Contractor without valid reason to commence



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.


of the

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




16.'1. Any terms and conditions resulting from repeal or amendment of any

existing laws or regulation or from the enactmenl 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


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

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

back or confirmation received, or if delivered by hand, upon receipt or ten

days after being deposited in the mail, airmail postage prepaid and

addressed as follows:

lf to the Government:


Department of Environment and Nalural Resources

OENR Building, Visayas Avenue

Diliman, Quezon City

lf to the Contractor:


San Juanico Resources Corporation

29rh Floor, RCBC Towell, Ayala Avenue

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


16.3. Governing Law

This Agreement and the relation between the parties hereto shall be

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

the Philippines. The Contractor hereby agrees and obliges itself to comply

with lhe provisions of the Act, its implementing rules and regulations and

other relevant laws and regulations.

16.4. Suspension of Obligation


Any failure or delay on the part of any party in the performance of its

obligation or duties hereunder shall be excused to the extent

attributable to Force Majeure as defined in the Act: provided, That

the suspension of Mining Operations due to Force Majeure causes

shall be subject to approval by the Oirector.

lf Mining Operations are delayed, curtailed or prevented by such

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

carrying out the obligations thereby affected, the term of this

Agreement and all rights and obligations hereunder shall be

extended for a period equal to the period involved.

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

Force Majeure causes, shall promptly give Notice to the other in

writing of any such delay or failure of performance, the expected

duration thereof and its anticipated effect and shall use its efforts to

remedy such delay, except that neither Party shall be under any

obligation to settle a labor dispute: Provided, That the suspension of

obligataon by the Contractor shall be subject to prior approval by the


'16.5. Amendments

This Agreement shall not be annulled, amended or modified in any respect

except by mutual consent in writing of the herein parties.

lN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of

the day and year first above written



and Natural Resources

-2-^- t^r-:.a

nature over Printe

Republic of the Philippines)

Quezon City

MAGSAYSAY, with Community Tax Certificate No. A *tq1


on $brJa a\ zor8 al 4,atu.z o' - z.*6b,.rt, in his capacity as President of San

Juanico Resources Corporation, both known to me and to me known to be the

same persons who executed the foregoing instrument consisting of twenty-four

(24) pages, including this acknowledgmenl page, and acknowledged to me that

the same is their voluntary acts and deeds.

vw{ c. aenaA


Doc. No.

Page No.

Book No.

Series of


11t{",(C rlr4(o/ 0C