SIGNED FINAL VERSION
4 August 2010
BASIC CONVENTION
BETWEEN THE REPUBLIC OF GUINEA BELLZONE MINING Plc AND BELLZONE HOLDINGS S.A. FOR THE DEVELOPMENT, PROCESSING, TREATMENT, TRANSFORMATION, TRANSPORT AND COMMERCIALIZATION OF KALIA IRON ORE DEPOSITS AND RELATED INFRASTRUCTURE (hereinafter the « Convention »)
-1-
SIGNED FINAL VERSION
4 August 2010
BASIC CONVENTION BETWEEN THE REPUBLIC OF GUINEA, Hereinafter designated as « the State », Represented by: His Excellency, Mr Mahmoud THIAM, Minister of Mines and Geology; . ON THE ONE HAND
And THE COMPANIES BELLZONE MINING Plc And BELLZONE HOLDINGS S.A. ON THE OTHER HAND Represented by : Mr. Nikolajs Zuks for BELLZONE MINING Plc, , intervening in this agreement as Group guarantee by the side of BELLZONE HOLDINGS S.A. and acting as the Investor; Hereafter jointly referred to as the “Parties”. The Shareholding and the nominal value of shares of the Investor group are shown in Appendix 1 of this Convention.
-2-
SIGNED FINAL VERSION
4 August 2010
Table of Contents TITLE I: GENERAL PRELIMINARY PROVISIONS .............................................................................. 7 ARTICLE 1: ARTICLE 2:
DEFINITIONS .................................................................................................................. 7 PURPOSE OF THE CONVENTION .................................................................................. 11
TITLE II: EXPLORATION WORK AND MINING CONCESSION ........................................................ 12 ARTICLE 3: ARTICLE 4:
PROSPECTING WORK ................................................................................................... 12 DISCOVERIES OF OTHER MINERAL RESOURCES ........................................................... 12
TITLE III: EXPLOITATION WORKS OF THE PROJECT ..................................................................... 14 ARTICLE 6: ARTICLE 7: ARTICLE 8: ARTICLE 9: ARTICLE 10:
PRE-FEASIBILITY STUDY ............................................................................................... 14 SUBMISSION OF THE FEASIBILITY STUDY ..................................................................... 14 FEASIBILITY STUDY CONTENT ...................................................................................... 14 DESCRIPTION OF THE PROJECT .................................................................................... 15 CONSTRUCTION AND INVESTMENT ............................................................................. 15
TITLE IV: OPERATIONAL STAGE.................................................................................................. 16 ARTICLE 11: ARTICLE 12: ARTICLE 14: ARTICLE 15: ARTICLE 16:
RIGHT OF ACCESS OF THE STATE TO THE PROJECT’S AREA ........................................... 16 INFORMATION ON THE MINERAL SUBSTANCES AND REPORTS REQUIRED .................. 16 PURCHASE AND SUPPLIES ............................................................................................ 17 HIRING AND EMPLOYMENT OF GUINEAN PERSONNEL ................................................ 17 HIRING AND EMPLOYMENT OF EXPATRIATE PERSONNEL ............................................ 18
TITLE V: PARTICIPATION OF THE STATE ..................................................................................... 19 ARTICLE 17:
PARTICIPATION OF THE STATE IN CAPITAL OF THE INVESTOR ...................................... 19
TITLE VI: BULK AND FREIGHT INFRASTRUCTURE ........................................................................ 20 ARTICLE 18: ARTICLE 19: ARTICLE 20:
GENERAL PROVISIONS ................................................................................................. 20 INFRASTRUCTURE OVERVIEW ...................................................................................... 20 GRANTING OF AN INFRASTRUCTURE CONCESSION ..................................................... 21
TITLE VII: SPECIFIC UNDERTAKINGS BY THE PARTIES ................................................................. 21 ARTICLE 21: ARTICLE 22: ARTICLE 23: ARTICLE 24: ARTICLE 25: ARTICLE 26: ARTICLE 27:
OBLIGATIONS OF THE INVESTOR .................................................................................. 21 OBLIGATIONS OF THE STATE ........................................................................................ 22 COOPERATION BY THE ADMINISTRATIVE AUTHORITIES .............................................. 23 INFRASTRUCTURE ACCESS RIGHTS ............................................................................... 24 USE OF INFRASTRUCTURE BY A THIRD PARTY .............................................................. 24 PROTECTION OF THE ENVIRONMENT AND CULTURAL HERITAGE ............................... 25 LOCAL COMMUNITIES DEVELOPMENT CONVENTION ................................................. 26
TITLE VIII: MARKETING .............................................................................................................. 28 ARTICLE 28:
SALE OF MINING PRODUCTS ........................................................................................ 28
TITLE IX: TAX AND CUSTOMS REGIME ....................................................................................... 28 ARTICLE 29: ARTICLE 30: ARTICLE 31: ARTICLE 32: ARTICLE 33: ARTICLE 34:
GENERAL PROVISIONS ................................................................................................. 28 GENERAL TAX REGIME APPLICABLE TO THE PROJECT .................................................. 29 TAX REGIME APPLICABLE TO THE OPERATIONAL STAGE .............................................. 30 CUSTOMS REGIME APPLICABLE TO THE RESEARCH AND STUDIES WORKS OF THE PROJECT ....................................................................................................................... 32 CUSTOMS REGIME APPLICABLE TO THE CONSTRUCTION AND EXTENSION WORKS OF THE PROJECT ................................................................................................................ 33 CUSTOMS REGIME APPLICABLE TO MINING AND PROCESSING OPERATIONS OF THE PROJECT ....................................................................................................................... 34 -3-
SIGNED FINAL VERSION ARTICLE 35: ARTICLE 36: ARTICLE 37: ARTICLE 38: ARTICLE 39: ARTICLE 40:
4 August 2010
CUSTOMS REGIME APPLICABLE TO THE TREATMENT OF IRON ORE ............................ 35 CUSTOMS REGIME APPLICABLE TO THE TRANSFORMATION OF IRON ORE ................. 35 CUSTOMS REGIME APPLICABLE TO TRANSPORT AND EXPORT OPERATIONS OF THE PROJECT ....................................................................................................................... 36 CALCULATION OF TAXES .............................................................................................. 37 OTHER PROVISIONS ..................................................................................................... 37 STABILISATION OF THE TAX AND CUSTOMS REGIME ................................................... 38
TITLE X: GUARANTEES ............................................................................................................... 39 ARTICLE 41: ARTICLE 42: ARTICLE 43: ARTICLE 44: ARTICLE 45:
GENERAL GUARANTEES ............................................................................................... 39 GUARANTEE FOR THE HOLDING OF FOREIGN CURRENCY ACCOUNTS AND TRANSFERS .. ..................................................................................................................................... 40 ADMINISTRATIVE, MINING AND LAND-RELATED GUARANTEES .................................. 40 GUARANTEES FOR THE PROTECTION OF GOODS, RIGHTS, TITLES AND INTERESTS ...... 41 FINANCING ................................................................................................................... 42
TITLE XI: FINAL PROVISIONS ...................................................................................................... 43 ARTICLE 46: ARTICLE 47: ARTICLE 48: ARTICLE 49: ARTICLE 50: ARTICLE 51: ARTICLE 52: ARTICLE 53: ARTICLE 54: ARTICLE 55: ARTICLE 56: ARTICLE 57: ARTICLE 58: ARTICLE 59: ARTICLE 60: ARTICLE 61: ARTICLE 62: ARTICLE 63: ARTICLE 64: ARTICLE 65:
CONTRIBUTION TO THE LOCAL SOCIO-ECONOMIC DEVELOPMENT ............................ 43 INVESTMENT AUTHORISATION .................................................................................... 43 SETTLEMENT OF DISPUTES ........................................................................................... 43 INSURANCES ................................................................................................................ 45 COMPENSATION .......................................................................................................... 45 FORCE MAJEURE .......................................................................................................... 46 RENEGOTIATION .......................................................................................................... 47 EARLY TERMINATION ................................................................................................... 47 PRECEDENCE ................................................................................................................ 48 GOOD FAITH BEHAVIOUR............................................................................................. 48 AMENDMENTS ............................................................................................................. 48 SUCCESSORS AND ASSIGNS .......................................................................................... 48 LIMITED WAIVER .......................................................................................................... 49 CONFIDENTIALITY ........................................................................................................ 49 GOVERNING LAW ......................................................................................................... 49 LANGUAGE OF THE CONVENTION AND SYSTEM OF MEASUREMENT .......................... 49 TERM ............................................................................................................................ 49 SURVIVAL ..................................................................................................................... 50 NOTICES ....................................................................................................................... 50 ENTRY INTO FORCE ...................................................................................................... 51
LIST OF APPENDIXES ................................................................................................................. 52 APPENDIX 1: APPENDIX2: APPENDIX3: APPENDIX4: APPENDIX5: APPENDIX6: APPENDIX 7:
BELLZONE MINING PLC’S SHAREHOLDING AND REGISTRATION DEED ..................................... 52 RESEARCH PERMIT ............................................................................................................ 52 MINING PERIMETER .......................................................................................................... 52 FEASIBILITY STUDY ............................................................................................................ 52 PROPOSED INFRASTRUCTURE CORRIDOR................................................................................ 52 JOINT ORDER ON YEARLY SURFACE ROYALTIES ........................................................................ 52 INFRASTRUCTURE DRAFT AGREEMENT ................................................................................... 52 ERROR! BOOKMARK NOT DEFINED. ERROR! BOOKMARK NOT DEFINED. ERROR! BOOKMARK NOT DEFINED.
