Republic of Zambia

Konkola Copper Mines PLC

Copper

Ministry of Mines and Minerals Development; Ministry of Finance and National Planning

Amended development agreement

2004

Konkola Copper Mines will comply with the final environmental and social management plan in accordance with its timetable and good mining, metal treatment and environmental practices to ensure the minimization of any harmful effects on the environment.

The carry forward of losses shall be permitted for a period not exceeding: (a) 16 years, in respect of losses incurred up to and including 31 December 2003; (b) 10 years, in respect of losses incurred after 31 December 2003 but up to and including expiry of the stability period; and (c) the expiry of the period for carry forward of losses under applicable legislation, in respect of those losses incurred after expiry of the stability period, provided always that all such losses should be used on a first in, first out basis with earlier losses used before later losses.

The income tax rate shall be 25%

The government shall in no way be restricted from introducing legislation related to transfer pricing to ensure that all transactions between companies and their affiliates are conducted on arm's length terms.

Konkola Copper Mines shall pay a royalty of 0.6% on the gross revenue of minerals produced in the mining areas.

Konkola Copper Mines shall comply with the employment and training plan. Subject to Konkola Copper Mines complying at all times with all applicable labor or other relevant, generally applicable legislation, Konkola Copper Mines may with government consent amend or alter the employment and training plan, to provide employees with improved opportunities to develop their potential to contribute to operations. Konkola Copper Mines shall amend the employment and training plan on a regular basis to identify a minimum number of employees necessary to conduct normal operations for the forthcoming 12 month period. Konkola Copper Mines shall, in its recruitment, selection, promotion and assignment of personnel comply with non-discrimination laws of general application in Zambia. Konkola Copper Mines shall make 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 Konkola Copper Mines.

Konkola Copper Mines shall comply with the local business development program so as 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. Konkola Copper Mines shall conduct an annual review of progress being made on the implementation of the local business development program and make alterations as may be reasonably required by changing circumstances. Konkola Copper Mines shall employ one or more persons full time who are experienced in setting up and managing small business enterprises to: (a) assist Zambian citizens who wish to or have set up businesses to offer services to Konkola Copper Mines; (b) assist in the implementation of the local business development program and variations; (c) liase with the appropriate government officials; (d) compile and maintain the business register; and (e) provide advice and assistance in the development and implementation of long term business enterprises which can continue after the approved program of mining and metal treatment operations is completed; and inform the government nominee on the Konkola Copper Mines Board of Directors at least annually on the implementation and results of the local business development plan. Konkola Copper Mines shall, on a regular basis, identify and invite registration of businesses in Zambia which are demonstrably capable of supplying materials, equipment and services of a reasonably acceptable standard to Konkola Copper Mines. The supply of materials, equipment and services may be tendered for and procured internationally without restriction, provided that: (1) where such materials, equipment and services are procurable within Zambia from registered businesses, such businesses shall have the opportunity to tender. If the initial tender submission from such business meets the specifications of the invitation to tender and such businesses are demonstrably capable of supplying the particular materials, equipment or services which are the subject of the tender, those businesses shall not be discriminated against in comparison with international suppliers; and (2) in the event of parity between the initial tender submissions from registered businesses and from international businesses, Konkola Copper Mines shall be obliged to award the tender to the registered business. When calling for tenders from contractors and suppliers, Konkola Copper Mines shall invite tenders from Zambian contractors and suppliers where, to the best of Konkola Copper Mine's knowledge the contractors have proven ability and reputation in: (a) performing work of a similar nature, quality and size to that required; and (b) completing such work within the specified time period; and the suppliers are established, recognized and reputable suppliers of materials and/or equipment and/or services and have previously marketed or distributed such materials. These provisions shall not require Konkola Copper Mines to incur any greater cost, accept an inferior standard of work, accept a delay in supply or otherwise suffer any prejudice. In assessing the tenders from local contractors and suppliers, Konkola Copper MInes shall consider the extra costs it would incur if it were to grant the contract to a foreign supplier or contractor. These extra costs shall include, without limitation, any wharfage costs, shipping costs, stevedoring costs, customs clearance costs, customs duties, and demurrage charges.

Disputes that cannot be resolved amicably shall be resolved by arbitration in accordance with the UNCITRAL Arbitration Rules in force and effect on the date of service of notice of dispute. The tribunal shall consist of a sole arbitrator appointed by the Secretary General of the Permanent Court of Arbitration at the Hague. The place of arbitration shall be Johannesburg and the language of the arbitration shall be English. Awards in these proceedings shall be final and binding on the parties and judgment may be entered in any court having jurisdiction for the purpose of enforcing the award. The government irrevocably agrees that should any proceedings related to this contract be taken in any jurisdiction against it or its assets, it will not have immunity from those proceedings. The government irrevocably waives any such immunity which it or any of its assets has or may acquire in the future in any jurisdiction.

