Republic of Zambia

29/06/1998

English

The location of the contract area is detailed in the maps in Schedule 3.

NFC Africa Mining PLC; China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (Group)

Chambishi Mine

Chambishi Mine

Copper and cobalt

Ministry of Mines and Minerals Development; Ministry of Finance

Development agreement

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) will comply with: (i) Zambian environmental and safety laws and regulations which are of general application (including those requiring contribution to the environmental protection fund); and (ii) the environmental plan. NFC Africa and China Nonferrous shall perform the environmental clean-up obligations in accordance with the provisions of the environmental plan and its timescale. NFC Africa and China Nonferrous will adopt the Zambia Consolidated Copper Mines environmental impact statement (EIS) issued in March 1997, for all environmental issues relating to the operation of Chambishi underground copper mine, concentrator and associated facilities, but not those relating to the Chambishi Cobalt and Acid plant. In accordance with the Mines and Minerals (Environmental) Regulations, the EIS will be updated by 30 September 1998 after an independent environmental audit is conducted. NFC Africa and China Nonferrous will prepare an environmental management plan which will be submitted to the government. NFC Africa and China Nonferrous will also submit a set of revised environmental clean-up obligations to the government for their approval. Decommissioning and closure costs applicable to Chambishi mine, concentrator and associated facilities will be US$ 1,601,000. NFC Africa and China Nonferrous will also meet the environmental protection fund obligations currently expected to be 5-20% of the concluding decommissioning and closures costs, payable over 5 years, as provided for in the Mines and Minerals Act. The environmental plan shall comply in all respects to the requirements of the Mines and Minerals Act. NFC Africa and China Nonferrous will invest US$ 3,129,000 to discharge the clean up obligations stipulated in the ZCCM environmental impact statement and detailed in Schedule 2.

NFC Africa Mining PLC and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation will fulfill the clean-up obligations set out in Zambia Consolidated Copper Mines' environmental impact statement as detailed in this schedule. Key aspects of the environmental plan for the rehabilitation and reconstruction of the mining operation at Chambishi Mine include protection of the environment, public health and safety; minimizing environmental impacts. It also allows for a productive post mining land use or an acceptable alternative following cessation of the mining activities. Specific measures that will be taken to safeguard the environment during the feasibility study stage will include: • There will not be any liquid effluents discharged to surface water. • An erosion and sediment control plan will be prepared, and all dirt roads and drill sites will be constructed and maintained so as to ensure adequate drainage to prevent damage to soil, water or other resource values. • A management plan will be developed for handling, storage and disposal of any chemicals and reagents. • Any hazardous (reactive, flammable, radioactive, corrosive or toxic) materials will be stored in clearly labeled containers at a designated and secure location. • Hazardous wastes will be disposed of in a manner consistent with local regulations. • Secondary containment and fire prevention systems will be provided for all petroleum product storage. • A reclamation plan will be prepared and implemented, with the objectives of returning the land to conditions capable of supporting productive land uses. All surface disturbances resulting from feasibility study activities will be fully reclaimed. To the extent possible, reclamation activities will be concurrent with feasibility activities. Reclamation will include all newly constructed access roads, drill sites and mud pits. * All drill holes will be plugged or capped at the surface to prevent possible ground water contamination, and to prevent possible injury to the public, livestock or wildlife. * A site environmental monitoring program will be conducted during the rehabilitation and reconstruction of the mining operations at Chambishi Mine to monitor possible environmental impacts and to characterize the mine size and receiving environment. The monitoring program will include air quality, surface and ground water quality and meteorology. All environmental monitoring information will be maintained in a computer database management program.

NFC Africa Mining PLC and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation shall pay tax, royalties and duties from time to time in accordance with applicable legislation.

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) shall advise the government of each agreement concerning sales or processing of mine products, patent licensing, engineering, construction or management services which is entered into with an affiliate. If, in the opinion of the government, any such agreement is not on arms' length terms, the government may give notice to NFC Africa and China Nonferrous of the terms which the government considers to be arms' length terms. Upon receipt of the government’s notice NFC Africa and China Nonferrous may: (a) terminate the agreement; or (b) renegotiate the agreement using the terms considered arms' length by the government; or (c) if NFC Africa and China Nonferrous disagree with the government’s terms, it may refer the dispute to a sole expert to determine what are arms' length terms. Upon receipt of the sole expert's determination NFC Africa and China Nonferrous shall renegotiate the agreement, if necessary, to embody those terms or terminate the agreement.

