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Water Supply Agreement
Execution Draft
AGREEMENT
Between
The Government of Afghanistan (“Government”)
And
MCC-Jiangxi Copper Consortium (“MCC”)
Concerning Water Supply for the Aynak Copper Project (the “Water Supply Agreement”)
This Water Supply Agreement is made this 23rd day of February, 2009 between the
Government and MCC (the “Parties”).
Whereas
(a) The Government and MCC hav«; entered into a Mining Contract under which
MCC has been granted the mineral rights for the Aynak Copper Deposit (the
“Mining Contract”). The mineral rights were subsequently transferred from MCC
to the MCC-JCL Aynak Minerals Company Ltd (“MJAM”) pursuant to Section
61 of the Mining Contract;
(b) The Mining Contract incorporates a Memorandum of Agreement between the
Parties concerning Water Supply (the “Water Supply MOA”) which identifies the
development of an adequate water supply and efficient water use as essential
components of the development of the Aynak Copper Project. Subject to the
requirements of Section 37(c) of the Mining Contract concerning the protection of
local water use, the Parties agree in principle that MCC may obtain water from
local water sources to supply its needs;
(c) The Parties wish to allocate water supply responsibilities for the Aynak Copper
Project. MCC has made a commitment to the Government to construct water
supply wells and pipeline system, at MCC’s sole expense, in the vicinity of the
Aynak Copper Project to supply the Project’s fresh water requirements. MCC has
also committed to reuse and re-eirculate process water to the extent possible. The
Government of Afghanistan has made a commitment to MCC to make available
sufficient water resources for MCC’s use in the Aynak Copper Project;
The Parties agree that MCC’s exploration, development and use of the water
supply for the Aynak Copper Pioject shall be at MCC’s sole expense and in
compliance with all applicable requirements under the laws of Afghanistan. The
Parties agree that they will work co-operatively to locate potential areas in the
vicinity of the Aynak Copper Project where fresh water supplies are likely to be
sufficient to support the Aynak Copper Project. Upon identification of fresh
water supplies of suitable quantity and quality, the Parties agree that they will
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work diligently and cooperatively to expedite completion of the approval process,
including the preparation of appropriate environmental and social impact studies,
necessary to allow MCC to supply water to the Aynak Copper Project; and
(e) The Parties have agreed that the time period in which to conclude this Water
Supply Agreement shall run until March 1, 2009.
In consideration of the commitments and obligations set forth in this Water Supply Agreement,
the Parties agree as follows:
PART I - GENERAL TERMS
1. Organization
1'his Water Supply Agreement is organized to reflect and address the scope of
water supply issues identified by the Parties in the Mining Contract and the Water Supply
MOA. Part I of this Water Supply Agreement establishes general terms and definitions
that will apply to the entire Water Supply Agreement. Part II of this Water Supply
Agreement establishes the conditions and requirements under which MCC will be
authorized to develop, operate and supply fresh water to the Aynak Copper Project. Part
III of this Water Supply Agreement establishes the social and sustainable development
requirements and obligations applicable to MCC’s activities under this Water Supply
Agreement. Part IV of this Water Supply Agreement contains miscellaneous provisions
of this Water Supply Agreement.
2. Definitions
In this Water Supply Agreement, the following expressions (except where the
context otherwise requires) shall have the following meanings:
(a) Agreement Period: The term as set forth in Section_of this Water Supply
Agreement and any extensions or other modifications to the term agreed to by the
Parties.
(b) Aynak Copper Project: The copper project located in Aynak and the surrounding
area of Logar province for which a Mineral Right has been granted to MCC.
(c) Effective Date of the Water Supply Agreement: the date February 23, 2009.
(d) Environment: Physical factors of the surroundings of human beings, including
land, water, atmosphere, climale, sound, odors, tastes, artifacts, and biological
factors of animals and plants and the social factors of aesthetics.
(e) MCC-Jiangxi Copper Consortium (“MCC”): The entity comprised of China
Metallurgical Group Corporation and Jiangxi Copper Company Limited that was
selected as the Preferred Bidder during the Aynak Tender Process to negotiate and
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conclude the Mining Contract with the Ministry of Mines and which will be
bound by the terms of the Mining Contract, jointly and severally, together with
any successor entities.
(1) Mineral Right: The rights to explore and exploit minerals granted by the
Afghanistan Minerals Law.
(g) Ministry of Energy and Water: The Ministry of Energy and Water of the
Government of Afghanistan.
(h) Ministry of Mines: The Ministry of Mines of the Government of Afghanistan or
any successor entity, acting on behalf of the Government of Afghanistan with
respect to the Mining Contract and the Project.
