The Philippines plans to hold another bidding round on March 31 for a potential gold and copper mine on Mount Diwalwal in the southern Mindanao region, after the first auction in December failed, a senior government official said on Tuesday.

State agency Philippine Mining Development Corp has relaxed the bid terms for the contract to develop the Upper Ulip-Paraiso property, a 1,620-hectare site near the gold rush area on Mt Diwalwal which has attracted many small-scale miners.

We're trying to test the market with these very liberal contract terms, Jaime de Veyra, vice president and head of the bidding committee, told Reuters.

Officials have said potential bidders at last month's auction may have found the terms too steep, given the lack of an estimate on the site's reserves.

The 25-year contract will go to the bidder who offers the highest commitment fee -- which the government has slashed to $500,000 from $1.5 million during the Dec. 3 auction -- for the first year of operations.

The winning bidder will also have to pay a total $5 million in additional commitment fees over the next four years, said de Veyra. These fees can be deducted from the 5 percent royalty on gross sales from the mine due to the government, he added.

Six foreign and local groups, including the Philippine unit of Britain's Metals Exploration Plc (MTL.L) which prequalified for the December auction, are automatically included in the second bidding, the official said.

Other groups which earlier prequalified to bid for the contract include a joint venture of China Sci-tech Holding Ltd and Songxian Fengyuan Molybdenum Industry Co and the partnership of Hangzhou Jiantong Group Co and local firm Mt Apo Mining Development Corp.

The rest were South Korea's Junheung International Co Ltd and Philippine firms Mt Sinai Mining Exploration and Development Corp and Karanglan Resources and Mining Corp.

The southeast Asian nation sits atop an estimated $1 trillion worth of mineral wealth but only $1.7 billion has flowed in since 2004, when the Supreme Court cleared a law allowing foreigners to own 100 percent of large-scale mining projects. (Reporting by Manolo Serapio Jr.; Editing by Rosemarie Francisco and David Holmes)

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