2004 Briefing Kit On RP Mining Sector

Briefing Kit On The
THE PHILIPPINE MINERALS SECTOR
Mines and Geosciences Bureau

Quezon City
December 2004
CONTENTS
Page No.
I. Brief Situationer of the Philippine Minerals Sector…………………. 1
A. Introduction………………………………………………………….. 1
B. Status of the Philippine Minerals Sector…...………………………... 2
1. Mineral Potential….…………………………………………….. 2
2. The Minerals Industry And The Economy…………………….... 6
3. Mineral Resources Development Projects……………………. 7
a. Operating Mines…………………………………………… 7
b. Mineral Development Projects On The Pipeline…………… 11
c. Mineral Development Projects Under Review……………… 12
d. Mineral Exploration Projects………………………………... 14
4. Mining Tenements Issued By National Government…………… 15
5. Mineral Production……………………………………………... 16
6. Mineral Exports…………………………………………………. 18
7. Employment……………………………………………………. 17
8. Equity Investments In Mining………………………………….. 19
9. Taxes and Fees Generated from Mining………………………... 20
10. Summary of Economic Contributions Of The Sector In 2003…. 21
11. Economic Potential of the Minerals Sector… ………………….. 21
II. Current Policies To Revitalize The Minerals Sector………………. 21
A. The Mining Act of 1995 And Its Revised Implementing Rules……. 21
1. Background………………………………………………………. 21
2. Major Types Of Mining Rights Granted Under The Mining Act... 23
3. Environmental Responsibilities Under The Mining Act…………. 23
4. Social Responsibilities Under The Mining Act………………….. 24
5. Role Of Local Government………………………………………. 24
6. Ancestral Lands And ICCs………………………………………. 25
7. Government Share From Minerals Development ………………. 25
B. Executive Order No. 270……….…………………………………… 27
1. Guiding Principles………………………………………………… 27
2. Mineral Action Plan………………………………………………. 27
III. Challenges/Concerns That Confront The Minerals Sector………… 28
A. Pervasive Anti-Mining Movement………………………………….. 28
B. Low Level of Investor Confidence…………………………………. 28
C. Restrictive Land Use And Conflicting Government Policies……….. 29
D. Idle, Sequestered and/or Abandoned Mining Assets………………... 29
IV. Future Plans/Directions Of The Minerals Sector………………… 30
A. Economic Development……………………………………………. 30
B. Environmental and Social Management…………………………… 31
Tables Page No.
Table 1 - Gross National Product And Mining Value Added Growth Rates… 6
Table 2 - Number Of Mining Rights Issued By The National Government… 15
Table 3 - Types Of Mining Rights Granted By The Mining Act……………. 23
Table 4 - Environmental Provisions Of The Mining Act……………………. 23
Table 5 - Social Development Provisions Of The Mining Act………………. 24
Figures Page No.
Figure 1 - Value Of Mineral Production And GDP Of Other Countries…… 2

Figure 2 - Comparative Exploration Expenditures (In US $ Million)……… 3
Figure 3 - Proportions of Land Area In The Philippines With Potential For 3
Metallic Minerals And Area Covered By Mining Permits……….
Figure 4 - Areas In The Phils. With Potential For Metallic Mineralization… 4
Figure 5 - Offshore Areas In The Philippines With Potential For Minerals... 5
Figure 6 - Percentage Share of Mining To GNP…………………………… 6
Figure 7 - GNP And Mining Value Added Growth Rates………………… 7
Figure 8 - Number Of Metal Mines, 1970-2002…………………………… 8
Figure 9 - Number Of Nonmetal Mines, 1990-2002……………………… 8
Figure 10 - Annual Average Price Of Copper (In UScents/Lb)……………… 9
Figure 11 - Annual Average Price Of Gold (In US$/Tr. Oz.)………………... 9
Figure 12 - Annual Average Price Of Silver (In US$/Tr.Oz.)……………….. 9
Figure 13- Annual Average Price Of Nickel (In Uscents/Lb)……………….. 9
Figure 14- Components Of Mineral Production Value (1979-2003)………... 16
Figure 15- Components Of Metallic Production Value (1979-2003)………... 16
Figure 16- Components Of Nonmetallic Production Value (1979-2003)…… 16
Figure 17- Production Volume Of Copper, Chromite And Nickel…………. 17
Figure 18- Production Volume Of Gold And Silver………………………… 17
Figure 19- Export Values Of Gold And Silver And Copper (In Million US$) 18
Figure 20- Export Values Of Nickel And Chromite (In Million US$)……… 18
Figure 21- Share Of Mineral Exports To Total Exports (In Percent)……….. 18
Figure 22- Employment In Mining (In Thousands)………………………… 19
Figure 23- Paid-Up Capital in Mining (1979-2001)..……………………….. 19
Figure 24- Estimated Taxes and Fees From Mining (1998-2003)...………… 20
Figure 25- Excise Tax On Minerals (1980-2003)……………………………. 20
Figure 26- Location Of Large And Medium Scale Operating Mines ……… 33
Figure 27- Location Of Operating Cement Plants And Quarries…………… 34
Figure 28- Location Of Mineral Development Projects On The Pipeline…. 35
Figure 29- Location Of Mineral Development Projects Under Review…… 36
Figure 30- Location Of Current Exploration Projects………………………. 37
I. A Situationer in the Philippine Minerals Industry
A. Introduction
The Philippine Government believes that a well-developed minerals industry is an option

that can catalyze economic development and community empowerment. Minerals are part
of its national patrimony, hence there is a big responsibility to maximize the benefits that
can be derived from their utilization with due regard to the protection of the environment
and without sacrificing the interests of communities.
The legal and administrative framework governing the minerals industry in the Philippines
is contained in Republic Act No. 7942 (otherwise known as the Philippine Mining Act of
1995) and given flesh by its revised implementing rules and regulations (Administrative
Order No. 96–40) and its subsequent amendments. These policies advocate the sustainable
development of mineral resources in the country.
While both the Mining Act and its regulations provide a strong focus on environmental and
social management, they continue to be the subject of debate by some non-government
organizations who are questioning the compatibility of extraction and utilization of
minerals with sustainable development. Also, they have questioned the constitutionality of
the major provisions of the Mining Act governing the participation of foreign–owned
corporations in the exploration, development and utilization of these mineral resources by
filing a case at the Supreme Court in February, 1997. After eight years of study, the high
court initially decided to sustain the charge of the contesting parties. However, after
successful presentation of arguments by Government and industry on the merits of allowing
foreign investors to participate in the development of the minerals industry, the case was
finally resolved in December 1, 2004 when the high court reversed its earlier decision and
upheld the constitutionality of the contested provisions in the Mining Act. With this legal
impediment removed, exploration and development activities in the Philippine minerals
industry is due to become vibrant once again.
Compared to previous policy regimes on mining, the Mining Act calls for a greater
responsibility from Government and the industry. Mining companies are expected to work
closer with stakeholders to improve the quality of life within the communities where they
operate. As regulator, Government, on the other hand, has the responsibility of establishing
and maintaining the enabling environment for a sustainable development of the industry.
Minerals development in the country is led by no less than the President of the Republic of
the Philippines. In her declaration of a policy shift in mining “from tolerance to
promotion”, minerals development was elevated among the priority economic activities in
the country during her presidential tenure. Early this year, she signed Executive Order No.
270 which approved a national policy agenda on revitalizing the minerals industry based on
the principles of sustainable development. From this order, a Minerals Action Plan (MAP)
was subsequently formulated by Government to chart a roadmap for the future development
of the minerals industry. Minerals development is now an important component of the
Medium Term Philippine Development Plan 2004-2010.
Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 1

B. Status of the Philippine Minerals Industry
1. Mineral Potential
The Philippines is a well-endowed country in terms of mineral resources. With its long
history and experience in mining, it has demonstrated its very rich potential for copper,
gold, nickel, chromite and other metallic minerals through the commercial operation of
numerous mines. It is also abundant in non-metallic and industrial minerals such as marble,
limestone, clays, feldspar, rock aggregates, dolomite, guano, and other quarry resources.
The Philippine minerals industry is currently an industry below US$ 1 Billion in annual
sales (Figure 1) similar to Malaysia and Papua New Guinea, but lagging behind Indonesia
(US$ 3.6 Billion), Chile (US$ 13 Billion) and Western Australia (US$ 26 Billion).
To make them useful to the economy, the rich mineral resources of the Philippines have to
be explored and developed into commercial mines. However, there is not much local funds
available for exploration investments. Historically, the funds used for exploration come
substantially from foreign investors through foreign direct investments. The Philippines has
to compete with other mineral producing countries to attract this fund. During the period
1995 to 1999, majority of the exploration funds went to Indonesia, Chile and Peru. At that
time, these countries were perceived by foreign investors to be the most attractive countries
to invest in. The Philippines only received as much foreign direct investments as PNG and
Tanzania.
Figure 1 - Value of Mineral Production and GDP
35
30
US$ B
+ 25
%GDP
20
15
10
0
Philippines PNG Peru Indonesia Chile South Australia
Africa
Mineral Production $bn %GDP