(i) Month: All references to months in this Mining Contract shall be based on the
solar calendar specified in Article 18 of Afghanistan’s Constitution.
G) Pollution: Any direct or indirect alteration of the physical, thermal, chemical,
biological, or radioactive properties of any part of the Environment by
discharging, emitting, or depositing wastes so as materially to affect any
beneficial use adversely, or to cause a condition which is hazardous or potentially
hazardous to public health, safety or welfare, or to animals, birds, wildlife, fish or
aquatic life, or to plants. The term “pollute” shall have a corresponding meaning.
(k) Waste: Any matter, whether liquid, solid, gaseous or radioactive, which is
discharged, emitted or deposited in the Environment in such volume, consistency,
or manner as to cause an alteration of the Environment.
(l) Water Use Right: the legal authorization granted to MCC, pursuant to the Water
Law, to use water which MCC locates, pumps or impounds in compliance with
the Water Supply Agreement.
(m) Water Supply Development Plan: A plan subject to the review and approval of the
Government that sets forth the plans, specifications, requirements and schedule
for water supply construction activities to be undertaken by MCC and which shall
address the results of the environmental and social impact assessment, including
the identification and ‘mplementation of necessary mitigation measures.
3. General Rights and Obligations
MCC shall receive the r ecessary governmental approvals required
under applicable Afgh; law to (i) explore for and develop water
supplies, (ii) construct a water supply system in the vicinity of the
Aynak Copper Project, (iii) operate the water supply system to
pump, treat and store such water supplies as specifically approved
by the Government and (iv) pipe such water supplies to the Aynak
Copper Project for use by MCC in accordance with the
requirements set forth in this Water Supply Agreement.
(b) MCC shall be entitled to the protections provided by applicable
Afghan law and agreed to in the Mining Contract with respect to
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expropriation, nationalization, deprivation and confiscation of any
assets owned and/or used by MCC in conducting activities
pursuant to this Water Supply Agreement.
(c) MCC’s General Obligations with Respect to Water Supply
Operations and Activities
(i) MCC hereby accepts the obligations to conduct its water
supply operations and activities in accordance with the
terms of the Mining Contract, this Water Supply
Agreement and the applicable laws and regulations of
Afghanistan.
(ii) MCC shall protect existing water usage. MCC shall not
adversely affect local agricultural water or deprive any
lands, villages, houses, or watering places for animals of a
reasonable supply ol water insofar as such water has,
through custom, been utilized for such lands, villages,
houses, or animals. Nor shall MCC interfere with any
water rights or existing uses of water enjoyed by any
persons under the law of Afghanistan.
(iii) MCC acknowledges and agrees that it shall conduct all
such water supply operations and activities in a sound
manner in accordance with best international hydrological,
environmental, mining, and engineering standards and
practices and in accordance with modem and accepted
scientific and technical principles applicable to fresh water
supply development, storage, pumping, and pipeline
transmission. All operations and activities under this Water
Supply Agreement shall be conducted in accordance with
environmental protection, water conservation and other
plans approved by the Government prior to the
commencement of operations so as to avoid waste or loss
of water or other natural resources, to protect water quality
and other natural resources against unnecessary damage,
and to prevent pollution and contamination of the
environment.
(iv) MCC shall take all appropriate risk management measures
to prevent damage to the rights and property of the
Government or third parties.
(v) In the event of negligence or carelessness on the part of
MCC or its ager.ts or of any subcontractor carrying on
operations or activities for MCC under this Water Supply
Agreement, MCC will be liable for such injuries in
accordance with the applicable laws of Afghanistan.
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(vi)MCC shall install and utilize such internationally
recognized modern safety devices and shall observe such
internationally recognized modem safety precautions and
risk management measures as are provided and observed
internationally under conditions and operations comparable
to those undertaken by MCC under this Water Supply
Agreement. MCC shall observe internationally recognized
measures, including risk management measures, for the
protection of the general health and safety of its employees
and of all other persons having legal access to the area
covered by this Water Supply Agreement.
(vii) MCC shall comply with such legally valid instructions as
may from time to time be given in writing by the
Government.
(viii) MCC shall pay all applicable fees, rents, payments,
penalties and other non-tax charges to the Government as
set forth in this Water Supply Agreement.
(ix)The Parties acknowledge and agree that MCC shall have a
reasonable time period in which to modify its water supply
operations and activities to incorporate legally required
technological advancements or to achieve compliance with
new laws or regulations that may apply in the future.
