PERU : MINING GUIDES 2006 THE MINING INVESTOR. PERU MINING COUNTRY

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1 PERU : MINING GUIDES 2006 MINISTRY OF ENERGY AND MINES GENERAL MINING BUREAU PERU MINING COUNTRY

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3 MINISTRY OF ENERGY AND MINES GENERAL MINING BUREAU PERU : MINING GUIDES 2006 PERU MINING COUNTRY

4 GLOSSARY GLOSSARY OF TERMS AND ACRONYMS AG : issued by the Ministry of Agriculture CONATA : Consejo Nacional de Tasaciones / National Council of Property Valuation DGAA : Dirección General de Asuntos Ambientales / General Bureau of Environmental Affairs DGAAM : Dirección General de Asuntos Ambientales Mineros / General Bureau of Mining Environmental Affairs DGE : Dirección General de Electricidad / General Bureau of Electricity DGM : Dirección General de Minería / General Mining Bureau DIGESA : Dirección General de Salud Ambiental / General Bureau of Environmental Health DM : Despacho Ministerial / Minister's Office DRA : Dirección Regional Agraria / Regional Agriculture Bureau DREM : Dirección Regional de Energía y Minas / Regional Energy and Mining Bureau EA : Environmental Assessment EF : issued by the Ministry of Economy and Finance EIS : Environmental Impact Study EM : issued by the Ministry of Energy and Mines FIA : Firm of Independent Supervisors Ha : Hectares IGV : Impuesto General a las Ventas / Value Added Tax INACC : Instituto Nacional de Concesiones y Catastro Minero / National Institute of Concessions and Mining Cadastre INDECOPI : Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual / National Institute for the Defense of Free Competition and Intellectual Property INGEMMET : Instituto Geológico Minero y Metalúrgico / Geological, Mining and Metallurgical Institute INRENA : Instituto Nacional de Recursos Naturales / National Institute of Natural Resources IPM : Impuesto a la Promoción Municipal / Municipal Development Tax ISC : Impuesto Selectivo al consumo / Excise Tax Km : Kilometer m : Meters MEF : Ministerio de Economía y Finanzas / Ministry of Economy and Finance MEM : Ministerio de Energía y Minas / Ministry of Energy and Mines MINEM : Ministerio de Energía y Minas / Ministry of Energy and Mines MM : Million MT : Metric Tons N : Number OCM : Oficina de Concesiones Mineras / Office of Mining Concessions OGA : Oficina General de Administración / General Administration Office OIT : Organización Internacional del Trabajo / International Labor Organization ONRP : Oficina Nacional de Registros Públicos / National Office of Public Registration PAMA : Programa de Adecuación y Manejo Ambiental / Environmental Adjustment and Management Program PCM : Presidencia del Consejo de Ministros / Presidency of the Council of Ministers PDM : Promoción y Desarrollo Minero / Mining Promotion and Development ProInversión : Agencia de Promoción de la Inversión / Investment Promotion Agency RUC : Registro Único del Contribuyente / Consolidated Registry of Taxpayers SA : Sociedad Anónima / Corporation SAA : Sociedad Anónima Abierta / Open Corporation SAC : Sociedad Anónima Cerrada / Closed Corporation SMRL : Sociedad Minera de Responsabilidad Limitada / Limited Liability Mining Company SRL : Sociedad de Responsabilidad Limitada / Limited liability corporation SS : Sworn Statement SUNARP : Superintendencia Nacional de Registros Públicos / National Superintendence of Public Registration SUNAT : Superintendencia Nacional de Administración Tributaria / National Superintendence of Tax Administration TR : issued by the Ministry of Labor (Ministerio de Trabajo) TUO : Texto Único Ordenado / Consolidated Amended Text TUPA : Texto Único de Procedimientos Administrativos / Consolidated Text of Administrative Procedures UIT : Unidad Impositiva Tributaria / Tax Unit US$ : US Dollars UTM : Universal Transverse Mercator VMM : Vice Ministro de Minas / Vice-Minister of Mines

5 INDEX INDEX OF PROCEDURES 1. MINING CONCESSIONS 2. ENVIRONMENTAL PERMITS 3. PROCESSING CONCESSIONS 4. MINING RIGHTS OF WAY 5. GENERAL SERVICE CONCESSIONS 6. MINING TRANSPORT CONCESSIONS 7. FINAL ELECTRIC CONCESSIONS 8. TEMPORARY ELECTRIC CONCESSIONS 9. MUNICIPAL AUTHORIZATION AND TAXES 10. SAFETY, HEALTH AND SANITARY AUTHORIZATION 11. USE OF WATER FOR NON-AGRICULTURE PURPOSES 12. INCORPORATION OF COMPANIES 13. COLLECTIVE LABOR RELATIONS 14. STABILITY AGREEMENTS 15. TAX REFUND FOR EXPLORATION ACTIVITIES 16. LEGISLATION ON DOMESTIC AND FOREIGN INVESTMENT ANNEXES

