MODULE 3:

Auditing Mining Industry

A Written Report Presented for

Auditing and Assurance in Specialized Industry (ACCO 30073)
Polytechnic University of the Philippines

Submitted by:

Gatbunton, Alyssa Marie G.

Inopiquez, John Jorge O.
Martin, Franchesca Claire I.
Morales, Carla Mariz D.
Sarmiento, Danie Rose T.

Bachelor of Science in Accountancy 3 - 8

Submitted to:

Mr. Mark Anecito R. Perlas, MBA, CPA

June 2023
 I. MINING INDUSTRY
● NATURE AND BACKGROUND OF MINING INDUSTRY (including Oil and Gas)

Mining Industry
Mining as it has been defined by the United Nations Environmental Program (UNEP)
might only mean “the extraction of minerals from the earth”. It may also be viewed as a
procedure that starts with the exploration and discovery of mineral deposits, and goes through
the steps of ore extraction and processing to the closure and remediation of locations that have
been developed. In this context, the term "minerals" would refer to a wide range of naturally
occurring materials that have been exploited for human purposes. Minerals are a non-renewable
resource because the ore is gone when it is mined and will take a very long time to replenish.
Thus, mining denotes a temporary use of the land.

The mining industry is important to the country’s economic growth since it employs a
large section of the population and adds to the country's foreign exchange profits through
exports. Furthermore, taxes and fees paid on mining and other associated operations provide
additional money for the government.

As stated by Perlas and Noleal (2021), a country's socioeconomic development is

significantly influenced by the quality and quantity of its natural resources. Natural resources
include things like forestry, minerals, and commercial sources of energy including coal, oil,
natural gas, and hydropower. Minerals are extracted and prepared for use in industry through
the processes of mining and mineral processing. The mining industry is likely to contribute to
the development of the social-economic infrastructure in the area where the mine is located and
to the growth of the economy of any country through taxes from large mining businesses. The
mining sector can:
● create employment opportunities both directly in the mines and indirectly on services to
the mines,
● provide education and health services,
● increase foreign exchange reserves, (reducing a country’s foreign exchange deficit),
● improve infrastructure like roads and water supply, and
● create other economic activities to support the mines instead of importing all supplies
from abroad.

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Physical Stages of the Life Cycle of a Mine

1. Exploration
The exploration phase of mining includes all fieldwork activities that come before
feasibility studies. Initial reconnaissance flights and geophysical surveys, stream
sediment studies and other geochemical surveys, construction of access roads, clearing
of test drilling sites, installation of drill pads and drilling rigs, benching, trenching/pitting,
erection of temporary accommodation, and power generation for exploratory drilling are
all examples of exploration activities. Prospecting techniques are used to locate a body
of ore and determine its location, size, form, position, and value (Perlas & Noleal, 2021).

A variety of actions are included in exploration to help identify whether there are
minerals beneath the surface. Mining may be achievable in the future if the exploration
process discovers minerals that can be profitably mined. However, less than one percent
of exploratory efforts normally advance to the establishment of a mine. Exploration for
minerals may involve:
● Mapping
● Surveying the ground from surface or air
● Testing water and soil samples
● Drilling

2. Project Development
Project development or the development phase of mining, entails many key
actions that include conducting a feasibility study, including a financial analysis to decide
whether to abandon or develop the property; designing the mine; acquiring mining
rights; filing an Environmental Impact Assessment (EIA); and preparing the site for
production. The development phase may include such activities as:
● Overburden stripping and placing
● Road/trail, building, and/or helicopter transport
● Drilling and trenching
● Erecting treatment plants, preparing disposal areas, and constructing
services, infrastructure such as power lines or generating plants, railways,
water, supplies, sewerage, laboratories, and amenities.

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3. Mining and Milling
The mining is still quite cyclical, however, the business's profitability is based on
shifting metal prices. It separates the mineral from the waste rock that surrounds it.
There are two types of mining:
● Underground Mining - It is employed to recover ore in narrow, almost
vertical veins and chutes, or when the ore body is covered by too much
overburden to be economically removed.
● Open-pit Mining - It is the preferred approach in regions where mineral
resources are found at or close to the surface.

In the milling process, the precious minerals are separated from the gangue.
Numerous concentrators and smelters in the area process the generated ores. Due to
the insufficient production of direct-shipping (high-grade) ore, the ores are processed in
concentrators to separate the metal-bearing minerals from the inert rock, or gangue.
The high-grade product, or concentrate, is delivered to a smelter, where it is melted with
fluxes to remove further impurities before being oxidized to remove the sulfur, yielding
around 99 percent pure metallic copper.

4. Smelting and Refining (beneficiation)

The operations necessary for downstream processing in the smelting and refining
(beneficiation) stage include separation and concentration. There are numerous
techniques for separating minerals. The most crucial method of mineral separation
among them is froth flotation (Shean and Cilliers 2011; Mesa and Brito-Parada 2019);
processing many metals and mineral raw materials without a flotation stage would be
impossible (Rudolph 2018). Using variations in mineral surface characteristics, valuable
particles are concentrated in huge tanks via their attachment to bubbles, which form a
froth phase that overflows as a mineral-rich concentrate. A variety of chemical reagents
are employed in flotation to affect the surface characteristics of precious and gangue
minerals, as well as their separation responses. While flotation chemicals are essential to
improve concentrate recovery and grade, many of them have significant environmental
impacts (Tao et al. 2019).

5. Mine Closure
Mine closure has a huge impact on individuals. The health and welfare of people
as well as the degree of reliance that communities have on mining are also factors in the
social costs of mine closure. It is the formal process for organizing and administering the
decommissioning of a mining site, minimizing effects and legacy problems, engaging in
environmental rehabilitation, and, ultimately, giving up the leases. It is both a process
and a distinct occurrence in the mining life cycle. When the mineral resources are
depleted or extraction becomes unprofitable, the mine will cease operations and shut.

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 Plans for mine closure may include several levels of site renovation:
● Remediation - removing the contamination from the region, including the
water.
● Reclamation - the site will be once again useful after some terrain
stabilization, landscaping, and topsoil replacement.
● Restoration - restoring any facets of the environment that were harmed
by the mining, such as the flora and animals.
● Rehabilitation - restoring the site to a stable and self-sustaining condition,
either as it was before the mine was developed or as a new similar
ecosystem.