4. Incorporation of the Mining Contract
(a) This Water Supply Agreement is being entered into by the Parties in
accordance with the terms of the Mining Contract and the Water Supply
MOA. To facilitate the negotiation and conclusion of this Water Supply
Agreement, the Parties acknowledge and agree that certain provisions of
the Mining Contract shall apply to the Water Supply Agreement and shall
be adopted by the Parties and incorporated into the Water Supply
Agreement as enforceable terms and provisions of the Water Supply
Agreement. The Parties agree '.hat the following Parts and Sections of the
Mining Contract shall apply to this Water Supply Agreement:
Section 17, Financial Assurance;
Section 18, Minimum Expenditures;
Section 19, Relinquishment;
Section 20, Tax Obligations;
Section 38, Services and Supplies;
Section 39, Employment of Afghan Nationals;
Section 40, Training;
Section 41, Non-Afghan Personnel;
Section 42, Employee Accident Compensation;
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Section 43, Imports;
Part XIII, Force Majeure;
Part XIV, Settlement of Disputes;
Part XX, Amendment
The Parties acknowledge and agree that the purpose of this Water Supply
Agreement is to support the development and operation of the Aynak
Copper Project. In the event that a conflict arises between the terms of
this Water Supply Agreement and the Mining Contract, the terms of the
Mining Contract shall control. Matters which are not explicitly covered
by the terms of this Water Supply Agreement shall be governed by the
applicable terms, provisions and procedures of the Mining Contract.
Insofar as such obligations are not covered by the Mining Contract or this
Water Supply Agreement, both parties shall resolve such matters through
friendly consultation in compliance with the terms of the Water Law and
all other applicable laws and regulations, from time to time in effect in
Afghanistan.
5. Environmental Protection
MCC has made broad environmental and social protection commitments
to the Government concerning the Aynak Copper Project including, without
limitation, its commitment to comply with the applicable environmental laws and
regulations of Afghanistan, Afghanistan’s environmental and social protection
guidelines and policies, all World Bank Environmental and Social Safeguard
Policies, the Equator Principles and the Voluntary Principles on Security and
I luman Rights. The Parties acknowledge and agree that these commitments shall
apply equally to all of MCC’s water supply activities and operations On this
basis, MCC’s commitments and obligations with respect to environmental and
social protection, as more fully specified in Appendix 6 of the Mining Contract,
are specifically adopted and incorporated by reference into this Water Supply
Agreement and are fully enforceable pursuant to the terms of the Mining Contract
and this Water Supply Agreement. In the event of a conflict between the above
referenced laws, regulations, guidelines and policies, the Parties agree to adhere to
the strictest applicable standard in order to protect Afghanistan's environment and
people. In light of these commitments, the Parties acknowledge and agree as
follows:
(a) MCC shall manage its water supply activities and operations in a
technically, financially, socially, culturally and environmentally
responsible manner to achieve 1he environmental protection and
sustainable development objectives and responsibilities required by this
Water Supply Agreement and the Mining Contract, the laws of
Afghanistan and any applicable international conventions to which
Afghanistan is or may become a signatory. In particular, MCC has
committed to reuse and re-circulate process water to the extent possible, in
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order to minimize the amount of fresh water necessary for the Aynak
Copper Project.
(b) MCC shall prepare an environmental and social impact assessment of the
water supply facilities, activities and operations in accordance with the
requirements of the Minerals Law, the Water Law, the Environment Law
and the above referenced environmental and social protection guidelines,
principles and policies. At a minimum, MCC shall undertake the
environmental and social impact assessment program specified in
Appendix 6 of the Mining Contract which is specifically adopted and
incorporated by reference into this Water Supply Agreement as an
enforceable part of this Water Supply Agreement. MCC shall submit its
environmental and social impact assessment program of the water supply
facilities, activities and operations to the Government for review and
approval prior to commencing construction of water supply related
facilities and structures. MCC acknowledges and agrees that the
Government may require additional assessment activities as a condition of
approval.
(c) MCC shall prepare a detailed, technically and scientifically sound plan for
the management, mitigation or elimination of water supply project impacts
and risks to the environment and local residents. MCC shall submit this
plan to the Government for review and approval prior to commencing the
construction and operation of water supply facilities and structures. The
Parties acknowledge and agree that MCC may submit this plan as part of
its Environmental Management Plan which MCC is required to submit for
review and approval by the Government pursuant to the Mining Contract.
MCC acknowledges and agrees that the Government may require
additional or alternative environmental management provisions, including
ISO 14001, as a condition of approval.