6 INTRODUCTION Peru is a country with high natural resources potential, being mining one of the sectors with strong possibilities of development, therefore, promoting both national and international investment in mining and creating the means to contribute to an easy access of investments is one of the priority State Policies. The mining industry has become and continues to be one of the mainstays of Peruvian economy concentrating a number of activities and processes where different areas of professional knowledge and fields converge. Based on this perspective, we offer both national and international potential investors this Manual, which has been designed to provide them with a basic orientation and updated information on issues related to the mining industry development. General Mining Bureau 4

7 MINING CONCESSIONS MINING CONCESSIONS I. DEFINITION The mining concession grants its holder the right to exploit and explore all mineral resources that may be found in the subsoil of the concession area. Mining concessions shall be granted in extensions ranging from 100 to 1000 hectares in grids or groups of adjacent grids that are contiguous to each other at least by one side, except for concessions on the maritime domain, for which grids from 100 to 10,000 hectares may be granted. Concessions are irrevocable provided that the concessionaire fulfills the obligations set forth by the General Mining Act to maintain the concession effectiveness. - Article 9 to Article 11, Article 117 of the Consolidated Amended Text (Texto Único Ordenado - TUO) of the General Mining Act as approved by Supreme Decree Nº EM. II. PROCEDURE 1. MINING CONCESSION APPLICATION The mining concession application is a request for mining concession filed under Decree Law Nº 708 Law for the Promotion of Mining Investment and Supreme Decree Nº EM Consolidated Amended Text of the General Mining Act. The mining concession application shall include the juridical person's and legal representative's registration data, as appropriate. Likewise, a sworn statement with the mining concession applicant's advanced commitment shall be submitted. The mining concession application shall attach the payment receipts for the Effectiveness Fee corresponding to the first year equivalent to US$ 3.00 per requested hectare, and the Payment Receipt for the Administrative Fee equivalent to 10% of the effective Tax Unit (Unidad Impositiva Tributaria UIT). Mining concession applications shall be received at the National Institute of Concessions and Mining Cadastre (Instituto Nacional de Concesiones y Catastro Minero INACC) on a first-come-first-serve basis. Upon reception of the mining concession application, the front desk officers at INACC's Office of Mining Concessions (Oficina de Concesiones Mineras-OCM) shall issue the corresponding code in the Book of Mining Concession Applications in order to determine priority in the submission of applications. This priority shall be applicable even when the reading of the application, or the review of the attached documents show incompliance with any of the requirements set forth in the General Mining Act as regulated. Deficient mining concession applications may be amended within 10 business days of notification of the omission. Mining concession applications failing to attach receipt of payment for the effectiveness fee and/or the administrative fee; not including information on the UTM coordinates of the requested area; or lacking an opinion or having an unfavorable opinion regarding the mining concession application issued by the Provincial and District Municipality, shall be rejected by the Office of Mining Concessions of INAAC. Mining Concessions in Urban Areas: Mining Concessions within Urban Areas shall only be granted if there is a Special Law authorizing the granting of mining concession rights in such areas. 5

8 MINING CONCESSIONS Mining concession applications shall request extensions from 10 to 100 hectares, in rectangles of 500 meters long by 200 meters wide, identifying its vortexes in UTM coordinates, under the grid-based system. If a mining concession application completely overlaps with an Urban Area zone, it shall be deemed inadmissible. In case of partial overlapping, the requested area shall be automatically reduced or fractioned, as appropriate, to cover only the area where no overlapping exists, unless the mining concession application has been made for the minimum extension of 10 hectares, in which case it shall be deemed inadmissible. INNAC shall officially communicate the Province Municipality when, based on the information available, it is evidenced that the area subject to mining concession application may likely be in a urban area, even though there is no municipal ordinance defining it as such. To that effect, INACC shall not grant the title before 60 business days since the official communication as sent by post to the municipality. Mining Concessions in Areas of Urban Expansion: For areas of urban expansion, the title to the concession shall be granted subject to the prior agreement of the relevant Provincial Municipality. If the provincial municipality does not issue a pronouncement within 60 calendar days of the request for pronouncement by the General Mining Concessions Bureau, the Municipality pronouncement shall be deemed unfavorable. Requests for mining concessions in areas of urban expansion, shall attach the mining concession application's Technical Information. Mining concession applications shall request extensions from 10 to 100 hectares, in rectangles of 500 meters long by 200 meters wide, identifying its vortexes in UTM coordinates under the grid-based system. If an overlapping is noted, an official communication shall be sent to the Provincial Municipality, accompanied by the Technical Information submitted, requesting a pronouncement within 60 calendar days. If the answer is favorable, the Ministry of Energy and Mines shall be notified, requesting a Ministry Resolution authorizing the granting of the title to the mining concession. Upon receipt of the Ministry Resolution, the mining concession application shall continue its process. If the answer is unfavorable, based on strictly technical criteria and/or in the protection of natural areas or archeological sites, the mining concession application shall be rejected, if completely located over an area of urban expansion, being this considered as an area not subject to mining concession application. If the overlapping is partial, the requested area shall be reduced or fractioned, as appropriate, to cover only the area where no overlapping exists. Mining Concessions in Border Zones: According to article 126 of the 1979 Constitution and article 13 of Legislative Decree 757, to exercise property or possession rights over mines, land, forests, water, fuel or sources of energy by foreign investors, either directly or indirectly, in the areas included within fifty kilometers of the country borderland, such foreign investors shall previously obtain the corresponding authorization, which shall be granted by Supreme Resolution countersigned by the Minister who at the time presides the Cabinet of Ministers and the Minister of the corresponding sector. Such authorization shall have the favorable opinion of the Joint Chiefs of Staff based on the considerations above. The Supreme Resolution to which the previous paragraph refers shall set forth conditions or limitations for the exercising of the corresponding property or possession rights, which may only be restricted due to reasons of national security. Reasons of national security shall mean those required to secure independence, sovereignty and territory integrity of the Republic of Peru, as well as internal order, as provided in article 275 of the 1979 Constitution. In order to obtain the required previous authorization, foreign investors or companies in which they have an interest shall submit an application to the Ministry of Energy and Mines. Such application shall contain the information provided in the Annex. 6