-4-
SIGNED FINAL VERSION
4 August 2010
PREAMBLE Whereas the State wishes to encourage and promote the exploitation and valorisation of the mineral resources in the Republic of Guinea; Whereas the exploitation and valorisation of Iron Ore is governed by the provisions of Articles 41 to 43 of the Mining Code relating to Mining Concessions; Whereas BELLZONE HOLDINGS PTY LTD has obtained an exclusive right to proceed with prospecting and research activities following the granting of the research permits, dated 28 November 2005 under N° A/2005/5755/MMG/SGG and renewed on 6 October 2008 under N° A/2008/3687/MMG/SGG and N° A/2006/3077/MMG/SGG, dated 16 June 2006, and renewed on 20 October 2009 under No A/2009/2801/PR/MMEH/SGG (hereinafter designated as the «Research Permit » a copy of which is attached as Annexure 1); Whereas the aforesaid prospecting and research activities conducted by BELLZONE HOLDINGS PTY LTD within the framework of the Research Permit have revealed a commercially exploitable, in quantity and quality, Iron Ore deposit; Whereas BELLZONE HOLDINGS PTY LTD has been transformed into BELLZONE HOLDINGS S.A. with the transfer of all of its rights into this new company; Whereas in this context, the Investor requests from the State a mining concession on the perimeter defined in Annexure 3 of the Convention (hereafter the “Mining Concession”); Whereas this Convention defines the rights and obligations of the parties relating to the legal, financial and social conditions applicable to the mining, processing, treatment, transport and export operations of the Iron Ore and guarantees the Investor the stability of such conditions for the term of the Convention; Whereas according to Article 3 of the Mining Code, the Parties state and acknowledge the State’s ownership rights over the deposit or deposits within the perimeter of the mining titles (Research Permit or Mining Concession), the BELLZONE HOLDING S.A. exclusive usufruct over these deposits up to the date of their exploitation and the ownership of this Company over the substances extracted from these deposits. Whereas the Mining Code authorizes the Minister of Mines and Geology of the Republic of Guinea to sign a basic convention in the name of the State, with the aforesaid Convention entering into force on the date of signing of the decree by the President of the Republic of Guinea enacting the law authorizing ratification; Whereas BELLZONE MINING Plc has the financial and technical capacities necessary to guarantee BELLZONE HOLDINGS S.A., the latter having the requisite qualities and capacities to request a mining concession and an infrastructure concession in order to proceed with the mining and transportation of the Iron Ore from the deposit which has been -5-
SIGNED FINAL VERSION
4 August 2010
revealed by the prospecting and research works within the framework of the Research Permit;
Whereas the terms and conditions of this Convention have been negotiated and approved by the Parties;
therefore, the parties agree as follows:
-6-
SIGNED FINAL VERSION
4 August 2010
TITLE I: GENERAL PRELIMINARY PROVISIONS ARTICLE 1:
DEFINITIONS
The terms and expressions used in the Convention with a capital as a first letter, whether in the singular or in the plural, shall have the following meaning: “Activities”, means all the tasks, work or actions linked directly or indirectly to the Project. “Affiliated Company”, means a company, which is involved in or affected by the Project, and in which BELLZONE MINING Plc or BELLZONE HOLDINGS S.A. holds directly or indirectly more than twenty (20%) of the share capital or voting rights; or which holds directly or indirectly more than twenty (20%) of the share capital or voting rights of BELLZONE HOLDINGS S.A. or of its respective successors and assigns. “Amendment”, means the documents which are drawn up at the request of one or other of the Parties in order to amend one or several clauses of the Convention, with such an amendment not being possible unless there is a common agreement between both two Parties. Each amendment shall take effect as at the date of its signing by the two Parties in accordance with the law in force. The Amendments form an integral part of the Convention. “Annexure” means the documents that specify or complete the provisions of the Convention of which they form an integral part. “Assign” means passing on and / or delegating entitlement, obligations and rights pursuant to specified parts. “Authorisations”, means all administrative acts, such as licences, assents, approvals, renunciations and exemptions, entrance, exit or residential visas, importation and regulation licences, decrees, decrees granting the Mining Concession and the Infrastructure Concession, mining rights, orders, circulars, certificates of customs and fiscal exemptions and other deed of any form required in the Republic of Guinea to carry out the Activities of the Project. “Authority” or “Governmental Authority”, means the State and the Government of the Republic of Guinea including in particular any ministerial department, territorial administration, body or agency including the competent land committees, the competent harbour and customs authorities authorised to act in the name of the State by virtue of the Guinean laws exercising a legislative, executive, administrative or judicial power or any entity having mandate to exercise such a power. "BCRG", means the Central Bank of Guinea. “BELLZONE MINING Plc”, means a company incorporated under the laws of Jersey, hereafter BELLZONE PLC. Submission of Shareholding Structure. “BELLZONE HOLDINGS PTY LTD”, means a Guinean limited liability company which is the holder of a research permit dated 28 November 2005, under the N° A 2005/5755/MMG/SGG and renewed on the 6 October 2008 under the N° A2008/3687/MMG/SGG and permit N° A/2006/3077/MMG/SGG, dated 16 June 2006, and -7-
SIGNED FINAL VERSION
4 August 2010
renewed on 20 October 2009 under No A/2009/2801/PR/MMEH/SGG and which has been transformed into BELLZONE HOLDINGS S.A.. "BELLZONE HOLDINGS S.A." means a Guinean public limited liability company (hereafter "BELLZONE HOLDINGS S.A."), created after the transformation "BELLZONE HOLDINGS PTY LTD ", and which is the holder of the Research Permit. "BIC", means industrial and commercial benefits. "BOT Law" means the "Build, Operate and Transfer" Law 97/012/NA, of the Republic of Guinea, enacted on 1 June 1998, allowing for the financing, construction, exploitation, operation and transfer of development infrastructure by the private sector in the Republic of Guinea. “CIF”, means Cost, Insurance, Freight: the seller will be responsible for the cost of freight and insurance of the goods from the port of loading to the port of destination. The sale price includes the value of the goods, the insurance and the freight. “Concentrated Ore”, means the Iron Ore which has been subject to a Treatment process in order to reduce the impurities and increase the Grade above the average grade defined in the feasibility study. “Contractual Interest Rate”, means the London Interbank Offered Rate (LIBOR) for the deposits of three months in American dollars plus three (3) basis points. “Convention”, means, in addition to the meaning which is given to it in the heading of this agreement, this basic convention, including its annexures, as well as these amendments. “Date of Entry into Force of the Convention”, has the meaning attributed to it in article 65 of the Convention. “Date of First Commercial Production”, means the day the first commercial production is achieved. “Deposit”, means any identified area of Iron Ore which is located within the Mining Perimeter. “Dollar” and “$”, mean the currency with legal tender in the United States of America. “Euro”, means the currency with legal tender in certain member States of the European Union. “Extension Works”, means any works programme concerning the mining, Processing and Treatment installations and Infrastructure which are not provided for or completed during the Investment Programme. “Extraction”, means all operations to extract the Iron Ore. “Feasibility Study”, means the study as defined in Article 7 of the Convention. “First Commercial Production”, means when first a monthly 820,000 tonnes production of processed or transformed iron ore is exported for sale for a period of three (3) consecutive months. -8-
SIGNED FINAL VERSION
4 August 2010
“FOB”, means that the seller bears the cost of the goods up to the point they are loaded onboard the ship. “Grade”, means the iron content of the Iron Ore, Concentrated Ore or Processed Iron Ore. “Impot Minimum Forfaitaire” or “IMF”, means the minimum fixed tax as defined by the Guinean general tax code. “Infrastructure and facilities”, means all the mining, slurry pipelines, rail, port, road, buildings, structures, dams, residue dams, waterways and water supplies, lines for the transmission of electricity and telecommunications. "Infrastructure Concession", means the concession title or mining titles to be granted to the Investor with respect to the realisation of the Infrastructure. “Infrastructure Concession Period” is defined in Article 24.2 of the Convention. “Infrastructure Perimeter”, means one or several zones which are located outside the Mining Perimeter for the realisation of the Infrastructure. “Investor”, means BELLZONE MINING Plc and BELLZONE HOLDINGS S.A. and Affiliated Companies, individually or collectively. “Investment Programme”, means any programme of the Investor, which relates to a) the construction or the opening of a mine and any other mining installations; b) the possible moving of mining installations built by the Investor; c) the construction of Iron Ore Processing or Treatment installations in addition to the mining installations built by the Investor d) the completion of Infrastructure, notably the construction of roads, accommodation camps, support services, water supplies and storage, power, a railway line and a site for a port necessary for the Project. “Iron Ore”, means any form of iron ore, including haematite, goethite, magnetite, itabrite, detritals or iron in any other form, extracted from within the Mining Perimeter and prior to any Processing or Treatment operation. “Legislation in Force”, means the laws and regulations in force in the Republic of Guinea. “Market Value”, means a value derived by an independent, suitably qualified and internationally recognised valuator as agreed to and appointed by both Parties. "Material Adverse Effect", means: a)
a material adverse change in the commercial operations, financial condition or financial prospects of a Party under or in respect of the Convention;
b)
a material reduction in the economic rights, interests and benefits granted to a Party under the Convention; or
-9-
SIGNED FINAL VERSION
4 August 2010
c) The failure of the State to fulfil its obligations under Title IX and Title X of the Convention shall be deemed to have a Material Adverse Effect on the Investor. "Material Breach" means: a)
with respect to the State, the failure of the State (or any Authority acting on its behalf) to satisfy its obligations under article 5, articles 7.1 and 7.3, article 8, articles 14.2 and 14.3, article 15, articles 17.2, 17.3 and 17.5, article 19, 20,article 21, articles 22.2 and 22.3, article 23, article 24, Title IX (Tax and Customs Regime) and 43, 44 and 45 of Title X (Guarantees), in each case where such failure has a Material Adverse Effect on the Investor; and
b) with respect to the Investor, the failure by the Investor to satisfy its obligations under article 6, articles 8, 9 and 10, article13, articles 14.1 and 14.4, article 16, article 20, article 25.2, article 27, article 28.1, article 46, in each case where such failure has a Material Adverse Effect on the State. “Mining Code”, means the Guinean law n° L/95/036/CTRN dated 30 June 1995 relating to the Mining Code of the Republic of Guinea. “Mining Concession”, means, in addition to the meaning which is given to it in the preamble of the Convention, the concession mining title that will be granted to BELLZONE HOLDINGS S.A. by the signature of a presidential decree. “Mining Perimeter”, means the zones which are the subject of the Mining Concession, as defined in Annexure 3 of the Convention. “Mining Tax’, has the meaning which is given to it in Article 26.11 of the Convention. “Operating Costs”, means all the costs linked to the operations of Extraction, Processing and Treatment of Production, Infrastructure, Transport and export operations, as well as running and administrative costs. “Operations” means the activities of prospecting, Extraction, Processing and Treatment, of Transport and export of the produced iron ore. “Party” or “Parties”, means, in addition to the meaning which is given in the heading of the Convention, the Republic of Guinea represented by the Minister of Mines and Geology, and the Investor. “Processing”, means all operations preparing the Iron Ore meant for export. “Processed Iron Ore”, means the Iron Ore which has been the subject of a process, which would include crushing and screening for processing or export without altering its grade. “Production”, means the quantity of Iron Ore which was extracted, has undergone Processing and/or Treatment and which is stored in the storage zones and recorded on the production register of the Investor. “Project”, means the survey and research activities, the environmental, socio-economic, design, engineering, procurement, construction and commissioning activities associated with the mining of Iron Ore from within the Mining Perimeter and the Processing, - 10 -
SIGNED FINAL VERSION
4 August 2010
Treatment, Transformation, Transport and export operations of Iron Ore from within the Project Perimeter and includes all Infrastructure activities. “Project Asset”, means all the goods, rights, titles and interests, whether present or future, movable or immovable, tangible or intangible, belonging to the Investor or farmed out or leased by the Investor and on their behalf, as well as the rights attached to the various mining or infrastructure concessions and/or long-term leases entered into by the Investor, for the purposes of the Project. “Project Perimeter”, means the Mining Perimeter as well as the Infrastructure Perimeter and all the occupied sites, together, by or reserved for the benefit of the Project. “Research Permit”, means the research permits granted to BELLZONE HOLDINGS PTY LTD on 28 November 2005 to and which was renewed on 6 October 2008 under No A2008/3687/MMG/SGG, and permit N° A/2006/3077/MMG/SGG, dated 16 June 2006, and renewed on 20 October 2009 under No A/2009/2801/PR/MMEH/SGG and any permit eventually issued further to renewal. “State” means, in addition to the meaning which is given in the heading of the Convention, the State of the Republic of Guinea. “Sub-contractor”, means any enterprise which has the required expertise to provide the services or works for the needs of the Project and which has entered into a contract with any Investor or with one of their affiliates in the exclusive context of the Project. “Tax and Customs Regime”, means the Tax and Customs Regime applicable to the Project and Operations drawn up in accordance with the provisions outlined in the Convention. “Taxes”, means any duty, tax, value added tax, stamp duty, customs duty, withholding tax (and the social costs) subscriptions and, in a more general way, any tax or special taxation levy to the advantage of the State, of any Authority, of any local administration, of any public body either to public capital, or public or private body charged with the management of a public utility or invested with a mission of a public utility. “Transformation”, means any operation which enables pig iron, direct reduced iron or steel to be produced. “Transport”, means any transport activities, including, in particular, use of the railway, roads, sea and air, for the requirements of the Project. “Treatment”, means any operation including any washing, grinding, separation, beneficiation, blending, or other relevant operation performed on the extracted Iron Ore to achieve an increased Grade.
ARTICLE 2:
PURPOSE OF THE CONVENTION
The purpose of the Convention in accordance with article 11 of the Mining Code, in addition to the applicable Guinean texts is, notably: - 11 -
SIGNED FINAL VERSION
4 August 2010
a)
To grant and to guarantee the right to the Investor to extract, process, treat, transport, export and sell Iron Ore from within the Perimeters of the Mining Concession and of the Infrastructures.
b)
To define the legal, administrative, financial, tax, customs, mining, environmental and social conditions according to which the Investor shall carry out the effective mining of any Deposit or to complete or have completed and then manage, under the best economic conditions, the Operations and Infrastructure necessary for the Extraction, Processing, Treatment, Transport and exportation of the Iron Ore.
c)
To define the rights and obligations of the Parties in relation to completion of the Project.