(d) MCC shall comply with all applicable standards regulating the discharge
of pollutants into the environment. At a minimum, MCC shall comply
with the standards specified in Appendix 6 of the Mining Contract which
are specifically adopted and incorporated by reference into this Water
Supply Agreement as an enforc eable part of this Water Supply
Agreement. MCC acknowledges and agrees that it shall comply with
additional or alternative standards that may be required in the future by the
Government in connection with the enactment of new laws or the
promulgation of new regulations by the Government. MCC further
acknowledges and agrees that it shall be subject to fines, penalties and fees
in the event that MCC breaches the terms of this Water Supply
Agreement, including without l imitation, discharge standards which MCC
is required to comply with pursuant to this Water Supply Agreement and
the Mining Contract.
(e) MCC shall not dispose of any waste created as a result of its water supply
operations under this Water Supply Agreement in an area or in a manner
not previously approved by the Government. MCC shall, when any water
storage structure or impoundment, or waste disposal area established
under this Water Supply Agreement, ceases to be utilized for such
purpose, ensure that such structures are reclaimed in accordance with the
requirements of applicable laws and regulations and MCC’s approved
reclamation plan.
(f) MCC shall provide fair compensation, as determined by a mutually
agreeable third party, for any loss suffered by any local inhabitant
resulting from any damage done (whether to land, anything on land, water,
or otherwise) or any interference with any right to use land or water
caused by MCC’s water supply activities under this Water Supply
Agreement.
6. Water Supply Financing
MCC shall have sole responsibility for financing all construction and
operations authorized pursuant to this Water Supply Agreement and determining
the terms on which said financing shall be obtained, including the extent to which
the financing shall be accomplished through issuance of shares of, or borrowing
by MCC. MCC may pledge such rights, licenses and authorizations obtained in
accordance with the Mining Contract or this Water Supply Agreement, to secure
financing for the construction and operations authorized by this Water Supply
Agreement.
7. Government Right of Access
The Government reserves the right to access, with prior notice to MCC,
any and all areas covered by this Water Supply Agreement for the purpose of any
authorized investigation allowed by the laws of Afghanistan, provided that if
damage results to MCC’s property from such investigation, the Government
agrees to provide fair and reasonable compensation to MCC for such damage,
except in cases where such damage is caused by an act of MCC.
8. Use of Subcontractors
Without in any way detracting from MCC’s responsibilities and
obligations under this Water Supply Agreement and the Mining Contract, MCC
may engage subcontractors for the execution of such phases of its water supply
activities and operations as MCC deems appropriate. MCC will have full
responsibility and assume all risks related to the activities of its subcontractors in
accordance with the terms and conditions of this Water Supply Agreement and the
Mining Contract. The records of such subcontractors shall be made available to
Government inspectors as provided in Appendix 3 of the Mining Contract, which
arc adopted and incorporated by reference into this Water Supply Agreement as
an enforceable part of this Water Supply Agreement.
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9. Cooperation of the Parties
The Government will cooperate; with MCC to the extent permitted under
the laws of Afghanistan and will take such actions as may be desirable to achieve
the mutual objectives of this Water Supply Agreement.
(a) The Parties agree that they will at all times use their best efforts to carry
out the provisions of this Water Supply Agreement to the end that the
activities authorized by this Water Supply Agreement may at all times be
conducted efficiently and for the optimum benefit of the Parties.
(b) MCC agrees to plan and conduct all operations under this Water Supply
Agreement in accordance with the standards and requirements imposed
elsewhere in this Water Supply Agreement and the Mining Contract for
the sound and progressive development of the Aynak Copper Project, to
give at all times full consideration to the aspirations and welfare of the
people of Afghanistan and to the development of Afghanistan, and to
cooperate in promoting the growth and development of Afghanistan’s
economic and social structure, and pursuant to the provisions of this
Agreement, at all times to comply with the laws and regulations of
Afghanistan.
PART II - WATER SUPPLY
10. Identification of Water Supply Area
The Parties acknowledge and agree that the Government, in consultation
with MCC, has identified and will make available to MCC for hydrological
investigation, an area in the vicinity of the Aynak Copper Project which the
Government believes contain sufficient fresh water supplies to support the Aynak
Copper Project. In identifying this area, the Government has taken into
consideration all currently known and relevant hydrological, environmental,
operational, social and logistical factors and requirements necessary for the
successful construction and operation of a water supply system for the Aynak
Copper Project. The area proposed for hydrological investigation is further
described in Appendix 1 to this Water Supply Agreement. The Government
agrees that it shall take those steps necessary to ensure that access to the proposed
area is made available to MCC, its employees, contractors, subcontractors and
advisors. MCC shall commence investigation and pre-development activities in
the proposed water supply area, pursuant to an authorization to be issued by the
Government. MCC’s investigation and pre-development activities shall include,
but not be limited to, additional hydrological investigation, drilling, sampling, and
activities related to the development of a Water Supply Development Plan which
is required by this Water Supply Agreement and more fully described in Section
13 of this Water Supply Agreement.
