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 REPUBLIC OF GUINEA





Work- Justice - Solidarity





MINISTRY OF MINES AND ENERGY








BASIC AGREEMENT


BETWEEN


The Republic of Guinea


and


BSG RESOURCES


FOR THE EXPLOITATION OF THE ZOGOTA / N'ZEREKORE IRON ORE


DEPOSITS











CONAKRY, DECEMBER 2009


 AGREEMENT








BETWEEN THE UNDERSIGNED:


- The Republic of Guinea, duly represented for the purposes of this


agreement by Mr. Mahmoud Thiam, Minister of Mines and


Energy,





OF THE ONE PART,








- BSG Resources (Guinea) Limited, a company under Guernsey law,


whose registered office is at.................... Guernsey, duly


represented for the purposes of this agreement by its CEO, Mr.








OF THE SECOND PART,


- BSG Resources (Guinea) Ltd, a sole proprietorship limited liability


company under Guinean law, registered in the Commercial


Register of Guinea under No. RCCM/GC-KAL/013.755A/2006


dated 24.11.2006 amended by declaration No. RCCM/GC-KAL-


M2/024.524/2009 dated 20 February 2009, located at the Villa


Andre, quartier Coleah, Southern cornice, Conakry, POB 6389,


duly mandated and represented by its co-manager, Mr. Asher


AVIDAN, hereinafter referred to as "the company"


OF THE THIRD PART


IT HAS BEEN STATED AND AGREED AS FOLLOWS:


1. PREAMBLE


- WHEREAS the Republic of Guinea encourages research,


prospection, exploitation and valorization of mineral resources in


its territory,


WHEREAS in this light, the country has decided that this


valorization could be undertaken by or with the help of investors in


order to promote the economic development and the populations'


well-being,


WHEREAS the Mining Code provides that the mineral or fossil


substances contained in the subsoil or on the surface, as well as


underground waters and geothermal deposits on the territory of the


Republic of Guinea and its exclusive economic zone, belong to the


State and cannot be the object of any form of private appropriation,


save as provided in the Mining Code and the Land Codes.


However, holders of operating titles acquire ownership of the


substances they extract.


WHEREAS in this framework, the Republic of Guinea informed


the mining investors of:


► the necessity to ensure rational resources exploitation to


avoid freezes, mortgages and waste,


► the principle that the mining infrastructures (railway and


port) located on the national territory belong to the


Government as well as any new mining infrastructure that


would be implemented,


► the necessity to create a mid-term synergy as to the iron


ore and bauxite exploitation, transportation and evacuation


schemes over the whole territory in order to minimize


operation and transportation costs and to ensure mining


operations,


► its commitment to tap mining resources with respect for


the environment, in compliance with the World Bank


standards.


► its commitment to turn mining areas into socio-economic


and industrial development centers leading to the


implementation of unities meant to transform raw materials


into finished and semi-finished products,


WHEREAS BSG Resources, conforming to the Government's


strategy as to the valorization of mining resources, has solicited an


iron ore exploration permit at Zogota, in N'Zerekore" prefecture,


WHEREAS the Republic of Guinea acceded to this request through


decrees A/2006/706/MMG/SGG of February 6 2006 granting BSG


Resources one (01) iron ore exploration permit, renewed by decree


A/2009/1327/PR/MMEH/SGG of June 10 2009,


WHEREAS the works carried out by BSG Resources Guinea led to


the identification of commercially exploitable iron ore deposits, as


attested by the feasibility study enclosed to the request for grant of


concession addressed to the Minister of Mines and Energy on


..............2009,


WHEREAS this study has been approved by the Government and


that the company fulfills the conditions attached to the grant of the


concession,


WHEREAS in this framework the Government granted, through


Decree n°...................dated......................(See copy in


Appendix......), the company BSG Resources a mining lease for a


period of twenty five (25) years, renewable, for the exploitation of


the iron ore deposits at Zogota, in N’Zerekore" prefecture,


WHEREAS BSG Resources wishes to develop the areas at its


disposal through the design, funding, development and


construction in Guinea of a complex consisting of a mine and its


dependencies (plants, storage areas, power stations, lodgings) and


of a railway with a nominal production capacity of 30 Mt/y of iron


ore,


WHEREAS BSG Resources nevertheless wished to evacuate the


iron ore production stemming from its mining concession through


Liberia,


WHEREAS the company therefore committed to implement a new


railway in Guinea that would be connected to the already existing


railway in Liberia and to use the railway and port infrastructures


located on the territory of the Republic of Liberia,


- WHEREAS the Republic of Guinea acceded to this request for the


following reasons:


►The Government's willingness to see the iron ore deposits in


operation as quickly as possible,


► The proximity of the Zogota deposits to the Liberian border,


►The request issued by the Guinean Government to the company


to rebuild the Conakry-Kankan railway and its potential extension,


► The establishment of an economic zone in the South-East of the


Republic of Guinea,


- WHEREAS BSG Resources has approved these requests and


declares possessing the financial, technical, technological and


commercial capacities required for the achievement and


exploitation of the project,


- WHEREAS the Government wishes the Project operations to


commence as soon as reasonably possible,


The Government and BSG Resources have initiated this basic Agreement


whose terms and conditions are defined below:











SECTION I: GENERAL PROVISIONS


CLAUSE 1: DEFINITIONS


Within the framework of the present Agreement, the following


expressions and words shall have the meanings hereunder assigned to


them or unless otherwise expressly agreed by the parties.


- "Project assets": means the project installations, all property


rights, rights, titles or interests already existing or to be created,


movable or immovable, tangible or intangible, belonging to the


investor or to the company, or put at the disposal of the investor or


the company, granted or rent for the benefit of the investor or the


company by the Government or by any other third party, as well as


all the rights granted to the investor and the company in virtue of


the present Agreement or any other contract, including the


contracts of the project regarding the design, funding, construction,


development, management, exploitation of the different elements


of the project, including and without limitation, profits and


incomes that will result from the Project and that will be paid or


payable by or to the investor or the company or on their behalf,


"Activities referred to in this Agreement": generally means the


prospecting activities, development, mining operations, processing,


transportation, exportations, handling, trade, sale of iron ore and


any other activity involved by the project in compliance with the


provisions of the present Agreement,


"Year": refers to a period of three hundred sixty five (365)


consecutive days,


"Calendar year": refers to a period covering 12 consecutive


months beginning January 1 and ending December 31,


•'Authority": refers to the Government and its organs of public


power, including notably any ministerial department, territory


administration, body or person acting on behalf of the government,


exercising legislative, executive, administrative or judicial power


or mandated to exercise such powers,


"C.P.D.M": stands for Centre de Promotion et de Developpement


Miniers of the Ministry of Mines and Geology, or its successors


and all the bodies and instrumentalities, which acts as sole liaison


between the Administration and investors,


"Land Code": refers to the Land Code of the Republic of Guinea


in force at the date of signature,


"Mining Code": refers to the act ratified by Law L/95/036/CTRN


of 30 June 1995 representing the Mining Code of the Republic of


Guinea including any amendment, modification, supplement or


extension hereof as well as any related application decree,


"Employment Law": of the Republic of Guinea in force at the


date of signature,


" Mining Concession": refers to a mining concession granted to


the company by the Government in virtue of the effective Mining


Code and the conditions stipulated by the present agreement related


to the area covered by the Mining Concession,


"Infrastructures contract": refers to the agreement between the


Government and BSGR regarding the design, development and


management of the railway running from Zogota to the Liberian


border.


"Agreement": refers to the present agreement and its appendices


as well as any modification that could be added to it,


"Agreement": refers to the present agreement and its appendices


as well as any modification that could be subsequently added to it.


The Agreement is sometimes referred to as "this agreement" or


"the present agreement".


"D.N.M": stands for National Direction of Mines under the


authority of the Ministry of Mines and Geology, its successors and


all related bodies and instrumentalities,


"Effective Date": refers to the date on which the present


Agreement enters into force,


"Failure": means a breach of any of the provisions of the present


Agreement, of any applicable law, or of any condition set out in the


prospecting permit or in the mining concession located within the


territory covered by this Agreement,


"Pre-operation expenses": means the expenses and costs incurred


for the benefit of or within the territory covered by the Agreement


within the framework of the Prospecting Permit granted to the


Company and of the investments for the development of the


project. These costs include: the expenses incurred within the


territory covered by the Agreement - including those incurred


within the framework of the prospecting activities, pre-feasibility


studies, feasibility studies, delimitation of mineral reserves areas,


mine and infrastructure, the development and construction costs


prior to the extraction, processing, transportation preceding the first


commercial production.


