EXECUTIVE ORDER NO. 759
EXECUTIVE ORDER NO. 759 -
ESTABLISHING RULES AND REGULATIONS FOR A COPPER STABILIZATION FUND
WHEREAS, copper prices are
characterized historically by volatile fluctuations;
WHEREAS, in times of depressed copper prices, many local mining
companies find themselves unable to meet even cash production costs and
continue operations;
WHEREAS, it is in the national interest for the Government to provide
assistance to local mining companies during periods of depressed copper
prices because of the large amount of foreign exchange it earns and the
substantial employment it generates;
WHEREAS, such assistance can be provided by a Copper Stabilization Fund
which shall extend financing to local mining companies during periods
of depressed copper prices;
WHEREAS, the Copper Stabilization Fund can be established with an
initial contribution from the Government but should be maintained
subsequently with contribution from the local mining companies
themselves during periods of high copper prices;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines, do hereby order the establishment of a Copper
Stabilization Fund under the following Rules and
Regulations:
RULE
I
THE FUND
Section 1. There is hereby created a Copper
Stabilization Fund (THE FUND) for the purpose of financing operating
cash flow deficits of primary copper producers occasioned by depressed
metal prices. The Fund shall be utilized only for the foregoing purpose
and shall not be drawn upon to finance expansions, other capital
investments, or replacement of existing debts.
Sec. 2. The Fund shall be established with an
initial contribution from the National Government of TWO HUNDRED
MILLION PESOS (P200 million). Primary copper producers shall also
contribute to the Fund as provided in Rule V hereof.
Sec. 3. All transactions of the Fund shall be
denominated in United States Dollars (US $).
RULE
II
BORROWING FROM THE FUND
Section 1. Primary copper producers shall be allowed
to borrow from the Fund whenever they incur cash flow deficits due to a
short fall between the cash cost applicable to a particular copper
export shipment and the proceeds from said shipment. “Cash Cost” is
hereby defined as total operating cost, plus freight, insurance,
smelting and refining charges, plus interest on short-term borrowings
to finance working capital requirements, less by-product credits.
Depletion and depreciation shall not be considered in determining cash
cost. Such cost shall be computed in the manner shown in Annex “A”
hereof and shall be certified under oath by the independent external
auditor of the copper producer. Cash cost shall be recomputed
periodically to reflect current costs, as may be decided by the Fund
Administrator.
Sec. 2. The amount which may be borrowed shall be
equivalent to the difference between the cash cost applicable to and
the proceeds from, each copper export shipment, based on the estimated
copper content of such shipment, as computed in the manner shown in
Annex “B” hereof.
Sec. 3. Borrowings from the Fund shall be charged
an interest rate of twelve percent (12%) per annum.
RULE
III
REPAYMENTS
Section 1. Repayments of borrowings from the Fund
shall be effected automatically with each shipment whenever the price
of copper export shipment rise above the cash cost and shall continue
until such time as all borrowings shall have been fully repaid. The
amount to be repaid shall be equivalent to the excess of the proceeds
from a particular copper export shipment over the cash cost applicable
to the same, based on the estimated copper content of such shipment, as
computed in the manner shown in Annex “C” hereof.
Sec. 2. Amounts repaid shall first be applied to
accrued interest charges before any reduction of the principal amount
borrowed.
Sec. 3. Copper producers borrowing from the Fund
shall undertake:
a)
To repay their obligations to the Fund as herein provided before
servicing their obligations to any of its other creditors, both as to
principal and interest (except interest on short term borrowings for
working capital requirements);
b) To refrain
from declaring dividends or otherwise distributing any profits for as
long as their respective borrowings from the Fund remain outstanding.
RULE
IV
CONTRACTUAL COMMITMENT
Section 1. Before any drawdown on the Fund may be
made, the borrower shall execute a written contract, duly confirmed by
its Board of Directors, agreeing to comply with these Rules and
Regulations and to the terms and conditions of the borrowing as set by
the Administrator of the Fund.
RULE
V
CONTRIBUTIONS TO THE FUND
Section 1. As a condition precedent to borrowing from
the Fund, copper producers shall commit to contribute to the Fund after
their respective borrowings shall have been repaid. The amount to be
contributed shall be equivalent to ten per cent (10%) of the excess of
the proceeds from a particular copper export shipment over the cash
cost applicable to the same, based on the estimated copper content of
such shipment, as computed in the manner shown in Annex “D” hereof.
