RA No 7942 | Philippine

Mining Act of 1995

Implementing Rules and Regulations
March 3, 1995

AN ACT INSTITUTING A NEW SYSTEM OF MINERAL RESOURCES EXPLORATION,

DEVELOPMENT, UTILIZATION, AND CONSERVATION

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

CHAPTER I Introductory Provision

Section 1

Title

This Act shall be known as the "Philippine Mining Act of 1995."

Section 2

Declaration of Policy

All mineral resources in public and private lands within the territory and exclusive economic zone of
the Republic of the Philippines are owned by the State. It shall be the responsibility of the State to
promote their rational exploration, development, utilization and conservation through the combined
efforts of government and the private sector in order to enhance national growth in a way that
effectively safeguards the environment and protect the rights of affected communities.

Section 3

Definition of Terms

As used in and for purposes of this Act, the following terms, whether in singular or plural, shall mean:

a. Ancestral lands refers to all lands exclusively and actually possessed, occupied, or utilized by
indigenous cultural communities by themselves or through their ancestors in accordance with their
customs and traditions since time immemorial, and as may be defined and delineated by law.

b. Block or meridional block means an area bounded by one-half (1/2) minute of latitude and one-half
(1/2) minute of longitude, containing approximately eighty-one hectares (81 has.).

c. Bureau means the Mines and Geosciences Bureau under the Department of Environment and
Natural Resources.

d. Carrying capacity refers to the capacity of natural and human environments to accommodate and
absorb change without experiencing conditions of instability and attendant degradation.
e. Contiguous zone refers to water, sea bottom and substratum measured twenty-four nautical miles
(24 n.m.) seaward from the base line of the Philippine archipelago.

f. Contract area means land or body of water delineated for purposes of exploration, development, or
utilization of the minerals found therein.

g. Contractor means a qualified person acting alone or in consortium who is a party to a mineral
agreement or to a financial or technical assistance agreement.

h. Co-production agreement (CA) means an agreement entered into between the Government and one
or more contractors in accordance with Section 26(b) hereof.

i. Department means the Department of Environment and Natural Resources.

j. Development means the work undertaken to explore and prepare an ore body or a mineral deposit
for mining, including the construction of necessary infrastructure and related facilities.

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

l. Ecological profile or eco-profile refers to geographic-based instruments for planners and decision-
makers which presents an evaluation of the environmental quality and carrying capacity of an area.

m. Environmental compliance certificate (ECC) refers to the document issued by the government
agency concerned certifying that the project under consideration will not bring about an unacceptable
environmental impact and that the proponent has complied with the requirements of the environmental
impact statement system.

n. Environmental impact statement (EIS) is the document which aims to identify, predict, interpret,
and communicate information regarding changes in environmental quality associated with a proposed
project and which examines the range of alternatives for the objectives of the proposal and their
impact on the environment.

o. Exclusive economic zone means the water, sea bottom and subsurface measured from the baseline
of the Philippine archipelago up to two hundred nautical miles (200 n.m.) offshore.

p. Existing mining/quarrying right means a valid and subsisting mining claim or permit or quarry
permit or any mining lease contract or agreement covering a mineralized area granted/issued under
pertinent mining laws.

q. Exploration means the searching or prospecting for mineral resources by geological, geochemical or
geophysical surveys, remote sensing, test pitting, trenching, drilling, shaft sinking, tunneling or any
other means for the purpose of determining the existence, extent, quantity and quality thereof and the
feasibility of mining them for profit.

r. Financial or technical assistance agreement means a contract involving financial or technical

assistance for large-scale exploration, development, and utilization of mineral resources.

s. Force majeure means acts or circumstances beyond the reasonable control of contractor including,
but not limited to, war, rebellion, insurrection, riots, civil disturbance, blockade, sabotage, embargo,
strike, lockout, any dispute with surface owners and other labor disputes, epidemic, earthquake, storm,
flood or other adverse weather conditions, explosion, fire, adverse action by government or by any
instrumentality or subdivision thereof, act of God or any public enemy and any cause that herein
describe over which the affected party has no reasonable control.
t. Foreign-owned corporation means any corporation, partnership, association, or cooperative duly
registered in accordance with law in which less than fifty per centum (50%) of the capital is owned by
Filipino citizens.

u. Government means the government of the Republic of the Philippines.

v. Gross output means the actual market value of minerals or mineral products from its mining area as
defined in the National Internal Revenue Code.

w. Indigenous cultural community means a group or tribe of indigenous Filipinos who have
continuously lived as communities on communally-bounded and defined land since time immemorial
and have succeeded in preserving, maintaining, and sharing common bonds of languages, customs,
traditions, and other distinctive cultural traits, and as may be defined and delineated by law.

x. Joint venture agreement (JVA) means an agreement entered into between the Government and one
or more contractors in accordance with Section 26(c) hereof.

y. Mineral processing means the milling, beneficiation or upgrading of ores or minerals and rocks or
by similar means to convert the same into marketable products.

z. Mine wastes and tailings shall mean soil and rock materials from surface or underground mining
and milling operations with no economic value to the generator of the same.

aa. Minerals refers to all naturally occurring inorganic substance in solid, gas, liquid, or any
intermediate state excluding energy materials such as coal, petroleum, natural gas, radioactive
materials, and geothermal energy.

ab. Mineral agreement means a contract between the government and a contractor, involving mineral
production-sharing agreement, co-production agreement, or joint-venture agreement.

ac. Mineral land means any area where mineral resources are found.

ad. Mineral resource means any concentration of minerals/rocks with potential economic value.

ae. Mining area means a portion of the contract area identified by the contractor for purposes of
development, mining, utilization, and sites for support facilities or in the immediate vicinity of the
mining operations.

af. Mining operation means mining activities involving exploration, feasibility, development,
utilization, and processing.

ag. Non-governmental organization (NGO) includes nonstock, nonprofit organizations involved in

activities dealing with resource and environmental conservation, management and protection.

ah. Net assets refers to the property, plant and equipment as reflected in the audited financial statement
of the contractor net of depreciation, as computed for tax purposes, excluding appraisal increase and
construction in progress.

ai. Offshore means the water, sea bottom and subsurface from the shore or coastline reckoned from the
mean low tide level up to the two hundred nautical miles (200 n.m.) exclusive economic zone
including the archipelagic sea and contiguous zone.

aj. Onshore means the landward side from the mean tide elevation, including submerged lands in
lakes, rivers and creeks.
ak. Ore means a naturally occurring substance or material from which a mineral or element can be
mined and/or processed for profit.

al. Permittee means the holder of an exploration permit.

am. Pollution control and infrastructure devices refers to infrastructure, machinery, equipment and/or
improvements used for impounding, treating or neutralizing, precipitating, filtering, conveying and
cleansing mine industrial waste and tailings as well as eliminating or reducing hazardous effects of
solid particles, chemicals, liquids or other harmful byproducts and gases emitted from any facility
utilized in mining operations for their disposal.

an. President means the President of the Republic of the Philippines.

ao. Private land refers to any land belonging to any private person which includes alienable and
disposable land being claimed by a holder, claimant, or occupant who has already acquired a vested
right thereto under the law, although the corresponding certificate or evidence of title or patent has not
been actually issued.

ap. Public land refers to lands of the public domain which have been classified as agricultural lands
and subject to management and disposition or concession under existing laws.

aq. Qualified person means any citizen of the Philippines with capacity to contract, or a corporation,
partnership, association, or cooperative organized or authorized for the purpose of engaging in miring,
with technical and financial capability to undertake mineral resources development and duly registered
in accordance with law at least sixty per centum (60%) of the capital of which is owned by citizens of
the Philippines: Provided, That a legally organized foreign-owned corporation shall be deemed a
qualified person for purposes of granting an exploration permit, financial or technical assistance
agreement or mineral processing permit.

