Foreign Participation in Philippine Mining: Rules on Foreign Ownership

Foreign participation in Philippine mining is allowed, but only through specific vehicles. Under the Philippine Mining Act of 1995 (Republic Act No. 7942), a legally organized foreign-owned corporation is deemed a qualified person for purposes of granting an exploration permit, a financial or technical assistance agreement (FTAA), or a mineral processing permit. A foreign-owned corporation is one in which less than fifty percent (50%) of the capital is owned by Filipino citizens. For mineral agreements, the contractor must be a qualified person with at least sixty percent (60%) Filipino ownership.

Who counts as a qualified person

The law defines a qualified person as any Filipino citizen with capacity to contract, or a corporation, partnership, association, or cooperative organized for mining, with the technical and financial capability to undertake mineral resources development and duly registered in accordance with law, at least sixty percent (60%) of the capital of which is owned by citizens of the Philippines.

The definition then creates a limited exception: a legally organized foreign-owned corporation is deemed a qualified person for purposes of granting an exploration permit, an FTAA, or a mineral processing permit. This means the foreign-equity route is tied to those three instruments, not to the mineral agreements.

The three vehicles open to foreign-owned corporations

Exploration permit. The Bureau of Mines and Geosciences has authority to grant an exploration permit to a qualified person. It grants the right to conduct exploration for all minerals in specified areas. The permit is for a period of two (2) years, subject to annual review and relinquishment or renewal upon the recommendation of the Director.

Financial or technical assistance agreement. An FTAA is a contract involving financial or technical assistance for large-scale exploration, development, and utilization of mineral resources. Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of mineral resources in the Philippines may enter into an FTAA directly with the Government.

Mineral processing permit. A mineral processing permit refers to the permit granted to a qualified person for mineral processing, which covers the milling, beneficiation, or upgrading of ores, minerals, and rocks into marketable products.

Mineral agreements and the 60% Filipino requirement

For mineral agreements, the contractor must be a qualified person — meaning at least sixty percent (60%) of the capital is owned by Filipino citizens. The Mining Act provides three modes of mineral agreement:

• Mineral production sharing agreement — the Government grants the contractor the exclusive right to conduct mining operations within a contract area and shares in the gross output.
• Co-production agreement — the Government provides inputs to the mining operations other than the mineral resource.
• Joint venture agreement — a joint-venture company is organized by the Government and the contractor, with both parties having equity shares.

A mineral agreement grants the contractor the exclusive right to conduct mining operations and to extract all mineral resources found in the contract area. Mineral agreements have a term not exceeding twenty-five (25) years from execution, renewable for another term not exceeding twenty-five (25) years under the same terms and conditions.

State ownership and policy on foreign investment

All mineral resources in public and private lands within the territory and exclusive economic zone of the Philippines are owned by the State. The State is responsible for promoting their rational exploration, development, utilization, and conservation through the combined efforts of government and the private sector.

The DENR's Revised Implementing Rules and Regulations of R.A. 7942 state that investments in commercial mining activities from both domestic and international sources shall be promoted in accordance with State policies. The rules also provide that the granting of mining rights shall harmonize existing activities, policies, and programs of the Government that directly or indirectly promote self-reliance, development, and resource management.

Ancestral lands and consent requirements

Foreign participation does not displace the rights of indigenous cultural communities. No ancestral land shall be opened for mining operations without the prior consent of the indigenous cultural community concerned. Where an agreement is reached, the royalty payment upon utilization of the minerals is agreed upon by the parties and forms part of a trust fund for the socioeconomic well-being of the indigenous cultural community.

Frequently asked questions

Can a foreign company own a mining company in the Philippines?

A foreign-owned corporation — one where less than fifty percent (50%) of the capital is owned by Filipino citizens — can be granted an exploration permit, an FTAA, or a mineral processing permit. For mineral agreements, the contractor must be at least sixty percent (60%) Filipino-owned.

What is the maximum foreign equity allowed in Philippine mining?

The Mining Act does not state a single equity percentage for foreign participation. Instead, it deems a foreign-owned corporation a qualified person for the exploration permit, FTAA, and mineral processing permit, while requiring at least sixty percent (60%) Filipino ownership for mineral agreements.

What is an FTAA in Philippine mining?

An FTAA is a financial or technical assistance agreement — a contract involving financial or technical assistance for large-scale exploration, development, and utilization of mineral resources.

Practical takeaways

• A foreign-owned corporation is a qualified person only for an exploration permit, an FTAA, or a mineral processing permit.
• Mineral agreements — production sharing, co-production, and joint venture — require a contractor with at least sixty percent (60%) Filipino ownership.
• An exploration permit runs for two (2) years, subject to annual review and renewal.
• Mineral agreements have a term of up to twenty-five (25) years, renewable for another twenty-five (25) years.
• Mining on ancestral lands requires the prior consent of the indigenous cultural community concerned.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 7942 - AN ACT INSTITUTING A NEW SYSTEM OF MINERAL RESOURCES EXPLORATION, DEVELOPMENT, UTILIZATION, AND CONSERVATION

• DENR ADMINISTRATIVE ORDER NO. 96-40, S. 1996, December 20, 1996

• EXECUTIVE ORDER NO. 665 - CONFERRING CABINET RANK UPON THE CHAIRMAN OF THE PHILIPPINE MINING DEVELOPMENT CORPORATION

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.