Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 5253

Introduced by HONORABLE STELLA LUZ A. QUIMBO

EXPLANATORY NOTE

Executive Order No. 79 dated 6 July 2012 requires a new legislation rationalizing
existing sharing schemes on mining revenues. This is pursuant to the recommendation of the
Climate Change Adaptation and Mitigation and Economic Development Clusters in a Joint
Resolution dated 16 March 2012 setting the direction and laying the foundation for the
implementation of Responsible Mining Policies, foremost among which is to improve
environmental mining standards and increase revenues to promote sustainable economic
development and social growth, both at the national and local levels.

This Bill proposes a fiscal regime and revenue sharing arrangement between the
Government and the mining Contractor for large-scale metallic mineral mining operations,
wherein the Government Share shall be ten percent (10%) of Gross Revenue or fifty-five
percent (55%) of the Adjusted Net Mining Revenue (ANMR), whichever is higher. In the event
that the ANMR Margin exceeds fifty percent (50%) due to increase in metal prices or other
factors, the Government, as the owner of the mineral, shall get fifty-five percent (55%) of the
Threshold ANMR plus sixty percent (60%) on the excess ANMR. Adjusted Net Mining
Revenue is arrived at after deducting from Gross Revenue the allowable deductible expenses.

Payment to the Government shall be in lieu of all national and local taxes including
income tax, royalty for indigenous cultural communities (ICC), duties on imported specialized
capital mining equipment, fees for mayors and/or business permits and other fees and charges
imposed by the host LGUs. However, the Contractor shall pay real property tax, value added
tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive
income, donor's tax, environmental fee, Securities and Exchange Commission (SEC) fee,
water usage fee, and administrative and judicial cost and penalty.

The Government Share shall be allocated as follows: sixty percent (60%) to the
National Government and forty percent (40%) to the Local Government Units. If the contract
area is in an ancestral domain, the royalties for the ICs shall be taken from the Goverment
Share. Thereafter, the Net Government Share shall be allocated to the NG and the LGUs at
the ratio stated earlier.

The Bill also prescribes that mining areas that will be covered shall be declared as
Mining Industry Zones which will be administered by the Philippine Mining Development
Corporation. The PMDC shall provide assistance to the Contractor in having its business
registered with the appropriate government agencies and in applying with the concemed
entities for the provision of services needed in the operation of the business. On the other


hand, the Mines and Geosciences Bureau (MGB) of the Department of Environment and
Natural Resources (DENR) shall continue to exercise its functions as mandated by existing
laws unless otherwise amended by the Bill

A salient feature of the Bill provides for more speedy remittances of the LGU shares of
ten days from the end of each quarter.

The Bill shall govern and apply to new Mineral Agreements (MAs) and Financial or
Technical Assistance Agreements (FTAAs) covering large-scale metallic mineral mining
operations that are entered into upon the effectivity of the Act. It shall also cover existing MAS
and FTAAs where such agreements provide that any terms and conditions resulting from
repeal or amendment of any existing laws or regulations or from the enactment of a law,
regulation or administrative order shall be considered part of said agreements. It shall also
govern the renewal and renegotiation of existing MAs or FTAAS.

This Bill was previously filed by Former Rep. “Miro” S. Quimbo in the Third Reading
during the 17th Congress. In light of the foregoing, the urgent passage of this Bill is earnestly
sought.

STELLA/LUZ A. QUIMBO
Representative
2nd District, Marikina City


Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

EIGHTEENTH CONGRESS
First Regular Session

52s
HOUSE BILL NO.

Introduced by HONORABLE STELLA LUZ A. QUIMBO.

AN ACT ESTABLISHING THE FISCAL REGIME AND REVENUE SHARING
ARRANGEMENT FOR LARGE-SCALE METALLIC MINING, AND FOR OTHER
PURPOSES

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

CHAPTER |
GENERAL PROVISIONS

SECTION 1. Title. - This Act shall be known as the “Philippine Fiscal Regime and Revenue
Sharing Arrangement for Large-scale Metallic Mining Act of 2019”.