"Development": means the prospecting operations and the works


entailed by the opening of the mine, the mining of iron ore,


processing activities, and also includes the construction and


commissioning of the necessary infrastructures and installations,


such as road construction, communication infrastructures, power


installations as well as water processing equipment and facilities,


"Decree related to the Mining Concession": refers to the Decree


issued by the President of the Republic granting the Company a


Mining Concession,


"World Bank Directives": refers to the protection standards and


environmental policy of the World Bank,


"GOVERNMENT": means the Republic of Guinea represented


by the Minister of Mines and Geology,


"Feasibility Study": means a comprehensive study conducted by


or for the company to determine the feasibility of operating an iron


ore deposit within the territory covered by the Agreement,


"Mining Exploitation": means the operations and works related


to the technical and economic use of Mineral Substances, including


mine development, extraction and processing activities,


"Force Majeure": has the meaning defined in clause 41 of the


present Agreement,





"Guinea": refers to the Republic of Guinea,


"Taxes": means the taxes, fees, stamp duties, patent and license


fees applied in the Republic of Guinea,


"Investor": means BSG Resources (Guinea) Limited, a company





under Guernsey law, whose registered office is in Guernsey,


“Days” : Refers to consecutive calendar days, without adjustments





for official closures, holiday days or any other interruption to the


calendar;











“Current Legislation": Refers to all the valid legislative and


regulatory texts of the Republic of Guinea (laws, Regulations,


Decrees, Orders, Decisions, Instructions, jurisprudence etc);








“Applicable Law”: Refers to the Mining Code and other laws,


regulations and decrees, and any other legislative instrument of


Guinean law, including rules, regulations, resolutions or other


directives or standards that require compliance, published


officially, having the force of law, and in effect at the time of their


application;








“Ore Concentrate”: Refers to raw iron ore that has been processed


to remove impurities to increase the content of the ore;











“Minister”: Refers to the Minister appointed by the President of


Guinea and responsible for the Ministry of Mines and Geology,





responsible for the regulation of activities of Prospecting,


development and operations of mineral substances;








“Processing Operations”: Refers to the operations and works


carried out in order to improve the quality of the extracted ore;


“Mining Operations”: Refers to all the operations and works


carried out as part of Mining Work, including Prospecting


Activities for Mineral Substances;











“Parties” means the Government, Investors and the Company, and


“Party” means the Government or the Investors or the Company;











“Operating Perimeter”: Means that part of the Contractual Area


in which the workable deposits are located;








“Person”: Refers to any person or body, a company or any other


form of corporate entity;











“Commercial Production”: Refers to commercial production as


defined in clause 15.3 of this Agreement;











“Project”: Refers to the activities of working the iron ore Zogota


in the N’Zerekore prefecture, including production, transportation,


shipping and marketing of the Zogota iron ore by the Company, as


well as the rebuilding of the Conakry - Kankan railway, as


described in its different phases in clause 10 of this Agreement;











“Reports”: Refers to every report required under the Mining Code


and this Agreement, as well as every report, study, analysis or


interpretation that is geological, geophysical, technical, financial,


economic and marketing, prepared by or on behalf of the Company


within the Territory Stipulated by the Agreement, concerning


Prospecting, Development and Mining Operations Activities,


which the Company must submit;


“Tax and Customs Regime”: Refers to the tax and customs


regime applicable in accordance with the provisions of this


Agreement, as defined in clause 33;








“Company”: BSG Resources (Guinea) SARL, a Sole


Proprietorship Limited Company under Guinean law, registered in


the Guinean Commercial Registry under No. RCCM/GC-


KAL/013.755A/2006 on November 24, 2006, modified by





declaration No. RCCM/GC-KAL-M2/024.524/2009 on February


20, 2009;








“Affiliated Company”: Refers to any company that controls or is


controlled, whether directly or indirectly, by the investor or a


company that controls or is controlled, whether directly or


indirectly, by a company or entity that itself controls, whether


directly or indirectly, the investor; “Control” refers to the direct or


indirect ownership by a company or any other entity of at least fifty


percent (50%) of the shares providing a majority of the voting


rights at the general meeting of another company or entity, or a


holding providing authority to determine policy and management;








“Direct Subcontractors”: Means the operators, bidders,


entrepreneurs, suppliers and other persons working exclusively on


the Project;











“Project Territory”: refers to everything within the operations


perimeter, the land occupied by infrastructure works and marked


on the maps attached as appendices to this Agreement;


 - “Territory Stipulated by the Agreement”: Refers to the territory


stipulated in this Agreement as described in Appendix B, including





any modification or enlargement granted in accordance with the


provisions of the Mining Code, but excluding any part of such


territory that, if applicable, has been waived by the Company in


accordance with the provisions of this Agreement and the Mining


Code;











- “Third party”: Refers to a Person apart from the Government, the


Company, a Person that is part of the Company, an Affiliated


Company to any Person that is part of the Company, an Operator, a


Subcontractor or any Party to this Agreement;











- “Land User or Occupier”: Refers to any Person that occupies or


uses in law that is in effective or by common law a piece of land


located within the Territory Stipulated by the Mining Agreement


and in project areas outside the Concession territory;











CLAUSE 2: INTERPRETATION








In this Basic Agreement and unless the context dictates otherwise:











The singular includes the plural and the masculine the feminine and


vice versa;











The table of contents and the organization of this Agreement into


sections, clauses, paragraphs is only for the purpose of making


reading easier and in no way affects its interpretation.


 Any reference to the law or to any other legislation includes any





amendment, modification, addition or law that replaces it, subject to


application of the stabilization clause.











In the event of any uncertainty concerning any description of a


perimeter or zone by geographic coordinates, geographic maps or


sketch map, only the geographic coordinates shall be valid;











Any reference to a Party includes the successors of this Party or any


other authorized successor;








Those terms in this Basic Agreement that are not defined shall have the





meaning accorded them in the Mining Code.








CLAUSE 3; APPENDICES








The attached appendices are an integral part of this Agreement.








CLAUSE 4: PURPOSE OF THE AGREEMENT








In accordance with Article 11 of the Mining Code, the purpose of this


Agreement is to define the rights and obligations of the Parties and the


general economic, legal, administrative, financial, fiscal, customs and





excise, mining, environmental, social, transport and shipping conditions


according to which the Parties undertake to carry out the Project for


working the iron deposits at Zogota in the N'Zerekore prefecture.











To this end it consists of:


(i) For BSG Resources to design, finance, develop and operate an iron


ore mine within the area of the Concession; transportation of the


iron ore by railway over Guinean and Liberian territory; shipping


the ore from the port of Buchanan in Liberia.





(ii) For the Government, to grant the facilities and guarantees that it





agrees to subscribe for BSG Resources to facilitate carrying out the


Project (mine, accessories and subsidiaries, and the railway lines).





(iii) For the Parties, to define the consequences of possible non-


compliance with their respective undertakings under the terms of


this Agreement.








CLAUSE 5: APPLICABLE LAW








This Agreement is governed by the Applicable Laws of the Republic of


Guinea.











However, in the event of a contradiction and/or difference between Current


Legislation and the provisions of this Agreement, the latter shall take


precedence.








CLAUSE 6: GENERAL WARRANTIES








Each of the Parties declares and warrants:








That it is duly authorized to enter into this Agreement and to have


obtained all the required authorizations to this end under its


applicable law,


 That it is capable of meeting all the obligations arising therefrom.








CLAUSE 7: UNDERTAKING OF GOOD FAITH


Both of the Parties undertake to comply with the terms and conditions





stated herein and to act in good faith in the fulfillment of its obligations


throughout the period of the Agreement.








CLAUSE 8; MINING CONCESSION


The Mining Concession granted under Order No............shall be





executed in accordance with the provisions of the Mining Code and this


Agreement.





CLAUSE 9: EFFECTIVE DATE - PERIOD








In accordance with the provisions of the Mining Code, the effective date of


this Convention shall be its approval by order and shall remain in force


throughout the validity period of the Concession.








CLAUSE 10: DESCRIPTION OF PROJECT








The project involves:








- The working, transportation, exporting and marketing of the iron ore;


• The rebuilding of a railway line Conakry - Kankan;








10.1 Phase I: Zogota


The Company shall provide the facilities and equipment required to work,


transport, store and ship an amount of thirty (30) million tons of iron ore


annually for fifteen (15) years from the Date of First Commercial Production.











The Company shall provide:


a) An open cast iron ore mine at Zogota in the prefecture of N'Zerekore;


b) An industrial area at Zogota that shall include:








• Storage and loading areas,


• Workshops,


• A railway line in Guinea 102 km long,


• A railway depot,


• Facilities and equipment,


• Electrical power station with output of.....MW,


• Offices,


• A water treatment station,


• A residential area;


• A hospital for employees.








c) A port area in Buchanan, Republic of Liberia, which shall include:


• Storage and loading areas,


• Workshops,


• Offices,


• A residential area.





d) The Conakry - Kankan railroad.





10.2 Phase II: Blocks 1 and 2 Simandou K6rouane











At this stage the Company undertakes to create the following elements:


 - Two iron ore mines,


- Industrial facilities and equipment,


- Suitable railway infrastructure required for removing the iron ore.


- A residential area at Kerouane,


- Extension of equipment and installations to the port of Buchanan.








For Phase II the Company shall present the Government with a feasibility


study within 24 months from date of signature of this Agreement.








The conclusions and terms of this study will facilitate defining the terms for


the grant of the Mining Concession between the Parties, the terms of


operation and shipping from these two Blocks.











CLAUSE 11; ZOGOTA INVESTMENTS











The Company undertakes to invest as part of this Agreement the sum of USD


2,542,000,000 to carry out the project, broken down as follows:











Mines USD 243,000,000


Industrial facilities and equipment, USD 496,000,000





Residential areas and hospital USD 71,000,000


Railway and rolling stock USD 845,000,000





Port USD 463,000,000





Contingency (20%) USD 424,000,000








CLAUSE 12: CONAKRY - KAN KAN - KEROUANE RAILWAY


The Company undertakes to rebuild this railway and will submit the


feasibility study to the Government for approval. The cost of this


reconstruction is budgeted at USD 1 billion (1,000,000,000) plus 20% for


contingencies.