6. Abandoned Mine / Rehabilitation

Rehabilitation is the final phase of the mining cycle. Before the mining closure
phase is finished, mining activities may occasionally be abandoned. Even though a lot of
mines have the potential to produce profitably for decades, mining is nevertheless a
temporary activity. Governments now seek proof that operators have a strategy and the
funding needed to close the mine before they will provide licenses to the great majority
of firms. The extensive environmental evaluations carried out during the process are an
important aspect of the strategy for how the mine site will be closed and rehabilitated.
The numerous specific goals of a mine rehabilitation program may include the following:
● Ensuring public health and safety
● Minimizing environmental effects
● Removing waste and hazardous material
● Preserving water quality
● Stabilizing land to protect against erosion
● Establishing new landforms and vegetation

Oil and Gas Industry

As the world's main fuel source and a significant industry in the energy market, the oil
and gas industry, like the mining sector, is crucial to the country's economic development. Oil
and gas production and distribution entail a wide range of business strategies and vehicles,
which makes the systems and processes involved extremely complicated, capital-intensive, and
technologically advanced. The industry's diversification arose in response to the risks associated
with exploration, price volatility, and fluctuations in supply and demand for oil and gas. This
industry is sometimes classified into three categories: upstream, midstream, and downstream.

Some of the factors that set the oil and gas industry apart from many other
capital-intensive industries include the following:
● Anticipated success of drilling
● Taxation
● Product price and marketability

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 ● Timing of production
● Acreage and drilling costs

Oil and gas activities include a wide range of activities, from exploration and production
through refining, transportation, and consumer marketing. Exploration and production activities
are subject to separate accounting regulations. Accounting for refining operations is quite
similar to accounting for other process manufacturing companies. The costs of shipping and
marketing are also the same regardless of the final product. The oil and gas accountant should
comprehend the effects of particular transactions in addition to having a basic understanding of
accounting practices and the operating characteristics of businesses engaged in oil and gas
activities. The same may be stated for mineral mining and processing, with the exception that
the accounting standards for mineral exploration and production are less formalized than those
for petroleum (Carmichael, Whittington, & Graham, 2007).

● OVERVIEW AND STATISTICS OF THE MINING INDUSTRY IN THE

PHILIPPINES

Philippines’ Market Profile

The COVID-19 pandemic has taken a heavy toll on the Philippine economy, causing GDP to fall
by 9.6 percent in 2020 (Source: GDP sinks by deeper 9.6% in 2020 after data revisions). This
year, nonetheless, GDP is predicted to expand at a rate of around 5% due to strong
macroeconomic fundamentals, repatriation from Filipinos living overseas, and the country's
business process outsourcing (BPO) earnings (Source: PH economy seen rebounding by 5-6%
in 2021).

Efforts to digitize have been accelerated. Between 2019 and 2024, e-commerce is predicted to
increase at a 37 percent CAGR (Source: E-Commerce in the Philippines).

The Philippines' strong economy, resurgent business confidence, and better-than-expected

competitiveness forecast are pushing investors to take a closer look at the country and the
opportunities it provides. Manufacturing has received the most foreign investment, followed by
food processing, finance, and business process outsourcing.

Philippine conglomerates account for up to 80% of sales and regard Australia as a major trade
and investment partner.

Foreign aid from multilateral development banks (MDB) and international donor organizations
(IDA) totals almost A$28 billion (2019) in the Philippines, primarily for infrastructure, education,
and capacity-building projects (Source: National Economic and Development Authority).

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Philippines’ Opportunities
● Agribusiness to the Philippines ● Food and beverage to the Philippines
● Asian Development Bank ● Healthcare to the Philippines
● Building and construction to the ● Mining to the Philippines
Philippines ● Public Private Partnerships (PPP) to
● Cosmetics and toiletries to the the Philippines
Philippines ● Water to the Philippines
● Energy to the Philippines
● Fashion to the Philippines

Mining to the Philippines

The market

The Philippines is the world's fifth most mineralized country, with the third greatest gold
deposits, fourth largest copper deposits, fifth-largest nickel deposits, and sixth largest chromite
resources. The country's mineral resource reserves are worth roughly A$1.32 trillion, although
they are virtually undeveloped. The overall land area covered by mining tenements in the
country is only 0.872 million hectares or 2.91 percent of the country's total land area of 30
million. In terms of non-metallic minerals, the country contains an estimated 2.4 billion tonnes
of undeveloped coal potential.

The country has 44 mining firms, 37 of which are active mines (six gold mines, three
copper mines, and 28 nickel mines) and 65 non-metallic mining enterprises. The Department of
Environment and Natural Resources has been conducting audits to guarantee that these
businesses are ISO14001 compliant. Philippine President Rodrigo Duterte has designated
Australian and Canadian norms as the reference point.

In the first quarter of 2017, the value of metallic mineral production increased by 5.1
percent. This was owing to favorable metal prices. More crucially, the highest-priced gold
generated the greatest percentage of overall mineral production. The combined gold output of
OceanaGold Philippines, Inc.'s Didipio Gold Project and Filminera Mining Corporation/Philippine
Gold Processing and Refining Corporation's Masbate Gold Production in Masbate accounted for
more than 58 percent of the country's total gold production. There are five underground mining
methods and one open-pit mine.

Direct Shipping Ore (DSO) and mixed nickel-cobalt sulfide production accounted for 28
percent of total mineral production. Only seven of the 28 nickel mines reported production in
the first quarter of 2017. Unfavorable weather conditions resulted in zero production; some
mines are on care and maintenance; and operations have been discontinued due to
environmental concerns. The combined nickel production of Coral Bay Nickel Corporation and
Taganito Mining climbed by 27 percent in the first quarter of 2017. The hydrometallurgical nickel
processing method is used by both companies/plants.

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 In terms of copper production, Carmen Copper Corporation reported the highest output,
accounting for 46 percent of total copper production, followed by Philex Mining's Padcal
Copper-Gold Project, an underground mine, the Toledo Copper open pit mine, and OceanaGold
Philippines' Didipio Copper-Gold Project, also an open pit mine.

Semirara Mining is the country's largest non-metallic mine operator, responsible for
about 97 percent of total coal production. Semirara Mining boosted coal production by 25% in
the first half of 2017 to 7.35 million metric tons (MMT) from 5.88MMT (Source: Semirara Mining
and Power Corporation report, 1H2017).

Government and Policies

The Department of Environment and Natural Resources (DENR) is the major agency in
charge of the conservation, management, development, and correct use of the country's
environment and natural resources. Its mandate includes, among other things, ensuring the
availability and sustainability of the country's natural resources through wise usage and
methodical repair or replacement whenever practicable (Source: Department of Environment
and Natural Resources).

The Mines and Geosciences Bureau (MGB) is responsible for the administration and
disposition of mineral lands and mineral resources, as well as the formulation of rules and
regulations, policies, and programs pertaining to mineral resource management and geoscience
developments (Source: Mines and Geosciences Bureau (MGB).

The Department of Energy (DOE) is responsible for preparing, integrating, coordinating,

supervising, and controlling all government plans, programs, projects, and activities related to
energy exploration, development, usage, distribution, and conservation.

Philippine Mining Act of 1995

Mining is governed by the Philippine Mining Act of 1995 (Republic Act No. 7942). The
state owns mineral resources under this Act, and the state has complete control and oversight
over their exploration, development, usage, processing, and conservation. The state has three
options for granting mining rights:

1. Exploration Permit (EP) or Mineral Processing Permit (MPP) – gives the right to explore
certain areas for two years, renewable for a total of eight years for metallic mines and
six years for non-metallic mines.
2. Mineral Production Sharing Agreement (MPSA) – allows the contractor to undertake
mining activities inside a contract area and split the gross output. The MPSA is valid for
25 years and can be renewed for another 25 years.