TITLE II EXPLORATION WORK AND MINING CONCESSION ARTICLE 3:
PROSPECTING WORK
In accordance with the provisions of Article 41 of the Mining Code, the Company undertook exploration activities within the Perimeter of its Permits. The findings of the mining prospection work will constitute a component of the Bankable Feasibility Study and will help define the precise area of the Mining Concession to be granted to the Company.
ARTICLE 4:
DISCOVERIES OF OTHER MINERAL RESOURCES
4.1
If, within the Mining Perimeter, the Investor discovers traces of mineral substances other than Iron Ore, the Investor shall immediately inform the State and the Investor shall send to the Ministry of Mines and Geology a research permit request for the said mineral substances that have been discovered. The State agrees to grant the Investor or its nominated Affiliated Company a research permit for the mineral substances discovered in accordance with the law.
4.2
The Investor or its nominated Affiliated Company will carry out the research and development of the identified mineral substances according to the requirements of the Mining Code.
4.3
If the Investor’s decision is not to exploit the mineral substances discovered the State may, under the conditions outlined in article 44 of the Mining Code grant a research permit and/or concession to a third party, provided that:
- 12 -
SIGNED FINAL VERSION
4 August 2010
a)
the Investor is satisfied that the grant of the research permit and/or concession would not have a negative impact from a safety, technical or financial point of view on the Project;
b)
the Investor is satisfied that the activities of the third party concerned do not hinder the Investor's current or future activities in the Mining Perimeter; and
c)
under the terms of article 79 of the Mining Code the State and the third party must enter into an agreement with the Investor guaranteeing to the Investor that for the whole term of the Mining and Infrastructure Concessions the possible research by the third party for other mineral resources shall not negatively affect the Project.
ARTICLE 5: GRANTING OF A MINING CONCESSION
5.1
After the Bankable Feasibility Study has been approved, the State will grant BELLZONE HOLDINGS S.A. a Mining Concession for Iron Ore over the area of the Mining Perimeter which constitutes Annexure 3 of the Convention.
5.2
The term of the Mining Concession shall be for an initial period of 25 (twenty five) years, as from the signing of the decree granting the said Mining Concession.
5.3
This Mining Concession shall be renewed, one or several times; each time for a period of 10 (ten) years.
5.4
The Mining Concession constitutes an immovable, divisible and farmable right which may be pledged or assigned to guarantee loans dedicated to the completion of the Project.
- 13 -
SIGNED FINAL VERSION
4 August 2010
TITLE III: EXPLOITATION WORKS OF THE PROJECT ARTICLE 6:
PRE-FEASIBILITY STUDY
Following the prospecting and research studies carried out pursuant to the Research Permit a Pre-feasibility Study, including a Project development plan, has been drawn up and is annexed to the Convention (Annexure 4). ARTICLE 7:
SUBMISSION OF THE FEASIBILITY STUDY
The Investor undertakes to produce an engineering Feasibility Study suitable to support the financing needs of the Project within a twenty four (24) month period from the Date of Entry into Force of the Convention. ARTICLE 8: FEASIBILITY STUDY CONTENT The Feasibility Study referred to in article 7.1 above shall be suitable to ensure financing of the Project is obtained. It shall include, in particular: a)
a detailed mining engineering study;
b)
a detailed mining investment budget;
c)
detailed engineering studies relating to: i.
road and rail infrastructure
ii.
port infrastructure
iii.
energy infrastructure
iv.
quarry sites and sources for the production of ballast
v.
water supply infrastructure;
d)
the probable sources, types and terms of the financing of the Project;
e)
detailed socio-economic development and management plan; and
f)
Marketing study;
g)
detailed environmental impact study, and the appropriate measures to eliminate, reduce or off-set any detrimental effects to the Project’s environment,
. - 14 -
SIGNED FINAL VERSION ARTICLE 9: 9.1
4 August 2010
DESCRIPTION OF THE PROJECT
The Investor intends to develop, subject to financial and market conditions, a 50 mtpa Iron Ore Production and export business in Guinea, West Africa that will include the following components: • • • • •
9.2
A hematite and magnetite mine with an annual 50mtpa production capacity; Ore processing facilities; Power generating facilities; Transport (Rail) and shipping (port) infrastructure; Housing complexes. However, the Investor may decide, at any time, subject to providing reasonable prior notice and compliance with the provisions of article 128 of the Mining Code, to adjust the capacity.
ARTICLE 10: CONSTRUCTION AND INVESTMENT 10.1 The objective of the Investor is to produce up to fifty million (50,000,000) tonnes of Iron Ore per year. The production stages are as follows: •
20 mtpa of “Direct Shipping Ore” (“DSO”) by 2014;
•
10 mtpa of concentrate by 2015;
•
30 mtpa of DSO by 2017;
•
20 mtpa of concentrate by 2018.
10.2 Investment The Investor undertakes to build the mine and its facilities, as well as bulk and freight infrastructure (rail and port) within a four (4) years timeframe from the date the Feasibility Study is completed. Development costs of the project are as follows:
Transport Infrastructure
$2,723,000,000
Power
$341,550,000
Infrastructure and Facilities
$147,217,250
Mine and Process facilities
$1,243,215,600
TOTAL (USD)
$4,456,090,775
- 15 -
SIGNED FINAL VERSION
4 August 2010
.
TITLE IV OPERATIONAL STAGE ARTICLE 11:
RIGHT OF ACCESS PROJECT’S AREA
OF
THE
STATE
TO
THE
The State reserves the right to have access to, visit and inspect the Mining and Infrastructure Perimeters with a view to carrying out all control or other investigations, at its own expense, as provided for by the Mining Code. ARTICLE 12: 12.1
INFORMATION ON THE MINERAL SUBSTANCES AND REPORTS REQUIRED
For the whole term of the Convention, the Investor must prepare and keep updated files and reports on any mineral substances discovered within the Mining Perimeter. The original or true copy of the original of the files and reports must be kept at all times in Guinea and easily accessible for its examination by the Ministry of Mines and Geology or by any other body designated during business hours. The files, reports or data, other than drilling samples may be kept under an electronic format.
12.2
The Investor must keep the fractioned samples, or as the case may be, drilling samples, ore concentrates, monthly composites from drillings and the samples of mineral wastes. These samples must be available, for examination by the Ministry of Mines, Energy and Hydraulics or any other officially designated and approved body that makes such a request at least two (2) weeks in advance and such a visit shall take place during normal office hours.
12.3
In the framework of the performance of the Project and in accordance with the procedures and formalities provided for in the Mining Code for the exportation of mineral substances, the Investor may export for Processing, analysis, laboratory examination, and evaluation samples or any other original material from within the Mining Perimeter.
12.4
The reports referred to above must be delivered to the State in accordance with the Mining Code
ARTICLE 13: FREIGHT AND MARITIME TRANSPORTATION The Investor, if responsible for freight and maritime transportation of the exported Iron Ore Production, undertakes to have the exported Iron Ore Production loaded, as a priority, on Guinean vessels, under the express condition that these vessels have a relevant valid LLOYDS’ Register Marine certification or equivalent, and that the tariffs and availability applied are at least equal to those any Investor Member would be offered on the - 16 -
SIGNED FINAL VERSION
4 August 2010
freight market under similar conditions, including as regards technical loading and unloading obligations for the period considered for the freight and the maritime relations concerned taking into consideration all the other parameters to be taken into account to analyse the competitiveness of an offer. ARTICLE 14:
PURCHASE AND SUPPLIES
The Investor and its Sub-contractors shall use, as much as possible, services and raw materials from Guinea and products manufactured in Guinea, insofar as they are available at competitive price conditions internationally and under competitive quality, guarantees and delivery periods. ARTICLE 15: 15.1
HIRING AND PERSONNEL
EMPLOYMENT
OF
GUINEAN
For the term of the Convention, the Investor and Sub-contractors undertake to: a)
give priority to the hiring of Guinean nationals to meet their non-qualified labour needs in Guinea, under conditions of remuneration in accordance with best local practices.
b)
give precedence to Guinean nationals with the qualification and experience required to realise the Project for executives and senior executives’ employments in Guinea (including managing functions).
c)
subject to the provisions of the Convention and the law applicable in Guinea, the Investor and Sub-contractors shall be subject to no restrictions as regards the selection of staff, hiring, appointment, promotion or methods of dismissal.
d)
implement a training and promotion program for the Guinean members of the personnel to enable them to gain the experience necessary to hold executives and senior executives’ functions within the management.
e)
comply with the sanitary laws and regulations such as they result from the texts in force.
15.2
The State undertakes to grant the Investor and Sub-Contractors, the authorizations required to permit the employees to work extra hours according to operational requirements, including nights or during bank holidays, in accordance with the law in force at the date of signing of the Convention.
15.3
The State undertakes not to impose as regards the Investor and SubContractors, as well as their personnel, any measure regarding labour or social law that might be considered as discriminatory as compared to those to which companies carrying out a similar activity are subjected.
- 17 -
SIGNED FINAL VERSION 15.4
4 August 2010
BELLZONE HOLDINGS S.A, undertakes, as from the start of the Production, to appoint at least one Guinean executive of its choice to the management of BELLZONE HOLDINGS S.A.
ARTICLE 16:
HIRING AND PERSONNEL
EMPLOYMENT
OF
EXPATRIATE
For their activities in Guinea, the Investor and Sub-Contractors shall be free to hire the expatriate personnel that, in the opinion of the Investor, shall be necessary for the efficient carrying out of the Project. The Authorisations for such expatriate personnel shall be delivered by the State under the following conditions: 16.1
A work permit shall be delivered individually to each member of the expatriate personnel at the Investor’s request. The permit shall be delivered as quickly as possible as from the filing date of the complete file with the relevant services, subject to compliance with Guinean law on foreigners’ entry and residence. The work permit shall be delivered in accordance with the law in force as at the date of the signing of the Convention for a renewable period if the work contract is unlimited and for the term of the contract when the work contract is of limited duration. The renewal of the work permit shall take place under the same conditions as those set in the previous paragraph of article 16.1.
16.2
The expatriate employees, as well as the members of their family (spouses, dependent children) shall also be granted a residence visa to be able to stay in Guinea. The visa shall be delivered individually at the request of the interested person or the Investor. The renewal of the visa shall take place in accordance with the same procedures as those mentioned in article 16.1 above.
16.3
A permanent entry and exit visa shall be granted to expatriate employees at the request of the Investor. The State undertakes, for the term of this Convention, not to rule or impose upon the Investor and Sub-Contractors, any measure which implies a restriction of the conditions under which the Legislation in Force in Guinea permits: a)
the entry, the residence and exit of any member of the personnel of the Investor and Sub-Contractors, of the families of the personnel and their personal belongings;
b)
subject to article 16 above, the hiring and dismissal by the Investor and SubContractors of the expatriated persons of their choice is free, whatever their nationality, in accordance with the law in force as at the date of the signing of the Convention .
- 18 -
SIGNED FINAL VERSION
4 August 2010
TITLE V: PARTICIPATION OF THE STATE ARTICLE 17:
17.1
PARTICIPATION OF THE STATE IN CAPITAL OF THE INVESTOR
State Free Carry Participation According to article 167.2 of the Mining Code the State is not entitled to any free carry in the share holding of BELLZONE HOLDINGS SA.
