WHEREAS, lhe Contractor desires to join and asslst the Government sustainable development and utilization ior comm"-"f 'pripoiu" in the and other associated minerat deposirs existing in rh" oi""rt"in gofa defined); i;"[rJ;;"-i as herein WHEREAS, the Contractor has. access to all the financing, technical compelence, technology and environmental management stif fs %quireO to promptly and effectivety cany out the oOlectives ot ttris-ngi;"r;;i; '-" NOW THEREFORE, for and in consideration of the foregoing premises, the mutual mvenants, terms and conditions treretnanei *i%rti "ii'ji n"r"ov stipulated and agreed as follows: sEcTtoN I SCOPE This Agreement is a Mineral producfion Sharing Agreement entered into pursuant to the provisions of the Act and itjimilementins ,ri"" uno ::.9:l{;ol::, T!: primary purpose or this esreemenii" t" pr",'rio!j", u," 腝ralonat exptoration, development and commercial ufifizaiion oi certain gold and other associated minsrat deposits *itn all nocessary services, "rtrtirg;ithi;lhJCoii""t ll:1. by the technotogy "-nO tin"n"ino to' O" :tll:Ieo l.arranged Conrracror in accordance iith rhe provrsrons of this Agreement. The Contraclor shatt not, Oy virtue dt tnis 1_nj,"..:T:".t, acquire any tifle over rhe ConkacUMining'Ar;'*iii,o, lJ-"]:1|.*^]o -th"_ ""quisition by the Conlractor of the lan-d/surface risnts rnrougn any mode of acquisition provided for by law. 12 The Contractor shall undertake and execute, for and on behalf of the Governmenl .suslainable mining operations in accordance with tne provrsions of this Agreemenl. and is hereby constituted and appointlo. tor the purpose of this Agreement. as the exclusive ;;iitt i, ;;i;';;;rg operations in the Contract Area. 腝腏艏 The Contractor shall assume all the exploration risk such that if no miner€ls in commerciat quantity aro devetoped proOr"eO,-ii *iii not oe enttued to reimbursement "nO 14 D.uring the term of this Agreement, the total value of production and sate of mh€rals deriv_ed from the mining operations confempfateJ nerein Jaf f oe accounted for and divided between the Governmenl and the Contractor in accordance with Section Vlll horeof. SECT:oN腡 DEFIN:TiONS 2.2 Aqreement means lhis Mineral Production Sharing Agreement. 2.3 Associated Minerals mean olher ores/minerals which occur together with the principal ore/mineral. 2.4 Banoko Sentral means Bangko Sentral ng Pilipinas. 25of expenditures to be made by Budqst means an estimate Contractor in mining operations contemplated hereunder to accomplish the Work Program for each particular period. 2.6 Calendar Yaar or Ysar means a period of twelve (12) consacutive months starting with the first day of January and ending on December 31, while 'Calendar Quarts/ moans a period of three consecutive months with the first calendar quarter starting with the first day of January. 2.7 Commercial Production means the production of sufficient quantity of minerals to suslain economic viability of mining operations reckoned from the date of commercial operalion as declared by the Contractor or as stated in ths feasibility study, whichever comes first. 2.A Constitution or Philiooine Constitution means the 1987 Constitution ofthe Republic of the Philippines adopted by the Constitutional Convention of 1986 on October 15, 1986 and ratified by the People of the Republic of the Philippines on February 2, 1987. 2.9 Contract Area means the area onshorB or offshore dslineated under the Mineral Production Sharing Agreement subject to the relinquishment obligations of the Contractor and properly defined by latitude and longitude or bearing and distance. 2.10 Contracl Year means a period of twelve (12) consecutive months counted from the Effeclive Date of lhis Agreement or from the annivorsary of such Effective Date. 莌1 DISCOVERY MINES, INCORPORATED or its assignee 2.1 Contractor means That the or assignees of interest under this Agreement Provided, assignment of any of such interest is accomplished pursuant to the pertinent provisions of the implemsnting rules and regulaiions of the Act. 2.12 Declaration of Minino Feasibilitv means a document proclaiming tha prasence of minerals in a speciflc site, which are recoverable by socially acceptable, environmentally safe and economically sound mEthods specified in the Mine Development Plan. 2.13 Department or DENR means the Department of Environment and Naiural Resources. 2.14 Oieclcf means the Director of Minas and Geosciences Bureau. 2.15 Effective Date means th6 date of execution of this Agreement by the Contractor and by the Secretary on behalf of the Government. ln case an Exploration PermiuTemporary Exploration Permit had been availed of by the Contractor, the Effectivo Date of this Agrsement shall be the date of (isuance of said Exploration PermiuTemporary Exploration Permit. 荸 2.16 Environment means all facets of man's surroundings: physical, ecological, aesthetic, cultural, economic, historic, institutional and social. 2.17 Exploration means searching or prospecting for mineral resources by geological, geophysical and geochemical surveys, remote sensing, test pitting, trenching, drilling, shaft sinking, tunneling, or any other means for the purpose of determining the existence, extent, quality and quantity of mineral resources and the feasibility of mining them for profit. 2.18 Exoloration Period shall mean the time period from ths Effective Date of this Agreement which shall be for two (2) years, renewable for like periods but not to exceed a total term of eight (8) years subject to the pertinent provisions of the implementing rules and ragulations of the Act. 2.19 Force Maieure means acts or circumstanc€s beyond the reasonable control of the Contractor including, but not limited to war, rebellion' insurection, riots, civil disturbances, blockade, sabotage, embargo, strike, lockout, any dispute with surface owners and other labor disputes, epid6mics, earthquake, storm, flood, or other adverse waather conditions, explosion, flre, adverse action by the Govemment or by any of its instrumentality or subdivision thereof, act of God or any public enemy and any cause as herein described over which the affected party has no reasonable control. 