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 3. Financial or Technical Assistance Agreement (FTAA) – a contract combining financial and
technical help for large-scale mineral exploration, development, and exploitation. This
form of contract is available to Filipinos and foreign firms with up to 100 percent foreign
equity, has a 25-year duration and is renewable for another 25 years.
As of September 2016, the Philippines had 29 EPs, 303 MPSAs, and five FTAAs in place.

Executive Order 79

Executive Order 79, issued in July 2012, established reforms in the Philippine mining
industry. The EO 79 has raised two critical problems that will have a significant impact on the
mining industry:

1. The proposed mining revenue sharing scheme

2. The proposed no-go zone maps

House Bill (HB) 5367 proposes a government share equal to 10% of gross revenue or
55% of 'adjusted mining revenue,' whichever is greater. The Mining Industry Coordinating
Council (MICC) established no-go zone maps that indicated regions reserved for agriculture,
eco-tourism, protected landscapes, and seascapes.

The Mineral Industry Coordinating Council's (MICC) no-go zone maps declare around 84
percent of the country's 30 million hectares total land area off limits to mining activity.
Agriculture, eco-tourism, protected landscapes, and seascapes are all permitted in these zones.
Approximately 4.5 million hectares of the 9 million hectares typically regarded as having strong
mineral potential are now effectively closed off to mining. The 'no-go' zone maps are still
awaiting clearance from the President's Office, but they are now being utilized by the MGB in its
examination of exploration permission applications.

Legislation on Open Pit Mining

The EO 79 makes no mention of mining practices. The Department Secretary (Minister)

for Environment and Natural Resources will propose legislation that establishes clear rules and
regulations for open-pit mining. Discussions with the Mining Industry Coordinating Council
(MICC) are ongoing.

The MICC is in charge of developing the EO 79 and implementing rules and regulations.
It is made up of the Cabinet Cluster for Economic Development and the Cabinet Cluster for
Climate Change Adaptation and Mitigation. The MICC, the Chamber of Mines of the Philippines,
and mining non-governmental organizations are currently holding a series of discussions to
ensure that it is equitably beneficial to the state and the private sector, with an emphasis on
environmental sustainability and safety standards.

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Extractive Industries transparency initiative

The Philippines has signed on to the Extractive Industries Transparency Initiative. This is
a pledge to fiscal openness and accountability in order to ensure successful governance. The
Philippines-EITI Multi-Stakeholder Group (MSG) designated an independent administrator to
reconcile the accounts supplied by the relevant government agencies and the 33 mining and oil
and gas corporations.

Local governments and mining communities now have access to data on their national
wealth shares and payments collected from companies in their area thanks to the EITI process.
The data is gathered from an electronic reporting system that integrates EITI data, Local
Government Units, and the Department of Finance.

For collections in 2014, the Philippine-Extractive Industries Transparency Initiative

(PH-EITI) report covers a total of 36 firms - 31 large-scale metallic mining companies and 5 oil
and gas companies. According to the research, there was a difference of approximately Php 76
million between what mining and oil and gas businesses paid in taxes and what the Philippine
government got. Differences in accounting systems, a lack of a centralized database,
disaggregated data, and delayed submissions of needed schedules and papers to support
disclosures were the reasons for variations.

The report's recommendations include establishing a unified accounting framework,

preferably using the accrual approach, formalizing alternative practices, strong communication
between central offices and provincial branches, and conducting audits on a regular basis.

Mining Projects (Source: Mines and Geosciences Bureau)

Some of the current Major Mining Projects in the Philippines are

● Didipio Copper Gold (OceanaGold Philippines): copper, gold, silver (FTAA)

● Carmen and Lutopan (Carmen Copper Corporation): copper, gold, silver (MPSA)
● Coral Bay HPAL (Coral Bay Nickel): mixed nickel-cobalt sulfide (MPP)
● Padcal Copper-Gold (Philex Mining): copper, gold, silver (MPSA)
● Masbate Gold (Filminera Mining): gold, silver MPP
● Taganito HPAL (Taganito HPAL Nickel Corporation): mixed nickel-cobalt sulfide (MPP)
● Mindanao Mineral Processing and Refining (Philsaga Mining Corporation/Mindanao
Mineral Processing): gold, silver (MPP)
● Cagdianao Nickel (Platinum Group Metals): nickel (MPSA)
● Rio Tuba Nickel (Rio Tuba Nickel): nickel (MPSA)

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New mining projects

Two mining projects are close to getting a final investment decision (FID). These are the
KingKing Mining Project and the Silangan Mining Project.

The A$ 2 billion Kingking Mining Project is located in Pantukan, Compostela Valley. The
project is funded by the National Development Corporation (NADECOR) and St. Augustine Gold
and Copper Ltd (Sagcl), a publicly traded corporation on the Toronto Stock Exchange. Up to 3.2
billion pounds of copper, 5.4 million ounces of gold, and 11.7 million ounces of silver are
predicted to be produced. The company intends to generate cathode copper between 2018 and
2019.

The Silangan Mining Project is a copper-gold mine in Surigao del Norte, Philippines. It
entails the development of mineral deposits in Boyongan and Bayugo with an estimated reserve
of five billion pounds of copper and nine million ounces of gold during a 25-year mine life. The
project's anticipated cost is A$ 1.2 billion. This project is expected to take the role of the Philex
Padcal project, whose mine life is set to expire in 2020. First Pacific Co. of Hong Kong owns
Silangan Mining and Philex Mining. Ltd.

Sagittarius Mines, Inc.'s Tampakan Mining Project, located 50 kilometers north of

General Santos City, has a potential investment of A$ 5.9 billion. There are 15 million tons of
copper and roughly 18 million ounces of gold in the Tampakan project. This mine will be an
open pit. The Alcantara family and SM Investments Corporation are the current investors.

Philippines GDP From Mining

According to Trading Economics global macro models and analyst forecasts, GDP from
mining in the Philippines is predicted to be 46067.00 PHP Million by the end of this quarter.
According to our econometric models, the Philippines' GDP From Mining is expected to trend at
39686.00 PHP Million in 2024 and 41988.00 PHP Million in 2025

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 ● KEY UPDATES

The Philippine Extractive Industries Transparency Initiative (PH-EITI)/ Beneficial

Ownership Disclosure
The Philippines EITI previously published a Beneficial Ownership (BO) roadmap on 15
December 2016. Several milestones of the Roadmap have been accomplished by the beginning
of 2021, including the integration of BO in the mainstreaming efforts of PH-EITI, the increased
coordination with the SEC, and the pilot disclosure of BO information. According to the 2018
EITI Report published in December 2020, 41 out of 65 covered companies/projects fully or
partially disclosed beneficial ownership information. A total of 128 name entries were declared
as beneficial owners.