17.2
State Share Capital Participation Rights Beyond this, the State can apply for a participation which will not exceed fifteen percent (15%) of BELLZONE HOLDINGS SA’s capital by purchasing shares in BELLZONE HOLDINGS S.A. at Investment Value. In this respect, the State must exercise its option and purchase the shares before the Project is given the go ahead or before financing is finalised by the Investor. If the State decides to exercise its buying option, it will have to pay, within the required timeframe for its level of participation, the full amounts representing the percentage of its participation in the share capital, advances against securities, increase in capital and any eventual guarantees that may be requested from the shareholders to finance the Project.
17.3
Should the State elect not to exercise or on sell its participation rights the fifteen percent (15%) share subscription will revert back to BELLZONE HOLDINGS S.A, at no cost to any Party.
17.4
Should the State elect to on sell its fifteen percent (15%) participation rights it can only do so within the timeframe indicated in Article 17.2 above, with the prior and written approval of the Investor.
17.5 If the State decides at a later stage to relinquish its participation rights or to resell its shares, the Investor has a pre-emptive right, in accordance with the legal statutes of BELLZONE HOLDINGS S.A..
- 19 -
SIGNED FINAL VERSION
4 August 2010
TITLE VI: BULK AND FREIGHT INFRASTRUCTURE ARTICLE 18: 18.1
GENERAL PROVISIONS
The Infrastructure will include, in particular, road construction and the development of a railway line from Kalia (Faranah region) to a port site in the Forécariah Prefecture. The Investor shall have absolute priority in terms of design, management, operations and use, as well as access to the sources of ballast production, power and water supplies necessary for their construction.
18.2
The State shall grant as from the Date of Entry into Force of the Convention, the right for the Investor to proceed, within the Project Perimeter, with all the reconnaissance and engineering works necessary for the completion of the Infrastructure.
18.3
Access to the quarries and the use of ballast are conditions for the success of the development of the Project. Suitable quarries and quantities of ballast will be identified and documented in the Bankable Feasibility Study. The State undertakes, as from the Date of Entry into Force of the Convention, to facilitate the granting of the Authorisations to the Investor for access to the quarries and the use of ballast from within the Project Perimeter and necessary for the development of the Project.
18.4
The State approves the Investor’s right to develop and construct and / or assign these rights to, amongst others, the required slurry pipelines, rail, port, roads, as well as the power and water infrastructure to support the Project. The Investor has the right to conduct all necessary engineering, economic, socio-economic and environmental works on the proposed Infrastructure corridors, and surrounding areas if necessary, required to finalise the Bankable Feasibility Study. On completion of the Bankable Feasibility Study, the Investor will provide to the government a finalized demarcated corridor for the rail, port and supporting Infrastructure for the Project.
ARTICLE 19: 19.1
INFRASTRUCTURE OVERVIEW
The railway line will pass though Southern Guinea from the Kalia mine site to the port located near Matakang. The length and width of the corridor will be defined in the Feasibility Study. As the routes pass through two (2) mountainous regions the assessment for the corridor has been increased in size to allow optimization. The area covered is approximately 120,000 hectares. Should the proposed corridor, from either an economic, technical or socio-economic or environmental aspect, prove unsuitable the State will automatically authorise the Investor to assess alternative corridors and / or areas to support the railway line requirements.
19.2
The port Infrastructure will consist of a road bridge extending from the Kabak mainland, to Matakang Island, which will potentially support the bulk stockyards. A - 20 -
SIGNED FINAL VERSION
4 August 2010
road bridge of approximately 4km will extend from the Matakang Island west into the sea. A channel is expected to be dredged from the 20m deep water mark to the island. The port development requires a twenty-five kilometre (25km) long by two kilometre (2km) wide corridor extending from the Kabak mainland to the Matakang Island in a south-westerly direction to the twenty metre (20m) deep water mark. Should the proposed corridor, from either an economic, technical or socio-economic or environmental aspect, prove unsuitable the State hereby authorises the Investor access to assess alternative corridors and / or areas to support the port Infrastructure requirements. ARTICLE 20:
GRANTING OF AN INFRASTRUCTURE CONCESSION
20.1
The State will grant an Infrastructure Concession to the Investorto develop the bulk and freight Infrastructures under a BOT system.
20.2
The Infrastructure Concession will be granted to the Investor after submission and approval of the bulk and freight Infrastructures Feasibility Study. a)
Upon completion of the Bankable Feasibility Study, will provide to the State finalized demarcated corridors for the rail, port and supporting Infrastructure for the Project.
b)
The Investor has the right to assign the conditions of the articles 17, 18, 19, 20, 21, 22 and 23 to a separate company which will focus solely on the Infrastructure development and operation.
20.3
For the purpose of the studies and for the guarantees to be granted to the Investor within the framework of the bulk and freight infrastructures’ development, the State and the Investor shall sign a Draft-Agreement describing the infrastructures’ conceptual, financial, development and management overview.
TITLE VII SPECIFIC UNDERTAKINGS BY THE PARTIES ARTICLE 21: 21.1
OBLIGATIONS OF THE INVESTOR INFRASTRUCTURES
Subject to the terms and conditions of the Convention the Investor shall: a)
Undertake the design, engineering, , construction, financing, procurement and operation of the bulk and freight Infrastructure in accordance with the basic Convention and the Infrastructure Concession; - 21 -
SIGNED FINAL VERSION
21.2
4 August 2010
b)
Operate and maintain the Infrastructure in accordance with the Infrastructure Concession;
c)
Have the required organisation and appoint appropriate managers, officers and representatives to supervise the construction, operation and maintenance of the Infrastructure;
d)
Make, or cause to be made, the necessary applications to the relevant Governmental Authorities to obtain the applicable Authorisations;
e)
Keep the Infrastructure Perimeter in conformity with the applicable environment and safety legislation;
f)
Obtain and keep current, from the Date of Entry into Force of the Convention, insurance policies in accordance with the provisions of this Convention;
g)
Appoint, supervise, monitor and control the activities of Sub-contractors under any project agreements, as may be necessary; and
h)
Take all reasonable precautions for the prevention of accidents on or about the Infrastructure Perimeter and develop, implement and administer a surveillance and safety program for the operation and maintenance of the Infrastructure.
MINING OPERATIONAL STAGE
21.2.1 The Investor undertakes to start exporting the Iron Ore processed on the Mining Perimeter within the deadline stipulated in Article 10 of the Convention. 21.2.2 After the Project is developed and in the event appropriate Iron Ore resources were available within the Mining Perimeter and sufficient power sources were available in Guinea, the Investor undertakes to study the technical and economic feasibility of transforming Concentrated Ores to produce iron and/or steel products in Guinea. ARTICLE 22:
OBLIGATIONS OF THE STATE
The State agrees to observe, comply and perform the following: a)
Provide the Investor free access to, and peaceful use of, the Infrastructure Perimeter, free from hindrance encumbrances, in accordance with Article 20;
b)
Assist and provide all reasonable assistance to the Investor in respect of obtaining and maintaining the applicable Authorisations;
- 22 -
SIGNED FINAL VERSION
4 August 2010
c)
Upon request from the Investor, assist the Investor in obtaining access to all necessary utilities, including water, electricity and telecommunication facilities at rates and on terms no less favourable to the Investor than those generally available to commercial customers receiving equivalent services;
d)
Grant to the Investor access to the Infrastructure Perimeter for carrying out such surveys, investigations and soil tests as the Investor may deem necessary;
e)
Grant to the Investor for the Infrastructure Concession Period, the right and license to access all buildings located in the Infrastructure Perimeter and to survey, design, engineer, procure, construct, operate and maintain the Infrastructure in accordance with the provisions of the Convention;
f)
Grant to the Investor the right to conduct reconnaissance and engineering works necessary for the completion of the Infrastructure within and outside the Infrastructure Perimeter;
g)
Authorise the Investor to open quarries to use materials necessary for the development of the Project and the Infrastructure;
h)
Grant to the Investor a guarantee that all the customs and taxes provisions of this Convention will be applied;
i)
Grant to the Investor the economic and financial guarantees to which it is entitled under the BOT Law in respect of the infrastructure financing, including, but not limited to, rights to repatriate revenues for repayment of the Project construction loans, setting up of off-shore Project accounts, etc.
ARTICLE 23:
COOPERATION AUTHORITIES
BY
THE
ADMINISTRATIVE
23.1 The State shall facilitate, by all appropriate means and in accordance with the terms and conditions agreed within the framework of the Convention and the enforceable laws, the performance of the Project and, in particular, all the study works, all development and mining, processing, treatment, transformation, transport and export operations of the Iron Ore as well as the operations relating to the Infrastructure, carried out by the Investor. 23.2 The State shall designate to the Investor the relevant Governmental Authorities in each field concerned so as to facilitate all administrative steps and ensure that the said Governmental Authorities provide all the necessary assistance and deliver all authorizations provided for under the laws in force within the necessary timeframes. 23.3 At any stage of the Project, the Investor shall have the right, in accordance to the law, to proceed, with the cooperation of the Governmental Authorities with all the - 23 -
SIGNED FINAL VERSION
4 August 2010
necessary filings and registrations in order to protect the rights granted pursuant to the Convention. 23.4 The State undertakes to provide or to have provided all the necessary Authorizations to carry out the rights guaranteed by the Convention within the deadlines set in this agreement, and in the absence of set deadlines, on a diligent basis and in accordance with legal requirements to ensure the proper completion of the Project. ARTICLE 24:
INFRASTRUCTURE ACCESS RIGHTS
24.1
The Investor shall have the right to finance, build, realise, operate and manage Infrastructure and construction.
24.2
The land dedicated to the realisation of the Infrastructure and to be used in the contract of the Project, shall be reserved to the Investor, and/or to any company agreed between the Parties to realize or have realized the Infrastructure necessary to the Project and the Operations for the Infrastructure Concession Period. This Convention provides that the financing and realisation of the Infrastructure shall be at the cost and risk of the Investor and that the Investor shall have priority enjoyment of the facilities and equipment necessary to the Project for the entire Infrastructure Concession Period.
24.3
Infrastructure to be built on private land The Investor may negotiate, at its own cost and under the authority of the State, with owners, the occupancy of the private lands necessary or useful to implement the Project and to pursue the Activities in accordance with this Convention, the Infrastructure Concession and the Authorizations. If the Investor so requests, the private land required for the Project shall be declared necessary for public utility works by the State and expropriated to be put at the Investor's disposal, in accordance with law in force as at the date of the signing of this Convention, within periods allowing the good development of the Project. The Investor shall bear the costs and indemnities incurred by the expropriation in compliance with the law.
24.4
The Investor shall construct and hold as freehold all the Infrastructure, subject to the rights that may be granted to third parties in accordance with the Legislation in Force and pursuant to Project contracts.
ARTICLE 25: USE OF INFRASTRUCTURE BY A THIRD PARTY 25.1
Within the Infrastructure Perimeter where the Investor holds an exclusive and automatic right to operate the railway and the port.
25.2
The bulk and freight infrastructure can be used by third parties at the following conditions: •
Existence of additional capacities; - 24 -
SIGNED FINAL VERSION
4 August 2010
Participation of the third party in the repayments of the investments before the BOT system expires; • The Investor will operate and maintain the infrastructure until the expiry of the BOT system; • The third party operations do not disrupt the Investor’s transport and freighting schedules. • The State, the Investor and the third party will enter into an agreement guaranteeing to the Investor that for the whole term of the Infrastructure Concession Period, the third party’s activities shall not negatively affect the Project. •
ARTICLE 26: PROTECTION OF THE ENVIRONMENT AND CULTURAL HERITAGE 26.1
Generalities The Investor undertakes to conduct its different activities with all due respect for the environment; health, safety and the well being of its employees and the community. The Investor shall comply with the Legislation in Force in Guinea in the area of the environment and shall also conform with national norms and international practices in the mining industry and in the matter of operation and environment and, notably, as regards the limitation on the negative impacts of the Project. In this regard, it will incorporate in the planning and the management of its activities the appropriate measures which will allow for the preservation of the natural characteristics within the Project Perimeter. During the course of the mining operations, the Investor undertakes to comply with the recommendations taken by the Ministry for the Environment in application of the Legislation in Force in Guinea in the area of the environment and shall facilitate the follow-up which will be effected by the specialist services.
