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

C L I F F 0 R D



LlMlTCD LIABILITY PARTNLRSHll



C H A N C E



EXECUTION COPY



DATED 3 1 MARCH 2000



THE GOVERNMENT OF THE REPUBLIC OF ZAMBIA

L



and



MOPANI COPPER MINES PLC



MUFULIRA MINE, SMELTER AND REFINERY AND

NKANA MINES, CONCENTRATOR AND COBALT PLANT

DEVELOPMENT AGREEMENT



L-



CONTENTS



Clause



L



L



Page



1.



Definitions And Interpretations ...................................................................



2.



Obligations To Develop..........................................................................



15



3.



Rights To Export And Import And A m ' Length Dealings ................................



16



4.



Procurement........................................................................................



18



5.



Local Business Development



18



6.



Training And Human Resources Management ................................................



19



7.



Insurance ...........................................................................................



22



8.



Suspension Or Curtailment Of Production.....................................................



22



9.



Social Assets And Municipal Infrastructure Services ........................................



25



....................................................................



5



10. Records And Operating Reports ................................................................



28



11. Foreign Exchange .................................................................................



31



12. Environmental Issues .............................................................................



34



13. Communications...................................................................................



41



14. General Obligation To Pay Tax .................................................................



43



15. Vat Refimds ........................................................................................



43



16. Taxation Stability..................................................................................



43



17. Assignment.........................................................................................



46



18. Extensions To Time...............................................................................



47



19. Temnation ........................................................................................



48



20 . Amicable Settlement Of Disputes...............................................................



51



21. Sole Expert .........................................................................................



52



22. Arbitration..........................................................................................



57



23. Performance To Continue........................................................................



58



24. Waiver Of Sovereign Immunity .................................................................



58



25 . Law Applicable....................................................................................



59



26 . Force Majeure .....................................................................................



59



27. Variation............................................................................................



60



28. Consultation ........................................................................................



62



29 . Notices ..............................................................................................



63



30. Waiver ..............................................................................................



64



31. Severability.........................................................................................



64



G2181/00030



32 . Further Acts ........................................................................................



64



33 . couIlterparts .......................................................................................



64



34 . Representations And Warranties ................................................................



65



Schedule 1



APPROVED F'ROGRAMME O F MINING

AND METALTREATMENT OPERATIONS 67



Schedule 2



.....................................

LOCAL BUSINESS DEVELOPMENTPROGRAMME



Schedule 3



C o m c - r AREAS. LARGE SCALE

MINING LICENCE

A m MININGAREAS ... A9



Schedule 4



........................................................................

SOCuu. SERVICES



73



Schedule 5



ENVIRONMENTAL

PLAN.................................................................



75



Schedule 6



TRAINING&



Schedule 7



INSURANCE

POLICIES....................................................................



77



Schedule 8



TAX SCHEDULE ...........................................................................



78



Schedule 9



TRANSFERRING



S o c l A ~ASSETS.......................................................



83



68



HUMANR E ~ ~ ~ c E ~ I ~ L ~ A G E M E N T P R O G R.................

A"E

76



d



G2181lOOO30



THIS AGREEMENT is made on 3 1 March 2000

BETWEEN:

(A)



THE GOVERNMENTOF THE REPUBLICOF ZAMBIA, actingthroughthe

Ministry of Mines and Minerals Development whose office is at the Ministry of Mines

andMineralsDevelopment,POBox 31969, HaileSelassieAvenue,Lusaka,Zambia

and theMinistryofFinanceandEconomicDevelopmentwhoseofficeisatthe

PO Box 50062, Ridgeway 15101,

MinistryofFinanceandEconomicDevelopment,

Chimanga Road, Lusaka, Zambia; and



(B)



MOPANICOPPERMINESPLC,

a companyincorporated in Zambia(registered

number 44139), whoseregisteredofficeis at InsuranceHouse,Kitwe,Zambia(the

"Company",which term shall include any permitted assigns or successors of the rights

and obligationsof the Company).



WHEREAS:

L



Proposalshave been submittedfortheacquisitionandsubsequentrehabilitation,

developmentandoperationofthemine,concentrator,smelterandrefinery,and

associated facilities at the ZCCM operating division known as Mufulira and the m e ,

concentratorandcobaltplantatthe

ZCCM operatingdivisionknown as Nkana,all

situated in the Copperbelt Province of Zambia (the

"Facilities")the location of which

is more specifically identified by reference to the plan annexed hereto

as Schedule 3,

Part I.

GRZ has approved these proposals, which are hereafter referred to as the "Approved

Programme of Mining and Metal Treatment Operations .

Therehabilitation,developmentandoperationoftheFacilities

economic significance to the people of Zambia.



will be ofmajor



GRZ wishestoensurethatthecontinueddevelopmentandexploitationofthe

commercial deposits of copper and cobalt ore at the Facilities' mines, together with the

development and operation of the smelter, refinery, concentrators and cobalt plant will

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

of Zambia,includingthepeople

in the

socialandeconomicwelfareof,thepeople

vicinity of the Contract Area in a manner consistent with their needs and the protection

ofthe environment and, at the same m e , secure an appropriate return on investment

for the Company commensurate with the risks involved to the Company.

GRZ and the Company have agreed on



a number of matters which are set out in this

Agreement and wish the matters agreed upon to be an enduring arrangement of national

interest.

GRZ has granted to the Minister of Mines and Minerals Development and the Minister

of Finance statutory authority under Section 9 of the Act to enter into this Agreement



on behalf of GRZ, and GRZ and the Company agree to be bound by all the terms and



-3-



G2181/00030



conditions relating thereto. The Minister has consulted with the Minister of Finance as

required by Section 9 of the Act, as amended, and has sought and received the advice

oftheMiningAdvisoryCommitteeinaccordance

with Section 88 oftheActandis

acting m accordance with such advice.

(7)



GRZ, theCompanyandZCCMhaveenteredinto

a SaleandPurchaseAgreement

dated 18 February 2000 which requires on its Completion (as therein defmed) the entry



into of this Agreement.



-4-



G21811030



PART A

GENERAL



1.



DEFINITIONS AND INTERPRETATIONS



1.1



In this Agreement and the Schedules hereof, unless tie context otherwise requires:

"Act" meanstheMinesandMineralsAct(Chapter

213 of tie LawsofZambia)as

from time to time amended and in effect and includes any regulations made thereunder;

"Affiliate,A f f i t e d Party, or Af'filiated Parties"means:

(a>



anycompany in whichtheCompany or a Shareholder (as tie case may be)

holds forty per cent. (40%) or moreof the ordinary voting shares or which

holds forty per cent. (40%)or more of the Company's or a Shareholder's (as

the case m y be)ordinary shares;



(b)



anypersonwhich,directly

or indirectly,iscontrolled by or Controls, or is

under Common Control with the Company or a Shareholder (as the case may

be); or



(4



anypersonorgroupofpersonsbeingdirectors

or executiveofficersof,or

the employment of any person referred to in (a) or (b) above,



in



and "Control"means:



L



03



tie power(whetherdirectly or indirectly)andwhetherbytheownershipof

share capital, the possession of voting power, contract or otherwise to appoint

and/or remove all or such of the board of directorsor other governing body of

a person as are able to cast a majority of the votes capable of being cast by the

members of thatboard as body,orotherwisetocontrolorhavepowerto

control the policies and affairs of that person; and/or



W



the holding and/or tie ownership ofthebeneficialinterests



and/or the

ability to exercise the voting rights applicable to shares or other securities

in

any person which confer in aggregate on the holders whether directly

or by

means of holding such interests in one

or more other persons (either directly

or indirectly) more than forty per cent. (40%) of the voting rights exercisable

at general meetings of that person,

m



and "Controlledby" shall be construedaccordinglyand "CommonControl"means

the circumstances where two (2) or more persons are controlled by the same person or

its Affiliates;

"Agreement"means this agreement as varied from time to time

terms hereof;



-5-



m accordance with the



G218V00030



"ApprovedProgramme of Mining and MetaJTreatmentOperations" meansthe

proposals for rehabilitating, developing and operating the Facilities which are set out in

Schedule 1 (as varied from time to time in accordance with Clause 27);



"Arms'Length Terms"means a transaction (which, provided that all such agreements

are properly disclosed, m y bedocumentedbymore than one (1) agreement between

the same pmes) where:



W



the parties innegotiating tie transactionhavesought to promotetheir ownbest

interests in accordance with fair and honest business methods;



(b)



tie considerationexpressed intheagreement(s)forthetransactionenteredinto

is tie only consideration fortie transaction; and



(c)



the price andothertermsofthetransaction:

(i)



are similar to the average market prices and terms and conditions offered

by third parties for a transaction of a similar size and nature; or



(ii)



havenotbeenaffectedby,nordeterminedas

a consequence of, any

otheragreement or any direct or indirectrelationship(otherthanthe

relationship created by the transaction agreemen@)) between the selling

party or shareholders ofthesellingparty, or a companyinwhichthe

selling party is a shareholder, and buying party or shareholders of the

buying party, or a company in which the buying party is a shareholder;



d



"Assets" shall have the meaning assigned to it m the Sale and Purchase Agreement;



"BusinessDay" means a day onwhichcommercial banks aregenerallyopenfor

business in London, Lusaka, New York City and Zurich;

"Calendar Month"means a month commencing on the first (1st) day of such month

and ending on the thirtieth (30th) or thirty first (31st) day of such month or, in the case

of February, the twenty eighth (28th) or twenty ninth (29th) day as the case may b e ;

"Carlisa"meansCarlisaInvestmentsCorp,

a companymcorporated m theBritish

Virgin Islands (registered 110.211422)whose registered office is at R.G. Hodge P l a z a ,

Upper Man Street, Wickham Cay 1, Road Town, Tortola, British Virgin Iskmds;

"CentralBank" means the Bank of Zambia or any successor;

"ColleetiveAgreement" means the agreement between the Seller and the MUZ

dated

17 August 1999 (effective from 1 July 1999) as amended from time to time which, for

the avoidance of doubt, includes the Standard Code Book 1996, tie Disciplimy Code

Book, the 1981JointEvaluationAgreement,the1997RedundancyAgreementand

AdministrativeRulesGoverningPaymentforServiceHeldinTrustdated15

September 1997;



-6-



G2181mmo



I



"CompaniesAct" means the Companies Act, Chapter

from time to m e amended and in effect;



388 of the Laws of Zambia



as



"Completion"has the meaning assigned to it in the Sale and Purchase Agreement;

to it m theSaleandPurchase



"CompletionDate" hasthemeaningassigned

Agreement;



"ContingentCommitment" means an invesment of threehundredandfortythree

millionUS dollars (US$343,000,000) to be expended in the manner, proportions and

amounts specified in, but subject to satisfaction of the conditions to t i t expenditure as

detailed m, the Approved Programme of Mining and Metal Treatment Operations;

"ContractArea(s)" means those land area(s) covered bythe Leases, as are described

m Schedule 3 Part I;



L



"Controlof Goods Regulations" meanstheControlof

Goods (ImportDeclaration

Fee) Regulations, 1997 (S.I. No. 20 of 1997) as issued pursuant to an amendment (S.1

690 of the Laws of Zambia) as

No. 7 of 1997) to the Control of Goods Act (Chapter

from time to t i e amended and in effect;

Topperbelt" meansCopperbeltProvince

mining area in Zambia;



m Zambiacomprisingthemaincopper



"Coststo Resume Operations" means:

(a)



onepointtwo

(1.2) timesthecosts(includingthe

cost ofnew

expenditures) required to resume Normal Operations; plus



(b)



onepointtwo (1.2) timesthesumoftheCompany'sestimate

(i)



capital



of



royalties;



(ii)



OperatingCosts;



(iii)



new capitalexpendituretotheextentnotincluded

and



(iv)



all otherincidentalcosts,



L



necessary to continue Normal Operations for

months;

"Director"means the person for the time being entitled

Director of Mines under the Act;



m OperatingCosts;



a further period oftwelve (12)

to exercise the powers of the



"Dispute" means any dispute,disagreement,controversy,claim

or difference of

whatsoever nature arising under, out of, m connection with or relating ( m any manner

whatsoever) to this Agreement including (without limitation) any dispute or difference:



-7-



G218UOOWO



concerningthe initial or continuingexistenceof

provision thereof;



this Agreement or any



as towhetherthisAgreementoranyprovisionthereofisinvalid,illegal

unenforceable (whether initially or otherwise);



or



as to the interpretation, performance or breach

ofthisAgreement(including

whether any defaultnoticesservedunderClause19isvalid

or whetherthe

default or failure alleged m any such Default Notice has occurred);

concerning the legal capacity of any of the Parties,

or the signatories on their

respectivebehalvestothisAgreement,toenterintoandvalidlybindthe

Parties to the terms of this Agreement or any provisions (or any part of any

provision) thereof;



as towhetheranycompensation

is payableunderanyprovisionofthis

Agreement and as to the quantum of such compensation; or

anydispute or claimwhichisancillary

manner whatsoewer, to the foregoing;



d



or connected, in each case inany



"Distributable Profii" means after tax profits and accumulated reserves of the



Company, available for distribution as dividends in accordance with Section 84 of the

Companies Act, as shown in the financial statements of the Company;

"EducationServices"means the education services as set out m Schedule4, Part I;

""Employees''

has the meaning assigned to it in the Sale and Purchase Agreement;

OEnablingL e g i s l a t i o d t means the Mines and Minerals (Amendment) Act (Cap No.

of 2ooo);



2



"EnvironmentalComfort Letter"means tie letter from the Environmental Council of

Zambia supplied to the Buyer at Completion m the form set out in Schedule 17 t o the

Sale and Purchase Agreement;

"Environmental Laws" means: the

Mining

(Mineral

Resource

Exmctions)

Regulations SI No. 119 1994; the Environmental Protection and Pollution Control Act

(Act No 12 of W O ) , and regulations enacted thereunder; Sections 75 t o 82 of the Act,

S I No. 291997,andthe

tie MmesandMineralsEnvironmentalRegulations1997

MinesandMinerals(Amendment)Act(CapNo.

2 of 2000) save fortheprovisions

contained in each of such laws and regulations which relate to mine safety andor the

safety of persons rather than to the protection of

tie environment, as each mayfrom

h e to h e be amended and m effect;

"EnvironmentalLiabilitiesAgreement" means the agreement of even date between

the Company, ZCCM and GRZ providing for the indemnification of the Company by

GRZ m respect of certain environmental liabilities and as amended m accordance with

C l a w 12 herein;

~.0ndonammrn7



-8-



G218"030



4



"Environmental Licences"means all licences issued by the Environmental Council of

ZambiaundertheEnvironmentalLaws

or regulations d e pursuanttosuch

EnvironmentalLawswhichrelatetotheAssetsandtheoperations

carried out at the

Operations immediately prior to Completion;

"EnvironmentalPlan" means until suchtimeasagreementisreachedpursuantto

Clause 12.1 on the f m l form of the Environmental Plan, the framework programme

forenvironmentalprotectionandcomplianceassetoutinSchedule

5 and,after

12.1, shall man the

agreementonthe final form of theplanpursuanttoClause

be deemed a modificationofthe

EnvironmentalPlanassoagreedandwhichshall

existing environmental plan and therefore exempt from any acceptance fees

or costs

imposedonacceptanceofnewenvironmentalplanspursuanttotheEnvironmental

Laws as mended m accordance with Clause 12;



L



"Environmental ProtectionFund" means the fund set up for environmental protection

by Section 82 oftheActandtheMinesandMineProducts(Environmental)

Regulations 1997 SI No. 29 1997;

"Excise Duty on Power" means theexcisedutyonpowerleviedfromtimetotime

LAWS of Zambia as amended

under the Customs and Excise Act, Chapter 322 of the

and currently set at ten (10) per cent.;

"Facilities"has the meaning ascribed to it in Recital (1);

"Force Majeure"has the meaning given to the term in Clause 26.2;

"Good Mining Pmctices" meansinternationallyaccepted

metal treatment practices;



miniig, metallurgicaland



"GRZ" means the Government of the Republic of Zambia and includes any authorised

agent of the Government oftie Republic of Zambia;

%vestment Commitment" means an investment of one hundred and fifty-nine million

US dollars (US$159,000,000) (or as t i e Parties hereto m y otherwise agree pursuant m

thisAgreement)tobeexpendedontheFacilitiesthroughnetincreasesinthe

Company's working capital or investment in capital items or, if less, such mount as is

required to achieve:

(a)



ore productionattheMufuliramineofnotlessthantwomillionfourhundred

a sustainablebasis

thousand (2,400,000) metrictonnesin2003andon

thereafter; and



(b)



copper metal productionfromtheMufuliramineofnotless

than fiftysix

thousand (56,000) metric tonnes m 2003 and on a sustainable basis thereafter;

and



-9-



G2181/00030



(c)



oreproductionatthe Nkana minesofnotless

than fourmilliontwo hundred

and fifty thousand (4,250,000) metric tomes m 2003 andon a sustainable

basis thereafter;



(d)



copper metal productionfromthe Nkanaminesofnotless

than seventyfour

thousand (74,000) metric tonnes m 2003 and on a sustamable basis thereafter;

and



(e)



cobaltmetalproductionfromtheNkanaminesofnotlessthantwothousand

twohundred (2,200) metrictonnes m 2003 andon a sustainablebasis

thereafter;



"Kwacha"or "K"means the lawful currency of Zambia;

"LargeScale Mining Licence (Mufdira)'l meansthelargescale

miniig licence

number thirty-two (32) granted as at the date hereof under Part III of the Act, to the

Company by the Ministry in the form set out m Schedule 3 Part 11for a term of twenty

five (25) years;

"Large! 3 d e Mining Licence (Nkana)" means the large scale mining licence number

Part III oftheAct,tothe

thirty-seven (37) granted as atthedatehereofunder

Company by the Ministry m the form set out m Schedule 3 P m II for a term of twenty

five (25) years;

"Large Scale Mining Licences" means the Large Scale Mining Licence (Mufulira) and

the Large Scale Mining Licence (Nkana);

"Leases" means the leases, details of which are set out in Schedule 2 of the Sale and

Purchase Agreement and "Lease"means any one of these leases;



"LIBOR" m e a n s , in relation to any amount on which interest for

accrue:



a given period is to



(a)



thepercentagerateper annum equaltotheofferedquotationwhichappearson

thepage of theTelerateScreenwhichdisplays

an averageBritishBankers

Association Interest Settlement Rate for US dollars (being currently "3750")

for one month deposits at or about 11.00 a m London time on the date which is

two (2) BusinessDays precediig tie fmalBusinessDayofeachcalendar

made onthe final

monththatmomes are outstanding or, ifpaymentisnot

BusinessDayof a CalendarMonth,two (2) BusinessDaysprecedingthe

Business Day on which payment is made or, if such page or such service shall

cease to be available, such other page or such other service for the purpose of

displaying an average British Bankers Association Interest SettlementRate for

one(1)monthdeposits in US dollarsastheparties,afterconsultation

with

each other, shall select; or



@)



ifnoquotationfor

US dollarsforonemonthdeposits

is displayedand the

parties havenotselected

an alternativeserviceonwhich

a quotationis



- 10-



G2181klCKM



d



displayed,thearithmeticmean(roundedupwardstofourdecimalplaces)

of

the rates at which the principal London offices of each of four major banks in

the London Interbank Market as selected by the Parties was offering to prime

banks in the London Interbank Market one (1) month deposits m US dollars at

or about 11.OO am London time on such date;

"Local Business Development Programme" means the programme for local business

development which is described m Clause 5 and which is set out in Schedule 2;



"MaterialAdverse Effect" means a material adverse effect on the condition (financial

or otherwise) of the Company which has or may have a material adverse effect on the

Company's present or future ability to operate the Assets and the Facilities pursuant to

the Scheduled Programmes;

"MedicalServices"means the medical services as set out in Schedule 4, Part 11;

"Metal Treatment Products"means all smelter and refinery products of the Mufulira

smelter and refinery and Nkana cobalt plant;

"Metal Treatment By-Products" means sulphuric acid;

Wine Products" means the ores or concentrates or other Minerals produced from the

Mining Area;

Winerals" means all mineralsexcludingpetroleumandotherhydrocarbons,asthe

same m y be located m the Miniig Area;

Winister" means the person for the time being entitled

to exercise the powers of the

Minister of Mines and Minerals Development under the Act;

"Mining" has the meaning given to the term m the Act;



c



"Mining Area" meanstheareascoveredbytheLargeScaleMiningLicences,the

same bemg set out in Schedule 3 Part III;



"Ministry" means the Ministry of Mines and Minerals Development or other successor

ministry from time to time;

"Non-TransferringEmployees" meansEmployeeswhodonottransfertothe

employment of the Company immediately prior to or at Completion;

"NormalOperations" meanstheoperationoftheFacilitiesinaccordancewiththe

Scheduled Programmes;

"Notices" meansanynotice,consent,demand,approvalorothercommunication

required or permitted to be given under Clause 28;

"OperatingCosts" foranyperiodmeansthecostsincurredbytheCompanyduring

(b) capital

Normal Operations excluding (a) depreciation and other non-cash costs and

costs other than replacement capital costs and (c) financing charges;



- 11 -



G2181/ooO30



"Operations"has the meaning assigned to it in the Sale and Purchase Agreement;



"Parties" meansthepersonswho

arefrom timetotimepartiestothisAgreement

includingtheoriginalpartiesheretoandpartiesaddedorsubstitutedpursuantto

Clause 17, and "Party" means any one of them;

"Quarter"means:

(a)



January,February,andMarch;



(b)



April, MayandJune;



(c)



July, August and September;or



(a



October,November and December;



