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Recent changes in the Philippine mining regulatory framework

In an effort to increase the government's share in the revenues derived from the use and development of the country's mineral resources, the President of the Republic of the Philippines issued Executive Order No 79 on July 6 2012. Section 4 of the Order imposes a moratorium on the execution of new mineral agreements (such as mineral production sharing agreements) 'until legislation rationalising existing revenue sharing schemes and mechanisms shall have taken effect.' The Department of Environment and Natural Resources will not accept nor approve applications for mineral agreements until the moratorium is lifted by the passage of a statute rationalising the current fiscal regime of mineral agreements. Section 4, however, excludes the issuance of exploration permits, financial or technical assistance agreements, mineral processing permits, and quarry permits from the coverage of the moratorium.

At present, mining contractors are generally subject to a two percent excise tax based on the actual market value of the gross output of the mineral resources at the time of removal. Legislators are proposing to increase the excise tax rate to at least five percent.

Section 4 of the Order likewise relegates the entitlement of an exploration permit holder (whose Declaration of Mining Project Feasibility has been approved by the Mines and Geosciences Bureau) to a mineral agreement from an 'exclusive right' into a 'right of first option'. While the term is not defined in the Order, a right of first option connotes a right that is inferior to an exclusive right. As opposed to an exclusive right, a right of first option implies that third parties will have similar rights with respect to the area covered by the exploration permit but that the permit holder is given the first option to exercise or enjoy such right.

Aaron Roi B Riturban

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