Figure 2 – Comparative Exploration Expenditures (In US $ Million)
250
Comparative
Exploration
Expenditures
200 (US $ Million)
150
100
50
0
CHINA PHILPPNS. INDONESIA PNG M Y ANM AR CHILE PERU TANZANIA
1995 1996 1997 1998 1999
Over the past decade, and despite stiff competition with other countries for exploration
funds, the Philippines has progressively expanded in exploration resulting in the discovery
of a new generation of world-class high-profit potential deposits of gold and copper (about
1.5% copper equivalent) such as the Tampakan Copper Deposit, Far Southeast Copper
Deposit, Boyungan Copper Prospect and many others. These deposits can be differentiated
from previous discoveries which are low-grade and shallow-seated. They are relatively
higher in value hence they can better absorb the social and environmental costs of mining.
Figure 3 – Proportions of Land Area In The Philippines With Potential For Metallic
Minerals And Area Covered By Mining Permits
Land Distribution In The Philippines

1.5%
30.0%
68.6%
Other Land Areas in the Philippines

Geologically Prospective Areas for Metallic Minerals
Land Area Covered by Approved Mining Tenements

Of the total thirty (30) million hectares of land area in the Philippines, only about one and a
half percent (1.5%) are presently covered by mining permits. Of the balance in area, about
thirty percent (30%) were found by the Mines and Geosciences Bureau to be geologically
prospective for metallic minerals. With continuing exploration and geological mapping work,
this potential for metals is expected to increase further. There is an estimated nine (9) million
hectares more of potential sites for metallic minerals
Figure 4 - Areas In The Philippines With Potential For Metallic Mineralization

The offshore area is another potential domain for mineral wealth of the country. The
Philippine offshore area including the Exclusive Economic Zone (EEZ) covers a wide span of
about 2.2 million square kilometers. By law, it is classified as a mineral reservation area by
virtue of the 1987 Constitution. It is known to be potentially rich in placer minerals such as
gold, chromite, magnetite and silica; polymetallic sulphide deposits containing gold, copper,
cobalt, and other minerals; manganese nodules and encrustrations with associated copper,
gold, zinc, cobalt; and construction aggregates such as sand and gravel; and decorative
stones.
Figure 5 - Offshore Areas In The Philippines With Potential For Minerals
Magnetite
Gold
Chromite
Chromite
Chromite

2. The Minerals Industry and the Economy
The mining industry’s highest contribution to gross national product (GNP) was 2.2% in
1985. By the year 2003, this has been reduced to just 1.5%.
Figure 6 - Percentage Share of Mining to GNP, 1970-2003
2.5
Share of Mining In Percent
2.0
1.5
1.0
0.5
0.0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Year
Table 1 – Gross National Product (GNP) And Mining Value

Added (MVA) Growth Rates, 1998 – Third Quarter, 2004
In Million Pesos
GNP MINING MVA

PERIOD GNP Growth Rate VALUE ADDED Growth Rate
1998 934,481 0.4% 10,624 2.8%
1999 969,334 3.7% 9,736 -8.4%
2000 1,036,392 6.9% 10,833 11.3%
2001 1,061,283 2.4% 10,125 -6.5%
2002 1,107,007 4.3% 15,285 51.0%
2003 1,168,778 5.6% 17,856 16.8%
Q1-Q3, 2004 896,643 6.2% 14,436 6.2%
It should be noted from Table 1 that the extraordinary surges (51% and 16.8%) in the
mining value-added growth rates in 2002 and 2003, respectively includes the huge increase
in the value-added from crude oil and natural gas production from the Malampaya Oil Rim
Project. Excluding these items result to an increase of 21% and 13% for minerals alone
during the years 2002 and 2003, respectively. For the third quarter of 2004, the mining and
quarrying posted a 6.0% growth rate in value-added.

Figure 7 - GNP AND MINING VALUE-ADDED GROWTH RATES, 1993-2003
50.0
Growth Rate In Percent
40.0
30.0 GNP Growth Rate

Mining Growth Rate
20.0
10.0
0.0
(10.0)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
PERIOD
2. Mineral Resources Development Projects
a. Operating Mines
As of December 31, 2003, the number of operating mines consists of:
?? 1 large-scale gold mine (Victoria Project of Lepanto);

?? 1 large-scale copper mine (Padcal Project of Philex);
?? 4 medium-scale nickel mines
(Palawan Project of Rio Tuba Mining Corp., Cagdianao Project of
Cagdianao Mining Corp., South Dinagat Project of Hinatuan Mining
Corp., and Taganito Project of Taganito Mining Corp.)
?? 3 medium-scale chromite mines
(Masinloc Project of Benguet Corp, Omasdang Project of Crau Minerals
and Homonhon Project of Heritage Resources Mining Corp.)
?? 5 medium-scale gold mines
(Canatuan Project of TVI Resources Philippines, Inc., Acupan SSM
Operations of Benguet Corp., Diwalwal Direct State Development
Project of the Natural Resources Development Corp, Banahaw Gold
Project of Philsaga Mining Corp., and Paracale Gold Project of Johson
Gold Mining Corp.)
?? 16 cement plants and quarries
?? 140 limestone quarries (agriculture and industrial uses)
?? 18 rock aggregate quarries and crushing plants
?? 216 industrial sand and gravel quarries and crushing plants
?? 9 marble plants and quarries
?? 334 large to medium scale quarries of various non-metallic minerals; and

?? More than 1,700 small quarries and commercial/special sand and gravel
mining operations covered by permits issued by local government.
The geographical distribution of the major operating metallic mines and

cement plants and quarries are shown in Figures 26 and 27, respectively.
The existing number of metal mines is small compared to the 58 metal mines that
operated in the 80s (Figure 8) when the industry accounted for over 20% of
Philippine exports. However, the trend for nonmetallic mines shows an abrupt
change in 1993 (Figure 9), after the enactment of the Local Government Code
which effectively transferred the function of the national government in the
issuance of quarry and small-scale mining permits to the local government units
(LGU). This drop in number can be attributed principally to the confusion caused
by the devolution of permitting function to LGUs. It is interpreted that a great
number non-metallic producers either did not submit production reports due to
confusion in authority or were probably not accounted for by the LGUs during
that year. Understandably, the LGU, particularly the provincial governments
were not yet prepared organizationally and systems and procedures have not been
put in place immediately to monitor mining operations, and also collect and
process production reports.
Figure 9 - NO. OF NON-METAL

Figure 8 - NO. OF METAL MINES OTHER THAN SAND
MINES, 1970-2002 AND GRAVEL, 1990-2002
800
55
700
45 600
Number
Number
35 500
400
25 300
15 200
100
5 0
1970 1977 1984 1991 1998 1990 1993 1996 1999
PERIOD PERIOD
The progressive drop in the number of metallic minerals producers have been
caused principally by a combination of economic, technical and financial
reasons.
In the later part of the seventies, investments in mining contracted and

continued to follow a downtrend until 1983 after brief surges in 1978 and
1980 following generally bullish years. Gold prices in 1980 soared to US$
870 per ounce while copper kept pace and peaked at US$ 1.43 per pound.
The market trend in the following year made a complete turnaround. The
situation was aggravated by the increasing costs of operations accounted
mostly by power, the devaluation of the peso that pushed up interest rates,
and the untimely increase in the rate of the ad valorem tax for mineral
products.

Marcopper posted its first loss in 1981 while Sabena closed its operation.
Other mines that were severely affected by the crises were the Ino and
Bagacay Projects which shut down in the late 1980. Many major mines were
forced to borrow capital to support their operations despite high interest
rates. Those that failed to secure financing were forced to close. Among
those that closed due to increasing operating costs were Western Minolco,
Baguio Gold, Acoje Mining and Hercules Minerals.
Figure 10 - ANNUAL AVERAGE Figure 11 - ANNUAL AVERAGE

PRICE OF COPPER PRICE OF GOLD
(In UScents/Lb) (In US$/Tr. Oz.)
160 700
140 600
120
500
100
400
80
300
60
40 200
20 100
0 0
1973 1978 1983 1988 1993 1998 1973 1979 1985 1991 1997
PERIOD PERIOD
Figure 12 - ANNUAL AVERAGE Figure 13 - ANNUAL AVERAGE

PRICE OF SILVER PRICE OF NICKEL
(In US$/Tr.Oz.) (In UScents/Lb)
25 7
6
20
5
15 4
3
10
2
5 1
0
0 1973 1979 1985 1991 1997
1973 1978 1983 1988 1993 1998
PERIOD
PERIOD
Eventually, many of the copper mines with substantial exposure to

government banks like the Development Bank of the Philippines and the
Philippine National Bank were foreclosed. By 1987, the Batong Buhay
Project, Sipalay Copper Project, and the Maco Copper Project of North
Davao were transferred to the Asset Privatization Trust.

