Legalist

11/07/2021

IS THERE REALLY SUCH A THING AS RESPONSIBLE MINING?

By: Atty. Cesar Edwin Tan Jayme
Jyly 12, 2021 | Muntinlupa City | Vol. 006
www.legalist.ph

Responsible and sustainable mining is a mindset when a miner puts the interest and welfare of the people and the environment before himself. It is possible and realistic if mining companies will depart from the old, traditional mining practices and start to adopt and use only the latest technology in developing the mine site, whether an open-pit mine or a tunnel- type mine.

Responsible mining means not putting the miners and the host community at harm's way, and then extracting the mineral deposits leaving behind minimal waste or tailings materials to dispose of without using mercury and other deadly chemicals that contaminate river systems. This can be done, and is already being done in most advanced mining countries like Australia and Canada.

The mining industry is an industry the world caanot survive without, like the food industry or agriculture industry. The only difference is that it is extractive and destructive by nature, making it a strong target for climate change advocates. But to preserve and conserve the environment, monitor the rising temperatures in the Arctic and Antarctic region, protect the Amazon Rainforest from loggers, stop poaching of endangered animals, study tornadoes, you will surely need drones, research equipment, sattelites, ships, radars, all of whichvate made of computer chips whose raw materials are iron, zinc and copper, and other metalic and non-metalic minerals. The Philippines has one of the richest mineral deposits in South East Asia, and probably the world.

So we go back to the question if there really is such a thing as responsible and suatainable mining, or could there be responsible mining in the Philippines? The answer is yes. That is why the government recently lifted the 9-year moratorium on miming applicatiins and has now allowed the DENR-MGB to process pending mining applications. This sends a strong signal to foreign investors to explore possible joint venture or forming a mineral-deposit based REIT mining company in partnership with local mining companies. There are so many ways to enter the Philippine mining industry, jump-start a moribund industry and help a contracting Philippine economy recover from the impact brought about by the Covid pandemic.

05/07/2021

A PRIMER ON THE TRIBAL MINING AREAS INSIDE THE DIWALWAL MINERAL RESERVTION (DMR)

By: Atty. Cesar Edwin T. Jayme
June 30, 2021 | Muntinlupa | Vol. 000

Question: How does a mining company acquire mineral rights inside the DMR?

Answer: Through the exercise of the Priority Rights and (EPR) and mining rights of the Mandaya, Manobo, Dibabawon and Mangguangan Tribes of the Indigenous Peoples (IPs) of Monkayo, Compostela Valley Province. The EPR of the IPs over their ancestral domain is recognized under R.A. 8371, or the Indigenous Peoples Rights Act of 1997 (IPRA), while their right to undertake mining operations in TRIMA, directly or through a mining investor, was vested by virtue of an Operating Agreement between the IPs and the Philippine Mining Development Corporation (PMDC).

Question: Where is the Diwalwal Gold Rush located?

Answer: The Diwalwal gold rush is located in Mt. Diwata, Monkayo, Compostela Valley Province, in the southern Philippines, covering an area of approximately 729 hectares.

Question: When did the Diwalwal Gold Rush start?

Answer: The Diwalwal gold rush started in September 1983 when gold panning, sluicing and tunnelling of gold ore vein in Diwalwal became widely known after the discovery of rich gold deposits in Mt. Diwata by an IP named Camilo Banad.

Question: What is Proclamation 297?

Answer: Proc. 297 was issued by President Gloria Macapagal-Arroyo on 25 November 2002 pursuant to Sec. 5 of R.A. 7942, also kinown as the Philippine Mining Act of 1995, which declared a certain portion of land located in the Municipality of Monkayo, Province of Compostela Valley, with an area of 8,100 hectares, as a mineral reservation and environmentally critical area, known as the “Diwalwal Mineral Reservation” or DMR. The constitutionality of Proc. 297 was challenged before the Supreme Court in the case of Apex Mining Co. vs. Southeast Mindanao Gold Mining Corp. (G.R. Nos. 152613 & 152628). The Supreme Court sustained its constitutionality.