SECTION 2. Declaration of Policy. —

a. All mineral resources in public and private lands within the territory and exclusive
economic zone of the Republic of the Philippines are owned by the State. The
exploration, extraction and utilization of these resources shall be allowed based on real
contributions to the economic growth of the country, and subject to the exercise by the
State of its regulatory powers to promote and protect the general welfare of the country.

b. The State shall effectively safeguard the environment and protect the rights of affected
communities.

c. The State shall get a fair and equitable share of the revenues and economic benefits
derived from the mineral resources. Any economic rent arising from such exploration,
extraction and utilization belongs to the State.

d. The State shall establish a fiscal regime for the large-scale exploration, development
and commercial utilization of mineral resources in the country that shall apply to the
Contractor.

e. The State shall promote investments in mining areas allowed by the Government
consistent with the revenue sharing arrangements under this Act.

f. The State shall encourage mining investments to develop value-adding and
downstream industries pursuant to the development program of the country.

SECTION 3. Definition of Terms. - As used herein, the following terms shall be defined as
follows:


.. “Adjusted Net Mining Revenue” means gross revenue less allowable costs that include
production costs as defined in item (t) hereof and the actual general and administrative
costs, but not to exceed ten percent (10%) of the direct mining, milling and processing
costs. Other allowable costs may be determined in the Implementing Rules and
Regulations of this Act. Pre-operating expenses may be allowed as deduction provided
that the amount shall be deducted within a five-year period from start of commercial
operation. The interest expenses, and bank and financial charges shall not be allowed
as deductible expenses from the gross revenue.

. “Adjusted Net Mining Revenue Margin” means total adjusted net margin revenue

divided by gross revenue.
“Administrative and Judicial Costs” means fees, charges, and or penalties imposed by
administrative agencies in the exercise of their regular administrative functions and or
quasi-judicial functions, and those imposed by the judiciary under the relevant laws
and rules and regulations.

.. “Contract Area” means the land or body of water delineated under a mineral agreement
or financial or technical assistance agreement properly defined by longitude and
latitude.

“Contractor” means a qualified person, acting alone or in consortium, who is a party to.
a mineral agreement or to a financial or technical assistance agreement.
“Co-production Agreement’ means an agreement between the Government and the
Contractor wherein the Government shall provide inputs to the mining operations other
than the mineral source.

|. “Direct Milling and Processing Costs” means expenditures and expenses directly
incurred in the mechanical and physical processing and/or chemical separation of the
ore from the waste to produce marketable mineral products.

|. “Direct Mining Costs" means expenditures and expenses directly incurred in all

activities preparatory to and in the actual extraction of the ore from the earth and
transporting it to the mill plant for mineral processing.

“Excess Adjusted Net Mining Revenue” means the adjusted net mining revenue that
is in excess of the threshold adjusted net mining revenue or the difference between
the total adjusted net mining revenue and the threshold adjusted net mining revenue.
“Final Mining Area’ means the contract area or portion(s) thereof identified by the
Contractor as defined and delineated in a survey plan duly approved by the Director /
Regional Director concemed of the Mines and Geosciences Bureau for purposes of
large-scale mining, development and utilization of mineral resources, and sites for
support facilities.

“Financial or Technical Assistance Agreement” means a contract involving financial or
technical assistance for large-scale exploration, development and utilization of mineral
resources.

“Joint-venture Agreement” means an agreement where a joint-venture company is
organized by the Government and the Contractor with both parties having equity
shares. Aside from earnings in equity, the Government shall be entitled to a share in
the gross output.

|. “Large scale metallic mining” means mining activities involving metallic minerals and

which are not classified as small-scale mining.

._ "Metallic Mineral’ means a mineral having a brilliant appearance, quite opaque to light,
usually giving a black or very black streak, and from which a metallic
element/component can be extracted/utilized for profit.