Philippines Ends Open Pit Mining Ban to Reinvigorate Industry (12/28/21)

The Philippines has lifted a four-year-old ban on open-pit mining for copper, gold, silver,
and complex ores, an official said on Tuesday, marking the second landmark policy move this
year as the government tries to revitalize the industry.
Environment and Natural Resources Secretary Roy Cimatu has signed an administrative
order lifting the ban, Mines and Geosciences Bureau Director Wilfredo Moncano said.
The government imposed the ban in 2017, when the ministry, which oversees the mining
industry, was led by an anti-mining advocate who had blamed the sector for extensive
environmental damage.
After several years of restrictive policies that have been blamed for stagnating the
industry, the government now wants to be stalled and new mining projects to attract
investments and help stimulate the pandemic-hit economy.
In April, President Rodrigo Duterte lifted a moratorium on new mineral agreements
imposed in 2012.

Mining Sector Getting Back on Track (1/4/22)

The country’s mining industry had a lot to be happy about last year. For one, the
industry continued to post gains in its production value, registering double-digit increases in the
first nine months.
Data from the Mines and Geosciences Bureau (MGB) showed that the country’s metallic
mineral production value went up by 22.34 percent from P99.03 billion in the same period last
year.
“The generally favorable global metal prices propelled the Philippine mining industry’s
production value in the first three quarters of 2021, due in large part to the growth in the
production of gold and nickel ore. Other metals, such as silver, copper, chromite, and iron ore
had lower output,” Chamber of Mines of the Philippines (COMP) spokesperson Rocky
Dimaculangan said.
“We believe the trend continued during the last quarter of the year,” he said.

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 ● KEY PLAYERS

Philippines: Five Largest Mines in 2021

Carmen Copper Mine in Cebu, was the largest mine in the Philippines, producing
approximately 20.15 million metric tons per annum (mmtpa) of Run-of-Mine (ROM) and
primarily produced copper (47.65 thousand tonnes) in 2021. The Carmen Copper Mine is owned
by Atlas Consolidated Mining and Development Corp and is due to operate until 2025.
The second largest mine with approximately 10.95 mmtpa of ROM, was the Molave
Project located in Antique. The Molave Project is owned by Semirara Mining and Power Corp.
Taganito Mine located in Surigao del Norte was the third-largest mine, the Masbate Mine
located in Masbate was the fourth-largest mine, and the Narra Project located in Antique was
the fifth-largest mine, with an estimated ROM production of 8.32 mmtpa, 7.25 mmtpa, and 7.01
mmtpa, respectively, in 2021.
The Taganito Mine is owned by Pacific Metals Co Ltd; Sojitz Corp; Nickel Asia Corp which
is due to operate until 2050, the Masbate Mine is owned by B2Gold Corp; Zoom Minerals
Holdings Inc which is due to operate until 2025 and the Narra Project is owned by Semirara
Mining and Power Corp.
The five largest mines, i.e., Carmen Copper Mine, Molave Project, Taganito Mine,
Masbate Mine, and Narra Project, cumulatively produced approximately 53.68 mmtpa of ROM in
2021.

Financial Adviser: 5 Most Profitable Mining Stocks to Buy this 2021 and How to
Profit from Them
Here are the five most profitable mining companies that could benefit from the coming
commodities boom and how you can profit from them:

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 1. Philex Mining Corp
Philex Mining Corporation (PSE: PX) is one of the country's oldest and largest mining
companies with interests in the large-scale exploration and development of mineral resources.

PX has been operating Padcal Mine in Benguet for the last 62 years, which produces
copper concentrates, gold, and silver.

PX also owns Bulawn Mine in Negros Occidental through its subsidiary, Philex Gold
Philippines, which has residual resource estimates of 29.6 million tonnes containing 1.7 million
ounces of gold.

Weak gold prices in the past 10 years have resulted in declining revenues for PX from
P12.6 billion in 2010 to P6.8 billion in 2019.

PX’s falling revenues, which are composed of 53 percent gold and 45.6 percent silver,
have caused its net income to fall from P3.9 billion in 2010 to a net loss of P647 million in 2019.

2. Apex Mining Company

Apex Mining Company (PSE: APX) is primarily a gold-producing company, with a bulk of
its revenues, about 94 percent, coming from gold.

APX currently operates the Maco Mines in Maco, Davao de Oro, which covers more than
2,200 hectares. APX also owns four patented mineral claims, through its subsidiary, Itogon, and
Suyoc Mines, covering the Sangilo and Suyoc Mines in Benguet.

APX has also interests in gold mines overseas, such as in Mongolia, Uganda and
Myanmar, through its subsidiary, Monte Oro Resources and Energy.

APX’s revenues have been growing by an average of 20 percent annually since 2015
from P2.4 billion to P4.9 billion in 2019. This steady increase in revenues resulted to a
41-percent yearly increase in net income from P78 million in 2015 to P306 million in 2019.

Last year, APX’s nine-month revenues increased by 27 percent to P4.6 billion from P3.4
billion in 2019, which translated to a net income of P991 million, or more than four times its net
income of P227 million in 2019, due to higher gross margins and lower operating expenses.

3. Nickel Asia Corporation

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 Nickel Asia (PSE: NIKL) is the largest producer of lateritic nickel ore in the Philippines
and one of the largest nickel companies in the world. It also has a growing interest in
renewable energy development.

NIKL operates four major mines: Rio Tuba in Bataraza, Palawan, which has a capacity of
24,000 tonnes of contained nickel; Taganito in Surigao del Norte, which has 36,000 tonnes
capacity; Hinatuan in Surigao del Norte; and Cagdianao in Dinagat Islands.

The company is also into the renewable energy business through its 86.3 percent
subsidiary, Emerging Power, Inc., which operates a 32 MW solar plant in Subic Bay freeport that
it plans to increase to 100 MW in 2021, as well as geothermal service contracts in Mindoro and
Biliran.

NIKL’s revenues, 92 percent of which come from ore and limestone sales, have been
growing by an average of 14 percent for the past 10 years from P4.7 billion in 2009 to P17.9
billion in 2019.

This growth in revenue has resulted in 24 percent annual growth in net income from
P303 million in 2009 to P2.7 billion in 2019.

4. Global Ferronickel Holdings

Global Ferronickel Holdings (PSE: FNI), through its wholly-owned subsidiary Platinum
Group Metals Corporation (PGMC), is one of the world’s largest suppliers of nickel ore.

It is also the country’s third-largest nickel ore producer by volume of nickel shipped and
second-largest by the value of the shipment.

Total revenues of FNI have been falling from P9 billion in 2014 to P3.8 billion in 2016
due to weak nickel prices. The fall substantially cut down its net income from P4.8 billion in
2014 to only P37.5 million in 2016.

But in 2017, as global prices of nickel started to recover, FNI’s revenues improved by 54
percent to P5.8 billion, which increased its net income to P779 million.