The Company undertakes to build 50% of this railway during the first phase


of the project.








The Government undertakes to grant a full exemption from duties, taxes


and fees on all the goods, materials, equipment and services required for


creating this infrastructure.
































SECTION II: PROJECT DEVELOPMENT





CLAUSE 13: PROSPECTING WORKS











In accordance with the provisions of Article 41 of the Mining Code, the


Company can carry out prospecting works within the Concession Perimeter.








All scientific research, studies, interpretations, logs of core samples or


cuttings carried out as part of the prospecting works shall be carried out


under the Company's direct supervision (or of a Subcontractor), by a


u


t


jj


| i geologist, geophysicist, geochemist, engineer or technician with the


required skills.


! i


i J


j j In the event that the Company demonstrates economically exploitable





LJ mineral substances other than iron ore, it must inform the Minister for


I Mines. In this event the Company shall have the right of first refusal and


L operating terms shall be defined in another agreement.


CLAUSE 14: DEVELOPMENT WORKS





y


14.1 The Company shall carry out all the component parts of the project


l • in accordance with a time chart that is appended to the Agreement.





j 14.2 Required conditions for the development works


i :


LI The development works shall commence following completion of the


following actions:





a) Provision by the Government to the Company of the required


authorizations to build a railway line in order to facilitate the


removal of the Mining Produce;


b) Approval by the Minister for the Environment of the survey and


plan for environmental and social management as required by


Article 26.1 below;


■ i


i


i I c) Conclusion of the community development agreement as required in





Lj clause 25 below, approved by the competent authorities;


I i d) Acquisition, compensation and/or settlement of all land rights and/or


i i


i j


claims arising from third parties in respect of the mining Concession


■ j and of expropriations for the railway line in the Republic of Guinea;


i i





i








l


e) Notification to the Minister of Mines informing of the date of start up


of the project's development activities.





CLAUSE 15: OPERATIONS





15.1 Mining operations








The Company undertakes to carry out its mining operations in accordance


with accepted engineering practice, under safe conditions, and in


compliance with international standards and practices that are usual in the


mining industry.








15.2 Start of Operations


The Company undertakes to start mining operations at the latest by May 31,


2012.








In the event that the Company is unable to comply with the deadline of May


31,2012 referred to above, it must inform the Government and provide the


necessary justifications. The Government undertakes to grant it, subject to a


duly supported request, an extension of the said deadline for a maximum


period of six (6) months.








In the case of failure to start the operations of the Mining Produce within


the aforementioned period that has possibly been extended, the


Government may revoke the Mining Concession in accordance with the


provisions of the Mining Code.


The Company must inform the Minister of its start up program for


operations, transportation and shipping of the iron ore within a minimum


period of thirty (30) days.








15.3 First Commercial Production


The start up of commercial iron ore production shall not take effect until a


threshold of stocks at the mine and the port allow for shipping 25,000 tons


per day for a consecutive period of 30 days.











If the Company does not achieve this production rate, but it exports


successively a quantity of more than 20,000 tons per day for over 60 days,


this production shall be deemed as being commercial.





15.4 Works required during the operations period





15.4.1 Works schedule








The Company must submit to the Minister for informational purposes a


works program, including:


• Forecast quantities from operations to transportation,





• Operational methods,


• Work accident statistics,


• System (standard) adopted for safety and hygiene,


• The Monitoring program for the environmental management plan.





15.4.2 Notice of changes








The Company must inform the Minister as soon as possible of any major


change in its Mining Operations (change in operational method, change to


the production program, and of safety standards).


15.4.3 Cessation of operations








If the Company is unable to maintain the Commercial Production of the


Mining Produce for a period of eighteen (18) consecutive months, the


Company will be deemed to not have met the requirements of the minimum


works program and the Government may revoke the Concession in


accordance with the provisions of the Mining Code.








15.4.4 Extension (Expansion or change to facilities)





The Company shall inform the Minister for Mines of any program for


extension and expansion of its facilities in order to increase production.





CLAUSE 16: INFRASTRUCTURE








16.1 Railways








16.1.1 Zogota - Sanniquellie Mining Railway








It is expressly agreed that the Government shall be the owner of the


railway irrespective of its method of financing. The railway line of 102 km


that will be constructed in Guinean territory outside of the Concession


Perimeter shall be subject to a usage fee.








The Company shall carry out the surveys, finance and construct the railway


line and provide for its operation and maintenance. The Company shall


allocate the agreed fees for use of the railway as a repayment for the


investment it will have made.


I I














After complete repayment of the loans, the Company shall continue to


provide maintenance of the railway and shall pay the Government fees for


use of the railway. These fees shall be fixed according to the same principles





as those used in similar infrastructure used under the same conditions in the


Republic of Guinea.








The Government guarantees the Company right of access and of priority use


of the railway line that will be built on Guinean territory from Zogota to the


li


Liberian border. Use of this railway by a third party shall be with the


agreement of the Company and may under no circumstances interfere with


the Company's activities.





u





The Government warrants that it will grant the Company all the required


authorizations to occupy the lands as part of building the railway.








The terms for design, financing, construction, operation and maintenance of


the railway shall be specified by agreement between the Government and


U the Company.





\ l


I I





; I 16.1.2 Railway in Liberia


i i








BSG Resources shall provide the Guinean Government with the information,


terms and warranties resulting from the agreements with the Liberian


Government in respect of the renovation, use and maintenance of the


railway line on Liberian territory.











16.1.3 State support


As part of bilateral cooperation and regional agreements, in particular the


Mano River Union, the Government undertakes to obtain from the Liberian


Government an agreement on the use of the railway line in Liberian


territory, of the port area and the residential area in Buchanan.








16.1.4 Access to existing public infrastructure








The State undertakes that Company shall have access and will be able to use


the roads, bridges, airfields, installations, transport-related installations, as


well as pipes for water, electricity and communications, set up or organized


by any body or entity owned or controlled by the Company, with the


exception of the armed forces, without having to pay fees greater than


those paid by companies with identical activities to those of the Company.








The Company is obliged to make suitable road infrastructure (with surfacing)


in the project development area to avoid pollution that is dangerous for the


health of the population.











16.2 Development and Maintenance of the Infrastructure


16.2.1 Subject to compliance with the Applicable Law, the Company can


build, use, improve and maintain any infrastructure, including roads, bridges,


airfields, port or rail installations, and transport-related installations, as well


as electrical power stations, telephone and other communications lines,


pipelines, water pipes or other networks or installations necessary for the


Mining Operations.








At the Company's request, the Government and the Company must analyse


such infrastructure or other requirements related to the Mining Operations,


including but not limited to energy and transportation requirements with a


view to entering into a fair agreement for the sharing of costs and profits


from such infrastructure.











Notwithstanding the foregoing, no construction may take place in the


following places:








a) Any territory, apart from that of the Mining Concession, belonging


to the Government, without the agreement of the Minister for


Mines, such agreement arising from checking with the competent


authorities;


b) Any area that is part of a Mining Concession or of a prospecting


permit not covered by this Agreement or other activities without


advising the Minister for Mines in wiring in advance, who will take


the necessary measures with the authorities in question and the


holders of mining rights to facilitate carrying out the planned


infrastructure.








16.2.2 Construction within the Concession








Subject to the provisions of the Mining Code in respect of closed, protected


or out of bounds areas and subject to the terms stated herein, the Company


holds the following rights in addition to those granted it by the Concession


and this Agreement:








a) Exclusive right of entry and occupation of the Concession,


following termination of the rights and compensation of the Land


Users or Occupiers;





b) Subject to the rights of every third party, Land Users and/or





Occupiers and to the provisions of the Applicable Law, the right to


use and construct on the Concession roads, railways, pipes,


pipelines, sewers, drains, electrical transport lines or other similar


 installations required for the activities that are the subject of the


Agreement.








To this end no prior approval is required by the Company in order to build


roads, bridges, railway lines, pits, sewers, pipelines, electrical lines or any


other installations required for the Mining Operations within the area of its


Concession.








The Minister may require changes in order to limit or eliminate any danger


to the health, safety or well being of the employees or of the public, or any


negative effect on the environment that results from constructing


infrastructure as a result of this paragraph.








16.2.3 Construction outside the Perimeter of the Mining Concession


The Government warrants the Company that it can create infrastructure





outside of the Perimeter of the Mining Concession. To this end the


Government grants it the suitable area to carry out the said infrastructure


and industrial installations.








16.4 Company's Priority of Use


The Company shall have priority for use of any infrastructure that it will have


built.








The Company may limit or prohibit access to roads located within the


Concession, if such access might pose a danger for users or staff, for reasons


of interference with or obstruction of the Mining Operations.


16.5 Third party rights to grazing and cultivation








In the exercise of the rights awarded it under this Agreement, the Company


must take account of and minimize the impact on the rights of Third Parties,


Land Users and/or Occupiers that exist at the Effective Date of the


Agreement (fishing, grazing, word cutting and agriculture rights or rights of


way).








The Company can grant Land Users and/or Occupiers within the Concession


grazing rights or the possibility of cultivation, subject to the pursuit of these


occupations not interfering with the Mining Operations.











