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DENR Administrative Order No. 63, S. 1991 (December 12, 1991)

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0% found this document useful (0 votes)
178 views10 pages

DENR Administrative Order No. 63, S. 1991 (December 12, 1991)

Uploaded by

Nel
Copyright
© © All Rights Reserved
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December 12, 1991

DENR ADMINISTRATIVE ORDER NO. 63-91

SUBJECT : Guidelines for the Acceptance, Consideration and


Evaluation of Financial or Technical Assistance Agreement
Proposals

To encourage foreign investors in the mining industry and in line with


the policy of the Government in harnessing the country's mineral resources
to accelerate economic recovery and development pursuant to Executive
Order No. 279 of 25 July 1987, the following rules and regulations governing
the acceptance, consideration and evaluation of the financial or technical
assistance agreement for large scale exploration, development and
utilization of mineral resources are hereby promulgated:
SECTION 1. Definition of Terms . — As used in and for the purposes
of this Order, the following words and terms, whether in singular or plural,
shall have the following respective meanings:
1.a Contract Area means the area originally awarded under
FTAA without reference to region or province.
1.b Contractor means any Filipino or foreign owned
corporation to whom a Financial or Technical Assistance
Agreement is awarded.
1.c Date of Commencement of Commercial Production shall
mean the first day of the calendar quarter following that
quarter in which production equals fifteen (15%) of the
Project's initial annual design capacity.
1.d Financial or Technical Assistance Agreement (FTAA)
means an agreement or contract which the Government
enters into with any Filipino or foreign-owned corporation
for the financial or technical assistance for large scale
exploration, development and utilization of mineral
resources.
1.e Foreign-Owned Corporation means any corporation,
partnership, association or cooperative duly registered in
accordance with Philippine laws in which more than forty
percent (40%) of the capital is owned by non-Filipino
citizens.
1.f Large Scale Mining means exploration, development and
utilization of mineral resources involving a committed
capital investment of at least US$ 50 million in a single
mining unit project.
1.g Meridional Block means an area of one-half (1/2) minute
of latitude by one-half (1/2) minute of longitude.
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1.h Mining Operations means mineral exploration,
development, production and/or all other activities
necessary to discover, develop an extract minerals.
1.i Mining Contract shall refer to mineral production sharing
agreement, co-production, joint venture or other similar
agreements.
1.j Pre-operating Expenses shall include all costs incurred by
the holder of the FTAA and any of its Related Corporations
on the Contract Area applied for under the FTAA up to the
Date of Commencement of Commercial Production.
Such costs shall include all activities conducted toward the
discovery, location and delineation of commercial ore
bodies within the Contract Area including, but without
limitation to:
(1) payments made to claimowners and landowners;
(ii) all exploration programs;
(iii) the acquisition, maintenance and administration of
any mining or exploration tenements;
(iv) the establishment and administration of field
offices;
(v) the cost of administering any program of work
together with any other work reasonably calculated to
lead to a decision to mine together with all costs
incurred in financing and insuring construction of the
mine;
(vi) feasibility studies;
(vii) all costs of constructing and developing the mine;
and
(viii) all costs incurred at the mine towards the
extraction and production of minerals from the
Contract Area until the date of Commencement of
Commercial Production less:
(a) any income received in payment for
production until the Date of Commencement of
Commercial Production; and
(b) any other credits offsetting the above costs.
1.k Project Area means an area remaining after
relinquishment which shall not be more than 5% of the
contract area.
1.l Related Corporation shall mean a body corporate or other
entity in which a shareholder in the FTAA Contractor owns
an interest in excess of 40%.
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1.m Single Mining Unit Project means mining operations per
project area.
SECTION 2. Fees — Upon filing of the FTAA proposal, the proponent
shall pay to the Mines and Geo-Sciences Bureau US $500 payable in
Philippine currency at the exchange rate prevailing at the time of application
for filing fee, processing fee and per P.D. 1856, as amended. Upon approval
of the FTAA, the Contractor shall pay to the Mines and Geo-Sciences Bureau
the following:
a. Occupation Fee
P10.00 per hectare/year for non-reservation area
P100 per hectare/year for reservation area
b. Regulatory Fee for Exploration
For onshore P10.00 per hectare/year for the first year of
exploration plus P5.00 yearly increment for the succeeding years
For offshore P50.00 per hectare/year
c. Registration Fee - P100.00 / FTAA
d. P.D. 1856, as amended, for c - P10.00
SECTION 3. Qualifications of Financial or Technical Assistance
Agreement Applicant — Any applicant, whether Filipino or foreign-owned
corporation, may enter into FTAA provided that it has the financial or
technical capability to undertake large scale mining as defined herein.
Without in any way limiting the tenor of and flexibility accorded by the
above provision, the capabilities of the applicant may be substantiated, inter
alia by the following:
3.a Financial Capability of FTAA Applicant — To ensure compliance
with its expenditures requirements and other obligations during the
Exploration Period, the FTAA applicant shall be required to post a financial
guaranty bond in favor of the Government for the amount equivalent to the
expenditure obligations of the applicant for any year.
The FTAA applicant shall make a firm commitment of at least fifty
million US dollars (US $50,000,000), or its equivalent in Philippine currency
in case of a Filipino applicant, that will be invested in the contract area.
After exploration and feasibility studies, but prior to construction and
development, an FTAA applicant, to ensure fulfillment of its US$50 million
commitment, shall be required to submit documentary evidence from an
internationally recognized offshore financial institution confirming that
contractor has available, sufficient and accessible fun for the development of
the mine for a capital investment in a single mining unit of US$50 million
less all exploration costs.
3.b Technical Competence of FTAA Applicant — Proof of technical
competence of the FTAA applicant shall be submitted showing its track
record in mineral resource exploration, development and utilization,
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technology to be introduced; and names and curriculum vitae of technical
men to undertake the operation.
SECTION 4. Documents to be Submitted — The FTAA applicant
shall submit its proposal accompanied by the following:
4.a Upon filing of the proposal —
4.a.1 Letter of Intent (LOI) to enter into FTAA;
4.a.2 The documents pertaining to the juridical
personality of the applicant such as Articles of
Incorporation. By-Laws, and SEC Registration papers;
4.a.3 All information data, and, documents referred to
or reasonably connected with the provisions of
Sections 3, 3.a and 3.b hereof, as may promote and
facilitate meaningful appreciation and evaluation of
the proposal;
4.a.4 Certified copies, if any, of mining exploration
contract, operating contract, assignment, permit or
similar agreement it has entered into with any local or
foreign juridical and natural persons; and
4.a.5 Financial statement of the mother company.
4.b Upon approval of FTAA — financial guarantee bond as
defined in Sec. 3a.
4.c After completion of feasibility study:
4.c.1 Technical description of the proposed Project
Area, its status as known to the applicant;
4.c.2 Mining operations to be undertaken and the
technology to be used and developed therein; and
4.c.3 Contributions to the economic and general welfare
of the country that shall be feasibly generated by the
proposed venture.
SECTION 5. Available Areas —
The following areas are available for Financial or Technical Assistance
Agreement:
5.a Lands of the public domain and alienable and disposable
lands not covered by valid and existing mining leases,
permits, licenses, applications and declarations of location.
5.b Lands covered by valid and subsisting prospecting
permits, exploration permits mining claims. mining leases
and similar agreements provided that the holders
consented thereto in writing.
5.c Government reservations provided that the agency
concerned gives its clearance.