26.2
Assessment of the Environmental Impact: For each Investment Programme, the Investor shall conduct impact studies regarding the natural surroundings for people and the environment in general. The report of these studies shall include the recommendations as regards the measures necessary in order to reduce the negative impact of the Project on the affected surroundings, including a programme for the restoration of the mining zones or compensatory measures and a plan for the management of the environment. The terms of reference for the environmental impact studies shall be drawn up in accordance with international standards in force, in close collaboration between
- 25 -
SIGNED FINAL VERSION
4 August 2010
the Investor and the State, within a time period of nine (9) months as from the Date of the Entry into Force of the Convention. Following the filing by the Investor of the environmental impact study, the State shall issue all the authorisations necessary within a time period of three (3) months, if the conclusions and proposals of this report are in conformity with the Legislation in Force and/or with international standards. 26.3
Specific Environmental Undertakings: The Investor undertakes in particular to:
26.4
a)
Preserve for the entire term of the Convention, the environment and the public works affected by the Project;
b)
to be in conformity in all respects with the environmental code relating to dangerous waste, with natural resources and with the protection of the environment;
c)
to organise the sites that have been excavated in such a way as to render them usable in accordance with the terms fixed by the Legislation in Force in this area;
d)
to proceed with operations of rehousing;
e)
minimise the impact of the Project on protected animal species living within the Project Perimeter.
Discovery of an Archaeological Site: In the event of the discovery of an archaeological site within the context of the execution of the Project in the Project Perimeter, the mining operations shall be preceded, at the expense of the Investor, by appropriate studies conducted by the competent services. The Investor undertakes to participate, as much as possible, in the reasonable expenses for the protection of such an archaeological site, provided that this does not cause any delay in the execution of the calendar for the works of the Project.
ARTICLE 27: LOCAL COMMUNITIES DEVELOPMENT CONVENTION To promote the socio-economic development of the local communities within the areas of the Project, the Company undertakes to enter into Development Conventions within the Plans de Développement Local (PDL = Local Development Plans) Scheme. The Local Communities Development Convention will be negotiated between the Company and the local communities official representatives. - 26 -
SIGNED FINAL VERSION
4 August 2010
The Local Communities Development Convention duly signed and approved by the representatives of the Company and local communities, must be submitted for approval to the Ministers in charge of the Mines and of the Local Communities.
- 27 -
SIGNED FINAL VERSION
4 August 2010
TITLE VIII MARKETING ARTICLE 28: SALE OF MINING PRODUCTS 28.1
Competitive Price
The Company undertakes to sell the mining products from the Concession at a fully competitive price. 28.2
Access by the State to the Mining Product
The State acknowledges that the Investor has the right to establish long term offtake contracts to underpin the financing of the Project. However, should these long term contracts cease, at some point in the future, to cover the entire Production, the State has the right to purchase or to enter into a Production offtake contract with the Investor with terms and conditions similar to those of the global raw material market, including in terms of quantities, prices and transport responsibilities. Exercising this right is subject to notification in writing at the latest at the end of the first term of the current calendar year. The Company will review this offer against ore availability and market conditions. 28.3
Notice of sale to an Affiliated Company
When the Mining Product is sold to an Affiliated Company, the Company must, within fifteen (15) Days following such a sale, advise the State and provide him with all information, data, sale contract and receipts which were used for the prices, discounts and commissions related to such a sale or transfer. This information is handled confidentially by the State.
TITLE IX TAX AND CUSTOMS REGIME ARTICLE 29: 29.1
GENERAL PROVISIONS
Due to the importance of the investments necessary to carry out the Project, incentive provisions of the Guinean tax and customs law from the Mining Code - 28 -
SIGNED FINAL VERSION
4 August 2010
are applied. Such provisions benefit the Investor and its Sub-contractors for Activities linked to the Project. 29.2
The Investor and its Sub-contractors are exempt from VAT on imports, purchases locally in Guinea and services insofar as the services are connected to the Project. Any VAT paid by the Investor to the State will be refunded according to a Ministry of Finances applicable procedure. The exemption certificates, signed by the Minister in charge of Finances, shall be transmitted by the Investor to its Sub-contractors intervening on the Project. The Investor shall prepare, at the end of each year, together with each of its Subcontractors that are involved in the Project and only for what concerns the Project, a list of equipment, materials, spare parts, heavy tools, engines, vehicles used for the purpose of mining and industrial operations, as well as the fuels (except for petrol and diesel), lubricants, other oil products and raw materials and consumables (except foodstuffs) to be imported. This list, after being transmitted to the Centre for Mining Promotion and Development (hereafter “CPDM”), shall be jointly approved by the Ministry of Finance and the Ministry of Mines, within a maximum period of thirty (30) days. The specific format of this list and related procedures shall be the object of an agreement between the State and the Investor in order to establish a memorandum of understanding on this matter. The industrial or commercial operations shall under no circumstance be compromised or negatively affected by a refusal or delay in approving thatlist. Any disagreement shall be settled without hindering the pursuit of imports and exports in general.
ARTICLE 30:
GENERAL PROJECT
TAX
REGIME
APPLICABLE
TO
THE
As from the Date of Entry into Force of the Convention, the Investor, its Sub-contractors, its service providers and suppliers directly taking part in the realisation of the Project and as regards their participation in the Project, shall be subject in Guinea, only to the following Taxes: 30.1
Permit granting and renewal fixed duties,
30.2
Surface royalties, the annual rates which have been fixed by joint ministerial order by the Minister of Mines and Geology and the Minister for Finance and are set out in Annexure6,
30.3
Sole duty on vehicles except for works engines and vehicles,
30.4
Employer’s share of social security contributions, given that the employee's share of the contributions is payable by the employee but paid by the employer,
30.5
Taxes on insurance contracts entered into in Guinea, the Investor may place insurance contracts in whatever jurisdiction is considered the most commercially beneficial.
30.6
Withholding taxes: a)
Nationals are subject to the payment of income tax. - 29 -
SIGNED FINAL VERSION
4 August 2010
b)
a withholding tax exclusive of any other Tax applies to the salary paid by the companies whose registered office is in Guinea to its expatriate personnel residing more than one hundred and eighty three (183) days in Guinea out of any twelve (12) month period, at the rate of ten per cent (10%) of the salaries paid in Guinea and outside Guinea. A 10% withholding tax also applies to all services provided by Companies not registered in Guinea.
c)
The above mentioned withholding taxes are borne by the employees or service providers and are paid by the company benefiting from the service.
ARTICLE 31:
TAX REGIME APPLICABLE TO THE OPERATIONAL STAGE
As from the Date of First Commercial Production, the Investor, its Sub-contractors, its service providers and suppliers taking part directly in the realisation of the Project and within the limit of this participation in the Project shall have to pay the Taxes for the operations mentioned under this article, under the following conditions: 31.1
Taxes on Industrial and Commercial Profits:
For the production operations taking place within the Mining Perimeter, as well as for the operations of exploitation of the iron ore transportation, production and exportation infrastructure that shall have been created mainly for the needs of the Project, an exemption from the industrial and commercial profits tax and from the IMF shall apply for a maximum period of eight (8) fiscal years, as of the Date of First Commercial Production.
At the expiry of this period, the Investor shall pay the industrial and commercial profits tax at the rate of thirty five per cent (35%). 31.2 Depreciation Regime: All tangible and intangible goods appearing amongst the Project Assets, as well as those put at its disposal within the framework of all occupancy of the public domain give rise to the right, for the benefit of the Investor, to a tax depreciation in accordance with the provisions of article 144 of the Mining Code commencing as of the Date of First Commercial Production. 31.3 Deficit Carry Forward: Losses can be carried forward on the five (5) fiscal years following the deficit fiscal year. However, the depreciation deemed deferred in a period of deficit, including the depreciation carried out during the exemption period, and in particular the costs of first establishment depreciation may be cumulated and carried forward without time limit on the subsequent fiscal years up to the amount of the taxable income. 31.4 Calculation of the Taxable Income: Except in the event of contrary provisions contained in the Convention, the taxable income is determined in accordance with the rules of the Guinean General Tax Code. 31.5 Deductions from the Taxable Income: - 30 -
SIGNED FINAL VERSION
4 August 2010
In particular are deductible from the taxable income the Mining Tax, the expense budgets for the construction of Infrastructure, Operating Costs, the socio-economic development costs, as well as the total amount of the interest and other compensations and costs due by the Investor as loans and advances subscribed including the interests generated by the shareholders current accounts. 31.6 Provision for Restoration of Deposits: a)
A provision for the restoration of Deposits in a maximum amount of ten per cent (10%) of the taxable profit shall be constituted by BELLZONE HOLDINGS S.A., holder of the Mining Concession, at the end of each fiscal year, free of income tax.
b)
This provision may be used to finance all research works, as well as all investment in the mining industry related to a project in Guinea in the two (2) years following its constitution.
c)
The part of the provision that may not have been used must be carried forward onto the result of the third fiscal year following that for which it has been constituted.
31.7 Investment Credit: The Investor shall benefit from an investment credit representing five per cent (5 %) of any investment made during the fiscal year. This allocation is deductible from the taxable profit. 31.8
For the calculation of [the BIC tax] under a stabilized regime, the Investor may consolidate its accounts.
31.9 Tax on Dividends: Dividends, percentages, directors' fees and other products distributed to shareholders by mining exploitation companies constituted as commercial companies, are subject to a tax on dividends (IRVM). This tax’s rate is fixed for the above mentioned products at ten per cent (10%) for the Guinean residents and zero percent (0%) for the shareholders non residents of Guinea for tax purposes. 31.10 Withholding on the rents of real estate built-up or not by companies resident in Guinea shall be due under common law conditions. 31.11 Mining Tax a)
During the whole term of this Convention, the Iron Ore extracted by the Investor or its Affiliated Companies is subject at the time of its sale to the payment of the Mining Tax under the following conditions: (i)
For Processed Iron Ore, which is exported, the rate of Mining Tax is seven per cent (7%) of the FOB value.
(ii)
For Concentrated Ore, which is exported, the rate of the Mining Tax is three point five per cent (3.5%) of the FOB value. - 31 -
SIGNED FINAL VERSION b)
4 August 2010
The Mining Tax is paid quarterly to the Guinean Public Treasury which shall acknowledge receipt in accordance with the following methods: (i)
Thirty (30) days from the last day of the preceding quarter, the Investor shall provide the Ministry of Mines and Geology, as well as the Ministry of Finance, a statement together with all useful evidencing documents of the quantities of Iron Ore exported over the preceding quarter.
(ii)
Thirty (30) days from the last day of the preceding quarter, the Mining Tax shall be paid in accordance with the Mining Code by application of the abovementioned rate.
(iii)
In the case that the Mining Tax paid during a given fiscal year appears to be greater or lesser to that effectively due, the surplus or the remaining amount, would be set off against the first payment of the following fiscal year or would be added to it, as the case may be.
(iv)
The Mining Tax mentioned constitute operating charges and therefore are deductible from the taxable basis.
31.12 Tax Reductions Except when otherwise provided in this Convention, the Investor benefit from the following exemptions: a)
exemption from IMF;
b)
exemption from licence taxes;
c)
exemption from registration and stamp duties imposed on deeds related to, the changes of the Company and capital increases necessary to complete the Project ;
d)
exemption from the professional training tax at the rate of 1.5% (one point five per cent) of the salary mass, provided the training expenses directly borne and recorded by the Investor exceed the amount of this tax, or that the Investor has its own training centre.
