Republic of the Philippines Ministry of Natural Resources OFFICE OF THE MINISTER Diliman, Quezon City

MINES ADMINISTRATIVE ORDER NO. MRD 41 Series of 1984 SUBJECT : RULES AND REGULATIONS GOVERNING THE GRANTING OF SMALL SCALE MINING PERMITS UNDER PRESIDENTIAL DECREE NO. 1899.

Pursuant to section 8 of Presidential Decree no. 1899, otherwise known as A Decree Establishing Small Scale Mining As a new Dimension in Mineral Development, the following rules and regulations are herby promulgated for the guidance of all concerned. CHAPTER I DEFINITIONS SECTION 1 Definition of Terms As used in this regulations, the following terms shall, unless the context otherwise indicates, have the following meanings: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Decree means the Presidential Decree No. 1899 establishing small-scale mining as a new dimension in mineral development. Regulations means these rules and regulations. Government means the Government of the Republic of the Philippines. Bureau means the Bureau of Mines and Geo-Sciences. Minister means the Minister of Natural resources. Director means the Director of the Mines and Geo-Sciences. Regional Director means the Head of a Mines and Geo-Sciences Regional Office. District Officer means the Head of a Mineral District Office. Claim owner means the Holder of a valid and existing mining claims and/ or mining lease contracts. Qualified Person means a Filipino citizen, of legal age, and with capacity to contract, or a corporation or partnership authorized to engage in mining registered with the securities and Exchange Commission at least 60% of the capital of which is owned at all times by Filipino Citizens. New Areas means mining areas not covered by a valid and existing claims before the promulgation of P. D 1899 on January 23, 1984. Small Scale Mining involves the operation of a single unit mining operation having an annual production not exceeding 50,000 metric tons of run-of-mine ore with the following requisites.

(k) (l)

(1) The working is artisanal, either open cast or shallow underground mining, without the use of sophisticated mining equipment; (2) Minimal investment on infrastructures and processing plant; (3) Heavy reliance on manual labor (m) Single Mining Unit means a mining operation covered by a mining permit and involving the extraction and/ or processing of any of the classified mineral commodities as specified herein. (n) Gold Panning or Sluicing means any gold mining operation having a daily production output of not more than five (5) metric tons of ore which shall not involve highly mechanized method but only man labor by panning or sluice box. Panning means the recovery of gold by the use of dishpan like wood, metal or any material thru the skillful manipulation or control of human hands. Sluicing means the recovery of gold using sluice boxes. Sluice Box means rectangular, wooden lauder provided with side wall and cross pieces of sawn lumber or round poles, metallic screen, jute cloth or a combination of both, on its floor to retain gold. Guano means accumulation of dropping of excrements of bats in caves/areas and does not include phosphatic rocks. Open Cast means a mine working which is exposed to the surface. Shallow underground means a subsurface mine working which is driven to such distances as safety conditions and practices with allow. Minimal Investment means all capital investment sunk by the permittee on single mining unit to make it operative; including raw, additional and existing capital, such as processing plants, mine and hauling equipment, tools, infrastructures, capitalized exploration and development cost, support facilities and working capital. This investment shall not exceed (10) million pesos during the effectivity of the original permits and its renewal. Labor Intensive without the Use of sophisticated Equipment means a mining operation wherein the ratio of labor cost to equipment utilization cost to produce, process and market one metric ton to ore equals or exceeds one (1.0).

(o) (p) (q)

(r) (s) (t) (u)

(v)

(w) Labor Cost means all cash expenditures such as salaries, wages, allowances, and other benefits, measured on a per metric ton of ore basis for renumeration of personnel directly involved in the mining, processing, hauling, handling and storage of ore concentrate or finished product on a single mining unit excluding supervisory and administrative personnel. (x) Equipment Utilization Cost means all cash expenditures for the operation and utilization of equipment for a single mining unit, which include fuel, compressed air, utilities, power, supplies, raw materials, lease of equipment, repairs and maintenance. Permit means small-scale mining permit issued under these regulations.

