Regulations for the General Mining Law of 2013

This Regulation constitutes the set of regulatory provisions, derived from and in accordance with the legal provisions contained in the General Mining Law, to which natural or juridical persons, public or private, that develop mining and metallurgical activities in the national territory must be subject.

The regulatory norms contained in this Regulation are of general application and are mandatory in character for the exercise of the provisions of the General Mining Law and related laws insofar as applicable.

For the purposes and exercise of the General Mining Law and this Regulation, the following shall be understood as: MINING ACTIVITY: It is the set of activities carried out with the objective of developing a mine or exploiting a mineral; it includes prospecting, exploration, exploitation, processing and closure. PUBLIC-PRIVATE PARTNERSHIP: A scheme of collaboration or common effort between public and private sectors, national and international, that adopts multiple models, establishing rights and obligations, determining and distributing risks and benefits among the parties. PROTECTED AREA: Those areas, whatever their management category defined by the Forest Law, Protected Areas and Wildlife, for the conservation of natural and cultural resources, taking into account geographical, anthropological, biotic, social and economic parameters of the same that justify the general interest. MINE MOUTH: Portal of entry and/or exit of the mine where ore is received in its natural, unprocessed state, when it has only been mined. PROCESSING: Physical, chemical and/or physicochemical processes that are carried out to extract or concentrate the valuable parts of a mineral aggregate and/or to purify, smelt or refine metals. ORE: Mineralized material with commercial value extracted from the mine to be subjected to crushing, concentration, hydrometallurgical and/or metallurgical processes. RESERVE CALCULATION: Quantification of mass or volume of mineral susceptible to being exploited, including dilution, and from which valuable or useful minerals can be economically recovered under real conditions. MINING CANON: Called Territorial Surface Canon, is the annual pecuniary consideration per hectare that must be paid to the Mining Authority, starting from the year in which the application for granting of the mining right is filed and its duration. GEOPHYSICAL CHARACTERISTICS: Physical properties of minerals, rocks or soils that contain them. GEOCHEMICAL CHARACTERISTICS: Qualities of the chemical elements that make up the earth's crust and that may be produced by the presence of a mineral deposit. CERTIFICATE OF ORIGIN: Document that serves to certify the origin or source of mineral products. MINE CLOSURE: Comprises the rehabilitation actions that the holder of the mining right must carry out simultaneously in the development of their productive activity or at the end of it, in accordance with the schedule and conditions established in the closure plan approved and supervised by the Mining Authority; which may be temporary, progressive or final. ENVIRONMENTAL CONTROL: Inspection and surveillance of the technical and legal measures that are applied and are necessary to reduce or prevent any type of harm to the environment in general. MINERAL DEPOSIT: It is the set of deposits located in a specific area; deposits of metallic minerals are called mines and those of non-metallic minerals and precious gems are called quarries. ALLUVIAL EXPLOITATION: Mining activities and operations on riverbanks, water courses, beaches, river beds and their basins, for the extraction of minerals and materials in alluvial terraces. FOB (FREE ON BOARD): Value to be charged or received for the mineral product to be exported. The commercial value is determined in the final sales invoice. ADMINISTRATIVE INFRACTION: Actions or omissions in mining matters that constitute violation of the Law, Regulation and Administrative Resolutions that lead to an administrative sanction. METALLURGY: 1. Study and technology of metals and alloys. 2. It is the science of extracting metals from their respective ores by mechanical means and chemical processes, and of preparing them for use. MINERAL DEPOSIT: Formation in which there is a statistically anomalous concentration of mineral (mineral deposits), present in the earth's crust or lithosphere. The residues or small bulk quantities of metals or precious stones existing in alluvial lands, channels, beaches, river beds and basins are called detrital mineral deposits. TITLE II INSTITUTIONAL FRAMEWORK CHAPTER I ORGANIZATIONAL STRUCTURE

The structure and hierarchical organization of the Honduran Institute of Geology and Mines (INHGEOMIN) is as follows:

• a)

  Executive Direction;

• b)

  Executive Sub-Direction of Mining;

• c)

  Executive Sub-Direction of Mining Research and Information;

• d)

  General Secretariat;

• e)

  Technical and/or Legal Advisory;

• f)

  Operational Units: a. Legal. b. Mining and Cadastral Registry. c. Research. d. Laboratories. e. Mines and Geology. f. Mining Inspection. g. Environment and Safety. h. Social Development. i. Planning and Management. j. Information Technology. k. Transparency. l. External Cooperation and Public Relations. m. Administration. n. Internal Audit. o. Human Resources. The creation of these organs shall be carried out in accordance with the necessary budgetary availability for the creation of these administrative organs. CHAPTER II POWERS

The Executive Director, in addition to the powers established in Article 101 of the General Mining Law, has the following powers:

• a)

  To comply with and enforce compliance with what is prescribed in the Constitution of the Republic, General Law of Public Administration, General Mining Law and other General and Special Laws that are within their competence to apply;

• b)

  To propose, direct, coordinate, and supervise mining policy and the activities of the Institute;

• c)

  To propose to the President of the Republic the policies, goals, objectives, strategies and priorities for the application of mining legislation;

• d)

  To prepare draft additional regulations that are necessary to apply the General Mining Law;

• e)

  To remit Internal Regulations to the Presidency of the Republic for their respective approval;

• f)

  To delegate to Sub-Directors and Unit Chiefs the functions that it deems appropriate;

• g)

  To decide on those matters that the President of the Republic delegates to it, documenting them in the respective agreements or resolutions, which it issues by delegation;

• h)

  To issue to the corresponding authorities the recommendations and guidelines generated by the technical units for the appropriate exploitation of borrow pits requested for works of public interest, dredging and correction of river channels;

• i)

  To authorize the Registry of Mineral Commercialization;

• j)

  To propose to the corresponding authorities or immediately execute the presidential instruction for the creation of mining reserve zones, for the benefit of the State and Municipalities;

• k)

  To propose agreements and contracts through public-private partnerships for the development of mining projects;

• l)

  To create, when deemed appropriate and with available budget, other Administrative, Technical and Operational Units, to comply with the General Mining Law and this Regulation;

• m)

  Those others that result from the application of the General Mining Law, this Regulation and those that the President of the Republic assigns or instructs.

The attributes and functions of the Mining Subdirector are:

• a)

  To substitute for the Executive Director in case of absence or legal impediment;

• b)

  To develop promotion and development policies for mining activities in technical, economic, and corporate social responsibility aspects;

• c)

  To support and coordinate together with the Executive Directorate the national mining policy to be executed according to the directives of the President of the Republic;

• d)

  To assist the Executive Directorate in the technical, legal, and economic evaluation regarding the appropriateness of granting mining rights;

• e)

  To send the delimitation of areas for artisanal mining at the request of municipalities;

• f)

  To appear before different national or international public and private institutions in representation of the Executive Directorate when delegated to do so.

The attributes and functions of the Subdirector of Research and Mining Information are:

• a)

  To coordinate and execute policies related to geological and mining research;

• b)

  To propose to the Executive Director the subscription or cancellation of research agreements with national and international bodies;

• c)

  To propose to the Executive Director the policies, legislative and regulatory initiatives, as well as manuals and instructions that it considers necessary for the proper performance of its competence;

• d)

  To manage national and international cooperation for the execution of research projects and laboratory equipment;

• e)

  To promote scientific research specifically in the area of geo-sciences;

• f)

  To consolidate, systematize, disseminate, and keep available in a permanent and updated data bank, information on the country's mineral resources, through a publication plan;

• g)

  To acquire, strengthen, and disseminate scientific and technological knowledge related to the institute's activities, through the management and support of research, training, and development plans, programs, and projects, proposing the corresponding policy of scientific research, development, and technological innovation, in accordance with the National Plan and Country Vision;

• h)

  To coordinate advisory and technical assistance services in the execution of prospecting activities;

• i)

  To inform the Executive Director to manage mining reserve areas or public-private partnerships based on canceled rights and areas of mining potential determined in the research;

• j)

  To fulfill any other functions delegated by the Executive Director or assigned in this Regulation and other legal provisions.