ARTICLE 32:
CUSTOMS REGIME APPLICABLE TO THE RESEARCH AND STUDIES WORKS OF THE PROJECT
As from the Date of Entry into Force of the Convention, the Investor, its Sub-contractors, its service providers and suppliers shall benefit, for their Activities, from the following customs advantages for the research and studies works of the Project. 32.1 Temporary Admission: The equipment, materials, consumables, machines, apparatus, utility and transportation vehicles (except for private vehicles), engines, generators imported by the persons mentioned under this article and dedicated to research and studies works are placed under the customs regime of temporary free admission prorata temporis for the time of said works. - 32 -
SIGNED FINAL VERSION
4 August 2010
At the expiry of the research and studies works, the items so admitted temporarily must be re-exported or used. The Investor must provide the CPDM and the relevant customs department, during the first quarter of each year, a statement of the equipment that is admitted temporarily. If an item so imported under temporary admission is resold in Guinea by the persons referred to in this article, they become liable to all the Taxes due in accordance with the provisions of article 154 of the Mining Code. 32.2 Customs Reductions Any replacement equipment, consumables, materials, machines, apparatus, utility and transportation vehicles (except for private vehicles), engines, generators and spare parts necessary for the research and studies works, shall benefit from a total exemption from fees and Taxes. The list of items concerned shall be sent to the CPDM and to the relevant customs department in the first quarter of each year. The fuels necessary to operate the research materials, consumables and equipment shall benefit from the price structure applied to the mining sector. 32.3 Personal Belongings The personal belongings imported by the persons referred to under this article are exempt in accordance with the customs regulation in force. In the event that such belongings are re-sold in Guinea, the duties are paid in accordance with the customs regulation in force. ARTICLE 33:
CUSTOMS REGIME APPLICABLE TO THE CONSTRUCTION AND EXTENSION WORKS OF THE PROJECT
As from the date of commencement of construction and extension of the Project, the Investor, its Sub-contractors, its service providers and suppliers shall benefit, for their Activities, from the following customs advantages for the construction and extension works of the Project. 33.1 Customs Reductions: As from the date of the commencement of the construction and, as the case may be, extension works of the Project, the Investor, its Sub-contractors, its service providers and its suppliers shall benefit, as regards their activities linked to the Project, from an exoneration of fees and Taxes in relation to the equipment, materials, consumables, heavy equipment, engines and vehicles, except as regards tourist vehicles and food stuffs. Spare parts and lubricants necessary for this equipment are also exempt. However, the items referred to above are liable to the payment, of a registration tax at the customs, at a rate of zero point five per cent (0.5%) of the CIF value of the imported goods up to an importation volume of twenty million dollars (USD 20,000,000), a volume beyond which this tax shall no longer be due. 33.2 Temporary Admission: - 33 -
SIGNED FINAL VERSION
4 August 2010
The equipment, materials, machines, apparatus, utility and transportation vehicles (except for private vehicles), engines, consumables and materials destined to be used temporarily in Guinea for the completion of all construction, commissioning and Extension Works necessary for the Project shall be admitted under the temporary admission regime in accordance with the identical terms provided for in article 32.1 above. 33.3 Conditions for the importation of oil products necessary for the completion of the construction and extension works. Petroleum products (apart from petrol) necessary for the completion of the construction and extension phase may be imported by the Investor in accordance with the price structure applicable to the mining sector. The related Taxes are charges which are deductible from the operating tax basis. ARTICLE 34:
CUSTOMS REGIME APPLICABLE TO MINING AND PROCESSING OPERATIONS OF THE PROJECT
As from the Date of First Commercial Production, the Investor, its Sub-contractors, its direct service providers and suppliers shall be obliged, as regards their mining and Processing operations linked to the Project, to pay the fees and Taxes in force at the Date of Entry into Force of the Convention except as regards the following: 34.1
The equipment, materials, consumables, heavy equipment, engines and vehicles used for mining and Processing needs (except for tourist vehicles), as well as raw materials and consumables (not including foodstuffs) participating directly in the operations of Extraction and Processing operations, are taxed upon importation at the single rate of five point six per cent (5.6%) of the FOB value of importations.
34.2
Notwithstanding the provisions of the previous paragraph, no Tax upon importation may be imposed as regards any equipment, materials, consumables, heavy equipment, engines, vehicles and fuel relating to the production of energy necessary for the Extraction and Processing operations. The list of items concerned shall be sent to the CPDM and to the relevant customs department in the first quarter of each year. The Investor can make 2 amendments to the list subject to approval by the CPDM throughout the year.
34.3
The fuel, lubricants, and other petroleum products (except for petrol) necessary for the realisation of the Extraction and Processing operations of the Project may be imported by the Investor and are taxed upon importation at the single rate of five point six per cent (5.6%) of the FOB value of imports.
34.4
The fuel, lubricants and other petroleum products not directly used in the Extraction and Processing operations of the Project are acquired in accordance with the price structure applicable in the mining sector.
- 34 -
SIGNED FINAL VERSION
4 August 2010
ARTICLE 35:
TO
CUSTOMS REGIME APPLICABLE TREATMENT OF IRON ORE
THE
35.1
The provisions of article 32 apply to research and studies work in relation to Treatment of Iron Ore.
35.2
The provisions of article 33 apply to construction, commissioning and extension works in relation to Treatment of Iron Ore.
35.3
As from the date on which a Treatment facility has been operating at design capacity for more than three (3) consecutive months, the Investor, its Subcontractors, its direct service providers and suppliers shall be obliged, as regards the Treatment of Iron Ore linked to the Project, to pay the fees and Taxes in force at the Date of Entry into Force of the Convention except as regards the following:
35.4
The equipment, materials, consumables, heavy equipment, engines and vehicles used for the Treatment of Iron Ore (except for tourist vehicles), as well as raw materials and consumables (not including foodstuffs) participating directly in the Treatment of Iron Ore, are taxed upon importation at the single rate of five point six per cent (5.6%) of the FOB value of importations.
35.5
Notwithstanding the provisions of the previous paragraph, no Tax upon importation may be imposed as regards any equipment, materials, consumables, heavy equipment, engines, vehicles and fuel (except for private vehicles) relating to the production of energy necessary for the Treatment of Iron Ore.
35.6
The fuel, lubricants and other petroleum products not directly used in the Treatment of Iron Ore are acquired in accordance with the price structure applicable in the mining sector.
35.7
The fuel, lubricants and other petroleum products (except for petrol) required for Iron Ore Processing can be imported by the Investor free of customs duties.
ARTICLE 36:
CUSTOMS REGIME APPLICABLE TRANSFORMATION OF IRON ORE
TO
THE
36.1
The provisions of article 32 apply to research and study works in relation to the Transformation of Iron Ore.
36.2
The provisions of article 33 apply to construction, commissioning and extension works in relation to the Transformation of Iron Ore.
36.3
As regards the Transformation Operations of the Iron Ore, the Investor, its Subcontractors, its service providers and suppliers directly linked to these operations shall benefit from an exoneration from all fees and Taxes on the importations necessary for the said Transformation operations whether this concerns the importation of raw materials for consumption, as well as any equipment, materials, - 35 -
SIGNED FINAL VERSION
4 August 2010
consumables, heavy equipment, engines, vehicles and petroleum products which serve to produce energy for these purposes. 36.4
The equipment, materials, consumables, heavy equipment, engines, vehicles (apart from tourist vehicles) not related to any energy production appearing on the list of the fixed assets of the Investor are taxed upon importation at the rate of five point six per cent (5.6%) of the FOB value of the said importations.
36.5
The fuel, lubricants and other petroleum products (except for petrol) necessary for Iron Ore Transformation may be imported by the Investor free of customs duties.
36.6
Notwithstanding the provisions of the previous paragraph, no Tax upon importation may be imposed as regards any equipment, materials, consumables, heavy equipment, engines, vehicles and fuel relating to the production of energy necessary for the Transformation of Iron Ore.
36.7
The fuel, lubricants and other petroleum products not directly used in the operations of Transformation of the Iron Ore are acquired in accordance with the price structure applicable to the mining sector.
ARTICLE 37:
CUSTOMS REGIME APPLICABLE TO TRANSPORT AND EXPORT OPERATIONS OF THE PROJECT
As from the Date of First Commercial Production, the Investor, its Sub-contractors, its direct service providers and suppliers shall be obliged, as regards their Transport and export operations linked to the Project, to pay the fees and Taxes in force at the Date of Entry into Force of the Convention except as regards the following: 37.1
The equipment, materials, consumables, heavy equipment, engines and vehicles used for transport and export needs (except for private vehicles), as well as raw materials and consumables (not including foodstuffs) participating directly in the operations of transport and export operations, are taxed upon importation at the single rate of five point six per cent (5.6%) of the FOB value of importations.
37.2
Notwithstanding the provisions of the previous paragraph, no Tax upon importation may be imposed as regards any equipment, materials, consumables, heavy equipment, engines, vehicles and fuel (except for private vehicles) relating to the production of energy necessary for the Transport and export operations. The list of items concerned shall be sent to the CPDM and to the relevant customs department in the first quarter of each year. The Investor can make 2 amendments to the list subject to approval by the Ministry for Finances and the Ministry for Mines throughout the year.
37.3
The fuel, lubricants, and other petroleum products (except for petrol) necessary for the realisation of the Transport and export operations of the Project may be imported by the Investor and are taxed upon importation at the single rate of five point six per cent (5.6%) of the FOB value of imports. - 36 -
SIGNED FINAL VERSION
4 August 2010
37.4
The fuel, lubricants and other petroleum products which were not directly used in the Transport and export operations of the Project are acquired in accordance with the price structure applicable in the mining sector.
37.5
Notwithstanding the provisions of the previous paragraph, no Tax upon importation may be imposed as regards any equipment, materials, consumables, heavy equipment, engines, vehicles and fuel (except for private vehicles) relating to the production of energy necessary for the Transport and Export of Concentrated Iron Ore or steel production.
ARTICLE 38:
CALCULATION OF TAXES
The calculation of all Taxes is carried out on the basis of an accounting and a currency always expressed in dollars which are then converted into Guinean francs in accordance with the following conditions: a)
As regards Taxes based on a reference period of twelve (12) months (such as the BIC), the exchange rate applicable shall be the average rate of the BCRG applicable to this reference period;
b)
As regards all other Taxes, the exchange rate applicable shall be that of the BCRG in force as at the date when the tax is due.
The exchange rates outlined above shall also apply for the calculation of any subsequent tax adjustment, interest and penalty, as well as all reimbursements of overpaid Taxes. Any overpayment of taxes will be deducted from the Mining Tax as defined in section 31.11. ARTICLE 39: 39.1
OTHER PROVISIONS
Accounting Principles: In view of the particularities of the Project, the Investor is authorised to keep its accounting in Guinea in US Dollars ($), but in compliance with the accounting and tax principles of the Guinean Accounting Plan. This accounting shall be truthful, genuine, detailed and accompanied with supporting documentation which allow for a verification to be made as to the truthfulness and exactness. This accounting may be reviewed by representatives of the State who are duly mandated for these purposes within the context of the applicable legislative dispositions. The State must provide at least three (3) weeks prior notice of such review to the Investor and such a review may only take place during normal office hours.
39.2
Annual Financial Statements: - 37 -
SIGNED FINAL VERSION
4 August 2010
The financial statements of the Investor required by the Legislation in Force in Guinea (balance sheets, account results, management table) are converted and presented in Guinean Francs in accordance with the conditions provided for in the Convention. 39.3
All information brought to the attention of the State by the Investor, in application of articles 39.1 and 39.2 above, shall be considered as being confidential, and the State undertakes not to reveal the contents to third parties without having obtained the prior written approval from the Investor, which may not be refused without a valid reason.
ARTICLE 40:
STABILISATION OF THE TAX AND CUSTOMS REGIME
40.1
Subject to the provisions of the Convention, the Investor and Sub-contractors shall not be liable, for the Activities of the Project, to any Tax including the exportation taxes and value added tax which are not expressly provided for in this Convention.