9 MINING CONCESSIONS Once the investment is made, it shall be registered with PROINVERSIÓN in free convertible currency, as appropriate. The acquisition of the goods referred to in article 32 of Supreme Decree Nº EF or the transfer of property or possession over such goods by foreign investors to other foreign investors, who lack the corresponding previous authorization, shall be sanctioned removing the investor's acquired right in the benefit of the State, according to article 71 of the 1993 Constitution. When the transfer of goods to which the previous paragraph refers is made to Peruvian investors, it shall only be required to advise the Ministry of Energy and Mines - Article 14, Article 39, Article 118º and Article 119 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree Nº EM. - Article 12 to Article 14, Article 17 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. - Article 1 of Legislative Decree Nº 913 substituting Article 39 and Article 57 of the Consolidated Amended Text of the General Mining Act. - Ninth Final Provision of Legislative Decree Nº 708 Law for Investments Promotion in the Mining Sector. - Article 32 to 34 of Supreme Decree Nº EF. 2. NOTIFICATION TO THE INTERESTED PARTY OF NOTICE FOR PUBLICATION If the mining concession application meets the requirements set forth in the Regulations on Mining Procedures (Article 17º of Supreme Decree Nº EM), The Head of the General Bureau of Mining Concessions of INACC shall notify the interested party, within 7 business days following the mining concession application submission, of the publication of court notices, attaching the notices to be published, and if necessary, to be posted. Simultaneously to the notification to the mining concession applicant, the Head of the General Bureau of Mining Concessions of INACC shall notify about the new mining concession application to the holders of other mining concession applications or previously granted mining concessions, whose areas are located in part of the grid or group of grids included in the mining concession application. - Article 122 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree Nº EM. - Article 20 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 3. PUBLICATION All mining concession applications shall be published only once in the "El Peruano" Official Gazette and in the newspaper in charge of the publication of court notices in the capital city of the province where the requested area is located. In the latter case, if no such newspaper exists, notices shall be posted for 7 business days in the INACC's main office or decentralized offices, as appropriate. Applications for mining concessions located in the Department of Lima, shall be published only in the "El Peruano" Official Gazette. Notices shall be published within 30 business days upon notice notification. Within 60 calendar days upon publication, the interested party shall deliver the entire pages evidencing the publication of the notices to INACC's General Bureau of Mining Concessions. 7

10 MINING CONCESSIONS - Article 122, Article 123 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree Nº EM. - Article 19, Article 20 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 4. TECHNICAL AND LEGAL OPINION Within 30 business days upon reception of the publication of notices, if no objection has been filed, INACC's General Bureau of Mining Concessions shall issue the legal and technical opinion. - Article 123º of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree Nº EM. - Article 21º of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 5. TITLE TO THE MINING CONCESSION The file shall be submitted to the Institutional Head of INACC for the issuance of the corresponding Resolution within 5 business days upon issuance of the opinions, under the responsibility of the Head of INACC's General Bureau of Mining Concessions. With the favorable technical and legal opinions, the Institutional Head of INACC shall grant the title to the mining concession not before 30 calendar days after the last publication. The Resolution issued by the Institutional Head of INACC shall be notified to the mining concession applicant and other parties interested in the respective procedure. Through the concession title, the State recognizes the right of the concessionaire to perform with exclusivity and within a clearly delimited surface, the activities inherent to the concession, as well as the rights set forth in the Consolidated Amended Text of the General Mining Act, notwithstanding its obligations. Within the first half of every month, INACC shall publish in the "El Peruano" Official Gazette the list of the mining concessions for which titles were granted during the immediately previous month. - Article 124, Article 127 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree Nº EM. - Article 21, Article 24 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 6. REGISTRATION OF TITLE TO THE CONCESSION Once the resolution granting the title to the mining concession is final and unappealable, it shall be registered upon request of the interested party, in the Registry of Mining Rights of the National Superintendence of Public Registration (Superintendencia Nacional de Registros Publicos - SUNARP). - Article 108, Article 126 of the General Mining Law approved by Supreme Decree Nº EM. 8