芈芅 2.20 Foreion Exchanoe means any currency other than the currency of 芈 腀 Republic of the Philippines acceptable lo the Governmsnt and 芅 Contractor. 2.21 Government means the Government of the Republic of the Philippines or any of its agencies and instrumentaliiies. 2.22 Gross Output means the actual market value of the minerals or maneral producls from each mine or mineral land oPerated as a separate entity, without any deduction for mining, Processing, refining, transporting, handling, marketing, or any other expenses: Provided, That if the minerals r., or mineral products are sold or consignad abroad by the Contractor under C.l.F. terms, the actual cost of ocean freight and insurance shall be dsducted: Provided further, That in the case of mineral concentrates which are not traded in commodity exchanges in the Philippines or abroad such as copper concentrat€, the actual market value shall be the world price quoiation of the refined mineral products contained thoreof prevailing in the said commodity exchanges, after deducting the smelting, refining, treatment, insurance, transporlalion and other charges incurred 苦 in the process of converting mineral concentrates into refined metal traded in thoss commodity exchanges. 雘 2.23 Mine Devalopment refers to work undertaken to prepare an oro body or a mineral deposit for mining, including the construction of necessary infrastructure and related facilities. substances in solid, Minerals meanoccurring inorganic all naturally liqrid, gas or any intermediate state excluding energy materials such as , petroleum, natural gas, radioactive materials and geothermal nergy. { 腧 2.25 Mineral Products mean materials derived from mineral ores/rocks and prepared into marketable state by metallurgical processes which include beneficiation, cyanidation, leaching, smelting, calcination and other similar processes. 2.26 Mininq Area means that portion of the Contract Area identified by the Contractor as defined and delineated in a Survey Plan duly approved by the Dirgctor/concerned Regional Director for purposes of dsyelopment ancuor utilization and sites for support facilities. 2.27 Mininq Ooerations means mining activities involving exploration, foasibility study, environmental impact assessment, development, utilization, mineral processing and mine rehabilitation. 2.28 Notice means notice in writing, telex or telecopy (authenticated by answer back or confirmation received) addressed or sent as provided in Section 16.2 of this Agreement. 2.29 Ote means naturally occurring substance or material from which a mineral or element can be mined and/or processed for profit. 2.30 Pollution means any alteration of the physical, chemic€l and./or biologic€l properties of any \,Yater, air ancuor land resources of the PhiliPpines, or any discharge thereto of any liquid, gaseous or solid wastes or any produclion of unnecessary noise or any emission of objeciionable odor, as will or is likely to create or render such water, air, and land resources harmful, detrimental or injurious to public health, safety or welfare or which will adverssly affect their utilization for domestic, commercial, industrial, agricultural, recreational or other legitimate purposes. 2.31 Secretarv means the Secretary of the Department of Environment and Natural Resources. 2.32 S!3!g means the Republic of the Philippines. 莔 presents plan 2.33 Work Prooram means a document which the of major mining operalions and the conesponding expenditures of the Contractor in its Contract Area during a given period of time, including the plan and expenditures for development of host and neighboring communities and of local geoscience and mining technology, as submitted and approved in accordance with the implementing rules and regulations of the Act. 苦 SECTION III 腒 TERM OF AGREETIENT 腏艕 This Agreement shall have a term of twenty-five (25) years from Effsctive Date, and may be renewed thereafler for another term not exceeding twenty five (25) years. The renewal of this Agreement, as well as the angos in the terms and conditions thereof, shall be upon mutual nsent by the parties. ln the event the Government decides to allow ining operations thereafter by other Contractor, this must be through competitive public bidding. After due publication of notice, the Contractor ll have the right to equal the highest bid upon reimbursement of all sonable expenses of the highest bidder. t SECTION IV CONTRACT AREA 41 Size, Shape, and Location of Contract Area. This Agreement covers a total area of two thousand six hundred seventy-three hectares (2,673.00 has.), situated in Santa and Caoayan, llocos Sur and bounded by the following geographical coordinates (please refer to ANNEX "8" 1:50,00o scale Location Map/Sketch Plan): LAT!TUDE LONGITUDE CORNER 艓 420膋23'30' 17膋30'30'' 艑 120膋23'30腅 17膋31'00' 艒 17膋31'00腅120膋24'00" 艓 17膋32'00'120膋24'00' 艔 17膋120膋22'30' 32'00' 艕 120膋22'30' 17膋32'30腅 艖 120膋24.00' 17膋32'30' 艗 17膋120膋24'00' 33'00' 艘 17膋120膋25'00' 33'00' 莌 葟 17膋120膋25'00膍 33'30' 腝艐 47膋420膋25'30' 33'30' 腝艑 120膋 17膋34'00'25'30腅 腝艒 120膋 17膋34'00腅27'30腅 艓艓 17膋33'30'120膋27'30' 腝艔 420膋 17膋33'30腅27'00' 腝艕 120膋 17膋33'00''27'00' 腝艖 47膋33'00'120膋26'30腅 腝艗 120膋26'30腅 17膋32'00腅 腝艘 17膋120膋26'00腅 32'00' 艑腂 17膋31'30'420膋26'00腅 艑腝 420膋25'30腅 17膋31'30腅 艑艑 17膋30'30'120膋25'30' 艑艒 17膋30'30'120膋24'30' 莔艑艓 120膋24'00' 17膋30'00腅 SECTION V 鍟 EXPLORATION PERIOD 54- shall commence Exploration Timetable for Exploration The Contractor activities not later than three (3) months after the Effective Date for a 腒 period of two (2) years, renewable for like