"RedundancyTerms" means those terms relating to entitlement to certain payments

andother rights m theeventoflossofemployment

due to redundancywhich are

applicable to the Transfemg Employees as set out in the Collective Agreement;

"RegisteredDepemhW means the spouse, children, step-children or legally adopted

children of TransferringEmployees or SmelterCoEmployeeswho, m the case of

children are 21 years old or less at the date of this Agreement and are further

registered as of the date of this Agreement m the records of ZCCM as bemg entitled to

use some or all oftheSocialAssetsandthereafterthosethatshallberegistered

m

accordance with Clause 9.1;

"Saleand Purchase Agreement" meanstheagreement dated 18 February 2000 and

GRZ vestingtheAssets (as suchterm is

madebetweenZCCM,theCompanyand

defined therein) m the Company m consideration of the payment of cash and the issue

of shares to ZCCM;

"Scheduled Programmes" meanstheApprovedProgrammeofMiningandMetal

TreatmentOperations, theEnvironmentalPlan,theTrainingandHumanResources

Management Programme and the Local Business Development Programme;

"Shareholder"means a registered holder of ordinary shares h the Companywhose

rights are set out in the Company's Articles of Association (asdefined m the Sale and

Purchase Agreement);



"Shareholders' Agreement" means tie agreementofevendateherewithamongst

certain Shareholders m the Company being initially Carlisa, the Company and ZCCM

governing the relationship between themas Shareholders m the Company;

"SocialAssets" means the Educational Services and the Medical Services;

"Sole Expert" means a personappointed

Clause 21;



- 12-



in accordance with theprovisionsof



G218MXO30



"SmelterCoSocial AssetsAccessAgreement" meanstheagreement

herewith between theBuyerandSmelterCofortheprovisionofeducational

medical services to SmelterCo;



ofeven date

and



"Socii Assets Access Agreements"'means the following agreements:

(a)



betweentheSeller and CECdated 21 November 1997; and



(b)



betweentheSellerand W C (Africa)MiningPLC dated 29 June 1998,



in each case for the provision of education, medical and recreational services;



"Social AssetsAccessNovationAgreements"

meanstheagreementsofevendate

herewith novating the Social Assets Access Agreements;



L



%peculativeCurrencyTransaction" means a transactioninvolvingthepurchaseor

sale of Zambian currency, the primary object of which is the making of a profit on the

exchangeofcurrency but doesnotincludethetakingoutofforwardcoveragainst

reasonably predictable incomesor costs;

"Stability Period"means the period commencing as of the date of this Agreement and

ending on the fifteenth (15"') anniversary of the date of this Agreement;



L



"Taxes"meansanypresentandfuturetaxes,duties,impostsandlevies

imposed by

statute or howsoeverotherwisearising,whether by state or provincialauthoritiesor

local or municipal authorities whatsoever and whenever imposed and without prejudice

to the generality of that expression includes: income tax, corporation tax, capital g a m

tax, rates, valueadded tax,

tax,inheritancetax,stampduty,stampdutyreserve

custom andotherimportdutiesandnationalinsurancecontributions,anypayment

whatsoever which the Company may be or become bound to make to any person as a

result of anyenactmentrelatingtotaxationandanyothertaxes,dutiesorlevies

supplementingorreplacinganyoftheaboveand

all costs, charges,interest,fines,

penalties and expensesincidental, or relatingtheretoand "Taxation"shallhave a

corresponding meaning;

"Training and Human Resources Management Programme" means the programme

which is set out m Schedule 6;

"TransferringJihployees" shallhavethemeaningascribedto

Purchase Agreement;



it m theSaleand



"TransferringSocial Assets" means those Social Assets listed in Schedule 9;

"Unspent Portion of t i e BudgetedCommitment" means m respect of any part or

parts of the Facilities where productionis to be suspended or curtailed an amount equal

tothecapitalallocated in theApprovedProgrammeofMiningandMetalTreatment

Operations for expenditure on such Facilities but which remains unspent as of the date

of suspension or curtailment;



Lmdon-26579SUO7



- 13-



G2181/00030



WS$'l, "USdollars" or "United States dollars" meansthelawful



currency ofthe



United States of America;

T A T " means value added tax payable under the Value Added



Tax Act, Chapter 331

of the Laws of Zambia as from time to time amended and in effect;

"Zambia"means the Republic of Zambia; and



"ZCCM"means Zambia Consolidated Copper Mines Limited.

1.2



h this Agreement, unless the context otherwise requires,



a reference to:



a referencetothestatutoryprovisionas

a statutoryprovisionincludes

modified or re-enacted or both from timeto time before or after the date of

thisAgreementandanysubordinatelegislationmadeunderthestatutory

provision before or after the date of this Agreement;

a personincludes

assigns;



a reference to that person's successors and permitted



a Clause, paragraph or Schedule is a reference to a Clause or paragraph of or

Schedule to this Agreement;

a document is a reference to that document as from time to time supplemented

or varied;

anydocument or agreementshallincludesuchdocument

or agreement as

amended novated, replaced or supplemented from time to time; and

a person include a partnership, firm or corporation and any reference to GRZ

includes any instrumentalityof GRZ or my political subdivision thereof,



words importing the singular include the plural and vice versa;

words importing any gender include the other gender;

the headings do not affect the interpretation or construction; and

the recitals form part of this Agreement.



L.mdon-2657952m



- 14-



G2181KlOO3O



PART B

OPERATIONALA N D EMPLOYMENT I!BUES



2.



OBLIGATIONS TO DEVELOP



2.1



TheCompanyshall,followingtheCompletionDateand,subjecttothetermsofthe

Mmmg Licencesand

this

Act,regulations made thereunder,theLargeScale

Agreementand, m thecaseoftheContingentCommitmentonly,satisfactionofthe

conditions attaching thereto detailed m the Approved Programme of Mining and Metal

TreatmentOperations,implementtheApprovedProgrammeofMiningandMetal

TreatmentOperations inaccordancewiththetimetablecontainedthereinandGood

Mmmg Practices provided that the Company shall not be obliged to expend more than

the Investment Commitment and the Contingent Commitment(if applicable).



2.2



Without prejudice to the obligation contained in Clause 2.1 and subject at all times to

the provisions of Clause 8 and Clause 27, the Company shall:



L



(a)



expendtheInvestmentCommitment;and



m



m theApprovedProgramme

ofMiningandMetalTreatmentOperationsrelating

totheContingent

Commitment are satisfied, expend that portion of the Contingent Commitment

m relation to which the conditions are so satisfied substantially in the manner,

onthe terms and m the mounts setoutintheApprovedProgrammeof

Mining and Metal Treatment Operations.

if andtotheextentthattheconditionsspecified



TheInvestmentCommitmentshall

be deemedtohavebeensatisfiedthrough

an

fifty m e million US dollars

investmentoflessthanonehundredand

(US$l59,000,000) notwithstanding the failure bytheCompany to meet the targets of

ore, copper metal and cobalt metal production contained in the definition thereof if the

failure to meet such targets could not reasonably

be considered to have a substantive

affect on the Company's ability to achieve these targets on a sustainable basis in tie

immediately s~cceedingtwelve(12)CalendarMonthperiodandwithoutsignificant

further capital expenditure.



v



2.3



The Company'sobligationtoexpendtheInvestmentCommitment



or theContingent

Commitment (as thecasemay be) in accordance with Clause2.2will be suspended

where an event of Force Majeure has been declared to the extent that such event of

be expended

Force Majeure impedes the activity upon which monies would otherwise

and for so long as such event of Force Majeure is continuing.



2.4



Subject m all cases to the provisions of this Agreement, GRZ hereby acknowledges its

tie Scheduled

agreementtotheScheduledProgrammesandthecomplianceof

Programmes with Sections 24(3) and 25(1) of the Act.



2.5



If at any t i e priortothesatisfactionoftheInvestmentCommitment

or, subjectas

provided m Clause2.2(b),theContingentCommitment,theCompanysuspendsor



L.ond0*2/557952/07



- 15 -



G2181/00030



curtails production at any part or parts of the Facilities in accordance with Clause 8 and

8, the Investment Commitment or the

has met its associated obligations under Clause

Contingent Commitment, as the case may be, shall be deemed to be reduced by:

(a)



m thecaseof a suspensionofproduction, the Unspent Potion of theBudgeted

Commitment m respect of such part or parts of the Facilities; or



(b)



m thecaseof

a curtailment of production, bytheUnspent

Potion ofthe

Budgeted Commitment at which the curtailment is proposed, multiplied by the

quotient of

(i)



theproposedcurtailmentofproduction;and



(ii)



theproductionbudgetedfortherelevantFacilitieswhicharethesubject

of the proposed curtailment,



PROVIDED HOWEVER THAT, if the Company resumes operations i n whole or in

part at the relevant part or parts of the Facilities previously so suspended or curtailed,

the Investment Commitment or Contingent Commitment, as the case may be, shall be

increased bytheUnspent

Potion oftheBudgetedCommitmentinrespectthereof

taking accountoftheextentoftheresumption.The

period overwhich the renewed

portion of tie Investment Commitment must be expended will be extended on a day for

daybasisequaltotheperiod

ofsuspension or curtailmentPROVIDEDFURTHER

THAT the provisions of this Clause 2.5 shall not cause the Investment Commitment to

exceed one hundred and fifty m e million Umted States dollars (US!§159,000,000) or

theContingentCommitmenttoexceed three hundred and forty three million Umted

Statesdollars(US$343,000,000) or prohibittheCompanyfromexpendingatthe

Facilitiessums exceeding the Investment Commitmentor the Contingent Commitment.

2.6



GRZ confkns thatitconsiders tie proposedmining,smeltingandrefinerypractices

described m the Approved Programme of Mining and Metal Treatment Operations not

to constitute "was?@ mining practices" for the purposes of Section 81 of the Act and

neither GRZ nor the Director of Mining Safety shall allege that mining practices

used



by tie Company are wasteful so longastheCompanyisconducting

mining m

accordance with mining practices set out m the Approved Programme of Mining and

Metal Treatment Operations or any GRZ approved variation or modification thereto.

Nothing m this Clause 2.6 shall prevent or restrict or otherwise limit GRZ from taking

all actions within the law to protect public health and safety provided that any dispute

or disagreement between the Company and GRZ as to the action taken or proposed to

be taken under such laws shall be regarded as a Dispute.

3.



RIGHTS TO EXFORT A N D IMPORT AND ARMS' LENGTH DEALINGS



3.1



Subject to Clause 4 andthepaymentofapplicableTaxesnototherwiseexempted

or

deferred pursuant to this Agreement, the Companymay import and where it so desires,

re-export without further reference to GRZ, materials, equipment and services to be

used directly or indirectly m Normal Operations provided that GRZ has not notified the



- 16-



G2181/00030



Company that the import andor re-export (as applicable) of such materials, equipment

and services would give rise to the matters specified in Clause 3.2(b).

3.2



The Company m y market and export without further reference to GRZ (and GRZ will

cause to be issued tie requisite export authorisation documentsin respect thereof at the

date of such export) all Mine Products, Metal Treatment Products and Metal Treatment

and managementofthesaleofsuchMine

By-Productsandshallhavesolecontrol

Products,MetalTreatmentProductsandMetalTreatmentBy-Productsincludingthe

forward selling of such Mine Products, Metal Treatment Products and Metal Treatment

By-Products and shall assume all risks therefor, provided t i t :

(a)



theCompanysellstheMineProducts,MetalTreatmentProductsandMetal

TreatmentBy - Products on Arms' Length Terms;



(b)



GRZhasnotnotifiedtheCompanythatthe

export oftheMineProducts,

Metal Treatment Products or Metal Treatment By-Products would:



L



(c)



(i)



breach an obligationofGRZarisingunderinternationallaw(including

mandatory sanctions imposed by the United Nations); or



(ii)



result in dealing or contracting with nationals of a state with which GRZ

is in a state of war;



manufacturers ofprocessedand

sem-processedgoodsinvolvingcopper

content with processing facilities located in Zambia which are willing and able

to purchase, and pay for, copper cathode or other Metal Treatment Prodwts at

currently prevailing international market prices payable inUS dollarstothe

Company's account within or outside Zambia at its option and within the time

limits laid down by the Company's forward selling plan of copper cathodes or

be afforded a preferenceover

otherMetalTreatmentProductsshall

manufacturerswhoseprocessingfacilitiesarenot

so locatedPROVIDED

THAT:



L



(i)



thisobligationshallonlyapplytoanamountofcopperwhichdoesnot

exceed 10 percent.oftheCompany'sannualcopperproductionfrom

time to time;



(ii)



theapplicationofthispreferenceshallnotresultintheCompany

breachingitsdeliveryobligations

with respecttoanyofthesales

contracts which are transferred to the Company pursuant to the Sale and

Purchase Agreement; and



(iii)



theapplicationofthispreferenceshallnotoperate

so as tocausethe

Companytoincuranygreatercostorotherwisesufferanyprejudice;

and



(d)



no order hasbeenmadebytheMinisterpursuanttoSection

which remains m force.



- 17-



69 oftheAct



G2181lOOO30



4.



PROCUREMENT



4.1



The Company shall, on a regular basis, identify and invite by advertisement in the local

pressregistration ofbusinesses in Zambia(particularlythoseintheCopperbeltand

with emphasis on businesses directly or indirectly majority owned by Zambian citizens)

which are capable of supplying materials, equipment and services to the Company and

satisfy the criteria of Clause 4.2.



4.2



Thesupplyofmaterials,equipmentandservicesmaybetenderedforandprocured

internationallyandwithoutrestriction,Provided,however,thatwherematerials,

equipment and services required for the implementation of the Scheduled F%gramrnes

or otherwise are manufactured or substantially assembled (or in the case of services,

are procurable)withinZambiafrom a businessorbusinessesregisteredpursuantto

m size

Clause 4.1 as having proven ability and reputation in performing work similar

and M~URas that required by the Company or as being of established, recognised and

reputablesuppliers of material antior equipment,suchbusiness(es)shallhavethe

opportunity to tender and if a tender submission from any such business:

(a)



meets the specificationsoftheinvitationtotender;



(b)



meets

quality

standards;



(c)iscompetitiveincostwithinternationalsources;and

(d)



meets tie deliveryrequirements oftheFacilities,



then the Company shall not discriminate actively against such business(es) in its award

ofsuchtender.

In theeventofactivediscrimination,notwithstandingtherightsof

GRZ under this Agreement, the validity of the award shall not be affected.

4.3



h assessingthetendersfromlocalcontractors



and suppliers,theCompanywill



considertheextracostsitwouldincur

ifitwereto

grantthecontractto a foreign

supplierorcontractor.Theseextracostsshallinclude,butarenotnecessarily

restrictedto,wharfagecosts,shippingcosts,stevedoringcosts,customsclearance

costs, customs duties (where appropriate having regard to Schedule 8), and demurrage

charges.

5.



LOCAL BUSXNES DEVELOPMENT



5.1



The Companyshall:

(a)



comply with the Local BusinessDevelopmentProgrammesoastoencourage

and assist the establishment of businesses within Zambia (particularly

m the

Copperbelt and with a particular emphasis on businesses directly or indirectly

and

majorityowned by Zambiancitizens)tosupplymaterials,equipment

services to the Company, provided that the Company shall not be obliged to

with any

grant or lendmoneytoanyperson

or to enterintoanycontract

person or entity;



- 18-



G2181/00030



4



L



(b)



conduct an annual review of progressbeingmadeontheimplementationofthe

Local BusinessDevelopmentProgrammeandmakesuchvariationsto

it as

required by changing circumstances; and



(c)



identifyanemployeeexperiencedinsettingupandmanagingsmallbusiness

enterprises:

(i)



assistZambiancitizenswhowishto

or havesetupbusinessestooffer

services to the Company and the Facilities;



(ii)



tohaveprimaryresponsibilityfortheimplementationofthe

Business Development Programme and variations thereof; and



(iii)



to liaise with the appropriate officials from GRZ.



h



1



6.



TRAINING A N D HUMANRESOURCES MANAGEMENT



6.1



TheCompanyshallcomplyin

all materialrespectswiththeTrainingandHuman

Resources Management Programme applicable from time to time.



6.2



Subject to the provisions of this Clause 6 and the Company being in compliance at all

times with all applicable labour or other relevant legislation m force from time to time,

the Company may with the consent of GRZ (which consent shall not be unreasonably

H u m ResourcesManagement

withheld), amend or altertheTrainingand

Programme, with a view to securing the maximum training of and benefits to Company

employees.



6.3



Subject to the provisions of this Clause 6, if the Company is unable to comply with the

Training and Human Resources Management Programmeas a result of

(a)



circumstancesor eventsbeyonditscontrol;or



(b)



a direction ofthe Director of MineSafetyundertheAct

thereunder),



(or regulationsmade



‘W



thensuchnon-complianceshallnotconstitute

a defaultunderthisClause

6 nor a

19 andtheCompanymaygivenoticeof

materialdefaultforpurposesofSection

alternativeorrevisedplanstothepart

oftheTrainingandHumanResources

Management Programme affected.

6.4



6.5



Should the Company give notice pursuant to Clause

days either:



6.3, GRZ shall within thirty (30)



(a)



approvethosealternativeorrevisedplans;or



(b)



meetwiththeCompanytodiscussandagreeuponthealternativeorrevised

plans.



If the discussions under Clause



of alternative or

revised plans following a notice given under Clause 6.3 and the Company considers



London-2/557952/07



6.4 do not lead to GRZ’s approval



- 19-



G2181lOOO30



GRZ's decision to be unreasonable, the Company m y elect to refer the reasonableness

of GRZ's decision to a Sole Expert m accordance with Clause 21.

6.6



Ifthe Sole Expert determines that GRZ's decision is not unreasonable, he shall identify

totheCompanythechangestotheTrainingandHumanResourcesManagement

Programme as will be necessary to bring such programme mto compliance with GRZ's

requirements inthisregard.However,iftheSoleExpertdeterminesthat

GRZ's

both Partiesandthe

decisionisunreasonable,heshalldeclarehisdeterminationto

proposed amendment or alternation to the Training and Human Resources Management

Programme shall be deemed approved.



6.7



TheCompanyshallnot,saveasprovidedbelow,

be restricted m itsemployment,

selection,assignment

or dischargeofpersonnelProvided,however,thatthe

employment and thetermsandconditionsofsuchemploymentandthedischarge

or

disciplining of personnel withm Zambia shall be carried out m compliance with (i) the

laws and regulations of Zambia which are, from time to time, of general application,

(ii) the Collective Agreement and (iii) the terms ofindividualemploymentcontracts

from m e to time.



6.8



The Training and Human ResourcesManagementProgrammeidentifies a targetlevel

of employees necessary to conduct Normal Operationsfrom time to time. The

Company will, however, be entitled to modify such target level m accordance with its

requirements with sixty (60)days prior notification to GRZ



6.9



TheCompanywill,

m itsrecruitment,selection,promotionandassignment

personnel,notdiscriminateactivelyagainstcomparablyqualifiedandexperienced

Zambian citizens.



6.10



TheCompanyacknowledgesGRZ'spolicy

t o attractqualifiedZambiancitizens

mining andmetallurgical

workingoverseasbacktoemploymentwithintheZambian

industry. h order to facilitate the fulfilment of this policy, the Company will t i e all

reasonableefforts initsrecruitmentandemploymentofemployees

m professional,

managerial, engineering and scientific grades to bring to the attention of such qualified

Zambians positions of employment available within the Company.



6.11



TheCompanywillhonour and performthetermsandconditionsofthecontractsof

employment of the Transferring Employees save that such contracts m y be varied with

to be made and obtained m

the TransferringEmployees'consent,suchvariation

complianceinallrespectswithZambianlawandregulationsandtheterms

of the

Collective Agreement.



6.12



The company will recognise,for cokctive bargainingpurposes,thetradeunion

currentlyrepresentingthe

Transfermg EmployeesandtheCollectiveAgreement

covemg theTransferringEmployees m forceatthedatehereofPROVIDEDTHAT

the Transferring Employees shall be free to form or belong to any other trade union or

no trade union at their choice.



-m-



of



G21mm30



d



6.13



TheCompanywilladopttheRedundancyTermscurrentlyapplicable

to Transferring

Employees. The Company will, as oftheCompletion Date, calculate the redundancy

paymentsduetoallTransferringEmployeesforthoseyearspreviouslyworkedfor

ZCCM (“ZCCM Redundancy”) in accordance with the Redundancy Terms applicable

immediately prior to the Completion Date in respect of the Transferring Employees and

providesuchTransferringEmployees with theoptiontoretaintheirexistingservice

contracts or enter into new service contracts with the Company on terms to be agreed

with the employees of the Company or their representatives.

to enter into new service contracts, tie

ForthoseTransferringEmployeeswhoelect

Company will note tie ZCCM redundancy amounts on each Transferring Employee’s

servicerecordandthereaftershallapplyanyagreednewRedundancyTermswhich

shallincludeanobligationtopaytheredundancypaymentscalculated

as at the

CompletionDate as aforesaid m addition to anyamounts to be paidunderanynew

Redundancy Terms by reference to service from the Completion Date.