11 MINING CONCESSIONS PROCEDURE TO OBTAIN GENERAL MINING CONCESSIONS 10 days File application with OCM - INACC - Effectiveness Fee Payment Receipt: US$ 3.00 per Ha. - Administrative Fee Payment Receipt for 10% UIT Yes Omission? No Notification 7 días útiles Up to 30 business days Publication Up to 60 business days OCM - INACC Reception of notices 30 business days from the last publication Up to 30 business days Legal & Technical Opinion 5 business days Title to the Concession is granted 15 first business days of every month Publication of Approved Concessions Registration with SUNARP UIT: S/.3,300 as from January 1,

12 MINING CONCESSIONS PROCEDURE TO OBTAIN MINING CONCESSIONS 1. In Urban Areas File application with OCM - INACC - Extensions of 10 to 100 Ha. - Rectangles of 500 x 200 m. Inadmissible yes Total overlapping? NO Up to 60 days The area is reduced or fractioned no Opinion by the Municipality If no answer is given in 60 days it shall be deemed approved yes Title to the concession 2. In Areas of Urban Expansion File application with OCM - INACC -Extensions of 10 to 100 Ha. -Rectangles of 500 x 200 m. -Technical Information Overlapping is noted Up to 60 days Official communication to the Municipality -Technical information -Communication requesting pronouncement in no more than 60 days Area not subject to application NO Opinion by the Municipality If no answer is given in 60 days it shall be deemed approved YES Official Communication to MINEM Submission of Ministry Resolution The process continues 10

13 MINING CONCESSIONS PROCEDURE TO OBTAIN MINING CONCESSIONS IN BORDER ZONES 3. In Border Zones (50 km. from the Borderline) File application with OCM - INACC - Extensions of less or more than 100 Ha. - Closed polygons - Technical Information Peruvian Holder? no Supreme Resolution authorizing it? no yes si Obtain Supreme Resolution Application approved? si no Inadmissible Application - If it has been so determined or if 6 months have elapsed since the application filing The process continues 11

14 MINING CONCESSIONS APPLICATION OF AUTHORIZATION TO ACQUIRE OWNERSHIP OR POSSESSION OF GOODS BY FOREIGNERS IN BORDER AREAS A) DIRECT PARTICIPATION I. IDENTIFICATION OF THE INVESTOR: 1. Natural person: 1.1 Name: Nationality: Address:... (in the country of origin) 1.4 Telephone:... Fax: Investor's legal representative: (in Peru) - Name:... - Address:... - Telephone: Juridical person: 2.1 Name: Nationality: Type of company: Date of company incorporation: Address:... (in the country of origin) 2.6 Telephone:... Fax: Investor's legal representative: (in Peru) - Name:... - Address:... - Telephone:... II. INFORMATION ABOUT THE GOODS SUBJECT MATTER OF ACQUISITION: 1. Type of goods: Right being acquired over the goods: New investment total amount: US$ Purpose of investment: 4.1 Economic sector: Brief description of the project: Investment recipient company: (when appropriate) - Name:... - Address:... - Telephone:... Fax:... - Current number of permanent workers of the company: Specified period to make the investment (when the goods are acquired in installments):... B) INDIRECT PARTICIPATION I. IDENTIFICATION OF THE COMPANY THAT INCLUDES FOREIGN INVESTORS: 1. Name: Type of company:... 12

15 MINING CONCESSIONS 3. Address: Telephone:... Fax: Legal representative: - Name:... - Address:... - Telephone: Current number of permanent workers of the company: Current amount of capital and reserves: Current amount and face value of the shares: Percentage share of foreign investment in the capital of the company:... II. IDENTIFICATION OF THE FOREIGN INVESTORS: Natural person: 1.1 Name: Nationality: Address:... (in the country of origin) 1.4 Telephone:... Fax: Percentage share of foreign investment in the capital of the company: Investor's legal representative: (in Peru) - Name:... - Address:... - Telephone: Juridical person: 2.1 Name: Nationality: Type of company: Date of company incorporation: Address:... (in the country of origin) 2.6 Telephone:... Fax: Percentage share of foreign investment in the capital of the company: Investor's legal representative: (in Peru) - Name:... - Address:... - Telephone:... III. INFORMATION ABOUT THE GOODS SUBJECT MATTER OF ACQUISITION: 1. Type of goods: Right being acquired over the goods: Total of the new investment: US$ Purpose of investment: 4.1 Economic sector: Brief description of the project: Specified period to make the investment (when the goods are acquired in installments):... 13