ar. Quarrying means the process of extracting, removing and disposing quarry resources found on or
underneath the surface of private or public land.

as. Quarry permit means a document granted to a qualified person for the extraction and utilization of
quarry resources on public or private lands.

at. Quarry resources refers to any common rock or other mineral substances as the Director of Mines
and Geosciences Bureau may declare to be quarry resources such as, but not limited to, andesite,
basalt, conglomerate, coral sand, diatomaceous earth, diorite, decorative stones, gabbro, granite,
limestone, marble, marl, red burning clays for potteries and bricks, rhyolite, rock phosphate,
sandstone, serpentine, shale, tuff, volcanic cinders, and volcanic glass: Provided, That such quarry
resources do not contain metals or metallic constituents and/or other valuable minerals in
economically workable quantities: Provided, further, That non-metallic minerals such as kaolin,
feldspar, bull quartz, quartz or silica, sand and pebbles, bentonite, talc, asbestos, barite, gypsum,
bauxite, magnesite, dolomite, mica, precious and semi-precious stones, and other non-metallic
minerals that may later be discovered and which the: Director declares the same to be of economically
workable quantities, shall not be classified under the category of quarry resources.

au. Regional director means the regional director of any mines regional office under the Department of
Environment and Natural Resources.

av. Regional office means any of the mines regional offices of the Department of Environment and
Natural Resources.

aw. Secretary means the Secretary of the Department of Environment and Natural Resources.
ax. Special allowance refers to payment to the claim-owners or surface right-owners particularly
during the transition period from Presidential Decree No. 463 and Executive Order No. 279, series of
1987.

ay. State means the Republic of the Philippines.

az. Utilization means the extraction or disposition of minerals.

CHAPTER II Government Management

Section 4

Ownership of Mineral Resources

Mineral resources are owned by the State and the exploration, development, utilization, and processing
thereof shall be under its full control and supervision. The State may directly undertake such activities
or it may enter into mineral agreements with contractors.

The State shall recognize and protect the rights of the indigenous cultural communities to their
ancestral lands as provided for by the Constitution.

Section 5

Mineral Reservations

When the national interest so requires, such as when there is a need to preserve strategic raw
materials for industries critical to national development, or certain minerals for scientific,
cultural or ecological value, the President may establish mineral reservations upon the
recommendation of the Director through the Secretary. Mining operations in existing mineral
reservations and such other reservations as may thereafter be established, shall be undertaken
by the Department or through a contractor: Provided, That a small scale-mining cooperative
covered by Republic Act No. 7076 shall be given preferential right to apply for a small-scale mining
agreement for a maximum aggregate area of twenty-five percent (25%) of such mineral reservation,
subject to valid existing mining/quarrying rights as provided under Section 112 Chapter XX hereof.
All submerged lands within the contiguous zone and in the exclusive economic zone of the Philippines
are hereby declared to be mineral reservations.

A ten per centum (10%) share of all royalties and revenues to be derived by the government from the
development and utilization of the mineral resources within mineral reservations as provided under
this Act shall accrue to the Mines and Geosciences Bureau to be allotted for special projects and other
administrative expenses related to the exploration and development of other mineral reservations
mentioned in Section 6 hereof.

Section 6

Other Reservations

Mining operations in reserved lands other than mineral reservations may be undertaken by the
Department, subject to limitations as herein provided. In the event that the Department cannot
undertake such activities, they may be undertaken by a qualified person in accordance with the rules
and regulations promulgated by the Secretary. The right to develop and utilize the minerals found
therein shall be awarded by the President under such terms and conditions as recommended by the
Director and approved by the Secretary: Provided, That the party who undertook the exploration of
said reservation shall be given priority. The mineral land so awarded shall be automatically excluded
from the reservation during the term of the agreement: Provided, further, That the right of the lessee of
a valid mining contract existing within the reservation at the time of its establishment shall not be
prejudiced or impaired.

Section 7

Periodic Review of Existing Mineral Reservations

The Secretary shall periodically review existing mineral reservations for the purpose of determining
whether their continued existence is consistent with the national interest, and upon his
recommendation, the President may, by proclamation, alter or modify the boundaries thereof or revert
the same to the public domain without prejudice to prior existing rights.

Section 8

Authority of the Department

The Department shall be the primary government agency responsible for the conservation,
management, development, and proper use of the State's mineral resources including those in
reservations, watershed areas, and lands of the public domain. The Secretary shall have the authority
to enter into mineral agreements on behalf of the Government upon the recommendation of the
Director, promulgate such rules and regulations as may be necessary to implement the intent and
provisions of this Act.

Section 9

Authority of the Bureau

The Bureau shall have direct charge in the administration and disposition of mineral lands and mineral
resources and shall undertake geological, mining, metallurgical, chemical, and other researches as well
as geological and mineral exploration surveys. The Director shall recommend to the Secretary the
granting of mineral agreements to duly qualified persons and shall monitor the compliance by the
contractor of the terms and conditions of the mineral agreements. The Bureau may confiscate surety,
performance and guaranty bonds posted through an order to be promulgated by the Director. The
Director may deputize, when necessary, any member or unit of the Philippine National Police,
barangay, duly registered non-governmental organization (NGO) or any qualified person to police all
mining activities.

Section 10

Regional Offices

There shall be as many regional offices in the country as may be established by the Secretary, upon the
recommendation of the Director.

Section 11

Processing of Applications

The system of processing applications for mining rights shall be prescribed in the rules and regulations
of this Act.

Section 12
Survey, Charting and Delineation of Mining Areas

A sketch plan or map of the contract or mining area prepared by a deputized geodetic engineer suitable
for publication purposes shall be required during the filing of a mineral agreement or financial or
technical assistance agreement application. Thereafter, the contract or mining area shall be surveyed
and monumented by a deputized geodetic engineer or bureau geodetic engineer and the survey plan
shall be approved by the Director before the approval of the mining feasibility.

Section 13

Meridional Blocks

For purposes of the delineation of the contract or mining areas under this Act, the Philippine territory
and its exclusive economic zone shall be divided into meridional blocks of one-half (1/2) minute of
latitude and one-half (1/2) minute of longitude.

Section 14

Recording System

There shall be established a national and regional filing and recording system. A mineral resource
database system shall be set up in the Bureau which shall include, among others, a mineral rights
management system. The Bureau shall publish at least annually, a mineral gazette of nationwide
circulation containing among others, a current list of mineral rights, their location in the map, mining
rules and regulations, other official acts affecting mining, and other information relevant to mineral
resources development. A system and publication fund shall be included in the regular budget of the
Bureau.

CHAPTER III Scope of Application

Section 15

Scope of Application

This Act shall govern the exploration, development, utilization and processing of all mineral
resources.

Section 16

Opening of Ancestral Lands for Mining Operations

No ancestral land shall be opened for mining-operations without prior consent of the indigenous
cultural community concerned.

Section 17

Royalty Payments for Indigenous Cultural Communities

In the event of an agreement with an indigenous cultural community pursuant to the preceding section,
the royalty payment, upon utilization of the minerals shall be agreed upon by the parties. The said
royalty shall form part of a trust fund for the socioeconomic well-being of the indigenous cultural
community.
Section 18

Areas Open to Mining Operations

Subject to any existing rights or reservations and prior agreements of all parties, all mineral resources
in public or private lands, including timber or forestlands as defined in existing laws, shall be open to
mineral agreements or financial or technical assistance agreement applications. Any conflict that may
arise under this provision shall be heard and resolved by the panel of arbitrators.