periods but not to exceed a total term of six (6) years for non-metallic minerals and eight (8) years for metallic minerals, subject to annual review and approval by the Director to evaluate compliance with the terms and conditions of this Agreement: Provided, That further renewal may be granted by the Secretary under circumstances as defined in the implementing rules and regulations of the Act. ln case where a Temporary Exploration Permit was issued, the Period of such Temporary Exploration Permit shall be included as part of the Exploration Period of this Agreement. "t Budgets - The Contractor shall strictly comply with 52and Work Programs the approved Exploration and Environmental Work Programs together with their corresponding Budgets (please refer to ANNEXES "C' and "D"). The amount to be spent by the Contractor in conducting ExPloration activities under the terms of this Agreement during the Exploration Period shall be in the aggregate of not less than that specified for each of the Contract Years, as follows: For the Exploration Work Program: 1st Contract Year : PhP 830,000.00 2nd Contract Year : PhP 1,460,000.00 Total PhP 2,290,000.00 For the Environmental Work Program Total : PhP 385,000 00 ln the event of renewal of the Exploration Period, the amount to be spent every year shall first be agreed upon by the parties. ln the event of termination of this Agreement, the Contractor shall only be obliged to expend the pro-rata amount for the Period of such Contract Year prior to termination. lf during any Contract Year, the Contractor should expend more than the amount to be expended as provided above, the excess may be subtracted from the amount required to be expended by the Contractor during the succeeding Contract Years, and should the Contractor, due to unforeseen circumstances or with the consent of the Government, expend less during a year, then the deficiency shall be applied to the amount to be expended during the succeeding Contract Years. 腌腏 5 艔艏 Relinquishment of Total/Portion of the Contract Area - During the Exploration Period, the Contractor may relinquish totally or partially the original Contract Area. After the Exploration Period and prior to or upon approval of a Declaration of Mining Project Feasibility by the Director, the Contractor shall finally relinquish any portion of the Contract Area not necessary for minang operations and not covered by any Declaration of Mining Project Feasibility. 苦 Final Mining Area - The linal Mining Area shall not be more than five thousand hectares (5,000 has.) for metallic minerals. The Director may 腒 allow the Contractor to hold more than one (1) final Mining Area subject to the maximum limits set under the implementing rules and regulations of the Act: Provided, That each final Mining Area shall be covered by a Declaration of Mining POect Feasibility. Declaration of Mining Project Feasibility - During the Exploration Period, the Contractor shall submit to the Director through the concerned Regional Director, a Declaration of Mining Proiect Feasibility of the Area./final lvlining Area supported by a Mining Project Feasibility a Three (3)-Year Development and Construction or Commercial on Work Program, a complete geologic report, an application for survey and the pertinent Environmental Compliance Certificate, among other applicable requirements. Failure of the Contractor to submit a Declaration of Mining Project Feasibility during the Exploration Period shall be considered a substantial breach of this Agreement. 56 Survey of the Contract Area/final Mining Area - The Contractor shall cause the survey of the perimeter of the Contract Area/final Mining Area through an application for survey, complete with requirements, filed in the concerned Regional Office simultaneous with the submission of the Declaration of Mining Project Feasibility. Survey returns shall be submitted to the concerned Regional Oirector for approval within one (1) year from receipt of the Order of Survey complete with the mandatory requirements stated in the implementing rules and regulations of the Act. 节腩艖 膌 Reporting a) Periodic Reports - During the Exploration Period, the Contractor shall submit to the Director through the concerned Regional Director, quarterly and annual accomplishment reports under oath on all activities conducted in the Contract Area from the Effective Date of 5 this Agreement. The quarterly report shall be submitted not later than fifteen (15) days at the end of each Calendar Quarter while the annual accomplishment report shall be submitted not later than thirty (30) days from the end of each Calendar Year. Such information shall include detailed financial expenditures, raw and procpssed geological, geochemical, geophysical and radiometric data plotted on a map at a minimum 1:50,000 scale, copies of originals of assay results, duplicated samples, field data, copies of originals from drilling reports, maps, environmental work program implementation and detailed expenditures showing discrepancies/deviations with approved exploration and environmental plans and budgets as well as all other information of any kind collected during the exploration activities. All information submitted to the Bureau shall be subject to 腒裪 the confidentiality clause of this Agreement. b) Final Report - The Contractor shall submit to the Director through the concerned Regional Director, a final report under oath upon the expiration of the Exploration Period which shall be in the form and substance comparable to published professional reports of respectable international institutions and shall incorporate all the findings in the Contract Area including location of samples, assays, chemical analysis, and assessment of mineral potentials together 苦 with a geologic map of 1:50,000 scale at the minimum showing the results of the exploration. Such report shall also include detailed expenditures incurred during the Exploration Period. ln case of 腒 diamond drilling, the Contractor shall, upon request of the Director/concerned Regional Oirector, submit to the Regional Offrce a quarter of the core samples which shall be deposited in the Regional Office Core Library for safekeeping and reference. c) Relinquishment Report - The Contractor shall submit a separate relinquishment report with a detailed geologic report of the relinquished area accompanied by maps at a scale of 1:50,000 and results of analyses and detailed expenditures, among others. 