16.6 Compensation for Land Users or Occupiers








If the Company deems the presence of the Land Users or Occupiers to be


incompatible with its Mining Operations in the Concession, it must


compensate these Land Users or Occupiers present prior to actual


commencement of the construction works and/or relocate them.











In such a case the Company must cooperate with the Government's


specialist departments in the choice of new localities for relocation and


setting the compensation to pay these Land Users or Occupiers, for any


relocation or loss of usage (land title, home, crops).








The aforementioned compensation must match the amount required for


relocating and resettling the said Land Users or Occupiers prior to the actual


commencement of works, in a place and under conditions at least similar to


those that prevailed until prior to the upheaval. Compensation must include


fair market value for all loss of crops, moving costs, costs related to creating


new rights of way, access and use, and any other expense arising from such


relocation.











If the Land Users or Occupiers there prior to the actual commencement of


the works accept relocation to a new place instead of, whether in whole or


in part, financial compensation, the Company in coordination with the


Government's specialist departments must carry out their relocation.











As part of the relocation the Company must rebuild on the new site


improved homes that take account of the life style of the rural occupants.








In the case of land users, the Company must prepare new areas for these


users to improve their activities.








The Company shall present the Government the map of areas that will


be affected by the project activities prior to initiating removal and


relocation surveys. The conclusions of this survey as approved by the


Government shall be publicized widely among the authorities and


populations in question.





The Government and Company shall set up a management structure for


this operation that will act to monitor the sustainable development plan


that will be drawn up.





16.7 Cooperation in the event of disputes








The Company can take advantage of all the rights provided for in this


Agreement. The Minister undertakes to cooperate with the Company in the


event of difficulties or the interference of third parties, in order to settle any


dispute.


SECTION III: MARKETING








CLAUSE 17: SALE OF MINING PRODUCE





17.1 Arm's length prices





The Company undertakes to sell the Mining Products from the Concession





under arm's length conditions.





17.2 Government's access to the Mining Produce


At the latest by the end of the first half of a Calendar Year, the Government





may request the Company to enter into a purchase contract for the


following calendar year for a percentage of the total production of Mining


Produce from the Concession.











The Company must examine this request and offer a contract at the same


market financial terms for quantities and periods similar to those in supply


contracts it would have entered into with its clients.











The Government expressly agrees that the Company is under no obligation


to sell it Mining Produce if at the time of receipt of the Government's


request, it is bound by long-term supply contracts that do not allow it satisfy


such a request.





17.3 Notice of Sale to an Affiliated Company








If the Mining Produce is sold to an Affiliated Company, the Company must


within fifteen (15) Days following such sale inform the Minister and provide


him with all the information, data, sales contract and receipts used to


calculated the prices, discounts and commissions involved in such a sale. The


Government shall treat this information as confidential.








17.4 Verification of Mining Produce sales


The Minister is authorized to inspect and verify all sales transactions of





Mining Produce, including their terms and the conditions for fulfilling them.








If at the end of these inspections and/or verifications, the Minister considers


that the sales transactions of Mining Produce do not reflect their fair market


value, he will notify the Company of his opinion and provide it with all


supporting documents.











Within fifteen (15) Days following receipt of such a notice, the Company


must submit documentation proving that the amounts paid for sales or


other disposals of the Mining Produce were their fair market value. The


Government shall treat this information as confidential.











Within a period of thirty (30) Days from receipt of the notice and unless


there has been an agreement between the Parties within this time the


Parties must meet in order to try to settle the disagreement in respect of


the sales of Mining Produce, and to agree on the fair market value for the


period in question.








If the Parties cannot agree within ten (10) days from their meeting, one of


the Parties may refer the dispute to an independent expert in order to


determine the fair market value.


The onus of proof is on the Company, which must show that the value


received was the fair market value during the period in question.











At the end of this process and if applicable the Company shall pay forthwith


the taxes and duties that had thus been evaded.








CLAUSE 18: MAINTENANCE AND INSPECTION








18.1 Maintenance of equipment and of the weighing system








The Company must maintain in good working condition all the equipment


and other assets used in the Mining Operations, including the weighing


systems.











The Company must have a weighing system that complies with international


standards accepted in the mining industry.








18.2 Method to determine the quantities of Mining Produce





The method for weighing Mining Produce is subject to the Minister's





approval.








Such approval should be forthcoming within a period of thirty (30) days from


date of receipt of the request submitted by the Company; it is understood


that no reply within this time constitutes acceptance by the Government of


the method selected by the Company.


The Minister may from time to time and with reasonable prior notice test or


examine the weighing system.








The Company may not modify the weighing method it uses in any way or


change the instruments, equipment or other facilities used for this purpose


without the prior, written approval of the Minister.





18.3 Faults in the weighing instruments








Any fault or other problem with the weighing instrument or method for the


Mining Produce must be corrected forthwith.


Excepting notification to the contrary by the Minister, any fault or problem


with the instrument or method is presumed to have taken place for the last


three (3) months or since the last test or examination of the equipment,


which ever is the longer.








Any payment to the Government resulting from the weighing of Mining


Produce must be adjusted to take into account the fault or problem for the


presumed period.








18.4 Access and inspection by the Government


Duly authorized representatives of the Government holding a movement





order issued or stamped by the Minister for Mines can during the


Company's normal working hours enter the locations in order to inspect,


examine, check or carry out an audit of all the assets, accounts, registers,


equipment, instruments, data concerning mineral substances and other


information related to the Mining Operations in Guinea and Liberia.


18.5 Inspection costs








Inspection and travel expenses shall be considered an operating expense.








In order to ensure the effective implementation of the rights of inspection,


observation, verification and auditing by the Government, the Company


must provide the Government's duly authorized representatives, free of


charge, all reasonable assistance, access to its employees and


representatives, and access to its facilities in the way usually available within


the Company.


CLAUSE 19: INFORMATION AND REPORTS


19.1 Maintaining files and reports








Throughout the entire period of this Agreement and in accordance with the


Mining Code, the Company must prepare and maintain, in French,


comprehensive files and reports that are transparent, precise and up to date


concerning the activities covered by the Agreement.








Activity reports required by the Mining Code shall be prepared in five (5)


copies and submitted to the CPDM, which will distribute them to the


technical departments.








Files, reports and/or data concerning ores, with the exception of drilling


samples, must be maintained in electronic format in the Republic of Guinea.


In addition the Company must submit its reports in the required form in


order to satisfy the Government in the application of the Transparency


Initiative of the Mining Industries (ITIE).








19.2 Samples to be retained





In accordance with the Mining Code and its rules, orders and regulations,


the Company must maintain fractional samples, or as is the case, drilling


samples, Ore Concentrates, monthly composites from the drilling, and


samples of ore tailings.





19.3 Export of samples


Export of samples must be carried out in accordance with the provisions of


the Mining Code and its rules, orders and regulations.





19.4 Report on annual expenses


The Company must submit to the competent authorities not later than the


30 April each calendar year all its financial statements.








19.5. Annual report on the community development agreement





Not later than the 30 April each calendar year the Company shall send the


competent authorities am annual report on execution of the community


development agreement, which must contain the following information:








a) A qualitative assessment whether or not the targets of the


agreement have been achieved;


 b) If applicable, the proof and approaches that will be taken to


achieve the targets in the future;


c) A detailed list of every amount spent by the Company for the local


community development agreement;


d) Any recurrent problem with the local community; and


e) Progress achieved in respect of closing down the mine.








SECTION IV : COMPANY'S UNDERTAKINGS











CLAUSE 21; COMPANY'S OBLIGATIONS AND WARRANTIES








21.1 Declarations and Warranties








The Company declares and warrants to the Government that at date of


signature of this Agreement and throughout its duration:








a) Any information provided to the Government by the Company to


conclude this Agreement contains no false declaration and/or any


intentional omission.


b) The Company is a body duly constituted as a company under





Guinean law in accordance with the uniform document


concerning the rights of commercial companies and the Economic


Interest Group (GIE) dated April 17,1997, adopted as part of the


OHADA treaty and declares that it is duly organized and exists


subject to the laws and regulations in force in the Republic of


Guinea.





c) The Company has the powers and authority required to own and





operate its assets at the sites where they are currently held or


operated, and to carry out its activities at the places where they


are being carried out. There is no current action, claim, enquiry,


arbitration procedure or other involving the Company or any


 order, decision, injunction, decree or judgment against the


Company.








d) The Company has or has access to, and shall make use of at the


right time, all the necessary financial, technical, managerial and


technology skills to meet its obligations and targets as stipulated


in this Agreement, subject to clause 43 of this Agreement.





e) The Company has the necessary powers and authority to sign this





Agreement and to meet the obligations arising therefrom.








21.2 Company's obligations





21.2.1 Financing








21.2.1.1 Fund raising








The Investor and the Company undertake to provide the Government with a


financing plan for the project within three (3) months of the agreement on


the terms of financing.








21.2.1.2 Possible changes to facilitate the financing








In order that the Company should obtain the financing necessary for the


operations covered by this Agreement, the Government undertakes to


consider favorably any request for an amendment, interpretation or


application of the terms of the Agreement that could be made.








21.2.1.3 Reporting Requirement


Any loan or other financing transaction of the Mining Operations from an


Affiliated Company must be declared to the Minister, and all documentation


referring thereto must be submitted within sixty (60) Days following the


effective date of such commitments.