Question: What is a Mineral Reservation?

Answer: A mineral reservation is established by the President of the Philippines over a certain tract of mineral land upon the recommendation of the Director of Mines through the Secretary of Environment and Natural Resources when there is a need to preserve strategic raw materials for industries critical to national development, or certain materials for scientific, cultural or ecological value.

Question: Who can explore, utilize and mine mineral deposits inside a mineral reservation?

Answer: The Philippine Mining Act of 1995 and Proc. 297 provides that mining operations in existing mineral reservations like the DMR shall be undertaken by the Department of Environment and Natural Resources (DENR) directly or through a qualified mining contractor. The mining operations that shall be undertaken inside the DMR is however subject to the rights of small-scale miners under R.A. 7076, or the Small-scale Mining Act, who have been operating inside the 729-ha. Diwalwal gold rush area.

Question: Is small-scale mining allowed in DMR?

Answer: Yes. Under the implementing rules and regulations of Proc. 297 (DAO 2002-35) small-scale mining operation is allowed in an area of not more than 25% of the total mineral reservation. Small-scale mining is presently being undertaken by various small-scale mining operators within the 729-ha. Diwalwal gold rush above 600 m asl.

Question: Do the Indigenous Peoples have a right to enter into a mining agreement with the government?

Answer: Yes. Under R.A. 8371 the ICCs/IPs of Monkayo have an EPR to undertake exploration, development, utilization and processing of mineral resources in the DMR and other mineral areas within their ancestral domain. The ICC/IP community of the Mandaya, Manobo, Dibabawon and Mangguangan Tribes have entered into an Operating Agreement with PMDC to expolore, develop and mine the mineral deposits in the 950-ha. TRIMA, directly or through an investment partner.

Question: Where is TRIMA situated?

Answer: The Tribal Mining Area (TRIMA) which is divided into two (2) parcels, known as TRIMA 1 and 2, is situated inside the DMR. TRIMA 1 is on the western side of the 729-ha. gold rush, while TRIMA 2 is on the southwestern side of the gold rush, adjacent to the Higanteng Bato porphyry Cu-Au Prospect.

TRIMA 1 lying adjacent to the declared Minahang Bayan of Diwalwal potentially host the probable western extension of the productive Buenas – Tinago gold vein system. Work to date in TRIMA 1 has been limited to chip sampling of existing adits (previously worked by artisanal miners) and soil sampling near workings in the northwest corner of the area.
TRIMA 2 host a potential porphyry Cu –Au prospect with its large area of advanced argillic alteration and strong silicified caps that could represent at depth of a buried and Cu - Au mineralized porphyry. Initial works conducted include soil geochemical sampling, channel sampling, EM and gradient array geophysical survey.

Question: Has the ICCs/IPs of Monkayo undertaken mining operations in TRIMA?

Answer: No. The IPs have been searching for a mining investment partner who could provide technical, consulting and financial assistance to undertake exploration and mining operation in TRIMA 1 and 2. Sec. 57 of R.A. 8371 (IPRA) provides that “[a] non-member of the ICCs/IPs concened may be allowed to take part in the development and utilization of the natural resources x x x provided that a formal and written agreement is entered into with the ICCs/IPs concerned.”

Question: Has the ICCs/IPs of Monkayo entered into any formal and written agreement with mining investors?

Answer: Yes. The ICCs/IPs of Monkayo have entered into agreements with some local miners and ERT Holdings Group. as their mining investment partner for TRIMA 1 and 2, and other areas within their ancestral domain covered by Certificate of Ancestral Domain Title (“CADT”) No. R11-CADT-MON-0703-0007.