“Mineral Agreement” means a means a contract between the Goverment and
Contractor, involving mineral production-sharing agreement, co-production
agreement, or joint-venture agreement.

. “Mineral Processing” means the milling, beneficiation, leaching, smelting, cyanidation,
calcinations, upgrading or by similar means, of ores, minerals, rocks, mill tailings, mine
waste and other metallurgical by-products to convert the same into marketable
products.



q. “Mineral Production-sharing Agreement” means an agreement where the Government
grants to the Contractor the exclusive right to conduct mining operations within a
contract area and shares in the revenue pursuant to Section 7 of this Act. The
Contractor shall provide the financing, technology, management and personnel
necessary for the implementation of this agreement.

r. “Mineral Products" means materials derived from ores, minerals and/or rocks and
prepared into a marketable state by mineral processing.

's. “Mining Industry Zone” means a final mining area as defined in Section 3 (j) of this Act,
endorsed by the Secretary of the Department of Environment and Natural Resources
for declaration as such and whose metes and bounds are fixed and delimited by a
Presidential Proclamation.

t. "Production Cost” means the direct mining, milling and processing costs, and other
allowable costs which are necessary and directly related to mining operations.

u. “Small-scale mining” means mining activities which rely heavily on manual labor using
simple implements and methods and do not use explosives or heavy mining
equipment.

v. “Threshold Adjusted Net Mining Revenue” means fifty percent (50%) of the gross
revenue.

The definitions of the terms under Section 3 (e), (f), (K), (I), (0), and (q), and under
Section 3 (h), (n), (p), and (r) were lifted from Republic Act No. 7942, known as the “Philippine
Mining Act of 1995” and its Implementing Rules and Regulations, respectively, as such the
meaning ascribed thereto under RA 7942 and its IRR shall be maintained.

CHAPTER Il
‘SCOPE OF APPLICATION

SECTION 4. Scope. — This Act shall govern and apply to new Mineral Agreements (MAs)
and Financial or Technical Assistance Agreements (FTAAs) covering large-scale metallic
mineral mining operations that are entered into upon the effectivity of this Act. This shall also
cover existing MAs and FTAAs where such agreements provide that any terms and
conditions resulting from repeal or amendment of any existing laws or regulations or from the
enactment of a law, regulation or administrative order shall be considered a part of said
agreements.

The renewal and renegotiation of existing MAs and FTAAs shall also be governed by
this Act.

CHAPTER III
DECLARATION OF MINING INDUSTRY ZONE

SECTION 5. Mining Industry Zones. — All mining areas governed by this Act shall be
declared by the President as Mining Industry Zones (MIZs) through a Presidential
Proclamation upon endorsement by the Secretary of the Department of Environment and
Natural Resources (DENR). For this purpose, only the mining areas approved and certified
by the Mines and Geosciences Bureau (MGB) may be endorsed by the DENR Secretary to
the President.

The MGB approval and certification process shall pass through consultation with the
concerned Local Government Units (LGUs) and the Indigenous Cultural Communities
(ICCs), if the mining area is within an ancestral domain. This consultation process shall
include an LGU endorsement for the establishment of the mining area as MIZ. In
consideration of the payment to LGU of 40% of the total government share referred to in
Section 12 of this Act, the LGU endorsement shall include a waiver of its power to regulate
the mining business operations through issuance of business permits and other license


requirements imposed by the LGU pursuant to the Local Government Code of 1991, as
amended.

The establishment of the MIZ must conform to the following criteria:

a. The proposed area is a “Go Zone” as identified by an appropriate government
agency or under any applicable law;

b. The final mining area shall be endorsed by the Secretary of the Department
of Environment and Natural Resources (DENR) to the President;

c. The final mining area must have a significant advantage to the economy and
its potential profitability can be established; and

d. Other criteria as may be determined by the Mining Industry Coordinating
Council (MICC) or an inter-agency Group that may be created, tasked or
assigned by the President.

No mining operations can be undertaken in any mining area without the LGU/ICC
endorsement and the Presidential Proclamation of an MIZ.