21.2.2 Construction of the Mine








The Company undertakes to construct in accordance with the Time


Chart attached in the Appendix an open cast mine together with the


related infrastructure and equipment required to extract the Mining


Produce from the Concession, with an initial production capacity of


thirty (30) million tons per annum at the latest 24 months after the


Effective Date of this Agreement and the Concession.





21.2.3 Construction of a Factory for Processing Magnetite Ores





At the latest at the end of the fifth Year following the Date of First





Commercial Production of Mining Produce, the Company shall present the


Government with a feasibility study for the construction of a factory for


processing magnetite ores.








On the assumption that the conclusions of the feasibility study will be


positive, the Parties will come together in order to set the terms for carrying


out this investment.











In the event that study submitted by the Company is negative, the


Government reserves the right to award a permit to a third party for


working and processing the magnetite deposits.











21.2.4 Construction of a Steel Mill


Ten (10) years after the date of the first commercial production the Parties


shall come together to decide on the construction if a steel mill in the


Republic of Guinea.





In the event that the Company does not commit to build a steel mill, the


Government can find a strategic partner to do so. Under these conditions,


the Company shall negotiate with the Government and with its partner a


contract for the supply of iron ore at market conditions.




















CLAUSE 22; COMPANY'S RIGHTS


22.1 Company's Rights





Subject to the specific provisions in this Agreement and/or the Mining


Code, the Company shall enjoy the rights conferred on it under this


Agreement, the Mining Code and the Concession.


Without derogating from the generality of the foregoing, these rights


include inter alia:


a) The exclusive right to carry out the Mining Operations;


b) The right to freely arrange its assets and to organize the business





as it sees fit;


c) Freedom to recruit and dismiss, in accordance with Current


Legislation in the Republic of Guinea;


 d) Free circulation in the Republic of Guinea of its staff, assets and


products;


e) Unrestricted importation of goods and services, including





insurance and the funds required for the Mining Operations;


f) Freedom to export and sell the Mining Produce from the


Concession on the international and/or domestic market;


g) The right to transport or have transported the Mining Produce to


a storage, processing or loading location;


h) The right to benefit from any agreement entered into between


the Government and other Governments to facilitate the


transport of the Mining Produce over the territory of these


Governments;


i) Freedom to set up in Guinea processing plants and iron ore


processing;





j) The right to acquire, use and operate any means of


communication, any type of aircraft or other means of transport


as well as the auxiliary facilities or equipment required for the


Mining Operations;


k) Freedom to carry out large-scale sampling and attempts at





processing the Mining Produce from the Concession in order to


determine the mining potential;


l) Freedom to take, take out and export reasonable quantities,





specimens or samples as part of the Prospecting Activities.





CLAUSE 23: EMPLOYMENT OF STAFF





23.1 Compliance with the work standards in the Republic of Guinea


As part of the employment of staff the Company must comply with the


provisions of the Labor Code and the Social Security Code in force in the


Republic of Guinea.


In addition and in accordance with the practices in the international


mining industry, the Company shall set up an effective system of


prevention and medical treatment of work accidents and occupational


health hazards.


The Company shall take out an adequate insurance policy to cover the


cost of treatment for occupational health hazards and work accidents.


23.2 Employment of Guinean Staff


From the start up of the Mining Operations, the Company must:


a) Employ only Guinean staff for works not requiring qualifications;


b) Give priority to the employment of qualified Guinean staff for the


requirements of the Mining Operations;


c) Contribute to the training of this staff with a view to providing


access to all employment as a qualified worker, supervisor,


manager and Director.


Employment of Guinean Staff in Liberia


As part of bilateral cooperation and regional agreements, in particular


the Mano River Union, the Government undertakes to set up with the


Liberian Government agreements defining the terms of residence and


work of Guineans in Liberia as part of this project. These documents will


be appended to this Agreement.





23.4 Management Careers for Guineans


At the end of each Year the Company shall draw up an agreement with


the Minister a recruitment plan for Guinean staff for the coming years in


order to arrive at an increasingly larger participation by Guinean staff in


the Mining Operations in Guinea and Liberia, it being understood that


five (5) years following the Date of First Commercial Production,


Guinean employees must represent 90% of the Company's workforce.


The Company undertakes to set up a career plan for employees with


positions of responsibility.


23.5 Employment of Expatriate Staff


The Company may employ a reasonable number of expatriate workers


who have a specialty, skills or special knowledge.


At the Company's request and after having submitted the required


supporting documents, the Government undertakes to grant expatriate


staff the required authorizations, including entry visas and residency


rights, work permits and any other permit required by law.


CLAUSE 24; SUBCONTRACTING








24.1 Subcontracting


The Company may subcontract the carrying out of all or part of the


Mining Operations, but subject to any provisions to the contrary in this


Agreement, shall remain responsible to the Government for the


execution of its obligations under the terms of the said Agreement and


Concession.


It is expressly agreed that to carry out subcontracted Mining Operations,


the said direct subcontractors shall benefit in particular from the


provisions concerning taxes and customs and excise in the Agreement


that are applicable to Subcontractors of the Company.


Not later than thirty (30) days from the signature of any subcontracting


contract the Company shall supply the Government with a certificate


including the following information:


a) Name and address of the subcontractor,


b) Purpose of the contract,


c) Start date and estimated period of contract,


d) Estimated contractual revenues.


24.2 Payment to Affiliated Companies


Any payment to an Affiliated Company for the execution of services or


the purchase of merchandise related to or regarding the Mining


Operations, must be documented, reasonable and competitive in terms


of price as though it was carried out without any form of dependency.


The amount invoiced to the Company must not be higher than that


charged by third parties for similar services and goods.


24.3 Preference for Guinean goods and services


The Company and the companies working on its behalf must grant


priority to Guinean companies for all contracts especially for purchases,


construction, supply or provision of services, including contracts for


shipping, insurance and transportation of merchandise, on condition


that they offer at least equivalent prices, quantities, quality and delivery


times.


For any contract for a value of more than USD one hundred thousand


(100,000), the Company shall select its subcontractors by tender or by


any other method used in the international mining industry.








CLAUSE 25: FREIGHT AND MARITIME TRANSPORT








The Company undertakes to reserve to the Government of the Republic


of Guinea the right to load the exported tonnage, up to a maximum


proportion of 50% on boats flying the Guinean flag or similar and/or


chartered by the Guinean Government on the international freight


market, on express condition that such ships comply with suitable


seaworthiness standards and that the prices are competitive on the


international maritime freight market.





CLAUSE 26; AGREEMENT ON DEVELOPMENT OF LOCAL


COMMUNITIES





In order to promote the economic and social development of local


communities, the Company undertakes to enter into Development


Agreements as part of the local development plans (PDL).


26.1 Provisions of the local community development agreement


The agreement on the development of local communities has been


negotiated between the Company and the official representatives of the


local communities, and must include at least the following provisions:


1. The Persons representing the various parties for the purpose of the


local community development agreement;





2. The obligations of the Company towards the local communities,


including in particular:


 a) The economic or social undertakings that must be made in respect


of sustainable development of the local communities;





b) The setting up of activities, aid and resources to create a self-


sufficient community by the promotion and diversification of


revenue generating activities;





c) The organization of periodic consultancy sessions with the local





community in respect of drawing up a plan for the closure of the


Mining Operations, in order to prepare that community for the


prospective closure of the mine;





3. The obligations of the local communities towards the Company;








4. The terms of the local community development agreement must be


revised every five (5) Calendar Years;








5. The framework for monitoring meetings and procedures between the


Company and the local communities and the means planned to get the


local communities to take part in planning, implementation, management


and monitoring activities; and





6. A declaration whereby the Company and the local community


undertake to solve any dispute concerning the local community


development agreement through their respective representatives, and


failing an agreement, the right to refer the dispute to the competent


authorities, whose decision shall be final.





26.2 Obligation to respect local traditions








The Company must pay attention to the rights, customs and traditions of


the local community when drawing up the local community


development agreement.








26.3 Approval of the Local Community Development Agreement


 I











I The local community development agreement, after having been duly


I


signed and approved by the representatives of the Company and the


local communities, shall be submitted to the Ministers for Mines and for


Local Communities for approval.


I 1


l ; The Ministers must approve the said agreement within thirty (30)





working Days following its receipt at their offices, stating that it complies


with the requirements in the foregoing paragraphs.


i I


( I Any refusal to approve by the Ministers must be sent in writing to the





representatives of the Company and of the local communities stating the


specific reasons and the way that should be considered to correct the


( situation.


1


The Company cannot undertake the Development of the Concession





before having received the prior approval for the local community


i I development agreement.


j I


CLAUSE 27: PROTECTION OF THE ENVIRONMENT AND


I I


REHABILITATION OF THE MINING SITES





Throughout the entire validity period of the Agreement, the Company


undertakes to conduct the Mining Operations while taking care to


minimize, manage and limit the impact on the environment.


27.1 Environmental impact study


I |


I - In accordance with the provisions of clause 13 of this Agreement,


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commencement of development works is subordinated to the approval


of the Minister for the Environment of the environmental impact study


< j and an environmental management plan prepared by the Company.














i


i


The Company must submit the study and the plan, in a single or two


separate documents, to the Minister for the Environment in five (5)


copies.