PMDC is looking for a qualified mining investor who can explore and develop the 729-area below 600 m asl, and the rest of the area known as the “Diwalwal Integrated Development Area” or PMDC Area. The gold rush area (729 ha.) above 600 m asl is reserved for small-scale mining operators. The PMDC area is a conflict area in the DMR due to turf wars between rival small-scale mining groups and tribal clans.

Question: Has ERT Holdings Group signified its intention to be a contractor and strategic partner of the government in developing the PMDC Area?

Answer: Yes. The ERT Holdings Group has offered to be the strategic partner of the government in exploring, developing and mining the gold and other mineral deposits in the PMDC Area.

What are the Strengths and Opportunities for ERT Holdings Group?

The strength of ERT Holdings Group in the DMR is its strategic alliance and partnership with the four tribes of the IP/ICC community thru the assistance of the Mindanao Indigenous Peoples Conference for Peace and Development (MIPCPD) for the exploration and development of TRIMA. The ancestral domain of the four tribes covers an area of about 30,468 has., and under R.A. 8371 the ICCs/IPs have the inherent right to approve any mining operation inside their ancestral domain. The approval of the IP/ICC is given through an FPIC without which the mining operator cannot commence any form of exploration or mining activity. With the partnership that was forged between the IP/ICC community and JMC, the opportunity for JMC to expand its exploration and mining operation throughout the 8,100 ha. DMR is not remote, and is attainable within a short period.

Question: Is there a geological evaluation of the mineral deposits in DMR?

Answer: The Diwalwal high grade gold vein systems are surrounded by several copper and gold prospects. The Upper Ulip/Matangad porphyry Prospect lies northwest and about 3km of Diwalwal, the Mabatas/Higanteng Bato porphyry Prospect in the southwest about 4 kms of Diwalwal and the Mapaso/Letter V epithermal Au Prospects located directly south of Diwalwal. All of these prospects have been the subject of exploration work of previous mining companies. Further exploration work is needed however to determine the exact volume of mineral deposits in Diwalwal Gold Rush area.

Does the Philippines government support mining in the Philippines?

Yes. The government is fully supportive of mining in the Philippines as an engine of economic growth and driver of economic development and recovery to mitigate the economic impact of the Covid-19 pandemic. The government expects to earn approximately P7 bn annually from mining operations in Diwalwal. At present, the government is only earning about P390 million a year from mineral production areas. The government is also exploring measures to level the playing field in the mining industry and to improve environmental compliance. Among the reforms in the mining industry are the protection of mining investment and the full implementation of the “use it, lose it” policy, upgrading of environmental standards and strengthening of public-private partnership (PPP) and private sector participation (PSP).

Can foreign companies directly undertake mining operations in the DMR?

No. Foreign companies cannot directly undertake exploration, development and other mining activities in the DMR. Under R.A. 7942 and Proc. 297, mining operations in the DMR shall be undertaken by the State or through a contractor. The contractor must be a Filipino citizen or a corporation or association at least 60% of its capital is owned by Filipino citizens as required under Article XII of the 1987 Constitution. Foreign mining companies may however enter into a Financial or Technical Assistance Agreement (FTAA) with the Government of the Philippines (GOP), through ther PMDC, to explore, develop and utilize mineral resources in the DMR subject to the FPIC and EPR of the ICCs/IPs community, thus allowing a 100% foreign ownership of the mining project.

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04/07/2021

TIPS IN BUYING SUBDIVISION LOT, TOWNHOUSE, HOUSE & LOT AND CONDO UNIT

By: Atty. Cesar Edwin T. Jayme
July 4, 2021 | Muntinlupa City | Vol. 004
Author is not a Real Estate Broker

The boom in the real estate industry in the Philippines in recent years has encouraged many real property developers to join the band wagon. Most of these developers however do not have the track record and financial resources to develop raw lands into sustainable housing, subdivision and condominium projects. The Housing and Land Use Regulatory Board (HLURB) is a national government agency that has the authority to regulate real estate developers. But we shall not be talking about the role and functions of the HLURB in this article because compliance with documentary requirements is a concern of housing developers not subdivision and condominium buyers.