Section 19

Areas Closed to Mining Applications

Mineral agreement or financial or technical assistance agreement applications shall not be allowed:

a. In military and other government reservations, except upon prior written clearance by the
government agency concerned;

b. Near or under public or private buildings, cemeteries, archeological and historic sites, bridges,
highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public or private
works including plantations or valuable crops, except upon written consent of the government agency
or private entity concerned;

c. In areas covered by valid and existing mining rights;

d. In areas expressedly prohibited by law;

e. In areas covered by small-scale miners as defined by law unless with prior consent of the small-
scale miners, in which case a royalty payment upon the utilization of minerals shall be agreed upon by
the parties, said royalty forming a trust fund for the socioeconomic development of the community
concerned; and

f. Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove
forests, mossy forests, national parks provincial/municipal forests, parks, greenbelts, game refuge and
bird sanctuaries as defined by law and in areas expressly prohibited under the National Integrated
Protected Areas System (NIPAS) under Republic Act No. 7586, Department Administrative Order No.
25, series of 1992 and other laws.

CHAPTER IV Exploration Permit

Section 20

Exploration Permit

An exploration permit grants the right to conduct exploration for all minerals in specified areas. The
Bureau shall have the authority to grant an exploration Permit to a qualified person.

Section 21

Terms and Conditions of the Exploration Permit

An exploration permit shall be for a period of two (2) years, subject to annual review and
relinquishment or renewal upon the recommendation of the Director.
Section 22

Maximum Areas for Exploration Permit

The maximum area that a qualified person may hold at any one time shall be:

a. Onshore, in any one province

1. for individuals, twenty (20) blocks: and

2. for partnerships, corporations, cooperatives, or associations, two hundred (200) blocks.

b. Onshore, in the entire Philippines

1. for individuals, forty (40) blocks; and

2. for partnerships, corporations, cooperatives, or associations, four hundred (400) blocks.

c. Offshore, beyond five hundred meters (500m) from the mean low tide level:

1. for individuals, one hundred (100) blocks; and

2. for partnerships, corporations, cooperatives, or associations, one thousand (1,000) blocks.

Section 23

Rights and Obligations of the Permittee

An exploration permit shall grant to the permittee, his heirs or successors-in-interest, the right to enter,
occupy and explore the area: Provided, That if private or other parties are affected, the permittee shall
first discuss with the said parties the extent, necessity, and manner of his entry, occupation and
exploration and in case of disagreement, a panel of arbitrators shall resolve the conflict or
disagreement.

The permittee shall undertake an exploration work on the area as specified by its permit based on an
approved work program.

Any expenditure in excess of the yearly budget of the approved work program may be carried forward
and credited to the succeeding years covering the duration of the permit. The Secretary, through the
Director, shall promulgate rules and regulations governing the terms and conditions of the permit.

The permittee may apply for a mineral production sharing agreement, joint venture agreement, co-
production agreement or financial or technical assistance agreement over the permit area, which
application shall be granted if the permittee meets the necessary qualifications and the terms and
conditions of any such agreement: Provided, That the exploration period covered by the exploration
permit shall be included as part of the exploration period of the mineral agreement or financial or
technical assistance agreement.

Section 24

Declaration of Mining Project Feasibility

A holder of an exploration permit who determines the commercial viability of a project covering a
mining area may, within the term of the permit, file with the Bureau a declaration of mining project
feasibility accompanied by a work program for development. The approval of the mining project
feasibility and compliance with other requirements provided in this Act shall entitle the holder to an
exclusive right to a mineral production sharing agreement or other mineral agreements or financial or
technical assistance agreement.

Section 25

Transfer or Assignment

An exploration permit may be transferred or assigned to a qualified person subject to the approval of
the Secretary upon the recommendation of the Director.

CHAPTER V Mineral Agreements

Section 26

Modes of Mineral Agreement

For purposes of mining operations, a mineral agreement may take the following forms as herein
defined:

a. Mineral production sharing agreement is an agreement where the Government grants to the
contractor the exclusive right to conduct mining operations within a contract area and shares in the
gross output. The contractor shall provide the financing, technology, management and personnel
necessary for the implementation of this agreement.

b. Co-production agreement is an agreement between the Government and the contractor wherein the
Government shall provide inputs to the mining operations other than the mineral resource.

c. Joint venture agreement is an agreement where a joint-venture company is organized by the

Government and the contractor with both parties having equity shares. Aside from earnings in equity,
the Government shall be entitled to a share in the gross output.

A mineral agreement shall grant to the contractor the exclusive right to conduct mining operations and
to extract all mineral resources found in the contract area. In addition, the contractor may be allowed
to convert his agreement into any of the modes of mineral agreements or financial or technical
assistance agreement covering the remaining period of the original agreement subject to the approval
of the Secretary.

Section 27

Eligibility

A qualified person may enter into any of the three (3) modes of mineral agreement with the
government for the exploration, development and utilization of mineral resources: Provided, That in
case the applicant has been in the mining industry for any length of time, he should possess a
satisfactory environmental track record as determined by the Mines and Geosciences Bureau and in
consultation with the Environmental Management Bureau of the Department.

Section 28

Maximum Areas for Mineral Agreement

The maximum area that a qualified person may hold at any time under a mineral agreement shall be:
a. Onshore, in any one province

1. for individuals, ten (10) blocks; and

2. for partnerships, cooperatives, associations, or corporations, one hundred (100) blocks.

b. Onshore, in the entire Philippines

1. for individuals, twenty (20) blocks; and

2. for partnerships, cooperatives, associations, or corporations, two hundred (200) blocks.

c. Offshore, in the entire Philippines

1. for individuals fifty (50) blocks;

2. for partnerships, cooperatives, associations, or corporations, five hundred (500) blocks; and

3. for the exclusive economic zone, a larger area to be determined by the Secretary.

The maximum areas mentioned above that a contractor may hold under a mineral agreement shall not
include mining/quarry areas under operating agreements between the contractor and a
claimowner/lessee/permittee/licensee entered into under Presidential Decree No. 463.

Section 29

Filing and Approval of Mineral Agreements

All proposed mineral agreements shall be filed in the region where the areas of interest are located,
except in mineral reservations which shall be filed with the Bureau.

The filing of a proposal for a mineral agreement shall give the proponent the prior right to areas
covered by the same. The proposed mineral agreement will be approved by the Secretary and copies
thereof shall be submitted to the President. Thereafter, the President shall provide a list to Congress of
every approved mineral agreement within thirty (30) days from its approval by the Secretary.

Section 30

Assignment/Transfer

Any assignment or transfer of rights and obligations under any mineral agreement except a financial or
technical assistance agreement shall be subject to the prior approval of the Secretary. Such assignment
or transfer shall be deemed automatically approved if not acted upon by the Secretary within thirty
(30) working days from official receipt thereof, unless patently unconstitutional or illegal.

Section 31

Withdrawal from Mineral Agreements

The contractor may, by giving due notice at any time during the term of the agreement, apply for the
cancellation of the mineral agreement due to causes which, in the opinion of the contractor, make
continued mining operations no longer feasible or viable. The Secretary shall consider the notice and
issue its decision within a period of thirty (30) days: Provided, That the contractor has met all its
financial, fiscal and legal obligations.

Section 32
Terms

Mineral agreements shall have a term not exceeding twenty-five (25) years to start from the date of
execution thereof, and renewable for another term not exceeding twenty-five (25) years under the
same terms and conditions thereof, without prejudice to changes mutually agreed upon by the parties.
After the renewal period, the operation of the mine may be undertaken by the Government or through
a contractor. The contract for the operation of a mine shall be awarded to the highest bidder in a public
bidding after due publication of the notice thereof: Provided, That the contractor shall have the right to
equal the highest bid upon reimbursement of all reasonable expenses of the highest bidder.

CHAPTER VI Financial or Technical Assistance

Agreement
Section 33

Eligibility

Any qualified person with technical and financial capability to undertake large-scale exploration,
development, and utilization of mineral resources in the Philippines may enter into a financial or
technical assistance agreement directly with the Government through the Department.

Section 34

Maximum Contract Area

The maximum contract area that may be granted per qualified person, subject to relinquishment shall
be:

a. 1,000 meridional blocks onshore;

b. 4,000 meridional blocks offshore; or

c. Combinations of a and b provided that it shall not exceed the maximum limits for onshore and
offshore areas.