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5.d Offshore areas including the Exclusive Economic Zone.
5.e Private lands subject to P.D. 512.
5.f Any combination of the above (5.a to 5.e)
SECTION 6. Maximum Contract and Project Areas Allowed —
The maximum contact area as shown hereunder, that may be granted
under the FTAA for exploration, development and utilization shall be subject
to relinquishment to the extent of ninety five percent (95%) of the contract
area after five (5) years of exploration, provided, that the minimum
relinquishment per year shall be ten percent (10%) of the contract area and
that the maximum retained area shall be approximately 62 meridional
blocks or 5,000 hectares and 800 meridional blocks or 65,000 hectares for
onshore and offshore respectively.
The maximum contract area shall be:
6.a. 1,235 meridional blocks or 100,000 hectares onshore
6.b 16,000 meridional blocks or 1,296,000 hectares offshore
reckoned from the 100 meters from the shore waterlines at
mean low tide extending seaward.
6.c Combination of a & b provided that it shall not exceed the
maximum limits for onshore and offshore areas.
SECTION 7. Duration of FTAA
The duration of FTAA shall be for a maximum of 25 years renewable for
another period not exceeding 25 years. The activities of each phase of
mining operations must be completed within the following periods,
respectively;
Exploration & Feasibility Study - 5 years from date of approval of
FTAA
Construction & Development and Production/Utilization -
remaining years of FTAA contract.
SECTION 8. Acceptance and Evaluation of FTAA
All FTAA proposals shall be filed with and accepted by the Central
Office Technical Secretariat (MGB) after payment of the requisite fees to the
Mines and Geo-Sciences Bureau, copy furnished the Regional Office
concerned within 72 hours. The Regional Office shall verify the area and
declare the availability of the area for FTAA and shall submit its
recommendations within thirty (30) days from receipt. In the event that
there are two or more applicants over the same area, priority shall be given
to the applicant who first filed his application. In any case, the
Undersecretaries for Planning, Policy and natural Resources Management;
Legal Services, Legislative, Liaison and Management of FASPO; Field
Operations and Environment and Research, or its equivalent, shall be given
ten (10) days from receipt of FTAA proposal within which to submit their
comments/recommendations and the Regional Office, in the preparation of
its recommendations shall consider the financial and technical capabilities of
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the applicant, in addition to the proposed Government share. Within five (5)
working days from receipt of said recommendations, the Technical
Secretariat shall consolidate all comments and recommendations thus
received and shall forward the same to the members of the FTAA Negotiating
Panel for evaluation at least within thirty (30) working days.
SECTION 9. Negotiating of FTAA -
The FTAA shall be subject to the approval of the President upon
recommendation of the Negotiating Panel, created by virtue of Presidential
Administrative Order No. 68 Series of 1988, to be composed of the following:
1. The Secretary of Environment and — Chairman
Natural Resources or his
Representative;

