Reform Articles of the General Mining Law

Reform by addition Articles 22-A, 27-A, 56-A, 67-A, 68-A, 76-A, 76-B and 76-C, of Decree No. 238-2012 dated January 23, 2013, which contains the GENERAL MINING LAW, which hereinafter shall read as follows:

The mining concession for the exploitation of non-metallic minerals and gems or precious stones shall have a duration period of up to twenty (20) years counted from the grant date. The mining concession for the exploitation of metallic minerals shall have a maximum period of thirty (30) years counted from its grant date, which in both cases may be maintained and renewed for equal periods, provided that a written petition has been submitted by the concessionaire to the mining authority with the following considerations:

• 1)

  Analysis of proven reserves with favorable reports from the Technical Units of the Mining Authority (in the event that there are still proven reserves that can be exploited);

• 2)

  Report properly prepared by a certified professional. This report must account for the exploitation plan and its technical and economic justification in the event that exploitation activities must continue after the grant period has expired;

• 3)

  Review and compliance with social commitments acquired with the Community;

• 4)

  Review and compliance with the mitigation measures plan of the environmental license; and,

• 5)

  Review of the investment committed by the company (in the time it has worked, as well as, the Investment committed if it wishes to continue with the Operation) and its financial capacity to carry out the same.

The execution of exploration, exploitation and beneficiation activities must be carried out in accordance with the international standards contained in the conventions and international treaties subscribed by Honduras in matters of environmental protection and conservation, in such a manner that public health and safety are not compromised; applying the precautionary principle when there is danger of serious or irreversible damage, and must utilize science and technology as a contribution to discover, prevent and combat risks that threaten the environment. The Honduran Institute of Geology and Mines (INHGEOMIN), through its corresponding technical units and jointly with the Ministry of State in the Office of Natural Resources and Environment "MY ENVIRONMENT", through the Center for Study and Control of Contaminants (CESCO), shall ensure compliance with the above. Every concession for exploration, exploitation and beneficiation must have its respective environmental license in accordance with the current categorization table established by the Ministry of State in the Office of Natural Resources and Environment "MY ENVIRONMENT", prior to beginning operations as a safeguard mechanism for life, human health and protection of environmental resources, which allows mining operations to be executed in accordance with the highest standards in matters of environmental protection and human health making prevail the right to life, in accordance with applicable laws, conventions and treaties subscribed by the State of Honduras. The beneficiation concession shall be mandatory for those who, not being holders of a mining exploitation concession, capture minerals or mineral intermediate products from concessionaires and third parties for the purpose of benefiting them.

The territorial canon is the periodic pecuniary consideration that must be paid in full, starting from the year in which the request for Mining Rights was filed and during the validity thereof within the first fifteen (15) days of the month of January of each year, in order to guarantee the reservation of the requested area, payable progressively in the following manner: EXPLORATION CANON a) The equivalent in national currency to ONE FIFTY OF UNITED STATES DOLLAR (US$ 1.50) for the first year and for each hectare or fraction requested, in the case of concessions; b) The equivalent in national currency to THREE FIFTY OF UNITED STATES DOLLAR (US$ 3.50) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploration concessions in the second year; c) The equivalent in national currency to FIVE FIFTY OF UNITED STATES DOLLAR (US$ 5.50) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploration concessions in the third year; d) The equivalent in national currency to SEVEN FIFTY OF UNITED STATES DOLLAR (US$ 7.50) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploration concessions in the fourth year; and, e) The equivalent in national currency to NINE FIFTY OF UNITED STATES DOLLAR (US$ 9.50) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploration concessions in the fifth year. EXPLOITATION CANON a) The equivalent in national currency to TEN UNITED STATES DOLLARS (US$ 10.00) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploitation concessions in the first ten (10) years; b) The equivalent in national currency to TWELVE UNITED STATES DOLLARS (US$ 12.00) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploitation concessions in the following ten (10) years; and, c) The equivalent in national currency to FOURTEEN UNITED STATES DOLLARS (US$ 14.00) per year and per hectare or fraction granted or requested, in the case of metallic and non-metallic exploitation concessions in the last ten (10) years of the project. In both cases (EXPLORATION AND EXPLOITATION), when concessionaires establish the need to renew their permits in accordance with what is established in this General Mining Law, they shall continue paying the same canon applicable at the time of their request for the renewal period. In Small Mining, the equivalent in national currency to FIVE UNITED STATES DOLLARS (US$ 5.00) per hectare or fraction granted or requested shall be paid annually and during its validity, within the first fifteen (15) days of the month of January of each year, starting from the year in which the request for Mining Rights was filed.