L



6.14



NotwithstandingtheprovisionsofthisClause 6, theCompany(andits contractors or

sub-contrac$ors) may bring into and retain in Zambia such non-Zambian citizens

as, in

the reasonable judgment of the Company’s management, are required for the efficient

and successful operation of the Facilities and, at the Company’s request (which shall be

accompanied by the requisiteinformationconcerningtheeducation,experienceand

other qualifications of the personnel concerned as may

be required by regulations of

ZambiaofgeneralapplicationinZambiafromtime

totime) GRZ shallcauseall

necessary permits (including entry and exit permts, work permits, visas and such other

p e m t s or pemssions as may be requested)to be issuedtosuchpersonsandtheir

entitleddependantswithoutunduedelayandwithouthamperingthecontinuousand

efficient performance of the Company’s obligations under this Agreement Provided that

GRZ shall be undernosuchobligationtoissuethepermitsaforesaid

to anynonby reasonofpreviouscriminal

Zambiancitizenwhoisdisqualifiedfromentry

convictions, health regulations and like restrictions set out in immigration regulations

of general application in Zambia from m e to time.



6.15



Any such non-Zambian citizens (and dependants) as are referred to in Clause 6.14 shall

be entitled(on his or their arrival or permanent departure from Zambia) and,

inthe

case of (c), at any time during his or their residency h Zambia to:



L



(a)



import within six (6) monthsfromthe date of arrivalfree ofdutyand

personal use, household and personal effects;



@)



export, withoutlet or hindrance or theimpositionof duty ortaxonexport, all

m Zambia;

personal effects originally imported or acquired during residency

and



W



freelyremit all incomeearned within Zambiaduringsuchresidency.



- 21 -



tax,



for



G218U00030



7.



IrauRANcE



7.1



TheCompanyshallinsure and keepinsuredwith a reputableinsurancecompanythe

Assets and those aspects of the Facilities that are normally and commercially insurable

(and where such insurance is customarily obtained m the mining mdwtry m accordance

with good international mining practice and reasonably obtainable for the Assets and

Facilities).Suchpoliciesshall be m accordancewithgood m k managementpractice

having regard to the nature, age and condition of the Assets and relevant aspects of the

Facilities and having regard to terms of insurance set out m Schedule 9 to the Sale and

PurchaseAgreement.Subjecttotheforegoing,thetermsandconditionsofthe

insurance taken bytheCompanyshallotherwise be left to the sole discretion ofthe

BoardoftheCompany.TheCompanyshalladviseGRZofthepolicy

or policiesin

place and shall forward copies to GRZ.



7.2



GRZ agrees thattheimurancesspecified m Schedule 7 are those which, as atthe date

hereof, would otherwise be required by:

(a)



thestatutoryinstrumentreferredtoSection



l O l ( 1 ) of the Act; amUor



(b)



theDirectorpursuant m Section lOl(3) oftheAct.



7.3



TheCompanyshall,unlesstheinsurancepolicies

or m y of its loanagreementsstate

otherwise or GRZ otherwise agrees, use any mount paid to it pursuant to any damage

or destruction provisions m any contract of insurance to reinstate such elements of the

Facilities(exceptforMineProducts)inrespect

ofwhichsuch

mount was pad,

provided that the Company shall not be required to repair or restore any portion of the

Facilities where such failure to repair or restore would not have a Material Adverse

In theeventGRZ

EffectprovidedthatsuchamountisinvestedattheOperations.

notifiestheCompany that itdisagrees that thefailuretorepair or restore wouldnot

have such a Material Adverse Effect, the matter shall be referred for determination toa

Sole Expert m accordance with Clause 21.



8.



SUSPJDJSION OR CURTAILMENT OF PRODUCTION



8.1



Thepartiesacknowledge.thattheCompany'srighttosuspendandcurtail(heremafter

referred to as "suspend")Normal Operations is governed by Section 28 of the Act and

that, m theeventofanysuchsuspension

or curtailment,theMinister may exercise

powers under SectionB(3) of the Act.



8.2



GRZherebyagreesthat:

(a)



theMinister'sapprovalshall

be deemedgiveninaccordancewithSection

28(3)(a) of the Act upon compliance by the Company with this Clause; and



(b)



insuch event, any directioncapable ofbemg

28(3)(b) of the Act will only be given either:

(i)



London-265795m



givenpursuanttoSection



m compliance with thisClause; or



- 22 -



G2181/00030



(ii)



iftheCompanyhasnotcompliedwithanyprovisionofthisClauseand

has not remedied such non-compliance within thirty

(30) daysofbeing

given notice of such non-compliance by GRZ.



8.3



TheCompanymay

elect bygivingwrittennotice

to GRZ to suspendNormal

Operations if in its reasonable opinion the Company

forecasts in the following six (6)

monthperiodoperatinglosses,shortagesofsuppliesandmaterials,interruptionof

transportation,smelting,power,labourandotherservicesessentialtoNormal

Operations, or othereconomicorpracticalreasonsorotherevents

or circumstances

it prudenttosuspend

which are, or maybecome, a ForceMajeureeventmaking

production.AssoonaspossibleaftergivingnoticeunderthisClause,theCompany

shall submit a report giving the reasons why, in its opinion, it is necessary to suspend

Normal Operations.



8.4



WherepursuanttoClause 8.3 or otherwise in accordancewithSection 28 oftheAct,

it shall maintain, subject to

theCompanyhaselectedtosuspendNormalOperations,

fair wear and tear, the Facilities so as to prevent significant deterioration until Normal

Operations are resumed.



8.5



Nolater than twelve (12) monthsfromthedateonwhichtheCompanysuspended

Normal Operations pursuant to Clause 8.3 or otherwise in accordance with Section 28

oftheActandthereafter

at no longer than twelve (12) month intervals until Normal

Operations are resumed, tie Company shall submit a further report to GRZ:



8.6

L



(a)



showing its projection oftheCoststoResumeOperationsandofrevenuefrom

Normal Operations (if resumed) for the same period; and



@>



givingreasonswhyinitsopinionitconsiders

Operations in such period.



it prudentnot to resumeNormal



If a reportsubmittedpursuant t o Clause 8.5 shows:

(a)



theCompany'sprojection

ofrevenues fromNormalOperationsforthe

succeeding twelve (12) month period is greater than its projection of the Costs

to Resume Operations for the said twelve month period; and



(b)



thattherearenootherrelevantandextraordinarycommercialconsiderations

including without limitation tie after tax return to the Shareholders that would

otherwise make it economically unreasonable and uncommercial to do so,



then the Minister m y direct the Company to take promptly such measures necessary to

ensure that Normal Operations are resumed within a reasonable time period.

8.7



WhereNormalOperationshavebeensuspendedfor

a continuousperiod ofnot less

than three (3) years,theMinister

may directtheCompanytoresumeNormal

Operations if he is of the reasonable opinion that:



- 23 -



G2181lOOO30



(a)



theCosts to ResumeOperationsareless than revenuefromNormalOperations

for the same period (the Minister will provide the Company with

a copyof

GFCZ's projections of costs and revenues supporting such opinion); and



(b)



there are nootherrelevantandextraordinarycommercialconsiderations

tax returnto tie Shareholdersthat

including,withoutlimitation,theafter

would otherwise make it economically unreasonable and uncommercial to do

so.



8.8



IftheCompany

disagrees withthe Minister'sdirectionpursuanttoeither

of

Clauses 8.6 and 8.7 it may elect either to submit the matter to

a Sole Expert for his

21 ortosubmitthematterforarbitration

m

opinion m accordancewithClause

accordancewithClause 22 providedthatanydetermination

by theSoleExpertor

award by an arbitral tribunal shallbe final.



8.9



Where a matterhasbeenreferredtotheSoleExpert

or to arbitrationpursuant t o

Clause 8.8, theSoleExpert or the arbitraltribunal(asapplicable)shalldetermine

whether:

(a)



theCoststoResumeOperations are less than revenuefromNormalOperations

for the period of tie suspension of Normal Operations; and



(b)



there are anyotherrelevant

and extraordinarycommercialconsiderations

including,withoutlimitation,theafter

tax returntotheShareholders

that

to resume

wouldmake it economicallyunreasonableanduncommercial

Normal Operations.



(asapplicable) shall be bmdmgon

The opinion of the Sole Expert or arbitral tribunal

the Parties so that in the event that the Sole Expert

or arbitral tribunal (as applicable)

determinesthat it would be economicallyunreasonableanduncommercial to resume

N o d Operations, the direction givenby tie Minister pursuant to Clauses 8.6 and 8.7

shall be deemed to have been withdrawn.Inreachingitsopinion,theSoleExpertor

arbitral tribunal, as tie case may be, shall have regard to the Company's cost of capital

as at the date of referral pursuant to Clause 8.8 when considering whether the after tax

return to the Shareholders is sufficient tojustify tie resumption of Normal Operations.

8.10



WherepursuanttoClause

8.7 theMinister has directedtheCompany to resume

NormalOperationsand that direction has notbeen or isnotdeemed to havebeen

withdrawn,theCompany, if it doesnotpromptly t i e suchmeasurestoensurethat

Normal Operations are resumed within a reasonable time period, shall be deemed for

thepurposesofthisAgreementtohaveabandoned

all tie land subject to the Large

Scale Mining Licence pursuant to Section 49 of the Act PROVIDED HOWEVER that

where the matterhasbeenreferred to a SoleExpert or arbitral tribunal pursuant to

Clause 8.8, the time period shall m from the date the Sole Expert or arbitral tribunal

(as amlicable) eave his (its) determination.



- 24 -



G2181/ooo30



W



8.11



NothinghereincontainedshallprejudicetheCompany'srightstosuspendNormal

Operations under Section 28 oftheAct for any other reason and the exercise by the

Minister of his powers under the said section save as specifically described herein.



9.



SOCIAL ASSETS A N D MUNICIPAL INFRASTRUCTURESERVICES



9.1



ThePartiesacknowledge t i t theCompanyhas,asatthedatehereof,(a)assumed

ownershipandoperationalcontrolof,andresponsibilityfortheTransferringSocial

Assets and (b) entered into the SmelterCo Social Assets Access Agreement and become

party to tie Social Assets Access Agreements through execution of the Social Assets

Access Novation Agreements so as to ensure the provision of the Transferring Social

Assets to the employees of SmelterCo, their Registered Dependants and qualified Third

Party users (whichshallincludepersonsentitled

to access the same pursuant to the

terms of theSocialAssetsAccessAgreements).TheCompanyagreestoreviewthe

registration practice for determining eligibility of dependants to qualify as Registered

DependantsinplaceasofthedateofthisAgreementandtomaintainthesamefor

Transferring Employees, their Registered Dependants and persons entitled to access to

the same pursuant to the terms of the SmelterCo Social Assets Access Agreement and

be

theSocialAssetsAccessAgreementsPROVIDEDTHATtheCompanyshall

entitled to alter any registration practiceif it is reasonably of the view that any existing

practice from time to time has teen subject to abuse.



L



Nothing m this section will oblige the Company to offer the same registration practice

tonewemployeesoftheCompany,theirdependants,newemployeesofSmelterCo,

their dependantsand new Third Party users.

9.2



Educational Services



Subject to Clause 9.9, the Company shall:

ensurethattheEducationalServicesareaccessibleto

all employeesofthe

Company, those persons entitled to access the same pursuant to the SmelterCo

Social Assets Access Agreement and the Social Assets Access Agreements and

RegisteredDependantsofsuchemployees

or persons(includingforthe

avoidance of doubt, such of those persons to whom access to the Educational

Services is granted by virtue of relevant redundancy or retirement provisions);

makeavailabletothosepersonsdescribedinClause

9.2(a), theEducational

Servicesatthetime of thisAgreementcominginto effect, at theleveland

standard thus applying and thereafter at a level appropriate to the number of

persons entitled thereto, namely tie number of the Company's employees and

tie Registered Dependantsof such employees from time to time;

ensure that the Educational Services are provided to such persons described m

Clause 9.2(a) at least to the same standard (as to range and quality of service)

as that currently available at the date of this Agreement; and



- 25 -



G2181KKO30



(d)



9.3



ensurethatthechargesfortheprovisionoftheEducationalServices

to those

m accordancewiththetermsand

personsdescribedinClause9.2(a)are

conditionsof employment of such employees as apply from m e to time.



MedicalServices



Subject to Clause 9.9, the Company shall:

(a)



e m r e thattheMedical!3ervices

are accessibletoallemployees

ofthe

Company, those persons entitled to access tie same pursuant to the SmelterCo

Social Assets Access Agreement and the Social Assets Access Agreements and

theRegisteredDependants of suchemployees or persons(includingforthe

avoidanceofdoubt,suchofthosepersons

to whom accessto tie Medical

Services is granted by virtue of relevant redundancy or retirement provisions);



m



makeavailable tie MedicalServicesatthefollowinglevels:

(i)



atthedateof this Agreement,atthelevelprevailingatthedatehereof

which is specified m Schedule 4, Part 11; and



(ii)



thereafter,at a levelappropriatetothenumberofpersonsentitled

theretofrom time to time, namely the sumof tie numberof the

Company's employees and the Registered Dependants of such employees

(including persons to whom access to tie Medical Services is granted by

virtue of redundancy or retirement provisions);



taking into account improvements m effkiency andor technology which result

in the same standards of services capable of being provided by fewer people;



9.4



(c)



ensurethattheMedicalServices

are provided to suchpersons described m

Clause 9.3(a) at least to the same standard (as to range and quality of service)

as that currently available as at the date of this Agreement; and



(4



ensurethatchargesfor

the provisionofMedicalServices

to suchpersons

described m Clause 9.3(a) are in accordance with the terms and conditions of

employment of such employees as apply from time to time.



Municipal Irtfrastrucmre Services



GRZ will procure the permanent provision of the following municipal infiastructure

services m the areas m which the Company will operate:



@)



sewerage

services;



(c)



solid

waste;



(4



domestic

electricity

supply;



- 26 -



G21W00030



(e)



street

lighting;



(0



storm

water

drainage;



(€9



roads;



(h)



pestcontrolservices(including, but notlimited to,grasscutting andmosquito

~ p y i n g;)



0)



markets;

and



(i)



cemeteries,



(together the "MunicipalInfrastructure Sewices").

GRZwillprocure that theMunicipalInfrastructureServiceswill be providedbythe

local councils, and m the case of domestic electricity supply - ZESCO Limited, except

thatforanmterimperiod

of approximatelyfiveyearswater,sewerageservicesand

solid waste services will be provided by a wholly owned subsidiary of ZCCM under a

THAT theprovisionofsuchwater,sewerage

GRZfundedprogramPROVIDED

servicesandsolidwasteservicesduringthisinterimperioddoesnotfallbelowthe

level of service otherwise available to the Company from ZCCM.. The Company will

not be required to provide or pay for the Municipal Infrastructure Servicesin respect of

its employees.

with thelocalcouncils,theZCCMsubsidiaryand

TheCompanywillco-operate

ZESCO Limited in ensuring that any transitional arrangements to be agreedwiththe

Company and put m place for recovering costs of the Municipal Infrastructure Services

fromtheCompany'semployees

are effectivesubject to obtainingallnecessary

agreements of employees or their representatives. For these purposes, "effective" does

notconstitute a guarantee by theCompanythattherecoveryofthecostsofthe

MunicipalInfrastructureServices

will beactuallyachieved

from eachofthe

Company's employees.

L



9.5



9.6



TheCompanyshallbefreetoeffect tie maintenanceofthe Transferring Social Assets,

pursuant to Clauses9.2 and 9.3 at the Company's sole option either:

(a)



itself; or



(b)



throughoutsourcmgorotherthirdpartyprovision,suchoutsourcmgorthird

partyprovision being effected by persons of suitablecompetenceor

professional standing.



GRZ agrees that, subjecttotheCompanygivingnotice m writing,itwillacceptnoncompliance with Clauses 9.2 and 9.3 (as the case may be) and that no action will be

taken under this Agreement if simultaneously with the giving of such notice:

(a)



theCompanysubmitsproposalstoGRZforanincrease

m generallevels of

remuneration or other employment benefits to employees of the Company; and



- 27 -



G2181KOO30



(b)



9.8



theCompanyalsoprovides GRZ withreasonableevidencethatsuchproposals

are agreed with tie employees of the Company or their representatives.



Pending confmtion from GRZ thatsuchproposalsforincreasesingenerallevelsof

remunerations or other benefits are acceptable to it, theCompanywillcomplyin

all

to the

respectswithClauses

9.2 and 9.3 and GRZ agreesthatitwillrespond

Company's proposal within 60 days of receipt of the same from tie Company Provided

that, m tie event GRZ doesnotrespond by such 60 day period, acceptance will be

deemed granted. If the Parties disagree about:

(a)



(b)



tie level of SocialAssetsto be maintainedortheavailabilityoftheSocial

Assets pursuant to Clauses 9.2(a) and 9.2(b) and Clauses 9.3(a) and 9.3(b)

the case m y be);



(as



thestandard of, or charges made for, theprovision oftheSocialAssets

pursuant to Clauses 9.2(c) and 9.2(d) and Clauses 9.3(c) and

9.3(d) (asthe

case may be);



(c)



thecompetenceofpersons or companiesprovidingoutsourcing or thirdparty

provision pursuant to Clause9S(b); or



(d)



the sufficiencyof the evidence thatsuchproposals



d



made by the Company to



the employees of the Company or their representatives have been agreed.

either Party m y elect to submit the matter m issue to a Sole Expert for determination

m accordance with the provisions of Clause 21.

9.9



TheCompanywillnot be requiredtomakeSocialAssetsavailabletopersonswho

not

(a)



employeesoftheCompany;



(b)



RegisteredDependantsofemployeesoftheCompany;



are



4



(c)personstowhomaccesstotheSocialAssetsisassuredbyvirtueofrelevant

redundancy or retirement provisions applying to the Company (save for those

employeeswho but forhavingbeendismissedforcausewouldhavebeen

assured access by relevant redundancy provisions);and

(d)



personstowhomaccesstotheSocialAssetsisassuredpursuant

to tie Social

Assets Access Agreements or the SmelterCo Social Assets Access Agreement.



10.



RECORDS ANTI OFERATINGFLEFORTS



10.1



TheCompanyshall,pursuanttoSection

104 oftheAct,keep

GFIZ, throughthe

Ministry,advisedconcerningtheCompany'soperationsthroughsubmission

of

progress reports, beginning with the first Quarter following the Completion Date as to

tie progress and results of the Company's mining operations under this Agreement.



-28-



G2181XMlO30



10.2



Pursuant to Sections 2(d) and (e) of the Fourth Schedule to the Act, the Company shall

provide quarterly reports to the Ministry of:

quantities of ore mined and average head grades;

quantities of waste mined;

concentratestreatedonbehalf

of thirdpartiesandtheMetalTreatment

Products returned to the owner;

quantities of copperandcobaltconcentratesproducedfromtheCompany's

mines and quantities of contained copper and cobalt sold for the Company's

own account;

quantities of the Company's concentrates toll treated by facilities m Zambia

notownedbytheCompanyandquantitiesofsmelterproductsreturnedby

each to the Company;

Operating Costs;

progress inimplementingtheScheduledProgrammes,theextentofany

continuingnon-compliance by theCompanywithEnvironmentallawsand

progress made m remedying this in accordance with the Environmental Plan;

and

anyotherrelevantmattersastotheprogress

and results of the Company's

metallurgicaloperations but excludinganyinternalCompanyinformation

if

relatingtoinnovationsinminingandminingrelatedactivitieswhich,

disclosedprior to properprotection(patent or trademark)beingobtained,

would damage the Company commercially.



10.3



Ministry a summary ofanygeologicaland

TheCompanyshallfilewiththe

metallurgical investigations and such other material data that m y be obtained from any

prospectingactivities

and a samplerepresentativeof

each principal type of

mineralisation encountered in such investigations.



10.4



The Company shall provide quarterly reports relating to any prospecting, appraisal and

development activities to the Ministry which shall include such information

as tothe

progress ofoperationsintheMiningAreaastheMinistrymayfromtime

to time

reasonablyrequirebutexcludinganyinternalCompanyinformationrelatingto

prior to proper

innovations m mining and mining related activities which, if disclosed

protection(patentortrademark)beingobtained,woulddamagetheCompany

commercially.



10.5



Allinformationfurnishedto

GRZ shall be m Englishand,intheeventthatsuch

information is a translation from the original, shall be a certified true translation. All

financial data shall be recorded in US dollars or Kwacha.



- 29 -



G2181/OOOXl



10.6



TheCompanyshallmaintainalloriginalrecordsandreportsrelatingtoitsactivities

and operations under this Agreement including all documents relating to financial and

commercial transactions with independent parties and Affiliates m its principal office in

be opened to

Zambia for a period of three (3) years. These records and reports shall

inspection by GRZ through m authorised representative during normal working hours

upon GRZ giving not less than one (1) week advance notice of its intention to inspect.

Such reports and records shall be maintained in the English language and all financial

data shall be recorded m US dollars or Kwacha.



10.7



All records,reports,plans,maps,



charts, accounts,andinformationwhichthe

Companyis or may be fromtimetotimerequiredtosupplyundertheprovisionsof

this Agreement shall be supplied at the expense of the Company.



10.8



GRZandtheMinistryherebyacknowledge

that allinformationsupplied

to them

pursuanttoClause10above i s confidential information and hereby agree to treat as

secret and confidential and not at any time for any reason to disclose or p e m t to be

disclosed to any person or otherwise make use of or p e m t to be made use of any such

information where the information was received during the period

of this Agreement

pursuant to this Clause and upon termination of this Agreement for whatever reason

GRZ and the Ministry will deliver up

to theCompany all working papers, computer

disks and tapes or other material and copies provided to or prepared by the Company

pursuant to this Agreementand still retained by it.



10.9



For tie avoidance of doubt and subject to the Act:

(a)



all documents,reports,records or informationmadeavailabletoGRZandthe

Ministry will remain the property of the Company; and



(b)



nothingheremcontainedshallprecludeGRZfromusinganysuchinformation

as has been supplied forthepurposesofthepreparationofgovernmental

statistics and data or from publishing the same in statistical format.