Section 35

Terms and Conditions

The following terms, conditions, and warranties shall be incorporated in the financial or technical
assistance agreement, to wit:

a. A firm commitment in the form of a sworn statement, of an amount corresponding to the

expenditure obligation that will be invested in the contract area: Provided, That such amount shall be
subject to changes as may be provided for in the rules and regulations of this Act;

b. A financial guarantee bond shall be posted in favor of the Government in an amount equivalent to
the expenditure obligation of the applicant for any year;

c. Submission of proof of technical competence, such as, but not limited to, its track record in mineral
resource exploration, development, and utilization; details of technology to be employed in the
proposed operation; and details of technical personnel to undertake the operation;
d. Representations and warranties that the applicant has all the qualifications and none of the
disqualifications for entering into the agreement;

e. Representations and warranties that the contractor has or has access to all the financing, managerial
and technical expertise and, if circumstances demand, the technology required to promptly and
effectively carry out the objectives of the agreement with the understanding to timely deploy these
resources under its supervision pursuant to the periodic work programs and related budgets, when
proper, providing an exploration period up to two (2) years, extendible for another two (2) years but
subject to annual review by the Secretary in accordance with the implementing rules and regulations
of this Act, and further, subject to the relinquishment obligations;

f. Representations and warranties that, except for payments for dispositions for its equity, foreign
investments in local enterprises which are qualified for repatriation, and local supplier's credits and
such other generally accepted and permissible financial schemes for raising funds for valid business
purposes, the contractor shall not raise any form of financing from domestic sources of funds, whether
in Philippine or foreign currency, for conducting its mining operations for and in the contract area;

g. The mining operations shall be conducted in accordance with the provisions of this Act and its
implementing rules and regulations;

h. Work programs and minimum expenditures commitments;

i. Preferential use of local goods and services to the maximum extent practicable;

j. A stipulation that the contractors are obligated to give preference to Filipinos in all types of mining
employment for which they are qualified and that technology shall be transferred to the same;

k. Requiring the proponent to effectively use appropriate anti-pollution technology and facilities to
protect the environment and to restore or rehabilitate mined out areas and other areas affected by mine
tailings and other forms of pollution or destruction;

l. The contractors shall furnish the Government records of geologic, accounting, and other relevant
data for its mining operations, and that book of accounts and records shall be open for inspection by
the government;

m. Requiring the proponent to dispose of the minerals and byproducts produced under a financial or
technical assistance agreement at the highest price and more advantageous terms and conditions as
provided for under the rules and regulations of this Act;

n. Provide for consultation and arbitration with respect to the interpretation and implementation of the
terms and conditions of the agreements; and

o. Such other terms and conditions consistent with the Constitution and with this Act as the Secretary
may deem to be for the best interest of the State and the welfare of the Filipino people.

Section 36

Negotiations

A financial or technical assistance agreement shall be negotiated by the Department and executed and
approved by the President. The President shall notify Congress of all financial or technical assistance
agreements within thirty (30) days from execution and approval thereof.

Section 37

Filing and Evaluation of Financial or Technical Assistance Agreement Proposals

All financial or technical assistance agreement proposals shall be filed with the Bureau after payment
of the required processing fees. If the proposal is found to be sufficient and meritorious in form and
substance after evaluation, it shall be recorded with the appropriate government agency to give the
proponent the prior right to the area covered by such proposal: Provided, That existing mineral
agreements, financial or technical assistance agreements and other mining rights are not impaired or
prejudiced thereby. The Secretary shall recommend its approval to the President.

Section 38

Term of Financial or Technical Assistance Agreement

A financial or technical assistance agreement shall have a term not exceeding twenty-five (25) years to
start from the execution thereof, renewable for not more than twenty-five (25) years under such terms
and conditions as may be provided by law.

Section 39

Option to Convert into a Mineral Agreement

The contractor has the option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability of the contract area
is found to be inadequate to justify large-scale mining operations, after proper notice to the Secretary
as provided for under the implementing rules and regulations: Provided, That the mineral agreement
shall only be for the remaining period of the original agreement.

In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the corporation,
partnership, association, or cooperative. Upon compliance with this requirement by the contractor, the
Secretary shall approve the conversion and execute the mineral production-sharing agreement.

Section 40

Assignment/Transfer

A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a

qualified person subject to the prior approval of the President: Provided, That the President shall
notify Congress of every financial or technical assistance agreement assigned or converted in
accordance with this provision within thirty (30) days from the date of the approval thereof.

Section 41

Withdrawal from Financial or Technical Assistance Agreement

The contractor shall manifest in writing to the Secretary his intention to withdraw from the agreement,
if in his judgment the mining project is no longer economically feasible, even after he has exerted
reasonable diligence to remedy the cause or the situation. The Secretary may accept the withdrawal:
Provided, That the contractor has complied or satisfied all his financial, fiscal or legal obligations.

CHAPTER VII Small-scale Mining

Section 42

Small-scale Mining
Small-scale mining shall continue to be governed by Republic Act No. 7076 and other pertinent
laws.

CHAPTER VIII Quarry Resources

Section 43

Quarry Permit

Any qualified person may apply to the provincial/city mining regulatory board for a quarry permit on
privately-owned lands and/or public lands for building and construction materials such as marble,
basalt, andesite, conglomerate, tuff, adobe, granite, gabbro, serpentine, inset filling materials, clay for
ceramic tiles and building bricks, pumice, perlite and other similar materials that are extracted by
quarrying from the ground. The provincial governor shall grant the permit after the applicant has
complied with all the requirements as prescribed by the rules and regulations.

The maximum area which a qualified person may hold at any one time shall be five hectares (5 has.):
Provided, That in large-scale quarry operations involving cement raw materials, marble, granite, sand
and gravel and construction aggregates, a qualified person and the government may enter into a
mineral agreement as defined herein.

A quarry permit shall have a term of five (5) years, renewable for like periods but not to exceed a total
term of twenty-five (25) years. No quarry permit shall be issued or granted on any area covered by a
mineral agreement or financial or technical assistance agreement.

Section 44

Quarry Fee and Taxes

A permittee shall, during the term of his permit, pay a quarry fee as provided for under the
implementing rules and regulations. The permittee shall also pay the excise tax as provided by
pertinent laws.

Section 45

Cancellation of Quarry Permit

A quarry permit may be cancelled by the provincial governor for violations of the provisions of this
Act or its implementing rules and regulations or the terms and conditions of said permit: Provided,
That before the cancellation of such permit, the holder thereof shall be given the opportunity to be
heard in an investigation conducted for the purpose.

Section 46

Commercial Sand and Gravel Permit

Any qualified person may be granted a permit by the provincial governor to extract and remove sand
and gravel or other loose or unconsolidated materials which are used in their natural state, without
undergoing processing from an area of not more than five hectares (5 has.) and in such quantities as
may be specified in the permit.

Section 47
Industrial Sand and Gravel Permit

Any qualified person may be granted an industrial sand and gravel permit by the Bureau for the
extraction of sand and gravel and other loose or unconsolidated materials that necessitate the use of
mechanical processing covering an area of more than five hectares (5 has.) at any one time. The permit
shall have a term of five (5) years, renewable for a like period but not to exceed a total term of twenty-
five (25) years.

Section 48

Exclusive Sand and Gravel Permit

Any qualified person may be granted an exclusive sand and gravel permit by the provincial governor
to quarry and utilize sand and gravel or other loose or unconsolidated materials from public lands for
his own use, provided that there will be no commercial disposition thereof.

A mineral agreement or a financial technical assistance agreement contractor shall, however, have the
right to extract and remove sand and gravel and other loose unconsolidated materials without need of a
permit within the area covered by the mining agreement for the exclusive use in the mining operations:
Provided, That monthly reports of the quantity of materials extracted therefrom shall be submitted to
the mines regional office concerned: Provided, further, That said right shall be coterminous with the
expiration of the agreement.

