Republic of Zambia

English

The location of the contract area is detailed in these maps.

Chibuluma Mines PLC (ChibCo)

Copper and cobalt

Ministry of Mines and Minerals Development and the Ministry of Finance

Development Agreement

Chibuluma Mines PLC (ChibCo) will conduct rehabilitation relating to previous and current mining operations identified in the environmental impact statement and conduct an environmental management plan to an acceptable standard designed to minimize the effect of mining on the environment. ChibCo will also adhere to the plan for environmental protection prepared for the environmental impact statement as part of the mining license for Chibuluma South Mine. The environmental plan will cover the following aspects; (i) dust and water pollution will be minimized by revegetation of disturbed areas and by control of stormwater through crest and toe paddocks and related drainage of tailings and rock disposal areas. (ii) a monitoring program for water flow, levels, qualities and discharges into the Fikondi Stream will be established. (iii) old shafts will be sealed and the concentrator site rehabilitated by removal of foundations, structures and scrap prior to contouring and revegetation. (iv) surface caving resulting from mining will be monitored and land use restricted in areas of potential danger. The environmental plan incorporates the clean up obligations, and will constitute a significant component of operations prior to and post closure of Chibuluma West and Chibuluma South. Regular audits will be made of the environmental management issues covered by the environmental plan and the post closure monitoring period will continue until stable conditions at a satisfactory standard are achieved. ChibCo will assume responsibility for the historic liabilities and obligations relating to impacts on the environment of previous and current mining operations as defined in the environmental impact statementfor the Nkana Division, Chibuluma Mining Licence Area.

Chibuluma Mines PLC (ChibCo) will comply with the generally applicable environmental and safety laws and regulations of Zambia and the environmental plan. ChibCo shall perform the environmental clean-up obligations of the environmental plan. Subject to compliance by ChibCo with the environmental plan and the environmental clean-up obligations, the government will not for a period of 15 years take any action under any applicable environmental laws with the intent of: (a) securing ChibCo’s compliance with environmental laws other than that envisaged by the timetable and conditions set out in the environmental plan; or (b) requiring ChibCo’s to clean up and/or remove any stock of preexisting pollutants; or (c) imposing fines or penalties upon ChibCo payable under Environmental Laws for non-compliance with environmental laws; or (d) imposing increased penalties in respect of ChibCo’s breach of environmental laws in excess of those applying on the effective date. In the event of non-compliance with the environmental plan or the environmental clean-up obligations, the government shall be free to take action under applicable environmental laws as it considers appropriate. The government may propose an amendment to the environmental plan if: (a) at any time the conduct of normal operations in accordance with the environmental plan for whatever reason poses a material danger to public health and safety or may result in significant damage to the ecology of the area which was not contemplated in the original environmental plan and is irreversible or only be reversed after the lapse of 15 years; or (b) the environmental impact or normal operations shall prove substantially more adverse than anticipated in the environmental plan; or (c) technology or procedures, or improvements thereof shall have been available and economic subsequent to the effective date and, if applied to the operation of the facilities, could materially mitigate the environment impact of normal operations. ChibCo shall be entitled to amend the environmental clean-up obligations, provided that it conforms to specifications and practices established by Zambian standards for the management of the environment as it is affected by mining operations. The principal components of the Chibuluma Mining Lease Area affecting rehabilitation, decommissioning and closure activities have been identified in the environmental impact statement and are as follows: shafts, buildings and land subsidence at Chibuluma East and Chibuluma West; Ore Stockpile No. 3; Waste Rock Dump No. 5; Tailings Dams TD1 and TD2; the old Concentrator. Progressive rehabilitation of old mine workings and monitoring of water and air quality will be undertaken prior to and during mine closure and decommissioning.

The carry forward of losses shall be permitted for a period of 10 years from the date the loss was incurred. For the stability period, royalties shall be deductible against liability for income tax.

