Pra ipe

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
Second Regular Session
5058

HOUSE BILL NO.

INTRODUCED BY: REPRESENTATIVE FRANCISCO T. MATUGAS

AN ACT
PROMOTING THE DEVELOPMENT OF MINERALS PROCESSING
AND IN THE PROCESS BANNING THE EXPORT OF IRON, NICKEL,
CHROMITE, MANGANESE AND OTHER STRATEGIC METALLIC
ORES, AND FOR OTHER PURPOSES

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

Section 1. Development of Minerals Processing. — The State shall
promote industrialization and full employment through industries that make
full and efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets.

The State recognizes that the revitalization of the mining industry can.
contribute greatly to the country’s industrialization. The State shall therefore,
promote the development of Minerals Processing to maximize the benefits or
value-added from mining. Towards this end, it shall encourage the
establishment and development of mining firms and manufacturing plants
that will utilize locally processed products and process mineral ores first
before exporting them to other countries.

Section 2, Entities Engaged in Minerals Processing. — For purposes
of this Act, an individual, partnership, cooperative, corporation or other entity
shall be considered as one engaged in Minerals Processing if it is engaged in
the milling, beneficiation or upgrading of ores or minerals and rocks or similar

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In terms of ores, the Philippines has the following reserves:

_ Ore Reserves Million MT (2005)
Gold 3,056 —_
= 2,968 _
~ 953
_ Chromite 18
Tron 40
7 Aluminum 292

It is unfortunate, however, that these ores, after mining or extraction, are exported
direetly to foreign countries as raw materials. The Philippines has not developed the
downstream mining industry and thus, cannot maximize the benefits or value-added from
mining. It is high time for the mining industry to focus on the final stages of the minerals
value chain and encourage the establishment and development of processing plants that use
new processes in manufacturing mineral ores.

It is well to note that the industrialization of the Philippine mineral industry is
included in the long-term plan of action of the Mines and Geosciences Bureau (MGB) of the
Department of Environment and Natural Resources, We should help promote the downstream
industries of processing of metals such as copper, nickel, gold and chromite so as to develop
community-based supplier industries and services, improve government benefits for the
mining industry, and control the export of unprocessed minerals,

It is my firm belief that by developing the downstream mining industry, we are not
only advancing said industry but paving the way for the industrialization of the entire
country

This is a refiled bill which was approved at the committee level during the 15"
Congress. Hence, approval of this bill is earnestly sought.

Hon, Frangisco T. Matugas


ae PRE,
oy

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
Second Regular Session

HOUSE BILL NO. 5058

INTRODUCED BY: REPRESENTATIVE FRANCISCO T. MATUGAS

AN ACT
PROMOTING THE DEVELOPMENT OF MINERALS PROCESSING
AND IN THE PROCESS BANNING THE EXPORT OF IRON, NICKEL,
CHROMITE, MANGANESE AND OTHER STRATEGIC METALLIC
ORES, AND FOR OTHER PURPOSES

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

Section 1. Development of Minerals Processing. - The State shall
promote industrialization and full employment through industries that make
full and efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets.

The State recognizes that the revitalization of the mining industry can
contribute greatly to the country’s industrialization. The State shall therefore,
promote the development of Minerals Processing to maximize the benefits or
value-added from mining. Towards this end, it shall encourage the
establishment and development of mining firms and manufacturing plants
that will utilize locally processed products and process mineral ores first
before exporting them to other countries.

Section 2. Entities Engaged in Minerals Processing. — For purposes
of this Act, an individual, partnership, cooperative, corporation or other entity
shall be considered as one engaged in Minerals Processing if it is engaged in
the milling, beneficiation or upgrading of ores or minerals and rocks or similar

1


means that convert the same into marketable products. However, not all
entities engaged in Minerals Processing shall be entitled to the incentives
provided under Section 4 of this Act. The incentives under Section 4 shall not
be available to entities engaged in processing where the ore or minerals and
rocks merely undergo a process or technology, without which, the resource
will not be developed or the mining activity could not be possibly undertaken
such as sorting, crushing, washing, drying and other similar activities.

For nickel, chromite and iron, an additional processing step that will
add further value to the mineral end product such as, ferro-nickel, mixed
sulfides, nickel pig iron, ferrochrome or refractory bricks, shall be required
before the entity can avail of the incentives under Section 4.

Section 3. Minerals Processing Permit. — No individual, partnership,
cooperative, corporation or other entity shall engage in the processing of
minerals without first securing a Minerals Processing Permit from the
Secretary of the Department of Environment and Natural Resources.