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17 ENVIRONMENTAL PERMITS ENVIRONMENTAL PERMITS FOR THE IMPLEMENTATION OF MINING PROJECTS I. DEFINITION The holder of the mining-metallurgical concession (including the assignee) is responsible for the emission, discharge and disposal to the environment of waste produced by the mining exploration and exploitation activities in the area of concession. Likewise, he shall prevent that maximum permissible levels are exceeded for those elements or substances that in high concentrations or prolonged permanence may adversely affect the environment and people's health. - Regulations on Environmental Protection as approved by Supreme Decree Nº EM. - Article 1, Article 5, Article 7 paragraph 2 of the Environmental Regulations on Mining Exploration Activities as approved by Supreme Decree Nº EM II. PROCEDURE 1. ENVIRONMENTAL IMPACT STUDY Applicants to a mining and/or processing concession as well as those increasing their operations' production are required to submit an Environmental Impact Study (EIS) for the project to the General Bureau for Mining Environmental Issues of the Ministry of Energy and Mines. The institutions authorized to perform EIS for mining activities are listed in the corresponding Registry of the General Bureau for Mining Environmental Issues of the Ministry of Energy and Mines ( Environmental Impact Studies for Mining Exploration Projects: a) Category A Exploration Projects: Include mining exploration activities causing slight or no alteration to the surface, such as geological and geophysical surveys, topographic surveys and the collection of small amounts of surface rock and ore samples using instruments or tools that can be transported by hand or over the surface without causing major alteration to the land other than the one caused by the regular use by people who is not involved in the exploration process. No exploration activities under this category require any permits. b) Category B Exploration Projects: Less than 20 drilling platforms (Sworn statement required). Requirements: 1. Application in due form and administrative fee payment (40% UIT). 2. Sworn Statement in two copies: - For the General Bureau for Environmental Issues - For public consultation 3. Proof of delivery of a copy of the sworn statement to the Regional Bureau of Energy and Mines corresponding to the area of the project. 4. Proof of delivery of one printed and one electronic copy of the environmental assessment, submitted to the District Municipality that is closest to the project. The General Bureau for Mining Environmental Issues shall have 20 calendar days to review the file and issue its first pronouncement. 15

18 ENVIRONMENTAL PERMITS The Head of such Bureau is the authority responsible for the final decision, which shall be issued in the form of a Bureau Resolution (Resolución Directoral). c) Category C Exploration Projects: More than 20 drilling platforms, in areas larger than 10 hectares and/or with more than 50m long tunnels (Environmental Assessment required). Requirements: 1. Application in due form and administrative fee payment. 2. Two copies (printed and electronic) of the Environmental Assessment: - For the General Bureau of Environmental Issues - For public consultation under the citizen participation process. 3. Proof of delivery of one printed and one electronic copy of the Environmental Assessment submitted to the Regional Bureau of Energy and Mines of the area of the project. 4. Proof of delivery of one printed and one electronic copy of the Environmental Assessment submitted to the District Municipality that is closest to the project. The General Bureau of Mining Environmental Issues shall have 40 calendar days to review the file. The Head of such Bureau is the authority responsible for the final decision, which shall be issued in the form of a Bureau Resolution Environmental Impact Study for Mining Exploitation and Processing projects: Requirements: 1. Application in due form and administrative fee payment. 2. Two printed and two electronic copies of the EIS and five copies of the executive summary: - For the General Bureau of Environmental Issues - For public consultation under the citizen participation process. 3. Proof of delivery of one printed and one electronic copy of the study submitted to the National Institute of Natural Resources (Instituto Nacional de Recursos Naturales INRENA). 4. Proof of delivery of two printed and two electronic copies of the EIS submitted to the Regional Bureau of Energy and Mines that is closest to the area of the project and twenty five copies of the corresponding executive summary. 5. Proof of delivery of two printed and two electronic copies of the EIS and one copy of the corresponding executive summary to the District Municipality that is the closest to the project. 6. Citizens participation is part of the assessment procedure in the process of approval of the EIS, namely by making the EIS available to the public through local, regional and national public hearings and workshops as appropriate. The General Bureau of Environmental Issues shall have 120 calendar days to review the file. The Head of such Bureau is the authority responsible for the final decision, which shall be issued in the form of a Bureau Resolution - Article 7, paragraph 3 of the Regulations on Environmental Protection as approved by Supreme Decree Nº EM. - Article 4 to Article 6 of the Environmental Regulations for Mining Exploration Activities as approved by Supreme Decree Nº EM. - Supreme Decree Nº EM: Provisions to standardize the administrative procedures with the General Bureau of Environmental Affairs (Dirección General de Asuntos Ambientales - DGAA). - Ministry Resolution Nº EM/DM Regulations on Citizen Consultation and Participation in the Procedure of Approval and Environmental Studies in the Sector of Energy and Mines. 16