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11. Commencement of Hydrological Investigation and Pre-Development
Activities
The Parties acknowledge and agree that upon the effective date of this
Water Supply Agreement and issuance of an authorization by the Government,
MCC shall commence a hydrological investigation in the proposed water supply
area including, but not limited to, additional drilling, sampling, as well as
activities related to the development of a Water Supply Development Plan. In
addition, pursuant to the requirements of Section 5(b) of this Water Supply
Agreement, MCC shall prepare an environmental and social impact assessment of
the impacts of water supply development for the Aynak Copper Project. The
Parties acknowledge and agree that the water supply environmental and social
impact assessment may be prepared as part of the Aynak Copper Project
environmental and social impact assessment required under the Mining Contract.
The commencement and performance of such activities shall occur according to a
project schedule proposed by MCC and approved by the Government. The
project schedule shall be incorporated into the Water Supply Development Plan
and be fully enforceable under this Water Supply Agreement and the Mining
Contract. MCC acknowledges and agrees that it shall commence these activities
as soon as possible, but no later than six (6) months following the completion of
de-mining and adequate security arrangements in the water supply area. Upon
completion of its evaluation and confirmation that the proposed area contains
suitable water supplies to support the Aynak Copper Project, MCC shall notify
the Government of its agreement as to the suitability of the proposed area. Upon
MCC’s agreement as to the suitability of the proposed water supply and the
Government’s review and approval of MCC’s Water Supply Development Plan,
the Government shall provide MCC with the governmental approvals necessary to
make the water supply exclusively available to MCC, as necessary, and taking
into account the limitations imposed by this Water Supply Agreement on MCC’s
use of water resources.
12. Identification of Additional Water Supply Areas
In the event that MCC’s hydrological investigation in the proposed water
supply area indicates that the available fresh water supply is insufficient to
provide an adequate source of fresh water for the Aynak Copper Project, MCC
shall notify the Government of this finding and provide the Government with
information supporting MCC’s position. The Government shall promptly review
the information provided by MCC. Following its review, the Government shall,
in consultation with MCC, determine if additional water supply areas are
necessary to meet the fresh water supply requirements for the Aynak Copper
Project. In the event that the Parties agree that additional water supplies are
necessary, the Government shall identify and make available additional areas for
hydrological investigation by MCC. Such additional areas may include surface
water suitable lor dam storage or groundwater sources. The Parties acknowledge
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and agree that the Parties will continue this process until adequate fresh water
supplies are identified or until the Parties agree to an alternate approach for
supplying fresh water to the Aynak Copper Project.
13. Water Supply Development Plan
The Parties acknowledge and agree that a Water Supply Development
Plan is a necessary prerequisite to construction of the water supply system for the
Aynak Copper Project. The Water Supply Development Plan shall set forth the
plans, specifications, requirements and schedule for water supply construction
activities to be undertaken by MCC, which may include an evaluation of the
feasibility of dam storage of surface water. In addition, the Water Supply
Development Plan shall address the results of the environmental and social impact
assessment performed to evaluate the effects of the Aynak Copper Project on
surface and groundwater resources in the vicinity of the Aynak Copper Project in
Logar Province, including the identification and implementation of necessary
mitigation measures. MCC shall submit its Water Supply Development Plan to
the Government for review no later than three (3) months following the
completion of its water supply exploration and pre-development activities. The
Government shall use its best efforts to complete its review of the Water Supply
Development Plan within two (2) months of receipt from MCC. The Government
shall review the Water Supply Development Plan to confirm that it meets the
commitments made by MCC in its Aynak Copper Project proposal and that
MCC’s proposed water supply system complies with applicable Afghan laws and
regulations and applicable international standards adopted and incorporated by
reference into the Mining Contract and this Water Supply Agreement.
14. Water Supply Construction
(a) Following approval of the Water Supply Development Plan by the
Government, MCC shall commence construction of the Aynak Copper
Project water supply facilities and structures in accordance with the
schedule specified in the approved Water Supply Development Plan.
Construction shall be completed within the time period necessary to
support the commencement of operations at the Aynak Copper Project.
The Parties acknowledge and agree that delays which occur during the
construction period shall be subject to the delay conditions and to the force
majeure provisions of the Mining Contract which are incorporated into
this Water Supply Agreement as an enforceable part of this Water Supply
Agreement.