SECTION 6. Relationship Between the LGU and the MIZ Administration. — Once an MIZ
is established, the administration of all mining activities within the zone shall exclusively
pertain to the MIZ Administrator referred to in Section 15 of this Act. Any local issuances and/or
directions that may be issued by the host LGU, which may affect or relate to mining operations
and other incidental activities thereto, shall be consistent with and shall conform to the
provisions of this Act and to the laws, regulations, policies and decisions taken by the National
Government.

CHAPTER IV
FISCAL REGIME AND REVENUE SHARING ARRANGEMENT

SECTION 7. Fiscal Regime and Revenue Sharing Arrangement for MAs and FTAAs. -
For every final mining area, the Government Share that shall be paid by the Contractor shall
be whichever is higher of the following:

a. Ten percent (10%) of Gross Revenue; or

b. Fifty-five percent (55%) of Adjusted Net Mining Revenue; Provided, that in the event
that the ANMR Margin exceeds fifty percent (50%) due to increase in metal prices or
other factors, the Government, as the owner of the mineral, shall get fifty-five percent
(65%) of the Threshold ANMR, as defined in this Act, plus sixty percent (60%) of the
Excess ANMR.

The payment of Government Share shall be in lieu of all national and local taxes including
corporate income tax, royalty for the ICs, duties on imported specialized capital mining
equipment, fees for mayor's and/or business permits, and other fees and charges imposed by
the host LGUs pursuant to Local Government Code of 1991, as amended; Provided that the
Contractor shall still be liable for the payment of real property tax, value added tax, capital
gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive income,
donor's tax, environmental fee, Securities and Exchange Commission (SEC) fee, water usage
fee, and administrative and judicial cost and penalty.

The list of exceptions shall be reviewed annually, or as often as may be necessary;
provided, however, that none of the exceptions indicated herein shall be delisted.

For purposes of this section, each final mining area is treated as a separate taxable entity.
If the Contractor has more than one final mining area in a contract area or is a party to more
than one mineral agreement, each final mining area shall be treated as a separate taxable
entity.


SECTION 8. Social and Environmental Funds. — \n accordance with existing laws, rules and
regulations, the Contractor shall continue to allocate and spend funds for the following:

a. Social development and management program (SDMP) and community development
program (CDP) for the host communities;
b. Environmental Protection and Enhancement Program (EPEP); and
c. Contingent Liability and Rehabilitation Fund (CLRF) which consists of the following:
i. Mine Rehabilitation Fund (MRF which further consists of the Monitoring Trust
Fund and Rehabilitation Cash Fund);
Mine Wastes and Tailings (MWT) Fees; and
Final Mine Rehabilitation and Decommissioning Fund (FMRDF).

In addition, the Contractor shall allocate funds to cover costs for the followin,
a. Restoration/rehabilitation of areas and communities affected by disasters arising from
mining operations; and
b. Perpetual liability insurance to cover damages in the mining area where the Contractor
previously conducted mining operations, as well as in identified impact areas.

SECTION 9. Recoverable Pre-operating Expenses. — Pre-operating Expenses allowed for
recovery under this Act shall be limited to actual expenses and capital expenditures relating
to the following which shall have been incurred before the commencement of commercial
operation:

a. Cost of acquisition, maintenance and administration of the contract area;

b. Cost of exploration, evaluation of explored areas, feasibility and environmental studies
and rehabilitation of areas affected during the pre-operating period;

c. Cost of meaningful CSR projects and activities undertaken for the affected
communities within the contract area;

d. Payments to landowners, surface rights holders, claim owners and Indigenous

Peoples or Indigenous Cultural Communities, if any;

.._ Training expenses for personnel;

Consultancy fees incurred for work directly related to the mining operations and
consistent with the Contractor's approved work program;

g. Cost of the establishment and administration of field and regional offices including
administrative overheads incurred within the Philippines which are properly allocable
to the mining operations and directly related to the performance of the Contractor's
obligations;

h. Costs of constructing and developing the mine which include machinery and
equipment and real property; and

i. General and administrative expenses actually incurred by the Contractor to support
the exploration and the construction and development of the mine.