In 1984, Letter Of Instruction (LOI) No. 1416, which suspended all tax
obligations payable by mining companies classified by the Ministry of Trade
as “distressed”, was signed to avert the negative impact of the continuing
decline of copper prices. These suspended taxes shall become due and
payable until such time when copper prices had improved. Five mining
companies availed of this assistance. During this period copper price hit the
bottom but gold price continued to become stable and remained to be the
only compensating factor in most copper operations. Chromite and nickel
during such time were beginning to perform well. However, the death of
Senator Benigno Aquino in 1983 threatened once again the revival of the
industry. Cost cutting measures were drastically resorted to by the remaining
surviving mines.
With the installation of the new Aquino Government in 1986, investments in

mining began to grow. Copper price at the end of 1988 reached an average
price of US$ 1.18 per pound indicating improvements in the international
metals market. Executive Order No. 340 was then signed into law providing
for the repayment of the taxes suspended under LOI No. 1416.
In 1989 and 1990, investments in the industry climbed up to new heights

reaching the billionth mark due to renewed interest in Philippine mining. The
foreign investments infused into the Far Southeast Copper Gold Project in
Benguet signaled a new beginning of investor confidence. At the onset of
1990, commodity prices began to fall once again. While copper was stable at
US$ 1.00 per pound, gold prices began to fall. With increasing costs of
production and the ill effects of the energy crises and natural calamities, the
industry was again beset with a series of mine closures. In 1992, the Siana
gold project suspended its operations due to mine flooding brought about by
a typhoon, the Dizon mine encountered technical problems with its ore
causing inefficiency in its milling process, the Atlas mine laid off its
managers and thousands of its workers due to financial problems, the Acupan
mine decided on a permanent closure, and the North Davao copper operation
finally shut down. To minimize heavy losses, the surviving mines began
laying off their employees resulting to further reduction in industry
production.
The combined forces of financial, environmental and technical reasons, in

the succeeding years, saw the closure of the biggest copper mining projects
in the country, namely: the Atlas copper mine in Cebu, the Marcopper
copper mine in Marinduque, the Lepanto copper mine in Benguet, and the
Dizon mine in Zambales. These closures cause a decline of more than half of
the 1993 industry production. The case of gold, however, was the opposite.
Four new players entered into the industry but only to close down by the end
of the decade. Nickel exhibited an unprecedented increase in production until
the early second century. The impressive showing can be attributed to the
long dry seasons brought about by the El Nino in 1998. Chromite has been
very erratic, but generally showed a declining trend in production. This slow
decline may have been caused by the dampened demand for refractory

chromite due to emerging technology for liner substitutes and also because of
the undesirable environmental effects of some chrome products.
A map showing the geographical distribution of operating mines, some

closed mines, and cement plants and quarries are shown in Figures 11 to 13.
b. Mineral Development Projects On The Pipeline
Some projects have undergone feasibility studies and are now completing
requirements prior to their construction and development. The more advanced
projects are as follows:
1. Rapu Rapu Polymetallic Project
A copper-gold-silver-zinc mining and mineral processing project in Rapu Rapu

Island, Albay to be developed with an investment of US$ 42 Million. The project
will be operated by Rapu Rapu Minerals, Inc. It is expected to generate an annual
revenue of US$ 41 Million from the sales of copper-zinc concentrates and gold-
silver bullions. Explored under the management of Lafayette Philippines, Inc., the
project has now advanced towards the construction and development stage. The
gold plant is expected to be in operation by February, 2005 and the base metal plant
by July 2005. The project is a joint venture of Rapu Rapu Minerals, Inc., Lafayette
Mining NL of Australia, Lafayette Philippines, Inc. and TVI Resource Devt
(Phils.), Inc.
2. Palawan Nickel Processing Project
A US$180 Million project involving the establishment of a High Pressure Acid

Leach (HPAL) nickel processing plant in Bataraza, Palawan – a pioneering
technology in low grade nickel ore processing. The plant is contemplated to
produce 10,000 tons nickel and 750 tons cobalt annually in the form of mixed
sulfides with an estimated value of US$53 Million per year. The plant is scheduled
to be debugged this September, 2004 and full operation is expected by early 2005.
The project is a joint venture among Rio Tuba Nickel Mining Corp., a local mining
firm and three foreign Japanese companies, namely: Sumitomo Mining & Metals
Corp.; Mitsui Co., Ltd.; & Nissho Iwai Corp. of Japan. The joint venture company
is Coral Bay Nickel Corporation.
3. Masbate Gold Project
A US$100 Million gold-silver mining and mineral processing project in Aroroy,

Masbate. The project site is the former mine site of Atlas Consolidated Mining
Development Corporation which was further explored and re-assessed by Filminera
Resources Corporation. Initial studies by Base Metal Minerals, Inc. show that the
property has a potential to produce 138,500 ounces of gold per year. Filminera has
just completed its final confirmatory drilling and is now finalizing the preparation of
a bankable feasibility study. It is expected to come on stream by 2006.
4. Nonoc Iron Fines Project

This is a US$ 7 Million project of Pacific Nickel Philippines, Inc. involving the
disposition of the iron-rich tailings materials from the former nickel refinery at
Nonoc Island, Surigao del Norte. The project is projected to generate annual
revenue of about US$ 16 Million from the export sales of the iron fines to Mainland
China. The project is expected to start commercial production this year.
5. Didipio Copper-Gold Project
This is a copper-gold mining and mineral processing project of Climax Arimco

Mining Corporation in Kasibu, Nueva Viscaya. The project is covered by the first
Financial or Technical Assistance Agreement (FTAA) under the Executive Order
No. 279. Its initial feasibility study shows that the project can be developed at an
initial investment US$ 63 Million generating an annual revenue of US$ 50 to 60
million. The area was found to contain 1 million ounces of gold and 126,000 metric
tons of copper. The company has recently renewed its Environmental Clearance
Certificate (ECC) and is now finalizing its revised project feasibility study.
Arrangements for its financing is currently on going.
6. King King Copper-Gold Project
A copper-gold-silver project of Benguet Corporation and National Development

Corporation located in Pantukan, Davao del Norte. Initial studies on the project
showed that it is capable of producing a total of 2 billion pounds of copper
concentrate, 466 million pounds of copper cathode, 4 million ounces of gold and
another 4 million ounces of silver with total estimated value of US$ 4 Billion and
requiring an initial capital investment of US$ 531 Million. The company is
updating its feasibility study for the mining and mineral processing of its oxide ore,
and epithermal gold.
Figures 28 shows the geographical distribution of mineral projects on the pipeline.
c. Mineral Development Projects Under Review
There are also projects that have productively operated in the past but have ceased
operations due to some economic reasons. They are currently studied and reviewed
by various investor groups for possible development or re-activation. These projects
include the following:
1. Toledo Copper Project
This is a project that involves the re-opening of the former Atlas Mine in
Barangay Don Andres Soriano in Toledo City. The property is formerly held by
Atlas Consolidated Mining Development Corporation and was recently acquired
by Toledo Copper Mining Plc. It intends to invest US$ 100 Million for its revival.
The mine is projected to generate US$ 130 Million annually from the sales of
copper concentrates and will employ about 2,600 workers during its commercial
operations. The project is presently confronted with issues on unpaid taxes from
the Bureau of Internal Revenue, Bureau of Customs and local government of

Toledo City. To re-open the mine, Government will be requiring the project
proponents to submit an Environmental Protection and Enhancement Program
(EPEP) and an updated Mining Project Feasibility Study.
2. Itogon Gold Project
A US$10 Million gold-silver project proposed by Itogon-Suyoc Mines, Inc. It

involves the re-activation and expansion of its former Itogon and Suyok mines
which ceased operations in 1996. The new project which require an investment of
about US$ 10 Million is an expansion project to a 3,000 metric tons per day
operation. It is projected to generate US$19 Million annually from the sales of
gold-silver bullions. It is currently under the feasibility study stage.
3. San Antonio Copper Project
This is the copper mining and mineral processing project of the former Marcopper
Mining Corporation in Santa Cruz, Marinduque before the infamous tailings spill
which caused its closure in 1996. Large amount of copper ore reserves still exists
in the San Antonio Pit which can support a 17-year mine operations using the
existing mine and mill facilities. This US$ 100 Million copper concentrate project
is projected to earn US$ 150 Million annually in foreign exchange..
4. Nonoc Nickel Processing Project
This project involves the revival of the former nickel refinery in Nonoc Island,
Surigao del Norte. It requires an investment of a least US$ 1 Billion for the
production of nickel and cobalt briquettes using the Sheritt-Gordon technology.
Estimated annual revenue was placed at about US$ 300 Millions. Commercial
operation is projected to start in 2010. The project proponents, Nonoc Processing
Inc. and Philnico are looking for investment partners to pursue the project. A
group of Chinese investors from Jinchuan Nonferrous Metal Corp, Shanghai
Baosteel Group Corporation and China Nonferrous Engineering have indicated
their interest in the project.
5. Batong Buhay Gold Project
This is a copper-gold-silver project located in Balatoc, Pasil, Kalinga which

produced copper concentrates in 1984 and 1985. It was then operated by Batong
Buhay Gold Mines, Inc. before its closure in November, 1985 due to the
destruction of its transmission power lines by unidentified persons. Its assets
which have a transfer price of close to P 5 Billion were then taken over by the
former Asset Privatization Trust (APT), now the Privatization Management
Office (PMO) of the Department of Finance. It has remaining copper reserves of
68 million metric tons with an average grade of 0.58% copper and a gold reserve
of 108 million metric tons with an average grade of 0.47 to 0.64 grams gold per
ton of ore. A Privatization Plan is being finalized for publication this September,