The income tax rate shall be 35%. However, if Chibuluma Mines PLC obtains a listing on the Lusaka Stock Exchange the rate shall be 30% from the year of listing.

The current tax regime is applicable to Chibuluma Mines PLC (ChibCo) 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 ChibCo 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 ChibCo or its operations.

Chibuluma Mines PLC (ChibCo) 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 it is the government’s opinion that any such agreement is not on arms length terms, the government may, within 30 days, give notice to ChibCo of the terms the government considers to be arms length terms. Then ChibCo: (a) may terminate the agreement; or (b) may renegotiate the agreements using the terms considered arms length by the government; or (c) if ChibCo disagrees with the government’s terms, it may refer the dispute to a sole expert for a determination of the appropriate terms. Upon receipt of that determination, ChibCo shall renegotiate the agreement, if necessary, to embody those terms or terminate it.

Chibuluma Mines PLC (ChibCo) shall pay a royalty of 2% on the net back value of the minerals produced.

Chibuluma Mines PLC (ChibCo) shall not be restricted in its employment, selection, assignment or discharge of personnel. However, the employment and the terms and conditions of such employment within Zambia shall be carried out in compliance with (i) the generally applied laws and regulations of Zambia, (ii) the collective agreements and (iii) the terms of individual employment contracts. ChibCo will, in its recruitment, selection, promotion and assignment of personnel not discriminate against comparably qualified and experienced Zambian citizens. ChibCo acknowledges the government’s policy to attract qualified Zambian citizens working overseas back to employment within Zambian mining industry. In order to facilitate that policy, ChibCo will take all reasonable efforts in its recruitment and employment of employees in professional, managerial, engineering and scientific grades (including, but not limited to the advertising of positions in international press and trade journals) to bring to the attention of qualified Zambian positions of employment available within ChibCo. Notwithstanding these provisions, ChibCo (and its contractors or subcontractors) may bring into Zambia such non-Zambian citizens as, in the reasonable judgment of ChibCo’s management, are required to carry out specified operations efficiently and successfully.

The development of local business will occur as the program of capital expenditure for the development of Chibuluma South commences with emphasis on both the formal and informal sectors of the economy. As the Chibuluma West operation becomes a decentralized profit center, competitive local suppliers of goods and services will be encouraged to deal directly with the mne. Chibuluma Mines PLC will submit to the government a detailed program for local business development within 12 months. Chibuluma Mines PLC (ChibCo) shall annually identify and invite registration of businesses in Zambia (particularly in the Copperbelt and with emphasis on business directly or indirectly majority owned by Zambian citizens) which are capable of supplying materials, equipment and services to ChibCo. Where materials, equipment and services required are manufactured or substantially assembled (or in the case of services, are procurable) within Zambia from a pre-qualified business, they shall have the opportunity to tender and if it: (i) meets the specifications of the invitation to tender; (ii) is competitive in cost with international sources; and (iii) meets the delivery requirements of the facilities, then ChibCo shall not discriminate against these businesses in its award of such tender. In assessing the tenders from local contractor and suppliers, ChibCo will consider the extra costs it would incur if it was to grant the contract to a foreign supplier or contractor. ChibCo shall: (a) comply with local business development program to encourage and assist the establishment of businesses within Zambia (particularly in the Copperbelt and with a particular emphasis on business directly or indirectly majority owned by Zambian citizens) to supply materials, equipment and services to ChibCo, provided that ChibCo shall not be obliged to lend money to any person; (b) conduct an annual review of progress being made on the implementation of the local business development program and vary it as required by changing circumstances; and (c) designate a responsible and experienced person to be involved in setting up and managing small business enterprises: (i) to assist Zambian citizens who wish to or have set up businesses to service ChibCo; (ii) to assist in the implementation of the local business development program; (iii) to liaise with the appropriate officials from the government; and (iv) to compile and maintain the register.