(y)

CHAPTER II GENERAL PROVISION SECTION 2 - Who May Qualify for the Insurance of a Small Scale Mining Permit Any qualified person is defined in sec. 1 of these regulation, preferably claim owners and applicants for or holders of quarry permits and/ or licenses may be issued a small scale mining permit provided that their mining operations, whether newly-opened, existing or rehabilitated, involve: (a) a single mining unit having an annual production not exceeding 50,0000 metric tons of run-of-mine ore, either an open cast mine working or a subsurface mine working which is driven to such distance as safety conditions and practices will allow; a total capital investment not exceeding P10 million during the effectivity of the permit and its renewal; a ratio of labor cost to equipment utilization cost to produce, process and market to one metric ton of ore equivalent to or exceeding (1). The extraction and processing of any of the classified commodities as specified herein.

(b) (c) (d)

SECTION 3 Classification of Mineral Commodities- a permit shall cover any of the following mineral commodity classifications: (a) Precious metal- primary gold with or without associated metal such as silver, etc.; (b) Metallics copper, chromite, mercury, lead, Zinc, manganese, iron, and nickel; (c) Non-Metallic diatomaceous earth, limestone for mine, clay, marble, talc, gypsum, phosphate rock, guano, barite, bentonite, feldspar, gem-stone, pyrite for fertilizer, perlite, and silica; and (d) All other rocks and mineral commodities as may be decided for inclusion by the director. Provided, That in case of gold panning or sluicing falling under classification (a) and Guano under classification(c) of this section, the issuance of a permit under a more liberalized and specific terms and conditions, shall be governed by chapter IV and chapter V respectively, of these regulations which shall be considered as exceptions to this chapter on general provisions. SECTION 4 Form and Contents of the Permit Application An application for a permit shall be accomplished and filed in five (5) copies in the form prescribed in the for the purpose, duly subscribed and sworn to by the applicant or his duly authorized agent before a notary Public or any official authorized by law to administer oaths and stating particularly among others, with sufficient fullness and clarity, the following: (a) Full name and post office or business address; (b) Applicants citizenship, age, sex, and civil status in the case of an individual, the sites (place) and the date of registration and life of the partnership and corporation; (c) Location of the area applied for; (d) Size of area applied for; and (e) The quantity of the minerals/quarry resources sought to be extracted and dispose of.

SECTION 5 Where and how to File Application - An application to a permit together with supporting Papers, shall be filed with the Mines and Geo-sciences Regional or with the Mineral District Offices concerned if one has already been established. No application shall be accepted unless accompanied by the following documents. (a) The survey plan with corresponding technical description of the area applied for prepared by a deputized geodetic engineer of this bureau; (b) If the application is a partnership or corporation, the articles of partnership or incorporation together with the by-laws thereof duly registered with the Securities and Exchange Commission; and (c) In areas covered by established government reservation other than mineral reservation, clearance from the government agencies concerned. (d) Operating agreement/contract between holders of a valid and existing mining rights with qualified persons. SECTION 6 Additional Requirement The regional Director, may if he deems it necessary, require additional requirement, such as: (a) The mode and manner of protecting the ecological balance of the area applied for duly signed by the application of his technical men, as the case may be. (b) A project study of the mining operation; and (c) Field verification of the area subject of application. SECTION 7 Areas Subject of Application The following areas may be applied for a permit under this regulation, to wit. (a) Areas covered by a valid and existing mining claims including thus already covered by existing mining leases; (b) Areas covered by quarry application, permit or licenses and those covered by exploration permits/ applications. (c) All other government reservation except mineral reservations, subject to prior verification by the bureau. (d) New areas defined in sec. 1 of these regulations; and (e) A combination of any of the above. SECTION 8 Areas Close to Application No application to permit shall be accepted on the following areas: (a) Near or under the building, cemeteries, bridges, highways, waterways, railroads, reservoirs, dams, or any other public or private works unless prior clearance from the government agency or owner concerned is obtained; and (b) All banned areas proclaimed and established by the government. SECTION 9 Mineral Reservation Areas covered by the duly established and existing mineral reservation shall be governed by the separate rules and regulations, to be promulgated by the Mineral Reservation Development Board pursuant to Presidential Decree No. 1305.