19 ENVIRONMENTAL PERMITS 2. MINISTRY OF ENERGY AND MINES The Ministry of Energy and Mines is the authority having jurisdiction on environmental issues in the miningmetallurgical sector. - Article 4 of the Regulations on Environmental Protection as approved by Supreme Decree Nº EM. - Ministry Resolution Nº EM/VMM Model Contract on Environmental Administrative Stability for Mining and Metallurgical Concessions. 3. SIGNING OF THE ENVIRONMENTAL ADMINISTRATIVE STABILITY CONTRACT Based on the EIS and the Environmental Adjustment and Management Program (Programa de Adecuación y Manejo Ambiental - PAMA), the holders of the mining concession may sign an Environmental Administrative Stability Contract with the Ministry of Energy and Mines, which shall set forth: - Term for the environmental adjustment - Sampling frequency and sampling points - Maximum permissible levels at the signing of the contract that are not subject to change during the term of the contract. It shall be an adhesion contract which model is approved by Ministry Resolution Nº EM/VMM. Compliance with the contract shall be verified by the General Mining Bureau every six months. - Article 18 of the Regulations on Environmental Protection as approved by Supreme Decree Nº EM. - Ministry Resolution Nº EM/VMM Model Contract on Environmental Administrative Stability for Mining and Metallurgical Concessions. 4. ENVIRONMENTAL QUALITY STANDARDS - Any processing concession shall have adequate facilities for liquid waste treatment. Additionally, if technically and economically feasible, waste water resulting from such treatment, as well as the water contained in solutions, pulps and emulsions shall be reused. - Any processing operation shall have a waste and spill collection and drainage system. - In case the water to be used in the processing plant comes from water bodies containing contaminating substances that are above the maximum permissible levels, a log shall be kept of periodical sampling and analysis performed before and after use. - In case the water used comes from wells, the natural refilling of the system and the aquifer control shall be favored. - Sewage from camps and sanitary services of the mining facilities shall be treated before they are discharged, in the volume corresponding to the holder of the mining concession. - In case that tailings and/or slag are disposed into the ground, they shall preferably be dumped in yards preferably located close to the processing plant to allow water recycling, thus preventing or minimizing the discharge of effluents discharge off the stockpile area. - When the tailings and/or slag stockpiles are abandoned, works or installations required to ensure their stability shall be implemented, especially those regarding the permanence and operational condition of the elements for watercourse diversion and surface stockpile treatment to avoid erosion. 17

20 ENVIRONMENTAL PERMITS - Article 31 to Article 36, Article 39 of the Regulations on Environmental Protection as approved by Supreme Decree Nº EM. 18

21 ENVIRONMENTAL PERMITS PROCEDURE TO OBTAIN ENVIRONMENTAL PERMITS FOR MINING EXPLORATION PROJECTS 1. Category B Exploration Projects (less than 20 drilling platforms) Sworn Statement to DGAAM - Application in due form - Processing fee payment 5% UIT - Sworn Statement in two copies - Proof of delivery to DREM - Proof of delivery to District Municipality Assessment 220 calendar days to the first pronouncement. Approval Permit - Bureau Resolution 2. Category C Exploration Projects (more than 20 drilling platforms) Submit EA to DGAAM - Application in due form - Processing fee payment 40% UIT Two copies of the EA - Proof of delivery to the DREM - Proof of delivery to the District Municipality Assessment 40 calendar days Approval Permit - Bureau Resolution UIT: s/. 3,300 as of January 1,

22 ENVIRONMENTAL PERMITS PROCEDURE TO OBTAIN ENVIRONMENTAL PERMITS FOR MINING EXPLOITATION AND PROCESSING Submit EIS to DGAAM - Application in due form - Processing fee payment 20% UIT - Two copies of the EIS - Proof of delivery to INRENA, DREM and Municipality. Assessment Hearings and workshops Correct objections Yes Objections No Report with commitment Permit - Bureau Resolution UIT: s/. 3,300 as of January 1,

23 PROCESSING CONCESSIONS PROCESSING CONCESSIONS I. DEFINITION The processing concession grants its holder the right to extract or concentrate the valuable part of broken ore aggregates and/or to melt, purify or refine metals using a number of physical, chemical and/or physicochemical processes. - Article 17 and Article 18 of the Consolidated Amended Text (Texto Único Ordenado - TUO) of the General Mining Act as approved by Supreme Decree Nº EM. II. PROCEDURE 1. APPLICATION The applicant for a processing concession shall file an application in original and copy to the General Mining Bureau (Dirección General de Minería DGM) meeting the requirements provided by the General Mining Act as regulated. Likewise, the applicant shall enclose the payment receipts for the Effectiveness Fee corresponding to the first year and for the Administrative Fee equivalent to 20% of the Tax Unit (Unidad Impositiva Tributaria UIT). The interested party shall pay for the Effectiveness Fee an amount computed according to the following scale: RANGO TAX UNIT Up to 350 MT/day UIT Over 350 and up to 1000 MT/day 1.00 UIT Over 1000 and up to 5000 MT/day 1.5 UIT Per each 5000 MT/day in excess 2.0 UIT MT/day refers to treatment installed capacity. In case of expansions, the payment enclosed to the application shall only be on the increased capacity. The application shall also include the technical information provided by the General Mining Act as regulated. - Article 46 of the Consolidated Amended Text of the General Mining Law as approved by Supreme Decree Nº EM. - Article 35 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. - Article 2º, prior commitment is established as requirement for the development of mining activities, as supplemented and approved by Supreme Decree N EM. 2. NOTIFICATION TO THE INTERESTED PARTY OF NOTICE FOR PUBLICATION If the application meets the requirements above, the General Mining Bureau shall notify the interested party to pick up the corresponding notices for publication. The interested party shall pick up such notices no later than 15 business days following the date of notification. 21

