Republic of Zambia

11/09/1998

English

The location of the operations are detailed in the maps in Schedule 3.

Chambishi Metals PLC

Chambishi Cobalt and Acid Plants and Nkana Slag Dumps

Chambishi Cobalt and Acid Plants and Nkana Slag Dumps

Cobalt and copper

Ministry of Mines and Minerals Development; Ministry of Finance and Economic Development

The realistic timetable for bringing the smelter into production is approximately 31 months and the life of the project is approximately 30 years.

Development agreement

Chambishi Metals will negotiate in good faith with the government to reach terms on an environmental plan within 18 months of the effective date. Chambishi Metals will comply with the environmental plan and generally applicable Zambian environmental and safety laws and regulations including required contributions to the environmental protection fund. The Environmental Plan will cover the following aspects: 1. Pollution prevention Priority will be given to technological modernization and improved process maintenance, monitoring and control to complement conventional pollution control systems for atmospheric emissions and effluent discharges. This will reduce the volume of water requiring treatment by increased recycling of process water and minimize the use of fresh water. It will also improve the efficiency of metals and solids removal in effluent treatment systems and minimize process upsets and environmental spills. 2. Reduction of risks Incidents of inadvertent releases will be minimized by an improved capacity for the containment of untreated water, reduced external storage of sludges and residues and the implementation of spill prevention plans. 3. Reduction of environmental impacts Treated water discharges into the environment will be consolidated into one stream for Operations, wherever possible. This will result in improved treatment efficiency and will reduce stress on the number of streams currently receiving untreated or partially treated water. 4. Conducting progressive rehabilitation Where appropriate, progressive rehabilitation will be exercised when an area becomes inactive and plant units redundant. 5. Achieving production efficiency A fundamental objective for Chambishi Metals will be to achieve production efficiency. Optimizing process and production efficiency will have a favorable environmental benefit. 6. Protection of human health Chambishi Metals commits to a modernization program that will reduce emissions, discharges and releases into the environment and address the protection of human health. 7. Phased compliance Chambishi Metals will bring the environmental performance of its operation into compliance, over time, with the environmental laws.

The carry forward of losses shall be permitted for 10 years from the date of the loss. For the first 15 years, royalties shall be deductible against liability for income tax.

The income tax rate applying at the date of the contract is 35%. If Chambishi Metals obtains a full listing on the Lusaka Stock Exchange the rate will drop to 30%.

The current tax regime is applicable to Chambishi Metals in the conduct of its activities under this contract. While Schedule 8 of this contract is not intended to override applicable legislation, in the event of any ambiguity between applicable legislation and Schedule 8, the government and Chambishi Metals agree that the provision of Schedule 8 shall apply. The intent of the parties is that Schedule 8 clarifies any ambiguities in the legislation and tax regime applicable to Chambishi Metals or its operations.

Chambishi shall pay to a mineral royalty of 2% on the net back value of minerals produced in the mining area. Net back value is the market value of mine products free-on-board at the point of export from Zambia minus: (i) the cost of transport, including insurance and handling charges to the point of export or delivery; and (ii) the cost of smelting and refining (where applicable) or other processing costs except processing costs related to processing that is normally carried out in Zambia in the contract area; (iii) payments made under the Cobalt Price Participation Agreement.

Chambishi Metals shall not be restricted in its employment, selection, assignment or discharge of personnel so long as the employment and the terms and conditions of such employment and the discharge or disciplining of personnel within Zambia shall be carried out in compliance with (i) the generally applicable laws and regulations of Zambia, (ii) the collective agreement and (iii) the terms of individual employment contracts. Chambishi Metals will, in its recruitment, selection, promotion and assignment of personnel not discriminate against comparably trained, qualified and experienced Zambian citizens. Chambishi Metals recognizes the government’s policy to attract qualified Zambian citizens working overseas back to employment within the Zambian mining and metallurgical industry. To assist this policy, Chambishi Metals will take all reasonable efforts in its recruitment and employment of employees in professional, managerial, engineering and scientific grades to make qualified Zambians aware of available employment positions in the company. This includes advertising positions in international press and trade journals likely to have circulation among suitably qualified potential employees.