- 30 -



G21811WO30



d



PART C

UNDERTAKINGS NECESSARY FOR OPERATIONS



11.



FOREIGN EXCHANGE



11.1



ThePartiesacknowledgethatunderlegislationandpracticecurrentlyinforcein

Zambia, the Company is free to:



11.2

L



(a)



remit foreign currency out of Zambia;



(b)



maintain foreign currency accounts outside of and within Zambia; and



(c)



remitforeigncurrencyaccruingtoorearned

Zambia.



by itoutsideZambiainto



h the event foreign exchange controls were to



be re-introduced in Zambia within the

StabilityPeriod,theCompanyshallnotwithstandingsuchreintroduction(andwithout

requiring further approvals from GRZ or any entity thereof) have the right to:

(a)



retainforeigncurrencybothoutsideZambiaandwithinZambia,inaccounts

establishedforthatpurposeand

to havepaid toitandmaintaininsuch

accounts the following:

proceedsofthesaleofMine

Prod~cts,Metal Treatment Products and

MetalTreatmentBy-Productsincludingproceedsreceivedfromthird

partiesresidentinZambiaforforeignexchangepurposesandtoll

treatment and refining revenues;

payments made by insurers or re-insurers not resident in Zambia under

contractsof insurance in the Company's favour;

proceedsofanydisposalofcapitalassetsreceivedfrompersonsnot

resident m Zambia for foreign exchange purposes;



L



the amount of any funds received pursuant to any loan f m c e provided

by persons not resident in Zambia for foreign exchange purposes;

any share capital received m foreign currency from persons not resident

in Zambia for foreign exchange purposes;

any other foreign currency earned or accrued in the ordinary course of



businessfrompersonsnotresidentinZambiaforforeignexchange

purposes; and

(b)



usefreelytheforeigncurrencyaccountsmaintainedbytheCompanyto:

(i)



servicepaymentsofprincipalandinterest,servicechargesandother

feesandexpenses in respectofanyloansarrangedwithinstitutions

including ShareholdersandtheirAffiliateswhoarenotresident



- 31 -



in



G2181/00030



to implementtheScheduled

Zambiaforforeignexchangepurposes

Programmes or otherwise finance or refinance the Facilities;

(ii)



makepaymentsdueto (aa)suppliers notresidentinZambiaforforeign

exchange purposes for the supply of goods and services to the Company

and

(includingcapitalgoodsandservicesofforeignemployees

to implementthe

consultants)wheregoodsandservicesarerequired

Scheduled Programmes or conduct Normal Operations and (bb) suppliers

residentinZambiaforforeignexchangepurposeswithrespectto

tie

treatmentireftig oforesandconcentratesandtothesupplyof

electricity to the Facilities;



(iii)



finance thepayment to ShareholdersandtheirAfflliates



who are not



resident in Zambia for foreign exchange purposes of

(A)dividendsprovided

that suchpayments

are madeoutof

Distributable Profits(asdefmed in the Companies Act); and



m



(h)



(V)



11.3



management and marketingfeespayableundermanagement

services and marketing agreements, respectively entered into

with its Shareholders or their Affiliates who are not resident

in Zambia for foreign exchange purposes;



payexpatriateemployeeswhosecontractsofemployment

specify that

they be paid (in whole or in part) in a currency other than Kwacha; and

effect such other payments m foreign currency to persons not resident m

Zambia for foreign exchange purposes as may be necessary or desirable

m the ordinary course of the Company's business.



The Company shall submit to the Central

(a)



(b)



Bank:



withinfifteen (15) daysoftheendofeachcalendarmonth:



d



(i)



a statementoftheforeign

currencyaccountsrepatriated

to Zambia

withinthepreviousmonthfromaccountsmaintainedoverseasbythe

COmp~Y;



(ii)



a statementof tie balance of theCompany'sforeigncurrencyaccounts

at the end of the previous month; and



(iii)



a forecast oftheforeign

currency whichtheCompanyintendsto

repatriate dumg the ensuing calendar month, and



withinfive (5) monthsoftheendofeach

year,auditedfinancialstatements

showing the mount of Distributable Profits (if any).



11.4 h theabsence of foreignexchangecontrolsinZambia,theCompanyshallhavethe



same rights to buyand sell currenciesfromauthoriseddealers



London-2/557952fO7



d



- 32 -



or othercommercial



G2181/00030



concerns inZambiaandenterintoswapsandhedgingagreements(whichagreements

will include, withoutlimitation,arrangementsfor

taking outforwardcoveragainst

local or other currency fluctuations or other fluctuations in incomes or costs or other

expensesincurredaspartofthemanagementoperationsbutshallnotinclude

Speculative Currency Transactions). In the event foreign exchange controls were to be

reimposed(andwithoutprejudicetotheCompany'srightsunderClause

11.2) such

controls shall not be applied to the Company i n a manner less favourable to it than the

manner m whichthey aregenerallyapplied to otherlargecommercialconcerns m

be entitledtobuyandsell

foreign exchange m

Zambia.TheCompanyshall

accordancewithsuchcontrols

at rates ofexchangenolessfavourable

than those

available to other commercial buyers and sellersof the currency concerned.

11.5



TheCompanyshallremittoZambiaandconvertintoKwacha

for creditto a bank

accountinthenameoftheCompanyinanorderlyfashionsufficientofitsforeign

currencyearningstopaysuchcommitmentsastheCompany

m y haveincurred m

local

Kwacha(including,withoutlimitation,obligationstopaydividendsto

shareholderspayable m local currency,taxes,royaltiesand

custom duties)which

cannot be metby its Kwachabalancesfromtimetotime.TheCompanyshalluseits

reasonable endeavours to notify the Central Bank of transfers of a substantial amount

which are not m accordance with the normal pattern of transfers.



11.6



11 or any

TheCompanyshallnotengagein

or useanyprovisionsofthisClause

authorityorapprovalgiven by theCentral Bank toengageinSpeculativeCurrency

Transactions.Fortheavoidanceofdoubt,thissectionshallnotprohibitorprevent

normal risk management operations discussed m section 11.4 above. If the Company

is in breachofthisClause 11 itshallpayto GIU as liquidateddamages an amount

equal to the amount of any net after

tax profit or gain which the Company makes on

by GRZ m establishing

theSpeculativeCurrencyTransactionandanycostincurred

that the transaction was a Speculative Currency Transaction.



11.7



Where any right or assurance given

Central Bank:



L



L



to the Company under this Clause



W



toapproveanyact,matteror



@)



tograntauthorityunderapplicablelaw

performance,



11 requires the



thiig; or

and regulationsforitsexercise



or



andtheCompanyhassuppliedanynecessaryinformationtotheCentralBankand

otherwisemettheconditions of thisClause 11, GRZ shall,uponrequestfromthe

Company,ensure by policydirectionstotheCentralBank

or otherwisethatsuch

approval is given or such authority is granted as soon as reasonably practicable.

11.8



it m y incur denominated m Kwacha

The Company shall ensure that any borrowings

will not exceed the Kwacha equivalent from time to time of twenty million US dollars

(US$2O,OOO,OOO) or such greater amount as may be agreed from time to time between

the Company and the Central Bank.



Lotion-2/557952/07



- 33 -



G218MMO30



11.9



The Company shall not actively discriminate against the Central

exchange for Kwacha.



12.



ENVIRONMENTALISSUES



12.1



The Company will:



Bank in selling foreign



withintwelve (12) months(orsuchlongerperiod as theParties m y agree)

finalise a baselineenvironmentalstudyoftheContractAreaswith

a view,

infer alia, to defining preexisting conditions to which the provisions of Clause

12.19 will apply;

negotiate m good faith with GRZ (which undertakes to negotiate m good faith

(6) monthsof

withtheCompany)with

a viewtoagreeingwithinsix

finalisation of the baseline environmental study referred to in (a).above (or

such longer period as the Parties may agree) the detailed terms and conditions

of the Environmental Plan.



I



(subject to the provisions of and save to the extent provided otherwise m this

Clause 12) comply with

(i)



environmentalandsafetylawsandregulationsenactedorpromulgated

withinZambia from timeto time which are ofgenera4application

as is

(mcludmg, fortheavoidanceofdoubt,makingsuchcontribution

requiredunderSection 82 oftheAct to theEnvironmentalProtection

Fund). For the purposes of Section 82 of the Act, the Facilities shall be

deemed to be either a category one (1) mine or a two (2) mine (or such

other category of m e for Environmental Protection Fund contribution

purposes as the Parties may agree from time to time) at the discretion of

the Director; and



(ii)



theEnvironmentalPlan.



12.2



The Company shall comply with andimplement the Environmental Plan in accordance

with the timetable contained therein and Good Mining Practices and, without prejudice

to thetimetable,

tie Company shall achieve the objectivesspecified m the

Environmental Plan no later than the last date specified therein for achievement.



12.3



Saveasprovided i n Clause 12.4 below, GRZ herebyconfirmsthatfortheStability

its

Perioditwillnot t i e anyaction(andwillprocurenoactionistakenbyanyof

ministries, departments or agencies over which it has operational control acting onits

behalf) under, or m enforcing,any applicable Environmental Laws with the mtent of:

(a)



securingtheCompany'searliercompliancewithEnvironmentalLawsother

than that envisagedbythetimetableandconditionssetout

Environmental Plan;



- 34 -



m the



G2181100030



I



requiringtheCompany toclean up andor removeanystockofpollutants

andor remedyanyotherconditionwhichwaspre-existing

as atthedateof

m respectof areas ofland or bodiesofwater

thisAgreement(otherthan

identified by the Company pursuant to Clause 12.19(b)(ii));

imposing fines or penaltiesupontheCompanypayableunderEnvironmental

Laws(orenactingnewfinesandpenaltiesthereunder)which

are payable m

respect of the Company's non-compliance with such Environmental Laws and

wheretheEnvironmentalPlanprovidesfortheremedyofthesame

m

m material

accordancewith a specifiedtimetableandtheCompanyis

compliance with that timetable;



L



imposingfines

or penalties m respectoftheCompany'sbreachof

Environmental Laws m the case of p e d t y charges in respect of the emission

of sulphur dioxide arising from the ongoing operation of the Mufulira smelter

provided that the Company remams m compliance with the measures, and m

material compliance with the timetables for implementing those measures

set

as appropriate,

out in the Environmental Plan to reduce such omissions and,

for the constructionof a new acid plant as set out in the Environmental Plan;

or

effecting any changestheretoorenactingnewlegislationandregulationor

repealing existing legislation or regulation which would prevent the Company

complying with theEnvironmentalPlanandthetimetablescontainedtherein

withoutmakingprovisionfortheCompany

to be exemptedtherefromor

materiallyalteroraffectthescope,enforcement

or application of

Environmental Laws regarding the establishment, maintenance or operation of

the Environmental Protection Fund.

h the event that GRZ considers m its reasonable opinion that the Company is

in material non-complmce withtheEnvironmentalPlan,

it shallnotifythe



L



Companyofsuchfactinwriting,specifyingthefactsandcircumstances

it

and theactions it considers

considersgiverisetosuchnon-compliance

12.4(b) and 12.5, the

necessarytoremedythesame.SubjecttoClauses

Company shall have three (3) months from the receipt of such notice within

which to remedy the alleged material non-compliance.

h the event that:

(i)



suchallegedmaterialnon-complianceisnotremediedwithinthethree

(3) months notice period; or



(ii)



theCompanyisnot,withinthe

three (3)monthsperiodsubstantially in

tie process of remedying the non-compliance and such non-compliance

is not remedied m full within a further three (3) months,



- 35 -



G218MKKBO



GRZ shall cease to be bound by the provisions of Clause 12.3 but only

m respect of

such breach and matters arising out of such breach (and in respect of no other matters)

and the Parties acknowledge that GRZ (or its ministries departments or such agencies

acting on its behalf) shall be free to t i e such action as is permitted under applicable

Environmental Laws in respect of such breach.

12.5



If the Company contests the non-compliance asserted by GRZ it shall serve

a counternotice specifying its reasons for disagreeing with GRZ within thirty (30) Business Days

of receiving GRZ's notice under Clause 12.4(a). Thereafter any dispute regardmg:

(a)



whether or notGRZisentitled t o serve a noticeunderClause12.4(a);or



(b)



whether or nottheactionsGRZconsidernecessarytoremedysuchnoncompliance specified in such notice are necessary and reasonable; or



(c)



whether the materialnon-compliancehas been remedied within thespecified

period or whethertheCompanyisnotsubstantially

m theprocessof

remedying such non-compliance within the initial three (3) month period,



d



may be referred by theCompany to a Sole Expert m accordance with Clause 21, for

determination providedt i t :



12.6



(d)



notwithstandingtheprovisionsofClause21,thedeterminationbytheSole

Expertshall be withinthirty (30) daysofthecounter-noticeservedbythe

Company; and



(e)



GRZshallcontinuetobebound

by theprovisionsofClause12.3pendingthe

determinationof the Sole Expert.



The Company shall be entitled to mend the Environmental Plan from time to time:

(a)



ifinitsview at anytimetheconductofNormalOperationsinaccordancewith

the Environmental Plan for whatever reason poses a material danger to public

health and safety;



(b)



if initsviewthe



q a c t ofNormalOperationswould

be likely to resultin

m therelevant

significantenvironmentaldamagewhichwasnotanticipated

Environmental Plan;



(c)



so as to reflectchangesinoperationsandothercircumstancesconsidered

to be

appropriateby the Company, provided t i t following such amendmemt:

(i)



(ii)



theEnvironmentalPlanis

m accordance with acceptedenvironmental

standards as applicable to Good Mining Practice; and

suchamendmentwillnotresult

in GRZ's liabilityunderthe

Environmental Liabilities Agreement or the Enabling Legislation being

materially increased or any liability thereunder being mcurred or arising



- 36 -



G2181KKKMl



d



on a date earlier than would otherwise have been the case but for the

making of such amendment.

(d)



if, at any h e followingtheexpiryof a periodof three (3) years following the

Nkana by

date ofthisAgreement,thecontinuedoperationofthesmelterat

KonkolaCopperMinesPLC (or any successor in titlethereto)rendersthe

operation of theMufulirasmelterandrefineryinaccordancewiththethen

applicable Environmental Plan uneconomic and mendment(s) thereto is (are)

required to enable its continued economic operation.



Prior to any formal proposal being made by the Company, it shall allow

a period of

four (4) Calendar Months for informal discussions of any proposed amendments to an

Environmental Plan.

Any formalproposalfromtheCompanyto



mend theEnvironmentalPlanshall be

deliveredinwritingtotheMinister.Thisshallinclude

a writtenstatementofthe

reasons why the Company considers the proposed variation to be necessary, setting out

to the extent it is reasonably practicable to do so:



L



c-4



its reasonforconcludingthereis



@)



itsreasonsforconcludingtheamendmentsproposedunderClause12.6(c)are

inaccordancewith Good MiningPracticeandwouldnotmateriallyincrease

GRZ's liabilitiesundertheEnvironmentalLiabilitiesAgreementorthe

Enabling Legislation; or



(c)



why thecontinuedoperationofthesmelteratNkanabyKonkolaCopper

MinesPLC (or anysuccessor m titlethereto)renderstheoperation



a risktopublichealthorsafety

or of

significant environmental damage not anticipated in the Environmental Plan;



ofthe

Mufhlirasmelter and refineryinaccordancewiththeEnvironmentalPlan

uneconomicandtheconsequentamendmentstotheEnvironmentalPlan

necessary to ensure the continued economic operation of the Mufulira smelter

and refinery.



L



12.7



h the eventthattheCompanyproposes a variationoftheEnvironmentalPlanunder

the circumstances set forth m Clause 12.6, GRZ undertakes to consider the proposed

variation m good faith and to accept the proposal unless it believes that the proposal

falls outside the scope pemtted under Clause 12.6 and unless, by notice of objection

in writing served on the company within two(2) calendar Monthsofreceiptofthe

GRZ informs the Company that it considers

proposal made pursuant to Clause 12.6,

the proposed variation to be unnecessary or unreasonable it shall be deemed to have

agreed the same. A notice of objection shall include a written statement of the reasons

why GRZ considers the proposed variation to be unnecessary or unreasonable setting



out to the extent it is reasonably practicable to do so:

(a)



itsreasonsforconcludingthere

is norisktopublichealthandsafetyorof

significant environmental damage not anticipated intie Environmental Plan;



- 37 -



G21WOOO30



(b)



m relationtoarnendmentsproposedunder

1 2 . q ~ i)tsreasonsforconcluding

that the amendment would not meet Goad Mining Practice andor its analysis

of the increase m liabilities under the Environmental Liabilities Agreement or

the Enabling Legislation; or



(c)



m relationtoamendmentsproposedunderClause12.6(d),itsreasonsfor

concluding either:

(i)



thatthecontinuedoperationofthe

Nkana smelterandrefinery

aforesaidhasnotrenderedthecontinuedoperationoftheMufulira's

smelter and refinery m accordanceoftheEnvironmentalPlan

uneconomic; or



(ii)



theamendmentssought to theEnvironmentalPlan are unnecessary m

order to renderthecontinuedoperation oftheMufulirasmelterand

refinery economic.



as



12.8



Followingreceiptof

a noticeofobjectionunderClause

12.7,theCompanyshall,

within two (2) Calendar Months and having considered the notice of objections m good

faith, inform the Minister by notice m writing whether or not the Company's proposal

for variation of the Environmental Plan is or is not withdrawn. h the event that the

be d e e d tohavebeen

Company'sproposalforvariationisnotwithdrawnitwill

agreed unless the Minister elects, within a further period oftwo (2) Calendar Months

from receipt of notification from the Company that its proposal is not withdrawn, to

submit the question of whether the Company's proposal for variation is unnecessary as

unreasonable for determinationby a Sole Expert m accordance with Clause 2 1.



12.9



The Minister on behalf of GRZ m y propose an amendment to the Environmental Plan

atany time theconductofNormalOperations

m accordance with the

EnvironmentalPlanforwhateverreasonposes

a materialdanger to public

health and safety or m y result m significant damage to the ecology of the area

which was not contemplated m the original Environmental Plan and is or m y

become mversible or only become reversible or only be reversed after the

lapse of fifteen (15) years;

the environn-mtal impact of Normal Operations shall prove substantially more

adverse than anticipated m the Environmental Plan; or

testedandestablishedtechnology

or procedures,orimprovementsthereof

shall have become available and economically viable subsequent to the date of

this Agreement and which, if applied to the operation of the Facilities, (but

excluding those areas of land or bodies of wateridentifiedinClause12.19

below),couldmateriallymitigatetheenvironmentalimpactofNormal

Operations.



- 38 -



G218103030



d



d



12.10 Prior toanyformalproposalbeingmadebytheMinister,unlesshereasonably

considers such danger or damage to be imminent and acute, he shall allow a period of

four (4) Calendar Months for informal discussions of any proposed amendments to an



Environmental Plan.

12.11 Any formalproposalfromtheMinistertoamendtheEnvironmentalPlanshall



delivered m writing to theCompany.Thisshallinclude

reasons why the Minister considers the proposed variation

to the extent it is reasonably practicable to do so:



b



be

a writtenstatement ofthe

to be necessary, setting out



(a)



thedangertopublichealthandsafetyortheenvironmentaldamagewhich

may

result from Normal Operations if the Environmental Plan is not amended and

theriskandmaterialityofsuchdamage

or, asthecase

may be,the

technology, procedures or improvements which could materially mitigate the

environmental impact of Normal Operations;



(b)



theactionsitconsidersnecessarytoremedythesame;



(c)



the time scalewithinwhichitconsiderstheactionsshould



(a



thecostofsuchactions.



be completed; and



12.12 h the event that the Minister proposes a variation to the Environmental Plan on behalf

of GRZ under the circumstances set forth m Clause 12.10, the Company undertakes to

considertheproposedvariation in goodfaith and,unless by notice ofobjectionin

writingserved ontheMinister within two (2) CalendarMonths of receipt ofthe

proposalmadepursuant t o Clause12.10itinformstheMinister

that it considers the

proposed variation to be unreasonable it shall be deemed to have agreed the same. A



notice of objection shall include a written statement of the reasons why the Company

considers the proposed variation to be unnecessary or unreasonable setting out to the

extent it is reasonably practicable to do so:

(a)



itsestimateofthecoststoimplementsuchchange;



(b)



its analysisofthevariationintheenvironmentalimpactthatwould



be effected



by such change; and

(c)



its appraisal of theeconomicandothereffectsofthechangeproposed

and, in particular, whethertheproposedvariationwouldconformto



by GRZ



Good



Mining Practice.

12.13 Followingreceipt of a noticeofobjectionunderClause

12.12,theMinistershall,

within two (2) Calendar Months and having considered the notice of objection in good

faith, inform the Company by notice m writing whether or not tie Minister's proposal



for variation oftheEnvironmentalPlanisorisnotwithdrawn.Intheeventthatthe

Minister'sproposalforvariationis

notwithdrawnitwillbedeemedtohavebeen

agreed unless the Company elects, within a further period of two (2) Calendar Months

from receipt of notification from the Minister that his proposal is not withdrawn, to



- 39 -



G2181/00030



submitthequestionofwhetherGRZ'sproposalforvariationisunnecessary

unreasonable for determination by a Sole Expert in accordance with Clause 21.



or



12.14 Should a Partyrefertheproposedchangetoexpertdetermination,thedetermination

pursuant to Clause 12.8 or Clause 12.13, will be binding on the parties with the effect

that:



(a)



iftheSoleExpertdeterminesthattheproposalforvariationisnotunnecessary

be defmed tohavebeen

or unreasonabletheproposalforvariationwill

agreed; or



(b)



iftheSoleExpertdetermines t i t theproposalforvariationisunnecessary

unreasonable the proposal willbe deemed to have been withdrawn;



or



Provided that the Sole Expert m y in his sole discretion suggest alternative proposals

or time schedules or mitigation of cost proposals to the parties who will consider the

same m good faith prior to tie determination being rendered by the Sole Expert. The

period during which such proposals suggested by the Sole Expert shall be considered

by the Parties shall be specified by him but shall not exceed six (6) Calendar Months.



d



12.15 Where a variationto tie EnvironmentalPlan has beenagreedby



tie Companyand

GRZ or isdeterminedpursuanttoClause21,thatEnvironmentalPlanshall

be



amended accordingly.

