NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here

 THE INDEPENDENT STATE OF PAPUA NEW GUINEA





and


RAMU NICKEL LIMITED





OROGEN MINERALS (RAMU) LIMITED









































MINING DEVELOPMENT CONTRACT


RAMU NICKEL PROJECT


























BLAKE DAWSON WALDRON KUTT C PAONGA


Lawyers State Solicitor


Level 4, Mogoru Moto Building Office of the State Solicitor


Champion Parade Department of Attorney General


PO Box 850 P O Box 591 '


Port Moresby, NCD Waigani, NCD


Tel: (675)309 2000 Tel: (675)325 2209


Ref: DCF.00-0485 Ref: RDTC 98/01


 TABLE OF CONTENTS





Clause Page No


1. DEFINITIONS 2


2. INTERPRETATION 7


2.1 General 7


2.2 joint and Several Obligations 8


3. LEASES AND OTHER RIGHTS FOR MINING DEVELOPMENT 9


3.1 State's Obligations to Grant 9


3.2 Provincial and Local-level Governmental Approvals 9


3.3 Modifications or Variations 10


3.4 Landowner Compensation 10


3.5 Content, Form and Term of Leases etc. 10


3.6 Leases etc as required for the Project 11


4. PROJECT IMPLEMENTATION 11


4.1 Joint Venturer's Obligations 11


4.2 Progress Reports 12


4.3 Liaison Office 12


4.4 Contractors and Subcontractors 12


4.5 Expatriate Workers , 12


5. INFRASTRUCTURE FACILITIES 12


5.1 Works and Facilities 12


5.2 State's Election to provide Works and Facilities 13


5.3 Transfer of Works and Facilities 13


5.4 Payment for Works and Facilities 13


5.5 Management and Maintenance 14


5.6 Proper Standard 14


5.7 Sale of Electricity 14


5.8 Telecommunications 15


5.9 Third Party Access 15


5.10 Title to Interest in Property 15


6. RATES AND DUTIES 16


6.1 Right to Import and Export 16


6.2 Export Taxes and Duties 16


6.3 Import and Excise Duties 17


6.4 Discriminatory Taxes and Duties 17


111339327


























1


 11.











6.5 Payment of Reimbursement 17





VALUE ADDED TAX


18


7.1 Application of VAT 18


7.2 Recovery of VAT 18





FISCAL PROVISIONS 18





8.1 Ring Fencing of Mining Operations 18


Transfer Price


8.2 20


8.3 Income Tax 21


8.4 Additional Profits Tax 21


8.5 21


Royalty


86 Tax Remittance 21





FINANCING OF THE PROJECT 21





9.1 Submission of Financial Plan 21


9.2 Consideration and Approval of Financial Plan 22


9.3 Maintenance of Debt: Equity Ratio 22





CURRENCY AND EXCHANGE CONTROL 23





PART A 23


Application and Definitions 23


10.1


10.2 Foreign Currency Accounts 24


10.3 Approved Finance 24


10.4 Distributable Profits 25


10.5 Approved Dividends 25





10.6 Retention of Foreign Currency 26


10.7 Purchase of Foreign Currency 27


10.8 Reporting to Central Bank 27


10.9 28


Return of Surplus Foreign Currency


10.10 Remittance of Equity 28


10.11 Non-discrimination 28


10.12 State's Action to Ensure Compliance 29


10.13 Speculative Currency Transactions 29





PART B 29


10.14 Application and Definitions 29


10.15 Foreign Currency Accounts 30


Approved Finance 30


10.16


10.17 Branch Profits and Distributable Profits 31


10.18 Approved Dividends 32


10.19 Retention of Foreign Currency 32


10.20 Purchase of Foreign Currency 33





10.21 Reporting to Central Bank 33


10.22 Return of Surplus of Foreign Currency 34


10.23 Remittance of Equity 34


10.24 Non-discrimination 35











111339327


 III.





10.25 Site's Action to Ensure Compliance 35


10.26 Speculative Currency Transactions 35


11. MARKETING AND OTHER CONTRACTS 36


11.1 Right to Market Mine Products 36


11.2 Agreements on Competitive Commercial Terms 36


11.3 Arms Length Basis 37


11.4 Sale of State's Share of Mine Products 37


12. ACQUISITION OF STATE INTEREST 38


12.1 State's Option 38


12.2 Mining Equity Agreement 38


12.3 Orogen Option 38


13. INVESTMENT PROMOTION AUTHORITY CERTIFICATION 38


14. ENVIRONMENTAL MANAGEMENT AND PROTECTION 38


14.1 Compliance with Environmental Plan 38


14.2 Variation of Environmental Plan 38


14.3 Amendment required by State 39


14.4 Disputed Amendments 39


14.5 Amendments while Approved Finance outstanding 39


14.6 Application of Environmental Laws Generally 39


15. TRAINING AND LOCALISATION 40


15.1 Compliance with Programme 40


15.2 Alteration of Programme 40


15.3 Disputed Alterations 40


15.4 State Assistance 40


16. SUPPLY AND PROCUREMENT 41


16.1 Registration of Local Suppliers 41


16.2 PNG Contractors and Suppliers 41


16.3 PNG and International Procurement 41


16.4 Costs to be considered 42


17. LOCAL BUSINESS DEVELOPMENT 42


18. INSURANCE 42


18.1 Insurance required 42


18.2 Insurance of PNG Risks 42


18.3 Application of Insurance Proceeds 43


19. PATENT AND TECHNOLOGY RIGHTS 43











111339327


iv.


20. SUSPENSION OF OPERATIONS 43


20.1 Election to suspend 43


20.2 Maintenance 43


20.3 Report on Costs to Resume Operations 44


20.4 Resumption of Operations 44


20.5 Direction to Resume Operations 44


20.6 Disputed Resumptions 44


20.7 Sole Expert Determinations 44


20.8 Deemed Abandonment 44


20.9 Other Suspensions 45


21. TERMINATION 45


21.1 Joint Venturers'Right to Terminate 45


21.2 State's Right to Terminate 45


21.3 Default Notice 45


21.4 Termination or Assignment Notice 46


21.5 Disputed Termination 47


21.6 Where Receiver or Manager appointed 47


21.7 Continuing Compliance 48


21.8 Assignment of Defaulting Venturer 49


22. CONSEQUENCES OF TERMINATION 49


22.1 Obligations of Parties 49


22.2 Reversion of Property to State 50


22.3 Continuance in Force 50


23. ASSIGNMENT 50





23.1 Right to Assign 50


23.2 Effect of Assignment 50


23.3 Assumption by Assignee 51


23.4 Mortgages, Charges etc 51


23.5 Rights of Mortgagee or Chargee 52


23.6 Consents and Approvals 52


24. EXTENSIONS TO TIME 53


24.1 Extensions by Agreement 53


24.2 Automatic Extensions 53


24.3 Effect on Periods and Dates 53


25. ARBITRATION 53


25.1 Meaning of Dispute 53


25.2 Submission to ICSID 53


25.3 ICSID Arbitration 54


25.4 Submission to UNCITRAL Arbitration 55


25.5 Application of UNCITRAL Arbitration Rules 55


111339327


 V.








25.6 Award Binding 56


25.7 Waiver of Immunity 56


25.8 Cost of Arbitration 56


25.9 Stay of Other Rights 56


25.10 Sole Expert 56


26. LAW APPLICABLE 57


27. STABILITY OF TERMS 57


27.1 Agreed Terms and Material Adverse Change 57


27.2 Stabilisation 57


27.3 Claim by Joint Venturer 57


27.4 Payment of a Cairn 58


27.5 Payments grossed up 58


27.6 Termination 58


27.7 Most Favoured Investor 58


28. FORCE MAJEURE 59


28.1 Effect of Force Majeure 59


28.2 Meaning of Force Majeure 59


29. INDEMNITY 59


29.1 State indemnified 59


29.2 Liability limited 60


29.3 Defence of Claims 60


30. NON-DISCRIMINATION , 60


31. VARIATION 60


31.1 Variations by Agreement 60


31.2 Modifications to Approved Proposals for Development 61


31.3 Definitions 61


32. CONSULTATION 62


32.1 Training and Localisation Committee 62


32.2 Supply and Procurement Committee 62


32.3 Environmental Committee 63


32.4 Committee Meetings 63


33. NOTICES 63


33.1 Notice Procedure 63


33.2 Notices deemed given 64


33.3 Plans, Proposals etc. 65


34. REPRESENTATIONS AND WARRANTIES 65








111339327


 VI.





34.1 Representations and Warranties by Each party 65


34.2 Representations and Warranties by the Joint Venturers 65


34.3 No Other Representations and Warranties 66


35. WAIVER 66





36. SEVERABILITY 66


37. FURTHER ACTS 66


38. COUNTERPARTS 66





SCHEDULE I - FORM OF SPECIAL MINING LEASE 69


SCHEDULE II - DUTIES ON IMPORTED GOODS 71
























































111339327


THIS CONTRACT is dated the 36lk day of 2000 and is made between -


(1) THE INDEPENDENT STATE OF PAPUA NEW GUINEA (hereinafter called the


State"); and


(2) RAMU NICKEL LIMITED, a company incorporated in Papua New Guinea with its


registered office at Level 9 Pacific Place, Musgrave Street, Port Moresby and


OROGEN MINERALS (RAMU) LIMITED a company incorporated in Papua New


Guinea with its registered office at Level 2, Ela Beach Tower, Musgrave Street, Port


Moresby (the "Joint Venturers' ).


WHEREAS


A. Promising indications of commercial deposits of minerals (nickel and cobalt) have


been discovered in the area of the Exploration Licences and the Joint Venturers have


applied for a Special Mining Lease.


B. In order to maximise the benefits of the Project to the people of Papua New Guinea,


development of the minerals within the Exploration Licences will be accompanied by


the construction of associated processing facilities, including:


(i) a slurry pipeline from the mine site to the refinery at Basamuk on the Rai


coast; and


(ii) the Basamuk refinery which will produce nickel and cobalt, together with


associated power, port and other facilities to export this product.


G The State may exercise its right u/ider the Exploration Licences to purchase up to a


30% interest in the mineral discovery and associated processing facilities in which


case it may nominate Mineral Resources Development Company Limited ("MRDC")


as the purchaser and the existing Joint Venturers, in proportion to their existing


interests, will be obliged to sell that interest to MRDG


D. Under the Option Agreement dated 13 September 1996 between the State, MRDC


and Orogen Minerals (Ramu) Limited ("Orogen"), Orogen has an option to acquire a


25% interest in the Project (including the associated processing facilities) from


MRDC.


E. Orogen has been given notice pursuant to Section 33 (3) of the Mining Act that the


Head of State acting on advice may grant a Special Mining Lease for the


development of a commercial mining project in the area of the Exploration Licences


and Orogen may exercise its option to acquire a 25% interest in the Project from


MRDC.


F. The balance of the 30% interest in the Project may be purchased by MRDC, namely


5%, to be held by a subsidiary of MRDC for the future benefit of the Landowners.











111339327


 2.





G. Development of the Project will be of major economic significance to the people of


Papua New Guinea.


H. The State wishes, subject to the provisions of Recital I, to ensure that the


development of any commercial mineral deposits and associated processing facilities


will secure the maximum benefit for, and adequately contribute to the advancement


and the social and economic welfare of the people of Papua New Guinea, including


the people in the vicinity of the Joint Venturers' operations, in a manner consistent


with their needs and the protection of the environment.


I. The State wishes to encourage the development of the mining and processing


operations and the optimisation of its natural resources upon terms and conditions


which, it is anticipated at the time of the execution of this Contract, will secure


maximum benefits for the people of Papua New Guinea and secure to the Joint


Venturers and their shareholders an appropriate return on investment


commensurate with the risks involved.


J. The State and the Joint Venturers have agreed on a number of matters which are set


out in this Contract and which are to be an enduring arrangement of national interest


and which are to be continuing legal and binding obligations of the State and the


Joint Venturers (and their respective successors and permitted assigns) subject to


alteration or termination only in the circumstances set forth in this Contract.


NOW IT IS HEREBY AGREED AND DECLARED AS FOLLOWS:


1. DEFINITIONS


In this Contract, unless the content otherwise requires -


"Approved Financial Plan" means the plan submitted by a Joint Venturer and


approved by the Secretary responsible for financial matters in accordance with


Clause 9, which upon approval will form part of the Approved Proposals for


Development;


"Approved Finance" means debt financing which is-


(a) within the scope of a Joint Venturer's Approved Financial Plan; and


(b) on terms and conditions which have been approved by the Central Bank in


accordance with Clause 10,


but does not include any part of the Equity of the Joint Venturer;


'Approved Proposals for Development" means the proposals for development


submitted by the Joint Venturers which have been approved by the Minister


pursuant to Section 43 of the Mining Act, as such proposals may be modified, varied,


amended or altered as permitted under this Contract;














111339327


 3.





"Approved Reduction of Capital" means:


(a) where a Joint Venturer is a single purpose company, a reduction in its


Equity (in accordance with the Companies Act 1997 in the case of a


company incorporated in Papua New Guinea); or


(b) where a Joint Venturer is a multi-purpose company, a reduction in the


Equity of its Branch,


where the reduction is made in accordance with Clause 10.10 or 10.23;


"Branch" means the facilities and other resources of a multi-purpose company


(whether incorporated in Papua New Guinea or elsewhere) that are used, fully or


partially, for the Project and the costs of which are identified in the Branch Accounts;


"Branch Accounts" means accounts prepared on a quarterly basis, and in accordance


with generally accepted accounting principles, which relate solely to a Joint


Venturer's expenditure on, revenue from and financing of, the Project and which


clearly identify head office advances, and the respective balances thereof, as Equity


or Approved Finance;


"Central Bank" means the Bank of Papua New Guinea created pursuant to the





Central Banking Act 2000 and its successors;


"Contract" means this Contract as varied from time to time in accordance with the


terms hereof;


"Commencement of Commercial Production" means the day on which the





aggregate production of Mine Products from the beneficiation plant reaches 80%


of designed production capacity (as set out in the Approved Proposals for


Development) for a continuous period of 30 days;


"Costs to Resume Operations" means one and two-tenths(1.2) times the costs (which


includes the cost of new capital expenditures) required to resume Normal


Operations plus one and two-tenths(1.2) times the sum of the Joint Venturers'


estimate of:


(a) royalties and mining levy,





(b) Operating Costs, and


(c) all other incidental costs,


necessary to continue Normal Operations for a further period of twelve months;





"Department" means the Department of Mining or such other department of the


State as is for the time being responsible for mining matters;











111339327


 4.








Effective Date" means the date on which this Contract was executed by the Parties,


and in the event that it was executed by different Parties on different dates means the


date on which it was executed by the Party who was the last Party to execute the


same;


"Environmental Plan" means the environmental plan for the Project submitted


under Section 4 (6) of the Environmental Planning Act (Chapter 370) and


approved under that Act by the Minister responsible for environmental matters,


which also forms part of the Approved Proposals for Development as such plan


may be varied or amended as permitted under Clause 14;





"Equity" means;


(a) where a Joint Venturer is a single purpose company, its issued ordinary


shares (to the extent that they are paid up), its issued preference shares (to


the extent that they are paid up and have been designated at the time of


their issue as "equity" in a notice to the Central Bank) and its undistributed


accounting profits; and





(b) where a Joint Venturer is a multi-purpose company, non-interest bearing


advances made by the head office to the Branch which are designated as


"equity" or "branch capital" in a notice to the Central Bank and entered in


the Branch Accounts so designated;


"Exploration Licences" means Exploration Licence No.193, Exploration Licence No.


1178 and Exploration Licence No 1247 granted pursuant to the Mining Act;





'Feasibility Study" means a study into the feasibility of the Project which forms part


of the Approved Proposals for development;


"Force Majeure" has the meaning given to that term in Clause 28.2;


"Foreign Currency Account" means an account denominated in a currency other


than Kina and opened by a Joint Venturer with a bank which may be (at the


discretion of the Joint Venturer) either in Papua New Guinea or outside Papua


New Guinea;


"Foreign Exchange Regulations" means the regulations made pursuant to the


Central Banking Act (Chapter 138);


"Income Tax Act" means the Income Tax Act 1959;


"Joint Venturers" means the second parties to this Contract and includes any





permitted assigns or successors of the rights and obligations of any of them;


"Joint Venture Agreement" means the agreement dated 21 January 2000 as


subsequently amended, which as a result of various assignments and accessions is


now between the Joint Venturers and may later include such other parties as may











111339327


 5.








acquire an interest in the Project, relating to the way in which exploration, mining


and processing operations shall be conducted under this Contract;


"Land Act" means the Land Act 1996;


"Landowners" means members of any landowning group, which has its origin in the


Madang Province and owns land within the Special Mining Lease, mining leases,


lease for mining purposes and mining easements and other tenements related to the


Project that have been granted, and whose customary ownership of that land has


been verified by the District Officer Lands for the Madang Province;


"Local Level Government" means the Usino, Bundi, Astrolabe Bay and Rai Coast


Local Government Councils;


“Manager" means the person from time to time appointed, with the consent of the


State, by the Joint Venturers to conduct operations pursuant to the Joint Venture


Agreement;


"Mine Products" means the ores or concentrates or other minerals produced from the


area of the Special Mining Lease and all refinery products from the Refinery;


"Minister" means the person for the time being entitled to exercise the powers of the


Minister under the Mining Act ;


"Mining Act" means the Mining Act 1992;


"Mining Area" means the area within the Special Mining Lease;





"Mining Equity Agreements" njieans the agreements under which Orogen and a


MRDC subsidiary may acquire their interests in the Project;


' Mining Operations” means the exploration, development and mining operations


carried on by the Joint Venturers within the Exploration Licences and the Mining


Area;


"Normal Operations” means the operation of the Project carried on in accordance


with the Approved Proposals for Development;


"Operating Costs" for any period means the costs incurred by the Joint Venturers


during Normal Operations excluding depreciation and other non-cash costs and


financing charges;


"Parties" means the persons who are for the time being original parties to this


Contract or parties added or substituted pursuant to Clause 21 and "Party" means


any one of them;














1113.39327


 6.