Subdivision and condominium buyers are enticed by housing developers to buy their units using attractive marketing materials, like brochures, leaflets, pamphlets and other form of printed materials. Once a buyer inquires with a sales person the buyer is given a list of units to choose from, and the price of each unit. For small to medium housing developers these units on the brochure are not yet built, but are already sold in the market. This is called pre-selling, and is also practiced by big developers. Now the raw land where the subdivision or condominium project shall stand is owned by the developer, but some developers may not yet have fully paid the price of the land to the landowner. In some instances the landowner and the housing developer enter into a Joint Venture Agreement (JVA) wherein the landowner shall get 40% of the developed land, and the developer gets 60%. This also holds true in condominium projects where the landowner and developer divide the number of units 60/40, or as agreed upon in the JVA.

First Tip:

Subdivision and condominium buyers should be careful with joint venture arrangements between landowners and developers because they might be buying the subdivision lot or condominium unit from the developer instead of the landowner, or vice versa. Because of the lack of marketing skills and sales expertise of the landowner to market his lots, the landowner would usually delegate the sales and marketing task to the developer. If the lot or unit the buyer has chosen belongs to the landowner, it is the landowner who should execute the Contract to Sell or Deed of Sale, or the developer should be armed with a special power of attorney to sign the documents, and receive or accept payments from the buyer. The best way to find out who the owner of the lot or unit is, is to examine the transfer certificate of title (TCT) or condominium certificate of title (CCT) of the property.

Second Tip:

The name of the owner and technical details of the property is found on the TCT or CCT as the case may be, issued by the Registry of Deeds. This is the first document that the buyer should demand from the developer to ascertain ownership. A photocopy will do if the original cannot be shown. The second important document is the tax declaration issued by the Assessor's Office, specially if the buyer is buying an existing house and lot or condo unit. But if the house has not yet been built then there is no tax declaration for the house. Once the buyer knows who the owner of the lot or condo unit is he should only deal with the owner or the authorized agent of the owner. The buyer must also ask for a copy of the Certificate of Registration and License to Sell (LTS) of the developer issued by the HLURB to ensure that the developer is not a bogus company and that it is duly authorized to develop and sell subdivision lots, house & lots or condo units to the public. It is better to verify than loose hard-earned money to scammers or banned developers

Third Tip:

After verifying the ownership of the subdivision lot, house & lot or condo unit, the next step is the financial part of the sale. Unless the buyer is buying on cash basis there are what you call terms of paying the selling price. The buyer has the choice to pay the selling price in cash or installment. If on installment, the buyer has to come up with his share in the price. This is called his “equity.” Usually, the equity of the buyer is from 20% to 30% of the price, and remaining 80% shall be paid through monthly installment. If the buyer cannot afford to pay the equity in full then he has to amortize also the equity portion over a period of time. If he defaults or fails to pay a single monthly amortization the developer shall forfeit all his payments and cancel the CTS. As much as possible, it is better to pay the equity portion than to amortize it over a long period of time because the amount will be subject to a high interest rate and the buyer will end up paying more interest than the equity portion itself. The developer will also immediately, without hesitation, forfeit all payments made if the buyer delays for a few days and then cancels the CTS and sell the property to a third party. Equity amortization are often debt traps for buyers who sadly cannot really afford to buy the property from the very start.