The study and the plan, using quantifiable criteria, must contain the data


and analysis reflecting best international practice as recognized in the


mining sector, and must include the following information:





a) Identification of probable major human and natural


environmental impacts, including pollution;


b) General targets in respect of each major environmental impact;


c) Detailed targets in respect of each major environmental impact


and the means to reduce such an impact;


d) Means to achieve the general and detailed environmental targets;


e) Implementation schedule;


f) Forecast budget and timetable to achieve the environmental


targets;


g) Ongoing rehabilitation program for the Concession and estimated


annual costs;


h) Final program for gradual rehabilitation for the Concession and


estimated costs;


i) Estimated costs for the final program for gradual rehabilitation,


taking into account each Year of operations of the Concession, in


the event that the final rehabilitation has to take place during a


Year in which operating activities cease.


j) As required, this plan shall be updated by the Company and sent


to the Government as soon as possible.


27.2 Cultural Heritage





In the event of the discovery of an archeological site during the Mining


Operations, the Company shall update the elements of the national


cultural heritage, both fixed and movable. It undertakes not to move or


destroy this site or parts thereof and to inform the Government


immediately.


27.3 Emergency measures





In the event of an emergency or exceptional circumstances, the


Company is obliged to take the necessary immediate and appropriate


measures.


For the purposes of this Agreement "an emergency" or "exceptional


circumstances" are considered to be any situation or event, actual or


imminent, whether resulting from a natural occurrence or caused by


man, that might involve the death, wounds or bodily harm to any


person, damages to property or to natural resources, if immediate


action is not taken.


27.4 Company's responsibility in the event of a claim


The Company must keep the Government informed of any claim or


justified debt related to the activities covered by this Agreement, as well


as any legal action or dispute arising from accidents or bodily harm or


damage to goods caused or occurring with the framework of the Mining


Operations. The Company undertakes to compensate the Government


for any expense related to such a claim, debt, action or dispute.




















CLAUSE 28: CLOSING DOWN AND REHABILITATION








28.1 Obligations during the close down phase and rehabilitation


The Company must comply with its obligations for closing down and


rehabilitation of the mining sites, as stipulated in the Mining Code, the


Environmental Code and this Agreement.


28.2 Rehabilitation of the area defined in the prospecting permit





The Company is obliged to reinstate the sites and locations affected by


its prospecting works and to put the affected sites and locations into a


state reasonably similar to how they were prior to carrying out of the


said works.


28.3 Rehabilitation of the Concession


Prior to expiry of the Concession the Company is obliged to reinstate


the sites and locations affected in accordance with the environmental


and social management plan stipulated in this clause.


28.4 Closing of the mine


28.4.1 Notice of closure


The Company must inform the Minister of its intention to close down


the mine located at the Concession at least six (6) months before the


scheduled closure date.


28.4.2 Closure plan


In cooperation with the Ministry of Mines and the local community, the


Company must draw up a closure plan for the Mining Operations that


prepares the community for a prospective cessation of activities. This


plan must supplement the local community development agreement.


28.4.3 Orderly close down





The Company shall take all steps to handle the close down of the mine


gradually, in an orderly and planned fashion in order to prepare the


community for prospective cessation of activities.


28.4.4 Arrangements for movable and fixed assets


Subject to the Government exercising its option available to it in


accordance with clause 56 of the Mining Code, the Company must


dispose of its entire moveable and fixed assets at the closure of the


mine, it being understand that moveable and fixed assets not removed


must be demolished and the site restored.


28.4.5 Obligation to render the site safe


Prior to expiry of the Concession, the Company must render safe the site


affected by its activities under this Agreement in order to ensure the


safety of the public and of future Land Users or Occupiers.


To this end, the Company must:


a) Permanently seal all the mine shafts including access and


ventilation shafts, if applicable;


b) Remove all electricity transport lines intended for the sole usage


of the Company;


c) Level all steep slopes, shafts on a slope and precipices created by


the Mining Operations in order to render them safe, and when


necessary to close off precipices to avoid any fall, and put up


warning signs as necessary;


 d) Render safe and reinforce all dams, concentrations of residue and


cuttings to avoid any collapse.





28.5 First demand bank guarantee


In order to guarantee its obligation of rehabilitation of the Concession


site, the Company must provide the Government with a first demand


bank guarantee, presented by a bank with sufficient financial resources.


The level of this guarantee shall be:


Initially set in relation to the environmental management plan


stipulated in clause 26 of this Agreement,


Then updated annually in line with the said environmental


management plan and, if applicable, with the rehabilitation works


carried out by the Company.


This guarantee can only be called upon at the expiry of the Concession.


SECTION V: WARRANTIES GIVEN BY THE


GOVERNMENT


CLAUSE 29: DECLARATIONS AND WARRANTIES OF THE


GOVERNMENT





The Government declares and warrants to the Company that at date of


signature of this Agreement:








a) The Minister acts as the duly authorized representative of the


Government and has the necessary powers and authority to sign


this Agreement;


 b) There are no mining rights, no request for mining rights, claim,


option agreement, lease, license, operating contract or any other


restriction that could affect the Concession governed by this


Agreement or the Company's rights as stipulated herein. The


Government is unaware if the existence of any notice, objection


or other pending legal action or dispute in respect of the


Concession in any manner whatsoever. The Concession governed


by this Agreement is free of any closed zone as defined in the


Mining Code.





c) Prior to the signature of this Agreement, the Government satisfied


itself that the Company has all the qualifications necessary, as


defined in the Mining Code, and that there is nothing to prevent


the granting of a Concession and the signature of this Agreement.


d) Signature by the Government on this Agreement and the


execution of the obligations arising, are not in violation of any law,


regulation, decree or order of any national or local authority or of


any ruling handed down by a Guinean court.


e) The Government shall ensure that the administrative authorities





provide the Company with all assistance necessary and provide it


with all the permits necessary for the Mining Operations as


stipulated in the applicable Guinean law.


f) The Company shall be entitled to proceed, with the cooperation of





the Authorities, to any registrations that might be deemed


necessary to better protect its rights it has been granted by the


Government under this Agreement;








The Government undertakes to facilitate all administrative steps and


procedures by all appropriate means in accordance with the


Applicable Law and to provide all reasonable assistance that will be


needed for carrying out the Project, and in particular:








(i) For all works concerning construction, development, operations and


enhancement of the iron ore that the Company might undertake as


part of this Agreement;


1_1


(ii) For the design, development, financing, construction, ownership,


operation and maintenance of the Project Installations and access to





the Existing Infrastructure and their use under this Agreement;


I '


! f








(iii) For the execution of its obligations that appear in this Agreement,


including but not limited to, by transferring to the Company in


accordance with applicable legislation all land reasonably required by


the Investor for the design, development, financing, construction,


ownership, operation and maintenance of the Project Installations.








CLAUSE 30: FOREIGN EXCHANGE RULES-TRANSFER


GUARANTEE








The Government warrants the Company that it can freely:


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a) Open and operate in Guinea and abroad any bank accounts, in any


currencies, it being understood that the Company has one or


several bank accounts in Guinea duly provided with funds to make


local payments (salaries, local suppliers etc),


b) Take out loans abroad in any currency,








c) Transfer abroad funds, dividends and income from capital


invested, as well as income from the liquidation or sale of their


credits or corporate assets.








In return the Company undertakes to provide the Government:


Within fifteen (15) days of opening them, the details of each bank





account opened abroad,


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■ i - Within fifteen (15) days of each quarter, a copy of the bank


; I


statements for the previous quarter of the bank accounts opened


abroad.





In addition, the Government warrants to foreign staff employed by the


; l


Company and living in the Republic of Guinea free conversion and free


transfer to their countries of origin, savings made on the salaries or


Li other items of remuneration they were due, subject to all taxes having


been paid in accordance with the provisions of Current Legislation and


this Agreement.





CLAUSE 31; EXPROPRIATION -NATIONALIZATION





In the event of the expropriation or nationalization of the Company or


any part of its assets, the Government shall pay fair and equitable


compensation based on the market value of the Mining Operations at


i i the date of the expropriation or nationalization.


lJ CLAUSE 32: STABILIZATION PERIOD





The Government warrants the Company from the date of grant of the





u Concession and throughout its full duration the stabilization of Current


Legislation and of all provisions, particularly fiscal and concerning


customs and excise, stipulated in this Agreement.


Accordingly, all changes to Current legislation, particularly fiscal and/or


Li concerning customs and excise, after the date of grant of the Concession


that would as a result increase, whether directly or indirectly, the


Company's tax and/or customs and excise charges would not be


u applicable for it.


On the other hand, the Company may validly take advantage of such





u changes if their effect is to reduce its tax and/or customs and excise


charges.


Li





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Li














; I In addition, the Company shall benefit from any more favorable clause





granted in respect of the provisions of this Agreement that will be


included in a mining agreement concluded at a later date with another


mining company carrying out similar activities.





SECTION V TAX AND CUSTOMS SYSTEM








CLAUSE 33: TAX REGIME








33.1 Applicable Taxes, Duties, Contributions and Fees








The Company, the Investors and Direct Subcontractors are subject


throughout the period of this Agreement only to following taxes, duties


and fees, to the exclusion of any others, in accordance with the terms


u stipulated in this Agreement:





i | Fixed duties and fees:


i i





Land fees;


Tax on Mining Substances;





J Tax on industrial and commercial profits;


Tax on Income from Securities (IRVM);





LumpSum;


Professional Training Levy;


Single tax on vehicles;





Social Security payments.