"Processing Operations' means those parts of the Project which are not Mining


Operations, and includes the transporting of the beneficiated ore from the Mining


Area to the Refinery through the slurry pipeline and the refining of the ore to


produce nickel and cobalt at the Refinery;


Project" means the mining and any processing development contemplated by this


Contract and described in the Approved Proposals for Development;


"Project Area" prior to the time when the leases referred to in Clauses 3.1 and 3.2 are


granted means the area of the Exploration Licences and thereafter means all areas


included in the leases, easements, licences, rights and grants referred to in Clauses 3.1


and 3.2.


"Project Assets" means:


(a) the Special Mining Lease and any other leases issued pursuant to the


Mining Act for Project purposes;


(b) all other leases, rights, permits, licenses, grants, authorisations and


approvals referred to in Clauses 3.1 and 3.2 which are required for the


Project;


(c) all plant, buildings, installations, infrastructure and other facilities located


on the Special Mining Lease or on any other lease from the State under the


Mining Act or under the Land Act which are required for the Project


(subject to the terms of such a lease); and


(d) all other property (tangible or intangible) and assets in Papua New Guinea


held by the Joint Venturers for the purposes of the Project (including ore in


process and Mine Products produced by the Project);


"Provincial Government" means the Madang Provincial Government;


"Quarter"; means -





(a) January, February, and March; or


(b) April, May and June; or


(c) July, August and September; or





(d) October, November and December;


"Refinery" means the refinery to be constructed at Basamuk in the Madang


Province which will produce nickel and cobalt;


"Related Corporation" means a related corporation as defined in Section 2 of the


Companies Act 1997;








111339327


 7.








"Sole Expert" means a person appointed by agreement between any two or more


Parties to resolve any difference of view or disagreement between them and in the


event the Parties in dispute fail to agree on the person to be so appointed, such


appointment shall be made by the Chairman of the Administrative Council of the


International Centre for the Settlement of Investment Disputes, provided that the


person so appointed, whether by agreement or otherwise, does not by virtue of


nationality, personal connection or commercial interests have a conflict between his


own interest and his duty as a sole expert to act impartially;


"Special Mining Lease" means the special mining lease (or leases) and any renewals





thereof, granted under the Mining Act to the Joint Venturers pursuant to Clause 3;


"Speculative Currency Transaction" means a transaction involving the purchase or


sale of Papua New Guinea currency, the primary object of which is the making of a


profit on the exchange of currency but does not include the taking out of forward


cover in respect of anticipated purchases or sales of goods and services or loan


obligations denominated or payable in foreign currency in accordance with the


guidelines issued from time to time by the Central Bank;


"State" means the first part)- to this Contract and includes any authorised agent of


the State;


'Test Date" means 30 June and 31 December each year; and





‘Training and Localisation Programme" means the training and localisation


programme prepared by the Manager pursuant to and in accordance with the


Employment of Non-citizens Act (Chapter 374) and the guidelines for training plans,


which also forms part of the Approved Proposals for Development, as such


programme may be amended or altered as permitted under Clause 15.


2. INTERPRETATION





2.1 General


In this Contract, unless the context otherwise requires -





(a) monetary references are references to Papua New Guinea currency unless


otherwise specifically expressed;


(b) the headings and subheadings do not affect the interpretation or construction;


(c) reference to an Act includes the amendments to that Act for the time being in


force and also to any Act passed in substitution therefor and any regulations


for the time being in force thereunder;


(d) words and expressions which have a certain meaning in the Foreign Exchange


Regulations or the Income Tax Act, as the case may be, are used with the same


meanings in this Contract;








111339327


 8.





(e) words importing the singular include the plural and vice versa;


(0 words importing any gender include the other gender;


(g) references to a person include a partnership, firm or corporation and any


instrumentality of the State; and


(h) the recitals form part of this Contract.





2.2 Joint and Several Obligations


Any covenant or agreement on the part of the Joint Venturers made pursuant to


this Contract (including any covenant or agreement made by all the Parties) shall,


unless otherwise provided, or the context otherwise requires, be read and


construed as a covenant or agreement by all of the Joint Venturers jointly and each


of them severally. For the avoidance of doubt, the following obligations, to the


extent that they arise from covenants or agreements of the Joint Venturers in this


Contract, are several ( and not joint and several) obligations of the Joint Venturers:


(a) obligations to pay income tax or any other tax, duty, charge or impost


payment (other than royalty) which is not included in any joint venture


budget or funded by cash calls on the Joint Venturers under the Joint


Venture Agreement;


(b) obligations under Clause 9 with respect to the submission of a financial


plan and the maintenance of a debt to Equity ratio;


(c) obligations under Clause 10 with regard to accounts, dividends, currency,


reporting, and other matters;


(d) obligations under Clause 11 with regard to sale or other disposition of Mine


Products;


(e) obligations under Clause 13 with regard to the Investment Promotion


Authority certification;


(f) obligations arising as a consequence of termination under Clause 22, but not


including:


(i) any obligation to pay moneys under Clause 22.1(b) which arises in


respect of an obligation which is a joint and several obligation of the


Joint Venturers; and


(ii) any obligations arising under Clause 22.1(e);


(g) obligations under Clause 23 with regard to assignment; and


(h) obligations with regard to arbitration under Clause 25, but not including an


obligation arising out of arbitration proceedings which relate to an








111339327


 9.





obligation or liability which is a joint and several obligation or liability of


the joint Venturers.


3. LEASES AND OTHER RIGHTS FOR MINING DEVELOPMENT





3.1 State's Obligations to Grant


Subject to the requirements of law and compliance with procedures under the


Mining Act, the Land Act and other applicable law's, the State will -


(a) on or within one month after the Effective Date, grant to the Joint Venturers





as tenants in common the Special Mining Lease, in accordance wnth the


form of lease annexed as Schedule I;





(b) within two months after the application by the Joint Venturers or within


two months after the Effective Date, whichever is later, grant to the Joint


Venturers as tenants in common such of the following as may be reasonably


required for the purpose of carrying out the Project:


(i) a mining lease for the mining of limestone near the Special Mining





Lease, other mining leases, leases for mining purposes, mining


easements, rights, permits, licences and grants pursuant to the


Mining Act;


(ii) leases, rights, permits, licences and grants pursuant to the Land Act;


and





(iii) leases, rights, permits, licence and grants pursuant to legislation


other than the Mining Act and the Land Act, including in particular


the grant of water use permits allowing the extraction of water in


sufficient quantities to meet the needs of the Mining Operations and


the Processing Operations, and the discharge of tailings from the


Processing Operations into the sea.


3.2 Provincial and Local-level Governmental Approvals





If the Joint Venturers require any lease, right, permit, licence, grant, authorisation


or approval of the Provincial Government or Local-level Government, for the


construction or operation of the Project in accordance with the Approved


Proposals for Development, the Joint Venturers, shall make application therefor to


the responsible authorities within the Provincial Government or Local-level


Government. Recognising that discretion and/or authority with respect to such


matters rest with the Provincial Government or Local-level Government, the State


shall nonetheless, at the request of the Joint Venturers to the extent the applicable


law' permits, use its good offices to assist in obtaining such lease, right, permit,


licence, grant, authorisation or approval.














111339327


 10.





3.3 Modifications or Variations


If, in accordance with Clause 31, the Joint Venturers modify or vary the Approved


Proposals for Development and such modification or variation is approved or


deemed approved by the State, the Joint Venturers may apply for and (subject to


the requirements of law and compliance with procedures under the Mining Act,


the Land Act and other applicable laws) the State shall, within two months of the


date of application, grant or cause to be granted to the Joint Venturers any


addibonal special mining lease, lease, right, permit, licence, grant or approval or


allow variations to any existing special mining lease, lease, right, permit, licence,


grant or approval required to give effect to any such modification or variation to


the extent that they are reasonably required for the purpose of carrying out the


Project.


3.4 Landowner Compensation


The Joint Venturers, after consultation with the State, shall negotiate a relocation


agreement and a compensation agreement covering the relocation of and


compensation or costs payable to the Landowners as a result of the use of the area


of land covered by the Special Mining Lease and other necessary leases, rights,


permits, licences, and grants, which compensation and costs shall be borne by the


Joint Venturers. If requested by the Joint Venturers, the State shall use its good


offices to assist the parties to conclude the negotiation of the compensation


agreement on fair and reasonable terms. During the life of such a compensation


agreement:


(a) the Joint Venturers will, in a timely manner, report to the State any


circumstances, happenings or events which might lead to disputes relating


to compensation and relocation or the orderly implementation of the


agreement; and


(b) the State will use its best endeavours to ensure that the institutions established


for the management and resolution of land disputes will be able to carry out


their duties so that any such disputes between the Joint Venturers and the


landowners, or between the Landowners themselves, are settled in an orderly


and expeditious fashion in accordance with such agreements and the


applicable law, and will upon request of the Joint Venturers use its good


offices to help ensure that the compensation and relocation agreements are


respected by the Landowners.


3.5 Content, Form and Term of Leases etc.


The leases, rights, permits, licences and grants referred to in Clauses 3-1 and 3.2,


shall contain -


(a) in the case of the Special Mining Lease, such terms and conditions in the


form appearing in Schedule I; and











111339327


 11.





(b) in any other case, such terms and conditions as are fair and reasonable to


the Joint Venturers, which may include, where applicable, provisions that -


(i) Joint Venturers shall not, without the consent of the State, which


consent shall not be unreasonably withheld, use the land for any


purpose other than that for which it was granted;


(ii) the Joint Venturers shall construct or provide improvements


substantially as specified in the Approved Proposals for


Development or as otherwise agreed between the Joint Venturers


and the State;


(iii) the leases, rights, permits, licences and grants will terminate on the


earlier of the termination of this Contract and the Special Mining


Lease, subject to any need for any of them to continue to permit


rehabilitation and the processing on a contract basis of ore from other


projects in Papua New Guinea or from overseas after mining on the


Special Mining Lease has ceased; and


(iv) the Joint Venturers shall use their best efforts to accommodate


traditional land uses to the degree that such uses are consistent with


economic, efficient, safe mining practices and do not interfere with


the construction and operation of the Project in accordance with the


Approved Proposals for Development.


3.6 Leases etc as required for the Project


The leases (other than the Special Mining Lease), rights, permits, licences, and


grants to which the Joint Venturers are entitled under this Clause will be drawn


up in a form and on terms which will ensure that the land to which these leases,


rights, permits, licences and grants relate may be used by the Joint Venturers in a


manner which will enable them to carry out the Project in accordance with the


Approved Proposals for Development.


4. PROJECT IMPLEMENTATION


4.1 Joint Venturer's Obligations


Subject to and following upon:


(a) the grant of the Special Mining Lease; and


(b) the approval of each Joint Venturer's Financial Plan,


the Joint Venturers, using their best efforts, shall:


(c) construct, install and provide all such plant, equipment, prepared sites and


facilities of the design and capacity specified in the Approved Proposals for


Development; and





111339327


 12.





(d) commence Normal Operations.


4.2 Progress Reports


Until the Commencement of Commercial Production, the Joint Venturers through


the Manager, shall supply on a quarterly basis a progress report to, and meet with,


the Department.


4.3 Liaison Office


The Joint Venturers through the Manager shall maintain a liaison office in Port


Moresby until the Commencement of Commercial Production and will, during the


life of the Project, designate a representative located in Papua New Guinea who


will be responsible for ensuring the implementation of the provisions of this


Contract relating to supply and procurement.


4.4 Contractors and Subcontractors


The Joint Venturers shall ensure that their contractors and subcontractors are


legally bound to comply with the provisions of this Contract insofar as such


provisions are applicable to them. Without limiting the generality of the foregoing


the Joint Venturers shall ensure that their contractors and subcontractors shall


comply with approved Training and Localisation Programme and Business


Development Plan of the Joint Venturers.


4.5 Expatriate Workers


Subject to:


(a) the requirements of law and national security; and


(b) compliance with procedures under the Migration Act (Chapter 16) and


other laws of general application relating to the entry of non-citizens into


Papua New Guinea and their employment within the country;


the State covenants that it will expeditiously approve the job descriptions for


expatriate workers in accordance with the approved Training and Localisation


Programme and grant permits and multiple-entry visas, as required, for the entry


and re-entry of expatriate workers (and their dependants) whose job descriptions


have been approved.


5. INFRASTRUCTURE FACILITIES


5.1 Works and Facilities


In this Clause, "Works and Facilities" means any of the installations and


infrastructure specified in the Approved Proposals for Development for use of the


Joint Venturers and which are capable of being used by the State but shall not


include:








111339327


 13.





(a) administrative buildings and buildings and other improvements allocated


for the accommodation of the Joint Venturers' employees and their families;


(b) installations and infrastructure directly used in the mining and processing


of ore including, without limitation, the slurry pipeline from the Mining


Area to the Refinery, the wharf and the power station ; or


(c) roads (other than existing public access routes^ constructed for and on


behalf of the Joint Venturers and situated within the Mining Area or the


lease upon which the Refinery is situated.


5.2 State's Election to provide Works and Facilities


Within sixty days of the Effective Date, the State may, by notice to the Joint


Venturers, elect to provide the costs, or part thereof, of any Works and Facilities.


The State may further elect to recoup such costs by the payment to the State of a


charge which shall be agreed between the State and the Joint Venturers. Such


charge will allow for the recoupment over a reasonable period of the amount of


such costs provided by the State, together with a reasonable return thereon. Such


return will be determined having regard to the State's expected risk in outlaying


the funds for the Works and Facilities and the cost of borrowing such funds as are


required. If the amount of such charge cannot be agreed, it shall be determined by


a Sole Expert.


5.3 Transfer of Works and Facilities


At any time after the Commencement of Commercial Production, but subject to


Clause 5.4, the State may, by notice, require the Joint Venturers to transfer to the


State their ownership of any Works and Facilities. As soon as practicable after


such notice, the Joint Venturers shall do all things necessary to transfer to the State


their title to the Works and Facilities. Upon vesting tit e in the State, the Joint


Venturers shall cease to have any liability or risk in respect of these Works and


Facilities except so far as they continue to manage them and except for any liability


which may have accrued prior to the date of transfer to the State. The Joint


Venturers shall at all times have first priority of use of such Works and Facilities


and that the State's ownership shall not unreasonably interfere with the use of


such Worlds and Facilities by the Joint Venturers.


5.4 Payment for Works and Facilities


Where the State requires the Joint Venturers to transfer to it any Works and


Facilities as provided in Clause 5.3:


(a) upon transfer of title, the State shall pay to the Joint Venturers a purchase


price equal to the then residual value after tax depreciation of their interest


in the Works and Facilities. The purchase price shall be paid in annual


instalments commencing at the end of the financial year in which title was


transferred, and shall be equal to the sum of the annual amounts of








111139327


 14.





depreciation that each Joint Venturer could have claimed as a deduction


allowable under the Income Tax Act. The State shall ensure that the annual


instalment payment is a capital receipt and will not constitute assessable


income under the Income Tax Act; and


(b) for so long as the State makes the payments under Clause 5.4 (a), the Joint


Venturers shall pay to the State on the day of the receipt of an annual


instalment under Clause 5.4 (a) a facilities use r charge equal to such


instalment. The State shall ensure that the facilities user charge will


constitute a deemed outgoing pursuant to Section 68 of the Income Tax Act.


5.5 Management and Maintenance


If, at any time, the State acquires or provides any Works and Facilities or part


thereof under this Contract, the State may either


(a) require the Joint Venturers at their own cost to manage and maintain those


Works and Facilities to a reasonable standard provided that the State shall


pay its equitable proportion of such costs; or


(b) assume responsibility for maintaining such Works and Facilities to a


reasonable standard and charge the Joint Venturers a maintenance charge to


cover an equitable proportion of the costs of maintenance and the direct


costs of operating such Works and Facilities.


In either case the equitable proportion shall be determined on the basis of the


proportionate use of the Works f nd Facilities by the joint Venturers and other


users. If the equitable proportion cannot be agreed it shall be determined by a Sole


Expert.


5.6 Proper Standard


Where the State has provided or acquired Works and Facilities pursuant to this


Contract and fails to properly maintain same, the Joint Venturers may, without


prejudice to any other rights they may have, after giving no less than ten days'


notice to the State, carry out such work as is necessary to bring such Works and


Facilities up to the proper standard required for the purposes of the Project and set


off the expense incurred against the maintenance charge payable under Clause 5.5


(b). The Joint Venturers may carry out such work immediately in the case of


emergency, giving notice to the State thereafter.


5.7 Sale of Electricity


If:


(a) the Approved Proposals for Development pro\ ides for the Project electric


power supply facilities to generate electric power in excess of the Project's


needs in order to meet local rural requirement; or








111339327


 15.