(b) Construction of the Aynak Copper Project water supply facilities and
structures shall be conducted in accordance with the approved Water
Supply Development Plan, all applicable Afghan laws and regulations and
all applicable best international practice standards and guidelines.
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including environmental protection standards, adopted in this Water
Supply Agreement.
(c) All construction and pre-opera:ion costs incurred in connection with the
Aynak Copper Project water supply system shall be borne by MCC and
MCC shall be responsible for arranging all funding necessary to construct
the water supply system. MCC' shall be responsible for the payment of all
taxes, duties and assessments, rents and other charges related to the
construction of the water supply system and associated structures,
buildings and improvements.
(d) Pursuant to its obligations under this Water Supply Agreement and in
accordance with the local purchasing obligations established by Section 38
of the Mining Contract, which are adopted and incorporated by reference
into this Water Supply Agreement, MCC shall, where possible, award
contracts to Afghan contractors and suppliers of materials and services
provided that, in its opinion, the quality, delivery times, costs, reliability
and other terms are comparable to those offered by foreign contractors
and/or suppliers.
(e) MCC, including its subcontractors, shall use its best efforts to purchase
goods and services in Afghanistan if there are available in Afghanistan
goods and services of suitable and reasonably comparable quality, and at
no higher price than goods available from abroad. In comparing prices of
goods available in Afghanistan to the prices of goods imported by MCC,
the following conditions shall apply. For goods and services imported
during the construction period, customs duties shall not be added to the
other expenses incurred up to the time the imported goods are landed in
Afghanistan. For goods and services imported during operations, customs
duties for raw materials shall be added to the other expenses. The Parties
agree that the process of comparing locally available goods and services to
imported goods and services shall not delay MCC’s construction activities
or operations.
(f) MCC shall be responsible for the importation and transportation of
equipment to the water supply system site. MCC shall comply with the
import and export requirements established in the Mining Contract, which
are incorporated and adopted by reference into this Water Supply
Agreement.
(g) The Government shall be entitled, at its own cost, to monitor water supply
system construction. For this purpose, MCC shall:
(i) ensure that the Government and any experts appointed by the
Government are afforded reasonable access to the water supply
system site at times to be agreed with MCC provided that such
access does not materially interfere with water supply system
construction activities or expose any person on the water supply
system site to any danger;
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(ii) make copies of all plans and designs available for inspection; and
(iii) within two months of the completion of the water supply system,
provide the Government with one set of reproducible copies and
five sets of white print copies (or equivalent) of all "as built" plans
and designs.
(h) MCC shall in no way represent to any third party that, as a result of any
review by the Government, the Government is responsible for the
engineering soundness of the water supply system and shall, subject to the
security provisions of this Water Supply Agreement, be solely responsible
lor the economic and technical feasibility, operational capability and
reliability of the water supply system.
(i) MCC shall own the water supply system and all facilities, machinery and
equipment used in connection with the water supply system which have
been purchased or supplied by MCC. The land and all appurtenant
structures shall be returned to the Government upon the expiration of this
Water Supply Agreement.
(j) All water supply system facilities and structures shall be the personal
property of MCC and may be mortgaged, pledged or otherwise
encumbered during the term of this Water Supply Agreement, with written
notification to the Government, by MCC subject to the provisions relating
to Assignment and to Termination, which are established in the Mining
Contract and adopted and incorporated by reference into this Water
Supply Agreement as an enforceable part of this Water Supply
Agreement.
15. Water Supply System Operation
(a) MCC shall, at its own cost, be responsible for the testing, operation,
management, metering, maintenance and repair of the water supply system
and shall ensure that the water supply system is in good operating
condition and capable of provic mg sufficient water to the Aynak Copper
Project, taking into account the applicable restrictions and water
recycling/reuse requirements established by this Water Supply Agreement.
(b) MCC shall operate the water supply system in accordance with all
applicable Afghan laws and regulations and all applicable best
international standards and guidelines adopted by the Parties as
enforceable requirements of this Water Supply Agreement, including
environmental requirements. Li particular, MCC shall reuse and re¬
circulate process water to the extent possible in order to minimize the
amount of fresh water necessary for the Aynak Copper Project.
(c) The Government may, at its discretion, inspect the water supply system on
a periodic basis to confirm that the water supply system is being operated
in conformance with applicable Afghan laws and regulations and the best
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international standards adoptee by the Parties as enforceable requirements
of this Water Supply Agreement. The Parties shall jointly inspect the
water supply system on a periodic basis to confirm that it meets applicable
structural and operational requirements specified under Afghan law and
regulations, international best practice standards and the Water Supply
Development Plan.