Chambishi Metals shall: (a) comply with the local business development program to encourage and assist the establishment of businesses within Zambia (particularly in the Copperbelt and with a particular emphasis on businesses directly or indirectly majority owned by Zambian citizens) to supply materials, equipment and services to Chambishi Metals, provided that it shall not be obliged to grant or lend money to any person or provide technical or other support to them; (b) conduct an annual review of progress being made on the implementation of the local business development program and alter it as required by changing circumstances; and (c) designate a responsible person experienced in setting up and managing small business enterprises: (i) to assist Zambian citizens who wish to or have set up businesses to offer services to Chambishi Metals and the facilities; (ii) to assist in the implementation of the local business development program; (iii) to liaise with the appropriate officials from the government; and Chambishi may, with the consent of the government, amend or alter the local business development program, to secure the maximum benefit to the establishment of Zambian businesses. Chambishi Metals will initiate a plan to develop local business. The company will identify areas of operation which are not part of its core business or which it does not want to carry out. These areas will be designated for outsourcing. Local businessmen and entrepreneurs who will be able to provide these services to the mines will be identified. Should there be no-one who can do so, the company will use its best endeavors to foster partnerships between foreign businesses who can provide these services and local businessmen who are interested in participating in these areas. Wherever possible Chambishi Metals will utilize local business in the capital expansion and maintenance program. Chambishi Metals will: (i) investigate mechanisms to assist Zambian citizens to effectively service the company through the provision of materials, equipment and services; (ii) will advise and assist the establishment of long term business enterprises; (iii) maintain a register of Zambian businesses to allow for the easier identification of potential providers. Chambishi Metals shall periodically identify and invite registration of businesses in Zambia (particularly in the Copperbelt and with particular emphasis on businesses directly or indirectly majority owned by Zambian citizens) which are capable of supplying materials, equipment and services. Where the materials, equipment and services required for the implementation of the scheduled program are manufactured or substantially assembled within Zambia, registered Zambian businesses shall have the opportunity to tender. If a tender from any such business: (i) meets the specifications of the invitation to tender; (ii) is competitive in price with international sources; and (iii) meets Chambishi Metals’ quality standards and delivery requirements; then Chambishi Metals shall not discriminate against registered Zambian business(es) in its award of tenders.

Chambishi Metals will comply with the training and human resources management program. Chambishi Metals may, with the consent of government, amend the training and human resources management program, to secure the maximum training of and benefits to Zambian citizens. Chambishi Metals will provide on-the-job training to enhance existing skills. Ongoing safety training will be an important part of this process. It is planned to provide opportunities to appropriate employees to develop and grow through rotational training at other operations in Africa. During the planning and construction stage of the new plant, Chambishi Metals will provide the employees with the new skills required to effectively manage the new technology.

Chambishi Metals’ operations to acquire the discard slag dumps from the Nkana smelter to process this material into finished cobalt and copper will include the following initial capital commitments: Mining and transport US$ 1 million Material Handling US$ 2 million Crushing US$ 3 million Smelter and ancillaries US$ 30 million Discard facilities US$ 2 million Leach section US$ 6 million Plant Reconditioning US$ 14 million Cobalt tank house expansion US$ 7 million Copper tank house expansion US$ 5 million Total committed capital US$ 70 million If, in the sole discretion of Chambishi Metals, certain technical commercial and economic criteria, Chambishi Metals will invest further capital in the construction of a second smelter and a further expansion of the hydro-metallurgical plant. This program would include an anticipated total investment of US$ 50 million.