(b) subsequent to the Approved Proposals for Development, the Joint


Venturers decide that the Project electric power supply capacity exceeds the


needs of the Project at any time;


and the Electricity Commission makes an Order under Section 31 of the Electricity


Commission Act (Chapter 78) permitting the sale of electricity to other users, the


Joint Venturers shall sell to the appropriate governmental agency such excess


electricity produced by the facilities for resale and distribution to rural electrical


loads. The Joint Venturers shall under no circumstances be required to increase the


capacity of its electric power supply facilities or transmission facilities beyond that


required by the Approved Proposals for Development to meet the needs of any


other users or to construct or maintain any off-site grid or distribution system. The


price of electricity to be purchased by the appropriate governmental agency shall


be negotiated between the Joint Venturers and such governmental agency and


shall be subject to the approval of the Electricity Commission. The approved price


and formula for future adjustments will be included in the Order issued by the


Electricity Commission.


5.8 Telecommunications


The State shall ensure that Telikom PNG provides data-quality international


telecommunication facilities for the Project in accordance with the Approved


Proposals for Development. The State shall, through Telikom PNG or other


responsible agency, charge the Joint Venturers for the supply of


telecommunication services either at the tariff rate specified in the Approved


Proposals for Development or such reasonable commercial rate as is agreed to


between Telikom PNG and the Joint Venturers.


5.9 Third Party Access ,


Third parties will be permitted by the Joint Venturers to use the Works and


Facilities which they own, operate and maintain, but only if such use will not


adversely affect the Joint Venturers' use or intended use thereof. Such Works and


Facilities will continue to be managed by the Joint Venturers and the Joint


Venturers will have the priority use thereof over all other users. The Joint


Venturers may charge a reasonable fee to allow third parties to use the Works and


Facilities. Third parties will also be permitted to use any of the Works and


Facilities vested in the State but managed and maintained by the Joint Venturers


under Clause 5.5(a) (but only if such use will not adversely affect the Joint


Venturers' use or intended use thereof) and in those circumstances the costs will


be shared in accordance with Clause 5.5 and the Joint Venturers shall not charge


the third parties any fee for use.


5.10 Title to Interest in Property


Except as otherwise provided in this Clause, nothing in this Clause shall take effect


to divest the Joint Venturers of their title to or interest in any property or to require


the Joint Venturers to transfer same to the State.











111339327


 16.








6. RATES AND DUTIES


6.1 Right to Import and Export


Subject to:


(a) any requirement of defence and the safety of t ie public and quarantine;


(b) the obligations of the State pursuant to multilateral international


agreements to which the State is a party;


(c) any general, non-discriminatory determination by the National Executive


Council of the State notice of which has been given to the Joint Venturers


that the import of goods from a particular place or the export of Mine


Products to a particular place is not permitted; and


(d) Clause 16;


the State shall ensure that the Joint Venturers, and the agents and contractors of


the Joint Venturers shall have the right to acquire, import into and move within


Papua New Guinea and use any plant, machinery, equipment, temporary


buildings and structures, vehicles, explosives, fuels, reagents, supplies, materials


and any other assets:


(e) required for the construction, installation, provision, expansion,


maintenance or operation of any of the facilities required for the Project; or


(0 otherwise required for the purposes of the Project;


and to export from Papua New Guinea -


(g) subject to Clause 22.1(c), any plant, machinery, equipment, temporary


buildings and structures, vehicles, explosives, fuels, reagents, supplies, and


any other asset imported into Papua New Guinea for the construction,


installation, provision, expansion, maintenance or operation of any of the


facilities required for the Project; and


(h) subject to Clause 11.1, the Mine Products resulting from the operation of the


Project.


6.2 Export Taxes and Duties


The State covenants to reimburse the Joint Venturers fer any rate, tax, charge, due,


duty, excise, tariff or other levy (except the royalty on Mine Products and the


mining levy oil assessable income from mining operations) imposed by the State,


any province or local-level government and applied to, or payable by, the Joint


Venturers in respect of the export from Papua New Gu nea by the Joint Venturers


of Mine Products.











111339327


 17.





6.3 Import and Excise Duties


The State shall ensure that, until the Commencement of Commercial Production,


all goods within the tariff classification items specified in Schedule II which are


imported by or on behalf of the Joint Venturers or any contractor or subcontractor


and are to be used or consumed in the construction of the facilities for the Project


will be free of import duty.


If necessary, the State shall promulgate exemptions under the Customs Tariff Act


1990 for this purpose. If at any time the relevant duty exemptions are not in force,


the State covenants to reimburse the Joint Venturers for any import duty paid on


the goods covered by this clause.


6.4 Discriminatory Taxes and Duties


In addition and without prejudice to the provisions ol Clause 27, the State


covenants to reimburse the Joint Venturers:


(a) for any payment made by them in connection with the Project (including


payments made by any of them pursuant to an obligation to reimburse


employees) on account of any rate, tax, rent, charge, due, duty, excise, tariff


or other levy by the State, any province or local-level government;


(b) for any withholding tax on, or compulsory' deduction of equivalent effect


from, dividends or interest payable by the Joint Venturers to any registered


or beneficial holders of shares in the Joint Venturers or to any lenders of


Approved Finance; and


(c) for any costs incurred by them to the extent that such costs arise as a result


of any law, statute, regulation or enactment of the State, any province or


local-level government,


to the extent that any of the above discriminates (either specifically or as a result of


the way it applies) against the Joint Venturers in respec t of either its Mining


Operations or its Processing Operations under this Contract or against their


employees.


6.5 Payment of Reimbursement


Any amount owed to the Joint Venturers in respect of reimbursement pursuant to


Clause 6.2, 6.3 or 6.4 shall be paid by the State not later than one (1) month


following the making of the payment in respect of which reimbursement is due,


together with interest on the amount of any such payment from the date paid until


so reimbursed by the State at the same rate per annum as is payable from time to


time by the State on its 30-day treasury bills, failing which any amount owed


pursuant to this clause shall be recoverable by credit against other taxes or duties due


and payable to the Commissioner General of Internal Revenue.











111339327


 18.








7 VALUE ADDED TAX


7.1 Application of VAT


For purposes of the Value Added Tax Act 1998, the State shall ensure that:


(a) the export of Mine Products from the Project is zero-rated;


(b) until the Commencement of Commercial Production, value added tax


levied on the importation of any plant, machinery, equipment, temporary


buildings and structures, vehicles, explosives, fuels, reagents, supplies,


materials and other assets which are imported into Papua New Guinea by


or on behalf of the Joint Venturers or any contractor or subcontractor solely


for the purpose of the Project will not be payable until the 21“ day of the


month following the month in which the importation occurs; and


(c) notwithstanding that the payment of value added tax is deferred in


accordance with paragraph (b), those imported goods are entered for home


consumption under the Customs Act (Chapter 101 of the PNG Revised


Laws) and released to the Joint Venturers, contractor or subcontractor (as


the case may be) without delay.


7.2 Recovery of VAT


Where as a result of the Value Added Tax Act 1998 or Clause 7.1 an amount is due


to the Joint Venturers or any contractor or subcontractor as a refund of value


added tax paid or borne, that amount may be recovered by the Joint Venturers,


contractor or subcontractor (as the case may be) by way of:


(a) monthly refund from the Commissioner General of Internal Revenue; or


(b) credit against other taxes or duties due and payable to the Commissioner


General of Internal Revenue,


and in either case may be set off against further value added tax due and payable


pursuant to Clause 7.1(b).


8. FISCAL PROVISIONS


8.1 Ring Fencing of Mining Operations


The State shall ensure that, for taxation purposes only, the Mining Operations will


be considered and treated as a mining project for the purposes of Part III Division


10, especially Subdivision CA of the Income Tax Act end the Processing


Operations will be considered and treated separately, and that as a result:


(a) the value (as determined in accordance with Clause 8.2)of the beneficiated


but unrefined ore from the Special Mining Lease, at the input flange of the








111339327


 19.





slurry pipeline will be deemed to be assessable income from mining


operations for each of the Joint Venturers;


(b) allowable exploration expenditure incurred by each of the Joint Venturers


in relation to the Mining Operations will be deductible against that


assessable income from mining operations;


(c) allowable capital expenditure incurred by each of the Joint Venturers in


relation to the Mining Operations will be deductible against that assessable


income from mining operations;


(d) the calculation of net cash receipts for additional profits tax purposes will


be done for each Joint Venturer on the basis of its receipts from and


outgoings in respect of the Mining Operations.


(e) income from the sale of the Mine Products from the Project's refinery will be


assessable income for each of the Joint Venturers under the general


provisions of the Income Tax Act;


(0 the value (as determined in accordance with Clause 8.2) of the benefidated


but unrefined ore from the Special Mining Lease, at the input flange of the


slurry pipeline, will be deemed to be a deductible outgoing incurred by


each of the Joint Venturers in carrying on business for the purpose of


gaining or producing the assessable income referred to in paragraph (e);


(g) without limiting the application or generality of provisions in the Income


Tax Act, expenditure on:


(i) facilities for carrying on the Mining Operations;





(ii) the benefidation plant to be constructed adjacent to the Mining


Operations;


(iii) the housing and related infrastrudure :o be provided in Madang for


persons employed in the Mining Operations; and


(iv) the access roads, bridges and transport infrastructure necessary for


or associated with the Mining Operations,


will be accepted and treated as allowable capital expenditure and be


deductible as such, or will be deductible as depreciation (including where


applicable, accelerated depreciation), against assessable income from the


Mining Operations;


(h) without limiting the application or generality of provisions in the Income





Tax Act, expenditure on:


(i) facilities for carrying on the Processing Operations;








111339327


 20.





(ii) facilities for the provision of power, water and other utilities


required by the Refinery;


(iii) the housing and related infrastructure to be provided for persons


employed in the Processing Operation.;; and


(iv) the marine facilities (including the wharf and storage) associated


with the Refinery,


will be deductible against assessable income from the Processing


Operations either as an allowable deduction in the year in w hich the


expenditure is incurred or as depreciation (including, where applicable


accelerated depreciation); and


(i) expenditure on the limestone mining operations will be deductible against


assessable income from the Processing Operations as allowable capital


expenditure under Part III Division 10.B of the Income Tax Act.


8.2 Transfer Price


The transfer price, being the value at which the beneliciated but unrefined ore





from the Special Mining Lease is deemed to be transferred from the Mining


Operations to the Processing Operations for the purposes of Clause 8.1, will be


determined quarterly in accordance with the following formula:


MOC + MD


TP = PR x__





TOC + TD


Where:





TP = Transfer Price


PR = Project Revenues, being the net revenues for the Project as a whole


from the sale of Mine Products derived from the Mining Area,


based on the sale price of the recoverable metal less all marketing,


selling and freight costs.


MOC = Mining Operating Costs, being the operating costs of the Mining





Operations


TOC - Total Operating Costs, being the aggregate operating costs of both


the Mining Operations and the Processing Operations


MD = Mining Depreciation, being the accounting or book depreciation of


all the depreciable assets (including assets the value of which is








111339327


 21.





deductible as allowable exploration expenditure or allowable


capital expenditure) used in Mining Operations.


TD = Total Depreciation, being the aggregate accounting or book


depreciation of all the depreciable assets used in the Project as a


whole.





8.3 Income Tax


Subject to and in accordance with Clauses 8.1 and 8.2 each of the Joint Venturers


will be subject to dual assessment of its income from :he Project, and shall submit


separate tax returns, in respect of:


(a) its taxable income from mining operations on the Special Mining Lease; and


(b) its other taxable income derived from the Project.


8.4 Additional Profits Tax


Subject to and in accordance with Clauses 8.1 and 8.2, the taxable additional


profits derived by each of the Joint Venturers from the Mining Operations will be


determined in accordance with the Mining Division of the Income Tax Act


(presently Division 10 of Part III in particular Subdivision D).


8.5 Royalty


Each of the Joint Venturers will be liable to pay royalty on its "net smelter returns",


which will be determined in accordance with Section 107 of the Mining Act


(Chapter 195) as continued in force by the transitional provisions of the Mining


Act. *


8.6 Tax Remittance


The Manager on behalf of the Joint Venturers will maintain US dollar


denominated accounting books and records for the Project, and on the basis of


these each Joint Venturer will prepare its tax returns in relation to the Project in US


dollars. The State shall ensure that the Commissioner General of Internal Revenue


assesses the income tax and additional profits tax (if any) for each Joint Venturer in


relation to the Project in US dollars and arrangements are made to allow each Joint


Venturer to pay such tax in US dollars.


9. FINANCING OF THE PROJECT


9.1 Submission of Financial Plan


Each Joint Venturer shall submit to the State and the Central Bank its financial


plan for financing its participation in the Project. The financial plans will











111339327


(a) set out in full detail the manner in which the Joint Venturer intends to


finance the cost of its participation in the Project through to


Commencement of Commercial Production, including a reasonable


provision for working capital to maintain Normal Operations;


(b) identify capital to be used by the Joint Venturer for this purpose as Equity


and/ or debt, as the case may be, and the ratio of debt to Equity which will


not exceed 3:1;


(c) identify sources of the proposed debt finance and the terms and conditions of


such debt finance, including in particular the cost of funds (identifying all


fees, charges and commissions as well as interest rates and or interest


margins);


(d) describe the security to be provided for the financing; and


(e) identify the Joint Venturer’s need for Foreign Currency Accounts.


9.2 Consideration and Approval of Financial Plan


The State shall ensure that its department responsible for financial matters and the


Central Bank give expeditious consideration to the financial plan and requests for


any further information required from the Joint Venturer. The State may by notice


to the Joint Venturer request a revised financial plan if the one submitted by the


Joint Venturer does not comply with the provisions of the Contract or otherwise


does not commercially or economically satisfy the State or the Central Bank.


Within one (1) month after the date of receipt from the Joint Venturer of:


(a) the financial plan or revised financial plan; and


(b) such further information as may have been reasonably requested,


the State shall notify the Joint Venturer whether or not it has been approved by the


Secretary of the department responsible for financial matters. If it has not been


approved, but the Joint Venturer is of the view that it provides for the financing of


its participation in the Project in a manner which is commercially and


economically reasonable, the Joint Venturer may require the decision to be


reviewed jointly by the Secretary for the department responsible for financial


matters and the Governor of the Central Bank and a recommendation to be made


to the Minister responsible for financial matters for a binding decision, within a


further period of one (1) month.


9.3 Maintenance of Debt: Equity Ratio


Each Joint Venturer shall ensure that, on each successive Test Date, the


outstanding balance of its Approved Finance (converted into Kina from the


currency of drawdown at the rate which is the average of the buying and selling


rates quoted for the currency by Australia and New Zealand Banking Group








111339327


 23.





(PNG) Limited at 11:00 am on the date of each drawdown) does not exceed


seventy five percent (75%) of the Joint Venturer's share of the sum of-


(a) allowable exploration expenditure, allowable capita] expenditure and


expenditure on any plant or article in respect of which an election has been


made under Section 163AVV of the Income Tax Act incurred by the Joint


Venturers on the Project;


(b) expenditure on the slurry pipeline, the Refinery and other transportation


and processing facilities;


(c) any net trade debt owing to the Joint Venturers in the ordinary course of


business in respect of operations of the Project; and


(d) the value of the uninvoiced inventory of the Joint Venturers held in the


ordinary course of business in respect of operat ons under the Project.


Expenditure by the Joint Venturer on the Project, that falls outside the scope of


Approved Finance as permitted by this subclause, will be financed by Equity.


10. CURRENCY AND EXCHANGE CONTROL





PART A





10.1 Application and Definitions


This Part A of Clause 10 applies to any Joint Venturer which is a single purpose





company incorporated in Papua New Guinea. In this Part:


"Accounting Profits" means the Joint Venturer's book profits, calculated in


accordance with generally accepted accounting pnnciples and arrived at after


deduction of:


(a) in relation to each Year of Income, the Income Tax and Additional Profits





Tax which have been paid or will be payable by the Joint Venturer on its


income from the Project for that year; or


(b) in relation to an interim period prior to the finalisation of the annual





accounts, the Income Tax and Additional Profits Tax which would be


payable by the Joint Venturer in respect of the in:ome from the Project


derived by the Joint Venturer during that period on the basis that the Joint


Venturer continued to derive income during the whole of the year of


income of which the period forms a part, at the same daily average rate as


in that period;


' Approved Dividends" means dividends of the Joint Vt nturer which have been


approved by the Central Bank pursuant to Clause 10.4(a); and











111339327


 24.








"Distributable Profits' means in relation to any date of determination, the sum of


a Joint Venturer's current year's undistributed Accounting Profits plus its retained


earnings as of that date.


10.2 Foreign Currency Accounts





In accordance with the provisions of this Clause 10, he Joint Venturer shall apply


to the Central Bank for authority to maintain Foreign Currency Accounts. The


Central Bank shall approve those Foreign Currency Accounts which are required


by the Joint Venturer's Approved Financial Plan. Funds in such accounts may be


invested in such liquid or marketable financial instruments (other than in


instruments of the Joint Venturer or its Related Corporations) as the Joint Venturer


may elect and the earnings in such financial instruments shall be treated for the


purpose of this clause as if they were earnings from he sale of Mine Products for


export from Papua New Guinea.