Holders of existing mining leases shall likewise have the same rights as that of a contractor: Provided,
That said right shall be coterminous with the expiry dates of the lease.

Section 49

Government Gratuitous Permit

Any government entity or instrumentality may be granted a gratuitous permit by the provincial
governor to extract sand and gravel, quarry or loose unconsolidated materials needed in the
construction of building and/or infrastructure for public use or other purposes over an area of not more
than two hectares (2 has.) for a period coterminous with said construction.

Section 50

Private Gratuitous Permit

Any owner of land may be granted a private gratuitous permit by the provincial governor.

Section 51

Guano Permit

Any qualified person may be granted a guano permit by the provincial governor to extract and utilize
loose unconsolidated guano and other organic fertilizer materials in any portion of a municipality
where he has established domicile. The permit shall be for specific caves and/or for confined sites with
locations verified by the Department's field officer in accordance with existing rules and regulations.

Section 52

Gemstone Gathering Permit

Any qualified person may be granted a non-exclusive gemstone gathering permit by the provincial
governor to gather loose stones useful as gemstones in rivers and other locations.
CHAPTER IX Transport, Sale and Processing of
Minerals
Section 53

Ore Transport Permit

A permit specifying the origin and quantity of non-processed mineral ores or minerals shall be
required for their transport. Transport permits shall be issued by the mines regional director who has
jurisdiction over the area where the ores were extracted. In the case of mineral ores or minerals being
transported from the small-scale mining areas to the custom mills or processing plants, the Provincial
Mining Regulatory Board (PMRB) concerned shall formulate their own policies to govern such
transport of ores produced by small-scale miners. The absence of a permit shall be considered as prima
facie evidence of illegal mining and shall be sufficient cause for the Government to confiscate the ores
or minerals being transported, the tools and equipment utilized, and the vehicle containing the same.
Ore samples not exceeding two metric tons (2 m.t.) to be used exclusively for assay or pilot test
purposes shall be exempted from such requirement.

Section 54

Mineral Trading Registration

No person shall engage in the trading of mineral products, either locally or internationally, unless
registered with the Department of Trade and Industry and accredited by the Department, with a copy
of said registration submitted to the Bureau.

Section 55

Minerals Processing Permit

No person shall engage in the processing of minerals without first securing a minerals processing
permit from the Secretary. Minerals processing permit shall be for a period of five (5) years
renewable for like periods but not to exceed a total term of twenty-five (25) years. In the case of
mineral ores or minerals produced by the small-scale miners, the processing thereof as well as
the licensing of their custom mills, or processing plants shall continue to be governed by the
provisions of Republic Act No. 7076.

Section 56

Eligibility of Foreign-owned/-controlled Corporation

A foreign-owned/-controlled corporation may be granted a mineral processing permit.

CHAPTER X Development of Mining Communities,

Science and Mining Technology
Section 57
Expenditure for Community Development and Science and Mining Technology

A contractor shall assist in the development of its mining community, the promotion of the general
welfare of its inhabitants, and the development of science and mining technology.

Section 58

Credited Activities

Activities that may be credited as expenditures for development of mining communities, and science
and mining technology are the following:

a. Any activity or expenditure intended to enhance the development of the mining and neighboring
communities of a mining operation other than those required or provided for under existing laws, or
collective bargaining agreements, and the like; and

b. Any activity or expenditure directed towards the development of geosciences and mining
technology such as, but not limited to, institutional and manpower development, and basic and applied
researches. Appropriate supervision and control mechanisms shall be prescribed in the implementing
rules and regulations of this Act.

Section 59

Training and Development

A contractor shall maintain an effective program of manpower training and development throughout
the term of the mineral agreement and shall encourage and train Filipinos to participate in all aspects
of the mining operations, including the management thereof. For highly-technical and specialized
mining operations, the contractor may, subject to the necessary government clearances, employ
qualified foreigners.

Section 60

Use of Indigenous Goods, Services and Technologies

A contractor shall give preference to the use of local goods, services and scientific and technical
resources in the mining operations, where the same are of equivalent quality, and are available on
equivalent terms as their imported counterparts.

Section 61

Donations/Turn Over of Facilities

Prior to cessation of mining operations occasioned by abandonment or withdrawal of operations, on

public lands by the contractor, the latter shall have a period of one (1) year therefrom within which to
remove his improvements; otherwise, all the social infrastructure and facilities shall be turned over or
donated tax-free to the proper government authorities, national or local, to ensure that said
infrastructure and facilities are continuously maintained and utilized by the host and neighboring
communities.

Section 62

Employment of Filipinos

A contractor shall give preference to Filipino citizens in all types of mining employment within the
country insofar as such citizens are qualified to perform the corresponding work with reasonable
efficiency and without hazard to the safety of the operations. The contractor, however, shall not be
hindered from hiring employees of his own selection, subject to the provisions of Commonwealth Act
No. 613, as amended, for technical and specialized work which, in his judgment and with the approval
of the Director, requires highly-specialized training or long experience in exploration, development or
utilization of mineral resources: Provided, That in no case shall each employment exceed five (5)
years or the payback period as represented in original project study, whichever is longer: Provided,
further, That each foreigner employed as mine manager, vice-president for operations or in an
equivalent managerial position in charge of mining, milling, quarrying or drilling operation shall:

a. Present evidence of his qualification and work experience; or

b. Shall pass the appropriate government licensure examination; or

c. In special cases, may be permitted to work by the Director for a period not exceeding one (1) year:
Provided, however, That if reciprocal privileges are extended to Filipino nationals in the country of
domicile, the Director may grant waivers or exemptions.

CHAPTER XI Safety and Environmental Protection

Section 63

Mines Safety and Environmental Protection

All contractors and permittees shall strictly comply with all the mines safety rules and regulations as
may be promulgated by the Secretary concerning the safe and sanitary upkeep of the mining
operations and achieve waste-free and efficient mine development. Personnel of the Department
involved in the implementation of mines safety, health and environmental rules and regulations shall
be covered under Republic Act No. 7305.

Section 64

Mine Labor

No person under sixteen (16) years of age shall be employed in any phase of mining operations and no
person under eighteen (18) years of age shall be employed underground in a mine.

Section 65

Mine Supervision

All mining and quarrying operations that employ more than fifty (50) workers shall have at least one
(1) licensed mining engineer with at least five (5) years of experience in mining operations, and one
(1) registered foreman.

Section 66

Mine Inspection

The regional director shall have exclusive jurisdiction over the safety inspection of all installations,
surface or underground, in mining operations at reasonable hours of the day or night and as much as
possible in a manner that will not impede or obstruct work in progress of a contractor or permittee.

Section 67
Power to Issue Orders

The mines regional director shall, in consultation with the Environmental Management Bureau,
forthwith or within such time as specified in his order, require the contractor to remedy any practice
connected with mining or quarrying operations, which is not in accordance with safety and anti-
pollution laws and regulations. In case of imminent danger to life or property, the mines regional
director may summarily suspend the mining or quarrying operations until the danger is removed, or
appropriate measures are taken by the contractor or permittee.

Section 68

Report of Accidents

In case of any incident or accident, causing or creating the danger of loss of life or serious physical
injuries, the person in charge of operations shall immediately report the same to the regional office
where the operations are situated. Failure to report the same without justifiable reason shall be a cause
for the imposition of administrative sanctions prescribed in the rules and regulations implementing this
Act.

Section 69

Environmental Protection

Every contractor shall undertake an environmental protection and enhancement program covering the
period of the mineral agreement or permit. Such environmental program shall be incorporated in the
work program which the contractor or permittee shall submit as an accompanying document to the
application for a mineral agreement or permit. The work program shall include not only plans relative
to mining operations but also to rehabilitation, regeneration, revegetation and reforestation of
mineralized areas, slope stabilization of mined-out and tailings covered areas, aquaculture, watershed
development and water conservation; and socioeconomic development.