2004. Prospective investors will be invited to conduct due diligence studies on the
property. The assets of the project have not been disposed so far due to legal
impediments and existing cases filed by its former stockholders with the
Securities and Exchange Commission and the lower courts.
6. Amacan Copper Projects
This is an open pit copper mining project in Maco, Compostela Valley formerly
operated by North Davao Mining Corporation from 1981 to 1992. The assets of
the mine during its closure in 1992 were transferred to the Assets Privatization
Trust (APT), now the Privatization Management Office (PMO) at a price of P 4.7
Billion. Parts of these assets have been disposed so far by PMO. It has a
remaining copper reserves of 65 million tons with a grade of 0.34% copper and
gold reserves of 1.1 million metric tons with a grade of 5 grams gold per tons ore.
Investor interest is not only confined to the existing mine but also focused on the
geological potential of the adjacent areas of the Amacan orebody within the
20,237 hectares of application area for Financial or Technical Assistance
Agreement (FTAA) filed in January 8, 1996.
Figure 29 shows the geographical distribution of mineral development projects that are
under review.
d. Mineral Exploration Projects
Although the industry suffered a sharp decline in the number of its operating mines,
it has been vibrantly performing in the exploration area. So far, there are forty-four
(44) exploration projects in the country. Five (5) of them are now in the advanced
stage of exploration. Majority of these exploration projects are conducted by foreign
exploration companies. They have acquired interest in most of the exploration
prospects that have not been pursued previously by Filipino companies who lack the
necessary funds to conduct a full-scale exploration program. The following are some
of the currently active exploration projects by foreign companies:
1. Advanced Exploration Stage
a. Buyongan Copper Project in Surigao del Norte by Anglo American Explo. Pty Ltd.
b. Tampakan Copper Project in South Cotabato by a consortium of Indophil
Resources, MIM Ltd and a group of Filipino investors
c. Adlay Nickel Project in Surigao del Norte by QNI, Ltd. and BHP-Billiton
d. Canatuan Gold Project in Zamboanga del Norte by TVI Pacific, Inc.
e. Manat Gold Project in Davao del Norte by Indophil Resources, NL.
2. Preliminary Exploration Stage
a. Cordillera Gold Project in Benguet by Anglo-American Explo. Pty., Ltd.

b. Surigao Copper-Gold Prospect in Surigao del Norte by Climax Mining Ltd.
c. Siana Gold Project in Surigao del Norte by Red 5 Resources NL
d. Labo Gold Project in Camarines Norte by Indophil Resources, NL
e. Leyte Gold Project in Eastern Leyte by Indophil Resources, NL

f. Pao Gold Project in Nueva Vizcaya by Oxiana Resources, NL

g. Southern Leyte Gold Project in Southern Leyte by Oxiana Resources, NL
h. Surigao Gold Project in Surigao del Norte by Oxiana Resources, NL
i. Gambang Gold Project in Benguet by Oxiana Resources, NL
j. Del Gallego Gold Project in Camarines Norte by Phelps Dodge Explo. Corp
k. Pujada Nickel Project in Davao Oriental by QNI, Ltd. and BHP-Billiton
l. Batoto Gold Project in Davao del Norte by Sur American Gold Corporation
m. Bayugan Gold Project in Zamboanga del Sur by Templar Resources, Inc.
n. Pan de Azucar Project in Iloilo by Mindoro Resources Ltd.
o. Lobo Copper-Gold Project in Batangas by Mindoro Resources, Ltd.
p. Acoje Chromium-Platinum Project in Zambales by Kinloch Resources, Inc.
q. Mabuhay Gold Project in Surigao del Norte by Pelican Resources, Inc.
r. Libona Gold Project in Bukidnon by Great Horizon Natural Res. & Devt Corp
s. Pamplona Sulfur Project in Negros Oriental by Crew Development Corp.
t. Tagpura Copper Project in Compostela Valley by Sur American Gold Corp.
u. Runruno Gold Project in Nueva Viscaya by Filminera Group.
v. Kematu Gold Project in South Cotabato by Tboli Mining Corporation
w. Hixbar Polymetallic Project in Albay by Lafayette Mining Corporation
x. Samar Bauxite Project in Western Samar by Alumina Resources, Inc.
y. Negros Gold Project in Negros Oriental by PNOC-EDC.
z. Alicia Gold Project in Zamboanga del Sur by PNOC-EDC
aa. Leyte Gold Project in Leyte by PNOC-EDC
bb. Nelesbitan Gold Project in Camarines Norte by El Dore.
cc. Limestone Project in Davao del Norte by Solid North Corporation
dd. Sta Cruz Nickel Project in Zambales by Benguet Corporation
ee. Panaon Gold Project in Southern Leyte by Vulcan Industrial Mineral Inc.
ff. Road 5M Gold Project in Davao Oriental by Boston Minerals
gg. Southern Leyte Copper–Gold Project in Southern Leyte by Up Mines
hh. Marian Gold Project in Isabela by Medusa Mining Ltd. of Australia
ii. Tabuk Copper Project by Wolfland Resources
jj. Pantingan Gold Project by Bataan Mineral Exploration
kk. Conner Copper-Gold Project in Cordillera
Figures 30 shows the location of some of the current exploration projects conducted
by foreign companies.
4. Mining Tenements Issued by the National Government
As of September 30, 2004, the total number of mining rights issued by the
national government is 632 disaggregated as follows:
Table 2 – Number of Existing Mining Rights Issued by National Government
TYPE OF MINING RIGHT NUMBER AREA

Mineral Production Sharing Agreements 208 340,945 has.
Exploration Permits 11 39,514 has.
Financial or Technical Assistance Agreement 2 51,955 has.
Industrial Sand and Gravel Permits 99 1,159 has.
Lease Contracts/Patents 312 39,800 has.
TOTAL……………………………………… 632 473,373 has.

The total area covered by these mining rights is only 1.5% of the total land area of
the Philippines. As of the same date, a total of six (6) Mineral Processing Permits
were approved by the Government.
5. Mineral Production
During the past two and half decades, metallic minerals accounted for 61%
of the country’s mineral production (Figure 14). Gold contributed the highest
(36%) share followed by copper which comprised 21% of the total
cumulative production.
Figure 14 - MINERAL PRODUCTION VALUE,

1979-2003
METALLICS NON-
61% METALLICS
39%
Figure 15 - METALLIC Figure 16 - NONMETALLIC

PRODUCTION VALUE, 1979-
MINERAL PRODUCTION
2003
VALUE, 1979-2003
LIMEST
ONE COAL
5% 11%
NICKEL OTHER
4% 3% OTHER
17%
SALT
COPPER
27%
32%
GOLD
60% SAND &
GRAVE
L
40%
SILVER
1%

Figure 17 - PRODUCTION VOLUME OF COPPER, CHROMITE

AND NICKEL, 1970-2003
1,400
PRODUCTION IN DRY METRIC TONS
COPPER
1,200 CHROMITE
NICKEL
1,000
800
600
400
200
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
PERIOD
Figure 18 - PRODUCTION VOLUME OF GOLD AND SILVER,

1970-2003
70
60
GOLD
PRODUCTION IN KILOGRAMS
SILVER
50
40
30
20
10
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
PERIOD

6. Mineral Exports
During the seventies, the mineral industry’s contribution to exports averaged

about 20% but declined to about 10% in the late 80s. It further decreased to about
2% in the nineties. In 2003, the minerals industry contributed only 1.78% to total
Philippine exports. While this can be partly attributed to the decline in
international metal prices, weakening of the peso against the US dollar, depletion
of existing ore reserves and to the overall expansion of the Philippine economy,
the figures simply highlight the industry’s decreasing contribution to Philippine
exports.
Figure 19- EXPORT VALUES OF GOLD & SILVER

AND COPPER, 1970-2003
700
Million US Dollars
600
500
400
300
200
GOLD & SILVER
100
COPPER
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
PERIOD
Figure 20 - EXPORT VALUES OF NICKEL

AND CHROMITE, 1970-2003
100
Million US Dollars
NICKEL
80
CHROMITE
60
40
20
0
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
PERIOD
Figure 21 - SHARE OF MINERAL EXPORTS

TO TOTAL EXPORTS
25
21
% SHARE
17
13
9
5
1
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
PERIOD

7. Employment
The industry is never considered a big employer owing to its equipment-intensive

nature. It accounted for 104,000 employees in its large-scale (mining and
quarrying) sector or just 0.30% of total Philippine employment. However, this is
significantly higher if the industry’s multiplier effect is considered. While
estimates vary, it is safe to assume that for every job in the industry, about four
indirect jobs are generated in the upstream and downstream sectors.
Figure 22 - EMPLOYMENT IN MINING, 1970-2003