10.3 Approved Finance


(a) Within the scope of the Approved Financial Plan and the required 3:1 debt


to Equity ratio, the State shall procure all the necessary authorities and


approvals for the following arrangements to be treated as Approved


Finance:


(i) loans to be used exclusively for the purpose of financing the Project


or Normal Operations, which are on tetms no less favourable to the


Joint Venturer than those generally available from banks and


financial institutions lending to similar mining projects in terms of


risk and location, and any refinancing of such loans on similar or


more favourable Jerms, provided that loans to a Joint Venturer from


a Related Corporation will be on terms [including interest rate and


fees) which are no more favourable to the Related Corporation than


terms given to third party lenders of equally ranking loan); and





(ii) issues of redeemable preference shares at par to finance major capital


expenditure on the Project, which is within the Approved Proposals


for Development, where the dividend rate on such shares is no more


than the market rate of interest at that time for secured loans to the


Project and other projects comparable tc the Project in terms of risk


and location.


(b) The Joint Venturer shall not at any time give notice to the Central Bank





designating the redeemable preference shares referred to in paragraph (a)


above as Equity.





(c) Preference shares constituting Equity of the Joint Venturer once designated


as such shall not at any time thereafter be converted into, or deemed to be.


Approved Finance.











111339327


 25.





(d) Within thirty (30) days of each Test Date the loint Venturer shall submit to


the Central Bank:


(i) a statement showing the balance of Approved Finance as of the


preceding Test Date (if any) expressed in US Dollars;


(ii) a schedule of drawdowns and repayments of Approved Finance


made prior to the Test Date and after the preceding Test Date (if


any), detailing the foreign currency (and if necessary the US Dollar


equivalent amount) and date of each drawdown and repayment; and


(iii) cumulative figures expressed in US Dollars for each of the categories


of expenditure described in Clause 9.3 certified by a duly authorised


officer of the Joint Venturer as having Oeen derived in accordance


with the last audited profit and loss statement.


10.4 Distributable Profits


(a) Before paying any dividend to a shareholder outside Papua New Guinea,


the Joint Venturer shall present to the Central Bank a full set of audited


profit and loss statements and balance sheet with accompanying notes


which:


(i) have been certified by a duly authorised officer of the Joint Venturer


as having been prepared in accordance with generally accepted


accounting principles; and


(ii) show that there are Distributable Profits in respect of which, or in


respect of part of,which, the dividends are to be declared.


(b) Within a period of two (2) weeks the Central Bank may, if on reasonable


grounds it is not satisfied that there are Distributable Profits out of which


the dividend is to be paid, require the Joint Venturer to submit an audited


profit and loss statement showing that there are sufficient Distributable


Profits.


10.5 Approved Dividends


(a) A dividend of the Joint Venturer payable to a shareholder resident outside


Papua New Guinea which is :


(i) one of a series of dividends declared not more frequently than once


each Quarter; and


(ii) payable directly or indirectly out of Distributable Profits in respect of


which, or in respect of part of which, that dividend has been declared


and cleared for taxation purposes and relevant Dividend


Withholding Tax has been remitted to the Internal Revenue


Commission,








111139327


 26.








shall be approved by the Central Bank.


(b) Approval pursuant to Clause 10.5(a) shall be given by the Central Bank


within thirty (30) days from the date on which the statements referred to in


Clause 10.4(a) were submitted or, in a case where the Central Bank has


required an audited profit and loss statement within thirty (30) days from


the date on which the Central Bank has recei\ed an audited profit and loss


statement showing that there are sufficient Distributable Profits.


10.6 Retention of Foreign Currency





The Joint Venturer may retain in foreign currency outside Papua New Guinea in


its approved Foreign Currency Accounts:


(a) the amount of any funds received or transferred in foreign currency


pursuant to Approved Finance and Equity in respect of:


(i) commitments due or to become due during the ensuing Quarter in





foreign currency to persons resident outside Papua New Guinea for


the supply of goods, and services for the Project (including capital


goods, insurance premiums and obliga ions due to non-resident


employees and consultants); and


(ii) any other payment approved by the Central Bank; and





(b) proceeds of the sale by the Joint Venturer of Mine Products exported


overseas, and its share of the settlement of insurance claims received in


foreign currency, in an aggregate amount (sub ect to Clause 10.8) not to


exceed the sum of the aqiounts due or to become due during the ensuing


Quarter, or such longer period as may be approved by the Central Bank, in


respect of -


(i) the discharge of obligations, arising out of Approved Finance,


designated in a currency other than Kina, but only to the extent that


Approved Finance did not, at the last Test Date, exceed the


proportion of expenditure referred to in Clause 9.3;


(ii) commitments in foreign currency to persons resident outside Papua


New Guinea for the supply of goods and services for the Project


(including capital goods, insurance premiums and obligations due to


non-resident employees and consultants);


(iii) the forecast amount of Approved Dividends declared or to be


declared by the Joint Venturer in accordance with Clause 10.5 and


payable to shareholders resident outside Papua New Guinea where


such dividends relate to profits derived from the Project;














111339327


 27.





(iv) payments to be made by the Joint Venturer for the purpose of


effecting an Approved Reduction of Capital in accordance with


Clause 10.10;





(v) payments of Papua New Guinea income tax, additional profits tax


and dividend withholding tax which are payable or forecast to be


payable in foreign currency; and


(vi) any other payment approved by the Central Bank.





10.7 Purchase of Foreign Currency


When at any time after the first sale of Mine Products:





(a) the amount of foreign currency' held by the Joint Venturer in its approved


Foreign Currency Accounts under Clause 10.6 i; as a result of any


circumstances of Force Majeure insufficient (belore taking into account


payment of Approved Dividends) to meet its obligations of the type


referred to in Clause 10.6(b)(i) and (ii); and


(b) the Joint Venturer has surplus funds held in Papua New Guinea in Kina,


the Joint Venturer may purchase foreign currency with those surplus Kina funds


and remit it overseas to meet its obligations of the type referred to in Clause


10.6(b)(i) and (ii) as they fall due, until foreign currency is again available for this


purpose under Clause 10.6.


10.8 Reporting to Central Bank


The Joint Venturer shall submit to the Central Bank:





(a) within ten (10) working days after the end of each calendar month, a report


on all inflows and outflows from its approved Foreign Currency Accounts


during that calendar month, in the form required by the Central Bank;


(b) within fifteen (15) working days after the end of each Quarter -


(i) a report on the foreign currency which it has retained in its approved


Foreign Currency Accounts under this Clause 10 during the Quarter,


if any, accounting for funds retained pursuant to Clause 10.6 by


identifying the purposes in the categories (a)(i) and (ii) and (b)(i) to


(vi) for which the foreign currency is being retained and disbursed;


and


(ii) a report certified by a duly authorised officer of the drawdown,


transfer or subscription of Approved Finance and any collateral


obligation pertaining thereto during that Quarter and the


outstanding balances at the end of the Quarter; and








111339327


 28.








(iii) a forecast of the foreign currency which it expects to retain in its


approved Foreign Currency Accounts under this Clause 10 during


the ensuing Quarter, if any; and


(c) within five (5) months after the end of each ye^r of income audited accounts


showing the amount of Distributable Profits for the year of income and the


balance of Approved Finance at the end of the year of income.


10.9 Return of Surplus Foreign Currency





Except as provided in Clause 10.6 the Joint Venturer shall convert all its foreign


currency earnings from the Project into Kina and remit the proceeds to Papua New


Guinea to a bank account in the name of the Joint Venturer for its use or pledged


to lenders of Approved Finance.


10.10 Remittance of Equity


(a) After the date upon which all Approved Finance has been repaid the Joint





Venturer may request from the Central Bank agreement on a schedule


providing, for a reduction in Equity of the Joint Venturer, which separates


Equity provided in Kina and Equity provided in a currency other than Kina.


Such a schedule will be agreed within twelve (12) months, or such shorter


period as the Central Bank may specify, of this -equest and will, for the


purposes of effecting the reduction in Equity, authorise payments in the


currency in which the Equity was provided to be made over a period being


not less than three (3) years and covering, so far as practicable, the


estimated period during which the Project will continue, provided that no


such payment will be authorised in respect of any period during which the


Joint Venturer is holding unremitted Distributable Profits other than


earnings of the current Quarter.


(b) Where a schedule has been agreed under paragraph (a) the Joint Venturer


may, to the extent that the Equity to be reduced was supplied in a currency


other than Kina, purchase foreign currency with funds held in Kina for the


purpose of making payments required in foreigi currency in order to give


effect to the Approved Reduction of Capital.


10.11 Non-discrimination


In addition to, and without derogating from, its rights under this Contract, the





Joint Venturer, in relation to the Project, shall not be subject to any legislative or


regulatory action of the State in regard to foreign exchange, and control thereof,


which:


(a) is less favourable than the general application of legislative and regulatory





action which applies to persons dealing with foreign exchange in Papua


New Guinea; and











1113,19327


 29.








(b) in particular, prevents the Joint Venturer from ouying and selling Kina, in


accordance with the Foreign Exchange Regulations and this Clause 10, and


at rates of exchange as favourable as those available to other commercial


buyers and sellers of that currency in similar sized transactions.


10.12 State's Action to Ensure Compliance





Where any right or assurance given to the Joint Venturer under this Clause 10


requires the Central Bank: -


(a) to approve or authorise any act, matter or thing; or


(b) to grant authority under the Foreign Exchange Regulations for its exercise


or performance,


and the Joint Venturer has supplied any information to the Central Bank required





by, and otherwise met the conditions of, this Clause 10 and the Central Banking


Act, the State shall, upon request from the Joint Ventu-er ensure by policy


directions to the Central Bank or otherwise that such approval is given or such


authority is granted.


10.13 Speculative Currency Transactions


Without limiting the provisions of the Central Banking Act the Joint Venturer shall





not use any provisions of this Clause 10 or any authority or approval given by the


Central Bank or by an authorized dealer under the Foreign Exchange Regulations


to engage in Speculative Currency Transactions. If the Joint Venturer is in breach


of this subclause, it shall pay to the State as liquidated damages an amount equal


to the amount of any profit or gain which the Joint Ver turer makes on the


Speculative Currency Transaction and any cost incurred in establishing that the


transaction was a Speculative Currency Transaction.


PART B





10.14 Application and Definitions


This Part B of Clause 10 applies to any Joint Venturer which is a multi-purpose


company incorporated in Papua New Guinea. In this Part:


"Accounting Profits" means the Branch's book profits, calculated in accordance


with generally accepted accounting principles and arrived at after deduction of:


(a) in relation to each Year of Income, the Income Tax and Additional Profits





Tax which have been paid or will be payable by the Joint Venturer on its


income from the Project for that year; or


(b) in relation to an interim period prior to the finalisation of the annual





accounts, the Income Tax and Additional Profits Tax which would be


payable by the Joint Venturer in respect of the income from the Project








111339327


 30.





derived by the Joint Venturer during that per od on the basis that the Joint


Venturer continued to derive income during the whole of the year of


income of which the period forms a part, at the same daily average rate as


in that period;


"Approved Dividends" means dividends of the Joint Venturer declared in respect


of Branch Profits and approved by the Central Bank pursuant to Clause 10.17(a);


"Branch Capital" means a non-interest bearing advance made by the head office


of the Joint Venturer to its Branch, which has been designated as branch capital in


a notice to the Central Bank given pursuant to this Contract;


"Branch Profits" means in relation to any date of determination, the sum of the


Branch's current year's undistributed Accounting Profits plus its retained earnings


as of that date; and


"Distributable Profits" means in relation to any date of determination, the sum of


a Joint Venturer's current year's undistributed Accounting Profits plus its retained


earnings as of that date.


10.15 Foreign Currency Accounts


In accordance with the.provisions of this Clause 10, the Joint Venturer shall apply


to the Central Bank for authority to maintain Foreign Currency Accounts to be


used exclusively for the activities of the Branch in relation to the Project. The


Central Bank shall approve those Foreign Currency Accounts which are required


by the Joint Venturer's Approved Financial Plan. Funds in such accounts may be


invested in such liquid or marketable financial instruments (other than in


instruments of the Joint Venturer or its Related Corporations) as the Company


may elect and the earnings on such financial instrume nts shall be treated for the


purpose of this Clause as if the)' were earnings from the sale of Mine Products for


export from Papua New Guinea.


10.16 Approved Finance


(a) Within the scope of the Approved Financial Plan and the required 3:1 debt


to Equity ratio, the State shall procure all the necessary authorities and


approvals for advances from the head office to the Branch (other than


Branch Capital), which are to be used exclusively for the purpose of


financing the Project or Normal Operations and are on terms no less


favourable to the Branch than those generally available from banks and


financial institutions lending to similar mining projects in terms of risk and


location, to be treated as Approved Finance.


(b) Within thirty (30) days of each Test Date the Joint Venturer shall submit to


the Central Bank:


(i) a statement showing the balance of Approved Finance as of the


preceding Test Date (if any) expressed in US Dollars;


111 339327


 31.





(ii) a schedule of advances entered in the Branch Accounts in respect of


Approved Finance, and debits made in the Branch Accounts in


respect of repayments thereof, made prior to the Test Date and after


the preceding Test Date (if any), detailing the foreign currency' (and


if necessary the US Dollar equivalent amount) and date of each


advance and debit; and


(iii) cumulative figures expressed in US Dollars for each of the categories


of expenditure described in Clause 9.3, certified by a duly authorised


officer of the Joint Venturer as having been derived in accordance


with the last audited profit and loss statement for the Branch.


10.17 Branch Profits and Distributable Profits


(a) If the Joint Venturer wishes to make a debit in the Branch Accounts against





Branch Profits it shall present to the Central Bank profit and loss statements


for the Branch which:





(i) have been certified by a duly authorised officer of the Joint Venturer


as having been prepared in accordance with generally accepted


accounting principles; and





(ii) show that there are Branch Profits in respect of which, or in respect


of part of which, the debit is to be made.


(b) The Joint Venturer may make a debit in the Branch Accounts, against the


Branch Profits, of an amount no greater than the Branch Profits as shown in


the profit and loss statements under paragraph (a).


(c) Before paying any dividend in respect of Branch Profits to a shareholder


outside Papua New Guinea, the Joint Venturer shall present to the Central


Bank profit and loss statements which :


(i) have been certified by a duly authorised officer of the Joint Venturer


as having been prepared in accordance with generally accepted


accounting principles; and


(ii) show that there are Distributable Profits in respect of which, or in


respect of part of which, the dividends are to be declared.


(d) Within a period of two (2) weeks the Central Bank may, if on reasonable


grounds it is not satisfied that there are Branch Profits or Distributable


Profits out of which the dividend is to be paid, require the Joint Venturer to


submit an audited profit and loss statements for the Branch and the Joint


Venturer showing that there are sufficient Branch and Distributable Profits.

















111339327


 32.





10.18 Approved Dividends


(a) A dividend of the Joint Venturer, in respect ot Branch Profits, payable lo a


shareholder resident outside Papua New Guinea which is :


(i) one of a series of dividends declared not more frequently than once


each Quarter; and


(ii) payable directly or indirectly out of that part of Distributable Profits


that are Branch Profits in respect of which, or in respect of part of


which, that dividend has been declared and cleared for taxation


purposes and relevant Dividend Withholding Tax has been remitted


to the Internal Revenue Commission,


shall be approved by the Central Bank.


(b) Approval pursuant to Clause 10.18(a) shall be given by the Central Bank


within thirty (30) days from the date on which the statements referred to in


Clause 10.17(a) and (c) were submitted or, in a case where the Central Bank


has required an audited profit and loss statement, within thirty (30) days


from the date on which the Central Bank has received audited profit and


loss statement showing that there are sufficient Efranch and Distributable


Profits.


10.19 Retention of Foreign Currency


The Joint Venturer may retain in foreign currency outside Papua New Cuinea in


its approved Foreign Currency Accounts:


(a) the amount of any funds,received or transferred in foreign currency


pursuant to Approved Finance and Branch Capital in respect of -


(i) commitments due or to become due during the ensuing Quarter in


foreign currency to persons resident outside Papua New Cuinea for


the supply of goods, and services for the Project (including capital


goods, insurance premiums and obligations due to non-resident


employees and consultants); and


(ii) any other payment approved by the Central Bank; and


(b) proceeds of the sale by the Joint Venturer of Mint Products exported


overseas, and its share of the settlement of insurance claims received in


foreign currency, in an aggregate amount (subject to Clause 10.21) not to


exceed the sum of the amounts due or to become due during the ensuing


Quarter, or such longer period as may be approved by the Central Bank, in


respect of -


(i) the discharge of obligations arising out of Approved Finance as


being designated in a currency other than Kina, but only to the extent


111339327


 33








that Approved Finance did not, at the la:.t Test Date, exceed the


proportion of expenditure referred to in Clause 9.3;


(ii) commitments in foreign currency to persons resident outside Papua


New Guinea for the supply of goods and services for the Project


(including capital goods, insurance premiums and obligations due to


non-resident employees and consultants);


(iii) the forecast amount of Approved Dividends declared or to be


declared by the Joint Venturer in accordance with Clause 10.18 and


payable to shareholders resident outside Papua New Guinea where


such dividends relate to profits derived from the Project;


(iv) payments to be made by the Joint Venturer for the purpose of


effecting an Approved Reduction of Capital in accordance with


Clause 10.23;


(v) payments of Papua New Guinea income tax, additional profits tax


and dividend withholding tax which are payable or forecast to be


payable in foreign currency; and


(vi) any other payment approved by the Central Bank.