12.16 Nothing m this Clause 12 shall be deemed or construed to:

(a)



limittherightof

GRZ to t i e suchotheractionswithin its power, such as

those rights given to the Director under Section 81 of the Act, to protect the

public health and safety (provided t i t any dispute or disagreement between

the Company and GRZ as to the action taken or proposed to be taken under

such laws shall be regarded as a Dispute);or



(b)



render the Companyliableforpenaltiesorfinesimposed,

or thirdparty c l a m

whenever they are made, in respect of activities undertaken by ZCCM prior to

the date hereof.



12.17 Notwithstanding the provisions of this Clause 12, the Company shall, at the invitation



of the Minister responsible for the environment, participate either individually or on an

industry-wide basis, m discussionsrelating to theimpactandeffectivenessofthe

Environmental Laws or on any prospective changes thereto.

12.18 Pendinganamendmentof



an EnvironmentalPlanpursuant

existing Environmental Plan shall continue to apply.



to thisClause12,the



12.19 During such period as is referred to m Clause 12.l(b), the Parties shall:

(a)



L.OdOIl-2M7952U7



identifyanyareas of land or bodiesofwaterwhich

arepolluted or contain

pollutantstockswhichwere

preexisting asatCompletionandwhichthe

CompanydoesnotrequireforfutureOperations(notwithstandingthatsuch



-40-



G2181lOOO30



d



areas of land or bodies of water may have k e n used by the Company during

such period referred to m Clause 12.l(b));

(b)



identifywhetherareasofland or bodiesofwater referred to in (a) above:

(i)



can be detachedfromtheLeaseswithoutaffectingtheconductof

Normal Operations and surrendered t o GRZ; or



(ii)



cannot be so detached from the Leases (within the period of twelve (12)

monthsfrom tie endoftheperiod

referredto in Clause 12.l(b) (the

"ShortTerm Use Period")) withoutaffectingtheconductofNormal

Operations.



12.20 Any such land as is referred



to in Clause 12.19(b)(i) shall forthwith upon adoption of



the Environmental Plan pursuant to Clause 12.l(b) be surrenderedby tie Company to

GRZwhoshallacceptsuchsurrender.Anysuchsurrender

shall be free of

encumbrances.



L



12.21



L



h theeventthatareasofland

or bodiesofwater are identifiedpursuant to Clause

12.19(b)(ii),the Parties shall procure the amendment of the Environmental Liabilities

Agreement(and

until suchamendmentismadetheEnvironmentalLiabilities

Agreementshall bedeemed amended in itsoperation)toreflectthefollowing

provisions:

(a)



theindemnitycontained

m clause 2 oftheEnvironmentalLiabilities

all costsandexpensestheCompany

Agreementshallbeamendedtocover

incurs by reason of a requirement by GRZ or the Company issued at any time

after the expiry of the Stability Period to clean-up and/or remove any stock of

pollutants contained within tie boundaries of such land or bodies of water or

remedy any other condition in respect thereto which was preexisting as at the

date of this Agreement; and



(b)



suchindemnityshallnotapply if suchstockofpollutantsasisreferredto

in

(a) above is augmented, used m, or depleted after the Short Term Use Period

as a result of the conduct of Normal Operations at any time after

tie date of

this Agreement.



12.22 The Parties will procure all necessary amendments to the Large Scale Mining Licences,



the Leases and this Agreement to reflect any detachment of land as is referred to

Clause 12.19(b)(i).



in



13.



COIilMUNICATIONS



13.1



GRZ will provide any reasonably required assistance and facilitation to the Company in

and otherapprovalsnecessaryforthe

respectofanyapplicationforlicenses

installation,maintenance and operationof a modemtelecommunicationssystem

PROVIDED THAT GRZwillnotberequired

toaffordanysuchassistanceor



- 41 -



G218MMO30



facilitation if it wouldresult m the breach of any legislationorregulationrelating

telecommunicationsin Zambiaor any regulatory or contractual duty binding on it.



- 42 -



to



G2181ltMO30



PART D

TAXATION



L



14.



GENERAL OBLIGATION TO PAY TAX



14.1



Theprovisions ofSchedule 8 correctlyreflec :t, inrespect ofthematterstherein

specifically described, the current tax regime applicable to the Company in the conduct

of its activitiesunderthisAgreement.WhilstSchedule

8 is not intended to override

applicable legislation, in the event of any ambiguity between applicable legislation and

Schedule 8, GRZ and the Company agree that the provisions of Schedule 8 shall apply.



14.2



Subject to Clauses 14.1, 16 and Schedule 8, the Company shall pay tax, royalties and

duties from time to time in accordance with applicable legislation.



15.



VAT REF'UNDS



15.1



GRZ shall ensure that VAT collected on goods and services procured by the Company

an

is refunded to tie Company within thirty (30) days from the date of submission of

acceptable monthly VAT return for the Company.



16.



TAXATION STABILITY



16.1



GRZ undertakes that it will not for the Stability Period:

(a)



increasecorporatemcome

tax or withholdingtax ratesapplicabletothe

Company (or change the basis of calculation which would result in a decrease

of deductions or decrease allowances available to the Company in computing

its liability to such Taxes) from those prevailing at the date hereof (and

as set

out in detail in Schedule 8 attached hereto);



(b)



otherwise mend theVATandcorporateTaxregimesapplicableto

tie

Company and any management or marketing company to the Company from

those prevailing as at the date hereof (and as set out in detail m Schedule 8

attached hereto); or



W



imposenewTaxesorfiscalimposts(includingnewimportorexportduties

or

other newduties or new royalties on Normal Operations) on the conduct of

NormalOperationsorsale

or export of productstherefrom or increase

withholding taxes applicabletotheCompany,itsShareholdersortheir

Affiliatesorlenderstoit

ontheremittancebytheCompanyof

principal,

interest or dividends above the rate prevailing as at the date hereof (asset out

in detail in Schedule 8 attached hereto),



L



providedthat m thecaseofClause 16.l(b) and Clause 16.l(c) amendments may be

made which taken together do not have a material adverse effect (compared with what

the position would have been but for the amendments) on the Company's Distributable



- 43 -



G21WOOO30



Profits or the dividends received by its Shareholders or their Affiliates or the amounts

received by lenders to it (the issue of whether or not such effect is materially adverse to

be d e t e m e d by a SoleExpert m accordancewithClause21

m theeventof

disagreement between the Parties).

GRZ further undertakes that for the Stability Period , it will not:

(a)



altertheright ofanynon-Zambiancitizens(anddependants)

(on his or their

m v a l or permanent departure from Zambia) and, m the case of (iii) below,

during the period of his or their residency m Zambia to:

(i)



importwithinsix(6)monthsfromthedateof

arrival free ofdutyand

tax, for personal use, household and personal effects;



(ii)



export,withoutletorhindrance

or theimpositionofduty

or tax on

export, all personaleffectsoriginallyimported

or acquiredduring

residency m Zambia; and



(iii)



m



freely remit all income earned m Zambia during such residency;



increase:



m Schedule 8 fromthelevelssetout



(i)



therate ofroyaltyreferredto

therein;



(ii)



import duty rates applicable to the Company so as to result in the import

duty rate to which the Company is subject on the import of machinery

and equipment (including specialised motor vehicles) or other i t e m of a

Mining and

capitalnaturerequiredfortheApprovedProgrammeof

Metal Treatment Operations, Normal Operations or the constructionof a

newacid plant and any other proposed capital expenditure as set out in

the Environmental Plan or m the Scheduled Programmes and which is,

atthedateofthisAgreement,exemptfromcustomsandexciseduties

under Section 97( 1) of the Act, above a level of zero per cent. (0%);or



(iii)



16.2



d



import duty ratesapplicabletotheCompanyso

as to result in the

weighted average import duty rate to which the Company is subject on

theimportofothergoodsandmaterialsrequired

for theApproved

ProgrammeofMining

and MetalTreatmentOperations

or Normal

Operationsortheoperationof

a newacidplant

as set out m the

Environmental Plan or in the Scheduled Programmes and which do not

fall under Clause 16.l(e)(ii), above a level of fifteen per cent. (15%).



For thepurposesofClause 16.l(e)(ii) and (m) theFacilitiesshallbedeemedto be a

"mine" andtheoperationsconducted m connectiontherewith to be "mining" for the

purposes of Section 97 of the Act.



-44-



G2181/OOO30



d



16.3



GRZ shall ensure that no law, statute, regulation or enactment shall be passed or made

which would discriminate against the Company m respect of any such matters as are

or any

referred t o in Clause16.1orotherwise initsconductofNormalOperations

other circumstances under this Agreement when compared to other mining companies

or joint ventures conducting similar operationson a scale equivalent to those conducted

by the Company m Zambia provided that GRZ will be at liberty to pass or make any

such law, structure, regulation or enactment to enable the performance or amendment

of a development agreement entered into by it and another mining company or joint

venture prior to the expiry of such period.



16.4



GRZ covenants to reimburse the Company (or, at its option, make offsetting changes in

anylaw,statute,regulationorenactmentapplicabletotheCompany)toensurethe

Company is fully, fairly and timely compensated for any costs incurred by it by reason

of a failure by GRZ tocomplywiththeprovisionsofClauses

14, 16.1andClause

16.3. The Company acknowledges that this will be its sole remedy for such failure to

comply with Clauses 14, 16.1 and 16.3.



16.5



In the event there is a dispute as to whether or not the Company has suffered any costs

be referredto a Sole Expert m

for thepurposesofClause16.4thedisputeshall

accordance with Clause 21.



16.6



GRZherebyexemptstheCompanyfor

a periodof fifken (15)yearsfromthedate

hereoffromliabilitytopaytheExciseDutyonPowerapplicabletotheCompany's

purchases of electricity m relation to the operation of the Facilities during such period.

to

Fortheavoidanceofdoubt,theCompanyshallnotincuranyliabilityinrelation

non-payment of tie Excise Duty on Power pursuant to this Clause 16.6.



16.7



GRZconfirmsthattheCompanyshallnotpayanypropertytransfertaxesassociated

withtheacquisitionoftheAssetsundertheSaleandPurchaseAgreementandthe

transfer of the Facilities to the Company.



L



L



-45 -



G2181/OCKl30



PART E

FORMAL CLAUSES



17.



ASSIGNMENT



17.1



TheCompany m y , withthe consent oftheMinister in accordancewith Sectionflfifour (one) of the Act, assign the whole or part only of its rights and obligations under

this Agreement and its interest in the Large Scale Mining Licences and GFU covenants

to suchanassignmentwillnot

be withheld m tie

thattheconsentoftheMinister

a

circurnstancessetout inClauses 17.5 and 17.7. Noassignmentofaninterestin

Large Scale Mining Licence may be made without the assignment to such person of a

comparable mterest in this Agreement and vice versa.



17.2



IftheCompanyassigns its entireinterest m theLargeScaleMiningLicences and its

rights and obligations under this Agreemnt m accordance with Clause 17.1,then upon

the assignee becoming party to this Agreement, the Company shall be discharged from

after the date of that

any further liability m respectofanyobligationwhichaccrues

GRZ against tie

assignmentwithoutprejudicetopre-existingrightsaccruedto

Company.



17.3



Whereanassignment t i e s effectpursuanttoClause 17.1,theCompanyshallenter

into an agreement with the assignee wherein the assignee agrees with the Company and

undertakes to GRZ that it will:



17.4



17.5



(a)



become a Party to theAgreement; and



(b)



assume,observeandcomplywith

all obligationsof the Companyunderthis

Agreement, the Act and any regulations made thereunder.



If tie Company assigns part only of its interest m the Large Scale Mining Licences and

the rights and obligations attaching thereto under this Agreement, then the Company

date of that

shall be dischargedfromanyfurtherliabilitywhichaccruesafterthe

assignment in respect of any obligation which accrues after such date as it relates to tie

interest so assigned without prejudice to pre-existing rights accrued to GRZ against the

company.

NotwithstandingtheforegoingprovisionsofthisClause

17,theCompanymaycharge

by way of fmd a d o r floating charge the Large Scale Mining Licences together with

this Agreement to secure the repayment of principal, and payment of interest and other

all loansmadetotheCompany

to finance or

fees,costsandexpensesrelatingto

refinance the Scheduled Programmes or otherwise for purposes of the Operations and

GRZ covenants that the consent of the Minister to such mortgages and charges shall be

given provided that such mortgages and charges are notified to the Minister upon their

grant (and, m any event, within sixty (60)days thereof). Subject to Clause

17.6,any

mortgagee or chargee under a mortgage or charge given by the Company pursuant to

this Clause may exercise all rights of sale and other rights included in such imrument



- 46 -



G2181100030



4



of mortgage or charge provided it shall fist give to GRZ fourteen (14) days notice of

its intention to exercise any rights of sale and five (5) days notice in all other cases.

17.6



Therights ofanymortgageeorchargeeunder

a mortgageorchargegiven by the

Company pursuant to Clause 17.5 shall be subject to and limited by the rights of the

Company under this Agreement and to the rights of GRZ to terminate this Agreement

under Clause 19. The rights of such mortgagee, chargee or lender to sell an interest in

suchLargeScale Miniig LicenceandthisAgreementwhilesochargedshallnot

be

exercisable unless the mterest in such Large Scale Mining Licence and this Agreement

is sold together with all or sufficient of the assets and undertakings of the Company as

are sufficient (or would be sufficient m conjunction with such additional assets as the

a

buyer may contribute) to enablethebuyertoundertakeNormalOperationsto

purchaserapproved byGRZ(whichapprovalGRZcovenantsnotunreasonablyto

withhold).



17.7



Wherethe Minister's consentisnecessaryto effect:

(a)



an assignmentunderSection 54(1) oftheAct

Section 55(1) of the Act; or



@)



anassignmentpursuanttoClause17.1,



or a changeofcontrolunder



GRZ will procure that the Minister will not withhold his consent where,



in the case of



an assignment,theproposedassigneehasdemonstrateditsfinancialcapacityand

technical ability to meet its obligations hereunder or, in the case of a change of control

of the Company, the acquiring party has demonstrated that it is of appropriate financial

standing having regard, inter alia, to the obligations it will assume under the Sale and

Purchase Agreement and the Shareholders' Agreement.

17.8



IntheeventthattheCompanyconsidersthat

a proposedassigneehasdemonstrated

such financial capacity or technical ability or the acquiring party has demonstrated such

financial standing, each as is referred to in Clause 17.7, it may refer the issue to a Sole

Expert for its opinion m accordance with Clause 2 1 . If the Sole Expert determines that

the proposed assignee or the acquiring party has demonstrated the requisite levels of

financial capacity and technical ability or financial standing (or as the case m y be) the

consents referred to m Clause 17.7(a) or Clause 17.7(b) (as the case m y be) shall be

deemed given and, if not, tie Minister's detemnation shall stand.



18.



EXTENSIONS TO TIME



18.1



Notwithstandinganyprovisionof this AgreementtheParties, by agreementbetween

thepersonsresponsibleforgivingNoticesunderClause

29, may from time to time

extend any period referred to m this Agreement, or substitute for any date referred to

m this Agreement such later date, as they think fit.



18.2



IftheCompanyispreventedorhinderedbyany

circumtances or event of a kindset

out m Clause 26 or by a reference to a Sole Expert or by an arbitration under Clause

21 or Clause 22 from undertaking all or any of its obligations or exercising any right



LOIXIO~-~/SS?XZO~



- 47 -



G2181KXlO3O



granted hereunder, 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 ofrightswhich

aredependentuponthe

fist mentioned

obligation or right, shall be extended by a period equal to the period dumg which such

prevention or hindrancecontinues or dumg theperiodfromthetimewhenthe

question,dispute or differencearoseuntilthetime ofitsdeterminationbytheSole

Expert or settlement by agreement or arbitration, as the case m y be.

18.3



Where my period is, or isdeemedto be, extended or any later date substituted for an

earlier date under this Clause 18, that extended or substituted period or date shall be

d e e d to constitute the period or date referred to m this Agreement (notwithstanding

that at the t h e of such extension or substitution such period may have expired or such

date m y have passed).



19.



TERMINATION



19.1



The Company m y terminate this Agreement at any time after the fifteenth anniversary

(12) months written notice to GRZ. Such notice

of the date hereof by giving twelve

may be delivered at any time after the fourteenth anniversary of the date hereof.



19.2



GRZ m y terminate this Agreement by written notice to the Company if:



19.3



(a)



the LargeScale Mining Licenceshaveexpiredbyaffluxionoftime(which

19 cannot occur prior to twenty five

subject to the remainder of this Clause

(25) years from the date of this Agreement) and have not been renewed; or



(b)



thelandthesubject ofthe LargeScaleMiningLicences(oreitherofthem)is

abandoned or forthepurposesof

this Agreementisdeemed tohave been

abandoned by the Company under Section 49 of the Act.



d



h theeventthatany Party:

(a)



isin material default in theperformance ofitsobligationssetforthin

Agreement; or



(b)



failstotreat as binding andcomplywithanyawardmadeby

m an arbitrationpursuant to Clause 22,



this



a Sole Expert or



andhasnotremediedsuchdefaultor

failurewithinthirty (30) daysofreceiving a

m y give notice of such default or

notice fiom another Party to do so, the other Party

failure(hereinaftercalled a "Default Notice") to thedefaulting Party whichshall

specify the default or failure alleged. If the Company receives a Default Notice, GRZ

shall at the same time give a copy of the Default Notice to each lender to the Company,

where the name and address of that lender has previously been notified to GRZ, and to

eachmortgagee or chargee of any of tie Company'sassetsunderanymortgage or

chargenotifiedtotheMinister

m accordancewithClause 17.5. If theCompany

disputes the subject matter ofthe Default Notice, it m y refer tie issue to arbitration

pursuant to Clause 22.



- 48 -



G2181/COXO



4



19.4



ForthepurposesofClause19.3(a)thewords"materialdefault"shallmean

which is material m nature and effect.



a default



19.5



If within a period of three hundred and sixty (360) days following a Default Notice (or

suchlongerperiodas maybe fmed by a tribunalwherethesubjectmatterofthe

Default Notice is submitted to arbitration under Clause 22) either:

(a)



thedefault or failurespecified m theDefaultNoticehasnotbeenremedied(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)



compensationisnotpaid in respectthereof(inthecaseof

a default or failure

not capable of remedy but where payment of compensation would be adequate

recompense to GRZ),



then, subject to Clause 19.6, the non defaulting party may by notice (hereinafter m this

Clause19called a "TerminationNotice") tothedefaultingparty(whichshallbe

copiedtoeachlender,mortgagee or chargeewhowasgiven

a copyoftheDefault

Notice) bring about the termination of this Agreement on a date which is not less than

thirty (30) days thereafter (heremafter i n this Clause called the "TerminationDate").

GRZ shall ensure that the Minister does not make a decision to suspend or cancel the

Large Scale Mining Licences and that no other action is taken by or on behalf of GRZ

without the approval of the Company to terminate the Large Scale Mining Licences or

m y of the Leases prior to the Termination Date,

19.6



A party shall notserve a TerminationNoticewhilearbitrationbetweenGRZandthe

Company under Clause 19.7 is in progress and any Termination Notice already served

will be suspendedimmediatelyuponthecommencementofsucharbitrationforthe

h favour of the Company, or

duration of any such arbitration. If the arbitrator finds

within the period fmed by the arbitrator the default or failure is substantially remedied

or thecompensationispaid, a partyshallnotserve

a TerminationNoticeand any

Termination Notice already served shall be deemed withdrawn.



19.7



If theCompanyor GRZ contest:



U



(a)



thegroundsfortheissueoftheDefaultNotice;



(b)



themateriality ofthedefault;



(c)



whetherthedefaultorfailure



(d)



theadequacyofanycompensationtobepaidpursuanttoClause



has been remedied; or



19S(b),



themattershall besubmitted forarbitrationpursuanttoClause22.

Ifthe arbitrator

finds (m the case of Clause 19.7(a)) that adequate grounds exist for issue of the Default

19S(a) or 19S(b) and tie

Notice,heshall fix a periodforcompliancewithClause

(m the case of

amount of compensation payable (if applicable). If the arbitrator finds

Clause 19.7(c)) that the default or failure has not been remedied, he shall fix a period



- 49 -



G2181/00030



during which the defaulting party must remedy the default or failure. If tie arbitrator

finds (in the case of Clause 19.7(d)) in favour of the non-defaulting party, he shall fix

the mount of compensation payable and the period for its payment.