2. The Secretary of Socio-Economic — Vice Chairman


Planning and Director-General,
National Economic and
Development Authority or his
Representative

3. The Secretary of Finance or his — Member


Representative

4. The Secretary of Trade and


Industry or his Representative — Member

5. The Governor, Central Bank of


the Philippines or his
Representative — Member

6. The Chairman, Board of


Investments or his Representative; — Member

7. The Director, Mines and


Geo-Sciences Bureau — Member
In evaluating the proposed FTAA, the Panel shall take into
consideration the real contributions to the economic growth and general
welfare of the country that will be realized, as well as the development of
local scientific and technical resources.
The Panel upon being satisfied of the terms and conditions of the
proposed FTAA and with the Contractor's compliance with all the
requirements, shall recommend its approval to the President. Should the
Panel, however, find some of the terms and conditions unacceptable, it shall
calendar the proposed FTAA for negotiation and shall make the
corresponding notification to the proponent. If after the negotiation, terms
and conditions, acceptable to the Panel, have been incorporated in the
proposed FTAA, the Panel shall then, forthwith recommend to the President
its approval.
SECTION 10. Obligations of the Contractor
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a. A performance guaranty shall be posted in favor of the
Government before the signing of the FTAA which shall be
in any foreign currency negotiable with the Central Bank of
the Philippines for foreign contractors. Unless otherwise
specified by the Secretary, the initial amount of the
guaranty shall be equal to the first year financial
commitment of the Contractor. Subsequent thereto, the
amount of annual guaranty may be increased or decreased
depending upon the Contractor's performance of its
financial and work commitments.
b. After the Exploration period, the Contractor shall relinquish
to the Government any portion of the Project Area which
shall not be necessary for Mining Operations and not
covered by any Declaration of Mining Feasibility.
c. Perform its activities within the periods expressed in this
Agreement. Plans and Work Programs, save as may be
excused by force majeure.
d. The Contractor shall give preference to products and
services produced and offered in the Philippines of
comparative quality. In particular, the Contractor shall give
preference to Filipino construction enterprises and use
buildings which can be constructed by using materials and
skill available in the Philippines, employ Filipino sub-
contractors for road construction and transportation, and
purchase Philippine household equipment, furniture and
food.
e. The Contractor shall, to the extent feasible and acceptable
in view of the rates and conditions available, maximize the
use of Filipino vessels and other means of transport
available in the Philippines.
f. The Contractor shall keep accurate technical records about
the operations as well as financial and marketing accounts
and make them available to Government representatives
authorized by the Secretary for purposes of assessing
performance and compliance of the Contractor with the
terms of this Agreement. Authorized representatives of
other Government agencies may also have access to such
accounts in accordance with existing laws, rules an
regulations.
g. Pay taxes or obligations in accordance with existing laws,
rules and regulations.
h. Conform to laws and regulations regarding among others,
labor, safety, demarcation of the Project Area, and non-
interference with the rights of other mining operators.
i. Recognize and respect the rights, customs and traditions of
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indigenous tribal communities over their ancestral lands.
j. Contribute to national development by helping develop the
host and neighboring communities of the Project Area, local
geo-sciences and mining technology, and mitigating
environmental effects of mining operations.
k. Undertake restoration and/or protection of the
environment in compliance with the requirements of
Environmental Compliance Certificate (ECC).
l. Provide a provision on Consultation and Arbitration with
respect to interpretation and implementation of the
agreement.
SECTION 11. Option to Convert into MPSA
The contractor has the option to convert the FTAA to MPSA at any
stage of exploration if the economic viability of the ores located in the
contract area is found to be inadequate to justify large scale mining
operations. As such, the Contractor shall notify the Government in writing
thirty (30) days of its intention to convert the FTAA to MPSA. All revisions to