Section 70

Environmental Impact Assessment (EIA)

Except during the exploration period of a mineral agreement or financial or technical assistance
agreement or an exploration permit, an environmental clearance certificate shall be required based on
an environmental impact assessment and procedures under the Philippine Environmental Impact
Assessment System including Sections 26 and 27 of the Local Government Code of 1991 which
require national government agencies to maintain ecological balance, and prior consultation with the
local government units, non-governmental and people's organizations and other concerned sectors of
the community: Provided, That a completed ecological profile of the proposed mining area shall also
constitute part of the environmental impact assessment. People's organizations and non-governmental
organizations shall be allowed and encouraged to participate in ensuring that contractors/permittees
shall observe all the requirements of environmental protection.

Section 71

Rehabilitation

Contractors and permittees shall technically and biologically rehabilitate the excavated, mined-out,
tailings covered and disturbed areas to the condition of environmental safety, as may be provided in
the implementing rules and regulations of this Act. A mine rehabilitation fund shall be created, based
on the contractor's approved work program, and shall be deposited as a trust fund in a government
depository bank and used for physical and social rehabilitation of areas and communities affected by
mining activities and for research on the social, technical and preventive aspects of rehabilitation.
Failure to fulfill the above obligation shall mean immediate suspension or closure of the mining
activities of the contractor/permittee concerned.

CHAPTER XII Auxiliary Mining Rights

Section 72

Timber Rights

Any provision of law to the contrary notwithstanding, a contractor may be granted a right to cut trees
or timber within his mining area as may be necessary for his mining operations subject to forestry
laws, rules and regulations: Provided, That if the land covered by the mining area is already covered
by existing timber concessions, the volume of timber needed and the manner of cutting and removal
thereof shall be determined by the mines regional director, upon consultation with the contractor, the
timber concessionaire/permittee and the Forest Management Bureau of the Department: Provided,
further, That in case of disagreement between the contractor and the timber concessionaire, the matter
shall be submitted to the Secretary whose decision shall be final. The contractor shall perform
reforestation work within his mining area in accordance with forestry laws, rules and regulations.

Section 73

Water Rights

A contractor shall have water rights for mining operations upon approval of application with the
appropriate government agency in accordance with existing water laws, rules and regulations
promulgated thereunder: Provided, That water rights already granted or vested through long use,
recognized and acknowledged by local customs, laws, and decisions of courts shall not thereby be
impaired: Provided, further, That the Government reserves the right to regulate water rights and the
reasonable and equitable distribution of water supply so as to prevent the monopoly of the use thereof.

Section 74

Right to Possess Explosives

A contractor/exploration permittee shall have the right to possess and use explosives within his
contract/permit area as may be necessary for his mining operations upon approval of application with
the appropriate government agency in accordance with existing laws, rules and regulations
promulgated thereunder: Provided, That the Government reserves the right to regulate and control the
explosive accessories to ensure safe mining operations.

Section 75

Easement Rights

When mining areas are so situated that for purposes of more convenient mining operations it is
necessary to build, construct or install on the mining areas or lands owned, occupied or leased by other
persons, such infrastructure as roads, railroads, mills, waste dump sites, tailings ponds, warehouses,
staging or storage areas and port facilities, tramways, runways, airports, electric transmission,
telephone or telegraph lines, dams and their normal flood and catchment areas, sites for water wells,
ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills, the contractor, upon
payment of just compensation, shall be entitled to enter and occupy said mining areas or lands.
Section 76

Entry into Private Lands and Concession Areas

Subject to prior notification, holders of mining rights shall not be prevented from entry into private
lands and concession areas by surface owners, occupants, or concessionaires when conducting mining
operations therein: Provided, That any damage done to the property of the surface owner, occupant, or
concessionaire as a consequence of such operations shall be properly compensated as may be provided
for in the implementing rules and regulations: Provided, further, That to guarantee such compensation,
the person authorized to conduct mining operation shall, prior thereto, post a bond with the regional
director based on the type of properties, the prevailing prices in and around the area where the mining
operations are to be conducted, with surety or sureties satisfactory to the regional director.

CHAPTER XIII Settlement of Conflicts

Section 77

Panel of Arbitrators

There shall be a panel of arbitrators in the regional office of the Department composed of three (3)
members, two (2) of whom must be members of the Philippine Bar in good standing and one a
licensed mining engineer or a professional in a related field, and duly designated by the Secretary as
recommended by the Mines and Geosciences Bureau Director. Those designated as members of the
panel shall serve as such in addition to their work in the Department without receiving any additional
compensation As much as practicable, said members shall come from the different bureaus of the
Department in the region. The presiding officer thereof shall be selected by the drawing of lots. His
tenure as presiding officer shall be on a yearly basis. The members of the panel shall perform their
duties and obligations in hearing and deciding cases until their designation is withdrawn or revoked by
the Secretary. Within thirty (30) working days, after the submission of the case by the parties for
decision, the panel shall have exclusive and original jurisdiction to hear and decide on the following:

a. Disputes involving rights to mining areas;

b. Disputes involving mineral agreements or permits;

c. Disputes involving surface owners, occupants and claimholders/concessionaires; and

d. Disputes pending before the Bureau and the Department at the date of the effectivity of this Act.

Section 78

Appellate Jurisdiction

The decision or order of the panel of arbitrators may be appealed by the party not satisfied thereto to
the Mines Adjudication Board within fifteen (15) days from receipt thereof which must decide the
case within thirty (30) days from submission thereof for decision.

Section 79

Mines Adjudication Board

The Mines Adjudication Board shall be composed of three (3) members. The Secretary shall be the
chairman with the Director of the Mines and Geosciences Bureau and the Undersecretary for
Operations of the Department as members thereof. The Board shall have the following powers and
functions:

a. To promulgate rules and regulations governing the hearing and disposition of cases before it, as well
as those pertaining to its internal functions, and such rules and regulations as may be necessary to
carry out its functions;

b. To administer oaths, summon the parties to a controversy, issue subpoenas requiring the attendance
and testimony of witnesses or the production of such books, papers, contracts, records, statement of
accounts, agreements, and other documents as may be material to a just determination of the matter
under investigation, and to testify in any investigation or hearing conducted in pursuance of this Act;

c. To conduct hearings on all matters within its jurisdiction, proceed to hear and determine the disputes
in the absence of any party thereto who has been summoned or served with notice to appear, conduct
its proceedings or any part thereof in public or in private, adjourn its hearings at any time and place,
refer technical matters or accounts to an expert and to accept his report as evidence after hearing of the
parties upon due notice, direct parties to be joined in or excluded from the proceedings, correct,
amend, or waive any error, defect or irregularity, whether in substance or in form, give all such
directions as it may deem necessary or expedient in the determination of the dispute before it, and
dismiss the mining dispute as part thereof, where it is trivial or where further proceedings by the
Board are not necessary or desirable:

1. To hold any person in contempt, directly or indirectly, and impose appropriate penalties therefor;
and

2. To enjoin any or all acts involving or arising from any case pending before it which, if not
restrained forthwith, may cause grave or irreparable damage to any of the parties to the case or
seriously affect social and economic stability.

In any proceeding before the Board, the rules of evidence prevailing in courts of law or equity shall
not be controlling and it is the spirit and intention of this Act that shall govern. The Board shall use
every and all reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process. In any proceeding before
the Board, the parties may be represented by legal counsel. The findings of fact of the Board shall be
conclusive and binding on the parties and its decision or order shall be final and executory.

A petition for review by certiorari and question of law may be filed by the aggrieved party with the
Supreme Court within thirty (30) days from receipt of the order or decision of the Board.