In case of temporary absence of the Executive Director, the Mining Subdirector shall assume his functions, and in the absence of the latter, the Subdirector of Research and Mining Information.

The functions of Technical and Legal Advisors are:

• a)

  To recommend to the Executive Directorate and the Subdirectorates on technical and legal matters for the solution of aspects related to mining activity;

• b)

  To review technical and administrative procedures for the granting of a mining right;

• c)

  To work jointly with the operational units of INHGEOMIN for the correct application of the General Mining Law and this Regulation;

• d)

  To design work strategies, methodologies, and tools for the performance of the activities of the operational units; and,

• e)

  Other functions assigned by the Executive Director and Executive Subdirectors.

The functions of the Legal Unit are:

• a)

  To issue legal opinions regarding the appropriateness of granting mining rights applications and legal opinions when required to do so;

• b)

  To issue legal opinions regarding nullities, appeals, manifestations, oppositions, incidents, transfers, assignments of mining rights, cancellation of Mining Rights, complaints, and various legal opinions;

• c)

  To exercise judicial representation that is delegated to it, in cases of lawsuits (Labor, Administrative Litigation, Civil, etc.);

• d)

  To provide Legal Advisory services to Operational Units when requested to do so;

• e)

  To compile for its application the new decrees, agreements, regulations, and current laws; and,

• f)

  Other functions assigned by the Executive Director.

The functions of the Mining and Cadastral Registration Unit are the following:

• a)

  To establish a registry of mining rights and documents related thereto;

• b)

  To establish a database in a grid system as established in Articles 39 and 40 of the General Mining Law, in which mining rights, mining reserves, borrow pits and dredging works are established;

• c)

  Update of the alphanumeric and graphic database of the mining cadastre under the modality of the Mining Information System of Honduras (SIMHON);

• d)

  To evaluate from the technical-cadastral perspective the appropriateness of applications for mining concessions; and,

• e)

  Others that the Executive Director may assign. Maps, copies, certifications, reports and sketches requested by users shall be granted prior to payment of the corresponding fee.

The functions of the Research Unit shall be the following:

• a)

  To conduct regional studies in a systematic manner and with modern methodology, of the basic geology of the country, including geo-environmental, hydrogeological and mining exploration studies;

• b)

  To prepare, publish and update the national geological chart;

• c)

  To prepare maps that include geochemical and multi-elemental information to provide baseline knowledge for studies of an environmental nature, as well as for the exploration of mining resources;

• d)

  To define prospective zones characterized by geochemical anomalies;

• e)

  To generate, systematize, focus and manage geological information throughout the national territory;

• f)

  To prevent the incidence of geological and anthropogenic threats;

• g)

  To promote, organize and manage the implementation of study programs and courses for undergraduate, postgraduate and specialization degrees;

• h)

  To train and develop researchers in the area of geo-sciences and disaster risks;

• i)

  To provide assistance and advisory services to national and international organizations, public and private institutions, entities and communities through professional services;

• j)

  To generate greater knowledge about the natural resources and geological hazards of the national territory, through technical assistance in geological matters to governmental authorities, contributing to the sustainable growth of the country; and,

• k)

  Others that the Executive Director may assign.

The functions of the Laboratory Unit are the following:

• a)

  To provide analytical support in the activities carried out by the following units:

  • •

    Environment and Safety.

  • •

    Inspection.

  • •

    Mines and Geology.

  • •

    Research.

• b)

  To provide service to the general public to meet the needs of study and research regarding analysis in the mining-geological field; and,

• c)

  Others that the Executive Director may assign.

The functions of the Mines and Geology Unit shall be the following:

• a)

  To analyze from the technical-geological point of view the feasibility of mining activities;

• b)

  To register mineral production data that describes the volume of production, substance of interest and origin of the mineral;

• c)

  To report possible mineral incidents to the Research Unit;

• d)

  To conduct sampling to determine the quantitative and qualitative characteristics of minerals to be exported, prior to their export; and,

• e)

  Others that the Executive Director may assign.

The functions of the Mining Inspection Unit shall be the following:

• a)

  To analyze from the economic and financial point of view, the capacity of applicants to develop mining projects in the country;

• b)

  To inspect compliance with the economic obligations of Metallic and Non-Metallic Mining Concessions pending with the Institution and the State of Honduras;

• c)

  To conduct accounting inspections when there are inconsistencies in the information presented by holders of mining rights;

• d)

  To verify minimum production in accordance with the sales declaration and determine the amount of penalties for non-compliance therewith;

• e)

  To conduct and schedule shipment inspections to exporters;

• f)

  To send information on exports and sales of mining rights holders to the National Institute of Statistics, Central Bank and Extractive Industries Transparency Initiative EITI; and,

• g)

  Others that the Executive Director may assign. The requirements of the Extractive Industries Transparency Initiative (EITI) referred to in Article 53 literal h) of the General Mining Law are those contained in the standards or norms that are internationally adopted and applied by the bodies of the Association for the Extractive Industries Transparency Initiative (EITI), and which, consequently, are mandatory for Honduras as a member country. All mining companies must provide the disaggregated information that, to meet those requirements, is requested of them by the National Council of the EITI - Honduras. In the resolutions granting new mining concessions, this article on the duty to comply with the EITI requirements shall also be reproduced literally and included. The foregoing is without prejudice to the corresponding duties of INHGEOMIN and other entities or institutions of the State to provide the information that, to comply with EITI requirements in relation to extractive activities in the local and national scope, is periodically requested of them by the National Council of the EITI - Honduras.

The functions of the Environment and Security Unit shall be the following:

• a)

  Determine preventive and/or corrective actions to minimize the risk of possible environmental impacts from the geological-mining sector;

• b)

  Coordinate actions with other state entities or civil society in order to contribute efforts aimed at environmental mining control;

• c)

  Analyze mining rights applications from the technical and/or environmental conservation perspective, reviewing environmental requirements for each of the mining activities;

• d)

  Require and verify the existence of the environmental license and other permits related to environment and security, required by current legislation;

• e)

  Participate and collaborate with the environmental authority in the design of manuals, guides and procedures for the implementation of environmental regulations in mining, knowing and enforcing that INHGEOMIN is responsible for executing the National Mining Sector Policy;

• f)

  Formulate and propose technical and legal standards related to conservation and protection of the environment that are related to mining activity, in accordance with current environmental regulations;

• g)

  Propose standards for the evaluation of environmental and social impacts derived from Mining Sector activities;

• h)

  Participate in open town halls or other related participation mechanisms; and,

• i)

  Other functions assigned by the Executive Director.

The functions of the Social Development Unit shall be the following:

• a)

  Analyze from a social perspective the feasibility of mining projects and verify the results of citizen participation in them;

• b)

  Promote and execute training and capacity-building programs on topics related to dredging, artisanal mining, small-scale mining, social impacts of mining, institutional projection and others related to mining activity;

• c)

  Plan and manage mining-social projects approved by the Mining Authority;

• d)

  Issue technical standards for the use of borrow pits and conduct their control and monitoring; and,

• e)

  Other functions assigned by the Executive Director.

Prospecting is free throughout the national territory in accordance with and compliance to what is established in Article 13 of the General Mining Law and without prejudice or detriment to private property.

In accordance with what is provided in the previous Article, prospecting may be carried out by performing the following activities, among others: collection of background information, use of aerial photographs and satellite images, field work through direct observations, collection of surface samples, laboratory analysis and testing, use of maps and profiles, geochemical prospecting, geophysical, magnetometry, radiometry seismic, gravimetry and geoelectric.

Exploration activities comprise:

• a)

  Preparation of exploration platforms;

• b)

  Carrying out drilling wells, test pits or trenches and other work to determine project profitability (reserve calculation);

• c)

  The construction of roads, access routes and other infrastructure related to carrying out the activities described above.

The Application for Mining Concession for the exploration stage must comply with the requirements set forth in Article 66 of the General Mining Law, declaring under oath that the applicant and their legal representative are not included in the ineligibilities indicated in Article 75 of said Law and committing to comply with all obligations resulting from it, and in accordance with the application form created for this purpose.