Prior to the request for the exploitation stage, when the exploration results are presented and prior to the resolution granting the Exploitation Concession, the Mining Authority shall request the respective Municipal Corporation to conduct a citizen consultation (open town hall), within a period not exceeding ninety (90) calendar days, counted from the notification, in the project's area of influence determined in accordance with the exploration results and the environmental license, in the terms indicated by the Municipalities Law, the result of which shall be reported within a period not exceeding ten (10) business days after the consultation. The decision adopted in the consultation is binding for the granting of the Exploitation Concession. If the result of the citizen consultation is opposition to exploitation, it cannot be conducted again until after one (1) year. Prior to the installation of a social development board made up of local governments, Mining Authority, Environmental Authority, Human Rights, Local Governor, Chamber of Commerce and community representatives in order to establish the viability or not of the project. In the case of projects to be developed in territories of indigenous and Afro-Honduran peoples, recognized as such by the Honduran Institute of Anthropology and History (IHAH), a prior, free and informed consultation shall be conducted in accordance with what is established in ILO Convention 169 and/or the special national legislation to be approved for such purpose.

When the area of influence of the concession encompasses more than one municipality, the consultation referred to in the preceding Article must be conducted in each municipality, taking into consideration the entire area of influence established in the environmental licensing of the project; without prejudice to the provisions of the preceding Article regarding projects to be developed in territories of indigenous and Afro-Honduran peoples that must conduct a prior, free and informed consultation in accordance with what is established in ILO Convention 169 and/or the special national legislation to be approved for such purpose.

Every mining concessionaire pays the following taxes:

• A)

  Income Tax;

• B)

  Sales Tax;

• C)

  Net Asset Tax;

• D)

  Rates for services and levies established in the Municipalities Law and in the Municipal Tax Schedule;

• E)

  Security Rate;

• F)

  Surface and Territorial Canon; and, G. Special Mining Tax (IEM)." "ARTICLE 76-B. SPECIAL MINING TAX (IEM): Special Mining Tax (IEM): Industrial non-metallic mining, gems or precious stones mining and small Metallic Mining shall pay three percent (3%) based on FOB value, broken down as follows:

  • a)

    One percent (1%) for the municipality where the material is extracted;

  • b)

    One percent (1%) in favor of the Mining Authority; and, c) One percent (1%) as a Security Rate." "ARTICLE 76-C. SPECIAL MINING TAX (IEM): Special Mining Tax (IEM): Metallic mining, oxides and sulfides (non-metallic) from which metals are extracted shall pay five percent (5%) on the FOB value, broken down in the following manner:

    • a)

      Two percent (2%) as a Security Rate that must be remitted to the General Treasury of the Republic;

    • b)

      Two percent (2%) as a municipal tax, which must be remitted directly to the Municipal Treasury where the mining operation is located; and, c) The remaining one percent (1%) in favor of the Mining Authority to strengthen it in its mining control and scientific research activities. It falls to the Honduran Institute of Geology and Mines (INHGEOMIN) to certify that the value of the commercial invoice reflects a coherent value of minerals in the international market in order to guarantee the sustainability of the exploitation of extracted resources.