The government shall: (1) use all confidential information only for the purpose for which it was supplied to the government and not for any other purpose; (2) not disclose and treat and safeguard as strictly private and confidential all such confidential information; and (3) ensure proper and secure storage of all such confidential information. The government and Konkola Copper Mines will keep strictly confidential the content of the arbitral proceedings and any arbitral award made in such proceedings.

Laws of Zambia

The parties acknowledge that Konkola Copper Mines has reached agreement with the Mineworkers Union of Zambia and the National Union of Mine and Allied Workers regarding remuneration and other employment benefits which shall be provided to employees and their registered dependants. These benefits include the provision or procurement of certain medical and educational services and access to other recreational assets. The government agrees to use its best endeavors to facilitate the continued provision of the following municipal infrastructure services by the relevant private companies and local councils and Konkola Copper Mines agrees that it will co-operate with such private companies and local councils in ensuring that any transitional arrangements to be agreed and put in place for recovering the costs of such services from Konkola Copper Mines’ employees are effective: - water; - sewerage services; - solid waste; - domestic electricity supply; - street lighting; - storm water drainage; - roads; - markets; and - cemeteries. The parties acknowledge that the cost to Konkola Copper Mines of the municipal services in aggregate at the date of this contract is approximately US$ 1,000,000 per year. The government shall ensure the costs payable by Konkola Copper Mines for such services are not increased during the stability period.

During the stability period, the government shall not in the case of: (1) legislation or regulations governing the regulation and management of companies, make any changes which would require a higher number of Zambian residents as directors of Konkola Copper Mines than that presently required; (2) legislation or regulations governing the operation of mines or related activities, make any changes which, individually or cumulatively, would have a material adverse economic effect; (3) regulations and procedures governing imports and exports within Zambia, make any changes to their application which, individually or cumulatively, would have a material adverse economic effect; (4) legislation or regulations governing the terms and conditions of employment within Zambia, make any changes which would prevent Konkola Copper Mines from: (a) operating on a 7 days a week, 24 hours a day, 365 days a year basis; or (b) negotiating with employees or relevant unions or engaging employees or terminating their contracts of employment in such a manner which would be likely to have a material adverse economic effect, individually or cumulatively. During the stability period, the government shall not change, amend, cancel or terminate this contract or the rights and obligations of the parties under this contract. The government shall ensure (both during and after the stability period) that no law, statute, regulation or enactment shall be made which would discriminate against Konkola Copper Mines in when compared to other companies or joint ventures conducting similar operations in Zambia under large scale mining licenses. Subject to Konkola Copper Mines’ compliance with the environmental plan, the government confirms that during the stability period, it will not take any action (and will ensure no action is taken by any of its agencies) enforcing any applicable environmental laws with the intent of: (a) securing Konkola Copper Mines' earlier compliance with environmental Laws other than those covered by the timetable and conditions set out in the environmental plan; (b) imposing fines or penalties upon Konkola Copper Mines 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 Konkola Copper Mines is in compliance with that timetable; or (c) repealing or amending the enabling legislation or the enabling statutory instruments; (d) imposing increased fines or penalties for Konkola Copper Mines' breach of environmental laws in excess of those that applied on the effective date, (adjusted for inflation). During the stability period the government shall not: (a) increase any rates of taxation (whether direct or indirect and including, without limitation, corporate income tax or withholding tax) applicable to Konkolo Copper Mines (or change the basis of calculation which would result in a decrease or increase of deductions, rebates or other allowances available to Konkolo Copper Mines in computing its liability for taxes) from those at the effective date; (b) increase the royalty rate or change the basis of computation of royalty from that prevailing at the effective date; (c) amend the VAT and corporate taxation regimes applicable to Konkolo Copper Mines from those prevailing as at the effective date, including the rules regarding carry forward losses (d) impose new or additional taxes or fiscal imposts (including export duties) on the conduct of normal operations; or (e) increase withholding taxes applicable to Konkolo Copper Mines and its shareholders on the remittance of principal, interest, dividends, royalties or management fees, nothing in these provisions shall restrict the ability of the government to impose new, incidental and one-off levies in order to fund program relating to public health, education, utility or benefit, provided that the imposition of such levies is not inconsistent with Schedule 6 and does not result in increased cost to Konkola Copper Mines in excess of US$ 250,000 per year. During the stability period the government shall also not increase import duty rates applicable on the import of goods and materials required for the implementation of the approved program of mining and metal treatment operations or normal operations so that the weighted average import duty rate rises above a level of 15%, or impose other royalties or duties on normal operations. If, after the effective date, there is a generally applicable more favorable taxation, duties or royalties regime applicable to the mining industry generally than applies to Konkola Copper Mines at the date of this agreement, Konkola Copper Mines shall be entitled to take advantage of such changes in any law, statute, regulation or enactment.