(In Thousands)
160
140
120
100
80
60
40
20
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000
PERIOD
8. Equity Investments In Mining
Investments in mining follows the typical cyclical fluctuations in the prices of

metallic commodities. But the highest infusion of equity capital was seen during the
period 1996 to 1999, just after the Mining Act of 1995 was enacted. This indicated a
renewed interest for investments in mining. Noticeable increases in investments were
also shown during the years 1992 to 1995, reflecting the enthusiasm of mining
investors to take advantage of an upcoming new mining law which is favorable to
investments.
Figure 23 - PAID-UP EQUITY INVESTMENTS IN MINING

4,000
3,500
EQUITY ( In Million Pesos)
3,000
FOREIGN EQUITY INVESTMENT
2,500
LOCAL EQUITY INVESTMENT
2,000
1,500
1,000
500
0
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
PERIOD
9. Taxes And Fees Generated From Mining
The minerals industry is a contributor to the financial coffers of the country through
the collection of taxes and fees from mining and minerals-related activities in the
country. A list of common taxes and fees collected by government from mining
contractors and permittees are given in B(7) of this paper. The undulating curve in the
graph below characterizes the nature of the industry being influenced by rise and fall
of international commodity prices.
Figure 24- ESTIMATED TAXES & FEES FROM MINING
3,000
P 2.4 B P 2.6 B P 2.7 B
2,500
P 1.9 B P 2.1 B
2,000
1,500
1,000
500
0
1998 1999 2000 2001 2002
PERIOD
Excise tax alone, which is currently two (2) percent of the gross value of mineral
products, is a major tax paid by mineral producers to the government. The Bureau of
Internal Revenue experienced increased tax collections during the years 1987 to 1992,
with 1991 as the year with the highest collection almost hitting the billion pesos
mark. Again this was a period when copper prices were high.
Figure 25 - EXCISE TAX ON MINERALS, 1980-2003
900
800
EXCISE TAX ( In Millions)
700
600
500
400
300
200
100
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
PERIOD

10. Summary of Economic Contributions of the Minerals Industry for 2003
Production value - P41.5 Billion

Value-Added Contribution - P17.9 Billion or 1.5 % of Phil. GDP
Exports - US$638 million or 1.8 % of total Phil. exports
Approved FDI in mining - P855 Million
Employment - 104,000
Wages and benefits - P4 to 5 Billion
Taxes and fees - P2 Billion
Multiplier effect - For each mining job, 4 to 10 allied jobs
created upstream and downstream
11. Economic Potentials of the Philippine Minerals Industry
Currently, the Philippines has the potential to produce twenty-three (23)

additional new metal mines in the next six to ten years with a potential
investment of US$ 6 Billion and a potential annual foreign exchange of
at least US$ 7 Billion from sales of mineral products. In addition to these
projects which are now in their advanced state of development, there are
thirty-seven other projects which are in various stages of exploration.
It has also the potential to contribute substantially to development of

communities, local government and the economic growth of the country,
in general. If allowed to develop fully, it can be an effective instrument in
poverty alleviation particularly in the countryside.
II. Current Policies Implemented To Revitalize The Minerals Industry
A. The Philippine Mining Act Of 1995 And Its Revised IRR

1. Background
Republic Act No. 7942 or the Philippine Mining Act of 1995 (“Act”) is the governing
law that regulates mineral resources development in the country. One of the primary
objectives of this act is to revitalize the ailing Philippine mining industry by providing
fiscal reforms and incentives and maintaining a viable inventory of mineral reserves
to sustain the industry through the infusion of fresh capital through direct investments
to finance mineral exploration and/or development activities. The original
implementing rules and regulations of the Act was prepared in 1995, and was revised
in 1996 under DENR Administrative Order 96 – 40, the revised implementing rules
and regulations (RIRR).
Collectively, the Act and its RIRR take into consideration the following:
?? Local government empowerment

?? Respect and concern for the indigenous cultural communities

?? Equitable sharing of benefits and natural wealth
?? Demands of the present while providing the foundation for future generations
?? Worldwide trend towards globalization
?? Protection for and wise management of the environment
The law also contain social and environmental safety nets far stronger than previous
mining laws, rules and regulations. It has:
?? Built-in protection for the Indigenous Peoples (IP) through the prior informed
consent requirement, one of, if not the only mining law in the world that contains
such requirement, even pre-dating the free and prior informed consent (FPIC)
requirement of the Indigenous Peoples Rights Act of 1997;
?? Competitive fiscal regime. The fiscal regime is a major consideration among the
investor's criteria for investment. The key concern of investors is not the fiscal
regime perse, but the overall profitability of the project after considering the
taxes. The fiscal regime of the Philippines is considered competitive not only in
Asia but throughout the world, according to an independent study by the Institute
for Global Resources Policy and Management of the Colorado School of Mines
(CSM) in the United States in 2000;
?? Equitable sharing of the benefits of mining among the major stakeholders – the
national and local government, the communities and the mining company. Under
the fiscal regime, the benefits of mining of mining are approximately shared at
50%:50% between the government and the contractor. The 50% is further divided
into 50% for the national government, 10% for the provincial government and
20% each for the municipality and host barangays; and
?? Environmental and social provisions comparable, if not better than similar

provisions in mining laws of established countries. During the World Bank Mine
Closure and Sustainable Development Workshop in 2000, the Philippines was
among the nations considered to “have (a) comprehensive policy and legislation
that provides for both comprehensive mine closure and post-mining sustainable
development”. The Social Development and Management Program (SDMP) was
also cited as a “tool for community participation”. The SDMP is meant for the
development of the host and neighboring communities and is managed by the
communities themselves together with the mining company and guidance by the
Government and site-base NGOs. In addition, the national wealth sharing
scheme, provided under the Local Government Code of 1991 where 40% of
mining taxes collected by the national government is flowed back to the
communities was cited as “one of the only few wealth sharing scheme of such
nature in the world”.
The revised implementing rules and regulations of the Mining Act provides strict
adherence to the principles of Sustainable Development which should encompass
the economic, social and environmental aspects of human development.

2. Major Types Of Mining Rights Granted Under The Philippine Mining Act
Table 3 – Types Of Mining Rights Granted Under The Mining Act
TYPE OF MAXIMUM AREA TERM QUALIFIED PERSON

MINING RIGHT (hectares)
Exploration 32,000 onshore 2 years; renewable Individuals or

Permit 81,000 offshore to a maximum of 8 Filipino or foreign
years corporations
Mineral 16,200 onshore 25 years; Individuals or
Production 40,500 offshore renewable for like Filipino corporations
Sharing period
Agreement
Financial or 81,000 onshore 25 years; Filipino or foreign
Technical 324,000 offshore renewable for like corporations
Assistance period
Agreement
One of the major features of the Mining Act is the annual mandatory relinquishment
of areas granted to the contractor. After the exploration stage, the Philippine
Government only allows a final mining area of only 5,000 hectares for metals and
1,000 hectares for non-metals.
3. Environmental Responsibilities under the Act and its revised IRR.
Table 4 – Environmental Provisions Of The Mining Act
Environmental Work Program At least 10% of the estimated exploration cost.

Initial expenditures for At least 10% of the estimated project
environmental infrastructures development cost.
Mine Rehabilitation Fund
(i) Rehabilitation Cash Fund 3% to 5% of annual direct mining and milling

costs or PhP5 million, whichever is lower;
utilized to implement the progressive
rehabilitation measures defined in the
Environmental Protection and Enhancement
Program.
(ii)Monitoring Trust Fund Replenishable amount of PhP50,000; utilized

by the Multi-partite Monitoring Team with
LGU, NGO, IP, company & govt representative
as members.
Environmental Trust Fund Replenishable amount of at least PhP50,000;
utilized for compensation for damages outside
of those caused by mine waste and tailings.
Mine Waste and Tailings Reserve Amount collected for every ton of mine waste
Fund and tailings equivalent to PhP0.05 and
PhP0.10, respectively; utilized for

compensation for damages as a result of mine

waste and mill tailings.
Polluter Pays Principle P50/MT of materials disposed in unauthorized

areas.
Final Mine Rehabilitation/ Cost variable but must include an
Decommissioning Plan (FMRDP) environmental plan and a social plan plus the
cost of a ten year maintenance and monitoring
period.
4. Social Responsibilities under the Act and its revised IRR.
Table 5 - Social Development Provisions Of The Mining Act
Community Assistance Variable; during exploration