10.20 Purchase of Foreign Currency


When at any time after the first sale of Mine Products:


(a) the amount of foreign currency held by the Joint Venturer in its approved


Foreign Currency Accounts under Clause 10.19 is as a result of any


circumstances of Force Majeure insufficient (before taking into account


payment of Approved Dividends) to meet its obligations of the type


referred to in Clause 10.19(b)(i) and (ii); and


(b) the Joint Venturer has surplus funds held in Papua New Guinea in Kina,


the Joint Venturer may purchase foreign currency with those surplus Kina funds


and remit it overseas to meet its obligations of the type -eferred to in Clause


10.19(b)(i) and (ii) as they fall due, until foreign currency is again available for this


purpose under Clause 10.19.


10.21 Reporting to Central Bank


The Joint Venturer shall submit to the Central Bank:


(a) within ten (10) working days after the end of each calendar month, a report


on all inflows and outflows from its approved Foreign Currency Accounts


during that calendar month, in the form required by the Central Bank,


(b) within fifteen (15) working days after the end of each Quarter -








111339327


 34.





(i) a report on the foreign currency which it has retained in its approved


Foreign Currency Accounts under this Clause 10 during the Quarter,


if any, accounting for funds retained pursuant to Clause 10.19 by


identifying the purposes in the categories (a)(i) and (ii) and (b)(i) to


(vi) for which the foreign currency is being retained and disbursed;


and


(ii) a report certified by a duly authorised officer of the advances and


debits pertaining to Approved Finance? and any collateral obligation


pertaining thereto during that Quartei and the outstanding balances


at the end of the Quarter; and


(iii) a forecast of the foreign currency which it expects to retain in its


approved Foreign Currency Accounts under this Clause 10 during


the ensuing Quarter, if any; and


(c) within five (5) months after the end of each year of income audited accounts





showing the amount of Distributable Profits lor the year of income and the


balance of Approved Finance at the end of the year of income.


10.22 Return of Surplus of Foreign Currency


Except as provided in Clause 10.19 the Joint Venturer shall convert all its foreign





currency earnings from the Project into Kina and remit the proceeds to Papua New


Guinea to a bank account in the name of the Joint Venturer for the use of the


Branch or pledged to lenders of Approved Finance.


10.23 Remittance of Equity '





(a) After the date upon which all Approved Finance has been repaid the Joint


Venturer may request from the Central Bank agreement on a schedule


providing for a reduction of Branch Capital w hich separates Branch Capital


supplied in Kina and Branch Capital in a currency other than Kina. Such a


schedule will be agreed within twelve (12) months, or such shorter period


as the Central Bank may specify, of this request and will, for the purposes of


effecting the reduction of Branch Capital, authorise payments in the


currency in which the Branch Capital was provided to be made over a


period being not less than three (3) years and covering, so far as practicable,


the estimated period during which the Project will continue, provided that


no such payment will be authorised in respect of any period during which


the Joint Venturer is holding unremitted Branch Profits other than earnings


of the current Quarter.


(b) Pursuant to the schedule agreed under paragraph (a), the Joint Venturer


will make a debit in the Branch Accounts against Branch Capital, effecting a


Kina transfer of the Branch Capital scheduled in Kina and otherwise


required in Kina, and may, to the extent that Branch Capital was supplied


in currency other than Kina, purchase foreign zurrency, with funds held in








111339327


 33.








Kina, for the purpose of making payments required in foreign currency, in


order to give effect to the Approved Reduction of Capital.


10.24 Non-discrimination


In addition to, and without derogating from, its rights under this Contract, the


Joint Venturer, in relation to the Project, shall not be subject to any legislative or


regulatory action of the State in regard to foreign exchange, and control thereof,


which:


(a) is less favourable than the general applicatior of legislative and regulatory


action which applies to persons dealing with foreign exchange in Papua


New Guinea; and


(b) in particular, prevents the Joint Venturer from buying and selling Kina, in


accordance with the Foreign Exchange Regulations and this Clause 10, and


at rates of exchange as favourable as those available to other commercial


buyers and sellers of that currency in similar sized transactions.


10.25 State's Action to Ensure Compliance


Where any right or assurance given to the Joint Venturer under this Clause 10





requires the Central Bank -


(a) to approve or authorise any act, matter or thirg; or


(b) to grant authority under the Foreign Exchange Regulations for its exercise


or performance,


and the Joint Venturer has supplied any information to the Central Bank required


by, and otherwise met the conditions of, this Clause 10 and the Central Banking


Act, the State shall, upon request from the Joint Venturer ensure by policy


directions to the Central Bank or otherwise that such approval is given or such


authority is granted.


10.26 Speculative Currency Transactions


The Joint Venturer shall not use any provisions of this Clause 10 or any authority


or approval given by the Central Bank or by an authorized dealer under the


Foreign Exchange Regulations to engage in Speculative Currency Transactions. If


the Joint Venturer is in breach of this Clause 10.26, it shall pay to the State as


liquidated damages an amount equal to the amount of any net after tax profit or


gain which the Joint Venturer makes on the Speculative Currency Transaction and


any cost incurred by the State in establishing that the transaction was a Speculative


Currency Transaction.

















111339327


 36.





11. MARKETING AND OTHER CONTRACTS


11.1 Right to Market Mine Products





A Joint Venturer may market without further reference to the State its share of


Mine Products and shall have sole control and management of sale and delivery of


such Mine Products, including the forward selling cf all Mine Products, and shall


assume all risks therefor, provided that -





(a) such marketing is consistent with the Approved Proposals for


Development;


(b) the Joint Venturer:


(t) sells its share of Mine Products on an arms' length basis (or, in the


case of sales to Related Corporations, on terms and conditions no


more favourable to the buyer than those which may apply in sales


made on an arm's length basis) subject only to normal deductions for


shipping (where applicable) and other realisation costs; or





(ii) delivers its share of Mine Products in repayment of loans which form


part of Approved Finance; and


(c) the State has not notified the Joint Venturer that the export of its share of


Mine Products to buyers in a specified jurisdiction could -


(i) breach an obligation of the State arising under international law;


(ii) prejudice nationa^security; or





(iii) prejudice the international relations of the State by the export of


Mine Products to another country with which it has been declared by


the State to be contrary to the interests of the State to be engaged in


international trading.


11.2 Agreements on Competitive Commercial Terms





Each Joint Venturer shall inform the State of each agreement concerning sales or


processing of Mine Products, patent licensing, engineering, construction or


management services which is with a Related Corporation or is otherwise not an


agreement entered into on an arm's length basis. If, in the opinion of the State,


such agreement is not on competitive commercial terms, the State may, within


thirty' (30) days of receipt of information about such ai agreement, give notice to


such Joint Venturer of the terms which the Slate determines to be competitive


commercial terms.


Upon receipt of the State's notice the Joint Venturer may -





(a) terminate the agreement;





111339327


 37.








(b) renegotiate the agreement using the terms determined by the State; or


(e) refer the dispute, within thirty (30) days, to a Sole Expert for a


determination as to what are competitive commercial terms in the


circumstances.


Upon receipt of the expert's decision, which shall bt binding on the Parties, the


Manager and each Joint Venturer shall renegotiate the agreement, if necessary, to


embody those terms decided by the Sole Expert to be competitive commercial


terms or terminate the agreement.


11.3 Arms Length Basis


For purposes of this Clause 11, a sale is at urm’s length or a transaction is on an


arm's length basis where -


(a) the buyer and the seller in negotiating the sale have sought to promote their


own best interests in accordance with fair and honest business practices;


(b) the consideration expressed in the agreement for sale is the only


consideration for the sale;


(c) the price and other terms of the sale have not been affected by, nor


determined as a consequence of, any other agreement or any direct or


indirect relationship (other than the relationship created by the agreement


for sale between the sellers or shareholders of the seller, or a company in


which the seller is a shareholder, and the buyer or shareholders of the


buyer, or a company in which the buyer is a shareholder); and





(d) neither the seller, nor any person or company connected with it through


shareholding or otherwise, has any direct or indirect interest in the


subsequent re-sale or disposal by the buyer of any of the products


purchased pursuant to the agreement or sale.


11.4 Sale of State's Share of Mine Products


At any time after the State has elected to participate in the Project (whether


directly or through its nominee) under provisions of a Mining Equity Agreement


or other like agreement, the State or its nominee, as the case may be, may require,


by notice in writing, all of the Joint Venturers (in proportion to their participating


interests under the Joint Venture Agreement) to sell, an its behalf, its share of the


Mine Products. The State agrees to, or to procure its nominee, to reimburse out-of-


pocket expenses incurred by the Joint Venturer in selling its share of the Mine


Products and pay a mutually acceptable marketing fee.

















111339327


 38.








12 ACQUISITION OF STATE INTEREST


12.1 Stale's Option


Further to Recitals C, D, E and F the State has an option but not the obligation to


acquire at cost from the Joint Venturers a 30% interest in the Project.


12.2 Mining Equity Agreement


If the State exercises its option in whole or in part, such acquisition shall be


effected under a Mining Equity Agreement or such other agreement pursuant to


and consistent with the Option Agreement as defined under the Mineral Resources


Development Company Pty Limited (Privatisation) Act 1996.


12.3 Orogen Option


If Orogen exercises its option under the Option Agreement to acquire a 25%


interest from the State or MRDC, this interest will be in addition to the existing


interest it holds under the Joint Venture Agreement but that existing interest will


be subject to proportional reduction as a result of the State exercising its option. In


addition, a 5% interest shall be taken up and funded by an MRDC subsidiary to be


held in trust for the benefit of the Landowners.


13. INVESTMENT PROMOTION AUTHORITY CERT IFICATION


Each Joint Venturer shall apply to be certified under the Investment Promotion Act


1992 in respect of its activities contemplated by or required to be carried out under


the Approved Proposals for Development. The State shall ensure that each Joint


Venturer is issued with a certificate, in which any corditions are consistent with


this Contract and the Approved Proposals for Development, in accordance with its


application for the duration of the Project or for any period until the Joint Venturer


ceases to have an interest in the Project (whichever period is shorter).


14. ENVIRONMENTAL MANAGEMENT AND PROTECTION


14.1 Compliance with Environmental Plan


The Joint Venturers shall comply in all material respects with the approved


Environmental Plan.


14.2 Variation of Environmental Plan


The Environmental Plan may be varied by the Joint Venturers pursuant to the


Environmental Planning Act (Chapter 370) and as provided for in Clause 31.


Where pursuant to Clause 31.2 any variation of the Environmental Plan requires


the approval of the State, the Joint Venturers shall submit such vanation to the


Minister responsible for environmental matters.











111339327


 39.





14.3 Amendment required by State


Subject to Clause 14.5, the Minister responsible for environmental matters may, on


behalf of the State, initiate amendment to the Environmental Plan if:


(a) at any time the conduct of Normal Operations in accordance with the


Environmental Plan for whatever reason poses a material danger to public


health and safety; or


(b) the conduct of Normal Operations results in significant damage to the


ecology of the area which was not contemplated in the Environmental Plan;


or


(c) the environmental impact of Normal Operations shall prove substantially


more adverse than anticipated in the Environmental Plan; or


(d) technological procedures or improvements taereof shall have become


available and economic subsequent to the Effective Date and, if applied to


the operations of the Project, could materially mitigate the environmental


impact of Normal Operations.


14.4 Disputed Amendments


In the event that there is a dispute in respect of any amendment initiated by the


Minister responsible for environmental matters on behalf of the State in any of the


circumstances set out in Clause 14.3, the dispute shall be referred to arbitration


under Clause 25 and the amendment shall not become effective unless and until it


is upheld by the resulting arbitration award.





14.5 Amendments while Approved Finance outstanding


During the period for which any Approved Finance is outstanding, the State shall


ensure that the Minister responsible for environmental matters does not initiate


any amendments to the Environmental Plan in the circumstances set out in Clause


14.3(d) which make the cost to the Joint Venturers of carrying out the Project


materially greater.


14.6 Application of Environmental Laws Generally


The Joint Venturers shall not be subject to any laws and regulations relating to the


environment that are in their general application less favourable to the Joint


Venturers than the laws and regulations relating to the environment which apply


to all other persons engaged in natural resource projects in Papua New Guinea nor


will the laws and regulations relating to environment in Papua New Guinea be


applied to the Joint Venturers in a manner less favourable to the manner in which


they are generally applied to others to whom they are applicable.














11IV19327


 40.





15. TRAINING AND I OCALISATION


15 1 Compliance with Programme


The Joint Venturers will comply with the approved Training and Localisation


Programme and priority in employment will be given in the following order,


firstly to the residents of the Usino - Bundi and Rai Coast Districts, then to other


Madang Province residents, and then to residents of Papua New Guinea.


15.2 Alteration of Programme


(a) The Joint Venturers may, with the consent of the State (which consent shall


not be unreasonably withheld), amend or alter the Training and


Localisation Programme with a view to secuiing the maximum training of


and benefits to Papua New Guineans from the Project. If the Programme is


disrupted by circumstances or events (whether or not they constitute Force


Majeure under Clause 28.2) which make it difficult or impossible for the


Joint Venturers -


(i) to comply with their obligations under (he Programme; or


(ii) to operate the mine site in accordance with the standard as outlined


in the Mining (Safety) Act (Chapter 195A);


the Joint Venturers may give notice of alternative or revised plans to the


part of the programme affected.


(b) Should the Joint Venturers give notice pursuant to paragraph (a) the State


shall within thirty (30) days either -


(i) approve those alternative or revised plans, or


(ii) meet with the Joint Venturers to discuss and agree upon the


alternative or revised plans.


15.3 Disputed Alterations


If the discussions under Clause 15.2 (b) do not lead to the State's approval of


alternative or revised plans and the Joint Venturers consider the State's decision to


be unreasonable, the Joint Venturers may within sixty (60) days, elect to refer the


matter to arbitration. In reaching a decision the arbitrator shall judge the


reasonableness of the State's decision.


15.4 State Assistance


The State shall give such advice to the Joint Venturers as is reasonably required in


the development and implementation of the Training and Localisation Programme


and in the recruitment of Papua New Guinean staff.











111339327


 41.





16. SUPPLY AND PROCUREMENT


16.1 Registration of Local Suppliers





The Joint Venturers shall, on an annual basis, identify and invite registration of


businesses in Papua New Guinea, particularly in the Madang Province and the


area of the Project, which are capable of supplying materials, equipment and


sen-ices to the Project, but pre-qualification and registration does not provide


assurance to a business that it will be invited to tender or be awarded any contract.


16.2 PNG Contractors and Suppliers





(a) When calling for tenders from contractors and suppliers, the Joint Venturers


shall include Papua New Guinean contractors and suppliers where -


(i) the contractors have proven ability in performing work of a similar


nature and size to that required for the Project, within the specified


time period; and


(ii) the suppliers are established and recognised suppliers of materials


and equipment who have marketed or distributed such materials


and equipment and who have applied in writing to be registered


with the Joint Venturers.


(b) The Joint Venturers shall ensure that its contractors are bound by


obligations comparable to those set out in paragraph (a) when the


contractors call for tenders from sub-contractors


16.3 PNG and International Procurement





The supply of materials, equipment and services may te tendered for and


procured internationally provided that where such materials, equipment and


services are procurable within Papua New Guinea from businesses pre-qualified


and registered pursuant to Clause 16.1 and meet the requirements of Clause 16.2,


such businesses shall be given a reasonable opportunity to tender and if a tender


submission from such business -


(a) meets the specifications of the invitation to tender,


(b) is competitive in cost with international sources, and





(c) meets the delivery requirements of the Project,


then such materials, equipment and services shall be procured from sources within


Papua New Guinea with preference being given to businesses including joint


ventures with substantial interests, firstly from the Usina - Bundi and Rai Coast


Districts, then from other parts of the Madang Province and then from other parts


of Papua New Guinea. With respect to all tendered contractors and suppliers,








111339327


 42.








whether Papua New Guinean or otherwise, the final determination to award a


particular contract shall be made by the Joint Venturers.


16.4 Costs to be considered


In assessing the tenders from local contractors and suppliers, the Joint Venturers


will consider the extra costs they would incur if they were to grant the contract to a


foreign supplier or contractor. These extra costs shall include, but are not


necessarily restricted to, wharfage costs, shipping costs, stevedoring costs, customs


clearance costs, customs duties, and demurrage charges.





17. LOCAL BUSINESS DEVELOPMENT


The Joint Venturers, in consultation and cooperation with the State and the


Provincial Government, will-


fa) comply with and carry out the Business Development Plan which forms


part of the Approved Proposals for Development; and


(b) conduct an annual review of progress being made on the implementation of


the Business Development Plan and make such variations to it as required


by changing circumstances and are agreed by :he Minister responsible for


trade and industry' matters.


18. INSURANCE


18.1 Insurance required





From the commencement of construction, the Joint Venturers shall ensure that


those aspects of the Project thaf are normally insured in accordance with the


practice of the mining industry and are commercially insurable at a reasonable


cost are insured and the State shall be advised of the policy or policies in place.


18.2 Insurance of PNG Risks





For all matters which involve Papua New Guinea risks, the Joint Venturers shall


obtain and maintain their insurance from Papua New Guinea insurers or through


Papua New Guinea insurance brokers, as required by the Insurance Act 1995,


except to the extent that:


(a) adequate insurance from companies having financial capacity to meet any





claims is not obtainable from or through such insurance brokers at a price


which is commercially competitive with the price for such insurance


obtainable elsewhere; or


(b) the agreements relating to Approved Finance require otherwise.