NFC Africa Mining PLC and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation shall pay tax, royalties and duties from time to time in accordance with applicable legislation.

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) will take all reasonable efforts in its recruitment and employment of employees in professional, managerial, engineering and scientific grades (including advertising positions in international press and trade journals likely to have circulation amongst suitably qualified potential employees) to bring to the attention of such qualified Zambians, employment opportunities with the project. During the project construction and pre-production at Chambishi Mine, NFC Africa and China Nonferrous will maintain a minimum workforce of approximately 140 persons. When Chambishi Mine is in full production NFC Africa and China Nonferrous will maintain a minimum workforce of 866 persons. NFC Africa and China Nonferrous will not discriminate in its recruitment, selection, promotion and assignment of personnel and may recruit non-Zambian citizens, where in the judgment of management they are required to carry out specialized operations for which skill are not available locally. NFC Africa and China Nonferrous will take all reasonable efforts to attract qualified Zambian citizens working overseas back to Zambia.

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) inherited no obligation in terms of participation in the local business community from Zambia Consolidated Copper Mines. NFC Africa and China Nonferrous and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) shall 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, provided that NFC Africa and China Nonferrous shall not be required to grant or lend money to any person or organization. NFC Africa and China Nonferrous shall conduct an annual review of progress being made on the implementation of the local business development program and make alterations to it as required by changing circumstances. NFC Africa and China Nonferrous shall employ full-time staff experienced in setting up and managing small business enterprises: (i) to assist Zambian citizens who wish to set up businesses to service the project; (ii) to assist in the implementation of the local business development program and variations thereof; (iii) to liaise with the appropriate officials from the government; (iv) to compile and maintain the business register; and (v) to provide advice and assistance in the development and implementation of long-term business enterprises which can continue after the approved program of mining operations is completed. Manufacturers of processed and semi-processed goods involving copper content with processing facilities located in Zambia which are willing and able to purchase copper cathode at currently prevailing international market prices shall be afforded a preference over manufacturers whose processing facilities are outside the country. This obligation shall apply to no more than 10% of the annual copper production. NFC Africa and China Nonferrous shall annually 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 materials, equipment and services required for the implementation of the scheduled program are manufactured, substantially assembled or procurable within Zambia from such business(es), they shall have the opportunity to tender. If a tender submission from such businesses: (i) meets the specifications of the invitation to tender; (ii) is competitive in cost with international sources; (iii) meets the delivery requirements of the project, then NFC Africa and China Nonferrous shall not discriminate against these businesses in its award of the tender. In assessing the tenders from local contractors and suppliers, NFC Africa and China Nonferrous will consider the extra costs it would incur if it was to grant the contract to a foreign supplier. These extra costs shall include, but are not necessarily restricted to, wharfage costs, shipping costs, stevedoring costs, customs clearance costs, customs duties, and demurrage charges. NFC Africa and China Nonferrous' procurement activities will be conducted in a fair, open and transparent manner.

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) will comply with the training and human resources management program. When Chambishi Mine is in full production NFC Africa and China Nonferrous will establish a consultative committee to monitor its training and human resources management program, in conjunction with representative from local and national government. Zambian citizens in management positions will be given exposure to overseas operations as an integral part of their development.

NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous) will, within 4 years of the date of this agreement, have ore production levels at between 5,250 and 6,000 tons per day, and contained copper in concentrate at between 35,000 and 40,000 tons per year. NFC Africa and China Nonferrous will carry out the program of mining operations detailed in Schedule 1 to bring Chambishi Mine back into production as early as possible.