In 2019, FNI’s total revenues further increased to P6.6 billion with a net income of P1.3
billion.

5. Semirara Mining and Power Corporation

Semirara Mining and Power Corporation (PSE: SCC) is the largest coal producer in the
Philippines and the only power producer in the country that owns and mines its own fuel source
(coal).

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 SCC operates the largest and most modern pit mine in the Philippines with an operating
capacity of 16 million metric tons of coal per year. SCC also installed generating capacity of 900
MW, with an additional 1,200 MW in the pipeline.

SCC’s revenues, which is comprised of 65 percent coal sales and 35 percent power
revenues, have been growing by an average of eight percent per year since 2010, from P22.8
billion to P44.2 billion in 2019.

This increase in revenues has resulted to annual growth of 10 percent in net

income—from P3.9 billion in 2010 to P9.6 billion in 2019.

Last year, due to lower sales volume and coal import quota in China, SCC’s nine-month
revenues fell by 42 percent to P19.8 billion from P34 billion in 2019.

II. ACCOUNTING STANDARDS APPLICABLE TO THE INDUSTRY

A uniform collection of accounting principles, rules, and procedures that establish the
foundation of financial accounting policies and practices is referred to as an accounting
standard. All national financial reporting become more transparent as a result of the adoption of
accounting standards. The collection of accounting rules that is generally accepted for the
purpose of compiling financial statements in the United States is referred to as generally
accepted accounting principles, or GAAP for short.

Companies that are not subject to the U.S. GAAP must use the International Financial
Reporting Standards (IFRS) as their guidance when compiling their financial statements. These
standards were developed by the International Accounting Standards Board and serve as the
standard for international corporations.

In the United States, businesses both public and private make heavy use of a set of
accounting standards known as generally accepted accounting principles (GAAP). IFRS is the
predominant accounting standard used in all other countries. It is essential for organizations
operating on a global scale to adhere to these requirements. When it comes to the preparation
of financial accounts, the International Accounting rules Board (IASB) is in charge of
establishing and interpreting the accounting rules used by international communities.

16
GAAP
The Financial Accounting Standards Board (FASB) is the body that is responsible for
issuing GAAP, which is a set of accounting principles. When putting out their financial accounts,
publicly listed corporations in the United States are required to adhere to GAAP standards.

Maintaining full openness in one's financial reporting requires adherence to GAAP. This makes it
simpler for third parties to contrast the financial accounts of various businesses. However,
adhering to the rules outlined in GAAP does not guarantee that financial statements are devoid
of mistakes or information that may mislead investors.

IFRS
The International Accounting Standards Board (IASB) is the organization responsible for
establishing IFRS. In the same vein as generally accepted accounting principles (GAAP), this
collection of standards was developed to promote openness and uniformity to accounting
operations.

The International Financial Reporting Standards (IFRS) are an attempt to standardize the
terminology used to discuss accounting practices around the world. IFRS has already been
implemented by more than 144 nations throughout the world.

When evaluating multinational businesses, it is important to keep in mind that IFRS is not
uniformly used, which might lead to confusion. The Securities and Exchange Commission of the
United States (SEC) has declared that it would not move from GAAP to IFRS; nevertheless, it is
now examining a proposal to enable IFRS to supplement financial disclosures in the United
States.

The IASB Framework

17
 An asset is "a resource controlled by the entity as a result of past events and from which
future economic benefits are expected to flow to the entity," as stated in the International
Accounting Standards Board (IASB) Framework.
If the company can reasonably estimate future economic benefits from the asset (such as
through the commercial exploitation of a mineral deposit or the sale of exploration/mining
rights), and if the asset has a cost or value that can be consistently quantified, then the item
should be recorded as an asset.
'Control' exists in the context of exploration and evaluation spending if the entity has the legal
right to explore and exploit any mineral resources in the designated region. This is the case if
the entity has the mining rights outright or has the ability to do so in the near future. True
expenditures are the most trustworthy measure of the value of any asset. However, not every
money spent on exploration and assessment has a high probability of yielding future economic
advantages.

Specific Accounting Process for Industry

Cycle
The accounting cycle is the series of steps taken by an organization to transform its
monetary transactions from a given accounting period into audited financial statements. The
assets and liabilities as well as the income and spending for the period are detailed in the
financial statements.

Although the specifics of the accounting cycle are up to interpretation, the basic steps are as
follows: record transactions; total transactions; verify totals; make accrual method adjustments;
verify modified totals; compile financial statements; terminate temporary accounts.

Books of Accounts
The recording procedure consists of two primary parts. To begin, the company keeps
track of all purchases, sales, loans, and repayments at the time they occur. Second, the
company compiles the sums into appropriate ledger accounts. Revenue, expenditures, accounts
payable, accounts receivable, cash on hand, and capital are all examples of different types of
accounts.

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Adjustments
Due to the nature of their business, manufacturers are often forced to utilize the accrual
method of accounting rather than the cash method when submitting tax returns. Accrual refers
to the practice of documenting transactions when money is owing, regardless of when the
payment actually occurs. A sale made on credit to a consumer, for instance, would be recorded
upon delivery of the goods, and not upon receipt of payment.

The accountants will need to make some changes to the books to reflect this new approach.
This is done by referring to documents like invoices rather than cash records in order to add
entries that don't appear in the record of transactions. In most circumstances, such changes
would result in an increase in revenue or a decrease in costs, but in the event of prepayment,
such as when rent is paid in advance for a term that extends beyond the accounting period, a
reduction would be more appropriate.

Inventory
A corporation must assign a monetary value to each item in inventory for the purposes
of cost allocation and the final valuation of the company's assets at the close of the accounting
period. If the business has many units of an item but purchased some of them at different
prices, this might lead to misunderstandings.

There are two reliable approaches to pricing that may be used to solve the problem. For
financial reporting reasons, the unit that has been on hand the longest is considered to be the
unit that has been sold first. Last-in, first-out (LIFO) is the opposite approach, when inventory is
depleted in reverse order of receipt.

Accounting regulations, such as those that apply if the firm is publicly listed, might limit the
system a business can use. Since 2010, most American businesses in this sector have been
required by law to adhere to GAAP, which permits the use of the LIFO approach. However, as of
this publication's date, there are proposals for all corporations, first only the bigger ones, to
adopt the International Financial Reporting Standards, which exclude the usage of LIFO.

19
 According to IFRS 6, a mining firm must establish and consistently execute an
accounting policy that determines whether expenditures on exploration and evaluation
operations will be recognized as assets. Management has the option of using the IASB
Framework (and/or the pronouncements published by other standard-setters) in choosing the
policy it chooses to implement. If so, it must adhere to the aforementioned guidelines;
alternatively, it may seek an exemption from the requirements of paragraphs and 2 of IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and thereby disregard the
requirements of the IASB Framework and also the pronouncements issued by other
standard-setters. Nonetheless, the policy it ultimately settles on must be current and
trustworthy.