=o

The actual costs of (c), (f) and (i) shall be allowed to be deducted but their aggregate
amount shall not exceed five percent (5%) of the aggregate cost of (b) and (h).

Payments made to Government, both national and local, shall not be considered for
recovery. All Pre-Operating Expenses reported for recovery shall be subject to verification by
the MGB and/or PMDC or their designated representative or auditor.

SECTION 10. Fiscal Regime for Co-production and Joint-venture Agreements. - The
share of the Government in Co-production and Joint-venture agreements shall be negotiated
by the Government and the Contractor provided that the Government Share shall not be less
than the share for MAs and FTAAs as prescribed in Section 7 of this Act.


SECTION 11. Mining Contract. ~ The fiscal regime and revenue sharing arrangement
provided herein and the applicable terms and conditions provided under existing laws shall be
embodied in the MAs and FTAs that shall be prepared by the MGB.

CHAPTER V
ALLOCATION OF GOVERNMENT SHARE

SECTION 12. Allocation. — The Government Share shall be allocated as follows:
a. National Government (NG): sixty percent (60%)
b. Local Government Units (LGUs) hosting the MIZ: forty percent (40%).

If the contract area is in an ancestral land/domain, the royalty for the ICC shall be taken
from the Government Share. Thereafter, the Net Government Share shall be allocated to the
National Government (NG) and the LGUs at the above stated ratio.

SECTION 13. Payment and Distribution of Government Share. — The Government Share
shall be remitted and paid quarterly by the Contractor to the Government.

The ICC share shall be directly remitted and paid by the Contractor to the ICC within
five (5) days from the end of each quarter.

Within five (5) days from the end of each quarter, the Contractor shall pay the
Government Share, net of the ICC share, if applicable, through the Electronic Filing and
Payment System (EFPS) facility of the BIR or its accredited bank which shall credit such
payment to the Bureau of Treasury (BTr) on the following banking day from payment. The BTr,
within five (5) banking days from receipt thereof, shall deposit the forty percent (40%) LGU
share to the account of the LGUs through their respective GFs or their authorized agent bank.

The distribution of the LGU shares and the royalties allocated to the ICCs shall be
based on existing laws. The utilization of these shares shall be covered by Section 18 of this
Act.

The Government Share shall be recorded by the BIR as follows:
a. Fifty percent (50%) as Corporate Income Tax; and
b. Fifty percent (50%) as Royalty Tax.

SECTION 14. Environmental / Rehabilitation Fund. — An Environmental / Rehabilitation
Fund of one-half of one percent (1/2 of 1%) from the NG share to be treated as a Trust Fund
shall be established for government environmental mining programs. The specific activities
and projects under these programs shall be determined and approved by the MICC or by an
inter-agency Group created by the President. The utilization of this fund shall be covered by
Section 18 of this Act.

CHAPTER VI
ADMINISTRATION OF THE MINING INDUSTRY ZONE

SECTION 15. Administration of the MIZ. ~ The Philippine Mining Development Corporation
(PMDC) created through Presidential Memorandum dated April 9, 2003, shall be designated
as Administrator of MIZs proclaimed under this Act. It shall have the following powers and
functions:

a. Formulate policies, rules and regulations to implement its functions under this Act;

b. Evaluate and determine the Government Share on a monthly basis, which the
Contractor shall remit and pay to the National Goverment (NG) and to the LGUs on
a quarterly basis;

c. Ensure that Government Shares are computed in accordance with this Act;


d. Establish a One Stop Action unit, composed of all government agencies involved in
the operation of MIZs, whose designated representatives are clothed with authority to
act and approve or deny any matter relative to their respective agencies;