24 PROCESSING CONCESSIONS - Article 36 of the Regulation of Mining Procedures as approved by Supreme Decree Nº EM. 3. PUBLICATION Notices are published only once in "El Peruano" Official Gazette and in the newspaper in charge of the publication of court notices in the capital city of the province where the concession is located. In the latter case, if no such newspaper exists, notices shall be posted during 7 business days in the Office of Mining Concessions of the National Institute of Concessions and Mining Cadastre (Instituto Nacional de Concesiones y Catastro Minero INACC). Notices shall be published within 30 days upon being received. Within 30 business days upon publication, the interested party shall deliver the entire pages evidencing the publication of the notices to the General Mining Bureau. - Article 3º of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 4. ASSESSMENT AND RESOLUTION Upon delivery of the notices, if no objection has been filed, the General Mining Bureau shall assess the application to see if it meets construction, security, housing, health, mining well-being and environmental impact regulations. The term for the General Mining Bureau to issue its Resolution is 30 business days. - Article 37 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 5. AUTHORIZATION OF CONSTRUCTION The Resolution issued by the General Mining Bureau authorizes the plant construction under the assessed and approved terms, allowing the interested party to request the rights of way and expropriations that may be necessary. - Article 37 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 6. INSPECTION OF VERIFICATION Upon completion of the plant construction and installation, the interested party shall give notice to the General Mining Bureau so they proceed to order an inspection in order to verify compliance with the original project in terms of security, mining health and environmental impact. Such notice shall include the corresponding authorization for industrial waste discharge conferred by the General Bureau of Environmental Health (Dirección General de Salud Ambiental DIGESA). The inspection shall be carried out no later than 60 calendar days counted as from the date it was requested. If the inspection is favorable, the General Mining Bureau shall grant the title of the profit concession; otherwise, the titleholder shall repair the objections appearing in the inspection report. 22

25 PROCESSING CONCESSIONS - Article 38 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 7. TITLE TO PROCESSING CONCESSION The Resolution issued by the General Mining Bureau granting the Title to Processing Concession authorizes the plant operation as well as the use of the requested water and the industrial and residential liquid discharge system. - Article 38 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 8. REGISTRATION The Resolution issued by the General Mining Bureau shall be registered with the National Institute of Concessions and Mining Cadastre for its incorporation into the National Mining Cadastre; also, the holder of the processing concession shall register the title with the National Superintendence of Public Registration (Superintendencia Nacional de Registros Publicos - SUNARP). - Article 38 of the Regulations on Mining Procedures as approved by Supreme Decree Nº EM. 23

26 PROCESSING CONCESSIONS PROCEDURES TO OBTAIN PROCESSING CONCESSIONS File application with DGM - Effectiveness Fee Payment - Administrative Fee Payment - Technical Information Assessment and issue of notices for publication 7 days Notification 15 days Delivery of notices to the holder Publication of notices 30 days Reception of the publications by DGM Technical objections Yes Answer objections 30 business days No Authorization to construct the plant Notice of the construction completion Inspection Application 60 calendar days 52 business days Objections under inspection Yes Answer objections No Title to the concession and authorization to operate Registration with SUNARP 24

27 MINING RIGHTS OF WAY MINING RIGHTS OF WAY I. INTRODUCTION Concession holders may request authorization from the mining authority to be granted mining rights of way over land owned by third parties that are necessary for the rational use of the concession. The right of way shall be granted subject to a previous fair compensation, as appropriate. - Article 37, paragraph 3 and 4 of the of the Consolidated Amended Text (Texto Único Ordenado - TUO) of the General Mining Act as approved by Supreme Decree N EM. II. PROCEDURE 1. DIRECT NEGOTIATION The use of the lands necessary to develop mining concession requires a previous agreement between the holder of the mining concession that requests the right of way and the owner of the surface property, as a step precedent to the granting of the legal mining right of way. The phase of direct negotiation between the parties starts with a notary's letter, in which the applicant of the right of way proposes a direct negotiation to the property owner. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 2. CONCILIATION In the event that both parties fail to reach an agreement within a maximum term of thirty (30) business days, the applicant of the right of way shall advise the General Mining Bureau (Dirección General de Minería DGM) about the exhaustion of the direct negotiation phase, attaching the acknowledgment of receipt of the notary's letter by the property owner. By virtue of this, the General Mining Bureau shall call both parties and invite them to start a conciliation process with the participation of a jointly appointed Conciliation Center, in a period not longer than 10 business days. Should the parties fail to reach an agreement, the General Mining Bureau shall request to the Regional Agriculture Bureau (Dirección Regional Agraria DRA) of the jurisdiction, a list of three candidates, from which a Conciliation Center shall be selected to seek an agreement between the parties regarding the right of way, within a maximum term of 30 business days. The Conciliation shall be conducted as set forth in the Conciliation Law as regulated; the expenses shall be charged to the party applying for the rights of way, through the General Mining Bureau. Previously to the call for conciliation, the General Mining Bureau shall advise the surface land owner about the mining legislation and the legislation on legal mining rights of way, as well as about the land owners' own rights. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 25