Chibuluma Mines PLC (ChibCo) shall comply with the training and human resources management program. ChibCo may, with consent of the government, amend or alter the program, with a view to securing the maximum training of and benefits to Zambian citizens. If ChibCo is unable to comply with some aspects of the Program as a result of: (a) circumstance or events beyond its control; or (b) a direction of the Director of Mine Safety then non-compliance shall not constitute a default and ChibCo may give notice of alternative or revised plans to the affected part of the program. If the government does not approve of ChibCo’s alternative or revised plans and ChibCo considers that to be unreasonable, ChibCo may refer the decision to a sole expert. The Metorex Consortium will undertake a comprehensive education and training program aimed at ensuring the technical competence and productivity and higher safety standards of all employees. Courses will be aimed at ensuring technical competence together with the acquisition of knowledge in areas unfamiliar to the particular employee. An advanced skill training program will ensure that each higher level employee reaches a level of competence in his or her specified filed. The training given at this level may take place outside Zambia, depending on requirements, and will be undertaken at the expense of Chibuluma Mines PLC (ChibCo). It will be aimed at expanding the knowledge base and will also ensure that the mine employees import a range of skills that may not be available within Zambia at the time. The Metorex Consortium is prepared to work with local administration in providing assistance with schooling facilities for employees. Mine workers and their immediate family members will be encouraged to have access to these facilities. The education would be designed to have a positive impact on the general abilities of all mine workers and their family members, and will comprise basic courses such as English, maths and technical subjects. The curriculum will be based on the needs of the community, wherever possible. Especially gifted employees or immediate family members, may be offered the chance of furthering their studies at a reputable institution within Zambia or internationally at a private school, technical college or university. Bursaries and loans may be set up to assist employees in this regard.

Chibuluma Mines PLC (ChibCo) shall allow the public and the government to use free of charge any roads constructed (and/or maintained) by ChibCo which have been freely available for public use, provided however, that such use shall not unduly interfere with ChibCo’s operations.

Chibuluma Mines PLC (ChibCo) shall Give preference to manufacturers of processed and semi-processed goods involving copper content to processing facilities located in Zambia which are willing and able to purchase copper cathode or other products at currently prevailing international market prices. This obligation shall only apply to an amount of copper which does not exceed 10% of ChibCo's annual copper production and this preference shall not result in ChibCo breaching its delivery obligations with respect to any of the sales contracts transferred to ChibCo as part of the sale and purchase agreement.

The government and Chibuluma Mines PLC (ChibCo) shall submit to the International Centre for Settlement of Investment Disputes any dispute 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, or such other place as the parties may agree in writing. Although ChibCo is a national of Zambia, it is controlled by nationals of South Africa and shall be treated as a national of South Africa for the purposes of the Convention. Any arbitral tribunal shall consist of a sole arbitrator appointed by agreement, and an arbitrator, who shall be President of the Tribunal, appointed by agreement of the parties or, failing such agreement by a neutral official. Any arbitration proceeding pursuant to this contract shall be conducted in accordance with the arbitration rules of the Centre in effect on the date on which the proceeding is instituted. An award in arbitration proceedings held pursuant to the Convention 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 such 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