Once the exploration concession is granted, the holder shall present to the Mining Authority within one hundred twenty (120) days following the exploration program. Non-compliance with this obligation constitutes a fault and shall be sanctioned in accordance with subsection b) of Article 85 of the General Mining Law, without prejudice to the obligation of its presentation and the consequences for repeated non-compliance.

The exploration program referred to in the previous article must contain:

• 1)

  Original plan indicating the sites where the proposed mining activity will be developed, on a scale between 1:500 and 1:50,000 that must contain for each site the following: Geometric figure delimited by geographic coordinates, perimeter of the zone indicating vertex, latitude and longitude, area in hectares. Each site must be presented in universal transverse mercator coordinates (UTM); WG84 system. The plan must be signed and sealed by a properly registered and solvent Civil Engineer, Mining Engineer or Geologist;

• 2)

  Certificate of solvency of the professional who signs the plans;

• 3)

  Substance of interest;

• 4)

  Exploration program signed, sealed and with the details of the responsible professional, for a period of up to two years containing the following:

  • a)

    Description of exploration activities;

  • b)

    Type of exploration methods;

  • c)

    Execution times (schedule);

  • d)

    Technical description of equipment, according to the exploration method;

  • e)

    Personnel to be employed, positions and responsibilities. 5. Budget for minimum investment related to the proposed exploration activities; 6. Environmental management plan developed according to the Manual of Good Mining Environmental Practices, in accordance with the format established by the Mining Authority; 7. Schedule and budget of environmental control activities to be implemented; 8. Plan of Socialization Strategies; 9. Original financial statements, signed, stamped and sealed by a certified expert in the accounting area. In the case of newly formed companies, present initial balance sheet; and, 10. Others established in the Manual of Good Mining Environmental Practices approved by the Mining Authority and which, in accordance with the second paragraph of Article 14 of the General Mining Law, must be reviewed periodically in order to keep it updated.

It shall be understood that the holder of the mining exploration right has complied with the obligations established in the mining right previously granted, when they have executed all the technical and legal requirements and programs committed in the exercise of the exploration concession. CHAPTER III OF EXPLOITATION

Exploitation activities comprise:

• a)

  Construction of plants, camps, preparatory physical works for the production process;

• b)

  Activities for the development of open pits, cutting profiles and tunnels;

• c)

  Overburden removal, construction of waste dumps and organic material dumps, extraction of brush or substance of interest;

• d)

  Detonations or blasts.

The requirements for exploitation are the following:

• 1)

  Payment of inspection for the exploitation stage;

• 2)

  Public Deed or document that accredits in legal and proper form the ownership of the surface property where the mining activity will be developed. In case of not being the owner, the respective authorization or contracting of the property owner granted in accordance with law and, which must be registered in a timely manner before the Mining Authority and, if the exploitation is alluvial (river) prove the respective easement when applicable;

• 3)

  Technical report of the results of exploration that contains:

  • a)

    Extraction method and description of the exploitation and/or benefit plan (process flowchart, mining plan);

  • b)

    Description of the design of the site or sites to be exploited, sterile deposit and organic matter;

  • c)

    Projected production volumes;

  • d)

    Volumes of sterile material and organic matter to be removed;

  • e)

    Equipment to be used (technical description);

  • f)

    Human Resources (organizational structure of the project, positions and responsible parties); and,

  • g)

    Activity schedule that details the times of monthly execution (adaptation, estimated date of exploitation, operation and closure). 5. Minimum Investment Project that contains the Construction Budget (adaptation and installation) and Industrial Execution Budget (operation); 6. Set Plans: Project Design (all plans must be geo-referenced in the transverse mercator projection UTM, WG84, with their respective coordinate table); 7. General plans of the project: Location of all elements that form part of the mining process (perimeter of extraction areas, haulage routes, administrative offices, warehouses, parking areas, mineral storage areas, mining operation effluents, crushers, screens, conveyor belts, water pipes, septic tank, latrines, area for location of explosives if applicable). The location of all elements previously described will depend on the substance of interest to be exploited and the process to be performed; 8. Design of the processing plant if it exists; 9. Plan of the mine design with its transverse and vertical sections that delimit the body or bodies to be mined; 10. Environmental license and mitigation measures contract; 11. Contingency plans (risk, natural disasters, performance); 12. Closure and abandonment plan; 13. Update of the original financial statements, signed, stamped and sealed by a certified expert in the accounting field (balance sheet, statement of results) with closing date to the fiscal year; 14. Minimum investment plan; and, 15. Social impact assessment in exploitation and closure stages that contemplates the environmental impact study.

To determine the classification of the mining right, in case of doubt about its classification, the Mining Authority through its unit of Mines and Geology and supported by the Laboratory and Research Unit, shall issue an opinion on the characteristics of the substance of interest to be exploited, framed within the following criteria:

• a)

  Physical-chemical characteristics of the mineral;

• b)

  Mining characteristics;

• c)

  Application of concentration techniques of the substance of interest; and,

• d)

  Application of refinement techniques of the substance of interest. In case the Mining Authority determines a different classification of the mining right than the one originally requested, the corresponding modification shall be ordered in accordance with the substance of interest. The modification of the mining concession shall not diminish the preemption rights that correspond to the interested party over the requested zone, without prejudice to the adjustment to the payment of territorial canon when applicable.

All requirements presented physically for the exploration and exploitation stage must be submitted in digital format PDF, Word or Excel as applicable. TITLE IV CONCESSIONS, PERMITS AND RECORDS CHAPTER I OF THE CONCESSION PROCESS FOR THE EXPLORATION STAGE

The application for Mining Exploration Concession shall be formulated in accordance with the provisions of the Administrative Procedure Law, attaching the documents required in Article 66 of the General Mining Law and in Article 23 of this Regulation and other applicable legal and regulatory requirements.

Once verified by the Mining and Cadastral Registry that the requested zone is free and is not found within the areas designated as excluded by Article 48 of the General Mining Law, it shall provisionally note the application and the Mining Authority shall order the publication of an extract thereof, so that the petitioner publishes it in a written newspaper and a radio with coverage in the zone, and must present within the following three (3) business days the receipt that evidences the publication order, otherwise the proceedings shall be filed without further action. The Mining Authority shall request bimonthly from the National Institute for Conservation, Forest Development and Protected Areas and Wildlife (ICF) and from the Honduran Institute of Anthropology and History (IHAH) the list of protected areas, national inventory of assets constitutive of cultural heritage and shall also request from the Environmental Authority the areas that are in recovery and environmental mitigation to incorporate them into the mining cadastre.

Once the receipts evidencing the corresponding publications are presented in the file, the procedure shall be advanced ex officio, concluding, after inspection of the site from which a report and joint opinion will result from the technical units of Mines and Geology, Environment and Safety, and Social Development.

If within fifteen (15) days following publication an objection is filed, being of an incidental nature, it shall be processed in a separate proceeding leaving a record in the main file, in accordance with the corresponding administrative procedure and without suspending the course of the mining concession application process. If no objection is filed or once it is resolved, the Mining Authority shall proceed to resolve the mining concession application following legal opinion in both cases, within a period not exceeding forty-five (45) days. The Mining Authority shall issue the corresponding resolution and, if favorable, shall order its registration in the Mining and Cadastral Registry Unit.

CHAPTER II CONCESSION PROCESS FOR THE EXPLOITATION STAGE

Once the exploration stage is completed, the concessionaire shall present to the INHGEOMIN an application for the right to exploit the explored deposit, accompanied by the requirements found in Article 26 of this Regulation.

The Executive Directorate shall forward the proceedings in order to the Units of Mines and Geology, Environment and Safety, Social Development, and Mining Oversight so that they issue their corresponding opinion on the feasibility of the exploitation stage.