Fourth Tip:

A subdivision or condominium buyer is usually given two (2) financing options by the developer: (1) avail of in-house financing or (2) apply for a housing loan with the government’s housing program, Pag-Ibig Fund, or with a commercial bank. If the buyer chose in-house financing, then he shall proceed to pay the balance of the selling price on installment to the developer. If he applies for a housing loan with Pag-Ibig or a commercial bank, Pag-Ibig or the bank will evaluate his paying capacity through a credit check and if his housing loan is approved, Pag-Ibig or the bank will issue a Letter of Guarantee (LOG) to the developer. The LOG puts on notice the developer that the housing loan of its buyer has been approved and that it shall pay the remaining balance of the selling price provided the developer executes a deed of absolute sale in favor of the buyer. This is called a “take-out.” On the other hand, if the buyer decides on the in-house financing more often because they want to, but because they have a poor credit rating that their housing loan application are disapproved by Pag-Ibig or the bank. The terms of the in-house financing are expected to be more onerous or highly disadvantageous to the borrower compared to Pag-Ibig or the banks because developers are not financial institutions, and they need the funds for the development of the project, but the money is held up by buyers who: (1) cannot afford to pay the entire selling price and (2) are disqualified to avail of a housing loan with Pag-Ibig. Therefore, most developers, especially the small to medium ones, see buyers who are stuck with in-house financing more of a liability. A single default or delay in the monthly payment will result in forfeiture of all payments made and cancellation of the CTS or reservation agreement.

Fifth Tip:

A subdivision or condominium buyer, no matter how poor his credit status is, or how unstable his financial condition, or who miscalculates his financial capacity to acquire a house & lot, is protected by the law.

The two laws that primarily govern the sale of subdivision lots and condominium units are R.A. 6552, or the Realty Installment Buyers Protection Act, and P.D. 957, or the Condominium and Subdivision Buyers Protective Decree, as amended by P.D. 1216.

Sec. 23 of P.D. 1216 provides that no installment payment made by a buyer in a subdivision or condominium sale shall be forfeited by the developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount he paid including amortization interest but excluding delinquency interests, with interest thereon at the legal rate.

However, if the subdivision or condominium buyer defaults in the payment of his monthly installment, whether it is the equity portion or the balance of the selling price, then the provisions of R.A. 6552, or the so-called MACEDA LAW, shall apply. These rights are as follows:

(1) The right to update payments without additional interest or refund of cash surrender value (CSV)

There are two kinds of buyers who are protected by the law:

a. A buyer who has paid at least 2 years of installments, and
b. A buyer with less than 2 years of installments

We will first discuss the first kind of buyer who has paid at least two (2) years of installment. If the buyer who has paid 2 yrs. of installments he is entitled to the following:

a. To pay without additional interest the unpaid installments due within the total grace period earned by him. Said grace period is equal to one (1) month for every year of installment payments he has made. Here the buyer has at least two (2) months grace period for he should have paid at least two (2) years of installments to avail of the rights under this section. This right can be exercised by the buyer only once every 5 years of the life of the contract.

b. To be refunded of the CSV or cash surrender value of his payments equal to 50% of his total payments if the contract is cancelled. But if he has paid five years or more, he is entitled to an increase of 5% every year and so on but the cash surrender value shall not exceed 90% of his total payments.

The developer cannot cancel the CTS unless:

1. after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission, AND
2. upon full payment to the buyer of the CSV.
In the computation of the total number of installment payments the following shall be included:

a. down payment and
b. deposit or option money

The second kind of buyer is the buyer is the buyer who has paid less than 2 years of installments.

If the buyer has paid less than two (2) years of installments, he still has the right to pay within a grace period of not less than sixty (60) days from the date the installment became due. If the buyer fails to pay the installment due at the expiration of the grace period, that is, 60 days, the developer may cancel the CTS after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission of the CTS by notarial act. Unfortunately, the buyer is not entitled to any refund.

In addition to the rights of the 2 kinds of buyers of subdivision and condominium units the buyer shall have the following the rights:

(2) The right to assign/reinstate Contract – The buyer has a right to sell or assign his rights over the lot or unit to another person or reinstate the contract by updating the account provided this is done during the grace period and before actual cancellation of the contract.

This right is found in Section 5 of RA 6552 which states that:

“SECTION 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by upgrading the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act.”

(3) The right to Advance Payment without Interest and Annotation of Full Payment in the TCT or CCT – The buyer has the right to pay in advance any installments or the full unpaid balance without interest any time and have such full payment annotated on the title.