CHAPTER XIV Government Share

Section 80

Government Share in Mineral Production Sharing Agreement

The total government share in a mineral production sharing agreement shall be the excise tax on
mineral products as provided in Republic Act No. 7729, amending Section 151(a) of the National
Internal Revenue Code, as amended.

Section 81

Government Share in Other Mineral Agreements

The share of the Government in co-production and joint-venture agreements shall be negotiated by the
Government and the contractor taking into consideration the:

a. capital investment of the project;

b. risks involved;

c. contribution of the project to the economy; and

d. other factors that will provide for a fair and equitable sharing between the Government and the
contractor.

The Government shall also be entitled to compensations for its other contributions which shall be
agreed upon by the parties, and shall consist, among other things, the contractor's income tax, excise
tax, special allowance, withholding tax due from the contractor's foreign stockholders arising from
dividend or interest payments to the said foreign stockholders, in case of a foreign national, and all
such other taxes, duties and fees as provided for under existing laws.

The Government share in financial or technical assistance agreement shall consist of, among other
things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from
the contractor's foreign stockholders arising from dividend or interest payments to the said foreign
stockholder in case of a foreign national and all such other taxes, duties and fees as provided for under
existing laws.

The collection of Government share in financial or technical assistance agreement shall commence
after the financial or technical assistance agreement contractor has fully recovered its pre-operating
expenses, exploration, and development expenditures, inclusive.

Section 82

Allocation of Government Share

The Government share as referred to in the preceding sections shall be shared and allocated in
accordance with Sections 290 and 292 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991. In case the development and utilization of mineral resources is undertaken
by a government-owned or -controlled corporation, the sharing and allocation shall be in accordance
with Sections 291 and 292 of the said Code.

CHAPTER XV Taxes and Fees

Section 83

Income Taxes

After the lapse of the income tax holiday as provided for in the Omnibus Investments Code, the
contractor shall be liable to pay income tax as provided in the National Internal Revenue Code, as
amended.

Section 84

Excise Tax on Mineral Products

The contractor shall be liable to pay the excise tax on mineral products as provided for under Section
151 of the National Internal Revenue Code: Provided, however, That with respect to a mineral
production sharing agreement, the excise tax on mineral products shall be the government share under
said agreement.

Section 85

Mine Wastes and Tailings Fees

A semi-annual fee to be known as mine wastes and tailings fee is hereby imposed on all operating
mining companies in accordance with the implementing rules and regulations. The mine wastes and
tailings fee shall accrue to a reserve fund to be used exclusively for payment for damages to:

a. Lives and personal safety;

b. Lands, agricultural crops and forest products, marine life and aquatic resources, cultural resources;
and

c. Infrastructure and the revegetation and rehabilitation of silted farm lands and other areas devoted to
agriculture and fishing caused by mining pollution.

This is in addition to the suspension or closure of the activities of the contractor at any time and the
penal sanctions imposed upon the same.

The Secretary is authorized to increase mine wastes and tailings fees, when public interest so requires,
upon the recommendation of the Director.

Section 86

Occupation Fees

There shall be collected from any holder of a mineral agreement, financial or technical assistance
agreement or exploration permit on public or private lands, an annual occupation fee in accordance
with the following schedule:

a. For exploration permit - Five pesos (P5.00) per hectare or fraction thereof per annum;

b. For mineral agreements and financial or technical assistance agreements - Fifty pesos (P50.00) per
hectare or fraction thereof per annum; and

c. For mineral reservation - One hundred pesos (P100.00) per hectare or fraction thereof per annum.

The Secretary is authorized to increase the occupation fees provided herein when the public interest so
requires, upon recommendation of the Bureau Director.

Section 87

Manner of Payment of Fees

The fees shall be paid on the date the mining agreement is registered with the appropriate office and
on the same date every year thereafter. It shall be paid to the treasurer of the municipality or city
where the onshore mining areas are located, or to the Director in case of offshore mining areas. For
this purpose, the appropriate officer shall submit to the treasurer of the municipality or city where the
onshore mining area is located, a complete list of all onshore mining rights registered with his office,
indicating therein the names of the holders, area in hectares, location, and date registered. If the fee is
not paid on the date specified, it shall be increased by twenty-five per centum (25%).
Section 88

Allocation of Occupation Fees

Thirty per centum (30%) of all occupational fees collected from holders of mining rights in onshore
mining areas shall accrue to the province and seventy per centum (70%) to the municipality in which
the onshore mining areas are located. In a chartered city, the full amount shall accrue to the city
concerned.

Section 89

Filing Fees and Other Charges

The Secretary is authorized to charge reasonable filing fees and other charges as he may prescribe in
accordance with the implementing rules and regulations.

CHAPTER XVI Incentives

Section 90

Incentives

The contractors in mineral agreements, and financial or technical assistance agreements shall be
entitled to the applicable fiscal and non-fiscal incentives as provided for under Executive Order No.
226, otherwise known as the Omnibus Investments Code of 1987. Provided, That holders of
exploration permits may register with the Board of Investments and be entitled to the fiscal incentives
granted under the said Code for the duration of the permits or extensions thereof: Provided, further,
That mining activities shall always be included in the investment priorities plan.

Section 91

Incentives for Pollution Control Devices

Pollution control devices acquired, constructed or installed by contractors shall not be considered as
improvements on the land or building where they are placed, and shall not be subject to real property
and other taxes or assessments: Provided, however, That payment of mine wastes and tailings fees is
not exempted.

Section 92

Income Tax-Carry Forward of Losses

A net operating loss without the benefit of incentives incurred in any of the first ten (10) years of
operations may be carried over as a deduction from taxable income for the next five (5) years
immediately following the year of such loss. The entire amount of the loss shall be carried over to the
first of the five (5) taxable years following the loss, and any portion of such loss which exceeds the
taxable income of such first year shall be deducted in like manner from the taxable income of the next
remaining four (4) years.

Section 93

Income Tax-Accelerated Depreciation

Fixed assets may be depreciated as follows:

a. To the extent of not more than twice as fast as the normal rate of depreciation or depreciated at
normal rate of depreciation if the expected life is ten (10) years or less; or

b. Depreciated over any number of years between five (5) years and the expected life if the latter is
more than ten (10) years, and the depreciation thereon allowed as deduction from taxable income:
Provided, That the contractor notifies the Bureau of Internal Revenue at the beginning of the
depreciation period which depreciation rate allowed by this section will be used.

In computing for taxable income, unless otherwise provided in this Act, the contractor may, at his
option, deduct exploration and development expenditures accumulated at cost as of the date of the
prospecting or exploration and development expenditures paid or incurred during the taxable year:
Provided, That the total amount deductible for exploration and development expenditures shall not
exceed twenty-five per centum (25%) of the net income from mining operations. The actual
exploration and development expenditures minus the twenty-five per centum (25%) net income from
mining shall be carried forward to the succeeding years until fully deducted.

Net income from mining operation is defined as gross income from operations less allowable
deductions which are necessary or related to mining operations. Allowable deductions shall include
mining, milling and marketing expenses, depreciation of properties directly used in the mining
operations. This paragraph shall not apply to expenditures for the acquisition or improvement of
property of a character which is subject to the allowances for depreciation.