In the case of small-scale miners, the processing of mineral ores and
minerals they produce, as well as the licensing of their custom mills or
processing plants, shall continue to be governed by the provisions of Republic
Act No. 7076.

In the case of individuals, corporations, partnerships, cooperatives or
other entities who are parties to a Mineral Agreement or a Financial or
Technical Assistance Agreement, holders of Quarry and Industrial Sand and
Gravel Permits, the approved Work Program for the production period shall
be sufficient requirement for them to process their minerals in lieu of a
Minerals Processing Permit.

A Minerals Processing Permit shall be for a period of ten (10) years,
renewable for like periods: Provided, That, the renewal of a Minerals
Processing Permit shall not be allowed unless the permit holder has complied
with all the terms and conditions of the Minerals Processing Permit and has
not been found guilty of violation of any provisions of Republic Act No. 7942,
or the Philippine Mining Act of 1995, and its implementing rules and
regulations. Section 55 of Republic Act 7942 is hereby amended in so far
is inconsistent with this provision.

After due process, a Minerals Processing Permit may be suspended,
revoked or cancelled by the Department of Environment and Natural
Resources for violation of its terms and conditions, or of pertinent laws, rules
and regulations.

Section 4. Incentives. - _ Minerals Processing, which are entitled to
incentives under Section 2 of this Act, shall be included every year in the
Investment Priorities Plan to be prepared by the Board of Investments in

accordance with Executive Order No. 226, as amended, otherwise known as
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the Omnibus Investment Code of 1987 and shall always be listed as a preferred
area of investment. Before being entitled to the foregoing incentives, the entity
involved shall be registered with the Board of Investments and satisfy the
requirements for registration provided for under Article 32 of Executive Order
No, 226,

Individuals, partnerships, cooperatives, corporations or other entities
engaged in Minerals Processing shall be entitled to the incentives provided for
under Chapter XVI of Republic Act No. 7942 or the Philippine Mining Act of
1995, including those on incentives for pollution control devices, income tax-
carry forward of losses, income tax-accelerated depreciation, and investment
guarantees,

Section 5. Additional Incentives to Entities Who Can Generate
Their Own Power, ~ An individual, partnership, cooperative, corporation
or other entity engaged in Minerals Processing shall be entitled to generate its
: Provided, That, it shall comply with all pertinent laws,
particularly those being implemented and enforced by the Department of
Energy. If such an entity is able to meet all or seventy percent (70%) of its own
energy requirements, said entity shall be entitled to the following additional
fiscal incentives:

a, Additional Deduction for Labor Expansion, Instead of being allowed
an additional deduction from taxable income of fifty percent (50%)

of the wages corresponding to the increment in the number of direct
labor for skilled and unskilled workers, in the first five (5) year from
registration only, said incentive shall be extended to the first six (6)
years from registration: Provided, That, in order to be entitled to this
incentive, the project must still meet the prescribed ratio of capital
equipment to number of workers set by the Board of Investments.

nd_Duty Exemption on Imported Capital Equipment. -

rtations of machinery and equipment and accompanying spare
parts needed for the construction, operation and maintenance of the
power plant shall be exempt to the extent of one hundred percent
(100%) of the customs duties and national internal revenue tax
payable thereon: Provided, That the importation of machinery and
equipment and accompanying spare parts shall comply with the
following conditions:

(1) They are not manufactured domestically in sufficient
quantity, of comparable quality and at reasonable prices;

(2) They are reasonably needed and will be used exclusively by
the entity involved in the generation of electricity; and


(3) The approval of the Board of Investments shall be obtained
for the importation of such machinery, equipment and
spare parts.

c. Tax Credit on Domestic Capital Equipment. - A tax credit equivalent
to one hundred percent (100%) of the value of the national internal
revenue taxes and customs duties that would have been waived on
the machinery, equipment and spare parts, had these items been
imported shall be given to the entities which purchase machinery,
equipment and spare parts from a domestic manufacturer: Provided,
That the said equipment, machinery and spare parts are reasonably
needed and will be used exclusively by the entity in the generation of
electricity.

d. Exemption from Contractor's Tax. — The entity shall be exempt from
the payment of contractor's tax, whether national or local for the
construction, operation and maintenance of the power plant.

Section 6. Expenditure for Community Development and Science
and Mining Technology. — The grantee of a Minerals Processing Permit
shall assist in the development of the community in which its processing
plants are established, the promotion of the general welfare of its inhabitants
and the development of science and mining technology.