4 SECTION VI DEVELOPMENT AND CONSTRUCTION PERIOD 61 Timetable - The Contractor shall complete the development of the mine including the construction of production facitities within thirty six (36) months from the submission of the Declaration of Mining project Feasibility, subject to such extension based on justifiable reasons as the Director may approve, upon recommendation of the concerned Ragional Director. 賶 苂 艴 艓 Reporting a) Annual - The Contractor shall submit, within sixty (60) days after Oec€mber 31 of each year, to the Director through the concemed Regional Director, an annual report which states the major activities, achievements and delailed expendilures during the year mvered, including maps, assays, rock and mineral analyses and geological and environmental progress reports during the Development and Construction Period. 莍 b) Final Report - Within six (6) months from the comptetion of the development and construction activities, the Contractor shall submit a final report to ths Director through the concerned Regional Director. Such report shall integrate all information in maps of appropriate scale and quality, as well as in monographs or reports in accordance with internalional standards. SECTION VII OPERATING PERIOD 7.1 Timetable - The Contractor shall submit, within thirty (30) days before ? completion of mine development and construction of production facilities, to the Director through the concerned Regional Director, a Three-year Commercial Operation Work Program. The Contractor shall commence commercial utilization immediately upon approval of the aforesaid Work Program. Failura of the Contractor to commencs Commercial production within the period shall be considered a substantial breach of the Agresment. 苦 72 Commercial Operation Work Program and Budggt - During the Operating Period, the Contractor shall submit to the Direclor through the concemed Regional Director, Work Programs and Budg€ts covering a period of 鉀 three (3) years each, which shall be submitted not tatsr than thirty (30) days before the expiration of th6 period covered by the previous Work Program. The Contractor shall conduct Mining Operations and other activities for tha duration of the Operaling Period in accordance with the duly approved Work Programs and corresponding Budgets and any modification ihereof shall be subject to approval by the Oirector. 4 9 Expansion and Modilication of Facilities - The Contractor may make expansions, modifications, improvements, and replacements of the mining facilities and may add new facilities as the Contractor may consider necessary for the operations: provided, That such plans shall be embodied in an appropriate Work program approved by the Oirector. 74 Reporling a) Quarterly Reports - Beginning with the first Calendar euartsr following the commencement of the Operating period, the Conlractor shall submit, within thirty (30) days afler the end of each Catendar Quarter, to the Director through the concemed Regional Director, a Quarterly Report stating the tonnage of produclion in terms of ores, concentrates, and their coresponding grades and other types of products; value, destjnation of sales or exports and to whom sold; terms of sales and expenditures. b) Annual Reports - During the Operating period, the Contractor shatl submit within sixty (60) days flom the end of each Calendar year, to the Director through the concerned Regional Director, an Annual Report indicating in sufficient dstail: 荖 b.1 ) The total tonnage of ore reserves, whether proven, probable, or inferred, the total tonnage of ores, kind by kind, broken down between tonnaga mined, tonnages transported from the.mrne site and their corresponding destination, tonnages stockpiled jn the mine and elsewhere in the philippines, tonnages sold or committed for export (whether actually shippeJ from lhe ffilippines or not), tonnages actuall, shiiped from the Philippines (with full details as to purchaser, destination and terms of sale), and if known to the Contractor, tonnages refined, processed or manufactured in tha philippines with full specifications as to the intermediate products, by-products or final products and of the terms at which they were disposed; 菁b.2) Work accomplished and work in progress at the end of the year in question with respect to all the installations and facilities rslated to the utilization program, including the investment actually mads or committed, b.3) Profile of work force, including managomsnt and staff, stating particularly their nationalities, and for Filipinos, their place of origin (i.e., barangay, town, province, region); and b.4) Ownership of the Contractor, particularly with respect to nationality. The. Conlractor shall also comply with other reporting requirgments provided for in lhe implementing rules and regulations of th; Aci. SECT10N Vi腡 FISCAL RECtME ral Principle - The fisc€t regime of this Agreement shall be governed ) principle according to which the Government expects a reisonable 荃 relum in economic value for the utilization of non-renewable mineral resources under its national sovereignty while the Contractor expecls a reasonable return on its investment with special account to be taken for the high risk of exploration, the terms and conditions prevailing elsewhere in the industry and any special efflciency to be gained by a particularly good performance of lhe Contractor. 