If paragraph (a) or (b) applies, the State shall grant or procure the grant by the


relevant government agency of an exemption from the requirement of the








111339327


 43.








Insurance Act 1995 to obtain and maintain certain irsurance in Papua New Guinea


subject to any tax, duty or levy as required by legislation or regulation.


18.3 Application of Insurance Proceeds


The Joint Venturers shall, unless the insurance polic es or loan agreements state


otherwise or the State otherwise agrees, use any amount paid to it pursuant to any


damage or destruction provisions in any contract of insurance to reinstate the


Project Assets (except for Mine Products) in respect of which such amount was


paid, provided that the Joint Venturer shall not be required to repair or restore any


portion of the Project Assets:


(a) that, prior to the damage or destruction, had been obsolete or were of no


material value to the operation of the Project; or


(b) where the Joint Venturers, following a review of the facts with the State, has


notified the State that in their judgement the cost of doing so is not justified


by the incremental economic benefit which the Project will derive


therefrom. In the event that the State notifies the Joint Venturers within


thirty (30) days of receipt of such notice that it disagrees with such


judgement, the matter shall be referred for determination to a Sole Expert.


19. PATENT AND TECHNOLOGY RIGHTS


All know-how within the meaning of section 163N ol the Income Tax Act


developed within the Project shall remain the property of the Joint Venturers. If


the Joint Venturers apply for, take out and retain patent or other technology rights


or registrations to protect all or any portion of the know-how, the State shall have


a royalty free right to use such protected know-how on and in respect of the


Project.


20. SUSPENSION OF OPERATIONS


20.1 Election to suspend


After consultation with the State and on giving the State not less than thirty (30)


days notice, the Joint Venturers may elect to suspend production if, in the three (3)


months immediately preceding the date of the notice, the Joint Venturers’ revenues


from the Project are less than the sum of royalties, mining levy and Operating


Costs. As soon as possible after giving notice under this Clause, the Joint


Venturers shall submit a report giving details of revenue, royalties, mining levy


and Operating Costs of the Project for the period of three (3) months aforesaid


giving the reasons why, in their opinion, it is necessar/ to cease production.


20.2 Maintenance


Where pursuant to the Clause 20.1 the Joint Venturers have elected to suspend


production they shall maintain, subject to fair wear and tear, the Project Assets so


as to prevent significant deterioration until Normal Oj*erations are resumed.





111339327


 44.





20.3 Report on Costs to Resume Operations


No later than twelve (12) months from the date on which the Joint Venturers


suspended production pursuant to Clause 20.1 and thereafter at no longer than


twelve (12) month intervals until Normal Operations are resumed, the Joint


Venturers shall submit a further report showing their projection of the Costs to


Resume Operations and of revenue for the same period.


20.4 Resumption of Operations


If a report submitted pursuant to Clause 20.3 shows the Joint Venturers' projection


of revenue from the Project for the succeeding twelve [12) month period is greater


than their projection of Costs to Resume Operations for that twelve (12) month


period if Normal Operations were to be resumed, ther the Joint Venturers shall


promptly take such measures necessary to ensure that Normal Operations are


resumed within a reasonable time period.


20.5 Direction to Resume Operations


Where production has been suspended for a continuous period of not less than


three (3) years, the Minister may direct the Joint Venturers to resume Normal


Operations if he is of the reasonable opinion that the Costs to Resume Operations


are less than the revenue from the Project for the same period. The Minister will


provide the Joint Venturers with a copy of the State's projections of costs and


revenues.


20.6 Disputed Resumptions


If the Joint Venturers disagree with the Minister’s direction pursuant to Clause


20.5, they may elect to submit th£ State's and the Joint Venturers' projections of


revenue and Costs to Resume Operations to a Sole Expert for his opinion.


20.7 Sole Expert Determinations


Where projections made by' the State and the Joint Venturers have been referred


pursuant to Clause 20.6, the Sole Expert shall determine what projections would be


reasonable to make in respect of the twelve (12) month period under review and


the opinion of the Sole Expert shall be binding on the Parties so that in the event


that the Sole Expert accepts the projections of the Joint Venturers or is otherwise of


the opinion that if Normal Operations were resumed the Joint Venturers' revenue


from the Project would be less than Costs to Resume Operations in respect of the


twelve (12) month period, the direction given by the Minister pursuant to Clause


20.5 shall be deemed to have been withdrawn.


20.8 Deemed Abandonment


Where pursuant to Clause 20.5 the Minister has directed the Joint Venturers to


resume Normal Operations and that direction has not been or is not deemed to


have been withdrawn, the Joint Venturers, if they do net promptly take such





111339327


 45.








measures to ensure that Normal Operations are resumed within a reasonable time


period, shall be deemed to have abandoned the Project for the purpose of Clause


21.2(c) provided however, that where projections of revenue and Costs to Resume


Operations have, pursuant to Clause 20.6, been referred to a Sole Expert, the time


period shall run from the date the Sole Expert gave his opinion on the projections.


20.9 Other Suspensions


Nothing in this Clause 20 shall be deemed to limit the right of the Joint Venturers


to suspend or limit production:


(a) as part of Normal Operations (for example, for engineering, maintenance or


other technical reasons); or


(b) when it is permitted to do so for reasons of Force Majeure pursuant to


Clause 28.


21. TERMINATION


21.1 Joint Venturers' Right to Terminate


The Joint Venturers may terminate this Contract at any time after the


Commencement of Commercial Production by giving twelve (12) months' notice to


the State.


21.2 State's Right to Terminate


The State may terminate this Contract by notice to each of the Joint Venturers if:


(a) the Special Mining Lease expires by effluxion of time and is not renewed;


(b) the Special Mining Lease is surrendered under the Mining Act other than


for the purpose of the Joint Venturers being issued a renewal or extension


thereof or being issued a new Special Mining Lease in respect of the Project;


or


(c) the Joint Venturers shall have abandoned the Project (within the meaning of


Clause 20.8) and not resumed it within a period of sixty (60) days after


notice is given by the State to each of the Joint Venturers.


21.3 Default Notice


In the event that:


(a) the Joint Venturers are in material default of any of the joint and several


obligations set forth in Clauses 4.1, 14.1,15.1, 17 or 20, or fail to treat as


binding and comply with any award made in an arbitration pursuant to


* Clause 25 in respect of any of those aforesaid obligations; or











111339327


 46.





(b) any Joint Venturer is in material default of any of the several obligations set


forth in 10.9,10.22, or 11.1(c), or fail to treat as binding and comply with any


award made in an arbitration pursuant to Clause 25 in respect of any of


those aforesaid obligations;


the State may give notice of such a default or failure (hereinafter in this Clause


called the "Default Notice"):


(c) in the case of the situation to which paragraph (a) applies, to each of the


Joint Venturers, which shall specif)' the default or failure alleged. The State


shall at the same time give a copy of the Default Notice to each lender to


any of the Joint Venturers under any Approved Finance, and each


mortgagee under any mortgage or charge of any of the Project Assets,


where the name and address of that lender, mortgagee or chargee has


previously been notified to the State; or


(d) in the case of the situation to which paragraph (b) applies, to the Joint


Venturer, which shall specify the default or failure alleged. The State shall


at the same time give a copy of the Default Notice to each lender to the Joint


Venturer under any Approved Finance, and each mortgagee under any


mortgage or charge of any of the Project Assets, where the name and


address of that lender, mortgagee or chargee has previously been notified to


the State.


21.4 Termination or Assignment Notice


If within a period of one hundred and eighty (180) days following a Default Notice


(or such longer period as may be fixed by an arbitration award where the subject


matter of the Default Notice is submitted to arbitration under Clause 21.5) either


(a) the default or failure specified in the Default Notice has not been remedied


(or active steps have not been commenced and continued to remedy the


default or failure if it is not capable of speedy remedy); or


(b) compensation is not paid in respect thereof (in the case of a default or


failure not capable of remedy but where payment of compensation would


be adequate recompense to the State),


then, subject to Clauses 21.5 and 21.6, the State may :


(c) in the case of the situation to w'hich Clause 21.3(a) applies, by notice


(hereinafter in this Clause called a ‘Termination Nodce") to each of the


Joint Venturers (which shall be copied to each lender, mortgagee or chargee


who was given a copy of the Default Notice) bring about the termination of


the Contract on a date which is not less than one (1) month thereafter


(hereinafter in this Clause called the Termination Date"). The State shall


ensure that the Minister does not make a decision to forfeit the Special


Mining Lease, and that no other action is taken by or on behalf of the State








111339327


 47.








lo terminate the Special Mining Lease or any other leases granted under the


Mining Act for the purposes of the Project, before the Termination Date; or


(d) in the case of the situation to which Clause 21.3(b) applies, by notice


(hereinafter in this Clause called an "Assignment Notice”) to the defaulting


Joint Venturer ("Defaulting Venturer") (which shall be copied to each


lender, mortgagee or chargee who was given a copy of the Default Notice)


will require the Defaulting Venturer, unconditionally and without


consideration and free from encumbrances, to assign its entire undivided


interest in the Project Assets to the other Joint Venturers in undivided


proportionate shares in proportion to their undivided interest in the Project


Assets, on a date which is not less than one (1) month thereafter (hereinafter


in this Clause called the "Assignment Date").


21.5 Disputed Termination


If the Joint Venturers) or the State contest:


(a) the grounds for the issue of the Default Notice; or


(b) whether the default or failure has been remedied; or


(c) the adequacy of any compensation paid pursuant to Clause 21.4(b),


the matter shall be submitted for arbitration pursuant to Clause 25. If the


arbitrator finds (in the case of paragraph (a)) that adequate grounds exist for issue


of the Default Notice, he shall fix a period during which the Joint Venturer(s) must


comply with Clause 21.4(a) or (b) and the amount of compensation payable (if


applicable). If the arbitrator finals (in the case of paragraph (b)) in favour of the


State, he shall fix a period during which the Joint Venturers) must remedy the


default or failure. If the arbitrator finds (in the case of pangraph(c)) in favour of


the State, he shall fix the amount of compensation payable and the period for its


payment.


The State shall not serve a Termination Notice or Assignment Notice, as the case


may be, while arbitration between the State and the Joint Venturers) under this


subclause is in progress and any Termination Notice or Assignment Notice


already served will be suspended immediately upon the commencement of such


arbitration for the duration of any such arbitration. If the arbitrator finds in favour


of the Joint Venturers) or within the period fixed by the arbitrator the default or


failure is substantially remedied or the compensation is paid, the State shall not


serve a Termination Notice or Assignment Notice and shall withdraw any


Termination Notice or Assignment Notice already served.


21.6 Where Receiver or Manager appointed


If at any time following a Default Notice but prior to the Termination Date or


Assignment Date, as the case may be, a receiver or manager or other administrator


acting on behalf of lenders who jointly or severally have provided Approved





111339327


 43.





Finance to ail or any of the Joint Venturers secured by a mortgage or charge, is


appointed in respect of the relevant portion of the Project Assets and his


administration covers or is extended to cover an undivided interest (in aggregate)


in the Special Mining Lease of more than fifty (50) per cent, or he otherwise


demonstrates to the satisfaction of the Minister that he has the power to procure


the remedy of the default or failure or the payment of compensation in respect


thereof, the State shall not give a Termination Notice or Assignment Notice, and


any Termination Notice or Assignment Notice already served will be suspended,


until the expiry of two (2) years after the date on which the Default Notice is given


or one (1) year after the determination (by award or otherwise) of any arbitration


under Clause 21.5, whichever is later. Within this period, the receiver or manager


or other administrator may either


(a) remedy the default or failure which gave rise to the Default Notice or pay


compensation in respect thereol in accordance with Clause 21.4; or


(b) (subject to the requirements of the Joint Venture Agreement and the Mining


Act) sell or otherwise dispose of the relevant interest in the Project Assets to


any other person approved by the Minister (such approval not to be


unreasonably withheld) on condition that such person shall within this


period remedy the default or failure which gave rise to the Default Notice


or pay compensation in respect thereof in accordance with Clause 21.4.


If in either case the relevant default or failure is substantially remedied or


compensation is paid in respect thereof, the State shall not serve a Termination


Notice or Assignment Notice following upon that Default Notice and any such


Termination Notice or Assignment Notice which has been suspended will be


deemed to be withdrawn.


21.7 Continuing Compliance


The extra period permitted under Clause 21.6 to a receiver or manager or other


administrator prior to the Termination Date or Assignme at Date shall be subject to


compliance with the condition that during that extra period the receiver or


manager or other administrator shall:


(a) comply with this Contract and the Mining Act; anc


(b) use such pow ers as are available to it to ensure tha: the Project Assets are


maintained, subject to fair wear and tear, so as to prevent significant


deterioration of such assets.


If during such period a receiver or manager or other administrator sells the


relevant portion of Project Assets, the obligations under paragraphs (a) and (b)


shall cease to apply to the receiver, manager or other administrator.














111339327


 49.








21.8 Assignment of Defaulting Venturer


Following an Assignment Notice, the Defaulting Venturer shall do all things


necessary to effect the assignment of the Defaulting Venturer's entire interest in


the Project Assets to the other Joint Venturers by or on the Assignment Date. The


Defaulting Venturer will be discharged from any further liability in respect of any


obligation under this Contract which accrues from the date that assignment has


been effected but without prejudice to pre-existing rights accrued to the State


against the Defaulting Venturer.


In the case where the Defaulting Venturer expresses in w riting an inability to meet,


or fails to meet, the Assignment Date deadline then the Minister may by notice


declare a later Assignment Date. If in the Minister's reasonable opinion there are


no extenuating circumstances whereby the Assignment Date should be changed,


then at any time after the Assignment Date the Minister shall exercise a power of


attorney hereby given in respect of doing all things and executing all documents


necessary, directly or indirectly, to effect the assignment of the Defaulting


Venturer's undivided interest in the Project to the remaining Joint Venturers.


22. CONSEQUENCES OF TERMINATION


22.1 Obligations of Parties


If this Contract is terminated -


(a) the Joint Venturers will surrender to the State the Special Mining Lease and


every other tenement which forms part of the Project Assets but without


prejudice to the liability of any of the Parties in resoect of any antecedent


breach or default under this Contract or in respect of any indemnity given;


(b) each Party shall forthwith pay to the other Party all moneys that may be


owing to the other Party hereunder;


(c) the State shall have the option to purchase (subject to any encumbrances


thereon) exercisable by notice to the Joint Venturers within thirty (30) days


following termination of this Contract all or any portion of the Project


Assets not surrendered pursuant to paragraph (a) at a price equivalent to


the lesser of the then residual value of such assets after tax depreciation or


the fair market value of such assets, which fair market value is to be


determined by agreement between the Parties but failing such agreement


by a Sole Expert;


(d) the Joint Venturers shall have the right, within the one (1) year period


following the thirty (30) day notice period referred to in (paragraph (c):


(i) to assign or otherwise dispose of all or any portion of the remaining


Project Assets to any person; or











111339327


 50.





(ii) to remove and recover from the Mining Area and export from Papua


New Guinea, unless otherwise specified in the Approved Proposal


for Development, any of the remaining Project Assets on the


condition that such removal does not cause irreparable damage to


major assets which are not removed from the Mining Area; and


(e) the Joint Venturers shall leave the Mining Area in a safe and stable


condition to the reasonable satisfaction of an inspector under the Mining


(Safety) Act (Chapter 195A), having regard to natural conditions in the area


and applying general!)' accepted standards of good mining practice,


provided that the Joint Venturers shall not be required to alter the physical


condition of the mine, the tailings disposal site, or ether Project facilities


beyond the requirements of the Environmental Plan.


22.2 Reversion of Property to State


Upon expiry of the one (1) year period referred to in Clause 22.1 (d), all Project


Assets which remain on the Mining Area shall become the property of the State


without any cost to the State or any liability for the State to pay compensation


therefor.


22.3 Continuance in Force


Clauses 22.1, 22.2 and 25 shall continue in force notwithstanding the termination


of the rest of this Contract.


23. ASSIGNMENT


23.1 Right to Assign ,


A Joint Venturer may, with the consent of the Minister, ass gn its entire interest or


an undivided proportionate share of its interest in:-


(a) the Project Assets ; and


(b) its rights and obligations under this Contract.


The State covenants that the consent of the Minister to an assignment will not be


unreasonably withheld. The consent of the Minister will not be required where


Clauses 23.4 or 23.5 apply.


23.2 Effect of Assignment


If a Joint Venturer assigns -


(a) its entire interest in the Project Assets and its rights and obligations under


this Contract, then upon the assignee giving the State the undertaking


referred to in Clause 23.3, the Joint Venturer shall be discharged from any


further liability in respect of any obligation which arises after the date of








II1339327


 51.








that assignment without prejudice to pre-existing rights accrued to the State


against the Joint Venturer; or


(b) an undivided proportionate share of its interest in the Project Assets and its


rights and obligations under this Contract, then upon the assignee giving


the State the undertaking referred to in Clause 23.3 -


(i) the obligations under this Contract assumed by the assignee and the


continuing obligations under this Contract of the Joint Venturer shall


be the joint and several obligations, or the several obligations of the


Joint Venturer and the assignee;


(ii) the Joint Venturer, if it is then the Manager shall, during the period


that it retains ownership of an undivided proportionate interest in


the Project Assets and in all of its rights and obligations under this


Contract, be the Manager and no change in the Manager shall take


place without the consent in writing of the State (which consent shall


not be unreasonably withheld); and


(iii) every agreement made between the Joint Venturer and any assignee


shall be consistent with this Contract and a copy thereof will be


furnished to the State as soon as it has been executed.