Once favorably opined by the Mining and Geology Unit on the site and the proposed extraction method, and prior to the pronouncement of Environment and Safety, the applicant must process their respective environmental license and accredit it in the file. In accordance with what is established in Article 36 of the General Mining Law, the approval of the exploitation method shall be made based on what is established in the feasibility study and the application of modern techniques in the field at the time of project approval, for which purpose the Mining Authority shall issue the necessary provisions.

Once the favorable pronouncement of the operating units mentioned in the preceding article is established in the file, the Mining Authority shall request the respective Municipal Corporation to conduct a citizen consultation within a period not exceeding sixty (60) calendar days counted from said request, in the terms indicated by the Law of Municipalities and in accordance with what is established in Articles 91, 92, and 93 of this Regulation.

Upon receipt of the result of the citizen consultation being favorable, the social, financial, and legal evaluation of the mining exploitation concession application shall proceed.

Once favorable opinions have been issued regarding the merit of the Mining Concession application by the technical and legal units, the Executive Director shall issue the corresponding Resolution for the granting of the Mining Exploitation Concession and once final, it shall proceed to its registration in the Mining and Cadastral Registry. CHAPTER III GRANTING OF PERMITS FOR SMALL-SCALE MINING

The Mining Authority is empowered to grant permits for small-scale metallic mining and for gems or precious stones. In the case of small-scale non-metallic mining, it corresponds to the Municipal Authority to grant them. Small-scale mining is understood as mining activities in which simple mechanical means are used, with the capacity to reach the production volumes established in Article 86 of the General Mining Law.

The permit to exercise the condition of small-scale mining must contain the following requirements:

• a)

  Full name, general particulars of the applicant and/or their representative, copy of personal identification document and National Tax Registry; in case of legal representation, the document proving it must be presented duly authenticated;

• b)

  Authenticated Power of Attorney or Special Power in favor of a law professional and photostat copy of their professional license;

• c)

  Articles of Incorporation of the Company, Individual Merchant or Legal Entity;

• d)

  Sworn Statement of not being included within the incapacities of the General Mining Law;

• e)

  Payment for the concept of territorial fee, according to the requested area;

• f)

  Payment of field inspection per request;

• g)

  Application addressed to the Mining or Municipal Authority in accordance with the designed form, which must include:

  • •

    Location of the requested area.

  • •

    Exploitation method.

  • •

    Substance of interest.

  • •

    Volumes of material to be exploited.

  • •

    Technology to be applied for recovery.

• h)

  Map at a scale of 1:20,000 indicating the sites where mining activity will be conducted, must contain the following: geometric figure delimited by geographic coordinates, perimeter of the zone in which the vertex, latitude and longitude are indicated and area in hectares. Each site must be presented in universal transverse mercator coordinates (UTM); WGS84 system.

• i)

  Location of the stockpiling or storage, processing, smelting and refining facilities in which materials resulting from the exploitation will be processed when applicable; and,

• j)

  Environmental license and its corresponding resolution when applicable in accordance with what is provided by the Environmental Authority, which must be accredited prior to the pronouncement of the Environment and Safety unit or the Municipal Environmental Unit, as applicable.

In the case of requests presented to the Mining Authority, once verified by the Mining and Cadastral Registry that the requested area is free and is not within the areas designated as excluded by Article 48 of the General Mining Law, it shall provisionally record the request. The General Secretariat shall issue a certificate of the small-scale mining permit request to begin the environmental licensing process. CHAPTER IV OF THE REGISTRY OF MINERAL TRADERS

Any natural or legal person who is not the holder of a mining right and regularly engages in the activity of buying and selling minerals to transform, process, distribute, or export them must be registered in the Registry of Mineral Substance Traders. The Mining and Cadastral Registry Unit together with the Mining Inspection unit shall be responsible for registering the granting of the same in their database. The registry shall have a unique number and shall be issued annually by the Mining Authority, which shall extend to the applicant the corresponding trader registry.

The application for registration as a mineral trader must be submitted to the mining authority with the following requirements:

• a)

  Name or business name and domicile of the applicant;

• b)

  National Tax Registry (RTN);

• c)

  Name of the mine, quarry, operation and/or establishment from which the mineral is supplied and the file number thereof before the Mining Authority or Municipality;

• d)

  Mineral substances intended to be traded, with approximate volumes and/or weights;

• e)

  Certificate of origin of the mineral, which shall be issued by the holder of a mining right, which must be authenticated;

• f)

  Authenticated copy of the document(s) that reliably prove compliance with the payment of all taxes, fees, royalties and other amounts that the holder of the mining right is legally required to pay, such as mine, quarry, operation and/or establishment from which the mineral is supplied to him;

• g)

  Solvency Certificates issued by the General Prosecutor's Office of the Republic; and,

• h)

  Receipt of payment for the registry issuance fee.

After the request is evaluated by the Mining and Cadastral Registry Units, Mining Inspection, and Legal, the Mining Authority shall issue the mineral trader registry certificate within a maximum period of five (5) days. The validity of the mineral trader registry shall be valid for a period of one year from its date of issuance, and may be renewed by resubmitting the aforementioned requirements, maintaining its original registry number.

The mineral substance trader must submit a detailed quarterly declaration of their sales volumes based on the form that the Mining Authority shall implement for this purpose, which must also be submitted to the Municipal Authority. It is clear and expressly established that in strict application of subsection h) of Article 76 of the General Mining Law, metallic mining, oxides and sulfides (non-metallic from which metals are extracted) shall pay six percent (6%) on the FOB value of sales or exports, consequently, at any time the Mining Authority may require, from the holder of the mining right or from the trader, as applicable to the specific case, payment of the total value or corresponding adjustments to ensure that this requirement and all payments that by law correspond are inescapably met, whether the sale or export is executed directly by the holder of the mining right or by duly registered Mineral Substance Traders. TITLE V MINING CONTROL CHAPTER I OF THE CONSOLIDATED ANNUAL DECLARATION

The consolidated annual declaration is the technical, economic, social and environmental report in which the holder of public and private mining rights describes all activities carried out in the immediately preceding year, in accordance with the program of activities approved by the Mining Authority; as well as the activities projected for the development of the mining project. It must be presented annually to the Mining Authority and the respective Municipalities in the month of January of each year. Said report shall be confidential in accordance with Article 53 literal h) of the General Mining Law.

The Consolidated Annual Declaration must contain: EXPLORATION 1. Balance Sheet; 2. Report of accidents that occurred; 3. Environmental protection activities and project socialization; 4. Mining, geological and geophysical activities, work executed, planned programs and results obtained from exploration; 5. Employee statistics; 6. Summary of existence of materials (materials to be explored); and, 7. Copy of receipts for payment of fees and contributions. EXPLOITATION 1. Balance Sheet; 2. Profit and loss report; 3. Income from metals, export declarations, sales contract, sales settlement; 4. Report of accidents that occurred; 5. Environmental protection activities and social compensation measures; 6. Mining, geological and geophysical activities, work executed, planned program and results obtained and mineral reserve status; 7. Consumption of explosives and fuels; 8. Employee statistics; 9. Summary of existence of materials; Consolidated list of fixed assets. Furthermore: Copy of receipts for payment of taxes, fees and contributions to the State, including municipalities; Inventory of production at the mine mouth and at storage sites; and, Solvency with the State of Honduras issued by the Executive Tax Authority. The Mining Authority may request that the aforementioned technical information be expanded if necessary.

All applicable requirements for exploitation concessions shall be those required for the Consolidated Annual Declarations that Small Mining must present.

The information contained in the Consolidated Annual Declaration and other technical reports shall be provided by the Mining Authority to other State agencies, ex officio or upon request.

The holders of exploitation concessions and small miners must present in the Consolidated Annual Declaration the registry and inventories of production at the mine mouth and at storage sites, to establish at all times the volumes of raw minerals and those delivered to processing plants, if applicable, as established in Article 21 of the General Mining Law.

The data mentioned in the previous article shall be accompanied by export volumes, which shall be analyzed by the Mining and Geology unit with the objective of maintaining a constant record of mineral production in the country. CHAPTER II ENVIRONMENTAL INSPECTION AND LABOR SAFETY

Use of Methods and Technologies.- The public or private holders of mining rights are obligated to carry out their exploration, exploitation, benefit, smelting and refining activities, employing methods that prevent, mitigate or compensate for possible impacts produced to soil, water, air, biodiversity and to adjacent concessions and populations.