19.8



If this Agreement is terminatedby GRZ pursuant to Clauses 19.2 or 19.5:

the Company will surrender to GRZ the Large Scale Mining Licences and the

Leases but without prejudice to the liability of any of the Parties in respect of

any antecedent breach or default under this Agreement or in respect of any

indemnity given and without prejudice to the rights of the Company to remove

and recover any of the Facilities for the purposes of Clause 19.8(d);

each Party shall forthwith pay to the other Party all monies that m y be owing

totheotherPartyhereunderwhich,fortheavoidanceofdoubt,shallnot

includeanyunexpended

mounts oftheInvestmentCommitmentorthe

Contingent Commitment;

GRZ shall havetheoption to purchasetheassetscomprisingthe

MufUra

any

mine,the Nkana mine or theMufulirasmelterandrefinery(and

associated assets of any of them) at a price equivalent to the lesser of the then

residual value of such assets after tax depreciationor the fair market value of

such assets, each having regard to any encumbrances over all or any portion

be

oftheFacilitiesandwithvacantpossession.Thefairmarketvalueisto

determined by agreementbetweenGRZ and theCompanybutfailingsuch

agreement by a Sole Expert in accordance with Clause 21. Such option to be

t h i i (30) daysfollowing

exercisable by notice to theCompanywithin

terminationofthisAgreement.Ifrequestedto

do so by GRZ, the Company

t o whichitis

a party as GRZ

shallalsoassigntoGRZsuchcontracts

determinesanddeliverallapplicablerecords

oftheFacilitiesheldbythe

Company to GRZ but GRZ shall be bound to t i e the contracts that relate to

the Transferring Social Assets;

the Company shall have the right, within the one (1) year period following the

thirty (30) day noticeperiodreferredtoinClause19.8(c)ifGRZ

has not

exercised its option thereunder:

(i)



toassign or otherwisedisposeof

all or anyportionoftheassets

comprising the Mufdira t i e , the Nkana mine or tie Mufdira smelter

and refinery (and any associated assets of any of them) not acquired by

GRZ under Clause 19.8(c) to any person; or



(ii)



to remove and recoverfromtheMiningArea



and export from Zambia



any of the remaining Facilities on the condition that such removal does

notcauseirreparabledamagetomajorassetswhich

are notremoved

from the Mining Area; and



Lmdon-265795207



- 50 -



G2181lOOO30



d



(e)



theCompanyshallleavetheFacilitiesandMiningArea

in a safe and stable

condition to the reasonable satisfaction of tie Director of Mine Safety having

regardtonaturalconditions

intheareaandapplyinggenerallyaccepted

standards of Good Mining Practice, provided that the Company shall not

be

required to alter the physical condition ofthe Facilities or theMiningArea

to

beyondtherequirements oftheEnvironmentalPlanapplicablefromtime

time or as otherwise provided under Clause 12.



19.9 Iffollowingtheexpiryoftheone



(1) year period referred to m Clause 19.8(d), the



assetscomprisingtheMufuliramine,theNkanamine

or theMufulirasmelterand

or removed in

refinery (and any associated assets of any of them) have not been sold

their entirety and such assets as remain are not posing any danger to the environment

or to public health andor safety, GRZ's option under Clause 19.8(c) shall be renewed

and the Company's right under Clause 19.8(d) shall be extended for a further period of

one(1)year

or, if less,untilanyoftheremainingassetspose

a dangertothe

environment or topublichealth andor safety, atwhichtimeallsuchassetswhich

remain on the Mmmg Area shall become the property of GRZ without any cost to GRZ

or any liability for GRZ to pay compensation therefor.



L



19.10 Clauses12,19.8,19.9,19.11,20,21,22,24,



25, 26and29



shall continuein force



notwithstandingtheterminationoftherest

of thisAgreementandtermination

hereunder shall not otherwise m any way affect a party's accrued rights and obligations

at the date of termination.

GRZ

undertakes not to enforce applicable legislation retrospectively against the Company to

the extent that it is inconsistent with the provisions of Clauses

12.3, 12.21, 14 and 16

and Schedule 8.



19.11 For the avoidance of doubt, m the event of the termination of this Agreement,



L



20.



AMICABLE SE'ITLEMENTOF DISPUTES



20.1



A Dispute shall be deemed to arise when one Party serves on the other

Party a notice

("NoticeofDispute") stating tie natureof tie Dispute, provided that no Notice

of

Dispute m y be served unless the Party wishing to do so has f m t taken m y steps or

invoked m y procedure available elsewhere in this Agreement in connection with the

Dispute and the other Party has either taken such step or invoked such procedure as

m y be required, or been allowed a reasonable time to take such step

or invoke such

procedure.



20.2 Following serviceof a Notice of Dispute the Parties shall attempt m good faith to settle

22 shallnotapplytoany

suchDisputeamicably. The provisionsofClauses21and

Disputeuntil a periodof thirty (30) BusinessDays, or anylongerperiodagreed



between the Parties, shall have elapsed following service ofa Notice of Dispute.



- 51 -



G218MMO30



21.



SOLE EXPERT



21.1



Where so providedbyClauses 6.5, 7.3, 8.8, 9.8, 12.5, 12.8, 12.13,16.1,16.5,17.8,

19.8(c), 27.2(b) and 27.4(d) of this Agreement any Dispute shall be referred to a Sole

Expert for determinationin accordance with the provisions of this Clause 21.



21.2



The Party wishing the appointment to be made shall serve written notice to that effect

onthe other Party ("Noticeto Appoint") and with such Notice to Appoint shall give

details of the matter which it is proposed shall be resolved by the Sole Expert.



21.3



Ifwithin ten (10)BusinessDaysfromtheserviceoftheNoticetoAppointtheParties

have failed to agree upon the selection of a Sole Expert, either Party may then submit a

("Requestfor Proposal") totheICCInternationalCentrefor

requestinwriting

Expertise (the W C Centre")for the proposal of a Sole Expert as quickly as possible.

TheRequestforProposalshallsetoutthenames,descriptionandaddressesofthe

Parties, shall attach a copyof this Agreement, shall set out any relevantindications

concerning the choice of the Sole Expert (including a reference to the provisions of this

Clause21)andshallsetout

a descriptivesummaryoftheSoleExpert'sbrief.The

Partiesagreetoaccepttheexpertproposedbythe

K C Centre as theSoleExpert

selected under this Clause 21.



21.4



Upon a Sole Expert being selexxecl under tie foregoing provisions of thisClause 21,



the Parties or either of them shall forthwith notify tie Sole Expert of his selection and

request him to confirm within five (5) Business Days after such notification whether or

not he is willing and able to (and does m fact) accept appointment as Sole Expert and to

(d) are all satisfiedinhis

confirm that tie requirementsofClauses21.8(b),(c)and

case.

21.5



21.6



IftheSoleExpertshall

be eitherunwillingorunable to acceptsuchappointmentor

m responsetotherequestto

be madeunder

shallnothavegiventheconfirmation

(5) BusinessDays,

Clause 21.4 (the "Confirmation")withinthesaidperiodoffive

to agree upon the selection of another t i l e Expert)

then (unless the Parties are abie

either Party may submit a Request for Proposal in the manner provided in Clause 21.3

to the ICC Centre which shall be requested t o make a proposal or (asthe case may be)

a further proposal and the process shall be repeated until a Sole Expert is selected who

accepts appointment.

The Parties shall co-operate with each other to ensure that the terms of the contract

of

appointment of the Sole Expert are agreed with him as soon as possible. If the Parties

andtheSoleExpertcannot

withii five (5) BusinessDays of thegiving of tie

Confirmation agreeon the amount of remuneration to be paid to the Sole Expert or any

other terms of his contract of appointment, then (unless the Parties

are able to agree

upontheselectionofanotherSoleExpert)eitherParty

m y submit a Request for

Proposal or (asthe case may be)a further Request for Proposal in the manner provided

in Clause 21.3 to the ICC Centre which shall

be requested to make a proposal or (as

be repeated until a Sole

the case may be) a furtherproposalandtheprocessshall



- 52 -



G2181/ooO30



d



Expertisselectedwhoacceptsappointmentandwhosetermsofcontract

appointmentare agreed.

21.7



TheappointmentoftheSoleExpertshall

signing the contract of appointment.



be deemedtohavebeenmadeuponhis



21.8 The Parties shall select or (ifapplicable)theICCCentreshallpropose

meeting the following criteria:



a SoleExpert



(a)



TheSoleExpertshall

be a personreasonablyqualifiedbyeducation,

experience and trainingto determine the Dispute to be referred to him.



(b)



NeithertheSoleExpertnor(ifheis

an individual) m y memberofhis

immediate family nor (in other cases) any partner in or director of the Sole

Expert shall be (or within ten (10) years before his appointment have been) a

director, office holder or an employee of or directly or indirectly retained as a

consultant or an adviser to either Party or an Affiliate of either Party.



(c)



TheSoleExpertshall be independentofthePartiesandshallhavenointerest

or duty which conflicts or m y conflict with his function as Sole Expert.



(d)



TheSoleExpertshallnot

be a citizenor a 1 ~ t t i 0 ~of

1nor

resident in Zambia, Canada or Switzerland.



L



21.9



of



a permanent



If, in respect of any particular Dispute, the ICC Centre informs the Parties or either

of

them that is unable to propose an expert as the Sole Expert to determine that Dispute,

then the said Dispute shall be referred to arbitration in accordance with Clause 22.



21.10 The



t e r m s of appointment of tie Sole Expert shall contain cmfirmation from the Sole



to

ExpertastothemattersrequiredbyClause21.8,shallrequiretheSoleExpert

comply with the obligations set out m Clauses 21.11 and 21.12, and shall contain at

leastthefollowingprovisionsregardingtheprocedureto

be followed in the

proceedings before the Sole Expert (the "ExpertFmceedings"):

L



(a)



TheSoleExpertshallnotlaterthanfourteen(14)BusinessDaysafterhis

appointment call the Parties to a meeting at which he shall raise m y matters

requiring clarification (whether arising out of his contract of appointment or

otherwise) and give directions as to the procedural rules to be applicable in the

ExpertProceedings which d e s shallcomplywiththetermsofthisClause

21.10. Such directions may thereafter be given from time to time by the Sole

Expert as he shall consider necessary. The Parties agree to comply with such

directions made by the Sole Expert, and with any request the Sole Expert may

make in accordance with this Agreement or with such directions.



(b)



ThePartiesshall be entitledtosupplydata,informationanddocumentation

and to make submissions (written and/or oral as the Sole Expert m y direct) to

the Sole Expert up to fifteen (15) Business Days after his appointment (and the

Sole Expert shall ignore all d a t a , information, documentation and submissions



- 53 -



G218"ON



supplied and made after such fifteen (15) Business Days unless the same are

furnished m response to a specific request from him or are made m response,

to data,information,documentation or

inaccordancewithClause21.1O(e),

submissions by the other Party).

(c)



TheSoleExpert

shall be entitledtoobtainsuchindependentprofessional

to obtainany

andor technicaladvice as he m y reasonablyrequireand

secretarial assistance as is reasonably necessary.



(d)



The Sole Expert shall be entitledtorequest fiom theParties (and theParties

shall supply to the Sole Expert) all documents and other information which the

be relatedtotheDisputeand

SoleExpert shall reasonablyconsiderto

necessary for resolution thereof, provided that neither Party shall be obliged to

provide the Sole Expert with any document or information which he would m

an action m theHighCourt be entitledtorefusetodiscloseongrounds

of

legal professional privilege.



(e)



Copies of all data, information,documentationandsubmissionssuppliedor

made by any party to the Sole Expert shall be provided simultaneously to the

other Party, and any data, information or submissions supplied or made orally

by one Party to the Sole Expert shall be supplied or made m t i e presence of

theotherParty.TheotherPartyshall,notwithstandingthelimitationsin

Clause X.lO(b), have the right for tie period of ten (10) Business Days from

receipt of such data, information, documentation

or submissions to comment

in writing on it to the Sole Expert and copies of any such comments shall be

promptly supplied to the other Party.



(0



NomeetingbetweentheSoleExpert

and theParties or either ofthemshall

t i e place unless both Parties are given a reasonable opportunity to attend any

such meeting.



(g)



If, withoutshowingsufficientcause,

a Partyfails to comply withany rule,

request, direction or metable deadline applicable to the Expert Proceedings,

or in any other way fails to comply with a requirement relating to the Expert

Proceedings, the Sole Expert shall nevertheless be obliged to proceed and to

issue his determination in accordance with Clause 21.100)

and (k), and m so

doing may:

(i)



continuetheExpertProceedingsintheabsenceof

document, information or submission;



(ii)



drawsuchinferencesfromthatfailuretocomply

the opinion of the Sole Expert, be justified; and



(iii)



makehisdeterminationonthebasisoftheinformationbefore

him

attaching such weight as he thinks fit to any evidence submitted to him



-54-



that Party or ofthe



or produce as m y , m



G218VOOWJ



'd



outside any period he may have requested or directed or as required by

the rules applicable in the Expert Proceedings.

TheSoleExpertshallhavethepowertoopenup,reviewandrevise

any

certificate,opinion,decision,instruction,direction,valuation,requisitionor

noticeissued,given or madeunderthisAgreementand

todetermineall

matters referred to him in accordance with the terms of his appointment.

The Sole Expert may conduct the Expert Proceedings at one or more locations

in any country as may appear to the Sole Expert to be reasonable.

Notmore than ten(10)BusinessDays afterexpiry of theperiodprovided

under Clause 21. l q e ) the Sole Expert shall furnish the Parties with a draft of

hisproposeddetermination of theDispute(including a draft of therkasons

required by Clause 21. l q k ) below) m respect of which both Parties shall be

the period offive (5)

entitled to make representations to the Sole Expert for

Business Days after receipt of the said draft.



L



The Sole Expert shall issue his determination of the Dispute in writing within

ten(10)BusinessDaysafterexpiryoftheperiodunder

Clause 21.10Q)and

shall give full written reasons for that determination.

21.11 The SoleExpertshallactimpartially



m carryingouthisdutiesandshalldosoin

accordance with any relevant terms of this Agreement and shall make his determination

in accordance with the applicable law in relation to this Agreement.



21 . l 2 Alldata,information



L



or documentationdisclosed or deliveredtotheSoleExpertin

connection with his appointment as Sole Expert shall be treated as confidential and the

Sole Expert shall not disclose to any person or company any such data, information or

documentation. All suchdata,informationanddocumentationshallremainthe

propertyofthePartydisclosingordeliveringthesameandshall(togetherwithall

copies thereof) be returned to that Party on completion of the Sole Expert's work or his

discharge from office under Clause 21.14. Provided that the Sole Expert may disclose

any data, information or documentation to employees of the Sole Expert or his firm or

company or Affiliates (if any) of the Sole Expert or his or its professional advisers if

suchemployeesorAffiliatesorprofessionaladvisershavepriortosuchdisclosure

entered into specific undertakings to maintain the confidentiality of such information

data and documentation.



21.13 Without prejudice to the Parties' obligation



to complywithanyrequestmade



SoleExpertunderClauseZl.lO(d)above,thePartiesshall

apply for, discovery of documents m the Expert Proceedings.



bythe

not be entitledto,orto



21.14 If the Sole Expert:

(4



relinquishes,resignsorabandons

his appointmentor

dies orbecomes

incapacitatedbefore the issueofhisdetermination

on costsunderClause

21.17(b); or



- 55 -



G21W00030



(b)



shallnothaveissuedhisdeterminationwithinthetimelimitsetoutinClause

21.1O(k)



then,attherequestofeitherParty,

a replacementSoleExpert shall be appointed m

accordance with the provisions of Clauses 21.3 to 21.6 and on such appointment being

made (asdefmed m Clause 21.7) the appointment of the Sole Expert shall cease unless

shall

prior to tie date of appointment of the replacement Sole Expert the Sole Expert

have rendered his determination thereunder in which case such determination shall be

binding on the Parties and the proposed appointment of the replacement Sole Expert

shall be withdrawn.

21.15 The Sole Expert shall act as an expert and not as an arbitrator and the laws relating to



arbitrationshall notapply to the SoleExpert or hisdeterminationortheExpert

Proceedingsor the procedure by which he reaches his determination.

21.16 Any determination of the Sole Expert shall



be final and binding upon tie Parties save



in the event of fraud or manifest error.

21.17 (a)



(b)



WhilsttheExpertProceedings



are m progress:



(i)



eachPartyshall

bear tie costs of providingall data, information,

documentation and submissions supplied or made by it and tie costs of

alllawyers,advisers,witnesses,employeesandotherPersonsretained

by it; and



(ii)



eachPartyshallcomplywithitsobligationsastopaymentoftheSole

Expert set out m his contract of appointment.



Thecostsreferredto

m (a)aboveandthecostsandexpensesoftheSole

Expert and any independent advisers to the Sole Expert retained in connection

with a determinationhereunderand any costsofhisappointmentifheis

proposed by the ICC Centre shall be borne as m y be determined by the Sole

Expert. The Sole Expert shall issue his determination on the question ofhow

the said costs are to be borne within five (5) Business Days of the issue of his

determinationoftheDisputeunderClause

2l.lqk). h reaching that

determinationtheSoleExpertshallbeguidedbytheprinciple

that the

umuccessful Party should pay the costs of the successful Party, and shall

tie

into account the relative extent of success or lack thereof by each Party.



21.18 The mount (if any) which is required by a determination of the Sole Expert under this

Clause 21 (including, without limitation, any costs under Clause 21.17(b))

to be paid



by one Party to the other Party shall be paid within ten (10) Business Days of the issue

ofthedetermination,andifnotpaidwithinthattime,intereston

t i t amountshall

accrue and be payable at the rate of LIBOR plus five per cent. (5%)per annum (to be

compounded on the first day of each calendar month of non-payment).



- 56 -



G2181lOOO30



d



22.



ARBITRATION



22.1



Subject to the provisions of Clauses 20 and 21, GRZ and the Company hereby consent

to submit to the h t e r ~ ~Centre

i ~ ~forlSettlement of Investment Disputes ("ICSID")

any Dispute for settlement by arbitration pursuant to the Convention on the Settlement

States andNationals

of Other States (the

ofInvestmentDisputesbetween

"Convention"). Save where the contrary appears, terms used m thisClause22shall

bear the same meaning as they do in the Convention.



22.2



The Parties hereby agree that the Company, because of foreign control, shall be treated

as a national of a state other than Zambia for the purposes of the Convention.



22.3



The Parties agree that the transaction to which this Agreement relates is an investment.



22.4



Any arbitraltribunal(the



"Tribunal")constitutedpursuanttothisAgreementshall

consist of three arbitrators. Each Party shall appoint (1) one arbitrator within fourteen

(14) days of the registration of the request for arbitration. The

third arbitrator, who

shall be President of the Tribunal, shall be appointed by agreement of the arbitrators

appointedbytheParties or, failingsuchagreementwithintwentyeight(28)daysof

registration oftherequestforarbitrationbytheChairmanoftheAdministrative

m y be a citizen or a

Council at the request of either Party. None of the arbitrators

nationalof,or a permanentresident m, Zambia or CanadaorSwitzerland.Without

prejudice to its other powers, the Tribunal shall have the power to fm a longer period

than the period 360 days referred to m Clause 19.5 m any case m which the question

whether a Default Notice is valid or whether the default or failure alleged m any such

Default Notice has occurred has been submitted for settlement by arbitration.



22.5



Any arbitrationproceedingpursuanttothisAgreement

shall beconducted

m

accordance with theArbitrationRulesofICSID

m effect onthe date onwhichthe

proceedingisinstituted(the "Arbitration Rules"). SuchArbitrationRulesshall be



L



subjecttotheexpressprovisionsofthisClause22.Intheeventofanyconflictthe

provisions ofthisClause22shalltakeprecedenceoversuchArbitrationRules.Any

communications by the Secretary-Generalwith either Party under either the Institution

Rules or the Arbitration Rules of ICSID m y be sent by the Secretary General in the

manner provided m Clause 29.



L



22.6



Any arbitration proceedings commenced pursuant to this Agreement shall be held

in

Londonwhichshall be theseatofthearbitrationproceedings.

In relationtoany

arbitration proceedings commenced under or m connection with this Agreement, GRZ

irrevocably submits to the jurisdictionof the United Kingdom and waives, to the extent

pemtted by applicable law, any objection to such arbitration whether on the ground of

venue or onthegroundthatthearbitration

has been commenced m an inconvenient



forum.

22.7



The language of any arbitration proceedings shall be English.



22.8



Any award in arbitration proceedings held pursuant to the Convention shall be binding

onthe parties and judgement thereon may be entered m any court having jurisdiction



L.omion-2m795uo7



- 57 -



G2181/00030



24, GIU irrevocablyandgenerallyconsentsin

for the purpose.SubjecttoClause

respectoftheenforcementofanyarbitralaward

or determination of a SoleExpert

against it m any proceedings in any jurisdiction to the giving of any relief or the issue

of any process in connection with such proceedings (including, without limitation, the

making, giving,enforcementorexecutionagainstor

in respect ofanyproperty

whatsoever (irrespective ofitsuse or intended use) of any decision, award, order

or

ofany

judgment which may be made or given in such proceedings and the granting

injunction or order for specific performance or for recovery of land or other property).

22.9



The Parties waive any right to appeal to any court of law or other judicial authority m

connection with any arbitration proceedings conducted pursuant to this Agreement.



22.10 ThecostsincurredbythePartiesinconnectionwithany



arbitrationprocedure(to

include both Parties' legal and other professional costs and other expenses, the fees and

expenses of the Tribunal, and the charges for the use of the facilities of ICSID) shall be

borne:

(a)



equally bythe PartieswheretheDispute has been referredjointly bythem; or

otherwise,



(b)



inaccordancewithArticle



61(2) oftheConvention.



is required by a determination or award of the Tribunal

22.11 The amount (if any) which

under this Clause 22 to be paid by one Party to the other Party shall be paid within ten

(10) Business Days of tie issue of the determination or award and, if not paid within

that time, interest on that amount shall accrue and be payable at the rate of LIBOR plus



five per cent. per annum (to be compounded on the first day of each Calendar Month

of non-payment).