Sec. 2. Copper producers shall make the foregoing
contributions for as long as they have no outstanding borrowings from
the Fund and copper prices continue to be higher than their respective
cash costs. However, the maximum amount which the copper producers
shall be required to contribute shall not exceed the highest
outstanding balance of the borrowings they previously obtained from the
Fund.
Sec. 3. Contributions to the Fund shall likewise
earn interest at twelve percent (12%) per annum. Interest earnings may
be withdrawn quarterly.
Sec. 4. The principal amounts contributed shall be
utilized to finance future requirements of the Fund, and shall
therefore not be withdrawable, except by way of borrowings as provided
in these Rules, in the event the respective copper producers again
incur cash flow deficits due to depressed copper prices.
RULE
VI
ADMINISTRATION OF THE FUND
Section 1. The Central Bank of the Philippines shall
act as Administrator of the Fund, and as such, shall be authorized to
issue implementing guidelines in connection with the operation and
administration of the Fund.
Sec. 2. The Administrator may in its discretion
assign any of the government banks as conduit institutions through
which borrowings from the Fund shall be released and repayments and
contributions made.
Sec. 3. Copper producers borrowing from the Fund
shall be required to accept a nominee of the Administrator as Fund
controller who shall insure compliance by the copper producers of the
governing rules, regulations and guidelines of the Fund, and
periodically review the cash production costs and other financial
statements of the copper producers.
DONE in the City of Manila,
this 7th day of January, in the Year of Our Lord, nineteen hundred and
eighty two.
ANNEX “A”
SAMPLE COMPUTATION
CASH COST
Costs and expenses (for 1 shipment) $1,824,300
Mining and Milling
Smelting, refining charges,
freight & insurance
675,160
Handling, hauling & storage
68,900
Royalties, mine products tax
146,060
General overhead (general and administrative
expenses)
192,900
Interest expense on short-term loans to fund
working capital requirements
344,400
—————
Total cost and expense $3,251,720
Less: Metal Credits
Au 559,400
Ag 68,900
—————
(1) Total cash coast
2,623,420
—————
(2) Concentrate shipped 5,000 DMT
(3) Copper content 25.0%
(4) Copper content in MT [(2) x
(3)] 1,250 MT
(5) Copper content in lbs. [(4) x 2,204.6
lb./MT] 2,755,750 Lbs.
Cash cost/lb. [(1) /
(5)] $0.95/lb.
===========
Note that depreciation, depletion and amortization of preoperating
expenses, being non-cash expenses, are excluded from the above
computations.
ANNEX “B”
SAMPLE COMPUTATION
AMOUNT OF BORROWING
(1) Concentrate shipped 5,000 DMT
(2) Copper Content 25.0%
(3) Copper Content in MT [(1) X
(2)] 1,250 MT
(4) Copper Content in lbs. [(3) X 2,204.6
lb/MT] 2,755,750 lbs.
(5) Copper Price/lb. $0.75/lb.
(6) Cash Cost/lb. (from Annex A)
$0.95/lb.
(7) Cash deficit/lb. (6)-(5)
$0.20/lb.
(8) Amount that may be borrowed (7) X
(4) $551,150
===========
ANNEX “C”
SAMPLE COMPUTATION
AMOUNT OF REPAYMENT DUE
(1) Repayment begins when copper price rises above
cash cost/lb. (from Annex
A) $0.95
(2) Copper price for last shipment
$1.00/lb.
(3) Amount repaid/lb. [(2) -(1)]
$0.05/lb.
(4) Concentrate shipped 5,000 DMT
(5) Copper Content 25.0%
(6) Copper content in MT [(4) X
(5)] 1,250 MT
(7) Copper content in lbs. [(6) X 2,204.6 lb/MT)]
2,755,750 lbs.
(8) Total repayment due [(3) X
(7)]
$137,788
===========
Note: Repayment shall be first applied to interest amounts due before
reduction in principal amount of the loan.
ANNEX “D”
SAMPLE COMPUTATION
AMOUNT OF CONTRIBUTIONS
(1) Cash Cost/lb.
$1.00
(2) Copper Price for last shipment
$1.25
(3) Amount of contribution/lb [(2)-(1) X
10%] .025
(4) Concentrate shipped 5,000 DMT
(5) Copper content 25.0%
(6) Copper content in MT 1,250 MT
(7) Copper content in lbs.
2,755,750 lbs.
(8) Total amount of contribution due [(3) X
(7)] $68,893
===========
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