Any dispute, disagreement, controversy or claim related to this contract shall be referred to arbitration in accordance with the rules of the London Court of International Arbitration subject to such modifications agreed on by both parties. Unless otherwise agreed, the appointing authority shall be the London Court of International Arbitration, it shall take place in London and be conducted in English. An award shall be binding on the parties and judgment may be entered in any court having jurisdiction for the purpose of enforcing the award. The government irrevocably waives any claim to immunity from proceedings to enforce awards or from the execution of awards against government property outside Zambia. Unless otherwise agreed the cost of any arbitration procedure will be borne by the unsuccessful party.

All information acquired by the government from the Chambishi Metals reports required by this contract shall not be disclosed to any third party other than an officer or employee of the government whose work requires him to have such information or for the purpose of enforcing the contract or as required by Zambian law.

Chambishi Metals PLC shall: (a) provide the housing allowance to those employees who are entitled to one (if such entitlement is set out in the employees' conditions of service in place immediately prior to completion); and (b) offer employees the facility of the payment of municipal rates and taxes through the payroll services.

For the first 15 years the government will not: (a) increase the current corporate income tax or withholding tax rates applicable to Chambishi Metals; or (b) otherwise amend the current VAT and corporate tax regimes applicable to Chambishi Metals; or (c) impose new taxes or fiscal imposts on the conduct of normal operations, to avoid a material adverse effect on Chambishi Metals’ distributable profits or the dividends received by its shareholders. During that 15 year period the government will also not increase: (i) the current royalty rate; or (ii) import duty rates applicable to Chambishi Metals so its weighted average import duty rate will not rise above 0% on the goods and materials required for operations and which fall under section 97(1) of the Zambian Mines and Minerals Act (Chambishi Metals is, as of the effective date, exempt from customs and excise duties); or (iii) import duty rates applicable to Chambishi Metals so its weighted average import duty rate will not rise above 15% on the goods and materials required for operations and which fall under Clause 15.1(d)(ii) of this contract; or (iii) the excise duty on power applicable to Chambishi Metal's electricity purchases above the rate at the time of this contract. For the first 15 years the government will also not impose other royalties or duties on normal operations, so there will not be a material adverse effect on Chambishi Metal's distributable profits or the dividends received by its shareholders. After 15 years the government shall ensure that no law, statute, regulation or enactment shall be passed or made which would discriminate against Chambishi Metals in respect of these provisions or the conduct of normal operations or any other circumstances under this contract when compared to other mining companies conducting similar operations on a similar scale. The government will be at liberty to pass or make any such law, structure, regulation or enactment to enable the performance or amendment of a development agreement with a different mining company or joint venture prior to the expiry of such period. The government will reimburse Chambishi Metals as soon as is practicable (or, make offsetting changes in any law, statute or regulation that applies to Chambishi Metals) to ensure it is fully and fairly compensated for any losses, costs or other adverse effects on its distributable profits incurred by it due to the government’s failure to follow these provisions. If the government does opt to make legislative changes it shall reimburse Chambishi Metals for any loss, costs or effects incurred along with interest at a rate of 1 month LIBOR while offsetting changes in any law, statute, regulation or enactment are being enacted. Subject to Chambishi Metals’ compliance with the environmental plan, the government confirms that for 15 years from the effective date, it will not take any action (and will ensure no action is taken by any of its ministries, departments or agencies over which it has control) enforcing any applicable environmental laws with the intent of: (a) securing Chambishi Metals' earlier compliance with environmental Laws other than those covered by the timetable and conditions set out in the environmental plan; (b) requiring Chambishi Metals to clean-up or remove any stock of pre-existing pollution; (c) imposing fines or penalties upon Chambishi Metals payable under environmental laws (or enacting new fines and penalties) for its non-compliance with environmental laws when the environmental plan provides for a remedy on a specified timetable and Chambishi Metals is in compliance with that timetable; or (d) imposing fines or penalties for Chambishi Metals' breach of environmental laws in excess of those that applied on the effective date, (adjusted for inflation).