16. Financial Assurance for Water Supply System Closure
The Parties acknowledge and agree that MCC shall be responsible for the
preparation and submission of a water supply closure plan to the Government for
approval. The water supply closure plan shall be consistent with the requirements
of the Environmental Management Plan developed and approved in accordance
with Section 15 of the Mining Contract. At a minimum, the water supply closure
plan shall identify the measures and financial requirements necessary to
decommission or transfer operational responsibilities for the water supply system
and complete reclamation and rehabilitation of land affected by the water supply
system. In particular, the water supply closure plan shall describe how closure
and reclamation of the water supply system, if necessary, will occur within the
closure of the Aynak Copper Project. MCC shall submit to the Government, as
part of its financial assurance for closure of the Aynak Copper Project, financial
assurance sufficient to fund the reclamation and closure requirements identified in
the water supply closure plan. The amount of such financial assurance shall be
determined by the Government following review of MCC’s water supply closure
plan. MCC shall establish a separate water supply closure fund or other
appropriate financial assurance with the Ministry of Mines within sixty (60) days
of the Government’s determination of the amount of financial assurance. MCC’s
financial assurance shall be in a form which is issued and guaranteed by an
institution acceptable to the Ministry of Mines and immediately available to the
Ministry of Mines in the event that MCC’s reclamation and closure obligations
are not fulfilled. This financial assurance requirement is in addition to the
performance security requirements specified in Section 17 of the Mining
Contract.
17. Water Price
The Parties acknowledge and agree that, in the future, MCC may be
required to pay the Government for fresh water utilized by the Aynak Copper
Project, including the coal mine and power plant constructed pursuant to the
Power Supply Agreement. The Parties further acknowledge and agree that any
future price for water will be established in the Water Law and applicable
regulations. In the event that a price for water is established in the future, the
Parties agree that they shall engage in friendly consultation and cooperatively
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negotiate an appropriate price for water. Any payments required in the future shall
be paid in United States Dollars or such other currency as may be mutually agreed
and shall be paid on or before the last day of the first month following the end of
each calendar quarter. Each payment shall be accompanied by metering
information and a detailed statement showing the basis of computation of
payment.
18. Water Supply Facilities
(a) Water supply facilities shall include, but not be limited to, the pumping
stations, wells, dams, impoundments, pipelines, wastewater treatment, and
other necessarily related facilities as set forth below, for which MCC is,
subject to the rights of third parties, authorized to construct and operate in
accordance with such reasonable safety regulations relating to design,
construction, and operation as required by best international practice and
the laws of Afghanistan. The facilities may include, but are not limited to:
(i) The pumping stations, wells, dams, impoundments, pipelines,
wastewater treatment, other operating facilities: development of
the water supply system may require the establishment of roads,
bridges, or other transportation facilities;
(ii) Additional roads, including roads to provide access to MCC
personnel;
(iii) A modem wireless communications system that complies with
Ministry of Communication requirements;
(iv) In addition, the water supply system may require other buildings,
workshops, warehouses, storage areas, sewage disposal, foundries,
machine shops, repair shops, and all such additional or other
facilities, plant and equipment as MCC shall consider necessary for
its operations or to prov ide services or to carry on activities
ancillary or incidental to such operations. The land and all
appurtenant structures shall be returned to the Government upon
the expiration of this Water Supply Agreement.
(b) All water supply system facilities and structures shall be the personal
property of MCC and may be mortgaged, pledged or otherwise
encumbered during the term of this Water Supply Agreement, with written
notification to the Government, by MCC subject to the provisions relating
to Assignment and to Termination, which are established in the Mining
Contract and adopted and incorporated by reference into this Water
Supply Agreement as an enforceable part of this Water Supply
Agreement.
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19. Control of Operations
MCC shall have full and effective control and management of all matters
relating to the operation of the water supply system including the production and
use of fresh water in accordance with sound, long-term policies. MCC may,
subject to complying with the applicab le requirements of the laws of Afghanistan
the Mining Contract and this Water Supply Agreement and, receiving approval
from the Government, make material expansions or modifications of the water
supply facilities, and may add new facilities, as MCC shall consider necessary for
the operation of the water supply system and the Aynak Copper Project. All such
expansions, modifications, improvements, replacements, and additions shall be
considered part of the water supply system of the Aynak Copper Project.