Just Compensation to Variable; depending on status of land
Landowners
Social Development and At least 90% of 1% of annual direct mining
Management Program and milling costs; for the implementation of
sustainable community development
projects/programs for the host and
neighboring communities.
Royalty to Indigenous Peoples At least 1% of gross revenue if ancestral
land is developed for mining
Social plan for the Final Mine Variable; meant to minimize the mine’s
Rehabilitation /Decommis- economic impact to the host and
sioning Plan neighboring communities and to mine
employees and their dependents.
5. Role of Local Governments
Local governments are both beneficiaries and active participants in mineral

resources management in accordance with the Constitution and local autonomy
and empowerment. They have a share of forty percent (40%) from the gross
collection of the national government from mining taxes, royalties and other fees.
In the case of occupation fees, the province gets 30% and host Municipalities get
70%.
In accordance with the People’s Small Scale Mining Law, local governments are
responsible for the issuance of permits for small scale mining and quarrying
operations through the Provincial/City Mining Regulatory Board. In the issuance
of Environmental Compliance Certificate, local governments actively participate
in the process by which the communities reach an informed decision on the
social acceptability of a project. They also participate in the monitoring of
mining activities as member of the Multi-partite Monitoring Team and the Mine
Rehabilitation Fund Committee. They can also act as mediator between the
indigenous cultural communities and the mining contractor if the need arises.
Local government are also recipients of social infrastructures and community

development projects for the utilization and benefit of the host and neighboring

communities. In the implementation of the Mining Act and its implementing

rules and regulations, local governments coordinate and extend assistance the
DENR and the MGB.
6. Ancestral Lands and Indigenous Cultural Communities
The Mining Act fully recognizes the rights of indigenous peoples and respects
their ancestral lands. No mineral agreements, Financial or Technical Assistance
Agreements and or any mining permits are granted in ancestral lands or domains
except those with prior informed consent in areas with Certificate of Ancestral
Domain Claims / Certificate of Ancestral Land Titles (CADC/CALT) and areas
verified by the DENR Regional Offices or other appropriate offices as actually
occupied by indigenous peoples under a claim of time immemorial possession.
When written consent is granted by the Indigenous Cultural Communities (ICC),

through the National Commission on Indigenous Peoples (NCIP), a royalty
payment shall be negotiated which shall not be less than 1% of the gross output
from the mining operations.
The rights of indigenous peoples are protected and governed by Republic Act
No. 8371 or better known as the Indigenous Peoples Rights Act of 1997.
7. Government Share From Minerals Development
Minerals development generate wealth for local and national governments. The
following taxes and fees are the most common imposts collected from mining
and mineral processing activities:
a. Direct payments to national government
?? Corporate income tax – 32% of taxable income

?? Excise tax on minerals – 2% of the gross output from minerals
produced
?? Customs duties and fees – 3%-7% for chemicals; 3%-10% for
explosives; 3%-15% for mechanical and electrical equipment; 3%-
10% for vehicles, aircraft and vessels.
?? Value-added tax on imported equipment, goods and services - 10%
of the value added
?? Royalties on minerals from mineral reservations, if applicable – 5%
of actual market value of minerals produced
?? Documentary stamp tax – rate depends on the type of transaction
?? Capital gains tax on traded stocks –5% to 10% of traded value
?? Additional share of Government in the case of FTAA – rate depends
on the scheme selected by the contractor
?? Administrative fees (e.g. wharfage and port fees, licensing fees for
radio, firearms and driving of motor vehicles and professional fees)
?? Other national taxes, fees and charges

b. Direct payments to local government
?? Local business tax – rate varies among local governments

?? Real property tax – 2% of the fair market value of the property based
on an assessment level set by the local government during a taxable
year; mobile equipment are not subject to tax
?? Special education levy – 1% of the same basis as a real property tax
?? Registration fees – rate depends on the activity to be registered
?? Occupation fees – 50 pesos per hectare per year for areas not covered
by mineral reservations; 100 pesos per hectare for areas covered by
mineral reservation.
?? Community tax – charged to individuals and business establishments;
maximum of 10,500 pesos per year per individual or establishment
?? Other local taxes – rate and type depends on local government
concerned
c. Direct payments to other Filipinos
?? Royalty to landowners/claimowners – depends on the negotiation between

landowner/claimowner and mining contractor
?? Royalty to indigenous peoples, if within ancestral lands – minimum of
1% of the gross output from minerals
d. Indirect payments
?? Fuel tax –1.63 pesos per liter of fuel

?? Tariff of imported fuel – 0.36 pesos per liter of fuel
?? Withholding tax on payroll – governed by the National Internal
Revenue Code
?? Withholding tax on royalties to claim owners – 20% of royalties
?? Withholding tax on interest income from banks – 20% of the interest
income
?? Withholding tax on interest payment on foreign loans – 15% of
interest payment
?? Withholding tax on foreign stockholders dividends –15% of dividend
?? Withholding tax on profit remittances to principal companies – 15% of
amount of remittance
?? Witholding tax on royalty for transfer of technology – 15% of the
royalty
?? Other withholding taxes
The rate of taxes and fees are guided by the National Internal Revenue Code, the
Customs and Tariff Code of the Philippines, the Mining Act of 1995 and the
specific tax code of local government units. Administrative fees and charges are
governed by the government agency concerned.

In addition to the above, communities and local governments receive benefits

from the social development and management programs (SDMP) of mining
operations.
B. Executive Order No. 270 : A National Policy Agenda on Revitalizing Mining
Evolving from the quest for a unified national minerals policy through a process of
nationwide stakeholder consultation and engagement, The National Policy Agenda
on Revitalizing Mining in the Philippines was signed by the President through
Executive Order No. 270 in January, 2004 signifying Government’s full support for
responsible mining. The objective of the order is to promote responsible mineral
resources exploration, development and utilization in order to enhance economic
growth, in a manner that adheres to the principles of sustainable development and
with due regard for justice and equity, sensitivity to the culture of the Filipino people
and respect for Philippine sovereignty.
1. Guiding Principles
The order underscored several principles that will guide the pursuit of the objective.
These principles are summarized as follows:
?? Recognize the critical role of investments in the minerals industry

?? Institute clear, stable and predictable investment and regulatory policies
?? Pursue value adding of minerals and mineral products
?? Recognize and legalize small scale mining sector
?? Adopt efficient technologies in extraction and utilization of minerals
?? Integrate environmental protection, mitigation and progressive rehabilitation
in mining operations
?? Safeguard the ecological integrity of areas affected by mining including
biodiversity and small-island ecosystems
?? Pursue mining within the framework of multiple land use and sustainable
utilization of minerals
?? Remediate and rehabilitate abandoned mines
?? Ensure equitable sharing of economic and social benefits from mining
?? Enhance public awareness and respect for the rights of communities
?? Institutionalize continuous and meaningful consultation process with industry
and all other stakeholders
2. Mineral Action Plan (MAP)
In order to provide guidelines for all concerned agencies on how the guiding principles
will be implemented, the DENR-Mines and Geosciences Bureau and other government
agencies formulated a Mineral Action Plan (MAP) in compliance with Executive Order
No. 270. The MAP contains the important issues to be addressed, the strategies adopted,
the activities to be undertaken, the implementing agency and the timetable of its
implementation. The major implementing agencies include, the Department of
Environment and Natural Resources (DENR), the National Economic Development
Authority (NEDA), the Department of Trade and Industry (DTI), the Department of
Interior and Local Government (DILG), the Department of Budget and Management

(DBM), the Department of Finance (DOF), the Department of Science and Technology
(DOST) and their respective bureaus and attached agencies. It also includes the National
Commission of Indigenous Peoples (NCIP), the National Anti-Poverty Commission
(NAPC). Leagues of Local Governments, civil society and the academe’. A copy of the
detailed MAP is published in the MGB website at www.mgb.gov.ph.
III. Challenges/Issues/Concerns Confronting The Minerals Industry

A. Pervasive Anti-Mining Movement
For some years now, some non-government organizations and leaders of the church launched
a nationwide anti-mining stance that is anchored on environmental, biodiversity and
nationalistic issues. They have accused the mining industry of displacing people and causing
damage to environment and biodiversity through siltation of rivers, dumping of toxic
effluents and cutting of trees. Industry responded to these accusations of being false
impressions and misstatements because of the lack of an acceptable objective explanation and
the absence of a scientific basis to support their accusations. To the uninformed stakeholders,
particularly local governments and communities, these assertions have created unfounded
fear and insecurity over project areas proposed for exploration and mining. This situation was
compounded by some unbalanced views and reporting of some editors and news writers in
the mass media who have capitalized on these conflicts raising further confusion and
sometimes, disinformation to the public.
Industry needs to demonstrate its genuine concern to the development of communities and
local governments. With the introduction of best practices in the mining industry and an
extensive information, education and communication campaign, the accusations of non-
government organizations with anti-mining sentiments is expected to wane down.
B. Low Level of Investor Confidence
There was so much interest shown by mining investors prior to and during the early years of
the Mining Act of 1995. However, several economic events, primarily the filing of the case in
the Supreme Court against the constitutionality of granting mining rights to foreign-owned
corporations, the inconsistent views in the interpretation of laws, the alleged convoluted
bureaucratic procedures in processing of permits, and other related factors have resulted to
low investments of Philippine mining. The uncertainties created by these events have caused
an unfavorable impact to foreign investments in the country.
This attitude is expected to change starting the year 2005 after Supreme Court, in November
30, 2004, decided to uphold the constitutionality of the Mining Act, particularly its provisions
relating to the participation of foreign-owned corporation in mining investments. With
aggressive promotion and revitalization of the minerals industry, investors with previous
investments are expected to come back and new ones will be invited to invest in the
Philippine mining.
With the shift in policy of “tolerance to promotion of mining” the President opened the doors
for the revitalization of mining in the Philippines. Government is working on a Minerals
Action Plan to achieve the strategic goals of the country towards a revitalized minerals
industry. Significant policy reforms had been introduced by government to further streamline

