CHAPTER IV

EXPLORATION PERMIT
Section 20
Exploration Permit - An exploration permit grants the right to conduct exploration for
all minerals in specified areas. The Bureau shall have the authority to grant an exploration
Permit to a qualified person.

 Such permit does not amount to an authorization to extract and carry off the mineral
resources that may be discovered.
 It involves nothing but expenditures for exploring the contract area and locating the
mineral bodies.
 It is an authorization for the grantee to spend its own funds on exploration programs
that are pre-approved by the government, without any right to recover anything should
no minerals in commercial quantities be discovered.

The Mines and Geosciences Bureau shall have the authority to grant an exploration permit to a
qualified person.

Section 21
Terms and Conditions of the Exploration Permit
An exploration permit shall be for a period of two (2) years, subject to annual review and
relinquishment or renewal upon the recommendation of the Director.

Renewable for like periods but not to exceed:

 Non-metallic mineral exploration (4 years)
 Metallic mineral exploration (6 years)
 Can be extended for 2 years for the very purpose of preparing and completing the
feasibility studies and the filing of the declaration of mining project feasibility and
pertinent mineral agreement or FTAA application.

No renewal of permit shall be allowed unless:

1. The permittee has complied with the terms and conditions;
2. Has not been found guilty of any violation of this act; and
3. Conduct of feasibility and filing of declaration of mining project feasibility shall be
undertaken during the term of the exploration permit.

Section 22
Maximum Areas for Exploration Permit
The maximum area that a qualified person may hold at any one time shall be:
1. Onshore, in any one province
a. for individuals, twenty (20) blocks: and
b. for partnerships, corporations, cooperatives, or associations, two hundred (200)
blocks.
2. Onshore, in the entire Philippines
a. for individuals, forty (40) blocks; and
b. for partnerships, corporations, cooperatives, or associations, four hundred (400)
blocks.
3. Offshore, beyond five hundred meters (500m) from the mean low tide level:
a. for individuals, one hundred (100) blocks; and
b. for partnerships, corporations, cooperatives, or associations, one thousand (1,000)
blocks.

Section 23
Rights and Obligations of the Permittee

An exploration permit shall grant to the permittee, his heirs or successors-in-interest, the
following rights:

1. right to enter
2. right to occupy
3. right to explore the area:
Provided, that if private or other parties are affected, the permittee shall first discuss with the
said parties the extent, necessity, and manner of his entry, occupation and exploration and in
case of disagreement, a panel of arbitrators shall resolve the conflict or disagreement.

The permittee shall undertake an exploration work on the area as specified by its permit based
on an approved work program.

Any expenditure in excess of the yearly budget of the approved work program may be carried
forward and credited to the succeeding years covering the duration of the permit. The
Secretary, through the Director, shall promulgate rules and regulations governing the terms and
conditions of the permit.

The permittee may apply for a mineral production sharing agreement, joint venture agreement,
co-production agreement or financial or technical assistance agreement over the permit area,
which application shall be granted if the permittee meets the necessary qualifications and the
terms and conditions of any such agreement: Provided, That the exploration period covered by
the exploration permit shall be included as part of the exploration period of the mineral
agreement or financial or technical assistance agreement.
Section 24
Declaration of Mining Project Feasibility

A holder of an exploration permit who determines the commercial viability of a project

covering a mining area may, within the term of the permit, file with the Bureau a
declaration of mining project feasibility accompanied by a work program for
development.

Within the term of the permit.

The approval of the mining project feasibility and compliance with other requirements
provided in this Act shall entitle the holder to an exclusive right to a mineral production
sharing agreement or other mineral agreements or financial or technical assistance agreement.

Effects when Granted:

1. The contractor will be in a position to extract minerals and earn revenues.
2. The contractor’s right and obligations will be covered by an FTAA or a mineral
agreement.

Section 25
Transfer or Assignment of Exploration Permit
An exploration permit may be transferred or assigned to a qualified person subject to the
approval of the Secretary upon the recommendation of the Director.

Absence of approval will result of an exploration permit to be without legal force and effect.
Reason: Non-qualified entities or individuals could circumvent the strict requirements under
the law by the simple expediency of acquiring the permit from the original permittee.