82 Registratlon Fees - Within fifteen (15) days upon receipt of the notice of approval of the Agreement from ths crncerned Regional Ofi]co, the Contractor shall cause the registration of this Agreement with lhe said Regional Ofiice and pay the registration fee al the rate provided in the existing rules and regulations. Failure of the Contractor to cause the registration of this Agreement within the prescribed period shall be sufficient ground for c€ncellation of the same. 83 Occupation Fees - Prior to registration of this Agraemenl and at the same date every year thoreafter, the Contractor shall pay to the concerned Municipal/City Traasurer an occupation fee ovor th€ Contract Area at the annual rate provided in the existing rules and regulations. lf the fea is not paid on the date specifiod, the Contractor shall pay a surcharge of twenty five percentum (25olo) of the amount due in addition Y to the occupation fees. 84 Share of the Government - Ths GovernmBnt Share shall be the excise tax on mineral products at the time of removal and at the rate provided,for in Republic Act No. 7729 amending Section 151 (a) of the National lnternal Revenue Code, as amended, as well as other laxos, duties, and fees levied by existing laws. For purposes of determining the amount of the herein Govemment Share, the Contractor shall strictly comply \r/ith the auditing and accounting requirements prescribed under existing laws and regulations. The Government Share shall be allocated in accordance with Seclions 29O and 292 of Republic Act No. 7160, otheMise known as "The Local 莔 Govemment Code of 1991." 85 Pricing of Sales - The Contractor shall endeavor to obtain the best achievable price for its production and pay the lowest achievable marketing commissions and related fees. lt shall seek to strike a balance between long-term sales comparable to policies followed by independent producers in the intemational mining industry. The Contractor shall likewise seek a balanced distribution among consumers. lnsofar as sales to Contracto/s affiliates are crncemed, prices shall be at arm's length standard and competing offers for large scale and long-term contracts shall b6 procured. The Bureau shall be furnishsd a copy of th€ said Sales Agreement subject to conridentiality botween the Bureau and the Contractor. 86 Assoclated Minerals - lf minerals other than gold and other associated deposits are discovered in commercial quantities in the Contract Area, lhe value lhereof shall be added to the value of the principal mineral in puting the Government share. 荽 lt sEcTroN rx WORK PROGRAMS 91 Submission to Government - Within the periods stated herein, the Contractor shall prepare and submit to the Director through the crncerned Regional Oirector, a Work Program and conesponding Budget for lhe Contract Aroa stating the Mining Operations and expenditures which the Contractor proposes to carry out during the period covered with the details and particulars set forth elsewhere in thts Agreemont or in the supporting documents. 92 Government's Examination and Revision of Work Program - Should the Government wish to propose a revision to a certain specific fealure in the Work Program or Budget, it shall, within thirty (30) days after receipt thersof, provide a Notice to the Contractor specifying in reasonable detail its reasons therefore. Promptly thereafter, the Government and Contractor will meet and endsavor to agree on lhe revision proposed by the Govemment. ln any event, the revision of any portion of said Work \i, Program or Budget in which the Government shall fail to notify the Contractor of the proposed revision shall, insofar as possible, be carried out as presqibed herein. lf the Government should fail within sixty (60) days from receipt thereof to notify Contractor of the proposad revisions, the Work Program and Budget proposed by the Confador shall be deemed to be approved. 93 Contractor's Changes to Work Program - lt is recognized by the Govemment and lhe Contractor that the details of any Work program may require changes in the light of changing circumstances. The Contractor may make such changes: Provided, That it shall not change the general objective of the Work Program: Provided further, That changes which entail a variance of at least twenty percentum (20%) shall be subject to the approval of the Director. \, 94 The Govemment's approval of a proposed Work Program and Budget will not be unreasonably withheld. sEcTtoN x ENVIRONMENTAL PROTECTION AND MINE SAFETY AND HEALTH 10.1 The Contractor shall manago its Mining Operations in a technically, financially, socially, culturally and environmentally responsible manner to achieve the sustainable development objectives and responsibilities as provided for under the implementing rules and regulations of the Act: 1O.2 The Contractor shall prepare a plan of mining so that its damage to the environment will be minimal. To the extent possible, control of pollution and the transformation of the mined-out areas or materials into economically and socially productive forms must be done simultaneously with mining; 4 10.3 The Contractor shall submit an Environmenlal Work program during the Exploration Period as prBscribed in the implementing rules and regulations of the Act: 10.4 An Environmental Compliance Certificate (ECC) shall be secured first by the Contractor prior to the conduct of any development works, construction of production facilities and/or mine produclion actiyities in the Contract Area; 10.5 The Contractor shall submit within thirty (30) Calendar days after the issuance and receipl of the ECC, an Environmental protection and Enhancement Program (EPEP) using MGB Form No. 16-2 covering all areas lo be affscted by development, utilization and processing