the FTAA, required by its conversion to MPSA, shall be submitted to the
Government within sixty (60) days from filing of the applicant's intention to
convert to MPSA.
The contractor shall be given a period of one (1) year within which to
satisfy the equity requirement of sixty (60%) Filipino capital for MPSA,
subject to an extension of another one (1) year as may be approved by the
Secretary taking into consideration the economic factors. Failure to convert
the FTAA into MPSA within the prescribed period shall cause automatic
forfeiture of the Contractor's right to such conversion and the area subject of
such FTAA shall be disposed of in accordance with Section 12 hereof.
SECTION 12. Area Relinquishment
Where the Contractor originally derived its rights to the Contract Area
from then claimowners or mineral rights owners, such part of the Project
Area relinquished pursuant to the provision of Sections 6 and 11 hereof, shall
revert to the claimowners or mineral right owners. Said claimowners or
mineral rights shall have preferential rights over the area, provided, that
within thirty (30) days from notification of relinquishment by the FTAA
Contractor, the former shall signify its intention to enter into a mining
contract with the Government. And, provided, further, that all documents
necessary for application for a specific mining contract shall be submitted
within sixty (60) days from receipt of such intention.
SECTION 13. Revenue Sharing
a. The net revenue shall be shared by the Government and
Contractor on a 60-40 basis, of which 60% of the net will be
the Government take and the remaining 40% will be for the
Contractor. The collection of government's share shall
commence after the Contractor has fully recovered its pre-
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operating expenses.
Net revenue means gross revenue derived from operations
less allowable deductions which are attributed to
exploration, development and actual commercial
production. Commercial production shall include mining,
utilization/processing, marketing expenses and depreciation
of properties directly used in the operations.
b. In each year, contractor may recover from the gross
proceeds resulting from the sale minerals produced under
the FTAA an amount to all operating expenses.
SECTION 14. Divestment Period
After ten (10) years from the Contractor's recovery of pre-operating
expenses, it shall be given a period of one (1) year to divest its equity to at
least 60% Filipino equity subject to an extension of another one (1) year as
may be approved by the Secretary taking into consideration the economic
factors. Failure to meet the 60-40 equity requirement within the prescribed
period shall cause the automatic cancellation of the FTAA and the area
subject of such FTAA shall be disposed of in accordance with Section 12
hereof.
SECTION 15. Revocation and Termination of FTAA
The FTAA may be terminated for any of the following reasons:
a. Any falsehood or omission of facts made in support of the
proposal.
b. Default or substantial breach of the terms and conditions
of the agreement by the Contractor.
c. By mutual consent of the parties.
d. Upon written notice to the Government if in the judgment
of the Contractor the mining project is no longer
economically feasible after the Contractor has exerted
reasonable diligence to remedy the cause/s.
Upon revocation/termination of the FTAA and liquidation of the
Contractor's obligations and liabilities, the financial guaranty/performance
guaranty bond shall be released.
SECTION 16. Disposal of Property
All materials, equipment, plant and other installations erected or
placed on the project area by the Contractor shall remain the property of the
Contractor and upon the termination of the Agreement, the Contractor shall
have the right to remove and export such materials, equipment, plant and
other installations except buildings, bridges, warehouses, and other social
infrastructures, subject to existing rules and regulations. All materials,
equipment, plant and other installations not removed within twelve (12)
months from the termination of the Agreement shall belong to the
Government.
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SECTION 17. Adoption of DENR A.O. 57, As Amended, and Other
Related Orders
The provisions of DENR A.O. 57, as amended, and all administrative
orders, rules and regulations related thereto, which are inconsistent with
provisions of these guidelines shall be adopted.
SECTION 18. Effectivity
This DENR Order shall take effect after fifteen (15) days from
publication in at least two (2) newspapers of general circulation.

(SGD.) FULGENCIO S. FACTORAN, JR.


Secretary

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