Mining companies are free from having to adopt the latest accounting standards set out by the
International Accounting Standards Board (IASB).
Please take note that this exemption is only temporary until the accounting processes of
companies involved in the exploration and assessment of mineral resources have been
thoroughly reviewed.

III. AUDIT CONSIDERATIONS

There are two specialized audit considerations in the mining industry which are:

Auditing Mining Revenues from the Extraction of Minerals

The extraction of a nation's abundant mineral resources can result in employment

creation, economic growth, and government revenue. Mineral extraction can contribute
significantly to the national or regional economy.

Auditing Financial Assurances for Site Remediation

When mining operations terminate, the mine facilities and sites are reclaimed and
abandoned. The objective of mine site reclamation and closure should always be to restore the
site to its condition prior to extraction. Often, mines with a reputation for having a significant
impact on the environment did not have an effect on the environment until after active mining
operations ceased. These effects may last decades or even centuries. Therefore, every auditor
for a proposed mining project must contain a comprehensive discussion of the mine
Reclamation and Closure Plan proposed by the mining proponent

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Risk Considerations

Legal framework

The government is responsible for establishing a legal framework for extractive industries. This
framework should be based on best practices and should include provisions at the
constitutional, legislative, and regulatory levels. The different levels of the framework should
work together and not prescribe contradictory processes.

Here is a more detailed explanation of each level of the framework:

Constitution: The constitution provides the legal basis for the ownership of natural resources
and their exploration, development, and production. It may also specify how revenue from
these resources is distributed between different levels of government.

Legislation: Legislation is enacted by the parliament or other legislative body and sets out the
principles of law for extractive industries. This legislation typically defines the legal and
institutional framework, the role of the state, licensing procedures and contractual terms, access
to resources, comprehensive environmental protection requirements, and a framework for fiscal
terms.

Regulations or instructions: Regulations or instructions are issued by the government and

provide more detailed and practical requirements for extractive industries. These regulations
should incorporate internationally recognized good practices, including technical, environmental,
accounting, and auditing aspects.

The requirements on different levels of the framework should all be based on the government’s
key policy decisions. When looking at a single item such as the extraction of petroleum, the
legislative framework applicable to the process will most likely be on all three levels described
above. It is important that the legislative provisions on different levels of the framework work
together and do not prescribe contradictory processes.

Fiscal systems, contracts, and licenses

In awarding contracts, different countries have different practices. While best practice
dictates that a competitive bidding process should be followed, governments often opt to enter
into bilateral agreements. This guideline discusses the characteristics of a transparent,
competitive, and non-discretionary bidding process for the award of exploration, development,
and production rights. The focus is on a best practice scenario, highlighting the characteristics
of an efficient and effective system, including:

· Transparent, competitive, and non-discretionary bidding procedures and legal framework

for the award of exploration, development, and production rights;

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· Well-defined institutional responsibilities.

There are two main types of fiscal systems for awarding oil exploration contracts: contracts and
concession/licensing. The best practice is to use a transparent, competitive, and
non-discretionary bidding process. This process should be well-defined and include clear
institutional responsibilities.

In a concession/licensing system, the title to the resources passes to the oil companies when
the oil is extracted. The government collects its share of the resource rent through a collection
of royalties and/or taxes.

In a contract system, the government is the owner of the resource, and the companies are
compensated through a variety of mechanisms. There are two main types of contracts:
Production Sharing Contracts and Service Agreements.

The amount of resource rent the governments and companies share is usually determined by
the parameters of the agreements, rather than the type of agreement used.

Monitoring of Operations

Monitoring of operations is an important audit consideration in the mining industry. This is

because the mining industry is a high-risk industry, with a number of potential hazards,
including environmental damage, safety hazards, and financial losses. By monitoring operations,
auditors can help to ensure that the mining company is complying with all applicable laws and
regulations and that it is taking steps to mitigate the risks associated with its operations. There
are a number of different methods that auditors can use to monitor operations in the mining
industry. These methods include:

· Reviewing the company's policies and procedures: Auditors can review the company's
policies and procedures to ensure that they are in place and that they are being followed.

· Observing the company's operations: Auditors can observe the company's operations to
see how they are being conducted. This can help auditors to identify any potential problems or
risks.

· Interviewing the company's employees: Auditors can interview the company's employees
to get their perspective on the company's operations. This can help auditors to identify any
potential problems or risks that the employees are aware of.

Reviewing the company's financial statements: Auditors can review the company's financial
statements to see if there are any red flags that indicate that the company is not complying
with all applicable laws and regulations.

Taxes

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The mining industry in the Philippines is subject to a number of taxes, including Corporate
income tax: Mining companies are subject to the regular corporate income tax rate of 25%.

Excise tax: A 4% tax is imposed on the gross output of extracted or produced minerals or
quarry resources.

Royalty: A 5% royalty is imposed on the gross output of mining operations. Local business
tax: Mining companies are subject to the local business tax (LBT) of the municipality or city
where their mining operations are located. The LBT rate varies from municipality to
municipality, but it is typically around 3% of gross receipts.

Real property tax: Mining companies are subject to the real property tax on the land and
buildings that they own or lease. The real property tax rate is set by the local government
unit (LGU) and is typically around 2% of the assessed value of the property.

Royalties to Indigenous communities: Mining companies operating in areas where

Indigenous communities are present are required to pay royalties to those communities. The
amount of the royalty is negotiated between the mining company and the indigenous
community. In addition to these taxes, mining companies may also be subject to other
taxes, such as the value-added tax (VAT) and the environmental impact fee. The total tax
burden on the mining industry in the Philippines is relatively high.

In 2018, the mining industry paid a total of Php 42.9 billion in taxes. This represents a tax
burden of 38% of the industry's net income. The high tax burden on the mining industry
has been a source of controversy. Some argue that the high taxes discourage investment in
the mining industry and make it difficult for mining companies to compete in the global
market. Others argue that the high taxes are necessary to ensure that the mining industry
contributes its fair share to the government's revenue and to protect the environment. The
government is currently considering a number of reforms to the mining tax regime. These
reforms are aimed at making the tax regime more competitive and encouraging investment
in the mining industry.

Taxes and royalties are important to audit considerations in the mining industry in the
Philippines. This is because the mining industry is a significant contributor to the Philippine
economy, and the government relies on taxes and royalties from mining companies to fund
its operations. Government revenue may therefore consist of several revenue streams,
which may be collected in cash or in kind. Transparency is improved and reconciliation of
accounts is facilitated when all payments made by petroleum and gas companies (including
any state-owned company) to the state and the proceeds of taxes collected in kind are
traceable and directed to a treasury account, preferably one opened at the central bank.

Revenues from the Extraction of Minerals

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 Royalties -The price that the owner of a natural resource (usually a government) charges a
private company for the right to develop the resource. The Supreme Court of Canada has
defined royalties as a property right, specifically a contractually stipulated share of
production or the proceeds thereof

· Unit-based royalties are regulated prices per unit of production (an ounce of
gold or a ton of coal, for example). This type of royalty requires controls to monitor
production and to ensure there is no illegal (unrecorded) production.