activities under this Agreement. The Contractor shall allocate for its initial environment-related capital expenditures approximat6ly ten percent (10%) of the total project cost or in such amount depsnding on the environmental/geological condition, nature and scale of operations and technology to be employed in tha Contract Area; 10.6 The Contractor shall submit, within thirty (30) days prior to the beginning of every c€lendar year, an Annual Environmental Protection and Enhancsment Program (AEPEP), using MGB Form'16-3, which shall be based on the approved EPEP. The AEPEP shall be imptemented during the year for which it was submitted. To implement its AEpEp, the Contractor shall allocate annually three to five percent (3%-50/6) of its direct mining and milling costs depending on ihe environmental/geologic condition, nature and scale of operations and technology employed in the Contract Area; 10.7 The Contractor shall establish a Mine Rehabititalion Fund (MRF) based on the financial requirements of the approved EpEp as a reasonable snvironmental deposit to ensure satisfactory compliance with the commitments/strategies of the EPEP/AEPEP and availability of funds for 腪 the performance of the EPEP/AEPEP during the specific project phase. 腪 The MRF shall be deposited as Trust Fund in a government depository bank and shall be used for physical and social rehabilitation of areas affected by mining activities and for research on the social, technical and preventive aspects of rehabilitation; 10.8 The Contractor shall set up mitigating measures such as mine waste and mill tailings disposal syslem, mine rehabilitation or plan, water quality monitoring, etc. to minimize land degradation, air and water pollution, acid rock drainage and changes in hydrogeology; 10.9 The Contractor shall set up an Environmental and Safety Office at its minesite manned by qualified personnel to plan, implement and monitor its approved EPEP; 10.10 The Contractor shall be responsible in the monitoring of environmental, safety and haalth conditions in the Contract Area and shall stricfly comply with all the rules and regulations embodied under DAO No. 2OO0-9g, otherwise known as the 'Mine Safety and Health Standards;,, 10 Conlractor shall be responsible for the submission of a final mine bilitation and/or decommissioning plans, including its financial ll "1 requirements and incorporating the details and particulars set forth in the implementing rules and regulations of the Act. sEcTroN xl RIGHTS AND OBLIGATIONS OF THE PARTIES 11.'l Obligations of the Contraclor a) To exclusively conduct sustainable Mining Operations within the Contracl Area in accordance with the provisions of the Act and its implementing rules and regulations; b) To construcl and operate any facilities specified undar tha Minoral Agreement or approved Work Program; c) To determine the exploration, mining and lreatment process to be utilized in the Mining Operations; d) To extract, remove, usB and dispose of any tailings as authorized by an approved Work Program, e) To secure all permits necessary or desirable for the purpose of Mining Operations; f) To keep accurate technical records about the mining operations as well as financial and marketing accounts and make thsm available to Government representatives authorizod by the Director for the purpose of assessing the performance and compliance of ihe Contractor with the terms of thas Agreement. Authorized r€presentatives of other Govemment Agencies may also have acc€ss to such accounts in accordance with existing laws, rules and regulations; 腝 g) To furnish the Bureau all the data and information gathered from tha Contracl Area and lhal all the books of accounts and records shall be opsn for inspection; h) To allow access to Government during reasonable hours in inspecting the Contract Area and examining pertinent records for purposss of monitoring complianc6 with ths terms of this Agroement; l) To hold the Govemment free and harmless from all claims and accounts of all kinds, as well as demands and ac{ions arising out of the accidsnts or injuries to persons or properties caused by Mining Operations of the Contraclor and indemnify the Govemment for any expenses or costs incured by the Govemment by reason of any such claims, accounts, demands or actions; j) ln the development of the community: j.'1) To recognize and resp€ct the rights, customs and traditrons of indigenous cultural communities over their anceslral lands and to allocate royalty payment of not less than one psrcent (1016) of (he value of the gross output of minerals sold; ,\( j.2) To coordinate with proper authorities in the development of the mining community and for those living in the host and neighboring communities through social infrastructure, livelihood programs, education, water, electricity and medical services. Where traditional self-sustaining income and the community activities are identified to be present, the Contractor shall assist in the preservation and/or enhancemont of such activities, j.3) To allot annually a minimum of one percent ('1%) of the direct mining and milling costs necessary to implement the activities undertaken in the development of the host and neighboring communilies. Expenses for community development may be charged against the royalty payment of at least one percent (1%) of the gross output intended for the concerned indigenous cultural community; j.4) To give preference to Filipino citizens who have established domicile in the neighboring communities, in the hiring of personnel for its mining operations. lf nacessary skills and 荗 expertise are currently not available, the Contractor must immediately prepare and undertake a training and recruitment Program at its expense; j.5) To incorporate in the Mining Project Feasibilrty Studi the planned expenditures necessary to implement 0.1) to 0.3) of this