10 minute read
Atty. Dennis Quintero gives legal view
Atty. Quintero on legal framework, updates on regulations in mining
By Marcelle P. Villegas
What does it take to own and operate a mining company in the Philippines? Mining is one of the industries that heavily revolves around a number of laws and regulations.
On Day 2 of the Philippine Mining Virtual Summit (17 March 2022), Atty Dennis A. Quintero of the Quisumbing Torres Law Office was one of the presenters. Atty Quintero gave a comprehensive report titled “Philippine Mining Legal Framework / Updates on Regulations”.
Known as one of the top lawyers in the Philippines, Atty Quintero is also a Chairman and Trustee of the Philippines-Australia Business Council (PABC). He is a member and active advocate of the Philippine Mineral Reporting Code Committee.
In his presentation, he stressed the importance of the adoption of international best practices and world-class standards in mining. He stated that the Philippines has taken steps to achieve the same by having the following: - World-class mining law - Requirement for free and prior informed consent for indigenous peoples/indigenous cultural communities - Local community approvals prior to commercial operations - Adoption of Philippine Mineral Reporting Code (PMRC) and Towards Sustainable Mining (TSM) - Extractive Industry Transparency Initiative (EITI) - New regulations on environmental safety and biodiversity.
He mentioned that PMRC, TSM, and EITI are being promoted and supported by the Chamber of Mines of the Philippines.
To open and operate a mine site requires different types of tenurial permits/agreements, namely: Exploration Permit, Mineral Production and Sharing Agreement (MPSA) or Financial or Technical Assistance Agreement (FTAA) (for extraction), and the Mineral Processing Permit (for processing activities).
The current legal framework in the Philippine mining industry can be described as: - The state having ownership of natural resources which is the foundation of the Philippine mining legal framework; - The state can undertake the exploration, development, and utilisation of these natural resources or it can enter into agreement with private parties or contractors under revenuesharing or production-sharing arrangements; - This is found in Article XII, Section 2 of the 1987 Constitution; - Private contractors can enter into an MPSA for the exploration, development, and utilisation of natural resources. In an MPSA, Filipino citizens or corporations must own at least 60% of the company that entered into an MPSA; and - The foreign equity limitation is removed for large-scale exploration, development, and utilisation of minerals and petroleum, and other mineral oils.
Atty. Dennis A. Quintero at the Philippine Mining Virtual Summit last 17 March 2022
< Page 20
SILVER 1. TVIRD Phils Balabag (5,155 kgs) 2. AMCI Maco (2,966 kgs) 3. MGP / PGPRC (1,436 kgs)
NICKEL 1. RTNMC (1,028,119 DMT) 2. TMC (451,265 DMT)
COPPER 1. CCC (35,423 DMT) 2. OGPI (15,452 DMT) 3. Philex Padcal (13,966 DMT)
CHROMITE 1. Techiron Resources 2. THPAL (by-product)
IRON 1. Ore Asia Mining Bulacan (41,124 DMT) 2. Strongbuilt Mining Leyte (3,009 DMT)
More industry updates:
~ 16 March 2022 - Marinduque RTC Branch 38, finds Marcopper Mining Corporation accountable for the March 1996 mine spill and awards each of the plaintiffs the amount of P200,000 in temperate damages, P100,000 in moral damages, and another P1 million as exemplary damages. ~ 2 May 2022 – DENR issued Administrative Order (AO) 1712022 which is a moratorium on the acceptance of all new applications for special exploration permit/ government seabed quarry permits.
Company News:
Oceana Gold Philippines Inc. - Probable + Proven Mineral Reserve of 42.2 Mmt of 0.91g/t Au (different cut-offs for OP & UG) - 2022 Q1 production of 29,446 oz Au and 3,500 tons Cu - Purchase Agreement with Bangko Sentral to sell 25% of Au signed last May 05, 2022, and the first
The gold bar was delivered the other week.
B2Gold / MGP - Production for 1Q 2022 is 59,764 oz.
Sagittarius Mines Inc. - SP has issued a Resolution lifting the open-pit ban. - Gov. Tamayo of South Cotabato has VETOED the SP Resolution, though he clarifies that it does not cover projects approved by the national government.
Mt. Labo Exploration and Development Corporation - They are currently resolving all issues, including restructuring brought about by the entry of TVIRD into the project.
Celsius Resources Limited - Drilling is ongoing at their flagship MCB Project (Kalinga) with significant assays obtained in MCB037 - Initial scoping study was recently completed.
Greenstone Resources (Siana Mine) - Ongoing rehabilitation of Tailings Storage Facility and other Joey Nelson Ayson (PMEA President) and Mr. Sukalp Sharma (Asian Digital Leader, GHD Digital)
Photo by Marcelle Villegas, Philippine Resources Journal
Page 25 >
< Page 22
The exception is implemented through (i) the Financial or Technical Assistance Agreement (FTAA) in the minerals sector (similar to the Service Contract in the oil and gas sector). Furthermore, an Exploration Permit (EP) and Mineral Processing Permit (MPP) in the minerals sector can be held by a corporation that is up to 100% foreign-owned.
What are the major requirements to operate a mine? Some programs are required, such as: a work development and utilisation program, an environment protection and enhancement program, safety and health program, social development and management program (SDMP), final mine rehabilitation and commissioning plan, environmental compliance certificate, and declaration of mining project feasibility.
Additionally, a Mechanical / Electrical permit is also required. Other permits needed are the Wastewater Discharge Permit, Ore Transport Permit, and Mineral Ore Export Permit.
Notable Regulatory Update
There are currently some notable regulatory updates that directly affect the mining industry.