Activities that may be credited as expenditures for development of the
community, and science and mining technology are the following:

a. Any activity or expenditure intended to enhance the development of
the community other than those required or provided for under
existing laws, or collective bargaining agreements, and the like; and

b. Any activity or expenditure directed towards the development of
geosciences and mining technology such as, but not limited to,
institutional and manpower development, and basic and applied
researches. Appropriate supervision and control mechanisms shall
be prescribed in the implementing rules and regulations of this Act.

Section 7. Training and Development. - The grantee of a Minerals
Processing Permit shall maintain an effective program for manpower training
and development throughout the effectivity of its Minerals Processing Permit
and shall encourage and train Filipinos to participate in all aspects of its
operations, including the management thereof.

Section 8. Safety and Environmental Protection. — The grantee of a
Minerals Processing Permit shall strictly comply with all safety rules and
regulations as may be promulgated by the Department of Environment and
Natural Resources concerning the safety and sanitary upkeep of its operations.

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Said grantee shall also undertake an environmental protection and
enhancement program covering the period of its Minerals Processing Permit.
Such environmental program shall be incorporated in the Work Program
which the grantee shall submit as an accompanying document to its
application for a Minerals Processing Permit.

Before being granted a Minerals Processing Permit, the applicant shall
be required to procure an Environmental Clearance Certificate ba: sed on the
environmental impact assessment and procedures under the Envi ‘onmental
Impact Assessment System including Sections 26 and 27 of the Local
Government Code of 1991 which require national agencies to maintain
ecological balance, and prior consultation with local government units,
nongovernmental and people’s organizations and concerned sectors of the
community.

Section 9. Ban on the Exportation or Direct Shipping of Iron
Nickel, Chromite, Manganese and Other Strategic Metallic Ores. —
Minerals Processing for iron, nickel, chromite and manganese shall be
prioritized. For this purpose, starting 1 January 2021, it shall be unlawful for
any individual, partnership, cooperative, corporation or other entity, to export
or directly ship to any foreign country iron, nickel, chromite and manganese
ores extracted from any mining site in the Philippines,

The President may, upon recommendation of the Secretary of the
Department of Environment and Natural Resources or the Secretary of the
Department of ‘Trade and Industry, indorsed by the National Economic
Development Authority, or upon recommendation by the National Economic
Development Authority, ban the export or direct shipping of other strategic
metallic ores, apart from iron, nickel, chromite and manganese if the same is
crucial to the accelerated industrialization of the country or is needed for
economic development and national defense.

Section 10. Penalty for Violation. — Any person exporting iron, nickel,
chromite, manganese or other strategic metallic ores, the export of which has
been banned by order of the President under Section 9 hereof, shall, upon
conviction, be imprisoned from six (6) months to six (6) years or fined Fifty
Thousand Pesos (P50,000.00) to Two Hundred Thousand Pesos
(P200,000.00), or both, at the discretion of the court. If the offender is a
corporation, association, partnership or any juridical person, the penalty shall
be imposed upon the responsible officers, as the case may be, who participated
in the commission of the offense. If the offender is an alien, he shall, in
addition to the penalty herein prescribed, be deported without further
proceedings after serving the prescribed penalties

Section 11. Transition Period. ~ The period from the approval of this Act
until 1 January 2021 shall be considered the transition period to prepare the
mining industry for the total ban on the export and direct shipping of iron,
nickel, chromite and manganese and other strategic metallic ores, the export

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of which has been banned by order of the President. The Department of Trade
and Industry, and the Department of Environment and Natural Resources
shall develop the necessary guidelines during the transition period to ensure
that the mining industry is adequately prepared for the eventually ban on
export and direct shipping of these ores.

Section 12. Implementing Rules and Regulations, - Within six (6)
months from the effectivity of this Act, the Department of Environment and
Natural Resources and the Department of Trade and Industry shall
promulgate the necessary rules and regulations for the effective
implementation of this Act. Such rules and regulations shall take effect upon
its publication in two (2) newspapers of general circulation.

Section 13. Separability Clause. - If, for any reason, any provision of this
Act is declared to be unconstitutional or invalid, the other sections or
provisions thereof which are not affected thereby shall continue to be in full
force and effect.

Section 14. Repealing Clause. - All laws, decrees, executive orders, rules
and regulations, and other issuances or parts thereof which are inconsistent
with this Act are hereby repealed, amended or modified accordingly.

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

Approved,