(4) The right to pay in advance any installment – Under Section 6 of RA 6552 a buyer shall have the right to pay in advance any installments or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase

03/07/2021

02/07/2021

INVESTING IN MINERAL DEPOSIT-BASED REIT MINING COMPANY IN THE PHILIPPINES

By: Atty. Cesar Edwin T. Jayme
July 1, 2021 | Muntinlupa City | Vol. 003

Real Estate Investment Trust or REIT is a financial instrument that has gained popularity among investors and real estate companies alike to hedge against the risks and volatility of the property market, primarily due to the Covid-19 pandemic which has ravaged the Philippine economy over the last 2 years, and without end in sight. REIT is a convenient way to raise capital in the stock exchange, through an Initial Public Offering (IPO), provided that it meets the criteria of the Philippine Stock Exchange, which are, among others, (1) a free float level of at least 15%; among the top 25% by median daily value per month for at least 9 out of 12 months, and (2) belongs to the top 30 companies. Most REITs that are listed in the PSE, or are about to list, are office spaces leased or occupied by Business Process Outsourcing (BPOs) companies.

REIT is a new financial platform designed to monetize non-performing or low-performing real estate assets and resources with potential high value to provide funding for the REIT company's operation, and build a steady stream of revenue so that it can regularly distribute dividends to its shareholders. A REIT company owns, holds, operates, controls and manages a portfolio of high-value, income-producing assets, or assets with a high potential to generate income, for investment by the public. The public will have the opportunity to invest in income-generating assets without having to acquire the asset itself.

The government may soon allow the diversification of the type of real assets covered by REIT, in order to strengthen the country's capital market. Presently, only commercial space are qualified for listing, but power and energy companies have offered their solar panels and renewable energy facilities to the government as a REIT asset. There is no doubt that mineral deposits, such as gold, silver, copper, nickel and zinc which are subterranean fall within the meaning of real estate under R.A. 9856, or the Real Estate Investment Trust (REIT) Act of 2009. Mineral deposits that are undergoing exploration and development, or ready for extraction, processing and export to foreign markets, should be seriously considered for inclusion in the government's diversified REIT program.

By providing the needed capital requirement to large-scale mining companies through the capital market, the protection, preservation and conservation of the environment is ensured. Mineral deposit-based REIT mining companies can leverage on the latest mining technology, and fully adopt global best practices, in the exploration, development, processing and utilization of mineral deposits. The so-called fifth revolution, or advancement in technology, has made mining cleaner and more safer both for the miner and the environment, that it has ever been in the past 2 decades.

The Department of Environment and Natural Resources (DENR), through the Mines and Geo-sciences Bureau (MGB), will soon implement the provisions of E.O. 130 issued in April 2021, lifting the 4-year ban on open-pit mining and the 9-year moratorium on all new and pending mining applications upon the recommendation of the Mining Industry Coordinating Council (MICC). The purpose of this new mining legislation, which may hopefully become a national policy, is to spur economic growth and development, support the infrastructure projects and programs of the government, and help the economy recover from the economic impact and adverse effects of the Covid-19 pandemic.

With the issuance of E.O. 130, the DENR is expected to approve and issue Exploration Permits (EP) and Mineral Production Sharing Agreement (MPSA), among others, pursuant to its existing rules, and guidelines. The grantees of such mining permits shall have the rights and privileges under existing laws, rules, and guidelines to explore, develop and utilize the minerals in their respective mining tenements, in accordance with their feasibility studies. A rapid inflow of billions of US$ dollars in foreign direct investments (FDI) from across the globe, either through direct investment, sponsorship, joint venture, M&A, or if warranted, through a special purpose investment vehicle known as a MINERAL DEPOSIT-BASED REIT MINING COMPANY, shall pour into the Philippine mining industry over the next 10 years and beyond.

15/04/2021

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