Section 94

Investment Guarantees

The contractor shall be entitled to the basic rights and guarantees provided in the Constitution and
such other rights recognized by the government as enumerated hereunder:

a. Repatriation of investments. The right to repatriate the entire proceeds of the liquidation of the
foreign investment in the currency in which the investment was originally made and at the exchange
rate prevailing at the time of repatriation.

b. Remittance of earnings. The right to remit earnings from the investment in the currency in which
the foreign investment was originally made and at the exchange rate prevailing at the time of
remittance.

c. Foreign loans and contracts. The right to remit at the exchange rate prevailing at the time of
remittance such sums as may be necessary to meet the payments of interest and principal on foreign
loans and foreign obligations arising from financial or technical assistance contracts.

d. Freedom from expropriation. The right to be free from expropriation by the Government of the
property represented by investments or loans, or of the property of the enterprise except for public use
or in the interest of national welfare or defense and upon payment of just compensation. In such cases,
foreign investors or enterprises shall have the right to remit sums received as compensation for the
expropriated property in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance.

e. Requisition of investment. The right to be free from requisition of the property represented by the
investment or of the property of the enterprises except in case of war or national emergency and only
for the duration thereof. Just compensation shall be determined and paid either at the time or
immediately after cessation of the state of war or national emergency. Payments received as
compensation for the requisitioned property may be remitted in the currency in which the investments
were originally made and at the exchange rate prevailing at the time of remittance.

f. Confidentiality. Any confidential information supplied by the contractor pursuant to this Act and its
implementing rules and regulations shall be treated as such by the Department and the Government,
and during the term of the project to which it relates.

CHAPTER XVII Ground for Cancellation, Revocation

and Termination
Section 95

Late or Non-filing of Requirements

Failure of the permittee or contractor to comply with any of the requirements provided in this Act or in
its implementing rules and regulations, without a valid reason, shall be sufficient ground for the
suspension of any permit or agreement provided under this Act.

Section 96

Violation of the Terms and Conditions of Permits or Agreements

Violation of the terms and conditions of the permits or agreements shall be a sufficient ground for
cancellation of the same.

Section 97

Non-Payment of Taxes and Fees

Failure to pay the taxes and fees due the Government for two (2) consecutive years shall cause the
cancellation of the exploration permit, mineral agreement, financial or technical assistance agreement
and other agreements and the re-opening of the area subject thereof to new applicants.

Section 98

Suspension or Cancellation of Tar Incentives and Credits

Failure to abide by the terms and conditions of tax incentive and credits shall cause the suspension or
cancellation of said incentives and credits.

Section 99

Falsehood or Omission of Facts in the Statement

All statements made in the exploration permit, mining agreement and financial or technical assistance
agreement shall be considered as conditions and essential parts thereof and any falsehood in said
statements or omission of facts therein which may alter, change or affect substantially the facts set
forth in said statements may cause the revocation and termination of the exploration permit, mining
agreement and financial or technical assistance agreement.
CHAPTER XVIII Organizational and Institutional
Arrangements
Section 100

From Staff Bureau to Line Bureau

The Mines and Geosciences Bureau is hereby transformed into a line bureau consistent with Section 9
of this Act: Provided, That under the Mines and Geosciences Bureau shall be the necessary mines
regional, district and other pertinent offices - the number and specific functions of which shall be
provided in the implementing rules and regulations of this Act.

CHAPTER XIX Penal Provisions

Section 101

False Statements

Any person who knowingly presents any false application, declaration, or evidence to the Government
or publishes or causes to be published any prospectus or other information containing any false
statement relating to mines, mining operations or mineral agreements, financial or technical assistance
agreements and permits shall, upon conviction, be penalized by a fine of not exceeding Ten thousand
pesos (P10,000.00).

Section 102

Illegal Exploration

Any person undertaking exploration work without the necessary exploration permit shall, upon
conviction, be penalized by a fine of not exceeding Fifty thousand pesos (P50,000.00).

Section 103

Theft of Minerals

Any person extracting minerals and disposing the same without a mining agreement, lease, permit,
license, or steals minerals or ores or the products thereof from mines or mills or processing plants
shall, upon conviction, be imprisoned from six (6) months to six (6) years or pay a fine from Ten
thousand pesos (P10,000.00) to Twenty thousand pesos (P20,000.00) or both, at the discretion of the
appropriate court. In addition, he shall be liable to pay damages and compensation for the minerals
removed, extracted, and disposed of. In the case of associations, partnerships, or corporations, the
president and each of the directors thereof shall be responsible for the acts committed by such
association, corporation, or partnership.

Section 104

Destruction of Mining Structures

Any person who willfully destroys or damages structures in or on the mining area or on the mill sites
shall, upon conviction, be imprisoned for a period not to exceed five (5) years and shall, in addition,
pay compensation for the damages which may have been caused thereby.
Section 105

Mines Arson

Any person who willfully sets fire to any mineral stockpile, mine or workings, fittings or a mine, shall
be guilty of arson and shall be punished, upon conviction, by the appropriate court in accordance with
the provisions of the Revised Penal Code and shall, in addition, pay compensation for the damages
caused hereby.

Section 106

Willful Damage to a Mine

Any person who willfully damages a mine, unlawfully causes water to run into a mine, or obstructs
any shaft or passage to a mine, or renders useless, damages or destroys any machine, appliance,
apparatus, rope, chain, tackle, or any other things used in a mine, shall be punished, upon conviction,
by the appropriate court, by imprisonment not exceeding a period of five (5) years and shall, in
addition, pay compensation for the damages caused thereby.

Section 107

Illegal Obstruction to Permittees or Contractors

Any person who, without justifiable cause, prevents or obstructs the holder of any permit, agreement
or lease from undertaking his mining operations shall be punished, upon conviction by the appropriate
court, by a fine not exceeding Five thousand pesos (P5,000.00) or imprisonment not exceeding one (1)
year, or both, at the discretion of the court.

Section 108

Violation of the Terms and Conditions of the Environmental Compliance Certificate

Any person who willfully violates or grossly neglects to abide by the terms and conditions of the
environmental compliance certificate issued to said person and which causes environmental damage
through pollution shall suffer the penalty of imprisonment of six (6) months to six (6) years or a fine
of Fifty thousand pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00), or both, at the
discretion of the court.

Section 109

Illegal Obstruction to Government Officials

Any person who illegally prevents or obstructs the Secretary, the Director or any of their
representatives in the performance of their duties under the provisions of this Act and of the
regulations promulgated hereunder shall be punished upon conviction, by the appropriate court, by a
fine not exceeding Five thousand pesos (P5,000.00) or by imprisonment not exceeding one (1) year, or
both, at the discretion of the court.

Section 110

Other Violations

Any other violation of this Act and its implementing rules and regulations shall constitute an offense
punishable with a fine not exceeding Five thousand pesos (P5,000.00).

Section 111
Fines

The Secretary is authorized to charge fines for late or non-submission of reports in accordance with
the implementing rules and regulations of this Act.

CHAPTER XX Transitory and Miscellaneous Provisions

Section 112

Non-Impairment of Existing Mining/Quarrying Rights

All valid and existing mining lease contracts, permits/licenses, leases pending renewal, mineral
production-sharing agreements granted under Executive Order No. 279, at the date of effectivity of
this Act, shall remain valid, shall not be impaired, and shall be recognized by the Government:
Provided, That the provisions of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to a
mining lessee or contractor unless the mining lessee or contractor indicates his intention to the
secretary, in writing, not to avail of said provisions: Provided, further, That no renewal of mining lease
contracts shall be made after the expiration of its term: Provided, finally, That such leases, production-
sharing agreements, financial or technical assistance agreements shall comply with the applicable
provisions of this Act and its implementing rules and regulations.

Section 113

Recognition of Valid and Existing Mining Claims and Lease/Quarry Applications

Holders of valid and existing mining claims, lease/quarry applications shall be given preferential rights
to enter into any mode of mineral agreement with the government within two (2) years from the
promulgation of the rules and regulations implementing this Act.

Section 114

Separability Clause

If any of the provision of this Act is held or declared to be unconstitutional or invalid by a competent
court, the other provisions hereof shall continue to be in force as if the provision so annulled or voided
had never been incorporated in this Act.

Section 115

Repealing and Amending Clause

All laws, executive orders, presidential decrees, rules and regulations or parts thereof which are
inconsistent with any of the provisions of this Act are hereby repealed or amended accordingly.

Section 116

Effectivity Clause

This Act shall take effect thirty (30) days following its complete publication in two (2) newspapers of
general circulation in the Philippines.