Section; k) ln the development of Mining Technology and Geosciences: k.1) ln the course of its operations, to produce geological, geophysical, geochemical and other types of maps and reports that are appropriate in scale and in format and substance which are consistent with the internationally accepted standards and V practices. Such maps shall be made available to the scientific community in lhe most convenient and cost effective forms, subject to the condition that the Contractor may delay release of said information for a reasonable period of time which shall not exceed three (3) years; k.2) To systematically keep the data generated from the 苦 ContracuMining Area such as cores, assays and other related information, including economic and financial data and make lhem accessible to students, researchers and other persons responsible for developing mining, geoscienco and processing  technology subject lo the condition that the Contractor may delay release of data to the science and technology community within a reasonable period of time which shall not exceed three (3) years; k.3) To transfer to the Government or local mining company the appropriate technology it may adapt in the exploration, development and commercial utilization of the minerals in the Contract Area, 15 k.4) To allocate rosearch and dovelopment budget for the advancemeni of mining technology and geosciences in coordination with the Bureau, research institutions, academe, etc.; k.5) To replicate data, maps and rePorts cited in (k.1) and (k.2) and furnish tho Bureau for archiving and systematic safekeeping which shall be made available lo the science and technology community for conducting research and undertaking other aclivities which contribute to the development of mining, geoscience and processing technology and the corresponding national pool of manpower talents: Provided, however, that the release of data, maps and the like shall be similarly constrained in accordance with (k.1) and (k.2) above; l) To incorporate in the Mining Prolecl Feasibility Study the planned expenditures necassary to implement all the plans and programs set forth in this Agreement; and m) To pay all olher taxes and fees mandaled by existing laws, rules and regulations. 荁 1 1.2 Rights of the Contractor The Contractor shall have the right: a) To conduct Mining Oparations within the confines of its ContracuMining Area in accordance with the terms and c.nditions hereof and that it shall not interfere with the rights of other Contractors/Lessaes/Operators/ Permittees; b) Of possossion of the Contracl Area, with full right ol ingress and egress and the right to occupy the same, subject to surface and easement rights, c) To use and have access to all declassified geological, geophysic€|, drilling, production and other data relevant to the mining operations; d) To sell, assign, transfor, convey or othsrwise dispose of all its rights, interests and obligalions under the Agreement subject to the approval of the Govemment; e) To employ or bring into the Philippines foreign technical and specialized personnel, including the immediate members of their families as may be required in the operations of the Contractor, subject to applicable laws and regulations: Provided. That if the employment connection of such foreign persons with the Contractor ceases, the applicable laws and regulations on immigration shall apply to them. EveMime foreign technologies are utilized and where alien executives are employed, an effective program of training understudies shall b€ undertaken. The alien employment shall be limited to technologies requiring highly specialized training and 0 To enjoy easement rights and use of timber, water and other natural resourcss in the Contract Area subject to pertinent laws, rules and regulations and ihe righis of third parties; g) Of repatriation of capital and remittance of profits, dividends and interest on loans, subject to existing laws and Bangko Sentral rules and regulations; and h) To import when nacessary all equipment, spare parts and raw materials required in the operations in accordance with existing laws and regulations. 11 .3 Obligation of the Govemment The Govemment shall: Ensure that the Contractor has the Government's full cooperatign in the exercise of the rights granted to it under this Agreement; Use its best efforts to ensure the timely issuancs of necessary permits and similar authorizing documents for use of the surface of the Contract Area, and C) To cooperale with the Contractor in its efforts to obtain financing contemplated herein from banks or other financial inslitutions: Provided, That such financing arrangements will in no event reduce the Contracto/s obligation on Govemment rights hsreunder. SECTION XII ASSETS AND EQUIPMENT 12.1 The Contractor shall acquire for the Mining Operations only such assets that are reasonably estimated to be required in carrying out such Mining Operations. 12.2 All materials, aquipmsnt, plant and other installations erecled or placad on the Contract Area of a movable nature by the Contractor shall remain the property of the Contractor. The Contractor shall have the right to remove and re-€xport such materials and equipment, plant and other installations from the Philippines, subject to existing rules and regulations. ln case of cessalion of Mining Opsrations on public lands occasioned by its voluntary abandonment or withdrawal, lhe Contractor shall have a period of one ('1) year from the time of cessation within which to remove its improvements, otherwise, all social infrastructures and facilities shall be turned over or donated tax free to the proper govemment authorities, national or local, to ensure that said infrastructures and facilities are continuously maintained and utilized by the host and neighboring communities. SECT!ON X腡 ! and after Commercial Production commences shall, in consultation and with consent of th6 Government, prepare and undertake an extensive training programme suitable to Filipino nationals in all levels of employment. The obiective of said programme shall be to reach within the timetable set forth below the following targets of "Filipinization": Unsk腡led Sk腡led Clerical PrOfessional Management /0) (膋(%) (%) (%) (%) Year 100 1 100100 80 70 Ysar 3 100100 100 80 70 Year 5 100100 100 80 80 Yeat 7 100100 100 90 9o Year 10 100 100100 100 1oo Yeall5 100 100100 100 1oo 13.2 Cost and expenses of training such Filipino personnel and the Contractofs own employees shall be included in the Operating Expenses. 