40.2
The Investor and Sub-contractors benefit, as regards the Activities of the Project, in accordance with the Convention, from the stabilisation of the tax and customs regime in force as at the date of the signature of the Convention, and contained in this Convention, and this for the entire duration of the Mining Concession.
40.3
The Investor may at any time, and at its convenience, choose to be governed by the legislative and regulatory dispositions which are more favourable resulting from the evolution of the Legislation in Force in Guinea, at whatever time, or which would be applied to whatever investor carrying out similar activities in Guinea, it being agreed that in the situation where such evolutions are subsequently modified in an unfavourable way, the benefit of the principle of stabilisation of the tax and customs regime of the Convention shall apply to the dispositions which the Investor has decided to benefit from, and which therefore remain in force for its benefit.
40.4
The provisions of this article 40 shall apply to the Affiliated Companies and to the Sub-contractors to the extent that they undertake to comply, and comply in participating in the Activities of the Project, with the provisions of the Convention.
- 38 -
SIGNED FINAL VERSION
4 August 2010
TITLE X: GUARANTEES ARTICLE 41: 41.1
GENERAL GUARANTEES
The State guarantees to the Investor, the retention of the economic and financial advantages and tax and customs conditions provided for in the Convention and this, for the entire period of validity of the Convention. The changes which may be brought in the future to the legislation and Guinean regulations, notably as regards the Mining Code, shall not be applicable to the Investor, without their prior agreement. The changes that are adopted after the signing of the Convention, in the context of the Legislation in Force in Guinea, and which shall be judged favourable for the Investor may be extended by the State to the Investor, at its request.
41.2
The State also guarantees to the Investor that they shall never and in no manner be the subject of any legal or administrative discrimination which is unfavourable in law or in fact.
41.3
Subject to the provisions of the Convention, the State, for the period of the validity of this Convention, shall not provoke or edict, with regard to the Investor, any measure implying a restriction on the conditions in which the Legislation in Force in Guinea permits, in particular: a)
freedom of choice of manufacturers and sub-contractors;
b)
free ownership of the ore extracted from the Mining Perimeter;
c)
freedom in the importation of goods, equipment, materials, machines, spare parts, consumable goods and services, directly necessary for the Project,
d)
freedom in the circulation across Guinea of personnel, equipment and goods as well as all substances and products coming from the research, mining, processing, treatment and transport activities.
41.4
The State undertakes to provide all the Authorisations necessary for the exercise of the rights and the guarantees provided for by the Convention. In addition, when the Project requires it, the State guarantees the Investor, the rapid putting into operation of all expropriation procedures.
41.5
In the event of an upheaval in the economic conditions of the Project, the Parties undertake to take the appropriate measures to re-establish the economic balance which has been upset.
- 39 -
SIGNED FINAL VERSION ARTICLE 42: 42.1
4 August 2010
GUARANTEE FOR THE HOLDING OF FOREIGN CURRENCY ACCOUNTS AND TRANSFERS
As regards income coming from the sale of products derived from the Iron Ore and other currency holdings, the Investor is authorised to open foreign currency accounts within and outside Guinea with foreign commercial banks, with an international reputation. The Investor shall not be obliged to return to Guinea the amounts which appear on these foreign currency accounts apart from the sums necessary for the completion of the Project, it being understood that all of the operations and financial movements corresponding to activities of the Investor shall be reflected in the accounting of the Investor in Guinea.
42.2
It is understood that the Investor shall be authorised to keep its accounts in Euros and/or in Dollars.
42.3
The Investor is guaranteed the free transfer abroad of dividends and income from capital thus invested, as well as income from the liquidation or the sale of its assets.
42.4
The foreign personnel, residing in Guinea and employed by the Investor, or by any other company participating in the realisation of the Project, are guaranteed the free conversion and the free transfer to their country of origin, of all or part of the salaries or other elements of remuneration which are owed to them, provided that their Taxes have been paid in accordance with the provisions of the Convention.
42.5
The Investor, at its own discretion and without any restriction, shall be authorised to receive, in respect of the Project, payments directly from clients and other credits into foreign currency accounts located outside Guinea and to make payments as from these accounts.
ARTICLE 43: 43.1
ADMINISTRATIVE, GUARANTEES
MINING
AND
LAND-RELATED
The State guarantees the Investor the freedom of occupation and use of all the sites necessary for the research and mining works regarding any Deposit, as well as in relation to the sites for all the transportation and removal Infrastructure necessary for the Project, including, in particular, quarries, the roads, water supplies, dams and bores, the railway line and the site of the port which shall service the Project. The Investor will use the above resources in a lawful manner.
43.2
The occupation and the use of the aforementioned sites referred to in article43.1 above, will not result for the Investor in the payment of any Taxes other than those specified in the Convention. - 40 -
SIGNED FINAL VERSION
4 August 2010
At the request of the Investor, the State shall proceed with the rehousing of the inhabitants whose presence on the sites would hinder the research, mining and Infrastructure works. The Investor shall pay a fair compensation to these inhabitants as full compensation for moving according to the provisions of the Land and State Property Code related to expropriation for public purposes, based on property and occupation titles or customary rights. 43.3 The State hereby authorises the Investor to carry out the following activities on the sites in relation to which the Investor may or may not have ownership to the extent that they are necessary for the completion of the Project:
43.4
a)
clearing all trees, bushes and other obstacles from the ground and logs,
b)
use of water courses which are not used or reserved and the organisation of these water courses, in particular, through the construction of dams, for the needs of the Project Activities,
c)
the construction of power stations and electricity sub stations, as well as any other means for the production of electricity,
d)
the creation and development of dams for water storage and supply;
e)
the creation and development of dams for the storage of residue
f)
the implementation of installations for the Extraction, Treatment and/or Processing of the ore,
g)
development of waste material storage facilities
h)
creation or the laying out of roads, canals, pipelines, infrastructure or other surface works which are used for the transportation of products,
i)
creation and development of a railway line and port installations.
The channels of communication drawn up or developed by the Investor, inside or outside the Project Perimeter may, in return for a fair financial compensation for the benefit of the Investor, be used by the State or by third parties which make the request where there is no resulting obstacle or problem caused for the activities of the Investor.
ARTICLE 44: 44.1
GUARANTEES FOR THE PROTECTION OF GOODS, RIGHTS, TITLES AND INTERESTS
Subject to what is provided for in this Convention, the Investor and Sub contractors have the exclusive right and the complete freedom to possess, maintain, enjoy, use and dispose of all their assets, rights, titles and interests and to organise its intervention to the best of its interests. - 41 -
SIGNED FINAL VERSION
4 August 2010
44.2
The State undertakes not to expropriate or nationalise all or part of the assets, rights, titles and interests of any Investor and Sub contractors.
44.3
The State undertakes not to interfere with the full enjoyment by the Investor and Sub contractors, of the legal rights that they possess over their assets, rights, titles and interests.
44.4
If the State impinges upon this right of enjoyment at any time and for any duration, and notably through a measure of requisition or through any other measure, which deprives directly or indirectly the Investor and Sub contractors from the control or the economic benefit of their assets, rights, titles or interests, the Parties shall agree upon a fixed compensation by common agreement, assessed depending upon the fair value of the impact of the restriction in the right of enjoyment as regards the progress of the Activities of the Project.
44.5
In the event of disagreement as regards the amounts of the compensation due under this article44, these amounts shall be fixed by Arbitration in the conditions provided for by article 48 below.
44.6
The Investor may assign or transfer any of their assets, rights, titles and interests under this Convention, including in respect of the Mining Concession and Infrastructure Concession, to any Affiliated Company after approval from the State, provided that the Affiliated Company agrees to comply with the provisions of this Convention.
44.7
In the event of transfer to a third party, the Investor will notify the State beforehand and submit the said transfer for approval by the State; and that the State agrees not to unreasonably withhold its approval required under article 62 of the Mining Code.
ARTICLE 45:
FINANCING
The Investor shall be free to put in place international financing for the needs of the Project and the State shall provide its full support and assistance to the Investor in connection with arranging and concluding financing for the Project. All rights, title and interest of the Investor in the Project and the Project Assets including, but not limited to, the rights of usufruct, the rights attached to long-term leases and the rights of occupation of public land through an Authorisation shall, depending on the situation in question, form the subject of an assignment, mortgage, pledge, substitution, stipulation for others or any other collateral or mechanism of guarantee necessary for the financing of the Project, subject to prior notice to the State according to the provisions of this Convention.
- 42 -
SIGNED FINAL VERSION
4 August 2010
TITLE XI: FINAL PROVISIONS ARTICLE 46: CONTRIBUTION TO THE LOCAL SOCIO-ECONOMIC DEVELOPMENT 46.1
The Investor shall contribute to the economic development of the population resident within the Project Perimeter or in the immediate proximity through participating in local initiative projects selected in coordination with the approved and competent authorities.
46.2
The Investor shall contribute to the socio-economic development of the population resident within the Project Perimeter or in the immediate proximity through participating in local initiative projects selected in coordination with the approved and competent authorities up to a total of ten million US Dollars (USD10,000,000) in annual instalments of two million (USD2,000,000) over the five (5) year construction period.
46.3
As from the Date of First Commercial Production, the Investor shall contribute through participating in local initiative projects selected in coordination with the approved and competent authorities according to Article 27 of the Convention at a rate of 1% of turnover.
46.4
The conditions of the use of the contribution to local development paid in accordance with article 46.2 and 46.3 are to be defined by common agreement between the Parties to this Convention and the local community beneficiaries.
46.5
The financial payable under this article 46 are deductible from the taxable income.
ARTICLE 47:
INVESTMENT AUTHORISATION
The ratification of the Convention amounts to an authorisation for direct foreign investment in Guinea. In this regard, all transfers to Guinea for the completion of the Project by the Investor and Sub contractors are authorised. ARTICLE 48: 48.1
SETTLEMENT OF DISPUTES
Out of court Settlement: The Parties will use their best efforts to settle out of court the disputes that arise from the performance of the Convention, or as regards its interpretation.
48.2
Conciliation:
- 43 -
SIGNED FINAL VERSION
4 August 2010
In the absence of an amicable settlement within thirty (30) days, the disputes shall be submitted to a procedure of conciliation, in accordance with the rules of the International Centre for the Settlement of Investment Disputes (“ICSID”). The conciliation shall be led by a conciliator appointed by joint agreement of the parties, or by a panel of three conciliators, appointed in accordance with the ICSID rules, and the appointment of the conciliator, or a panel of conciliators must occur within thirty (30) days as from the request for conciliation initiated by the Party who raised the dispute. 48.3
48.4
Arbitration: a)
If no solution is found within ninety (90) days as from the date of the appointment of the conciliator or the panel of conciliators, the disputes shall be finally settled in accordance with the rules of arbitration of the Common Court of Justice of ABIDJAN (“CCJA”) by a panel of three arbitrators designated in accordance with these rules.
b)
The arbitration procedure shall be held in Paris and French shall be the only official language.
c)
In the event that a request for the introduction of an arbitration procedure cannot be registered by the arbitration centre of the CCJA in accordance with article 41.3(a) above, the disputes shall be settled in accordance with the rules of ISCID.
The State expressly waives under the Convention its right to any immunity of jurisdiction and to any immunity of execution as regards the State itself and its assets (except as regards the assets exclusively reserved for diplomatic usage) for the needs of the enforcement of any decision or final arbitral sentence rendered in the context of this article 48.