23.3 Assumption by Assignee


Where an assignment takes effect pursuant to Clause 23.1 -


(a) the Joint Venturer shall enter into a Contract with the assignee wherein the


assignee -


(i) agrees to become a part)' to this Contract; and


(ii) undertake to assume, observe and comply with all obligations of the


Joint Venturer; and


(b) the assignee shall be a permitted assignee and have the same rights of


assignment as the Joint Venturer under this Contract.


23.4 Mortgages, Charges etc


Notwithstanding the foregoing provisions of this Clause 23, but subject to


generally applicable legal requirements for the creation, perfection and


enforcement of security interests -


(a) each Joint Venturer may mortgage, charge by way ol fixed or floating


charge or otherwise assign or encumber by way of security its entire interest


or an undivided proportionate share of its interest in the Project Assets, this


Contract, its share of Mine Products, its rights under any sales agreements


for Mine Products, its proceeds from the sale of Mine Products (including








111339327


 52.





such proceeds in any of the accounts referred in Clause 10) and any of its


other assets and its uncalled capital (and premiums) to secure its Approved


Finance; and


(b) subject to Clause 23.5, any mortgagee, chargee or other secured party under


any mortgage, charge or other security given by a Joint Venturer pursuant


to this subclause may exercise all rights of sale and other rights included in


any instrument of mortgage or charge given by it under any Approved


Finance, provided that it first gives to the State thirty (30) days notice of its


intention to exercise any rights of sale and five (5) days notice in all other


cases.


The State shall ensure that all statutory approvals required in Papua New Guinea


are given for each mortgage, charge or other security to be given or granted by a


Joint Venturer pursuant to this subclause.


23.5 Rights of Mortgagee or Chargee


No mortgagee or chargee or other secured party that acquires by assignment or


otherwise any rights of a Joint Venturer under this Contract shall have any greater


rights than a Joint Venturer hereunder, and its exercise of those rights shall be


subject to all of the terms, conditions and requirements of this Contract. The rights


of any such mortgagee, chargee, or secured party to sell a Joint Venturer's interest


in the Project or any of the Project Assets shall not be exercisable:


(a) unless the whole or part of the Joint Venturer's undivided interest in the


Project and the Project Assets which are mortgaged, charged or otherwise


subject to a security interest is sold as a going concern (or with such


exceptions as the State may agree) to a purchaser tc which the State does


not reasonably object on grounds of:-


(i) national security or national foreign policy; or


(ii) insufficient financial standing to perform the obligations that the


purchaser will be assuming as a Joint Venturer under this Contract,


within thirty (30) days of being notified of the identity of such purchaser


and being given information sufficient for the State to assess the financial


standing of the purchaser; or


(b) except in accordance with any provisions in the Joint Venture Agreement


relating to pre-emptive rights.


23.6 Consents and Approvals


The State shall ensure that, subject to compliance with applicable procedures, all


required statutory approvals are given to the assignment of this Contract and all or


any of the Project Assets or of an undivided interest therein, to the person that


purchases from a mortgagee, chargee, or other secured party in accordance with





111339327


 53.








the requirements of Clause 23.5. Any such purchaser shell be required to comply


with the requirements of Clause 23.3.


24. EXTENSIONS TO TIME


24.1 Extensions by Agreement


Notwithstanding any provision of this Contract, the Parties by agreement between


the persons responsible for giving Notices under Clause 33, may from time to time


extend any period referred to in this Contract for such period, or substitute for any


date referred to in this Contract such later date, as they think fit.


24.2 Automatic Extensions


If a Joint Venturer is prevented or hindered by any circumstances or event of a


kind set out in Clause 28 or by an arbitration under Clause 25 from undertaking all


or any of its obligations hereunder or exercising any right granted, the period of


time allowed for the performance of that obligation or exercise of that right and all


periods of time thereafter allowed for the performance of obligations or exercise of


rights which are dependent upon the first mentioned obligation or right, shall be


extended by a period equal to the period during which such prevention or


hindrance continues or during the period from the time when the question,


dispute or difference arose until the time of its settlement by agreement, its


determination by the Sole Expert or by arbitration, as the case may be.


24.3 Effect on Periods and Dates


Where any period is, or is deemed to be, extended or any later date substituted for


an earlier date under this Claus?, that extended or substituted period or date shall


be deemed to constitute the period or date referred to in this Contract


(notwithstanding that at the time of such extension or substitution such period


may have expired or such date may have passed).


25. ARBITRATION


25.1 Meaning of Dispute


For purposes of this Clause, "Dispute" means any dispute, disagreement,


controversy or claim arising out of or relating to this Contract, or the interpretation


or performance of provisions of this Contract or the breach, termination or validity


thereof, which the Parties are unable to resolve by mutual agreement within a


reasonable time. It does not include any difference of viev/ or disagreement


which, pursuant to provisions of this Contract, has been submitted for


determination of a Sole Expert.


25.2 Submission to ICSID


The Parties irrevocably consent to submit any Dispute between the State and the


Joint Venturers to the International Centre for Settlement of Investment Disputes








111339327


 54.








("ICSID") for settlement by arbitration pursuant to the Convention on the


Settlement of Investment Disputes between States and Nationals of Other States


(the "Convention").


25.3 ICSID Arbitration


(a) For the purposes of Article 25(2)(b) of the Conventicn the Parties agree that:


(i) although Ramu Nickel Limited is a national of Papua New Guinea, it


will because of foreign control be treated as a national of Australia;


(ii) although Orogen Minerals (Ramu) Limited is a national of Papua


New Guinea because it is a 100% subsidiary of Orogen Minerals


Limited, if the State’s indirect shareholding ir Orogen Minerals


Limited falls below 50%, Orogen Minerals (Ramu) Limited will


because of foreign control be treated as a national of Australia; and


(iii) if an incoming Joint Venturer, although incorporated in Papua New


Guinea and therefore a national of Papua New Guinea, is foreign


controlled, it will be treated as a national of the contracting state


under the Convention of which it gives notice to the State at the time


of acceding to this Contract.


(b) An ICSID Arbitral Tribunal constituted pursuant to >his Contract (the


"Tribunal”) shall consist of a single arbitrator appointed by agreement


between the parties to the Dispute, but if the parties are unable to agree on


the identity of the single arbitrator to be so appointed within forty-five (45)


days of the date on which the Secretary-General of ICSID has dispatched


notification of the registration of a request for arbitration, the Tribunal shall


consist of three arbitrators*. In that event, one arbitrator shall be appointed


by each party to the Dispute and the third arbitrator, who shall be the


President of the Tribunal, shall be appointed by agreement between the


parties or in the absence of such agreement by the Chairman of the


Administrative Council of ICSID in accordance with Article 38 of the


Convention.


(c) Nothing in any notice by the State pursuant to Article 25(4) of the


Convention shall be read or construed as limiting the jurisdiction which a


Tribunal established under the Convention pursuant to this Contract would


otherwise have to settle a Dispute by arbitration.


(d) For the purposes of submission of any Dispute to arbitration by ICSID, the


Parties agree (without limitation) that a Dispute about any of the following


is fundamental to the investment by the Joint Venturers in the Project:


(i) the continuation of the Special Mining Lease or any other mining


lease, lease for mining purposes or mining easement granted


pursuant to Clause 5;








111X19327


 55.





(ii) the operation of Clause 6 in respect of rates and duties;


(iii) the ability of any Joint Venturer to obtain financing for its


participation in the Project in accordance wth Clause 9 and on


commercial terms;


(iv) the right to retain foreign currency in foreign currency accounts and


to convert Kina into foreign currency which can be remitted out of


PNC, as provided for in Clause 10;


(v) the right to export the Mine Products and to market them in


accordance with Clause 11;


(vi) the Agreed Terms under Clause 27;


(vii) non-discrimination and related matters under Clause 30; and





(viii) the termination of this Contract.


25.4 Submission to UNCITRAL Arbitration


Any Dispute between the State and any one or more of the Joint Venturers which


cannot be referred to ICSID arbitration under Clauses 25.2 and 25.3 shall be settled


by arbitration under the Arbitration Rules, as at present in force, of the United


Nations Commission on International Trade Law (hereinafter in this Clause called


the "UNCITRAL Arbitration Rules"), subject to such modifications as the parties


to the Dispute may agree in writing at the time.


25.5 Application of UNCITRAL Arbitration Rules


For the purposes of the arbitration of any Dispute under the UNCITRAL


Arbitration Rules:


(a) the appointing authority shall be the Chairman of the Administrative


Council of ICSID;


(b) an agreed appointee shall be appointed as a single arbitrator, but if within


thirty (30) days of the receipt by the respondent of the notice of arbitration


the parties have not agreed on a single arbitrator, the number of arbitrators


shall be three;


(c) the place of arbitration shall be Port Moresby, Papua New Cuinea or such


other place as the parties to the Dispute may agree; and


(d) the language to be used in the arbitral proceedings shall be English.














111339327


 56.





25.6 Award Binding


An award in arbitration proceedings under this Clause shall be binding on the


parties to the Dispute and judgement thereon may be entered in any court having


jurisdiction for the purpose.


25.7 Waiver of Immunity


The State hereby irrevocably waives any claim to immunity -


(a) in respect of proceedings on the merits of the claim which is the subject of


such arbitration;


(b) in respect of proceedings to enforce any such award including, without


limitation, immunity from service of process and from the jurisdiction of the


Court; and


(c) in respect of execution of any such award against the property of the State,


being property of the State held for commercial purposes.


25.8 Cost of Arbitration


Unless otherwise agreed or provided, the cost of any arbitration procedure will be


borne -


(a) equally by the two parties to the Dispute where it has been referred jointly


by them; or


(b) otherwise, by the unsuccessful party in accordance with the ICSID


Arbitration Rules or the 15NCITRAL Arbitration Rules, as the case may be.


25.9 Stay of Other Rights


Where a Dispute has been referred to arbitration pursuant to this Clause, neither


Party shall be entitled to exercise any rights or election arising in consequence of


any alleged default by the other arising out of the subject matter of the Dispute


until the Dispute has been resolved by the decision of the arbitrators.


25.10 Sole Expert


Where any difference of view or disagreement between any two or more of the


Parties is, pursuant to any other provision of this Contract, submitted for


determination of a Sole Expert, the Sole Expert shall act as an expert and not as an


arbitrator, and accordingly the foregoing provisions of this Clause do not apply. A


determination by a Sole Expert shall be binding on the Parties. Unless otherwise


agreed, the cost of submitting any such matter to a Sole Expert will be borne:


(a) if one Party calls for the matter to be determined by the Sole Expert and


loses, by that Party;








111339327


 57.





(b) if one Parly calls for the matter to be determined by the Sole Expert and


wins, equally by ail Parties to the determination; and


(c) if a number of Parties jointly submit the matter to be determined by the Sole


Expert, equally by all of them.


26. LAW APPLICABLE


This Contract shall be governed by and construed in accordance with the law of


the Independent State of Papua New Guinea and such rules of international law


as may be applicable.


27. STABILITY OF TERMS


27.1 Agreed Terms and Material Adverse Change


The State is committed to maintaining the long term stability of the fiscal terms


under which the Project is developed. The fiscal terms outside this Contract which


are important for the Joint Venturers are the fiscal provisions set out in Clauses 7


and 8, whether they apply by force of existing legislation or otherwise, and the


royalty, taxes, levies and charges applicable to the Project or the Joint Venturers, or


dividends or interest payable by any of the Joint Venturers, as at the date of this


Contract at the rates in force as at such date (the "Agreed Terms").


For the purposes of this Clause 27:


"Material Adverse Change" means a change w'hich materially or substantially


impairs, erodes or diminishes the financial results derived cr expected from the


Project by a Joint Venturer or the dividends or other payments payable by a Joint


Venturer.


27.2 Stabilisation


If at any time during the period of ten (10) years after the Commencement of


Commercial Production the Agreed Terms are altered or affected by any


legislative or administrative action of the National Government, any provincial or


local-level government or any government agency in such a way as to cause a


Material Adverse Change for any Joint Venturer, the State shall indemnify the


Joint Venturer, but only to the extent of the financial loss to the Joint Venturer or


the reduction in dividends or other payments payable by it caused by the Material


Adverse Change when assessed on its own and not in concert with factors which


do not form part of the Agreed Terms.


27.3 Claim by Joint Venturer


The Joint Venturer may, by notice to the State, claim payment of any amount to


which the indemnity in Clause 27.2 relates (including any amounts payable to


providers of Approved Finance under an increased costs clause in a finance


agreement or otherwise). The notice must specify the amount and the Material





111339327


 58.








Adverse Change that is the basis of the claim. If the State disputes the claim, it


must give notice to this effect to the Joint Venturer making the claim within two(2)


months after the State's receipt of the Joint Venturer's notice. If the dispute is not


resolved within a further period of four (4) months, then it will be referred to an


arbitration under Clause 25.


27.4 Payment of a Claim


The State shall pay to the Joint Venturer making a claim:


(a) if the claim is undisputed, the amount of the claim within three (3) months


after the State's receipt of the notice from the Joint Venturer; or


(b) if the claim is disputed, the amount, if any, determined by the arbitrator as


being the proper amount of the claim within three (3) months after the


arbitrator makes his determination.


If the amount under paragraph (a) or (b) is not paid within the period of three (3)


months, the State shall become liable to pay interest on that amount from the end


of that period until actual payment at the same rate per annum as is payable from


time to time by the State on its 30-day treasury bills, and the Joint Venturer shall be


entitled to recover such amount (plus interest) by credit against taxes or duties due


and payable to the Commissioner Ceneral of Internal Revenue.


27.5 Payments grossed up


If any payment made by the State under Clause 27.4 is subject to any taxes in


Papua New Guinea in the hands of the Joint Venturer, or if any deductions or


withholdings are made from any such payment on account of taxes, the sum due


from the State under Clause 27.4 Will be increased to the extent necessary to ensure


that, after the application of such taxes or the making of such deductions or


withholdings, the Joint Venturer receives a net sum equal to the sum which it


would have been left with or have received if no such taxes were applicable or no


such deductions or withholdings were required to be made.


27.6 Termination


Subject to Clause 27.7 and to any claim outstanding and unpaid at the time, the


foregoing provisions of this Clause 27 shall terminate and tease to have effect on


and from the tenth anniversary of the Commencement of Commercial Production.


27.7 Most Favoured Investor


If at any time an investor in a development project in Papua New Guinea is


accorded by a contract or agreement with the State or otherwise more favourable


treatment in respect of the stability of fiscal and other term; than has been given to


the Joint Venturers under this Clause 27, that more favourable treatment


(including, if appropriate, those fiscal and other terms) will apply to the Joint


Venturers by force of this provision.








111339327


 59.








28. FORCE MAJEURE


28.1 Effect of Force Majeure


Any failure on the part of a Party hereto to comply with any of the terms,


conditions and provisions of this Contract (except any obligation of a Party to


make payment of money to the other Party) shall not be grounds for termination


or give the other Party hereto any claim for damages insofar as such arises from


Force Majeure, if the first-mentioned Party-


fa) has taken all appropriate precautions, due care an d reasonable alternative


measures with the objective of avoiding such failure and of carrying out its


obligations under this Contract; and


(b) has given notice to the other Party of the occurrence of Force Majeure on


becoming aware of such an event.


The first-mentioned Party shall take all reasonable measures to overcome the Force


Majeure and to fulfil terms and conditions of this Contract with the minimum of


delay (provided that no Party has an obligation to settle a labour dispute or to test


the constitutionality of any legislation or law) and shall give notice to the other


Party on the restoration of normal conditions.


28.2 Meaning of Force Majeure


For the purposes of this Contract, Force Majeure shall include w’ar, insurrection,


civil disturbances, terrorism, sabotage, blockades, riot, embargoes, strikes and


other labour conflicts, land disputes, epidemics, volcanic eruptions, earthquakes,


cyclones, floods, tidal waves, explosions, fires, lightning, governmental restrictions


or unavailability of materials or equipment and any other event which the party


claiming force majeure could not reasonably be expected to prevent or control, and


in the case of the Joint Venturers shall include any delay or failure by the State to


give any consent or approval required under this Contract or under any applicable


law.


29. INDEMNITY


29.1 State indemnified


Except as otherwise provided in this Contract, the Joint Venturers shall indemnify


and hold harmless the State against all claims made by or on behalf of any third


party in respect of injury, loss or damage resulting from work carried out or goods


or services supplied by the Joint Venturers pursuant to th s Contract provided,


however, that such indemnity shall not apply to the extent, if any, that such injury,


loss or damage resulted from wrongful acts or omissions of the State.














111339327


 60.





29.2 Liability limited


In the absence of negligence of the Joint Venturers, their servants or agents, the


Joint Venturers shall not be liable to indemnify and save harmless the State


pursuant to Clause 29.1 except where injury, loss or damage was caused to a third


party by work carried out or goods or services supplied by the Joint Venturers of a


kind or in circumstances in respect of which the law of Papua New Guinea


imposes liability for injury, loss or damage without proof of negligence.