膌 13.3 The Contractor shall not discriminate on the basis of gender and shall respect the right of women worksrs lo participate in policy and decision- making processes affecting their rights and bensfits. SECTION XIV ARBITRAT'ON 14.1 The Government and the Contractor shall consult with each other in good faith and shall exhaust all available remedies to setfle any and all disputes or disagreemonts arising out of or relating to ths validity, interpretations, enforceability, or performance of this Agreement before 膥resorting to arbitration as provided for in Section 14.2 below. 14.2 Any disagreement or dispute which can not be setflsd amicably within a period of one (1) year from the time the issue was raised by a party shall be settled by a tribunal of three (3) arbitrators. This kibunal shall be constituled as follows: one to be appointed by the Contractor and another to be appointed by the Secretary. The flrst two appointed arbitrators shall considor names of qualmed persons until agreement on a mutually acceptable Chairman of the tribunal is selected. Such arbitration shall be initiated and conducied pursuant to Republic Act No. 876, otheMise known as the 'Arbitration Act' ln any event, the arbitration shall be conducted applying the substantive laws of lhe Republic of the phitippines. Each party shall pay fifly per centum (SO%) of the fees and expenses of the Arbitrators and the costs of arbilration. Each party shall pay its own 膌 腓 SECT:ON XV V b) Failure of the Contractor to conduct mining opsrations and other activities in accordance with the approved Work Programs and/or any modification thereof as approved by the Darector. 15.9 The Government may suspend and cancel tax incentivos and credits if the Conlractor fails to abide by the terms and conditions of said incentives and credits. SECTION XVI OTHER PROVISIONS 16.1 Any terms and conditions rssulting from repeal or amendment of any gxiating laws or regulation or from lhe enactmenl of a law, regulation or administrative order shall be considered a part of this Agreement. '16.2 Notice All notices, demands and other communications required or permittsd hereunder shall be made in writing, telex or telecopy and shall be deemed 腝have been duly given notice, in the case of telex or telecoPy' if to or confirmation received, or if dslivered by hand' upon anslyered back in the mail, airmail postage receipt or ten days after being deposited prepaid and addressed as follows; lf to the Government: THE SECRETARY Department of Environment and Natural Resources DENR Building , Visayas Avenue Diliman, Quezon City 腝lf to the Contractor : THE PRESIDENT Discovery Mines, lncorporated Lipcann, Bangued, Abra 苓 Eithar party may substitute or change such address on notice thereof to the olher party 荾 16.3 Goveming Law This Agreement and the relation between the parties hereto shall be governed by and construed in accordance with the laws of the Republic of the Philippines. The Contractor hereby agrees and obliges itsslf to comply with the provisions of the Act, its implementing rules and regulations and other relevant laws and regulations. N 20 16.4 Suspension of Obtigation a) Any failure or delay on the part of any party in the performance of its obligation or duties hereunder shall be excused to the extent attributable lo Force Majeure as defined in the Act: provided, That the suspension of Mining Operations due to Force Majeure causes shall be subject to approval by the DENR Secretary. b) lf Mining Operations are delayed, curtailed or prevented by such Force Majeurc causes, then the time for enjoying the rights and carrying out the obligations thereby affected, the term of this Agreement and all rights and obljgations hereunder shall be extended for a period equal to the period involved. c) The Party, whose ability to perform its obligations is affected by such Force Maleure causes, shall prompily give Notice to the other in writing of any such delay or failure of performance, the expected duration thereof and its anticipated etfect and shall use its efforts to remedy such delay, except that neither Party shall be under any obligation to settle a labor dispute: Provided, That the suspension of r-.- obligation by the Contractor shall be subiect to prior approval by the Director. 16.5 Amendments This Agreement shall not be annulled, amended or modified in'any respect except by mutual consent in writing of the herein parties. lN WTNESS WHEREOF, the Parties hereto have executed this Agreement, as of the day and year first above written THE REPUBLIC OF THE PHILIPPINES BY Nov 2r @ of Environment and Natural Resources DISCOVERY MINES, NCORPORATED BY: SIGNED IN TH PBESENCE OF : RP^6- F lt膌 膌 (Signature over printed Nanrel (Signature over printeO llanre) 腣 腃 裪 ACKNOWLEDGMENT Republic ofthe Ph腡 ippines) 膜 "E2C"c`0 )SS President of Discovery Mines, tncorpoEGOloG tnorwr io me and lo me known to be the same persons who ex€cuted the foregoing instrument consisting of twenty.two (22) pages, including this acknowledgment page, and acknowledged to me that the same is their voluntary acts and deeds. lN WITNESS WHEREOF, I have hereunto set my hand and affix my notarial seal, this , .-;:- dav of -TI''-, ----r