First is the Amendment of Section 4 of Executive Order No. 79. E.O. No. 79, series of 2012 prohibited the grant of mineral agreements until a new legislation rationalising existing revenue sharing schemes and mechanisms shall have taken effect. Executive Order No. 130 which was issued on 14 April 2021 lifted the moratorium on mineral agreements. The government may enter into new mineral agreements.
Second is the Lifting of the Ban on the Open Pit Mining, DENR Administrative Order no. 2021-40. The order lifted the ban on open pit method of mining for the extraction of copper, gold, silver and complex ores. While open pit mining is a topic of debate for some environmental groups, it is subjected to the following conditions and strict requirements: a) use of surface mining method shall not pose possible hazard to public health and safety resulting from ground failure or physical deterioration. b) it shall not release hazardous chemicals into the environment, or the proponent has presented proven and acceptable techniques to control the same c) proponent has adequate information to conduct a comprehensive stakeholders’ involvement process to ensure that all interests and concerns are considered, and has social acceptability of its project since the commencement of exploration activities.
Moreover, as a means to further protect the environment, there are orders concerning the Biodiversity Conservation and Protection in Mining Operations.
DENR Administrative Order No. 2022-04 provides guiding principles to be promoted in the enhancement of biodiversity in mining operations. This order entails a precautionary principle and a sustainable use of natural resources. The operation should not lead to the decline of biological diversity.
Tax Reform for Acceleration and Inclusion Act
Republic Act No. 10963 (signed in 2017) doubled the rate of excise tax on minerals, mineral production, and quarry resources from 2% to 4%. Under the new law, there shall be a tax of 4% on all nonmetallic minerals and quarry resources, based on the actual market value of the gross output thereof at the time of removal in the case of those locally extracted or produced.
Corporate Recovery and Tax Incentives for Enterprise Act (CREATE Act)
Under the CREATE Act (R.A. No. 11534).it may be possible for mining operations, in particular those with downstream processing activities, to qualify for incentives under the CREATE Act, subject to details in the new Board of Investments Strategic Investment Priorities Plan (SIPP).
Under CREATE, the Fiscal Incentives Review Board or the investment promotion agencies (e.g. PEZA and BOI) may grant the following incentives to registered business enterprises (RBEs): - Income Tax Holiday of 4-7 years, depending on tier, location and industry priorities - Followed by a Special Corporate Income Tax (SCIT) rate of 5% based on gross income earned or Enhanced Deductions for 10 years - Enhanced Deductions are in addition to the allowable deductions under the Tax Code - Duty exemption and VAT exemption on importations and VAT zero rating on local purchases
Recommendations for Investors in the Mining Sector
At the end of Atty Quintero’s presentation, he enumerated some recommendations for investors in the mining sector. - Conduct appropriate due diligence on exploration / mining projects - Consider pending bills in Congress (e.g. downstream ore processing) - Consider the foreign equity limitations applicable to certain mining projects (i.e. if under an MPSA) - Strengthen stakeholder acceptance and involvement. Build a strong CSR in-house team. Local community acceptance is of paramount importance. - Consider possible investment incentives under the CREATE Act and 2022 SIPP.
For our next article, we shall discuss the briefing of the Board of Investment’s initiatives on copper, iron and steel industries, their economic contributions, industry roadmaps and more. This was a Philippines Australia Business Council webinar last year that was organized by Atty. Quintero with the Board of Investments.
< Page 23
mining infrastructures, access, and in-pit roads - Target resumption of mining operations including gold-silver production: 2nd quarter 2023
TVIRD Balabag - Ongoing ramp-up of mining and milling operations to reach target capacity of 2,000 tons per day - Continuous production of goldsilver dore sold to direct markets in Asia, Australia, and Switzerland
The PMEA Monthly Membership Meeting last June 6 was sponsored by GHD, while the keynote speaker was Mr. Sukalp Sharma. He is GHD’s Asia Digital Leader and Southern Hemisphere Practice Director for Digital Experience in Singapore
(see related story on page XX — Editor)
A week after the PMEA Meeting, Mr. Sharma posted on LinkedIn, “Last week, I had the pleasure of being the keynote speaker at a Philippine Mining and Exploration Association Event in Manila, Philippines. The topic of my address was ‘Contemporary digital innovation and automation case studies in Mining’.”
“I had a great time discussing with a very receptive audience, some recent #GHDDigital case studies focusing on five key themes pertinent to the sector. The key themes included: (i) Increasing ESG and sustainability focus among miners globally is driving a push towards the adoption of digital-led innovation (ii) IoT devices are increasingly being adopted in the Mining sector for operational, safety, and compliance purposes. Sensors generated big-data finds useful applications through Automation / Integration (iii) High-impact automation in Mining does not have to be complex; there are many low complexity, high benefit, high impact use cases with rapid ROIs that can fuel the digital transformation program of a mining organization (iv) The pandemic accelerated the need for being nimble, flexible, and agile to be resilient to disruption. Digital emerged as the clear enabler (v) Increase in the sophistication of Industrial Control Systems (ICS) enabled by the Industrial Internet of Things (IIoT) and convergence of OT and IT systems has made critical infrastructure more vulnerable than ever before.”
“Thank you, PMEA, for being a very gracious host. I look forward to our ongoing association.” #innovation #sustainability #GHDDigital #digitaltransformation #automation #miningindustry #PMEA
We pioneer motion
Smart Mining
CONCEPT Series Lubricators
With Schaeffler CONCEPT series automatic lubricators, it is possible to supply precise amount of oil or grease, at the right interval, to your mining machineries and equipment, thereby avoiding consequential damage and reducing the risk of application failures. At Schaeffler, we are committed in finding the best solution for your business. Call us at +63 917 805 6589 to find out more.