Manual of Good Practices.- The holders of public or private mining rights shall be regulated during the exploration stage through the Manual of Good Environmental Practices in Mining, which must be approved and reviewed every two years by the State Secretariat in the Departments of Natural Resources and Environment (SERNA) in consultation and with the support of INHGEOMIN.

Accreditation of Environmental License.- In all mining works, stages or activities, the holders of mining rights must accredit the respective environmental license, as stipulated by current environmental legislation.

Compliance with Environmental Obligations.- The holders of mining rights must comply with the Environmental Management Plan approved by the environmental authority and with current environmental standards, the Mining Law and regulations and other applicable legislation.

Within the framework of corporate social responsibility, the environmental management plan shall determine the mechanisms to support information, training, and permanent awareness programs for municipal staff and the population in the areas of influence of the projects, as well as the implementation of training programs for its personnel to encourage actions that minimize environmental deterioration.

Protection of Worker Health.- For the purpose of protecting the health of mining workers, the Honduran Institute of Geology and Mines (INHGEOMIN) together with the Ministry of State in the Offices of Labor and Social Security and the Ministry of State in the Office of Health, shall create the Manual of Mining Occupational Health, Safety, and Hygiene.

Holders of mining rights shall plan and execute the development of their activities in compliance with what is established in the technical standards of water and air quality and the Regulation for the Management of Solid Waste.

The Environment and Safety unit shall conduct pertinent inspections of all mining projects to guarantee compliance with these provisions. Upon completion of the inspection, recommendations shall be made so that corrective measures are taken as applicable.

Non-compliance with the same technical recommendation on three consecutive occasions shall be considered a violation and shall be sanctioned in accordance with what is stated in Article 85, literal h) of the General Mining Law. CHAPTER OF THE INSPECTION OF MINERAL PRODUCTION AND EXPORT

In order to comply with Article 33 of the General Mining Law, the Mining Authority shall conduct a prior analysis before any mineral export through the Laboratory Units and Mining and Geology, in order to analyze qualitatively and quantitatively the mineral to be exported.

The procedure for taking samples in compliance with the previous article is regulated under the Technical Guides for Mineral Sampling implemented by the Mining Authority and which contains in general terms the following procedures:

• 1)

  Recognition of the mineral lot to be sampled;

• 2)

  Sample extraction according to Technical Sampling Guides;

• 3)

  Obtain a representative sample according to the volume of the mineral lot to be exported and label it with a specific code; 5. Transfer of the sample to the laboratory for analysis; 6. The Mining and Geology Unit shall conduct audits of exporters to ensure the correct application of the sampling protocol; 7. The laboratory analysis report shall be sent to the Mining Inspection Unit for support and verification at the time of export inspection.

The exporter prior to shipment must present to the Customs Authority the following documentation:

• •

  Certificate of Analysis of the mineral product together with the result of analysis of the samples taken previously;

• •

  Certificate of origin of the mineral;

• •

  Current Registration of Commercializers and issued by the Mining Authority, in the case of non-concessionaire exporters.

The Mining Authority at the moment of shipment must request from the representative of the exporter the following documentation:

• a)

  Export declaration;

• b)

  Commercial invoice, with corresponding supporting document that indicates the minimum purchase conditions such as: substances of commercial interest, quality, quantity, prices, treatment costs and penalties;

• c)

  Certificate of origin issued by the State Department of Industry and Commerce; and,

• d)

  Packing list, when applicable.

Subsequently, a representative sample is taken as established in Article 62 of this Regulation, in order to confirm that the lots to be exported are the lots initially characterized.

At the end of each shipment, the Inspection Unit shall prepare a report that includes the following information:

• a)

  Report number;

• b)

  Place and date of export;

• c)

  Name and address of the exporter;

• d)

  Name and address of the consignee;

• e)

  Customs office of departure;

• f)

  Details of the export declaration (unit of measurement, weight, description of the mineral and FOB value in dollars and lempiras); and,

• g)

  Signature and seal of the inspector responsible for the Inspection Unit and the representative of the exporter.

Once the shipment inspection process is completed, the Inspection Unit shall prepare a shipment report in accordance with Article 33 of the General Mining Law, with the following information:

• a)

  Start and end date;

• b)

  Substance of interest (type of mineral);

• c)

  Sample results (before and after export);

• d)

  Certificate of origin;

• e)

  Export declaration from the Central Bank of Honduras;

• f)

  Commercial sales invoice; and,

• g)

  Packing list of the mineral product to be exported.

The exporter must submit to the Mining Authority a copy of the notice of adjustment to the declared export value and the foreign exchange justification report, in order to compare the results of the analyses. It is clear and expressly established that in strict application of subsection h) of Article 76 of the General Mining Law, metallic mining, oxides and sulfides (non-metallic), from which metals are extracted, shall pay six percent (6%) on the FOB value of sales or exports, consequently, at any time the Mining Authority shall require the holder of the mining right or the marketer, as applicable to the specific case, payment of the total value or corresponding adjustments to ensure that this and all payments required by law are complied with without fail, even if the sale or export is executed directly by the holder of the mining right or by duly registered Mineral Substance Marketers.

Mining Rights are the legal relationship between the State and a private party that arises from an administrative act of the Mining Authority or the municipalities, as applicable, and that comprises the concession, permit, or registration. Depending on whether it is a concession, permit, or registration, the applicant or concession holder shall pay to the mining authority and municipalities the territorial canon values indicated in Article 56 of the General Mining Law.

The Territorial Canon corresponding to the year in which the application for mining rights is filed must be paid in full and credited at the time of filing. The amount paid shall not be refundable if the application is denied. The Territorial Canon corresponding to the second year, calculated from January 1st of the year following the year in which the application for mining rights was filed, must be paid in the first half of January of the following year. The same rule shall apply for subsequent years (following the year of application). Holders of mining rights granted prior to the effective date of this Law shall inevitably pay the territorial canon at the same values established in this Article for mining concessions in the exploration and exploitation stages, respectively.

In accordance with the legal provisions on the matter, the necessary forms shall be issued for the payment of the territorial canon, before the Mining Authority or the municipality, as appropriate. Said form must contain at minimum the following information: 1. Consecutive Number. 2. Name of the Issuer. 3. Name of the Taxpayer. 4. National Tax Registry of the taxpayer. 5. Place and Date of payment. 6. Denomination of the requested zone. 7. Type of concession or permit. 8. Amount to be paid. 9. Year to which the canon corresponds. CHAPTER II OF TAXES

The following charges shall be applicable to holders of exploitation and beneficiation concessions, in accordance with special laws:

• a)

  As set forth in the Income Tax Law;

• b)

  As set forth in the Sales Tax Law;

• c)

  Net Asset Tax;

• d)

  Fees for services and tributes established in the Law of Municipalities and in the Municipal Fee Schedule;

• e)

  Security Fee, in accordance with Decree 105-2011 containing the Law of Population Security, which shall be deposited in the General Treasury of the Republic;

• f)

  Right of Validity or Surface (Territorial Surface Canon);

• g)

  Non-metallic mining of an industrial nature and mining of gems or precious stones shall pay two point five percent (2.5%) based on the FOB value or based on the value at the plant or ex-factory as the case may be, broken down as follows: - One percent (1%) for the municipality where the material is extracted; - Zero point fifty percent (0.50%) in favor of the Mining Authority; and, - One percent (1%) for the Security Fee.