With the exception of and limited to what is stated in this clause, the





Company and Direct Subcontractors shall not be subject to any duty, tax


and/or fee of a taxation nature, including value added tax.








I I














I


The calculation and payment of all taxes and duties incumbent on the


Company is made on the basis of accounting data and is done in US


dollars ($), except for taxes and social security payments assessed on


salaries and withholdings at source on payments denominated in a


currency other than the US dollar, which shall be payable in Guinean


francs.








The applicable rate of exchange for conversion transactions in US dollars


for expenses and charges in another currency shall be the average


monthly rate of exchange for the month in question as published by the


Central Bank of the Republic of Guinea.








The exchange rates defined above shall also be applicable for the


calculation of all later back payments, interest charges and penalties,


and for all repayments of overpayment of taxes.








33.2 Fixed duties and fees - Land fees





The Company is liable for fixed duties and fees as well as for land fees in


accordance with Current Legislation.





33.3 Tax on mining substances





The Company shall be liable for the tax on mining substances according


to the following terms:





33.3.1 Base





The tax base for mining substances is made up of:


 The FOB value of the iron ore.





33.3.2 Rates


The applicable rate for concentrated iron ore (ore that has undergone


mechanical processing to remove impurities in order to increase its


content) is 3.5% of the FOB value.


33.3.3 Terms of payment


This tax is payable quarterly, at the latest on the fifteenth of the month


following each quarter, based upon quantities exported.


This tax is deductible for the calculation of taxable profits.


33.4 Tax on Industrial and Commercial Profits


The Company shall be liable for Tax on Industrial and Commercial Profits


(BIC), to the exclusion of all other taxes on profits, according to the


following terms.


33.41 Base


Taxable profit is determined by application of the provisions of the


General Tax Code and the Mining Code, subject to special provisions


stated in this Agreement.


33.4.2 Rate








On account of the building of the Conakry - Kankan railway, the rate for


the Tax on Industrial and Commercial Profits applicable to the net


taxable profit shall be thirty percent (30%).


33.4.3 Tax relief on Industrial and Commercial Profits





In accordance with the provisions of Article 143.3 of the Mining Code,


the Company shall be exempted from the Tax on Industrial and


Commercial Profits for a period of 8 years from the first commercial


production.


The Company shall benefit from a further two years of exemption, being


10 years in all, for the extension of the railway from Kankan to


Kerouane.


33.4.4 Terms of payment


Terms of payment for the Tax on Industrial and Commercial Profits are


as stipulated in the General Tax Code.


33.5 Tax on Income from Securities


The Company shall be liable for payment for the Tax on Income from


Securities (dividends, royalties, directors' fees paid by the Company).


33.6 Taxes and contributions assessed on salaries


Salaries paid to employees of the Company or its Direct Subcontractors


shall be liable to the following taxes and contributions:


Lump sum payment at rate of six percent (6%) for salaries paid


to employees with Guinean nationality,


Training levy at the rate of one and a half percent (1.5%) for


salaries paid to its employees in Guinea and outside it. This levy


shall not apply if the Company will have its own, permanent


training center in Guinea. A permanent training center is


defined as being a place where there are classrooms to hold


courses by qualified staff, for the training and development of


the skills of staff taking part directly in the Mining Operations,


Withholding on Salary Payments (RTS) of Guinean nationals by


application of the current scale;


Withholding on Salary Payments (RTS) of foreign employees


residing more than one hundred and eighty-three (183) days in


the Calendar Years at a rate of ten percent (10%) of the


remuneration, it being understood that foreign employees


residing less than one hundred and eighty-three (183) days in


the Calendar Years are exempt from this tax,


Applicable social contributions, it being understood that


foreign employees are exempt.


33.7 Single Tax on Vehicles








The Company, its Investors and Direct Subcontractors are liable for the


Single Tax on Vehicles at the currently applicable rate, excluding for


worksite vehicles and machines.








33.8 Withholding at Source of non-salary income


Payments made by the Company or its Direct Subcontractors to Persons


not resident in Guinea shall be liable to a withholding at source in full


discharge often percent (10%).


It is expressly agreed that interest on bank or other loans contracted by


the Company for the financing of the Project shall be exempt from any


withholding at source.








33.9 Value Added Tax


The Company, Investors and Direct Subcontractors shall be exempt from


value added tax on the purchase of goods and services necessary for the


Mining Operations.


In the event that, notwithstanding this total exemption on Value Added


Tax, the Company, Investors or Direct Subcontractors pay such a tax,


they can deduct it either as a deduction or repayment.


33.10 Local development levy


From the Start Date of Commercial Production the Company shall be


liable to an annual levy for local development at a rate of 1% of gross


profits.


This local development levy is deductible for the calculation of taxable


profits.








CLAUSE 34: CUSTOMS REGIME








This clause applies to direct imports by the Company and its Direct


Subcontractors intended for use in connection with the activities under


this Agreement.








34.1 Value Added Tax on imports








The Company and its Direct Subcontractors shall be exempt from value


added tax on the import of goods.


34.2 Classification of imported goods


The Company must draw up and have approved by the Ministers of


Mines and of Finance, prior to the start of operations, lists of goods to


be imported, according to the following categories:








a) Category 1: equipment, heavy tools, machines and vehicles


except vehicles for tourism that appear in the Company's


assets register.


b) Category 2: raw materials and consumables required for on


site processing of the Mining Produce into finished and semi¬


finished products, as well as oil products used in the


production of energy.


c) Category 3: raw materials and consumables required for the


extraction and enhancement of the Mining Produce.


d) Category 4: fuels, lubricants and other oil products not used in


processing the Mining Produce into finished or semi-finished


products.





These lists are revised periodically based upon changes in the Company's


needs, the national production capacity and the availability on time and


on competitive terms of products manufactured locally.


34.3 Temporary admission








Equipment, machines, instruments, utility vehicles, and generators


intended to be used temporarily in Guinea for the requirements of the


project shall be treated as temporary admissions, with suspension of


duties and taxes.








For the purposes of the construction works, goods thus admitted


temporarily can either be re-exported or consumed in accordance with


current regulations.





34.4 Customs relief in the Development phase


From the start date of the construction works, the Company and its


Direct Subcontractors shall benefit for their project related activities


from exemption of duties and taxes, and customs fees on goods in


Category 1 as well as on spare parts and lubricants, with the exception of


the registration tax at the rate of 0.5% of the CIF value with a maximum


ceiling fixed by the Finances Law and the fee on administrative services


(RPA).


In the event of the resale within the Republic of Guinea of items


belonging to Category 1, the Company and its Direct Subcontractors


become liable for all the duties and taxes as determined by the Customs


Service based on an assessment that takes into account the depreciation


that had occurred up until the date of resale.


34.5 Customs relief during the Operations phase, closure and


rehabilitation


Imported goods in Category 2 intended for the processing of the Mining


Produce into finished and semi-finished products are exempt from taxes


and customs duties.


Imported goods in Category 1 or Category 3 intended for the extraction


and enhancement of the Mining Produce are taxed upon importation at


a single rate of 5.6% of the FOB value of these goods as well as the fee


on administrative services.


Fuels except petrol, lubricants and other imported oil products


belonging to Category 4 enjoy the price structure applicable to the


mining sector.





34.6 Personal effects


The personal effects and items with the exception of foodstuffs and


private vehicles imported by employees of the Company and its Direct


Subcontractors are exempt from all duties and taxes.





SECTION VI: OTHER FINANCIAL PROVISIONS


CLAUSE 35: GENERAL PRINCIPLES








In the Republic of Guinea the Company must keep its accounts in dollars,


in accordance with the accounting program of OHADA.


Each tax year the Company must have its balance sheet and income


statement certified by a Guinean CPA, and submit its financial


statements to the Minister not later than April 30 of the following year.


For the purposes of verification and audit by the authorized personnel of


the Government, the Company must provide access to its accounting


documents and the supporting documentation.














SECTION VII: SUNDRY AND FINAL PROVISIONS





CLAUSE 36: WAIVER AND TERMINATION





36.1 Waiver


The Company may waive the Concession in accordance with the terms


stipulated in the Mining Code.


36.2 Cancellation








The Government, in accordance with the Mining Code, can cancel the


Company's Concession, which involves termination of this Agreement.





Apart from the situations stated in the Mining Code, the Concession can


be terminated if the Company refuses to carry out a final decision in


arbitration in accordance with clause 38 of this Agreement.








CLAUSE 37: SALE, TRANSFER AND LEASE








Any sale or transfer by the Company of all or part of its rights and


obligations arising from the Concession, as well as any direct sale of over


fifty percent (50%) of the Company's shares, by sale or by any other


method involving transfer of effective control of the Company, is


deemed equal to a sale and is subordinated to the prior approval of the


Government, which holds a right of preemption exercisable at the terms


offered by the would-be purchaser.





In the same situation the Company must inform the Government of the


planned sale, stating all available information, and in particular the


name of the purchaser, the price and the payment terms.








From date of receipt of this notification the Government has a period of


thirty (30) days to:


a) Either withhold its approval of the sale and thus exercise its


right of preemption according to the terms of the initial


planned sale of which it had been notified,


b) Or approve the sale and thereby waive its right of preemption,


it being understood that the Government must notify the


Company of its decision at the latest at the end of the period of


thirty (30) days and the absence of a response from the


Government within the thirty (30) day period will mean


approval of the proposed sale and thus a waiver by the


Government of its right of preemption.