e. Provide assistance to the Contractor in having its business registered with the
appropriate government agencies such as the Securities and Exchange Commission
(Sec), Social Security System (SSS), Department of Labor and Employment (DOLE)
and Bureau of intemal Revenue (BIR);

f. Provide assistance to the Contractor in applying with the concerned entities for the
provision of utilities and other services needed in the operation of the business such
as supply of electricity or power, water, telecommunications, and security in the area
and waste disposal;

g. Issue import permits, building permits, business permits and other necessary permits
to the Contractor;

h. Gather and verify data on the production and sales of the Contractor including the
assaying of the mineral product. The data shall include tonnage or volume, value,
market price and assay results, such as composition, percentage of metals, grade,
purity, among others.

i. Create and maintain a mineral revenue database system of the MIZ for reporting
purposes and support the implementation of the Extractive Industries Transparency
Initiative (EITI);

j. Render annual reports to the President and to the MICC or inter-agency Group that
may be created by the President; and

k. Perform such other functions and duties relevant under this Act.

For this purpose, a one-time allocation of One Hundred Million Pesos
(Php100,000,000.00) shall be appropriated for the administrative, promotional and operational
expenses relating to the MIZs of the PMDC and all fees and charges collected by the PMDC
shall be retained by the said office to sustain its operations.

CHAPTER VII
INCENTIVE

SECTION 16. Capital Equipment Incentive. - The Contractor shall be entitled to duty-free
importation of specialized capital mining equipment that are directly needed in the exploration,
extraction and processing of its mineral ores.

CHAPTER VIII
INSTITUTIONAL ARRANGEMENTS

SECTION 17. Mines and Geoscience Bureau. — The MGB shall continue to exercise its
functions as mandated by existing laws unless otherwise amended by this Act.

SECTION 18. Fund Utilization and Other Reports. - The LGUs, ICCs through the NCIP,
the DENR and other concerned agencies allocated funds from the Government Share shall
regularly submit reports to PMDC on completed projects and activities where their respective
shares were utilized. They shall also be required to submit updated lists of current mining
contractors, locations of mining projects and the areas covered or occupied by the mineral
deposits, land area and population of the mining host communities, and other relevant
information.

SECTION 19. Administrative Arrangements. - The mandates, powers and functions
provided in this Act shall be carried out through an agreement between and among the PMDC,
MGB and other concemed agencies in accordance with the implementing rules and
regulations promulgated under this Act, for purposes of coordination and consistency in policy
formulation and implementation.


CHAPTER IX
TRANSITORY AND MISCELLANEOUS PROVISIONS

SECTION 20. Implementing Rules and Regulations. — A committee shall, within ninety (90)
days from the effectivity of this Act, promulgate rules and regulations to implement the intent
and provisions of this Act. The Committee shall be chaired by the DTI and composed of the
following:

Department of Environment and Natural Resources;
Department of Finance;

National Economic and Development Authority;
Department of Budget and Management;
Department of Interior and Local Government;
Bureau of Internal Revenue;

Board of Investments;

. Bureau of Local Government Finance; and
Philippine Mining Development Corporation.

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SECTION 21. Vested Right. - Valid MAs and FTAAs existing prior to the effectivity of this Act
that do not provide that any terms and conditions resulting from a repeal or amendment of any
existing laws or regulations or from the enactment of a law, regulation or administrative order
shall be considered a part of said agreements shall continue to be governed by the terms and
conditions contained in their respective mining contracts.

SECTION 22. Repealing Clause. — Sections 80, 81, 83, 84, 86, 87, 88, 90, 92 and 93 of
Republic Act No. 7942 are hereby repealed or amended to the extent that they relate to the
‘Scope of this Act.

Any laws, rules and regulations, decrees and executive orders inconsistent with the
provisions of this Act are hereby repealed and modified accordingly.

SECTION 23. Separability Clause. — If any provision of this Act is subsequently declared
unconstitutional, the validity of the remaining provisions hereof shall remain in full force and
effect.

SECTION 24. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
publication in at least two (2) national newspapers of general circulation.

Approved,