• h)

  Metallic mining, oxides and sulfides (non-metallic) from which metals are extracted, shall pay six percent (6%) on the FOB value of sales or exports, broken down as follows: - Two percent (2.0%) for the Security Fee, in accordance with Decree 105-2011 containing the Law of Population Security, which shall be deposited in the General Treasury of the Republic; - Two percent (2.0%) for the municipal tax, which shall be deposited directly in the treasury of the municipality or municipalities where the mining exploitation is located; - One percent (1%) as counterpart in Development projects under the Law for the Promotion of Public-Private Partnerships (COALIANZA), in the case of PPPs; - The remaining one percent (1.0%) in favor of the Mining Authority, to strengthen it in its research, control, and scientific investigation activities. - The tributes established in subsections g) and h) are not applicable to holders of artisanal mining operations; For purposes of this Regulation, FOB value is understood to be the value of mineral products to be exported, that is, the commercial value of the product, as determined in the final commercial invoice.

The municipal tax referred to in subsection h) of the preceding article shall be paid to the Municipal Treasury of the Municipality in whose geographic jurisdiction the mineral is extracted. This tax is two percent (2%) on the total monthly value of sales or exports made and in accordance with the declaration submitted to the Central Bank of Honduras and INHGEOMIN. In the event that extraction occurs in more than one municipality, payment shall be made to each municipality proportionally to the volume of mineral extracted in each of them, as determined by the final commercial invoice and the mineral.

Natural or legal persons shall present to the Municipal Office on the 30th or last day of each month, in the Tax Administration section, an affidavit that includes the following: 1) For exports: - The estimated exports or sales in accordance with the value declared in the export permit authorized by the External Financing Regulatory Department (DERFE) dependent on the Central Bank of Honduras; - Export policy certified by the Executive Revenue Directorate; - Certificate of origin authorized by CENTREX dependent on the Ministry of Industry and Commerce; and, - Laboratory certificate from INHGEOMIN. 2) In local sales of mineral-derived products: - A summary table of sales made in the national market that contains dispatch date, invoice number, and value of the sale, endorsed by a senior administrative authority of the company.

The Municipality shall verify the amount of the foreign sale by reviewing the export declaration authorized by the Central Bank of Honduras and local sales, by reviewing purchase and payment invoices. Once the documentation supporting the affidavit has been received, the Municipality, through the tax section, shall issue a notice of collection for the tax owed so that the mining company shall proceed to pay it within the following five (5) business days. During the month of January of the following year, the Municipality shall be informed, by means of a special affidavit, of the adjustments to the original values presented in the monthly declarations. The following documents shall accompany the report: - Final settlement received from the external importer; - Adjusted export declaration (form C-3 from the Central Bank of Honduras or as shall be established in the future); - Declaration of Currency Income for each export to match values declared to the Central Bank of Honduras and to be compared with what was declared to the Municipality; - In the event that the adjustments are greater than the provisional declarations, the tax section of the Municipality shall proceed in accordance with what is indicated at the beginning of the process; and, - If the adjustments were less, the Municipality shall issue a payment order or a credit memo in favor of the mining company to proceed with collection through payment or deduction towards the following municipal tax settlement.

In application of Article 76 literal h) sub-literal b) of the General Mining Law, the holder of mining exploitation or processing rights shall make available to the tax auditors of the Municipality the necessary documentation for verification of the amount of the tax indicated in the sworn statements. In the event that no sales or shipments have been made during the month, the requirement to present the declaration shall be fulfilled by indicating these circumstances. It is understood that mining activities in Honduras are subject exclusively to the Tax Regime established by the General Mining Law, therefore the spirit of this provision may not be altered. CHAPTER OF THE TRUST FUND

For purposes of what is established in Article 77 of the General Mining Law, a Social Investment Fund is established that shall be comprised of 5% of the monthly municipal tax established in Article 76 of the General Mining Law. This Fund shall operate through a trust fund and, for its constitution, it is the responsibility of the Association of Municipalities of Honduras (AMHON) to determine the conditions of this trust fund. The trust fund shall have as its purpose the execution of investment projects in areas other than mining for the generation of employment in the area, without prejudice to the social responsibility of the mining company. The National Council of the Initiative for Transparency of Extractive Industries (EITI), civil society, and the Superior Court of Accounts shall monitor the proper use of the investment of the funds and the trust fund.

The Association of Municipalities of Honduras (AMHON) through a bidding or auction procedure shall execute the necessary contract or contracts for the constitution and operation of the trust fund, complying with the requirements established in the Commercial Code and shall be registered in the respective Public Registry of Commerce. CHAPTER IV OF THE GUARANTEE

The holders of public and/or private mining rights must establish and maintain in favor of the State of Honduras a bank guarantee of 2% of the amount established in the Minimum Investment Plan that accompanies the application and that must be presented at the time of the resolution granting the mining right and shall be adjusted in accordance with the activity programs. It is the responsibility of the Mining Authority to request from the General Prosecutor's Office the immediate total or partial execution of the guarantee, once non-compliance has been declared by means of a final Resolution through the administrative process. Once the guarantee has been executed, the funds shall be allocated to remedy, by the Mining Authority, the non-compliance that gave rise to the execution. This guarantee shall be sole during the course of the project development and it is the responsibility of the Mining Authority, ex officio or at the request of a party, to adjust the amount thereof to maintain it adequate to the compliance of mining activities in accordance with each of its stages. In the case of the exploration stage, the annual amounts of investment shall be contemplated in the exploration plan and in the exploitation stage, from preparation through closure, such amounts shall be included in the feasibility study without prejudice to what is established in Article 32 of the General Mining Law. The annual investment amounts referred to above shall serve as the basis for the determination of the guarantee in question.

Non-compliance that gives rise to the execution of the guarantee shall be understood to occur when:

• a)

  The mitigation, remediation, or compensation measures duly required by the Mining Authority are not complied with within the established period;

• b)

  Unjustified non-compliance with the approved closure plan;

• c)

  Cancellation of the environmental license by the competent authority;

• d)

  By resolution of non-compliance with the closure plan; and,

• e)

  Abandonment of mining operations. TITLE VII OF SOCIALIZATION AND CITIZEN CONSULTATION CHAPTER I OF THE SOCIALIZATION OF MINING PROJECTS

All mining projects must conduct socialization processes based on relationship protocols, a Communication Plan and a Community Relations Plan, which are described in the Guide for the Promotion of Citizen Participation in the Mining Sector, approved by the Mining Authority. CHAPTER II CITIZEN CONSULTATION

Prior to the resolution granting exploitation, the Mining Authority shall request the respective Municipal Corporation and the population to conduct a citizen consultation within a period not exceeding sixty (60) calendar days from the date of notification, in the terms established by the Law of Municipalities, whose result shall be reported to it within a period not exceeding ten (10) business days. The decision adopted in the consultation is binding for the granting of the exploitation concession. Citizens domiciled in the municipality or municipalities consulted who are registered as such in the electoral census of the last general election, in accordance with the provisions of the Supreme Electoral Tribunal and, if necessary, the National Registry of Persons, may participate in the consultation. If the result of the citizen consultation is opposition to exploitation, it cannot be held again until after three (3) years have passed. The respective municipal authority must request technical assistance and supervision from the Supreme Electoral Tribunal (TSE) for the conduct of the consultation.

When the concession area encompasses more than one municipality, the consultation referred to in the previous article must be held in the municipality in which the concession is territorially larger, without prejudice to the residents of the other municipalities being able to attend and participate in it. TITLE VIII INFRACTIONS AND SANCTIONS CHAPTER I ADMINISTRATIVE INFRACTIONS

Administrative infractions shall be understood as any action or omission that violates the laws, regulations, provisions and administrative resolutions in mining, environmental and natural resources matters, provided that they are not classified as crimes.

The Mining Authority is the competent body to supervise, inspect and ensure compliance with and application of this Law and its regulations and to impose the sanctions derived from its non-compliance.