· Value-based (ad valorem) royalties are based on the value of the extracted
commodities. The value is mass multiplied by price, so the difficulty of establishing
price (which is set by the market and can vary day to day) is added to the difficulty
of establishing mass (the mine’s production for a given period of time). Often, some
production costs (transport, handling, insurance, smelting, and refining) are
deductible from the royalty calculation. (This is known as net smelter return.)

· Profit-based Royalties are based on a company’s profits. While this is in many

ways similar to an income tax, it is an additional charge for extracting public natural
resources. Like an income tax, this type of royalty requires government departments
with strong financial, technical, and administrative capacity to regulate and collect
the royalties while minimizing the risk of tax evasion.

Other Sources of Revenue are Collected at different phases of the life cycle of mining – projects.

· Leases - Governments require proponents to pay a set rate for the lease of each unit of land
they intend to explore.

· License and Permit Fees - Through the successive phases of mining projects, project
proponents may be required by regulations to obtain a number of licenses or permits to conduct
specific exploration, production, or decommissioning activities

· Bonuses are one-time payments made when signing a contract, launching activities at a
project site, or meeting certain goals laid out in regulations or in contracts.

· Penalties and Fines - Leases and licenses grant certain rights to project proponents, but
they also bestow obligations on them. Penalties (or “cash in lieu”) may apply when these
requirements are not met and leases may be rescinded under certain conditions.

● AUDIT PROCEDURES
Audit Selection

Audit selection is the process of identifying and selecting the areas of an organization
that will be audited. It is an important part of the audit process, as it ensures that the audit is

24
focused on the areas that are most likely to have errors or omissions. There are three main
factors that are considered when selecting audits: strategic planning, knowledge of business,
and risk assessment.

Strategic planning: The auditor will first consider the organization's strategic goals and
objectives. The auditor will then identify the areas of the organization that are most critical to
achieving those goals and objectives. These areas will be given a higher priority for audit.

Knowledge of business: The auditor will also consider their knowledge of the organization's
business. This knowledge can be obtained from a variety of sources, such as the organization's
annual report, financial statements, and internal controls. The auditor will use this knowledge to
identify areas of the organization that are more likely to have errors or omissions.

Risk assessment: The auditor will also conduct a risk assessment. This assessment will identify
the areas of the organization that are most susceptible to errors or omissions. The auditor will
then focus their audit on these areas.

Audit Planning

This phase involves acquiring knowledge of the business, assessing risk, and
conducting analysis in order to determine the audit focus and set the stage to prepare a
detailed audit plan that will include the audit objective(s), criteria, evidence-collection methods,
and analytical techniques.

Acquiring knowledge of business and assessing risks

Typically, audit procedures require auditors to obtain knowledge of the audited

organization and subject matter and to develop a risk-based audit plan. In practice, this means
that once the decision to audit the completeness of revenues from the extraction of minerals
(and related questions) has been made, the audit team must begin conducting research and
interviewing officials to acquire or further develop a solid understanding of business and the
risks facing the organizations being audited. The compiled data will be used to determine the
primary risk areas and where auditing efforts should be focused.

Audit Focus

The first step in this audit planning process is to determine what exactly should be
audited in the mining sector (that is, the audit focus). To make this decision, auditors will need
to undertake two initial research and analysis tasks

25
 ❖ Acquire knowledge of business by gathering and analyzing relevant information
on the mining sector and on in regulating, monitoring, and government
responsibilities overseeing the sector.
❖ Identify and assess risk factors that could prevent the government from carrying
out its responsibilities in this sector effectively and meeting its objectives.
❖ Examine previously published performance audits on the mining sector by their
office or other jurisdictions.
To be able to make sound scoping decisions for a performance audit of the mining
sector, auditors must have a thorough understanding of the variety and scope of government
oversight responsibilities.

These responsibilities can be separated into five categories:

1. Evaluating mining development options

2. Ensuring the responsible development of natural resources
3. Monitoring natural resource extraction
4. Collecting revenues from natural resource extraction
5. Collecting financial assurances for site remediation and monitoring financial

Drafting audit objectives

Performance audits need clearly stated objectives that are realistic, achievable, and
informative. The number of objectives will depend on the audit's breadth. Sub-objectives can be
used, but auditors will still be expected to conclude on their main objective(s). The objective of
an audit will depend on its focus. For example, an audit of the completeness of revenues from
the extraction of minerals may have a specific objective, while a broader audit of the mining
sector may have a general objective.

Selecting Audit Criteria

Audit criteria are standards that audited organizations are expected to meet. They are
important for the strength and impact of an audit. Audit procedures focus on determining
whether criteria are met or not met. Suitable criteria are relevant, complete, reliable, neutral,
and understandable. Finding suitable criteria can be challenging, especially when there is no
recognized source of accepted criteria. This is the case for auditing the completeness of
revenues from the extraction of minerals.

Example of Sub-topic with uniform criteria established by the Advisory Group, audit offices
represented by the Canadian Council of Legislative Auditors and INTOSAI Working Group on the
Audit of Extractive Industries:

○ Design of the revenue framework

26
○ Processing of payments
○ Internal review and auditing of payments
○ Fraud prevention and transparency

Examination

During the examination phase of a performance audit, audit teams must conduct
procedures that will yield sufficient appropriate evidence to:

● Determine whether audit criteria are met

● Conclude on audit objectives, and
● Document and support these conclusions

An audit of financial assurances for site remediation may not always involve simple and
straightforward planning and execution of auditing procedures. Prior to obtaining all the
information they require and concluding on their audit objective(s), performance auditors may
face a variety of obstacles, ranging from mandate restrictions to locating the necessary
expertise.

This section covers:

▪ Evidence sources and audit tests for audits of financial assurances
▪ Challenges involved in financial assurances for site remediation

Evidence sources and audit tests

Documentary, testimonial, physical, and analytical evidence can all play a role in audits of
financial assurances for site remediation. The main sources of evidence that will be useful in this
context are:
● a review of relevant documents,
● interviews,
● testing of controls and
● IT systems, and site visits.

Review of relevant documents

Performance audits rely on documentary evidence, including evidence of rules, controls,

and their implementation. Auditors gather, review, and analyze documentation to support their
observations and conclusions. Auditors need to consider everything from the evidence of the
rules that government organizations and mining companies have to meet to evidence that
controls have been put in place and are functioning as intended

27
Examples:
● Laws, regulations, and policies that govern the mining sector, including financial
assurance requirements
● Descriptions of financial assurance programs
● Reports on financial assurance programs, including audits and evaluation reports Process
maps and narratives

Interviews

Auditors can gather valuable testimonial evidence from interviews with key managers
and staff in organizations responsible for collecting and managing financial assurances for site
remediation. Interviews with relevant stakeholders and industry members may also be useful,
depending on the specific audit focus.