22.12 The provisions of this clause shall not preclude any Party



from applying for m t e m

relief on an urgent or any other basis to a court of competent jurisdiction.



23.



PERF'ORMANCE TO CONTlNUJ3



23.1



UnlesstheAgreement has alreadybeenrepudiated or terminated, tie Partiesshall

continuetoobserveandperformalltheobligationscontainedin,andmayexercise

their rights under, this Agreement notwithstanding the reference of any Dispute to the

Sole Expert or to arbitration. Neither Party shall be entitled to exercise any rights or

by the other arising out ofthe

election arising in consequence of any alleged default

subject matter of the Dispute until the Dispute has been resolved by the Sole Expert or

by arbitration or by agreement of the Parties as the case may be.



24.



WAIVER OF SOVEREIGNIMMUNITY



24.1



G I U irrevocably agrees that should any proceedings in relation to, arising out of or in

connection with this Agreement be taken in any jurisdiction against it or its a s s e t s , no

immunity (to theextentthat it mayatanytime

exist,whetheronthegrounds

of

sovereignty or otherwise) from those proceedings shall be claimed by it or on its behalf



Lmion-U557952l@7



- 58 -



G2181lOOO30



or withrespectto its assets, and GRZ hereby irrevocably waives any such immunity

which it or any of its assets now has or m y acquire m the future in any jurisdiction.

24.2



Thewaiverof immtities referredtoinClause 24.1 constitutesonly a limitedand

specific waiver for the purposes of this Agreement and under no circumstances shall it

be interpreted as a generalwaiver by GRZor a waiverwithrespecttoproceedings

unrelatedtothisAgreement.GRZhasnotwaivedsuchimmunityinrespectof

property which is (i) located in Zambia, (U)usedby a diplomatic or consular mission

of GRZ (except as may be necessary to effect service of process), or (iii) propertyof a

military character and under the control ofa military authority or defence agency.



25.



LAW APPLICABLE



25.1



This Agreement shall be governed by and interpreted in accordance with the laws of

Zambia as in forceatthe date of execution oftheAgreement,supplementedbythe



rules of international law where necessary to give effect to this Agreement.

L



26.



FORCE " E U R J 3



26.1



Any failure on the part of a Party hereto to comply with any of the



terms, conditions



and provisionsof this Agreement (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 my claim for damages insofar as such arises from Force Majeure, if the

firstmentioned Party:

(a)



hastaken all reasonableprecautions,duecareandreasonablealternative

measureswiththeobjectiveofavoidingsuchfailureandofcarryingoutits

obligations under this Agreement; and



(b)



has givennoticetotheotherPartyoftheoccurrenceofForceMajeureon

becoming aware of such an event.



Thefmt-mentionedPartyshall t i e allreasonablemeasurestoovercometheForce

Majeure and to fulfil the terms and conditions of this Agreement with the minimum of

delay (provided that no Party has an obligation to settle a labour dispute or to test the

constitutionalityof any legislation or law) and shall give notice to the other Party on

the restoration of normal conditions.

26.2



For thepurposesofthisAgreement,ForceMajeureshallincludewar,

insurrection,

civildisturbances,blockades, not, embargoes,strikes,lock-outsandotherlabourconflicts,landdisputes,epidemics,volcaniceruptions,earthquakes,cyclones,floods,

explosions,fires,lightning,governmentalrestrictions,change

m applicablelaw,

unavailabilityofmaterialsorequipment,failureby

GRZ or anyof itsapplicable

ministries,departmentsoragenciestograntorissue

to theCompany

(as

consultantioperator)or contractors or subcontractorsappointed by theCompany (as

consultantioperator) the necessary consents and pemssions to enable them to operate

in Zambia or toimportequipmentintoZambia

or tograntorissuethenecessary

permits for nonZambian employees of the Company to enter into Zambia and t i e up



Lmdon-2/557952/07



- 59 -



G2181KXJO30



employment m a timely fashion and any other event which the Party claiming Force

Majeure could not reasonably be expected to prevent or control and which prevents a

Partyfromcomplyingwith

any ofthe terms,conditions or provisions of thii

Agreement (provided that GRZ shall not be entitled to give notice of the occurrence of

Force Majeure nor be excused from performance hereunder as

a result ofanyofits

actions or inaction or any ofthe actionsorinactionsofitsapplicableministries,

departmentsor agencies).

In the event of any circumstances or event of a kind set out m this Clause 26 the period

oftimeallowed fortheperformanceofthoseobligations

or exercise ofthoserights

periods of time thereafter

which are delayed by such event of Force Majeure and the

allowed for the performance of obligations or exercise of rights which are dependant

upon tie f i s t mentioned obligations or tights, shall be extended by a period equal t o

the period during which such event of Force Majeure continues. Any Force Majeure

event arising as a result of the failure by GRZ to perform its obligations as detailed m

rights arising

Clause 26.2 shall not preclude the right of the Company to enforce its

from a breach of GRZ's obligations under this Agreement.

Where any period is, or is deemed to be, extended or any later date substituted for an

earlier date under this Clause 26, that extended or substituted period or date shall be

to in this Agreement (notwithstanding

deemed to constitute the period or day referred

that at the t i m e of such extension or substitution such period m y have expired or such

date m y have passed).

VARIATION



TheParties may from time to timeby agreement m writingadd to, substitute for,

cancel or vary all or any oftheprovisionsofthisAgreement,theApproved

Programme ofMiningandMetalTreatmentOperations,theLargeScale

Mtig

Licencesor any other programme(includinganyoftheScheduledProgrammes),

this

proposal or planapprovedforthepurposeoffacilitatingtheobjectivesof

Agreement.

(a)



Except as otherwiseprovidedinClause 27.4, wheretheCompanyproposes to

modify or varytheApprovedProgrammeofMiningandMetalTreatment

Operations (for the avoidance of doubt, not including the Environmental Plan)

(hereinaftercalled a "Modifiitionff), theCompany shallprovidewritten

notice of such Modification to GRZ. Such Modification shall be deemed t o be

approved by GRZ and theApprovedProgrammeofMiningandMetal

Treatment Operations shall be amended to the extent necessary to reflect such

Modification unless GRZ within ninety (90)busmess days of the notice being

to be a

given to it notifies the Company that GRZ considers the Modification

MajorChange. IftheCompanyacceptsthattheModificationis

a Major

Change the provisions of Clause 27.4 shall apply.



(It)



IftheCompanydoesnotagreethattheModificationis

a MajorChangethenit

m y either refer to the Sole Expert m accordance with Clause 21 or submit for



London-US5795UO7



-60-



G2181KKmO



arbitration inaccordancewithClause22thequestionwhetherthe

Modificationis a MajorChange.IftheSoleExpert

or thearbitraltribunal

determinesthattheModificationis a MajorChangethen it is deemed that

noticehasbeengivenpursuant to Clause27.2(a)asofthedateoftheSole

Expert's or arbitraltribunal'sdecisionandtheprovisionsofClause27.4

apply, unless the Company has implemented or commenced implementation of

theMajorChange.Ifsuchimplementationhasoccurred

or c a m m u d then

the Sole Expert or the arbitral tribunal's shall also determine:



27.3



(i)



whatactiontheCompanymust t i e ; or



(ii)



whatcompensationtheCompanymustpayand

compensation shall be paid.



to whomsuch



For thepurposeofthisClause

27, a proposedMajorChange

Programme of Mining and Metal Treatment Operations mans:



totheApproved



L



L



27.4



(a)



anyModificationbywhichtheCompanyshallnotremaininsubstantial

compliancewiththeApprovedProgrammeofMmmgandMetalTreatment

Operations; or



(It)



anyproposedmaterialchangeinvolvingtheelimination

or materialdiminution

m the capacity or availability of the Facilities or in the Approved Programme

of Mining and Metal Treatment Operations if a consequence of such proposed

of

material change would be to reduce materially or delay materially receipt

GRZ's tax revenues or royalties derived from the Facilities' operations or in a

materialrespectadverselyimpactorincreasetheadverseimpact

ofthe

Company's mining activities on the environment; or



(c)



anymaterialchangeincapitalexpenditureon

the Investment Commitment.



item notpreviouslyincluded m



NoMajorChangeshall t i e effectunless it hasbeenapproved or is deemed to have

been approved by GRZ and where the Company intends to make

a Major Change the

following provisions shall apply:

(a)



withinthirty (30) daysofGRZgivingnotice

t o theCompanyunderClause

27.2(a) the Company shall, by notice to GRZ of the proposed Major Change,

give full details including an economic analysis of the proposed Major Change

entitled "Proposed Major Change to the Approved Programme of Mining and

Metal Treatment Operations";



(b)



if GRZ doesnotnotifytheCompanythat

it objectstotheMajorChange

within thirty (30) days of the notice, GRZ shall be deemed to have approved



the Major Change;

(c)



whereGRZrequiresadditionaltimetoevaluatetheMajorChange,

it shall

withm the thirty (30) days stipulated in Clause 27.4(b), extend the period by



- 61 -



G2181/00030



an a d d i t i ~ dthirty (30) daysandifwithinthat

does notnotifytheCompanyofanyobjections

approved the Major Change;



thirty (30) dayperiodGRZ

itshallbedeemed

to have



(d)



whereGRZobjectstotheMajorChangeandtheCompanyconsidersthe

objection to be unreasonable, the Company m y elect to refer the question of

the reasonableness of GRZ's objection, at its option, t o the Sole Expert under

22. h assessingthe

Clause 2 1 orthe arbitraltribunalunderClause

GRZ's objectionstheSoleExpertorthe

reasonablenessorotherwiseof

arbitral tribunal shall have regard to the impact which withholding approval to

thechangewouldhaveontheeconomicviabilityoftheproject

or on other

relevant and extraordinary commercial considerations, as wellastheimpact

on GRZ revenues, as described m Clause 27.3; and



(e)



iftheSoleExpert

or the arbitraltribunaldeterminesthatGRZ'sobjection

unreasonable, GRZ shall be deemed to have approved the Major Change.



is



27.5



Where GRZ approvesorisdeemed to haveapproved a Modification,theApproved

Programme of Mining and Metal Treatment Operations shall be varied or mended to

the extent necessary to reflect tie Modification.



27.6



ForthepurposesofthisAgreement,

a reduction m thenumberofemployeesofthe

Company notified (where applicable) t o GRZ m accordance with Clause 6.8 shall not,

m and of itself, constitute a Major Change.



2.8.



CONSULTATION



2.8.1



(a)



28.2



The Companyshallnominate

a representative, of appropriatequalifications

and who meets the approval of the Minister. to a committee compmmgof one

and the local government

memberfromeachoftheMinistry,theCompany

and chaired by a representative of the Ministry of L a b o u r , which shall have no

powerstobindtheCompanybutshallmonitortheimplementationofthe

Training and Human Resources Management Programme.



(b)



This committeeshalloperateduringthetermofthisAgreementandthe

(6) monthsoutliningthe

Companyshallfurnishitwithreportseverysix

progress ofthe Trainingand Human ResourcesManagementProgramme,

problem encountered,positions filled andthenumberofZambiancitizens

employed.



(c)



The Companyshallonlybeliableforthecostsassociatedwithits

representative m respect of the committee formed pursuant to Clause B.1.



(a)



The Companyshallnominate

a representative,ofappropriatequalifications

andwhomeetstheapprovaloftheMinister,

to a committee, comprising of

local governmentandthe

one memberfromeachoftheMinistry,the

Company and chaired by a representativeof the Ministry of Commerce, Trade



- 62 -



G2181100030



4



Industry,whichshallmonitorthesupplyandprocurementofgoodsand

services to the Facilities.



%!C



(b)



(c)



ThecommitteeshalloperateduringthetermofthisAgreementandthe

Companyshallfurnish it with reportseverysix(6)monthscomprisingthe

following information:

(i)



a list ofsuccessfultendererswhichshallincludethe

item supplied,

residence of tenderers and the reasons for awarding the tender; and



(ii)



a list ofunsuccessfullocallybasedtendererswhichshallincludereasons

for not awarding the tender.



TheCompanyshallonly

representativeinrespect



be liableforthecostsassociatedwithits

ofthe committeeformedpursuanttothisClause



28.2.

L



29.



NOTICES



29.1



(a)



(b)



Any notice,consent,demand,approval or othercommunication(a

required or permitted to be given shall be m writing and:



"Notice")



(i)



in thecaseof a NoticegivenbyGRZ,suchNoticeshall

behalfofGRZbyeithertheMinisterorPermanentSecretary

Ministry as their respective responsibilities require; or



(ii)



m the case of a Notice to be given by the Company, such Notice shall be

signed by a director or by the Secretary of the Company.



be signedon

to the



EachsuchNoticeshall,

as elected by the Party givingsuchnotice,

be

personally delivered or transmitted by telex or facsimile to the other Party as

follows:

A Notice to GRZ



L



If by facsimile:

Permanent Secretary

Ministry of Mines and Minerals

Development

+260 1251 M / 2 5 2 916



If by hand:

Permanent Secretary

MinistryofMinesandMinerals

Development

PO Box 31969

Haile Selassie Avenue

Luaka

Zambia



A Notice to the Company



If by facsimile:

The Secretary

Mopani Copper Mines Plc



If by hand:

The Secretary

Mopani Copper Mines Plc



- 63 -



G2181~00030



+ 2602229 1 7 7



Insurance House

Kitwe

Zambia



29.2 Except as otherwisespecifiedherein,allNoticesshall



be deemed to havebeenduly



given on tie earlier of:

(a)



tie dateofreceiptifdelivered



p e r ~ ~ d land

y;



(b)



tie date oftransmissionwithconfirmedanswerbackiftransmittedby

facsimile,



PROVIDED THAT m theeventthat a Noticeisdeliveredon a day whichisnot a

Business Day m the jurisdiction in which it is delivered, the Notice shall be deemed to

be delivered on the next following Business Day m that jurisdiction.

Either Party m y change its address by Notice to the other Party in accordance with the

provisions of this Clause 29. All Notices and all documents or instruments delivered in

connection with this transaction shall be m the English language.

29.3



Where tie Company is required to submit any plans, proposals or other material for

the approval of GRZ, the date of submission shall be deemed to be the date on which

GRZ received the said plans, proposals or other materials.



30.



WAJVER



30.1



The failure of any Party to enforce at any time any of the provisions of this Agreement

shall m 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.



31.



sEvEIbuHLm



31.1



The provisions of this Agreement shall be separate and severable each from the other

tothe extentthat ifany potion or anyoneprovision or portion is deemed to be

inoperativethentheremainderofthisAgreementshallremainbmdmguponand

enforceablebythePartieshereto.

Nothiig hereinshallprecludeonePartyfrom

requesting tie other Party to renegotiate any provision herein.



32.



FURTHER ACTS



32.1



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 Agreement.



33.



COUNTEFWARTS



33.1



This Agreement m y be executed m any number of counterparts, each of which when

be an original, andsuchcounterpartsshalltogether

executedshallbedeemedto

constitute one Agreement.



-64-



G2181AWWO



d



34.



REPRESENTATIONS AND WARRANTIES



34.1



Except as expresslystatedinthisAgreement,norepresentation,inducement

or

warranty was, prior to the execution of this Agreement, given

or made by one of the

Parties hereto with the intent of inducing the other Party to enter into this Agreement,

andanyrepresentations,inducements or warrantiesthatmayhavebeen

so given are

hereby denied and negated.



L



L



- 65 -



G2181/OCKOO



INWITNESSWHEREOFthePartieshavecausedthisAgreementtobeexecutedbytheir

duly authorised representatives on the day and year first before written.



SIGNEDforandonbehalfof

GOVERNMJlNTOFTHEREP

OF ZAMBIA

~



SIGNED for and on behalf of

MOPANI COPPER MINES PLC



&



,~



1

)



d



- 66 -



G2181/ooo30



SCHEDULE 1

APPROVED

PROGRAMME OF MINING AND METAL TREATMENT OPERATIONS



- 67 -



G2181/00030



Schedule 1

Approved Progmnme of Minim and Metal Treatment Operations

TheCompany has developed a Business Plan based on its intention to purchase

ZCCM’s NkanaMine,ConcentratorandCobaltPlant

as wellas theMufulira

Division as going concerns. The plan’s main focus revolves around the rehabilitation

and improvement of the assets and in so doing ensuring the long term survival and

prosperity of bothoperations.Thesegoals

will besupportedby

a planned

programme of capital expenditure as envisaged under the Investment Commitment.

A more detaileddiscussion of theCompany’s plans in eachareafollows.

A

breakdown of the Investment Commitmentis included m the annexure.

Mufulira

U



Reserve Development

Current reserves down to the 1340 level, based on information provided by ZCCM,

mount to 28.8ti0 tomes grading 3.02%copper m-situ. Below this level there is an

indicated resourceof around 18mio tomes grading3.21 % copper in-situ.

Several studies on the economic feasibility of exploiting the resource at the 1340 to

1540 level have been completed. The Business Plan provides for the completion of a

detailed feasibility studyon this resource within the first three yearsof operations.

Mining Operations

The current business plan envisagesan mcrease m ore throughput from the current

level of 2 . l m o tpa to m estimated 2.4mio tpa by 2003. This will be achieved by

completing the implementation of the up-&p open stopmg mining method and by

investing capitalin the operationas per the Investment Commitment.



c



The bulk of the spending will initially be applied to rehabilitating the underground

mining fleet and other mining equipment and also i n increasing stocks of critical

spares to the levels requiredto sustain the operation.h years two and three capital

will be invested in replacing obsolete equipment and m developing the W shaft.

This should result in an increase in throughput and a signiiicant reduction in the

operating costsof the mine.

Provided that the feasibility study results are positive and it makes economic sense

todo so, a decision will be taken on the development of the 1340 to 1540 level.

Prelmunaryestimates of thedevelopmentcapitalrequired

are approximately

Us$11.5 m o over a three year period.



Concentrator Operations

As is the case with the Mining Operation the focus of our efforts m the fist year of

operations will be to reverse the deteriorationof the asset andbuild up the necessary

spares and consumables to improve the operation of the concentrator. h years two



and three the focuswill shift to mcreasmgits capacity and improving efficiencies.

Smelter Operations

Expenditure will be directed during the initial years of theBusinessPlan



on

improvingthe effiaencies of theOperation as well as addressingthe major

environmental concerns. To this end funds have been allocated for the repair and

improvement of theconverters,electrostaticprecipitatorsandelectricfurnace

transformers as well as for the repair and, where needed, the replacement of key

items of equipment.

Further reductions m the t i t operating costs of the smelter will be achieved by

focussmg efforts on ensuring thatsuffiaentconcentrate feedis secured to enable the

smelter to operate at the highest capacity level possible. These concentrates

will

mainly be secured under toll arrangements with KCM, RAMC and the soon to be

reopened Chambishi operations.



d



Acid Plant

Following the completion of a feasibility study and depending on whether KCM

exercise its option on the Nkana Smelter and Refinery complex, the Company will

take a decisionontheconstruction

of anacidplantattheMufuliraSmelter.

Prehmmary estimates set the cost of constructing an acid plant capable of handling

the Smelter’s emissions at approximatelyUS60 mio.

Refinery Operations

Our efforts m the Refinery will be f o a m e d on the refurbishment of the tankhouse

and the modemsation of the anallary infrastructure. Particular attention will be

paid to therectifier transformers and the rehabilitation and conversion

of Tankhouse



2 to periodic current reversal.



The Company intends to refurbish Tankhouse4 and the Stripper section four years

after the completion date. These projectswill, however, only be undertaken should it

make economic sense to do so. Thecost of these projects have been estimated at

around US14.6 d o .

Engineeringpther



The Jhgineering Department suppliesa full range of servicesto the Division. After

completiontheCompany will review its needs and rationalise the Engineering

Department m h e with its needs.Excess capacity will be leased off to private

enterprises and wherepractical to retrenchedemployees. As m other areas the



d



Engineering Department is critically short of spares and consumables. Our initial

efforts willbe focussed on addressingthis need.

Sigrufxant amounts of money have been provided for the funding of the various

service departments as well as the social assets that will be purchased as part of the

Operation.

A further provision has been made to fulfill the Company's obligations under tie

proposed retrenchment plan which is to implemented as part of the rationalisation

of the Operation.

Production Targets

The Business Plan targets production levels of 2.4 mio tomes of ore and 56,000

tomes of copper metal per m u mby 2003.



L



Reserve Development

Current in-situ reserves are shown as being 78 mio tomes at a grade of 2.26% Cu.

TheCompany will continue with an ore reserve delineation programme

mainly

comprising underground drilling. Oneof the main purposes of this programme will

be to firm upestimatesregardingtheSynclonoriumresource.

Thecostof

this

drilling programme will form part of the Investment Commitment.

The Company will also undertake studies into the feasibility of exploiting various

surface oxide resourcesand m oxide dump. This will have both positive economic

and environmental consequences.



b



Mining Operations

Mining Operations will continue to focus on the Mindola, Mmdola North, Central

andSouth Ore Bodies.Durmgthe fist two years thebulk of thefundsmade

and

available will be spent m rehabilitatingtheundergroundequipment

infrastructure as well in mcreasmg spares to a level that is sufficient to sustm

operations at the planned levels.



Current mining methods will be reviewed m due course with a view to improving

effiaenaes and reducing dilution. Expatiate personnel will be introduced m certain

key positions. Their main purposes will be to t r m the local workforce and to ensure

that international best practiceis followed m conducting the operation

Following thesuccessfulcompletion ofthe drillingprogrammeand

a positive

feasibility study the board will evaluate the economc viability of developing the

SynclinoriumOreBody.Should

tie decision be takentoproceedwiththe

developmentof this area a further investment of approximately US240 mio will be



required.