procedures and reduce the processing time for mining applications. A Mining Investment
Assistance Center (MIAC) was jointly established by the Department of Environment and
Natural Resources and the Department of Trade and Industry to serve as an advisory,
information and referral center for mining investors. The MIAC office is housed at the
ground floor of the main building of the Mines and Geosciences Bureau.
C. Restrictive Access To Lands And Conflicting Government Policies
Entry into mineralized areas for the purpose of mineral exploration have not been easy
because of requirements for permits and consent from government offices and affected
parties. In areas declared and occupied by indigenous peoples or communities, an applicant
has to secure a Free and Prior Informed Consent (FPIC) from the indigenous peoples
concerned. Permit or clearance is also required from various DENR agencies particularly if
exploration or mining activities will be conducted in protected, biodiversity and forestry
areas. A One-Stop-Shop clearing center was established in every regional office of the DENR
to facilitate issuance of area clearances. Agricultural lands intended to be converted into
mining areas need clearance from the Department of Agrarian Reform. The numerous
clearances to be secured in mining applications is regarded by investors as a tedious and
bureaucratic procedure. Under the Minerals Action Plan, policy reforms will be formulated
to simplify the processes involving the acquisition of a mining permit including clearances
and requirements from other government agencies. Inter-agency committees are working on
the harmonization of conflicting government rules and regulations.
D. Idle, Sequestered and/or Abandoned Mining Assets
A number of inactive mines, either orphaned or have stopped operation due to temporary
non-feasibility, have become the subject of concern by government. Some of these
abandoned mines were sensationalized by environmentalist groups as producers of mine acid
drainage causing incidents of “fish kill” in downstream fishing areas. Some of these areas
have been categorized to have a great potential of producing natural acids. Immediate
government action was sought to prevent further potential damage caused by these
abandoned mines. In the case of orphaned mines, government is left with the problem of how
to alleviate the impact of acid mine drainage. Policies of abandoned mines have to be
formulated to address the current impacts and future occurrence of this problem. Under the
Minerals Action Plan, a Mine Viability and Environmental Assessment (MVEA) Study is
contemplated to identify which mines still have the potential to generate wealth to be used in
the rehabilitation.
In the past, Government signed guarantees to loans used to finance mining projects which
have profitably operated in the late seventies and early eighties. Because of some compelling
negative economic factors, these mines have shut down and were sequestered by government
through the assignment of a trustee – the Asset Privatization Trust (APT). The physical mine
assets of these projects consisting principally of machineries, equipment and building
infrastructures have been sold by APT to recover some value of the guarantee. What were left
behind were mining and adjacent areas that still possess high potential for mineral deposits.
To convert these mining assets into productive mines need serious government action to
hopefully recover its losses. These assets are currently under the management of the
Privatization Management Office under the Department of Finance.

IV. Direction And Future Plans Of The Minerals Industry

The overall goal of revitalizing the minerals industry in the context of sustainable
development is expressed in the vision statement of the DENR-Mines and Geosciences
Bureau which is to establish:
“a minerals industry that is not only prosperous but also socially,

economically and environmentally sustainable, with broad
community and political support while positively and
progressively assisting in the Government’s program on poverty
alleviation and contributing to the general economic well-being
of the nation.”
A. Economic Development
The DENR-MGB projects that in the short term (2004-2005), the Government anticipates
mining investments of more than US $300 million from five (5) projects, namely:
?? Rapu Rapu Polymetallic Project of Lafayette Philippines, Inc. in Albay

?? HPAL Nickel Processing Project of Coral Bay Nickel Corporation in Palawan
?? Diwalwal Direct State Utilization Project of the Natural Resources Mining
Development Corporation in Compostela Valley
?? Nonoc Iron Fines Project of Pacific Nickel Philippines, Inc. in Surigao del Norte
?? Teresa Gold Project of Lepanto Consolidated Mining Corporation in Benguet
These mining and mineral processing projects were projected to yield annual revenues of
US$ 80 to US$182 Million in 2004 and 2005, respectively.
In the medium-term (2006-2008), and considering the overall stability in the investment
climate and the major impediments in investments have been addressed, Government
expects a US$ 842 Million in additional mining investments from new projects with an
annual potential revenues of US$365 to US$764 Million. These investments will come
from eight (8) large-scale projects namely:
?? Aroroy Gold Project of Filminera in Masbate

?? Adlay Nickel Project of QNI and BHP Billiton in Surigao del Norte
?? Didipio Copper-Gold Project of Climax Arimco in Nueva Vizcaya
?? King King Copper-Gold Project of Benguet Corporation in Compostela Valley
?? Canatuan Gold Expansion Project of TVI in Zamboanga del Norte
?? Padcal Copper Expansion Project of Philex in Benguet
?? Itogon Gold Project of Itogon Suyoc Mines in Benguet
?? Toledo Copper Project of Toledo Copper Corp in Cebu.
In the long-term (2009-2013), and considering that the momentum of stability and policy
consistency is sustained, additional mining investments can go as high as US$4.6 Billion
with annual potential revenues of more than US$ 2 Billion from nine (9) projects namely:
?? Far-Southeast Gold Project of Lepanto in Benguet

?? Boyungan Copper Project of Silangan in Surigao del Norte

?? Pujada Nickel Project of BHP-Billiton/Blue Ridge in Davao Oriental
?? San Antonio Copper Project of Marcopper in Marinduque
?? Mindoro Nickel Project of Aglubang in Mindoro Occidental
?? Nonoc Nickel Refining Project of Pacific Nickel Philippines in Surigao del Norte
?? Batong Buhay Gold Project in Benguet
?? Amacan Copper Project in Compostela Valley
The minerals industry will be an industry with sustained exploration activities dominated
by a new-generation of high-profit potential mines able to absorb the social and
environmental costs of modern mining and contributing to the sustained economic well-
being of the nation, and in the countryside community development.
In the long term, the MGB expects to create a value-added minerals industry that paves the
way for industrialization of the country through the generation of wealth, employment and
other benefits and exporting finished products rather than raw materials. During such
period, the industry shall have matured into such stage capable of producing/creating:
?? Nickel and cobalt metals;

?? Copper wires and cables;
?? Alumina and aluminum metal through the establishment of an alumina plant and
aluminum smelter, respectively utilizing the bauxite deposit in Samar Island;
?? Fine jewelry of the highest quality from the original designs of the Filipino
craftsman through the utilization of the gold, silver and semi-precious stones from
small, medium and large mines in the country;
?? High-value non-metallic products;
?? Small and medium enterprises that will recycle minerals and metals;
?? Opportunities for the development and utilization of manganese polymetals and
other offshore mineral resources.
B. Environmental And Social Management
In the environmental and social fronts, it is envisaged to achieve the above-cited long goal
through a progressive shift from conventional mineral resources management approach to a
regime of self-regulation.
The conventional way of managing mineral resources entails a formal “command and
control” method of regulation characterized by its prescriptive nature. Under this regime,
work programs and expenditure commitments in occupational health and safety,
environmental and social management, are prescribed for each stage of mining operations
and reviewed, evaluated, approved and monitored/audited by the Mines and Geosciences
Bureau. While popularly used in Government, this approach is inadequate, inflexible and
ineffective and not the cheapest tool for management.
To be effective, the conventional approach needs full government support at the local and
national levels. There should be well-defined roles of the large, medium and small-scale
mining sectors. There should also be recognition of multinational corporations with proven
track record as pacesetters in modern technologies in exploration, environmental

management, corporate social culture and experience in the application of innovative

technologies. It also needs a strong linkage with international organizations and active
participation in international initiatives to learn and share and be part in developing
international consensus and response to common issues on mining.
Then a stage of co-regulation comes in requiring the development of an appropriate policy

mix from the traditional regulatory approach and a host of complementary approaches such
as voluntary and non-regulatory initiatives and economic instruments. At this stage, it is
envisioned that MGB should have transferred all its regulatory functions in environment
and social management to the MGB regional offices. MGB central office will undertake
policy review and development, research and oversight functions. On the other hand, the
industry shall demonstrate attitudinal change based on the highest degree of
professionalism, responsibility and accountability. This change can be achieved through:
?? integration of environmental, social and economic considerations into decision-

making and management; consistent with the objectives of sustainable development;
?? openness, transparency and improved accountability through public environmental
reporting and engagement with the community;
?? compliance with statutory requirements as a minimum;
?? partnership with non-government organization and other stakeholders to promote and
achieve excellence in environmental and social;
?? development and transfer of innovative approaches to improving efficiency in
resources development and in production processes.
To be successful, the co-regulation stage needs retrofitting of local operating mines and
quarries and the management of public health and safety and environmental risks associated
with abandoned/inactive mines and their cost-effective transformation to pre-determined
end-use acceptable to local communities and other stakeholders.
The final stage would be an informal, self-regulating regime where both Government and
industry work together for:
?? a socially accepted minerals industry demonstrating a track record or good corporate

practice and engaged in enduring relationships with stakeholders;
?? a self-regulating minerals industry driven by industry initiatives, dedication to
continual improvement and commitment to Best Practice and sustainable
development;
The current efforts by the government to revitalize the Philippine minerals industry is not
meant merely to create new economic opportunities but also to prove that mining as a
development option for the country can be both responsible and sustainable and pro-people
and pro-environment in sustaining wealth creation and improved quality of life.
ooOoo