CHAPTER V
MINERAL AGREEMENTS
Section 26
Modes of Mineral Agreement

For purposes of mining operations, a mineral agreement may take the following forms as herein
defined:
a. Mineral production sharing agreement is an agreement where the Government grants to the
contractor the exclusive right to conduct mining operations within a contract area and shares in
the gross output. The contractor shall provide the financing, technology, management and
personnel necessary for the implementation of this agreement.

b. Co-production agreement is an agreement between the Government and the contractor

wherein the Government shall provide inputs to the mining operations other than the mineral
resource.

c. Joint venture agreement is 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.
A mineral agreement shall grant to the contractor the exclusive right to conduct mining
operations and to extract all mineral resources found in the contract area. In addition, the
contractor may be allowed to convert his agreement into any of the modes of mineral
agreements or financial or technical assistance agreement covering the remaining period of the
original agreement subject to the approval of the Secretary.

Section 27 Eligibility

A qualified person may enter into any of the three (3) modes of mineral agreement with the
government for the exploration, development and utilization of mineral resources: Provided,
That in case the applicant has been in the mining industry for any length of time, he should
possess a satisfactory environmental track record as determined by the Mines and Geosciences
Bureau and in consultation with the Environmental Management Bureau of the Department.

Section 28 Maximum Areas for Mineral Agreement

The maximum area that a qualified person may hold at any time under a mineral agreement
shall be:
a. Onshore, in any one province
1. for individuals, ten (10) blocks; and
2. for partnerships, cooperatives, associations, or corporations, one hundred (100) blocks.

b. Onshore, in the entire Philippines

1. for individuals, twenty (20) blocks; and
2. for partnerships, cooperatives, associations, or corporations, two hundred (200) blocks.

c. Offshore, in the entire Philippines

1. for individuals fifty (50) blocks;
2. for partnerships, cooperatives, associations, or corporations, five hundred (500) blocks; and
3. for the exclusive economic zone, a larger area to be determined by the Secretary.
The maximum areas mentioned above that a contractor may hold under a mineral agreement
shall not include mining/quarry areas under operating agreements between the contractor and a
claimowner/lessee/permittee/licensee entered into under Presidential Decree No. 463.

Section 29 Filing and Approval of Mineral Agreements

All proposed mineral agreements shall be filed in the region where the areas of interest are
located, except in mineral reservations which shall be filed with the Bureau.
The filing of a proposal for a mineral agreement shall give the proponent the prior right to areas
covered by the same. The proposed mineral agreement will be approved by the Secretary and
copies thereof shall be submitted to the President. Thereafter, the President shall provide a list
to Congress of every approved mineral agreement within thirty (30) days from its approval by
the Secretary.

Section 30 Assignment/Transfer

Any assignment or transfer of rights and obligations under any mineral agreement except a
financial or technical assistance agreement shall be subject to the prior approval of the Secretary.
Such assignment or transfer shall be deemed automatically approved if not acted upon by the
Secretary within thirty (30) working days from official receipt thereof, unless patently
unconstitutional or illegal.

Section 31 Withdrawal from Mineral Agreements

The contractor may, by giving due notice at any time during the term of the agreement, apply
for the cancellation of the mineral agreement due to causes which, in the opinion of the
contractor, make continued mining operations no longer feasible or viable. The Secretary shall
consider the notice and issue its decision within a period of thirty (30) days: Provided, That the
contractor has met all its financial, fiscal and legal obligations.

Section 32 Terms

Mineral agreements shall have a term not exceeding twenty-five (25) years to start from the date
of execution thereof, and renewable for another term not exceeding twenty-five (25) years under
the same terms and conditions thereof, without prejudice to changes mutually agreed upon by
the parties. After the renewal period, the operation of the mine may be undertaken by the
Government or through a contractor. The contract for the operation of a mine shall be awarded
to the highest bidder in a public bidding after due publication of the notice thereof: Provided,
That the contractor shall have the right to equal the highest bid upon reimbursement of all
reasonable expenses of the highest bidder.
CHAPTER VI
FINANCIAL OR TECHNICAL ASSISTANCE AGREEMENT

Section 33 Eligibility

Any qualified person with technical and financial capability to undertake large-scale
exploration, development, and utilization of mineral resources in the Philippines may enter into
a financial or technical assistance agreement directly with the Government through the
Department.

Section 34 Maximum Contract Area

The maximum contract area that may be granted per qualified person, subject to relinquishment
shall be:
a. 1,000 meridional blocks onshore;
b. 4,000 meridional blocks offshore; or

c. Combinations of a and b provided that it shall not exceed the maximum limits for onshore
and offshore areas.