SECTION 10 Limitation of the Number of Permits The number of permits than an applicant is entitled to shall be as follows; (a) For individuals one (1) permit is any one (1) province; and (b) For partnership and corporation two (2) permit in any one province covering its own mining areas with the option to operate another (2) permits belonging to another person or entity or a total of (4) permits. SECTION 11 Priority of Application In Case of Conflict The applicant who has first filled his application coupled with the substantial compliance with the requirements of these regulations shall be given preferential right over the area subject of the conflict; Provided, That in case of doubt in the resolution, the provision of existing mining decrees and the rules and regulation promulgated there under shall be adopted; provided, further, that in case of private lands, the pertinent provisions of Presidential Decree No. 512 shall apply. SECTION 12 Applicant Forms - Application of permit shall be accomplished in the prescribed form here to attached as Appendix A and made part of these regulations. However, for renewal application, the filing of a verified letter request may suffice. SECTION 13 Rights Acquired Under a Permit A permit duly approved and granted under the provisions of these regulations conveys upon the permittee from the grant thereof and during its term and renewal, if any, the exclusive right to posses, explore, develop, and exploit the minerals quarry resources found within the permit area for commercial purpose together with the incentives attached thereto. In addition, if the area subject of the permit covers valid and subsisting mining claims, the compliance with the requirements under existing mining laws, decrees and rules and regulation in so far as the permit areas is concerned shall be deemed suspended during the term of the permit. The bureau may provide technical assistance, whenever feasible and capable, depending upon the needs of the permittee. SECTION 14 Term of Permit The term of this permit shall be for a period of two (2) years from the issuance thereof, renewable only one for a like period upon compliance with the terms and conditions of the permit, and upon filing of the application before the expiry thereof. Provided, That in case of new areas not covered by existing reservation the permittee shall within a period of two (2) years from the grant of the permit have the option to located the same and its immediate vicinity not exceeding one meridional block under Presidential Decree No. 463, as amended; Provided, Further, That upon expiration of permits or its renewal, if any, covering valid and existing mining claims the provisions of Presidential Decree No. 463, as amended, and its implementing Rules and regulations shall thereafter be reinforced. SECTION 15 Conditions Under Which Permits May Be Issued Permits issued under these Regulations shall be subject, among others, to the following terms and conditions: (a) The permit shall be for the exclusive use of the permittee and shall not be transferred within the written approval of the Director or Regional Director, as the case may be. (b) The Permit may be suspended or revoked at any time by the Director or Regional Director, as the case may be, when in their opinion, public interest, welfare and peace and order conditions so requires or demands or upon failure of the Permittee to comply with the other terms and conditions stated in the Permit or for ecological reasons. (c) The statements made in the application and those made later in support thereof shall be considered as conditions and essential parts of the Permit and any misrepresentation contained therein shall be a cause for the suspension or cancellation of the permit;