Sanctions shall be applied in the following manner:

• a)

  A fine equivalent to Three (3) minimum wages in the highest category applied in the zone, for late presentation of the Consolidated Annual Statement and reports required by the Mining Authority;

• b)

  A fine of Two (2) minimum wages in the highest category applied in the zone, for incomplete or unrelated presentation of reports, which does not exempt the titleholder from making corrections within the term established by law;

• c)

  A fine of Six (6) minimum wages in the highest category applied in the zone, for commercialization of minerals from illegal mining operations; if subsequent audits prove that commercialization and purchase of minerals from illegal mining operations continues, the sanction shall be one hundred percent (100%) of the exploited value and compensation for damages and losses caused, all without prejudice to the criminal liability that may apply under law;

• d)

  Non-payment of territorial or benefit fees within the time established by this Law shall be sanctioned with an additional ten percent (10%) for each month or fraction of delay;

• e)

  Commercialization of unauthorized mineral substances, in which case the full value of the product shall be paid without deduction of production costs;

• f)

  A fine of Two (2) minimum wages in the highest category applied in the zone, for failure to appear personally or properly represented at inspection visits conducted by the Mining Authority, without justified cause;

• g)

  A fine of Two (2) minimum wages in the highest category applied in the zone, for carrying out works or activities not approved in the Activity Programs and Investment Plans without justification; and,

• h)

  A fine of six (6) minimum wages in the highest category applied in the zone, for not allowing the Mining Authority, Environmental Authority, Municipal Mayors, and other competent institutions to exercise control, oversight, and audit functions of mining activities. Any other infraction of the obligations provided in this Law and not contemplated in the preceding subsections shall be sanctioned with a fine between two (2) and six (6) minimum wages in the highest category applied in the zone, at the discretion of the Mining Authority, taking into consideration the gravity of the offense. The aforementioned fines shall be applied to small-scale mining reduced by three-fourths.

Payments of sanctions that INHGEOMIN applies to any natural or legal person, public or private, or holder of a mining right for infractions committed against the General Mining Law and this Regulation, shall be made effective at the banking institution designated to it.

The Mining Authority, after a hearing for discharge, shall impose the fine or sanction in question by means of a Resolution, against which the remedy established in the Administrative Procedure Law shall be available administratively, which shall be processed strictly within the established legal term and shall not be delayed for any reason due to its priority, under penalty of sanctions against the responsible public official and employee, and once the legal remedy has been processed and resolved, the violator must proceed, within five (5) business days following its notification, either personally or through the notice board of the Directorate and/or General Secretariat, to immediate payment of the imposed sanction, if payment has not been made previously. If payment of the infraction is not made within the term established here, the Mining Authority shall proceed in accordance with what is established in Article 81 of the General Mining Law. For purposes of citing the violator to the discharge hearing, the Mining Authority may notify the violator, indistinctly in person, through notices in any means of communication or even electronic means, of which reliable evidence must remain in the merit file. Non-appearance of the cited party shall be interpreted as tacit acceptance of responsibility, without prejudice to the appeal rights conferred by Law.

Any other action or omission that constitutes a crime shall be sanctioned in accordance with the pertinent Law by the competent authority, and for that purpose, the Mining Authority must notify said authority as soon as it becomes aware of them. TITLE IX OF SMALL-SCALE MINING AND ARTISANAL MINING CHAPTER I SMALL-SCALE MINING

As a complement or addition to everything established in Articles 39, 40, and 41 of this Regulation, for purposes of this Law, Small-Scale Mining is understood to be mining activities in which simple mechanical means are used and which present the following characteristics:

• a)

  Production capacity up to Two Hundred (200) tons of overburden per day, in the case of metallic minerals;

• b)

  Production capacity up to One Hundred (100) cubic meters per day, in the case of non-metallic minerals;

• c)

  Exploitation capacity up to Ten (10) cubic meters daily, in the case of gems or precious stones; and,

• d)

  Exploitation capacity of placer metallic mineral up to Fifty (50) cubic meters of area.

It is the responsibility of the municipality to grant permits for small non-metallic mining operations for the production of up to one hundred (100) cubic meters daily. Each small non-metallic mining permit shall be granted for extensions of up to ten (10) hectares in grids or sets of contiguous grids sharing at least one side.

To avoid overlaps or conflicts of small mining with other mining rights that have been requested or granted, the municipality must request from INHGEOMIN the areas free of mining rights, prior to the granting of the corresponding permit or permits. The Mining Authority, at the request of the municipalities, shall allocate areas for artisanal exploitation and shall delimit those for small mining in the municipalities, in areas free of mining rights; it shall also recommend technical measures to be implemented in the sustainable use of resources.

Once a mining right has been granted, the municipality and INHGEOMIN shall communicate with each other in order to keep the mining rights cadastre updated. TITLE X OF THE DESILTATION OF RIVERS AND MATERIAL BANKS FOR PUBLIC WORKS AND INFRASTRUCTURE PROJECTS CHAPTER I OF DESILTATION

The Mining Authority, in accordance with Article 65 of the General Mining Law, shall issue technical guidelines or technical standards, ex officio or at the request of the municipalities, the Ministry of Public Works, Transportation and Housing (SOPTRAVI), Road Fund and other public agencies for cleaning, correction, desiltation and flood control works of river channels, which must contain the following:

• 1)

  Application submitted by the Municipal Mayor, State Secretary, Regional Directors, General Directorate of Roads, General Directorate of Public Works, Road Fund or head of other public agencies, indicating the name of the person responsible for project execution;

• 2)

  Authenticated Power of Attorney (in case the heads of the agencies do not appear);

• 3)

  Technical Project Profile;

  • •

    Justification of the request;

  • •

    Location of the project described in UTM WGS-84 coordinates;

  • •

    Description of the project; o Length of the section to be desalted or corrected. o Bathymetry of the section to be desalted (longitudinal view of the current condition of the section), o Projected profile of the section (condition to be achieved). o Works to be executed in the section (gabions, spurs, channelization, channel correction, etc.). o Volume calculation (to be removed and surplus). o Execution time, o Description of machinery and equipment.

  • •

    Description of the biophysical environment; o Type of ecosystem. o Description of existing flora and fauna. o Existing structures (channels, bridges, bridge boxes, irrigation systems, electrical lines, fords, flood control structures, etc.). o Communities in the area near the project.

  • •

    Description of environmental activities; o Possible environmental impacts. o Mitigation measures for such impacts.

  • •

    Destination of surplus material. In case the surplus material is destined for the development of a public work, the following additional requirements must be met: Contract for execution of the public works project. Certificate, agreement or environmental license, as applicable to the public work.

The Mining Authority shall send a copy of the technical guidelines or technical standards to all State Audit Entities for the respective notification of the authorized project. It must maintain an updated cadastral database of all desiltation and channel correction projects executed at the national level. The Mining Authority shall conduct control and monitoring inspections based on the technical guidelines or technical standards, evaluating environmental and social aspects and the volumes of extracted material. If the Mining Authority ex officio issues technical guidelines or technical standards, in the absence of a request from an interested party, it shall require all necessary information for that purpose, and it is mandatory that it be provided by the corresponding agency. CHAPTER II OF MATERIAL BANKS FOR PUBLIC WORKS AND INFRASTRUCTURE PROJECTS

The Mining Authority in accordance with Article 95 of the General Mining Law and Articles 21, 23, 24, 25 and 26 of the Special Law for the Simplification of Investment Procedures in Public Infrastructure, shall issue technical guidelines or technical standards ex officio or at the request of municipalities, the Secretariat of Public Works, Transportation and Housing (SOPTRAVI), Road Fund and other public agencies, for the use of non-metallic materials in areas, with or without mining concession, for the execution of public infrastructure works or projects and, if at the request of a party, it must contain the following: 1. Request submitted by the Municipal Mayor, State Secretary, Regional Directors, General Directorate of Roads, General Directorate of Public Works, Road Fund or head of other public agencies, indicating the name of the person responsible for project execution and providing all pertinent information. 2. Technical Profile of the Project in accordance with the format established by the Mining Authority and other necessary requirements in each specific case. The Mining Authority shall conduct inspection, control and monitoring activities based on technical guidelines or technical standards, evaluating environmental and social aspects and the volumes of material extracted. If the Mining Authority ex officio issues technical guidelines or technical standards, without a request from a party, it shall require for that purpose all necessary information, and it is mandatory that it be provided by the corresponding agency. TITLE XI OF SPECIAL AREAS OF MINING INTEREST AND OF THE STATE'S PREEMINENT RIGHT