Figure 26
LARGE AND MEDIUM

SCALE OPERATING
METALLIC MINES
(as of January 2004)
Victoria Gold Project
(Lepanto Consolidated
Mining Co., Inc.)
Acupan SSM LEGEND:
Operations
(Benguet - Copper
Corp.)
- Gold
Padcal Copper Project Paracale Gold Project
(Philex Mining Corp.) (Johson Gold Mining Corp) - Chromite
- Nickel
Masinloc Chromite Project

(Benguet Corporation)
Sigbanog Nickel Project

(Hinatuan Mini ng Corp)
Homonhon Chromite Project Omasdang

Palawan Nickel Project (Heritage Resources Mining Corp) Chromite
(Rio Tuba Mining Corp) Project
(CRAU Mineral
Resources Corp)
Cagdianao
Nickel
Project
(Cagdianao
Nickel
Mining Corp)
Banahaw Gold Project

Canatuan Gold Project Philsaga Mining Corp.)
(TVI Resources Phil.,)
Inc.)
Diwalw al
Direct State
Development
Project
(Gold)

Figure 27
LOCATION MAP
OF
CEMENT
PLANTS
(As of Jan 2004)
UNION CEMENT CORP.
Baloan & Bacnotan, La Union
LUZON CONTINENTAL LAND CORP.
NORTHERN CEMENT CORP. Bo. Bigte, Norzagaray, Bulacan
Labayog, Sison, Pangasinan
REPUBLIC CEMENT CORP.
Minuyan, Norzagaray, Bulakan
UNION CEMENT (Bulacan Plant)

FR CEMENT CORP.
Matictic, Norzagaray, Bulakan
Brgy. Dul umbayan, Teresa Rizal
UNION CEMENT
(Limay, Bataan) Plant
GOOD FOUND CEMENT CORP.
Palanog, Camalig, Albay
SOLID CEMENT CORP.
Bo. Tagbac, Antipolo City
FORTUNE CEMENT CORP.

Mapulo, Taysan, Batangas
GRAND CEMENT CORP.

South Pob., San Fernando, Cebu
APO CEMENT CORP.

Tinaan, Naga, Cebu
ALSONS CEMENT CORP.

Lugait, Misamis Oriental
PACIFIC CEMENT
CO., INC.
ILIGAN CEMENT CORP. Km.11 Surigao City
Kiwalan, Iligan City
UNION CEMENT (Davao Plant)

Budbud & Mahayag, Davao City

Figure 28
MINING
Didipio Copper Gold Project
(Climax Arimco Mining Corp.) PROJECTS ON
THE
PIPELINE
As of Jan, 2004
LEGEND:
-Copper-gold-silver-etc
-Gold-silver
-Nickel
Rapu Rapu Polymetallic Project

(Lafayette Phillippines, Inc..)
Masbate Gold Project

(Filminera Resources Inc.)
HPAL Nickel Processing Project

(Coral Bay Nickel Mining Corp)
Canatuan Gold Project

(TVI Resources, Inc.)
King King Copper Gold Project

(Benguet Corporation)

Figure 29
LOCATION MAP
Batong Buhay Copper Gold Project OF MINING
(Batong buhay Gold Mines, Inc.)
PROJECTS
UNDER REVIEW
As of January 2004
LEGEND:
Itogon-Suyoc Gold Project
(Itogon Suyoc Mines,Inc.) -Copper-gold-silver-etc
-Gold-silver
-Nickel
San Antonio Copper Project
(Marcopper Mining Corporation.)
Toledo Copper Project

(Alakor Corporation.)
Nonoc Nickel Processing Project

(Nonoc Processing Inc. and Philnico)
Amacan Copper Project

(North Davao Mining
Corp.)

Figure 30
Conner Copper-Gold Project
(Cordillera Exploration Corp.)
Gambang Gold Project Tabuk Copper Project

(Oxiana Phils., Inc.) (Wolfland Resources)
LOCATION MAP
OF MINERAL
Camp 3 Gold Project EXPLORATION
(Northern Luzon Mining Corp.) PROJECTS
Nueva Viscaya Gold Project
(Orophilippine Ventures)
LEGEND:
Acoje Chromite - Platinum Project
(Crau Minerals)
- Copper-gold-silver, etc
Dinapigue Nickel Project - Gold-silver

(Platinum Group)
- Chromite
Bataan Gold Project Del Gallego Gold Project
(Balanga Bataan Mineral Exploration/Benguet Corp.) (Phelps Dodge Explo. Corp.)
- Nickel
-Sulfur
Lobo Gold Project - Alumina

(Mindoro Resources Ltd.)
Labo Gold Project

(Indophil Resources, NL)
Leyte Gold Project Hixbar Project
(PNOC-EDC) (Lafayette Mining Corp)
Samar Bauxite Project
(Alumina)
Southern Leyte Gold Project
(Orophilippine Ventures) Leyte Gold Project
Negros Gold Project

(PNOC-EDC)
Surigao Gold Project

(Orophilippine Ventures)
Surigao Copper Gold Project
(Coolabah Mining Corp.)
Pamplona Sulfur Project

(Crew Development Corp.)
Agatha Gold Project

(Mindoro Resources Ltd.)
Manat Gold Project
Mabuhay Gold Project
(All-Acacia Resources, Inc.)
Bayugan Gold Project

(Zamboanga Minerals Corp.)
Alicia Gold Project

(PNOC - EDC)
T’boli Gold Project Batoto Gold Project

Tagpura Copper Project
(Tribal Mining Corp/Philco Mining Co.) (Philco Mining Co.)
(Philco Mining Co.)

2004 Briefing Kit On RP Mining Sector

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Briefing Kit On The

THE PHILIPPINE MINERALS SECTOR

Mines and Geosciences Bureau

Figures Page No.

Figure 1 - Value Of Mineral Production And GDP Of Other Countries…… 2

I. A Situationer in the Philippine Minerals Industry

The Philippine Government believes that a well-developed minerals industry is an option

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 1

B. Status of the Philippine Minerals Industry

Figure 1 - Value of Mineral Production and GDP

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 2

Figure 2 – Comparative Exploration Expenditures (In US $ Million)

1995 1996 1997 1998 1999

Land Distribution In The Philippines

Other Land Areas in the Philippines

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 3

Figure 4 - Areas In The Philippines With Potential For Metallic Mineralization

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 4

Figure 5 - Offshore Areas In The Philippines With Potential For Minerals

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 5

2. The Minerals Industry and the Economy

Figure 6 - Percentage Share of Mining to GNP, 1970-2003

Table 1 – Gross National Product (GNP) And Mining Value

GNP MINING MVA

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 6

Figure 7 - GNP AND MINING VALUE-ADDED GROWTH RATES, 1993-2003

30.0 GNP Growth Rate

2. Mineral Resources Development Projects

As of December 31, 2003, the number of operating mines consists of:

?? 1 large-scale gold mine (Victoria Project of Lepanto);

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 7

The geographical distribution of the major operating metallic mines and

Figure 9 - NO. OF NON-METAL

In the later part of the seventies, investments in mining contracted and

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 8

Figure 10 - ANNUAL AVERAGE Figure 11 - ANNUAL AVERAGE

Figure 12 - ANNUAL AVERAGE Figure 13 - ANNUAL AVERAGE

Eventually, many of the copper mines with substantial exposure to

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 9

With the installation of the new Aquino Government in 1986, investments in

In 1989 and 1990, investments in the industry climbed up to new heights

The combined forces of financial, environmental and technical reasons, in

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 10

A map showing the geographical distribution of operating mines, some

b. Mineral Development Projects On The Pipeline

1. Rapu Rapu Polymetallic Project

A copper-gold-silver-zinc mining and mineral processing project in Rapu Rapu

2. Palawan Nickel Processing Project

A US$180 Million project involving the establishment of a High Pressure Acid

3. Masbate Gold Project

A US$100 Million gold-silver mining and mineral processing project in Aroroy,

4. Nonoc Iron Fines Project

Briefing Kit on the Philippine Minerals Sector (December, 2004 Update) 11

5. Didipio Copper-Gold Project

This is a copper-gold mining and mineral processing project of Climax Arimco

6. King King Copper-Gold Project

A copper-gold-silver project of Benguet Corporation and National Development

Figures 28 shows the geographical distribution of mineral projects on the pipeline.