28 MINING RIGHTS OF WAY 3. EXPERT'S REPORT At the same time a call for conciliation is made, the General Mining Bureau shall appoint a mining expert from the official list who shall issue an opinion about the need and the extent of the rights of way necessary for the proposed mining activity, and shall request the National Council of Property Valuation (Consejo Nacional de Tasaciones - CONATA) to appoint a professional expert on agricultural issues, who shall appraise the value of the area in demand, preparing as well, a duly supported technical report analyzing whether the right of way is possible without impairing the property right, that is, without damaging the remaining servient tenement, turning it useless or substantially affected for the purposes for which it was being used or was going to be used. The maximum term allowed for both assessments shall be 15 business days, after which, the reports shall be sent to the Conciliation Center and to the General Mining Bureau to serve as reference or basis for their corresponding procedures. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 4. COMPLETION OF THE CONCILIATION PHASE The agreement reached by the parties or the absence of agreement shall be certified by the Conciliation Center and notified to the General Mining Bureau. If the conciliation phase is completed without an agreement between the parties, a request to the General Mining Bureau may be made to start the administrative procedure to be granted a legal right of way, attaching the first notary's letter, and incorporating the relevant expert's reports to the file. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 5. APPLICATION The application to be granted a right of way shall be submitted to the General Mining Bureau, including the names and domiciles of the involved parties, a narrative report and the drawings of the requested rights of ways with as many copies as owners are involved, which shall include: - Nature and duration of the right of way - Technical and economic rationale for the proposed right of way. - Description and value of the affected property and assessment of the resulting loss of profit and detriment. Likewise, the application shall be accompanied by a document proving that the applicant submitted a previous agreement proposal to the property owner, and all the additional documents the concessionaire may deem necessary. - Article 130 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree N EM. 26

29 MINING RIGHTS OF WAY 6. APPEARANCE The Head of the General Mining Office shall call the parties to appear on the fifteenth day after notification, explicitly warning them that the process will continue in case of non appearance by the property owner. In such act, the real property owner shall prove its right. In case of disagreement, or if the warning is executed, the Head of the General Mining Bureau shall appoint an expert, and order a visual inspection of the place. The interested parties and the expert shall be called to appear for the sight inspection. - Article 130 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree N EM. 7. VISUAL INSPECTION The visual inspection shall take place within sixty days of the date of appearance, in order to prove the need of the requested right. - Article 130 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree N EM. 8. EXPERT'S REPORT Once the inspection is completed, the expert shall issue a report within thirty days, and submit it together with the file to the General Mining Bureau. The report shall necessarily give an opinion about the compensation for the corresponding damages - Articles 130 and 131 of the Consolidated Amended Text of the General Mining Act as approved by Supreme Decree N EM. 9. TECHNICAL OPINION The Head of the General Mining Bureau and the Head of the General Bureau for Agriculture Development of the Ministry of Agriculture, within 30 business days upon reception of the expert's report, shall issue, each, their technical opinions about the compliance with the procedure established by the General Mining Act as regulated, expressly determining if the right of way is possible without impairing the property right, taking into account the expert's reports, unless in their opinion, the expert's reports contain irregularities or defects, in which case, the General Mining Bureau shall order the correction of such deficiencies, having the experts 15 business days to submit the required information to such Bureau. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 10. SUPREME RESOLUTION Should the right of way be possible, without impairing the property right; the Head of the General Mining Bureau shall prepare a draft Supreme Resolution setting the compensation, together with the draft public instrument that grants the right of way. All these documents shall be submitted to the relevant authorities 27

30 MINING RIGHTS OF WAY within 30 business days for the issuance of a Supreme Resolution granting the right of way; such Resolution shall be countersigned by the Minister of Energy and Mines and the Minister of Agriculture. The Supreme Resolution granting a right of way may only be challenged in court regarding the amount of the set compensation.. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 11. DEPOSIT Upon issuance of Supreme Resolution, the applicant shall deposit in an account to the name of the General Mining Bureau at the Nation's Bank (Banco de la Nacion), the compensation amount, within a maximum of 10 business days upon notification of compensation by the Resolution; otherwise the application shall be regarded as abandoned. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 12. SIGNING OF THE PUBLIC INSTRUMENT Once the compensation payment has been deposited, the General Mining Bureau shall order the signing of the public instrument within 10 business days of notification to the parties. The delivery of the compensation to the property owner shall be made once he/she signs the public instrument. If after 10 business days, the owner has not signed yet the public instrument; it shall be signed by default by the Head of the General Mining Bureau, who shall instruct the Nation's Bank to deliver the deposited amount to the owner. - Article 1 of Supreme Decree N AG, amending various articles of the Regulations to Article 7 of Law N 26505, on the procedures to be granted legal mining rights of way as approved by Supreme Decree N AG. 13. DENIAL OF APPLICATION If it is determined that the right of way impairs the property right, according to the technical opinion of the General Mining Bureau or according to the General Bureau for Agriculture Promotion (Dirección General de Promoción Agraria) of the Ministry of Agriculture, the application submitted by the mining concessionaire shall be denied by means of a Ministry Resolution issued by the Ministry of Energy and Mines. In case the owner of the land subject to the application is unknown; the call for appearance shall be published three times in the "El Peruano" official gazette, and in a local newspaper or in a newspaper of the place nearest to the area where the land is located; there shall be an eight days window in-between the publications. The call for appearance shall also be published posted on a sign to be fixed in the property. The appearance shall take place after the sixty-day term counted as from the day after the last publication has elapsed, with or without attendance of the owner, continuing with the process, as appropriate. 28