29.3 Defence of Claims


If any claim, demand, or writ, in respect of the liability referred to in this Clause


29, is brought or alleged against the State, in respect of w hich indemnity is to be


sought from the Joint Venturers, the State shall forthwith notify the Joint Venturers


and the Joint Venturers shall have the option to assume the defence thereof.


Unless the Joint Venturers fail to assume such defence, they will not be liable to


the State for any legal or other expenses subsequently incurred by the State in


connection with such defence. The State agrees to provide reasonable co-operation


to the Joint Venturers and their legal advisers in the defence of such alleged


liability. The Joint Venturers shall not be liable to indemnify the State for any


settlement of any such action effected without the written consent of the Joint


Venturers. The compliance by the State with this Clause 29 shall be a condition


precedent to any liability of the Joint Venturers under such clause.


30. NON-DISCRIMINATION


The State shall treat the investments and activities of the joint Venturers in Papua


New Guinea pursuant to this Contract on a basis no less favourable than that


accorded to investments and activities associated with investments of foreign


owned or controlled companies in Papua New Guinea under any bilateral


investment protection treaty between the State and any e ther country, and


accordingly, if under any such treaty companies receive the benefit of any


undertakings by the State relating to expropriation and nationalisation and


compensation therefor, the Joint Venturers will be treated as though those


undertakings were extended to them.


31. VARIATION


31.1 Variations by Agreement


The Parties may from time to time by agreement in writing add to, substitute for,


cancel or vary all or any of the provisions of this Contract, the Approved Proposals


for Development, the Special Mining Lease, Leases for Mining Purposes, Mining


Easements and all other leases, licences, rights or grants granted or any


programme, proposal or plan approved for the purpose of this Contract to more


efficiently or satisfactorily implement or facilitate the objectives of this Contract.














111339327


 61.





31.2 Modifications to Approved Proposals for Development


(a) Subject to Clauses 14.2 and 14.3 in respect of the Environmental Plan and


Clause 15.2 in respect of the Training and Localisation Programme,


Modifications to the Approved Proposals for Development may at any time


during the life of the Project be made by the Joint Venturers without


reference to the State unless by making any such Modification the Joint


Venturers would cease to be in substantial compliance with the Approved


Proposals for Development.


(b) If the Joint Venturers wish to make a Modification to the Approved


Proposals for Development which falls outside the scope of Clause 31.2(a)


the Joint Venturers shall notify the State in writing of the Modification


which they wish to make, and unless the State within thirty (30) days


informs the Joint Venturers by notice in writing that the Modification is one


on which further consultation between the State ard the Joint Venturers is


required the Modification will be deemed to have been approved by the


State and the Approved Proposals for Developmer t shall stand amended


accordingly.


(c) In the event that the State pursuant to Clause 31.2(b) informs the Joint


Venturers that a Modification to the Approved Proposals for Development


requires further consultation between the State and the Joint Venturers the


Modification shall not take effect unless it has been approved by the State,


provided, however, that;


(i) the State undertakes that its approval of any such Modification will


not be unreasonably withheld; and


(ii) the State will be deemed to have approved any such Modification if


either


(A) the State, within thirty (30) days from the date on which notice


was given to the Joint Venturers pursuant to Clause 31.2(b),


has not informed the Joint Venturers that it declines to


approve the proposed Modification; cr


(B) a refusal by the State to approve a Modification has been


referred to arbitration under Clause 25 and the arbitrator has


(or arbitrators have) made an award finding that the refusal of


the State to approve the Modification s unreasonable.


(d) Where pursuant to Clause 31.2(c) a Modification has been approved or is


deemed to have been approved by the State the Approved Proposals for


Development shall stand amended accordingly.


31.3 Definitions


For the purpose of this Clause








111339327


 62.








(a) " Approved Proposals for Development" includes in relation to each joint


Venturer its Approved Financial Plan and for a Modification of an


Approved Financial Plan references in Clause 31.2 to the "Joint Venturers"


shall be read as the Joint Venturer whose Approved Financial Plan is being


modified.


(b) "Modification" includes variation or amendment cr any alteration by


deletion or addition.


(c) The approval by the State of any Modification of the Approved Proposals


for Development in respect of Clauses 9,14,15 and 17, shall be signified in


writing by, respectively, the secretary of the department responsible for


finance matters, the minister responsible for environmental matters, the


minister responsible for labour matters and the minister responsible for


industry matters. In any other, case approval by the State of a Modification


of the Approved Proposals for Development shall be signified by any


instrument under the hand of the Minister.


32. CONSULTATION


32.1 Training and Localisation Committee


(a) A Committee shall be formed, comprising one member each from the


Department, local landowners, the Joint Venturers and the Provincial


Government and chaired by a representative of the department responsible


for labour matters, which shall monitor the implementation of the approved


Training and Localisation Programme.


(b) This Committee shall operate during the term of this Contract and the Joint


Venturers shall furnish if with quarterly reports outlining the progress of


the approved Training and Localisation Programme, problems


encountered, positions filled and the number of Papua New Guineans


employed (including from the particular province and local area).


32.2 Supply and Procurement Committee


(a) A Committee shall be formed, comprising one member each from the


Department, the Provincial Government, local landowners and the Joint


Venturers and chaired by a representative of the department responsible for


commerce and industry matters, which shall monitor the supply and


procurement of goods and services to the Project.


(b) The Committee shall operate during the term of this Contract and the Joint


Venturers shall furnish it with quarterly reports conforming in form and


content to that agreed for major project operators in the minerals sector. The


reporting format and content and any revisions thereto shall be mutually


agreed to achieve the following objectives:











111339327


 63.





(i) to provide the information necessary to eva uate the economic


impact of procurement of goods and services for the Project;


(ii) to enable the monitoring of the Papua New Guinean content of


goods and services procured for the Project;


(iii) to assist in the identification of industries w iich could be established


in Papua New Guinea to supply the Project; and


(iv) to provide suitable and reliable statistics to be used by the State.


32.3 Environmental Committee


A Committee shall be formed, comprising one member each from the Department,


the Provincial Government, local landowners and the Joint Venturers and chaired


by the representative of the department responsible for environmental matters,


which shall review environmental matters concerning the Project.


32.4 Committee Meetings


All of the above Committees will meet quarterly on the same dates and in the


same location (Madang or Port Moresby) and prior to their meetings will receive


from the Joint Venturers an update of the Project.


33. NOTICES


33.1 Notice Procedure


(a) Any notice, consent, demand, approval or other communication (a


"Notice") required or permitted to be given shall be deemed to have been


given if-


(i) in the case of a Notice given by the State other than a Notice given


pursuant to Clause 14, such Notice is signed on behalf of the State by


either the Minister or the Secretary of the Department, as their


respective responsibilities require; or


(ii) in the case of a Notice to be given by the Joint Venturers, such Notice


is signed by a duly authorised representative of the Joint Venturers


or Joint Venturer as the case may be.


(b) Each such Notice shall, as elected by the Party giving such notice, be


personally delivered or transmitted by telex or facsimile to the other Party


at the address in Papua New Guinea as given below




















111139327


 64.





Notice to the State -


The Secretary





Department of Mining,


Konedobu, PNG


Telex No. NE22211


Answerback: VVABRO


Fax No: (675) 321-3701





Notice to the Joint Venturers -


The Manager


Ramu Nickel Limited


9* Floor, Pacific Place


Musgrave Street


Port Moresby, PNG


Fax No: (675) 321-7633





with copies to -





Highlands Pacific Limited


Level 4, 167 Eagle Street


Brisbane Qld 4000


Australia


Fax No: (61-7)3221-6727


Orogen Minerals (Ramu) Limited


Level 2, Ela Beach Tower


Musgrave Street


Port Moresby, PNG


Fax No: (675) 320 2209


33.2 Notices deemed given


Except as otherwise specified herein, all Notices shall be deemed to have been


duly given on the earlier of -


(a) the date of receipt if delivered personally;


(b) the next business day after the date of transmission with confirmed


answerback if transmitted by telex; and


(c) two (2) business days after the time recorded on the transmitting machine if


transmitted by facsimile, unless -


(i) within those two (2) business days the intended recipient has


informed the sender that the transmission was received in an











111339327


 65.





incomplete or garbled form and is able subsequently to produce the


transmission evidencing the fact; or


(ii) the transmission result report of the sender indicates a faulty or


incomplete transmission.


Any Party may change its address by Notice to the other Parties in accordance


with the provisions of this Clause. All Notices and all documents or instruments


delivered in connection with this transaction shall be in the English language.


33.3 Plans, Proposals etc.


Where the Joint Venturers are required to submit any plans, proposals or other


material for the approval of the State, the date of submission shall be deemed to be


the date on which the State received those plans, proposals or other materials.


34. REPRESENTATIONS AND WARRANTIES


34.1 Representations and Warranties by Each party


Each of the Parties represents and warrants that:


(a) it has the capacity to enter into and perform its obligations under this


contract and that all corporate and other internal actions required to


authorise it to enter into and perform its obligations under this Contract


have been or will be properly taken;


(b) its execution, delivery and performance of this Contract have been duly


authorised by all required actions of its governing authority or owners and


do not and will not: ,


(i) violate any law, rule, regulation, order or decree applicable to it; or


(ii) violate its constitution or organisational docc ments;


(c) this Contract is a legal and binding obligation of the Party, enforceable


against that Party in accordance with its terms, except to the extent


enforceability is modified by bankruptcy, reorganisation and other similar


laws affecting the rights of creditors generally and by general principles of


equity; and


(d) it will not breach any other agreement or arrangement by entering into or


performing its obligations under this Contract and this Contract when


signed will have been duly executed by it and will be valid and binding


upon it in accordance with its terms.


34.2 Representations and Warranties by the Joint Venturers


Each Joint Venturer represents and warrants that:








111339327


 66.








(a) it is duly organised, validly existing and in good standing under the laws of


its place of incorporation; and


(b) it has the corporate power to carry out the Project and achieve


Commencement of Commercial Production.


34.3 No Other Representations and Warranties


Except as set out in Clause 34.1 and 34.2 or expressly stated elsewhere in this


Contract, no representation, inducement or warranty was, prior to the execution of


this Contract, given or made by any one of the Parties with the intent of inducing


any other party to enter into this Contract, and any representations, inducements


or warranties that may have been so given are hereby den ed and negated.


35. WAIVER


The failure of any Party to enforce at any time any of the provisions of this


Contract shall in no way be construed to be a waiver of the provision or any part


thereof or the right of any Party thereafter to enforce each and every part of the


provision in respect of any subsequent default or breach.


36. SEVERABILITY


The provisions of this Contract shall be separate and severable each from the other


to the extent that if any provision or any portion of any provision is deemed to be


inoperative then the remainder of this Contract shall remain binding upon and


enforceable by the Parties. Nothing herein shall preclude one Party from


requesting any other Party to renegotiate any provision of this Contract.


37. FURTHER ACTS


The Parties shall execute such documents and do and perform such acts that lie


within their power and are necessary to give full effect to this Contract.


38. COUNTERPARTS


This Contract may be executed in any number of counterparts, each of which


executed shall be deemed to be an original, and such counterparts shall together


constitute one contract.








IN WITNESS WHEREOF this Contract has been duly executed by the Parties





2000.

















111339327


 67.














SIGNED for and on behalf of (he


INDEPENDENT STATE OF PAPUA NEW


GUINEA by the Governor General SIR Signature of Governor General


SILAS ATOPARE, G.C.M.G., K. St.J acting


with and in accordance with the advice of


the National Executive Council in the

















SmhE 7lf-k!ica]


Name of witness


























THE COMMON SEAL of RAMU NICKEL


LIMITED was affixed by authority of tlje


Board of Directors in the presence of, and the


sealine is attested by:


Signaturepf director





Stenatu





Name of faoutaiy • /?/Y C-c^fa fMOSoCjg-f M0/U-lM0tf.o





Name of director
































111339327


 68.























THE COMMON SEAL of OROGEN


MINERALS (RAMU) LIMITED was affix


by authority of the Board of Directors in th


presence of, and the sealing is attested by:


MI/Az.





Signature of Secretary


Mxmu 1. UtML ■T F





Name of Secretary Name of director



















































































111339327


 INDEPENDENT STATE OF PAPUA NEW GU NEA





Mining Act 1992





Mining Regulation 1992








Act, Sec. 33, 36


Reg Sec. 2 FORM 3





SPECIAL MINING LEASE No. 8


I, SILAS ATOPARE, G.C.M.G, K.SLJ, Governor General of the Independent


State of Papua New Guinea (the State) by virtue of the powers conferred by the


Mining Act 1992 (the "Act") and all powers me enabling, and in accordance with


the Mining Development Contract dated Jl, *Su&j, 2000 (the "Mining


Development Contract”) acting with and in accordance with the advice of the


National Executive Council, HEREBY GRANT to Ramu Nickel Limited, a


company incorporated in Papua New Guinea with its registered office at Level 9.


Pacific Place, Musgrave Street, Port Moresby, and Orogen Mnerals (Ramu)


Limited, a company incorporated in Papua New Guinea with its registered office


at Level 2, Ela Beach Tower, Musgrave Street, Port Moresby, (collectively


referred to as the "Lessee’) Special Mining Lease No. (the Lease') over land


situated at Kurumbukari in the District of Usino-Bundi in the Madang Province


and more particularly described in Appendix 1 (the “Land-), a;; may be varied


from time to time, for a term of Forty (40) years from the date hereof, and


such extensions of the term as may be endorsed hereon for the purpose of


mining minerals in accordance with the Act and subject to the following


conditions -


(1) The Lessee shall comply with the Approved Proposals for Development


attached hereto as Appendix 2, as may be varied from time to time;


(2) The Lessee shall adhere to the conditions of the Mining Development


Contract


(3) The Lessee shall commence construction of the Mine within 36months of


grant of the Special Mining Lease or from the date of financing being secured


whichever occurs first.


(4) Without limiting the obligations imposed on the Lessee, the Lessee shall


compensate the owners of land which is located within the boundaries of this


Special Mining Lease in accordance with the Act and the Approved Proposals


for Development;


(5) The Lessee shall provide the Department of Mining six monthly reports on


any exploration activity carried out on the Land;


(6) The Lessee shall construct or provide improvements on the Land,


substantially as specified in the Approved Proposals for Development, or as


otherwise agreed from time to time between the Lessee and the State;


(7) The Lessee shall not, without the consent of the State, wNch consent shall


not be unreasonably withheld, use the Land for any purpose other than for


which it was granted pursuant to the Act. the Mining Development Contract


and the Approved Proposals for Development;


(8) The Lessee shall use its best efforts to accommodate traoitional land uses to


the degree that such uses are consistent with efficient anc safe mining


practices and are compatible with the performance of the .essee's obligations


under the Mining Development Contract


(9) This Special Mining Lease, or any renewal thereof, may not be cancelled


under the Mining Act unless the Mining Development Con.ract has been


terminated and therefore this Special Mining Lease shall cnly terminate


(a) if the Mining Development Contract is properly terminated in


accordance with its terms or by the agreement of all the parties to


the Mining Development Contract for the time being; or


(b) on the expiry of its term including any extension thereof,


whichever occurs first.








•P^^dayof


Dated at Port Moresby this 2000.





Signed for and on behalf of the


INDEPENDENT STATE OF PAPUA


NEW GUINEA by Wqpvernor -general )





Sir SilSs'Atopare, G.CTfa G. K.St.J acting ) Governor General


with and in accordance with the advice of the )


National Executive Council in the presence of )











Witness Stymie /--f-N/o'd


Name (printed)


 71.





SCHEDULE II


DUTIES ON IMPORTED GOODS


Under Customs Tariff Act 1990








Tariff Classification * General Description


Chapter 25 - all items Salt; sulphur; earths and stone; plastering materials, lime and


including: cement


2523.21.00


2523.29.00


Chapter 32: Paints, varnishes etc


3208.10.00


3208.20.00


3208.90.10


3208.90.90


3209.10.00


3209.90.10


3209.90.90


Chapter 34: Soap, detefgent, cleaning agents etc


3402.11.00


3402.12.00


3402.13.00


3402.19.00


3402.90.00





























111339327


 72.














Chapter 39 - all items Plastics and articles thereof


except:


3923.21.10


3923.21.30


3923.29.00


3923.3


3923.6


3923.90.90


39.24


3924.90.50


3926.40.00


Chapter 44 - all items Wood and articles of wood, wood charcoal


except:


44.13


4413.00.10


44.14


4415.20.00


44.18


44.19


44.20


44.21


4421.90.40 •


Chapter 68: Articles of stone, plaster, cement, asbestos, mica or similar


materials


68.08


6810.20.00


6810.91.00


68.12























111339327


 73.











Chapter 69 - all items Ceramic products


except:


69.11


69.13


69.14


Chapter 72 - all items Iron and steel


including 7210.41.00


Chapter 73 - all items Articles of iron and steel


except:


7310.21.00


7310.29.10


7321.13.00


73.23


7323.99.10


Chapter 76 - all items Aluminium and articles thereof


except: $


7615.11.00


7615.19.10


Chapter 78 - all items Lead and articles thereof


including:


7806.00.20


7806.00.90























111339327


 74.











Chapter 85 - all items Electrical machinery and equipment and parts thereof


including:


85.06


8507.1


Chapter 94: Prefabricated buildings


94.06





* As set out in Customs Tariff (Tariff Reform 1999) Act 1998













































































111339327