In accordance with Article 52 of the General Mining Law, the State, at all times and over areas not previously requested and not granted in concession to private parties, may establish agreements or contracts of understanding regarding prospecting, exploration and exploitation of any mineral with national or foreign companies, establishing for that purpose public, private or mixed enterprises. For all purposes of the preceding paragraph, the State shall exercise this right by means of an Executive Decree issued by the President of the Republic, at its own initiative or at the proposal of the Mining Authority, which shall be transcribed and sent to the Mining Authority and in turn published in "La Gaceta", Official Newspaper of the Republic, specifying therein the vertices of the reserved area or areas and the possible substance or substances of interest. The State's preeminent right for reasons of national interest, in areas previously requested by private parties before the Mining Authority, contemplated in Article 64 of the General Mining Law, shall also be exercised by the State and for all purposes by means of an Executive Decree issued by the President of the Republic, at its own initiative or at the proposal of the Mining Authority, which shall be transcribed and sent to the Mining Authority and in turn published in "La Gaceta", Official Newspaper of the Republic. In order not to affect the interest and initiative of private parties, the Executive Decree must specify the vertices of the area or areas that are reserved by the State and the possible substance or substances of interest. This preeminent right of the State must be exercised within three (3) years following the entry into force of the General Mining Law. These rights of the State, contained in Articles 52 and 64 of the General Mining Law, shall be exercised without needing to comply with the requirements and procedures established in Articles 66, 67, 68, 69 and other applicable provisions of the General Mining Law as they shall be governed by the Public-Private Alliance Agreement or Contract that is executed and under the contracting procedures regulated in Articles 4, 5, 6, 7, 8 and other applicable provisions of the Law for the Promotion of Public-Private Alliance, contained in Legislative Decree Number 143-2010 published in "La Gaceta", Official Newspaper of the Republic dated September 16, 2010, which in its preparation must have the timely accompaniment and assistance of the Mining Authority and other corresponding public agencies to ensure in all cases that it contains and results in compliance with those unavoidable legal and regulatory requirements before, during and after all mining operations. TITLE XII CHAPTER I GENERAL AND TRANSITORY PROVISIONS

In accordance with Article 47 of the General Mining Law and, without prejudice to the obligation to notify the Mining Authority, the discovery of minerals different from those authorized in the concession guarantees the holder of mining rights the possibility of addition, modification or substitution thereof and/or of the mining title, accompanied by the respective feasibility study. The Mining Authority shall resolve what is pertinent based on what is requested. The holder of mining rights who requests the addition, modification or substitution of the substance of interest has the right to an extension of the original term of the concession or permit if so requested.

Whoever intends to explore substances of different nature in the same area shall timely notify such intention to the Mining Authority and must pay the canon corresponding to each substance according to its nature, in accordance with Article 56 of the General Mining Law, being able to accumulate the values that correspond provided that the Mining Authority so authorizes it previously.

For purposes of Article 48 literal b) it is required that the Environmental Authority has previously authorized or determined the environmental recovery and mitigation activities that make infeasible or render incompatible the granting of mining rights, which this Environmental Authority must report to the Mining Authority for its consideration and respective notation, without prejudice to the Mining Authority being able to request this information ex officio for the same purposes.

When notified or when the Mining Authority becomes aware of the discovery or presence of vestiges of the country's cultural heritage within the area of a mining right, whether by its holder, ex officio investigation, by a private third party, or by any authority, it is incumbent upon the Mining Authority to order the immediate suspension of mining activities in the zone where the vestiges are found; an action that shall be communicated in turn and within the twenty-four (24) hours following, to the Honduran Institute of Anthropology and History for all corresponding purposes. It is incumbent upon the Mining Authority, in consultation with the Honduran Institute of Anthropology and History, to determine, within a period of thirty (30) calendar days following the suspension, whether or not the exclusion of the zone is warranted or, in its case, the duration of the suspension of mining activities and the delimitation of the perimeter for the purposes of protection, rescue and preservation of the country's cultural heritage.

In accordance with what is clearly and expressly established in Article 109 of the General Mining Law, the files that are in process of requesting a concession as of the effective date of the General Mining Law shall continue to be processed until completion with the regulations under which they were initiated; however, their files shall be previously reviewed and evaluated by the Mining Authority and, mandatorily corrected, where applicable and within the corresponding deadlines, by the holder of the mining right, in whatever is notified or required of them in legal and proper form by the Mining Authority, to guarantee in all cases the principles of generality, equity and legality. The Mining Authority shall have a maximum period of up to nine (9) months counted from the effective date of this Regulation, to execute and comply, either ex officio or at the request of a party, with a process of adaptation and subjection to the current General Mining Law and this Regulation, of all mining rights currently in effect that were granted under previous laws and that have been operating and/or exploiting, to guarantee in all cases the unavoidable compliance with the new environmental requirements, tax burdens and obligations, among them but not limited only to the same, the Surface Measures and the Surface Land Tenure Regime of mining rights, contained in Articles 39, 40, 41, 42, 43, 50, 51 and other applicable provisions of the current General Mining Law, aspects that would in turn guarantee the principles of generality, equity and legality, all in accordance with what is clearly and expressly authorized in Article 109 of the General Mining Law. In case of non-compliance, within the corresponding deadlines, of the adaptation and subjection to the current General Mining Law and this Regulation, of which the holder of mining rights is notified and required in legal and proper form, the corresponding legal sanctions shall be mandatorily applied against them and that are applicable to the specific case, those contained in Articles 78, 79, 80, 81, 82, 83, 84 and 85 and other applicable provisions of the General Mining Law. In strict application of subsection b) of Article 99 and other applicable provisions of the General Mining Law, the Mining Authority must proceed additionally, ex officio or at the request of a party, always within the maximum period of up to nine (9) months counted from the effective date of this Regulation, to a thorough review, verification and inspection of all mining rights granted under previous laws, which are not operating or have not been executed or exploited in accordance with the deadlines established by law and/or in the corresponding concessions to the same, proceeding, in case it is proven and reliably documented this aspect, to declare the extinction of the Mining Right, mainly based on subsection d) of Article 82 of the General Mining Law, and being able to base it in turn on other applicable legal grounds.

The Mining Authority, with the mandatory accompaniment and support of the Executive Revenue Directorate (DEI), shall proceed ex officio and immediately, to an exhaustive review, investigation and inspection, of the economic values that have been paid or remitted by the holders of mining rights as of the effective date of the General Mining Law onwards, the same ones that, if it turns out to be appropriate by discovering and reliably establishing that as of its effective date, they have not paid in accordance with Articles 56, 76 and other applicable Articles thereof, in these cases the Mining Authority shall formulate the corresponding adjustments so that they are made within five (5) days following the formulation of these adjustments, the corresponding payments and, if these payments are not made within this period, execute against them the processes that are legally provided for in subsection a) of Article 81 or, in subsections d) and e) of Article 82, as applicable and, applying the other pertinent provisions of the General Mining Law. For the foregoing reason, it is expressly noted and clarified for all corresponding legal purposes, that all obligations established in the General Mining Law, are unavoidable as of the date of its effective date and, their compliance is mandatory and is not conditioned to the subsequent effective date of this Regulation, in legal consequence, no natural or legal person can claim to argue that they have not complied totally or partially with their legal obligations, for having been or being in expectation of the effective date of this Regulation or for instructions issued to the Executive Directorate of INHGEOMIN emanating from Executive Decrees issued by the Presidency of the Republic that in no way influenced or affected the compliance of payment obligations and other legal obligations already clearly and expressly contemplated in the General Mining Law. SECOND.- This Regulation shall enter into effect as of the date of its publication in "La Gaceta" Official Newspaper of the Republic. Given in the City of Tegucigalpa, Municipality of the Central District, in the Presidential House, on the second (2) day of the month of August of the year two thousand thirteen (2013). PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC MARIA ANTONIETA GUILLEN VASQUEZ DESIGNATED TO THE PRESIDENCY OF THE REPUBLIC IN CHARGE OF THE SECRETARIAT OF STATE OF THE PRESIDENTIAL OFFICE