20. Land Use
Subject to the applicable laws and regulations of Afghanistan and the
requirements of the Mining Contract and this Water Supply Agreement, for the
duration of the Aynak Copper Project or such time period as may be agreed to by
the Parties, to the extent not already established by the Mining Contract, MCC
shall have the right to enter and utilize the surface of those areas identified as the
water supply area as may be necessary for the construction and operations of
roads, pumping stations, pipelines and water storage structures necessary for its
activities and operations under this Water Supply Agreement. During the term of
this Water Supply Agreement, MCC shall pay a nominal rent to the Government
for its use of public lands calculated on a per hectare basis. With regard to private
lands located in the water supply area, to the extent not already addressed in the
Mining Contract, the Government shall, at MCC’s expense, complete the
requirements necessary to obtain the rights to use the private land, including the
requirements for buying, leasing or transferring land or relocating privately
owned buildings, as may be necessary. MCC shall make reasonable
compensation, as determined by a mutually agreeable third party, for those
owners of private lands who suffered economic loss due to the aforesaid
relocation.
21. Water Supply System Security
The Parties acknowledge and agree that security responsibilities for all
facilities and structures constructed and operated in accordance with this Water
Supply Agreement shall be allocated between the Parties in accordance with the
principles, terms and conditions established in the Aynak Security Agreement,
which is adopted and incorporated by reference into this Water Supply
Agreement. On this basis, the Government shall be responsible for security,
including de-mining, in all areas outside of the water supply facility boundaries
covered by this Water Supply Agreement. MCC shall be responsible for security
inside the water supply facility boundaries. The Parties acknowledge and agree
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that the Security Coordination Committee established by the Parties in the Aynak
Security Agreement shall also review security matters associated with this Water
Supply Agreement. The Parties further agree to establish an Operational Security
Committee, if necessary, for the water supply area and facilities.
PART III - WATER SUPPLY SOCIAL AND SUSTAINABLE DEVELOPMENT
COMMITMENTS AND OBLIGATIONS
22. Resettlement and Compensation Plan
MCC shall be required to compensate local residents adversely affected by
development activities authorized by this Water Supply Agreement. Compensation shall
be determined through the application of applicable Afghan law and internationally
accepted principles of fairness and reasonableness. The Parties acknowledge and agree
that in the event that certain residents will be required to move their residences, such
residents will be properly resettled in a location and condition that does not result in a
diminishment of the resettled resident’s standard of living or adversely impact the
resident’s livelihood. Such resettlement shall be conducted in accordance with World
Bank Resettlement Guidelines. In addition, the Parties acknowledge and agree that water
supply development and operations will impact surrounding villages and residents. To
address such impacts, MCC shall, in consultation with appropriate governmental
officials, develop and finance an aid program established for the benefit of the
surrounding villages and residents. At a minimum, MCC’s efforts in this area shall be
coordinated with the local and regional benefits specified in Section 22 of the Mining
Contract.
23. Other Social and Sustainable Development Commitments and Obligations
The Parties acknowledge and agree that the social and sustainable development
commitments made by MCC in the Mining Contract concerning housing, medical
facilities, schools, entertainment and shopping, and the protection of religious belief shall
be adopted and incorporated by reference into this Water Supply Agreement as an
enforceable part of this Water Supply Agreement. The Parties further acknowledge and
agree that compliance with the social and sustainable development commitments and
obligations set forth in Part TV of the Mining Contract shall constitute compliance with
the social and sustainable development commitments referenced in this Section of the
Water Supply Agreement.
24. Government's and Third Parties’ Right to Use Company’s Facilities
MCC shall:
(a) Allow the public and the Government of Afghanistan to use, free of charge, any
roads constructed and/or main.ained by MCC pursuant to this Water Supply
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Agreement, however, that such use shall not unduly prejudice or interfere with
MCC’s operations hereunder;
(b) Allow the Government of Afghanistan to have access over the water supply area,
provided that such access does not unduly prejudice or interfere with MCC’s
operations hereunder.
PART IV - MISCELLANEOUS PROVISIONS
25. Duration
The Parties agree that this Water Supply Agreement will take effect immediately
upon execution by the Parties. This Water Supply Agreement shall expire upon the
expiration or termination of the Mining Contract, or as otherwise mutually determined.
26. Amendments
The Parties mutually agree that this Water Supply Agreement may be amended by
the written consent of the Parties and will be revised as necessary.
27. Complete Agreement
This Water Supply Agreement, consisting of the above Sections 1-27 constitutes
the complete agreement of the Parties with respect to water supply matters for the Aynak
(tapper Project and shall become effective in accordance with the terms of this Water
Supply Agreement. This Water Supply Agreement shall be executed in English in three
(3) originals with each Party holding one (1) original and one in Dari. In the event that a
dispute arises under this Water Supply Agreement, between the English and Dari
versions, the English text shall be definitive as to the terms, conditions, rights and
obligations of the Parties under this Water Supply Agreement.
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Agreed
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APPENDIX 1
WATER SUPPLY AREA
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