(d) The removal or extraction of ores/quarry materials under the permit shall be confined within the area specified therein, the boundaries of which, according to the application are established on the ground with prominent marks; and (e) The penal provisions of P.D. No. 463, with emphasis on theft of minerals are deemed included and adopted in these Regulations. SECTION 16 Commercial Operations The permittee shall within twelve (12) months from the date of issuance of the permit, place the area in actual commercial production and shall submit verified quarterly production and integrated annual survey reports, within thirty (30) days after the end of the quarter and year covered by reports aforementioned. Provided, that failure to place the area in actual production within the period aforestated without justification shall cause the automatic cancellation of the permit. SECTION 17 Inspection of Operations The Minister, Director, Regional Director and/or District Officers, personally or through their duly authorized agents or representatives shall have the authority to inspect any operation of the permittee at all reasonable times and to examine the records of said operations and to carry our any other inspection authorized by law or regulations. The permittee shall furnish such officers, agents or representative with all technical and actual data specified in these Regulations and shall give them ample facilities and assistance to discharge their duties as such. For these purposes, the permittee shall be under obligation to keep the permit area open at all reasonable times for such inspection. SECTION 18 Tax Exemption Benefits Holders of small scale mining permit are exempted from the payment of all taxes except income tax for a period co-terminus with the term of the permit. SECTION 19 Duties and Taxes to be Exempted Among Others The duties and taxes that are to be exempted from the permittees in the course of their operation shall include, but not limited to, the following: 1. 2. 3. 4. 5. 6. 7. Special Import Tax Compensating Tax Tariff Duties Royalties Sales Tax Real Estate Tax Occupation Fees/Rentals CHAPTER III MINERAL COMMODITIES EXCLUDING GOLD FALLING UNDER GOLD PANNING OR SLUICING AND GUANO SECTION 20 Application Fee An application fee of Thirty Pesos (30.00) per hectare of fraction thereof shall accompany the application for a permit. No fee shall be required in cases of renewal applications. Failure on the part of the applicant to pay the same shall be a ground for the Regional Director and/or Mineral District Officer not to accept the application. The data appearing in the Official Receipt evidencing payment of the applications fee shall be considered as the official date of the filing of application. SECTION 21 Size and Shape of Area The maximum area subject of an application under paragraph (a) and (b) of Section 7 of these Regulations shall be one meridional block or containing an area eighty-one (81) hectares, more or less, while for application under par. (c), (d) and (e) of said Section 3, the maximum area allowable is of one meridional block of fifteen (15) seconds by fifteen (15) seconds of latitude and longitude containing an area of 20 hectares, more or less.

SECTION 22 Grant of Permits Upon compliance with all the requirements relative to the application a permit shall be issued by the Regional Director concerned; Provided, That in areas covered by mining claims involved in a case or conflict, the Claim owner who first registered his claim or the party in whose favor a decision has been rendered notwithstanding appeal, shall be granted a permit by the Director subject to the following conditions: (a) Posting of surety bond in the amount to be determined by the Director; and (b) Escrow deposit with the Bureau pursuant to Section 133 of the Consolidated Mines Administrative Order, as amended, and the pertinent provisions of P.D. 1100. CHAPTER IV GOLD MINING, PANNING OR SLUICING (GRAVITY SEPARATION METHOD) SECTION 23 To Whom Shall a Permit be Granted- A permit shall be granted by Regional Directors or Mineral District Officers only to qualified individual or entity as defined in these regulations: Provided, That the Claim owner, operator, landowner or holders of other rights such as pasture leases, timber leases, etc. shall have consented in writing: Provided, further, That if the area I s situated within a government reservation other that a mineral reservation, a clearance from the government agency concerned shall first be secured. SECTION 24 Size of the Permit Area A permit granted under this Chapter shall cover an area of not more than five thousand (5,000) square meters. SECTION 25 Application and Fees- A duly accomplished application form shall be filed with the Mines and Geo-Science Regional Office or District Office concerned. No application shall be accepted unless accompanied by a sketch plan of the area in as nearly as possible, a rectangular form with the corner post number one tied to permanent and prominent object and proof of payment of a fee in the amount of P 50.00. SECTION 26 Disposal of Gold Extracted- All gold recovered or extracted shall be disposed and sold only to dealers authorized or licensed by the Central Bank of the Philippines or its authorized agencies subject to the payment of agreed royalties due to operator, Claim owner or landowner. Any individual or groups of individual s or barangay desiring to engage in the buying and selling gold shall secure a business permit from the city or municipality concerned and a license form the Central Bank or its authorized agents. SECTION 27 Preference to buy Gold Existing mining operator, claim owner, or landowner in that order shall have the preference to buy gold recovered from their properties at a price prevailing in the locality: Provided, That the provisions of the preceding Section are complied with. SECTION 28 Books of Accounts - All permittee of gold shall keep a complete and accurate books of accounts containing all their transactions such as the names and addresses of persons they deal with, the quantity (in grams) of gold recovered and all details necessary to establish each transaction ; Provided, That said books of accounts shall at all times be available for inspection by the Minister, Director, Regional Director or District Officer or their duly designated representatives, Provided, further, That the permittee shall submit to the Mines and Geo-Science Regional Office or Mineral District Office concerned within ten (10) days after the end of each quarter a report in the prescribed form indicating that transactions entered in the books of accounts.