While testimonial evidence is usually considered weaker than documentary evidence, interviews
can be useful to:
• confirm information obtained from other sources of evidence (thus strengthening the support
for audit observations and conclusions),
• confirm the absence of something that was expected to exist,
• place documentary evidence in its proper context, and
• open new leads in an audit and identify further sources of evidence.

Testing of controls and IT systems

Public sector organizations must have controls in place to ensure that payments they
receive from mining companies for the extraction of mineral resources are accurate and
complete. Auditors will likely test a selection of these controls during the examination phase of
their audit of mining revenues.

Auditors can document that controls are in place by doing a walkthrough, but they need
to do more testing to ensure that the controls are effective. This testing can involve selecting a
sample of transactions, using data mining techniques, or testing the quality of datasets.
Performance auditors should also inquire as to whether financial auditors have performed
walkthroughs and another detailed testing of mining revenues.

Audit teams may need the help of an IT expert to complete their audit procedures,
depending on the nature and complexity of the IT systems used. An IT expert can review IT
general controls and validate application controls for the calculation of financial assurances.
Auditors should document all the steps they took as part of the process so that another auditor
could replicate their work and arrive at the same conclusion.

Site visits

28
 Site visits are important for auditors to understand how things work in a country or
region. They can meet people with direct knowledge of key processes and observe important
systems. Site visits can be even more valuable if an audit team is accompanied by an
independent expert. Site visits can help auditors to map out processes, test key controls, and
obtain testimonial and documentary evidence.

Reporting

During the reporting phase, the auditors report their performance, audit observations, and
conclusions. Audit reports vary considerably in scope and nature. In addition, new formats and
writing styles of performance audit reports are specific to individual audit offices, and as a
result, there is no standard willing to present audit findings; however, auditors can apply some
common principles and good practices to improve the readability and impact of their audit
reports such as:

Use diagrams, graphs, and charts - Visual aids can help to make audit reports more
readable and easier to understand. For example, a diagram can be used to illustrate a complex
process, or a graph can be used to show trends in data.

Draft recommendations - Recommendations are a key part of any audit report. They should
be clear, concise, and actionable. The recommendations should also be based on the findings of
the audit.

Set context - Audit reports should provide context for the findings. This includes explaining the
purpose of the audit, the scope of the audit, and the methodology used. By setting context,
auditors can help readers to understand the significance of the findings

● KEY AUDIT MATTERS

Key audit matters according to the SGV’s annual report of Apex Mining, one of the
largest mining company in the Philippine Industry key audit matters were the most that play a
significance in the audit of consolidated financial statements and below in the illustration is the
provided context on how the audit is addressed. Also it is a technique, processes, and methods
that auditors use to obtain reliable audit evidence, which enables them to gain a sound
judgment about an organization's financial status.

29
 Here is the audit response of the auditor’s regarding to these key audit matter

This audit response highlights certain key points such as:

Obtaining management’s assessment

Reviewing of the status of exploration
Inspection of licenses/permits and checking the expiration in a specified area
Inquiry of existing concession areas that are expected to be abandoned.

IV. REFLECTION AND LEARNING POINTS

● Mining might only mean “the extraction of minerals from the earth”. The physical
stages of the life cycle of a mine are the following: exploration, project
development, mining and milling, smelting and refining (beneficiation), mine
closure, and abandoned mine/rehabilitation.
● The mining industry is important because it employs a large section of the
population, adds to the country's foreign exchange profits, and provides
additional money for the government.
● The oil and gas industry is crucial to the country’s economic development as it
serves as the world’s main fuel source and is a significant industry in the energy
market.
● Reflecting on the updates and key players in the Philippine Mining Industry, it is
evident that responsible mining practices, adherence to environmental
regulations, and sustainable development are crucial for the industry’s success.

30
 Collaboration between government bodies, mining companies, and local
communities is necessary to ensure the industry’s positive impact on the
environment and the economy.
● The mining industry is a high-risk industry. This is due to the potential for
environmental damage, safety hazards, and financial losses. As a result, auditors
need to be aware of the specific risks associated with the mining industry and
take steps to mitigate those risks.
● Auditors need to be familiar with the legal and regulatory framework governing
the mining industry. This includes the laws and regulations that govern the
exploration, development, and production of minerals, as well as the laws and
regulations that protect the environment and the safety of workers.
● Auditors need to be able to assess the effectiveness of the mining company's
internal controls. This includes the company's policies and procedures for
managing its operations, as well as its systems for financial reporting and
internal auditing.
● Auditors need to be able to gather evidence to support their conclusions. This
evidence can be obtained through a variety of methods, including reviewing the
company's documents, observing its operations, and interviewing its employees.

V. REFERENCES

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Australian exporters.
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Australian Trade and Investment Commission. (n.d.-b). Mining - Philippines - For Australian
exporters.
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Carmichael, D. R, Whittington, R., & Graham, L. (2007). Eleventh Edition Accountants'

Handbook Volume Two: Special Industries and Special Topics

Department of Jobs, Precincts and Regions. (2023, February 14). Understanding minerals
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Jessica. (2019). The 5 Stages of the Mining Life Cycle. Mining Software - Technical Assurance,
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Marmiroli, B., Rigamonti, L., & Brito-Parada, P. R. (2021). Life Cycle Assessment in mineral
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Mineral Resources | Philippine Statistics Authority. (n.d.).

https://psa.gov.ph/content/mineral-resources

Mining, C. F. S. R. I. (n.d.). Mine closure overview.

https://stories.uq.edu.au/smi/2022/csrm-mine-closure-hub/mine-closure-overview/index.
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Ong, H. (1970). Financial Adviser: 5 Most Profitable Mining Stocks to Buy this 2021 and How to
Profit from Them. Esquiremag.ph.
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20210119-lfrm

Perlas, M. A., & Noleal, L. D. (2021, March 15). Instructional Material for Acco 30073 -
Audit in Specialized Industries.

Research Guides: Oil and Gas Industry: A Research Guide: Introduction. (n.d.).
https://guides.loc.gov/oil-and-gas-industry

Reuters. (2021, December 28). Philippines ends open pit mining ban to reinvigorate
industry.Reuters.https://www.reuters.com/business/environment/philippines-lifts-four-ye
ar-old-ban-open-pit-mining-2021-12-28/

Shantz R. (1979, May). Mining, milling, and smelting operations in southwest New Mexico.
https://geoinfo.nmt.edu/publications/periodicals/nmg/1/n2/nmg_v1_n2_p24.pdf

ShieldSquareCaptcha.(n.d.).https://www.globaldata.com/data-insights/mining/philippines--five-l
argest-mines-in-2090840/

Talavera, C. (2022, January 3). Mining sector getting back on track. Philstar.com.
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(n.d.). Apex Mining Co. Inc. – Philippine Gold Producer.
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TRADING ECONOMICS. (n.d.). Philippines GDP From Mining - 2023 Data - 2024 Forecast -
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