Chibuluma Mines PLC (ChibCo) shall, until alternative arrangements are agreed with the government (but no longer than 2 years): (a) provide the municipal infrastructural services in full compliance with the public health legislation and the rules, regulations and standards of general application in Zambia; (b) ensure that the municipal infrastructural services are available to: (i) all employees of ChibCo and their registered dependents, all persons to whom access in the municipal infrastructural services is granted by virtue of relevant redundancy and retirement provisions); and (ii) such persons as may be entitled to receive the municipal infrastructural services under the terms of the Zambia Consolidated Copper Mines (ZCCM) social access agreement; (c) make available the municipal infrastructural services at the time of this contract coming into effect, at that level and standard and at a level appropriate to the number of persons entitled to them; and (d) ensure that the charges for the provisions of the municipal infrastructural services: (i) to employees and their registered dependents are no greater in real terms than those levied by ZCCM immediately prior to the closing of the sale and purchase agreement; and (ii) to persons entitled to municipal infrastructural services under the social access agreement, are in accordance with the relevant provisions of that agreement. The municipal infrastructural services currently comprise normal township services managed and funded by Kalulushi Municipality, ZCCM and Chibuluma Mine. Chibuluma Mine provides and manages drinking water and sewage treatment facilities, and electric power is distributed to the township from the mine busbar. These services are provided on a reimbursable basis. In addition, Chibuluma Mine provides labour for other municipal requirements such a storm water drain cleaning. Residents pay for such services at a nominal rate. Municipal Infrastructure Services will continue at a current level and standard no worse than that applying prior to this agreement, and made available to residents of Kalulushi and Chibuluma townships on commercial terms related to the coast of provision of such services. ChibCo will procure payment for municipal services provided to the houses of ChibCo employees and its proportional share of other municipal services. On the basis ChibCo will charge ZCCM on a monthly basis for all municipal services rendered to ZCCM employees in Kalulushi. All non-Chibuluma, ZCCM residents will be levied directly by ChibCo. ChibCo will work towards transferring of these services to the municipality and assist in establishing a commercially viable municipality within 2 years of the date of completion. ChibCo will continue to provide their proportional share of the financial support that was provided by ZCCM for the municipal services before the completion date at the same standard as currently being supplied. It is intended that these services of the assets necessary to provide their services will be transitioned by the Chibuluma Town Council on an ordered manner on a commercial basis over a 2 year period. The agreed objective of both ChibCo and ZCCM is to establish a commercially viable municipality at the town of Kalalushi. ZCCM provides assistance when needed to the municipal council on road maintenance, refuse collection, sewage services, provision of treated water and street lighting.

The government will not for a period of 15 years: (a) increase corporate income tax or withholding tax rates currently applicable to Chibuluma Mines PLC (ChibCo) (or decrease allowances available to ChibCo in computing its liability to such taxes); or (b) otherwise amend the VAT and corporate tax regime currently applicable to ChibCo; or (c) impose new taxes or fiscal imposts on conduct of normal operations, or (d) alter the right of any non-Zambian citizens (on his or their arrival or permanent departure from Zambia) to: (i) import free of duty and tax, for personal use, household and personal effects; (ii) export, without hindrance or the imposition of duty or tax on export, all personal effects originally imported or acquired during residency in Zambia; and (iii) freely remit all income earned within Zambia during their residency, so as to have, in each case, a material adverse effect on ChibCo's distributable profits or the dividends received by its shareholders. Further for the same period of 15 years, the government will not: (d) increase: (i) the rate of royalty from the current level, or (ii) import duty rates applicable to ChibCo above a level of 5%; or (iii) import duty rates applicable to ChibCo that do not fall under Clause 15.1(d)(ii) above a level of 20%; or (iv) the rural electrification levy applicable to ChibCo's purchase of power from the current level; or (e) impose other royalties or duties on normal operations, so as to have a material adverse effect on ChibCo's distributable profits or the dividends received by its shareholders. After 15 years the government shall ensure that no law, statue, regulation or enactment shall be passed or made which would discriminate against ChibCo when compared to other mining companies or joint ventures conducting similar operations on a scale equivalent to those conducted by ChibCo in Zambia provided that 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 entered into by it and another mining company or joint venture prior to the expiry of the period. The government agrees to reimburse ChibCo (or, at its option, make offsetting changes in any law, statute, regulation or enactment applicable to ChibCo) to ensure ChibCo is fully and fairly compensated for any costs incurred by it by reason of a failure by the government to comply with these provisions provided that (if the government opts to make such legislative changes) it shall reimburse ChibCo for any costs incurred along with interest at a rate of 6 month LIBOR while offsetting changes in any law, statute, regulation or enactment are being enacted.