SECTION 29 Penalty for failure to keep books of account- Failure of the permittee to comply with the provisions of the preceding section shall be sufficient cause for the cancellation of the permit. CHAPTER V GUANO SECTION 30 Kinds of Permit There shall be two kinds of Permit that may be issued by the Regional Director or District Officer under these Chapter, namely: (a) Gratuitous permit to extract or remove guano to be issued to individual entity for their personal uses and to government agencies for official use within a specified period and quantity; and A commercial permit to extract or remove guano to be issued to qualified person for sale or commercial disposition thereof with or without processing within a specified period or quantity.

(b)

SECTION 31 Document to accompany Applications and Fees Applications must be accompanied by the sketch plan of the area to include not only the description of the cave area and the names of the surface landowners but also the adjoining areas to the north, south, east and west including the nearest river, roads and other features. In case there are more than one cave the relative positions of the same must also be included thereon. No application shall be accepted unless accompanied by proof of payment in the amount of P30.00. SECTION 32 Size of the Permit Area A permit granted under this chapter shall not be more than eight (8) hectares. SECTION 33 Areas covered by valid mining claims and/or within the private lands In case the area is covered by a valid and subsisting mining claims, the Claim owner shall have the preferential right for a commercial permit subject to the rights of gratuitous permittees. In no case may a guano permit be granted without the written permission of the surface owner of the land where the area is located. SECTION 34 Specific Conditions Under Which Permit is Issued Permit granted under this chapter shall be subject to the following terms and conditions: (a) Removal or taking of guano shall be confined within the cave or area specified in the permit, the location of which shall be indicated in a sketch map and properly identified; Under justifiable circumstances, commercial permittees shall allow gratuitous permittees to remove or take from the cave or area of their permit the quantity of guano sufficient for personal or government use. In the same manner, gratuitous permittees shall allow other permittees to remove or take guano from their cave or area; and The permittee shall immediately stop digging and extracting guano the moment man-made articles or artifacts are found. He shall notify the Director of National Museum of such findings, in which case, the digging shall be under the supervision by the National Museum until said artifacts are recovered.

(b)

(c)

SECTION 35 Quantity of Guano Allowed a Permittee A gratuitous permittee shall be allowed to remove or extract not more than two thousand kilos (2,000 kg.) of guano and commercial permittee shall be allowed such quantity as may be specified in the permit. SECTION 36 Record of Guano Removed or Disposed of Gratuitous permittees shall keep a book or books of accounts wherein there shall be entered daily the quantity of guano removed. In the case of commercial permittees, daily entry shall be made on the quantity of guano extracted and sold, selling prices thereof, identity and address of buyers. CHAPTER VI FINAL PROVISIONS SECTION 37 Immediate Sanctions The permittee shall observe and comply with the provisions of Presidential Decree No. 1899, these Regulations, the terms and conditions of the permit, and the applicable provisions of existing mining decrees and the rules and regulations promulgated thereunder; Provided that the operator shall be mandated to follow strictly the mine safety rules and regulations prescribed by the Bureau; otherwise, the Director or Regional Director shall take steps as he may deem necessary to secure these or enforce compliance therewith as are authorized in these Regulations. SECTION 38 Repealing Clause All orders, rule and regulations inconsistent with the provisions of these Regulations are hereby repealed or modified accordingly. SECTION 39 Effectivity This Administrative Order shall take effect immediately. Approved, JUNE 4, 1984. (SGD.) TEODORO Q. PEA Minister RECOMMENDED BY: (SGD.) JUANITO C. FERNANDEZ Director