- 44 -
SIGNED FINAL VERSION
ARTICLE 49:
4 August 2010
INSURANCES
The Investor shall assume the direct consequences of civil liability that it may incur by reason of any losses or damage, of whatever kind, caused to third parties or to its personnel upon the occasion of the conduct of the Activities of the Project, or caused by its personnel or the equipment or materials of which it is the owner or which are placed under its responsibility. The Investor and its Sub contractors participating in the Project shall take out the required insurance policies against such risks with the companies of its choice offering the coverage and indemnification guarantees in currencies that the Investor deems most appropriate. The insurance companies shall be selected via international tenders in order to obtain the best conditions available. Guinean insurance companies shall be included in these tenders and shall have the right to take part on the same conditions as the other insurance companies. ARTICLE 50: COMPENSATION 50.1
In the event of the breach of the Convention, the Parties shall be entitled to compensation in accordance with the following: a)
Material Breach resulting in Early Termination
In the case of early termination of the Convention as a result of Material Breach by the State, the Investor shall be entitled to compensation in an amount equal to the total amount of the Project investment as determined at the time of the Material Breach, plus an amount equal to 100% of the capital invested at that time by the Investor.
b)
Compensation for all other breaches of the Convention For all other breaches of this Convention, the non-defaulting Party shall be entitled to recover its out-of-pocket costs and expenses incurred in remedying the breach by the defaulting Party (if it elects to remedy the breach) and/or the out-of-pocket costs and expenses actually incurred by the non-defaulting Party in enforcing the Convention.
50.2
In the event of early termination of the Convention by mutual agreement pursuant to article 53.1, neither Party shall be entitled to compensation from the other unless otherwise expressly agreed upon at the time of such early termination. - 45 -
SIGNED FINAL VERSION 50.3
4 August 2010
The amount of the compensation owed to a Party as a result of a Material Breach or early termination of the Convention shall be determined in accordance with the foregoing provisions within ninety (90) days as from the date of the written notification of the decision fixing the responsibility for the breach or early termination of the Convention, as the case may be. The compensation shall be assessed at the same date. If the defaulting Party agrees with the written notification fixing the quantum of the damage it has sixty (60) days to pay the compensation to the non-defaulting Party and this amount shall carry interest as from the expiry of the sixty (60) day period up and until the effective payment of the compensation. This interest shall be calculated at the Contractual Interest Rate.
50.4
Unless there is a contrary and prior agreement between the Parties, the Euro and/or the Dollar are the only currencies of compensation.
50.5
In the event of a disagreement regarding one of the points in this article50, the provisions of article 48 above shall apply.
ARTICLE 51:
FORCE MAJEURE
51.1
The Parties, their Affiliated Companies and their Sub contractors shall not be liable for the non performance of their obligations attributable to the occurrence of an event of force majeure. For the duration of the event of force majeure, the obligations which are affected under the Convention by the force majeure, including those set out in Title IX and Title X, shall be suspended.
51.2
An event of force majeure means, as regards the performance of the Convention, any act or event which is unforeseeable, compelling and outside the control of the Party that invokes it, notably, natural catastrophes, fires, explosions, war, insurrections, riots, revolutions, pillaging, strikes, earthquakes, an act of authority, an act of government, military mobilisation. Consequently, what does not constitute an event of force majeure within the meaning of the Convention is any act or event which it would have been possible to predict that such act would occur and it would have been possible to protect against the consequences of the act or event by being reasonably diligent. In the same way, that does not constitute an event of force majeure is any act or event what just renders the performance of an obligation more difficult or more onerous for the Party in question.
51.3
The Party which invokes the event of force majeure must immediately following the occurrence or the appearance of the event of force majeure, within a time period of fifteen (15) days, send to the other Party a notification by registered letter with an acknowledgment of receipt, establishing the elements which constitute force majeure and the likely consequences as regarding the application of the Convention. - 46 -
SIGNED FINAL VERSION
4 August 2010
In all cases, the Party in question must take all useful steps to minimise the impact of the force majeure on the performance of its obligations and ensure, as quickly as possible, the normal continuation of the performance of the obligations affected by the event of force majeure. 51.4
If following an event of force majeure the suspension of the obligations lasts for longer than one (1) month, the Parties will meet as soon as possible in order to consider the effects of the events upon the performance of the Convention and, in particular, as regards the financial obligations of any nature falling upon either party, their Affiliated Companies and their Sub contractors. In the case of the latter, the Parties shall seek an appropriate financial solution in order to adapt the Project to the new situation taking, in particular, any measure which puts the Parties in an economic situation which is rebalanced in order to pursue the Project.
51.5
In the event of disagreement as regards the measures to be taken three (3) months after the occurrence of the event of force majeure, in accordance with article 48 above, a procedure of conciliation may be commenced and then, as the case may be, arbitration, immediately upon the request of the most diligent Party.
ARTICLE 52:
RENEGOTIATION
In the event that one of the Parties considers that the general balance of the Convention has been broken during the course of the performance of the Convention, the Parties shall meet in order to examine, as quickly as possible, the possibility of amending the Convention by means of an Amendment so as to restore the balance that initially prevailed as at the date of the signing of the Convention. ARTICLE 53: 53.1
EARLY TERMINATION
The early termination of the Convention may occur in the following cases: a) If the Parties agree, by mutual agreement, to put an end to the Convention before its term;
b)
In the event of a Material Breach by one of the Parties. The exercise of the right to terminate is left to the discretion of the non defaulting Party.
53.2
Compensation in the event of early termination of the Convention shall be determined in accordance with article 50 of the Convention.
53.3
Notice a)
The Material Breach may only be invoked at the end of a period of ninety (90) days after the occurrence of the breach upon the non-defaulting Party giving written notice to the defaulting Party ("Default Notice"). - 47 -
SIGNED FINAL VERSION b) 53.4
53.5
4 August 2010
The Default Notice must specify the nature of the default and, where appropriate, the party or parties responsible.
Arbitration a)
If the defaulting Party contests the alleged default, the non-defaulting Party shall, within 60 days after notice has been given, refer the matter in dispute to arbitration. The arbitration shall be conducted in a manner which is consistent with article 48 of this Convention.
b)
The defaulting Party must comply with the arbitration award within a reasonable time to be fixed by that award but in any event not less than ninety (90) days from the date of such award.
Early Termination or Remedying the Default a) If the default has not been remedied within a period of ninety (90) days after the receipt of the Default Notice, or within the time fixed under an arbitration award, the non-defaulting Party may elect to terminate the Convention or remedy the default. The costs and expenses incurred by the non-defaulting Party in remedying the default shall be a debt payable by the defaulting Party to the non-defaulting Party.
ARTICLE 54:
PRECEDENCE
In the event of incompatibility between the Convention and any other contractual document relating to the completion of the Project, the terms of the Convention shall prevail. ARTICLE 55:
GOOD FAITH BEHAVIOUR
Each Party undertakes to conduct itself in such a way as to give full effect to the provisions of the Convention in the best interests of the Project. ARTICLE 56:
AMENDMENTS
Any provision which is not provided for in the text of the Convention may be proposed by one or other of the Parties and shall be examined with care. Each Party shall try to reach a solution which is mutually acceptable, in order to insert the new provisions in a signed Amendment which is adopted in accordance with the law in force at the time of the signing of the Convention and which will be annexed to this agreement.
ARTICLE 57:
SUCCESSORS AND ASSIGNS
The Convention binds the Parties and their respective successors and assigns.
- 48 -
SIGNED FINAL VERSION ARTICLE 58:
4 August 2010
LIMITED WAIVER
The implied waiver or not as regards the rights provided for by any provision in the Convention may not be assimilated to a waiver of rights provided for by other provisions (whether similar or not) of this agreement and such a waiver may only be temporary, unless the waiving Party has made a written and duly signed declaration to this effect. ARTICLE 59:
CONFIDENTIALITY
Subject to compliance with obligatory legal provisions or with the provisions of any stock exchange that apply to a Party, the Parties undertake not to communicate to third parties, or to use for the benefit of third parties, industrial, financial, commercial, scientific, technical or personnel information provided by one of the Parties, other than that which is naturally to be found in the public domain and normally used for a similar type of project or in a non confidential manner, unless there is prior express agreement of the Party which has provided such information. ARTICLE 60:
GOVERNING LAW
60.1
The Convention is subject to Guinean law in force as at the date of the signing of the Convention and to international law, in all its aspects non prejudicial to the Guinean public order. In the event of a conflict or contradiction between the Guinean law in force as at the date of the signing of the Convention and international law, the Guinean law in force as at the date of the signing of the Convention shall prevail.
60.2
No amendment to the Guinean law in force as at the date of the signing of the Convention shall apply to the Convention except in the event of the agreement of the Parties.
ARTICLE 61:
LANGUAGE OF THE CONVENTION AND SYSTEM OF MEASUREMENT
The Convention is drafted in French. All the reports and other documents drawn up or to be drawn up in application of the Convention shall be drafted in French. The translation of the Convention into any other language is done for the sole purpose of facilitating its understanding. In the event of a contradiction between the French text and the text translated into a foreign language, the French text shall prevail. The system of measurement is the metric system. ARTICLE 62:
TERM
The Convention is concluded for an initial term of twenty-five (25) years, which shall start to run as from the Date of Entry into Force of the Convention. It shall be renewed or extended upon the request of the Investor by periods of ten (10) years each. - 49 -
SIGNED FINAL VERSION ARTICLE 63:
4 August 2010
SURVIVAL
The rights and obligations of the Parties shall survive the early termination or the occurrence of the term of the Convention, notably, those obligations provided for by provisions relating to the settlement of disputes and confidentiality. ARTICLE 64: 64.1
NOTICES
Form of Notices: All notification carried out in the context of the Convention shall be in writing and shall be sent to its addressee by registered letter with an acknowledgment of receipt or by hand or by fax to the addressed below : a)
For the Republic of Guinea, Ministère des Mines et de la Géologie, Conakry, Guinée
For BELLZONE PLC, 88 Colin Street, Level 3, WA 6005 West Perth, Australia For BELLZONE HOLDINGS S.A., 7th Floor, Immeuble Zein, Rue KA 021, Quartier Almamya Commune Kaloum, BP 4539, Conakry, Guinée 64.2
Presumed Receipt: A notice is considered as having been validly carried out: a) the day that it is handed to its addressee either by hand or by special delivery, b) the eighth (8th) business day following the return of the acknowledgement of receipt docket for correspondence sent by post, it being understood that all correspondence sent by post shall be confirmed by fax within a week after posting.
64.3
Other Means of Notification: In the event of the default in the means for the sending of notices as provided for in this agreement, the Parties shall use any other means for sending the notice which enables it to be sure that the notice reaches its addressee as quickly as possible.
64.4
Change of Address: Any change of address by one of the Parties must be notified to the other Party as quickly as possible.
64.5
Documents: - 50 -
SIGNED FINAL VERSION
4 August 2010
All documents destined to one of the parties must be sent to the address indicated in the Convention in article 64. ARTICLE 65:
ENTRY INTO FORCE
The Convention, after having being first approved by the bodies authorised by the Parties and signed by the Parties, shall enter into effect upon the day of signing of the decree by the President of the Republic of Guinea enacting the Law ratifying the Convention and this, even if as at this date, the publication in the Official Journal of the Republic of Guinea has not yet been effected. The Parties undertake to use all their efforts to ensure that the Date of the Entry into Force of the Convention occurs according to the provisions of the Mining Code.
- 51 -
SIGNED FINAL VERSION
4 August 2010
List of Appendixes APPENDIX 1: BELLZONE MINING Registration Deed
PLC’s
Shareholding
APPENDIX2:
Research Permit
APPENDIX3:
Mining Perimeter
APPENDIX4:
Feasibility Study
APPENDIX5:
Proposed Infrastructure Corridor
APPENDIX6:
Joint Order on yearly Surface Royalties
and
APPENDIX 7: Infrastructure Draft-Agreement
Signed in Conakry on (in five 5 original copies)
For the Republic of Guinea
For the Republic of Guinea
Minister of Mines and Geology His Excellency Mr Mahmoud Thiam
Minister of the Economy and Finance His Excellency Mr Kerfalla YANSANE
For BELLZONE MINING Plc Mr Nikolajs Zuks
For BELLZONE. MINING Plc - 52 -
SIGNED FINAL VERSION
4 August 2010
Mr Nikolajs Zuks
- 53 -