If disputes cannot be resolved amicably they shall be submitted to the International Centre for Settlement of Investment Disputes for settlement by arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Arbitration shall be held in London. Although NFC Africa is a national of Zambia, it is controlled by nationals of China and shall be treated as a national of China for the purposes of the Convention. An award in arbitration proceedings shall be binding on the parties and judgment may be entered in any court having jurisdiction for the purpose. The government irrevocably waives any claim to immunity: (a) in respect of proceedings to enforce any award including immunity from service of process and from the jurisdiction of the Court, and (b) in respect of execution of any such award against the property of the government outside Zambia.

Laws of Zambia

Zambia Consolidated Copper Mines Limited (ZCCM) employees in Chambishi live in two townships. All the townships are within the area serviced by the local council. Utilities such as water, sewerage, street lighting, road maintenance are the responsibility of the council who provide the services at a cost to ZCCM. ZCCM in turn provide these services free of charge to the employees. Electricity to the houses is provided by ZESCO who bill ZCCM for the service. Due to a continued deterioration of council services and in order to maintain the standard of services due to its employees living in Chambishi Township. ZCCM has over the years taken an active role in helping the council with some of the responsibilities: (i) Roads in the township are maintained by an independent contractor who is, however, supervised by ZCCM on behalf of the council. (ii) Sewerage services and water reticulation plans are maintained by ZCCM. The water source is mainly from the mine and ZCCM owned pumping stations. (iii) Supervision of contractors responsible for refuse removal who are employed by the local council. (iv) Street lighting is maintained by ZCCM. All the above services are a responsibility of the council and there is an arrangement of ZCCM to recover any costs from the council. A number of Chambishi Mine and Chambishi Cobalt/Acid Plant employees reside in these townships. These employees are entitled to the same quality of municipal and social services as applicable to other ZCCM employees in the location where they live.

For 15 years from the effective date the government will not: (a) increase the current corporate income tax or withholding tax rates applicable to NFC Africa Mining PLC (NFC Africa) and China Nonferrous Metal Industry's Foreign Engineering and Construction Corporation (China Nonferrous); or (b) otherwise amend the current VAT and corporate tax regimes applicable to NFC Africa and China Nonferrous; or (c) impose new taxes or fiscal imposts on the conduct of normal operations, to avoid a material adverse effect on NFC Africa and China Nonferrous’ distributable profits or the dividends received by its shareholders. During the stability period the government will also not increase: (i) the current royalty rate; or (ii) import duty rates applicable to NFC Africa and China Nonferrous so its weighted average import duty rate will not rise above 5% on the goods and materials required for operations and which fall under section 97(1) of the Zambian Mines and Minerals Act (NFC Africa and China Nonferrous is, as of the effective date, exempt from customs and excise duties); or (iii) import duty rates applicable to NFC Africa and China Nonferrous so its weighted average import duty rate will not rise above 20% on the goods and materials required for operations and which fall under Clause 15.1(d)(ii) of this contract; or (iv) the rural electrification levy applicable to NFC Africa and China Nonferrous’ purchases of power from the current level. The government shall ensure that no law, statute, regulation or enactment shall be passed or made which would discriminate against NFC Africa and China Nonferrous 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 NFC Africa and China Nonferrous as soon as is practicable (or, make offsetting changes in any law, statute or regulation that applies to NFC Africa and China Nonferrous) 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. Subject to NFC Africa and China Nonferrous’ 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 NFC Africa and China Nonferrous' earlier compliance with environmental Laws other than those covered by the timetable and conditions set out in the environmental plan; (b) requiring NFC Africa and China Nonferrous to clean-up or remove any stock of pre-existing pollution; (c) imposing fines or penalties upon NFC Africa and China Nonferrous 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 NFC Africa and China Nonferrous is in compliance with that timetable; or (d) imposing fines or penalties for NFC Africa and China Nonferrous' breach of environmental laws in excess of those that applied on the effective date, (adjusted for inflation). Subject to NFC Africa and China Nonferrous’ compliance with the environmental plan, the government will not for 15 years take any action (which will include a proposal to amend the environmental plan) and will ensure that no action is taken by any of its ministries, departments, or agencies acting on its behalf, to make or render NFC Africa and China Nonferrous liable for any environmental liabilities incurred by the Zambia Consolidated Copper Mines Limited prior to the transfer of assets to NFC Africa and China Nonferrous.