Section 35 Terms and Conditions

The following terms, conditions, and warranties shall be incorporated in the financial or
technical assistance agreement, to wit:
a. A firm commitment in the form of a sworn statement, of an amount corresponding to the
expenditure obligation that will be invested in the contract area: Provided, that such amount
shall be subject to changes as may be provided for in the rules and regulations of this Act;

b. A financial guarantee bond shall be posted in favor of the Government in an amount

equivalent to the expenditure obligation of the applicant for any year;

c. Submission of proof of technical competence, such as, but not limited to, its track record in
mineral resource exploration, development, and utilization; details of technology to be
employed in the proposed operation; and details of technical personnel to undertake the
operation;

d. Representations and warranties that the applicant has all the qualifications and none of the
disqualifications for entering into the agreement;
e. Representations and warranties that the contractor has or has access to all the financing,
managerial and technical expertise and, if circumstances demand, the technology required to
promptly and effectively carry out the objectives of the agreement with the understanding to
timely deploy these resources under its supervision pursuant to the periodic work programs
and related budgets, when proper, providing an exploration period up to two (2) years,
extendible for another two (2) years but subject to annual review by the Secretary in accordance
with the implementing rules and regulations of this Act, and further, subject to the
relinquishment obligations;

f. Representations and warranties that, except for payments for dispositions for its equity,
foreign investments in local enterprises which are qualified for repatriation, and local supplier’s
credits and such other generally accepted and permissible financial schemes for raising funds
for valid business purposes, the contractor shall not raise any form of financing from domestic
sources of funds, whether in Philippine or foreign currency, for conducting its mining
operations for and in the contract area;

g. The mining operations shall be conducted in accordance with the provisions of this Act and
its implementing rules and regulations;

h. Work programs and minimum expenditures commitments;

i. Preferential use of local goods and services to the maximum extent practicable;

j. A stipulation that the contractors are obligated to give preference to Filipinos in all types of
mining employment for which they are qualified and that technology shall be transferred to the
same;

k. Requiring the proponent to effectively use appropriate anti-pollution technology and

facilities to protect the environment and to restore or rehabilitate mined out areas and other
areas affected by mine tailings and other forms of pollution or destruction;

l. The contractors shall furnish the Government records of geologic, accounting, and other
relevant data for its mining operations, and that book of accounts and records shall be open for
inspection by the government;

m. Requiring the proponent to dispose of the minerals and byproducts produced under a
financial or technical assistance agreement at the highest price and more advantageous terms
and conditions as provided for under the rules and regulations of this Act;
n. Provide for consultation and arbitration with respect to the interpretation and
implementation of the terms and conditions of the agreements; and

o. Such other terms and conditions consistent with the Constitution and with this Act as the
Secretary may deem to be for the best interest of the State and the welfare of the Filipino people.

Section 36 Negotiations

A financial or technical assistance agreement shall be negotiated by the Department and

executed and approved by the President. The President shall notify Congress of all financial or
technical assistance agreements within thirty (30) days from execution and approval thereof.

Section 37 Filing and Evaluation of Financial or Technical Assistance Agreement Proposals

All financial or technical assistance agreement proposals shall be filed with the Bureau after
payment of the required processing fees. If the proposal is found to be sufficient and
meritorious in form and substance after evaluation, it shall be recorded with the appropriate
government agency to give the proponent the prior right to the area covered by such proposal:
Provided, That existing mineral agreements, financial or technical assistance agreements and
other mining rights are not impaired or prejudiced thereby. The Secretary shall recommend its
approval to the President.

Section 38 Term of Financial or Technical Assistance Agreement

A financial or technical assistance agreement shall have a term not exceeding twenty-five (25)
years to start from the execution thereof, renewable for not more than twenty-five (25) years
under such terms and conditions as may be provided by law.

Section 39 Option to Convert into a Mineral Agreement

The contractor has the option to convert the financial or technical assistance agreement to a
mineral agreement at any time during the term of the agreement, if the economic viability of the
contract area is found to be inadequate to justify large-scale mining operations, after proper
notice to the Secretary as provided for under the implementing rules and regulations: Provided,
That the mineral agreement shall only be for the remaining period of the original agreement.
In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the
corporation, partnership, association, or cooperative. Upon compliance with this requirement
by the contractor, the Secretary shall approve the conversion and execute the mineral
production-sharing agreement.
Section 40 Assignment/Transfer

A financial or technical assistance agreement may be assigned or transferred, in whole or in

part, to a qualified person subject to the prior approval of the President: Provided, That the
President shall notify Congress of every financial or technical assistance agreement assigned or
converted in accordance with this provision within thirty (30) days from the date of the
approval thereof.

Section 41 Withdrawal from Financial or Technical Assistance Agreement

The contractor shall manifest in writing to the Secretary his intention to withdraw from the
agreement, if in his judgment the mining project is no longer economically feasible, even after
he has exerted reasonable diligence to remedy the cause or the situation. The Secretary may
accept the withdrawal: Provided, That the contractor has complied or satisfied all his financial,
fiscal or legal obligations.