It is expressly agreed that no prior approval shall be necessary for direct


or indirect transfer transactions concerning the actions of a company


holding shares in the Company.








In addition, any sale, pledge or transfer made in the interest of an


Affiliated Company is free if the following conditions are met:








a) The transfer agreement specifically states a commitment by


the transferee to be bound by the terms and conditions of this


Agreement;


b) The transferee has demonstrated that it has or has access to


the technical and financial resources and the skills necessary to


carry out the activities under this Agreement;


c) A copy of the transfer agreement is sent to the Government,


and


d) The transfer agreement is duly signed and contains a clause by


which the transferee assumes all the Company's obligations,


and that if it does not receive the Government's approval the


transfer agreement shall be null and void.





CLAUSE 38: SETTLEMENT OF DISPUTES


38.1 Out of court phase








In the event of a dispute and/or conflict between the Parties in respect


of this Agreement and/or the Concession, including but not limited to its


validity, interpretation, execution, non-compliance or termination, the


Parties undertake in the first instance to try to resolve the dispute or


conflict between them out of court.


Failing an out of court settlement within a period of one hundred and


twenty (120) Days from the date of receipt of the notice sent by one


Party to the other of the dispute or conflict between them, the


provisions of clause 38.2 shall apply.


38.2 Binding arbitration


The Parties agree to submit to the arbitration of the ICC any dispute


arising from or related to this Agreement that has not be resolved under


clause 38.1, using the Arbitration Convention of this institution.








In addition, the Parties agree to make all requests and submissions to


the ICSID or to the International Arbitration Court, depending upon the


case, and to undertake any other actions supply all information required


to set up arbitration proceedings.


Unless the Parties have agreed otherwise, the arbitration procedure


shall take place in Paris (France) and shall be conducted in French.





Thjere shall be three (3) arbitrators: one appointed by the Government,


one appointed by the Company, and the third appointed by the two (2)


arbitrators already chosen.





One of the Parties can start the arbitration process by sending the other


Party a notice to that effect, including:


a) Reference to the provision in this Agreement that has led to


the dispute;


b) Reference to the mining rights issued as part of this


Agreement:


c) The nature of the dispute that has led to the complaint and, if


applicable, any sum of the complaint for damages or


compensation;


d) The facts that cause any complaint, and


e) The remedy sought.


The Party that receives the notification must reply within thirty (30)


Days, confirming or rejecting the compaliant in whole or in part, and if


applicable stating the nature and circumstances of any counter-


complaint. Failure to reply within the period allocated is considered a


refusal by this Party to accept the complaint and leads to the arbitration


process provided for in this Agreement.


The Parties recognize that the decision handed down following


arbitration under this Agreement is binding, final and without appeal.


That fact that one of the Parties does not take part in the arbitration


proceedings is not a reason to reject the arbitration tribunal's


jurisdiction or its decision.


The Parties expressly waive any objections to arbitration procedures and


the decision arising therefrom, unless the said arbitration does not


comply with requirements stipulated in this Agreement.


The Parties hereby expressly waive any immunity of jurisdiction and any


immunity of execution, for themselves and their respective employees


(except those of the Government exclusively reserved for diplomatic


work), for the requirements of executing any decision or judgment


handed down in respect of this Agreement.


CLAUSE 39: CHANGES








This Agreement cannot be changed and/or amended in any manner,


unless by mutual written agreement between the Parties and entry into


effect in accordance with the same terms as those of this Agreement.





CLAUSE 40: CONFIDENTIALITY


40.1 The Agreement is not confidential








This Agreement is not confidential








All the reports, plans and information provided by the Company under


this Agreement to the Government shall be treated as public documents


unless specified otherwise.





40.2 Non-confidential matters








The following matters are not confidential, subject to a disclosure not


being a violation of any legislation or stock exchange rules governing


securities, applicable to the Company:








a) The annual quantities of mineral substances produced coming


from the Concession;


b) Employment, including training programs offered by the


Company;


c) Fees and payment of taxes related to the Concession, without


the details of the calculations of the amounts of such


payments;


d) Operating parameters, such as capacities, yield rates and


recovery rates of the mines and the concentration plants and


the dilution factors;


e) Information about the number and frequency of accidents


arising from the Mining Operations;


f) The payment of any amount or any provision of services under


the local community development agreement;


g) Any information held by the Government prior to the Company


obtaining that information, and having been disclosed by


someone not having any obligation of confidentiality towards


the Company.


40.3 Confidentiality of information


The disclosure of confidential information must be done in such a way as


to ensure the confidentiality of this information by the recipient.


Each of the Parties must ensure that their respective directors,


employees, as well as its shareholders, technical and professional


consultants do not disclose information considered confidential, and do


not make inappropriate use of such information for their own benefit or


the benefit of any other Person.








CLAUSE 41; FORCE MAJEURE


41.1 Case of force majeure








For the purposes of this Agreement, force majeure means any event, act


or circumstance that is unforeseeable, cannot be resisted and is beyond


the control or wishes of a Party for whom the execution of its obligations


by this Party is restricted or rendered impossible.








Without derogating from the generality of the foregoing, the following


events can constitute a case of force majeure:





a) War (whether declared or not), armed insurrection, civil


unrest, blockade, riots, sabotage, embargo, strikes, lock-out or


other protest actions or forms of labor disputes;


b) Any dispute in connection with the Mining Operations, with


Persons who prove they have been significantly affected by the


Mining Operations, including but not limited to other holders


of mining rights, Land Users or Occupiers and members of the


local community, neighboring communities, government


departments or non-governmental organizations (NGO);


c) Any natural catastrophe, including epidemics, earthquakes,


storms, floods, volcanic eruptions, tsunami or other severe


weather issues, explosions and fires;


 d) Any other cause outside the control of the Party in question


with the exception of economic problems that are the result of


fluctuations in market prices.





The Parties agree that the Government cannot claim in its favor that the


reasons or events listed in paragraph b constitute a case of force


majeure.


41.2 Consequences of force majeure








When one of the Parties finds itself objectively prevented from fulfilling


one or several of its undertakings under this Agreement and the Mining


Code on account of a case of force majeure, such an impediment does


not constitute a breach of this Agreement.





41.3 Extension of the Agreement period








The Parties must extend the period of this Agreement for any period for


which a case of force majeure caused the suspension of the execution of


the undertakings under this Agreement.


41.4 Notification of force majeure





When one or other of the Parties finds itself objectively prevented from


fulfilling one or several of its undertakings under this Agreement on





account of force majeure, it must:





a) Within not more than fifteen (15) Days from the date of


occurrence of a major case of force majeure send the other


Party notice by registered mail or by any other available and


rapid method, stating the case of force majeure and the


undertakings affected;


b) Take the necessary, reasonable and legal measures to solve the


problem that caused the force majeure; and


c) Having adopted the steps referred to in paragraph b), notify


the other Party and take all necessary steps to ensure the


earliest possible return to normal execution of the


undertakings affected by force majeure.


41.5 Meeting between the Parties








If the effects of an event of force majeure last longer than fifteen (15)


Days, the Parties must meet as soon as possible to study the situation


and to agree upon the necessary measures to be taken to solve the


problem that caused the force majeure.








CLAUSE 42; PRECEDENCE OF THE AGREEMENT








The provisions of this Agreement represent the entire agreement


between the Parties and take precedence over any prior declaration,


representation, contract and/or agreement, whether verbal or in


writing, between the Parties (or their Affiliated Companies or prior


holders of the same rights).





CLAUSE 43; NON-WAIVER


Unless by express, written waiver, if one Party does not exercise all or


part of its rights conferred upon it by this Agreement, shall under no


circumstances constitute a case of waiver of the unexercised rights.


CLAUSE 44; SUCCESSORS AND BENEFICIARIES


This Agreement ties the Parties and their respective successors and


beneficiaries.


CLAUSE 45: COSTS OF THE AGREEMENT





Each of the Parties must assume its own legal expenses or other costs


incurred as part of setting up this Agreement.


CLAUSE 46: NOTICES








All notices, demands and communications made by one of the Parties to


the other as part of this Agreement shall be in writing and shall be


deemed to have been validly delivered if they are handed over


personally in return for a receipt or sent by express mail, by registered


mail, telegram or fax to the addresses stated at the beginning of this


Agreement.


CLAUSE 47: LANGUAGE





All reports, notices and other documentation prepared in application of


this Agreement must be in French.


CLAUSE 48: REGISTATION AND ENTRY INTO EFFECT


Within thirty (3) Days from signature of this Agreement by all the


Parties, the Minister must sent a signed copy to the CPDM, which shall


register it without delay.


In application of the tax system stipulated in this Agreement, and the


Company not being subject to registration duty, no registration duty


shall due payable for this formality.


In witness whereof the Parties have signed this Agreement in five (5)


copies in Conakry on 2009


FOR THE REPUBLIC OF GUINEA


THE MINISTER STAMP OF THE MINISTER


FOR MINES AND ENERGY OF THE ECONOMY AND


FINANCES























Mr. Mahmoud Thiam Captain Mamadou Sande

















For BSG Resources For BSG Resources


(Guinea) Limited (Guinea) SARL











DIRECTOR CHIEF EXECUTIVE





Marc Struik 7Asher Avidan