PICOP Resources v. Base Metals

PICOP Resources v.
Base Metals
G.R. No. 163509, December 6, 2006, 510 SCRA 400
Syllabus:
RA No. 7942, recognizing the equiponderance between mining and timber rights, gives a mining contractor
the right to enter into a timber concession and cut timber therein provided that the surface owner or concessionaire
shall be properly compensated for any damage done to the property as a consequence of mining operations.
Even granting that the area covered by the MPSA is part of the Agusan-Davao-Surigao Forest Reserve,
such does not necessarily signify that the area is absolutely closed to mining activities. Contrary to PICOP’s obvious
misreading of the Supreme Court’s decision in Apex Mining Co., Inc. v. Garcia, supra, to the effect that mineral
agreements are not allowed in the forest reserve established under Proclamation No. 369, the Court in that case
actually ruled that pursuant to PD No. 463 as amended by PD No. 1385, one can acquire mining rights within forest
reserves, such as the Agusan-Davao-Surigao Forest Reserve, by initially applying for a permit to prospect with the
Bureau of Forest and Development and subsequently for a permit to explore with the Bureau of Mines and
Geosciences.
Facts:
The Central Mindanao Mining and Development Corporation (CMMCI) entered into a Mines Operating Agreement
with Banahaw Mining and Development Corporation, wherein the latter will serve as the Mine Operator of CMMCI’s
18 mining claims in Agusan del Sur. In accordance with the Agreement, Banahaw Mining applied for Mining Lease
Contracts over the mining claims with the Bureau of Mines. It was issued a Mines Temporary Permit to extract and
dispose minerals within its mining claims. The permit was renewed thrice.
Banahaw Mining and PICOP entered into a Memorandum of Agreement recognizing each other’s right to the area
concerned since the mining claims were within the logging concession of PICOP. These mining claims were later
converted to Mineral Production Sharing Agreements (MPSA).
During the pendency of the MPSA, Banahaw Mining sold/assigned its rights and interests over 37 mining claims,
including those covered with its agreement with CMMCI, in favor of Base Metals. CMMCI approved the assignment
and recognized Base Metals as the new operator of the mining claims.
Base Metals amended the pending MPSA applications to substitute itself as applicant. The required area clearances
and documents were submitted. However, PICOP filed an opposition to Base Metals’ application on the following
grounds: (1) the approval will violate the constitutional mandate against impairment of obligations in a contract; and
(2) PICOP’s rights will be defeated by the approval of the application. Base Metals, on the other hand, contends
that PICOP has no rights over the mineral resources in the concession area.
The Panel Arbitrator set aside the MPSA applications because the consent of PICOP was not obtained in the
assignment of Banahaw Mining’s rights. The Mines Adjudication Board (MAB) reinstated the MPSAs on appeal,
and the decision was later upheld by the Court of Appeals. Hence, the present petition.
Issue:
Whether PICOP’s logging concession within the Agusan-Surigao-Davao Forest Reserve established under
Proclamation No. 369 is closed to mining applications in accordance with Section 19 of RA No. 7942.
Ruling:
No. The mere fact that the area is a government reservation does not necessarily prohibit mining activities in the
area.
Assuming arguendo that the area of Base Metals’ MPSA is a government reservation, this fact does not necessarily
prohibit mining activities in the area. DAO 96-40, Section 15(b) allows government reservations to be opened for
mining applications with a condition precedent of a prior written clearance issued by the government agency having
jurisdiction over the reservation. As provided in Section 6 of RA No. 7942, “[m]ining operations in reserved lands
other than mineral reservations may be undertaken by the DENR, subject to certain limitations.” RA No. 7942 only
prohibits mining applications in areas proclaimed as watershed forest reserves.
In this case, the area covered by the MPSAs were not proclaimed as watershed forest reserves. Assuming that it
is, PD No. 463 (as amended by PD No. 1385) provides that mining rights may be acquired over forest reserves,
such as the Agusan-Davao-Surigao Forest Reserve by applying for a prospecting permit, and subsequently a permit
to explore.
“Section 18 [of] RA No. 7942 allows mining even in timberland or forestry subject to existing rights and reservations.
x x x Similarly, Section 47 of PD No. 705 permits mining operations in forest lands which include the public forest,
the permanent forest or forest reserves, and forest reservations,” but there is no requirement of prior consent of
existing licensees. Only prior notification before commencing mining activities is required.
The SC also held that DENR Memorandum Order No. 03-98 providing for the guidelines in the issuance of area
status and clearance or consent for mining applications pursuant to RA No. 7942, allows government reservations
to be open to mining applications subject to area status and clearance. The required clearance and certifications
have already been issued to Base Metals and included in its application.
However, the reinstatement of the MPSA does not automatically result in its approval. There should still be
compliance with the requirements in DAO No. 96-40, “including the publication/ posting/radio announcement of its
mineral agreement application.”

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