Developments in the Mining Industry in the Philippines

The local mining industry has contributed significantly to the Philippine economy with PHP44.84 billion generated through national and local taxes, fees and royalties. The industry also has the potential to contribute even more as 9 million out of the 30 million hectares of land area of the Philippines are identified as having mining potential. Currently, only 2.6% (or 779,446.41 hectares of the 9 million identified areas) of the Philippines has mining tenements.

The Philippine Mining Act, enacted in 1995, established the regulatory framework for mining in the Philippines. It provides for two major types of tenements, and who may hold them: the first are mineral agreements, which may be in the form of mineral production sharing agreements (MPSAs), co-production agreements, and joint venture agreements; the second are financial or technical assistance agreements (FTAAs).

Mineral agreements are subject to the nationality restriction under the 1987 Philippine Constitution; that is, only Filipino citizens or corporations with at least 60% Filipino ownership may hold mineral agreements. By virtue of an exception in the 1987 Philippine Constitution, foreign citizens or 100% foreign-owned corporations may hold FTAAs.

The Philippine Constitution expressly authorises the Philippine President to enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development and utilisation of minerals, according to the general terms and conditions provided by law, based on real contributions to economic growth and the general welfare of the country.

A mining contractor would have the same rights and obligations, whether it operates under an MPSA or an FTAA. The biggest difference, at least at present, would be in the setting of the government’s share from mining operations under either agreement.

A bill is pending in Congress, proposing additional changes to the fiscal regime for the Philippine mining industry. These recent developments are generating interest from prospective foreign investors, and lately there has been an increase in the number of enquiries about the Philippine regulatory framework and permitting processes.

The permitting process to operate a mine in the Philippines is not streamlined, in that a prospective mining contractor or operator will have to deal separately with the national government, the concerned local government units, and, where applicable, the indigenous communities inhabiting the proposed mining area. The interests and policies of those three are not always aligned, creating hurdles for would-be miners in the Philippines. Affected indigenous communities have absolute discretion as to when they may give or withhold their consent in respect of proposed mining projects.