Pending the outcome of further technical studies it is foreseen that there could be a

need for the construction of cooling facilities for theMmdola Shaft. Should this

prove necessary the capital requirements have been estimated at around US27.6

ti0.



Concentrator Operations



The initial focus in this area would be to reverse the deteriorationof the asset and to

increasethelevels of spares andconsurnables to levelsthat will supportthe

production plan.

Notwithstandingthefactthatcurrentrecoveriesaresatisfactory,theplanned

increase in throughput will necessitate the investment of capital to ensure that the

plant operates ata satisfactory level in future.

Should the decision be taken to develop the Synclonorium Ore Body the

ament

milling capaaty would prove insufficient. A capital investment of approximately

US$10 mio would be required to expand capacity to a level sufficient to cope with



the expanded throughput.

Cobalt Plant Operations



The focus of the Investment Commitmentm the Cobalt Plant during the three years

following completionwill be aimed at improving recoveries and reducing operating

costs. This will include the completion of the Zn SX programme, the refurbishment

and improvement of the filtering system, the process conversion from Lime

to Soda

Ash and the improvement of offgas collection.

capaaty.

The Cobalt Plant’s production is currentlyconstrainedbytheroaster

Following the completion of a successful feasibility study and the positive outcome

of m economic evaluation the Company will mvest approximately US$X8mio in

increasing thecapaaty of the plantto 3,500 tpa of cobalt.

Enpeeringpther

Duetothe split of the Nkana operationbetweentheCompanyand

ZCCM the

current Engineering Facilities will be m excess of our needs. W e are planning to

condidate the key functionsto provide the Minewith the necessary services. Excess

capacity will be leased off to private enterprises and where practical to retrenched



employees.



As a further measure tooptimise cost effiaenaestie managementof the e n p e e m g



services that affect key operational areas will be decentralised. For shared semces a

centralised approachis still envisaged.



Production Targets



The Business Plan targets production levels of 4.25 m o tomes of ore, 72,000 tomes

of copper metal and2,200 tomes of Cobalt metal per annum by 2003.



Annexure:

Committed Cauitd Exuendihue for the =M- and Mufulira Operations

Jhring the First three Years of Omrations

Nkanr Operation:

Miniq



Underground Equipment

Storesbuildup



L



Year One



4,000,000



Year Two



YearThree

2 7 2~2m~8Jp, o9 o

00,~



Togl



23m000



~ 8 0 0 ~ 6,600,000



U7f"



13,100,000

0000,000



3,510,000

6,051,000

233,532



l+nw%



2500,000

0



Geological

WCPE

FeasibilityStudies



20,oco

5,650,000

0



3,750,000

Z~r0al



3@9m

10,000

3,700,000

0



Concenhtox

Crushingand Milling

concenming

Sparesand Reagents Buildup

WCPE



4mJ@J

1J50,000

3337m

m 7 7



335m

430,000

L6%W

77,218



50m

WWJ0

LO'%@J(J

6437



10,000



4,679,000

40,000



8o5poo



cobalt Plank

F%mtRefurbidlment

WCPE



otha:

StoresRepknkhment

Rekedumnt etc

Engineering

Overheads



5D0m

6,656OOO

Lao0,OOO



0

0



0

0



z3mm



L0"0



WCPE



1JM3300



L=5000

1,020,000



1,000,000

410,000

m2m0



5,000iNO

6.656iNO

3mom

42mm

292,000



subtotal



Mdidh Omrrtiox

hfhlillK

L



Underground F.quipment

w i n g

SVShaft



130,000

700,COO

0



SP==

WCPE

FeasibilityStudies



500,000

1zwm

1.0cQ000



1,020,000

0

5m4000

5cQ000

1,036,000

~



#



~



#



O



concenhatoc

CrushmgandIWmg

concentrating

Sparesand Reagents Buildup

WCPE



41~NJO

WW000

5mm0

3,950,000

3,492,000



W000

563,000



zsnm



1248,000

172,000

0



lW,O00

665,000

0



319,500



330,150



m340



O



O



um000



Smelter

Preciptator Rehabilitation

Equipment Replacement

Workshop Equipment

WCPE



U % ~ O

3,510,000

0



3wm



3,140,000

2198,000

118,000

330,000



0



45om

0

0



6373,000

6,158,000

118,000

660,000



R&Tankhouse Refurbishment

Overhead Cranes

WCFJE



L35VOO

0



1,215,000



U W W



0



200Po0



200,000



200,000



mwm



4,698,000

200,000



QJom



other:

! k m s Replenishment



5mwm



0



Retrendunentetc



4mr.ooo



3mpoo



Overheads



2,4405,000

7.483233

LXUQO



4mJ5o

1200m



74,587,627



45,996Jl8



WCFJE



z3vm



0

3#000,000

Gm0

4,165,000

3xt000



5m,000

10,000,000

5237,000

15,727,OCKl

3,0!%,000



SUbtdd



Total clpitd Expendihue



3WlW77



=92W8=



d



SCHEDULE 2

L a x B u s m ~ sD

s EVELOPMENT

PROGRAMME



L



'L



- 68 -



G2181/CMO30



Schedule 2

Local Business Development Programme

1.



INTRODUCTION



The Company is very conscious of the need for the establishment of long term, viable and sustainable local

businesses. Over and above the economic requirement for this, there is the need to reduce the community

dependency on the mining operations. The mm thrust of the Company's involvement m local business

developmeqtW11 be m assisting retrenched employees to have meaningfid employment after leaving the

mines. Sufficient financial resources have been provided, within the retrenchment provision, to establish

this local Business Development Programme.

2.



BASIS OF THELOCALBUSINESSDEVELOPMENTPROGRAMME



The basis of the Programme will be to provide advice and assistance to retrenched employees. This advice

will focus on the following fimdamental businessissues-



the husbanding of retrenchment packages

m establish thebasis of required capital

the identification of suitable entrepreneurial opportunities

preparation ofa business plan

the establishment ofa companyhsmessvehicle

training m busmesstechniquesincludingmarketing,bookkeeping,

hiring, taxation,cash

management, etc.

ongoing assistancem the a d running of the busmess.



.

.

.

/

,



Thisadvice till be offeredthroughtheAdministrationDepartment.Thesepeoplewillbetramedby

suitable qualified professionals,who will also be called upon to interactdirectly t i t h the retmchees.

3.



ENCOURAGEMENTTO OTHER EMPLOYEES



The company is keenly aware of the fact that not every retrenched miner t i l l be self-employed, or indeed

an employer. To this end, the Company will encourageotha employeesto establish theiropxationsat the

h turn, theCompanywillprovidesuitable

Minesitessoas

to createemploymentopportunities.

inducements for other companies to establish operations at our mine sites

as opposed to any other.

4.

L



POTENTIAL

BUSINESS OPPORTUTVITIES



The Company doesnot wish to prescrii areasofbusinessopportunities

that ex-employees may be

mterested in as these are of a limited scope. However, there are a number of areas in which the Company

m y be able to actively create opportunities, these include:

c)



Lightvehiclemaintenance.ThemaintenanceofCompanyvehicles is anareawhichwouldeasily

be sub-contmcted, provided quality and cost objectives are met. It is also an area where there is a

large client base outside the Company. If the Company was satisfied that these services could

satisfactorily be sub-contracted, then it would consider leasing out

employees



d)



F%perty



its existing premises to ex-



Maintenance.There

are many areasrelating to property maintenance that lend

themselves to subcontract by suitably qualified ex-employees. These include: pamting (internal,

external and roofs), plastering and bricklaying, plumbing, electrical work, garden services, etc.

Potentialcustomersfortheseservicesinclude:themine,houseowners,absenteelandlords,

busmesses and municipalities, as well as social and sporting clubs.



c)



FuneralServices.Theservicesthatmay be offered m thisregardincludeprovisionof cofiim and

firewood, supplya d o r pitching of tents, transportation of moumm. Again this may be an area

where certain of the caqxntry shop are sub-contracted to carpentry rentiechees. These services

could be offered to the public at large.



d)



Taxi Services.TheCompanycouldassistretrenched

drivers in purchasing,runningand

m range of certain retrenchees’

maintaining small Combi buses. These small vehicles are possibly

severance packages. This service has a relatively low entry threshold, but critically requires astute

operatingand maintenance.



e)



Forestry and Fanning.Within the minelicencearea,thereare tracts oflandthataresuitablefor

agriculture. Every effort will be made to discourage ad-hoc subsistence type of firming, while

encouraging the subdivision of adequately sized plots to allow good f b m i n g practice, such as

will be advocated m areas

rotation, to provide economic returns. Plantations of certain exotic trees

a

wluch W11 not encroach on an existing indigenous forests. Although forest plantations have

long return period, the steady planting of treesin early years could lead to substantial and steady

returns latero n



4



FishFanning. The Company’sproperties are blessedwith wondafbl water resources.These

resources are alreadyendangered Wth poor fishing practices.Theinitiationofproperfish

breeding programs, with controlled destodcing methods could lead to the steady croppmg of an

eminentlysaleableproduct.Individualretrenchees

or theircompaniesinvolvedinsuchan

undertakmg would need to give adequateattentionto security.



0



Workshop Smces. TheCompany is keen to downsize its workshops to provide only unique

services which are not readily available outside, This policy would lead to the abandonment of

largeparts ofthe existing workshops. The Companywould liketosublet sections ofthese

workshops as mini-units to a variety of skilled ex-employees. These units could then offer their

services not only to the mine but to other businesses

m the cities.



5.



FURTHER ASSISTANCE TO ENTRJ3PRENEURS.



d



There are a number of external factors that impact negatively on the successful implementation of our

Local Busincss Development Program,these include:

a)



LackofaccesstoCapital.Thereis

a verymilitantbankingsystem m Zambia. Thisthroughits

extotionate lending rates prevent locals ftom borrowing funds. Borrowing is the secret to the

industrial nations rapid growth. Unfortunately high interest rates are a product of high inflation

rates. The Company will offer whenever possible to improve mdividuals’ access to capital.



b)



Lackofworkingcapital.Where certain ex-employeessubleasecompanypremisesfromwhich to

provide services, there may still be diflicultiesm purchasing working capital. h cases where it is

deemed prudent, the Companywill assist in the supply of work-m-progress stocks.



c)



Lack of Recognition. Wherever an ex-employee or their company is able to prowdea competitive

service (m texms of price, quality and s m c e ) then the Company w i l l have a fixed policy to

support suchan enterprise.



6.



TheCompany has designated Mr Brim RobinsonofFirstQuantum

Minerals to bethe

responsible person to facilitate the success

of the Local Busmess Development Plan.



d



SCHEDULE 3

CONTRACT AREAS, LARGESCALE l ” N G LICENCE

AND MINING AREAS



PART I



CONTRACT AREAS



Schedule 2 of the Sale and Purchase Agreement shall be incorporated here by reference



- 69 -



G2181/OMl30



PART II

LARGE SCALE MINING LICENCE



H i Fmn 10396

SmckedbyHiDc4qmauDcplnma



I m B 1 4399~96

ItBXSTRATION No. LML ..................................



REPUBLIC OF ZAMBIA

LARGESCALE MINING LICENCE



(Section 25 of the Mines and Minerals Act, 1995, No. 31 of 1995)

Applicant's name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prospecting Licence No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The miniug area shall be the area described m the Schedule and annexed hereto and bordered

........................

onthe Plan.

The Licence is granted for a period of twenty five (25) years commencing on the . . .

day of. . . . . . . . . . . . . . . . . . . . . . .

Theprogrammeofmininganddevelopmentoperationsshall

hereto.



be as shown m theAppendix



The following conditions included m Prospecting Licence No. PL . . . . . . . . .



shall continue to apply: N/A

Issued a t . . . . . . . . . . . . this . . . . . . . . . . . . . . day o f . . . . .



...................

Director

ENDOR!3EMENT OF REGISTRATION



This large-scale mining licencehas this. . . . . . . . . . . . day o f . . . . . . . . . . . . . . . . . .

been registered m the Register of Mining Rights.

...................

Director



- 70 -



G2181/QOO30



RENEWALS m AlmNDiwnws

Date of

Amendment



Details of Renewal or

Amendment



Date of Registration and

Registration No.



- 71 -



Signature of Director



G2181/00030



PART III



MININGAREAS

Schedule 2 of tie Sale and Purchase Agreement shall be incorporated hem by reference



- 72 -



G2181lOOO30



SCHEDULE 4

SOCIAL



sERvKJLs



PART 1

EDUCATIONAL SERVICES



L



L



- 73 -



G2181KlOO3O



SCHEDULE 4

PART11

MEDICAL SERVICES



d



- 74 -



G2181lODO30



18/02 ' 0 0



10:25



PAX 2802447004



.._



- -W A G-E R___ -



H/R



-



@002



.-



c39

-



TABLE l HOSPITAL BED CAPACrrY



PAGE l



NOTE: The ZOOOi2(lOl bed c a p d b i s for bath high cost a n d l o w cost wings a t hWoolm Watson Hospital



18/02 '0010:25



TX/RX N O . 7 0 2 8



P.002



18/02 ' 0 0



10:25



FAX 2602447004



MhNAa



-W



BOOS



R



-



TABLE 2 CLINIC BED CAPACiW



PAOE 2



18/02 '00 10:25



TXjRX NO.7028



P.003



18/02 ‘ 0 0



10:25



UNA=



F M 2602447004



-



W R



TABLE 3 - HOSPITAL OCCUPANCYRATE



PAGE 3



c



* This i s as a result of a l l employees attending one hospital



I--



P - I - 1



L



18/02 ’00 10:25



TX/RX NO.7028



P.004



d



18/02 '00 10:25



TX/RX NO.7028



P.005



18/02 '00 10:25



@oos



-



W A W .



F M 2802447004



-



TABLE 7 PLANNED LABOUR D I S I R I M J T I O N BY .

FUNCTION FOR F.Y. 2000/2001



PAGE 5



-p-



--



CONSULTANTS

ConsultantAnaesthetist



3



- - -



l

--



p



1



Consultmt Surgeon

l



L



SUB TOTAL

MEDICAL DOCTORS

Substantive .

--.---



5



.

p



l!s=



-



-



4

1



79



--



5

5

3

2

3



--p-



_

c

c

-



L



-----



2

20

7



p

.



p



-



25



--



18/02 '00 10:25



TX/EU NO. 7028



P.006



18/02 '00



m:25



F M 2602447004



UNAGER



a007



-



-



TABLE 8 HOSF4TALUTIIJSAllON BY ELJGl8LEUSERS



PAGE 6



v

-



NOTE

7 h pra/ecied #gum b r 2ocxMOOf above is fir both High and L o w Cost V # g s

ptiiisettion~



18/02 ' 0 0 10: 25



TX/RX NO.7028



at "W post



P.007



4



18/02 '00 M:25



F M 2602447004



-



TABLE 9 CURRENTHOSPITAL B U I L D I N G S AND FAClUTES ( MW-H)



PAGE 7



L



-.



Pharmacy Bulk Store

p

-



Incmemtor

.MaintenanceWorkshop



-.

P

.



l



1



L



18/02 '00 10:25



TX/RX NO.7028



P.008



18/02 '00 10:25



FAX 2602447004



MANAGER



-



la000



WR



PAGE 8



18/02 '00 10:25



TX/RX N O . 7 0 2 8



P.009



1l-



c8



\



0



h)



0



0



TABU 10



PAN8



MEDICAL COSTS BY ELEMENT



l-



0



N

CA



A) MALCOLM WATSON HOSPITAL



E

97198



a

e



h)



ACTUAL



US '000



N



WO1



99100



98/99



US '000



ACTUAL



V S '000



1



(Projection) (BuWET a*

Locd labour

W

CO

\



0



ru



0

0



E x p a M e Labour



1



..



ru

cl7



.Eh9C#Wy



Surtdryexpmses

Sundryrevenw



3

0

NI



W



448



496



112



163



118



m4 1



wortifl{ cost fvojJct



U



408



Maws

l



c.r

0



.-



-



726

36



66



380



67

539



281



313



103



W



74



26

25



18



la



m



28



36



65



13



If6



19



409



11

-78



9



-146 -129

3



16

-157

*O



an



K401



10

20



0

*



f



10881



1114



E

52

-19



42



-99

0



66

28

40



0



0



9381



741



1191



1132



7



I



1M61



0

0

10



100



Nob:

"'The 230012001 projeckl budget Is for both ~I@Ic o s t end kwmhhpbawd at Malcom Wakm Hospkal wllh a grand totd of 110 beds as opposed (0 tie

current 63.



557



b

&

-l



t



22

0



H-i

0



e



B) CLINKS



P



CO

\



0

W



0

0

W



..



0

N



ul



1-3



X



\



E

z

0



*



Note:

*' 'ONLY FOUR CLlNlCS AND PLANTSIE CLINK WILL BE MAINTAINEOWITH A TOTAL LABOUR FORCE OF 25 ,



-4

0



ru



m



'd

0

W

c-l



a

0

F

P



PUPIL ENROLMENT AT ZCCM MTJFULIRA PRIMARY SCHOOL

C H I L D R E N OF



MINES/NOB-XtNERS-



P U P I L ZNROlXY33SIT 2000



PUPIL ENRtXLMENT 1999



Children o f Miners



400



412



Children o f

Ncm-Miners



TOTAL



45



31



445



443



NUMBER OF TEACHERS AND SUPPORT STAFF BY PAY GISDE



PAY GRADE_



-NUMBER OF' TE2ACBER.S



G12



NUMBER OF S U P P O R T STAFF



2



G1

G2

G3

G4

G5

G7

TOTAL



2

1

2

5

10



19



VACAHCIES

PAY



GRADE



G2



NUMBER OF



NUMBER U? TEACHJ3RS

2



G7



SUPPORT STAFF

-3



MAIN FACILITIES AT ZCCM MUFULIRA



PRIMARY SCHOOL



BUILDINGS AND GROUNDS



NUMBER



Classrooms

Music R o o m

Library

Eomecraft

Print/Ccmputer L i b r a r y

Costume R o o m

Store Room

Administration



16



1

1



I

1



Hall

Playing Fields



Car P a r k s



18/02 '00 10:25



TX/RX NO.7028



P.012



NKA!!A HOSPITAL



FAX 260 2 228917



18/02 '00 09:34



@loo1



-I-



TABLE 1 HOSPITAL BED CAPAClTY



WUSAKlLE



BEDS COTS



CRIBS lNXJBATORS HRS



HOSPITAL



TOTAL



OPEN/

DAY



WARD

Male Medical



Post Natal and Nursery



Isolation

FcmdeOPD



TOTAL,



30



0



0



0



17

22

2

247



0



16



5 .



24



1



1

0

26



0



0

8



24

24



0

34



30



1

1

1



1



38



24



2

315*



Note: * Beftm 1998, the total mnnber of beds at Wusakile Hospital was 330. From 1 9 9 9

todate~mlmherhasreducedto3159sarefllhofdoing~ywith15hotboxes.



4



18/02'0009:35



TX/RX NO.7022



P.001



~



18/02 ' 0 0



T



OQ:S4



@oon



N K A I U HOSPITAL



F M 260 2 248917



m 2 - CLINIC BED CAPACITY



CLINIC



FARMI

LOT



TOWBEWIP



NO



NO



J

chamboii



BEDS COTS CRIBS HRS TOTAL

OPEN/

DAY



Sub C 1 , F a r m



chambdi



842



Chaznbfi



Sub Cl, Farm



4



3



24



3



2



24



6



3



24



3



2



24



4



2



24



6



24



20



7



P



h!hmni*



L



842

M i n d o l o U Mindolo

Sub G21, Farm

840

Mi!&li

Sub E68. Fam

84.0

Atfhd~doMiscshi

Materniity

Sub TT3, Faun

Natwange Natwange

842

Phtsite

Fam 971

SOB,

Farm 839

cIinics

central

MindoloMah

Farm840

Mindolo North

Farm 840



I

9

.



5



5

wuches

eadl



L



18/02 '00 09:35



TX/RX NO.7022



P.002



U(02



'00



09:QS



FAX 460 2 228917



NKANA HOSPITAL



@oom



TABLE 3 - HOSPITAL OCCUPANCY RATE



1 wusAKrLE HtmmlxL 1



1997



Bcd Capkity



330



stay m hospital



I



5&w



48%



I



1998



I



1999



330



315



S days



5 w Q



50%



50%



I



-



TABIX 4 ROSPJTAL OUT-PATIENT ATTENDANCZ



1



1



WUSAKILE HOSPITAL



NkanaDivisien cmphyccs



P397

NO.OF

PATKEIWS



I



I



1999



PATIENTS

12656

26439



13844

36371

14832

65047



Nkana Division dependants

Non-Nkana D i W t i u

~sa~

TOTAL



1998



NO. OF



I



18790

37170



d



17403

73363



6045



45140



TABLE 5 - HOSPITAL ADkUSSIONS

WUSAKILE HOSPITAL



1997



PATtEN"S

1



h a n a Division employees

Nkana Division dewadants

hm-Nkana Division users



TOTAL



2112

1



8559



1999



199s



NO. OF

PATIENTS

1574



NO. OF



I



m

2320

11620



1301



11972



NO. OF

PMXENTS

2012

9903



.



2872

14787



4



18/02'00



09:48



TX/RX NO. 7023

P.002



18/02 '00 1O:Ol



4



PAX 280 4 228917



NKANA HOSPITAL



la001



TABLJC 6 - LABOUR DISTMWTION By FUNCTION

LABOUR



CATEGORY

A

.D

m

0

o

N



ICONSULTANTS



28



1



I



consukant P a d l o l o g i s t



1

0

0



Consultant Gpaecdogisr



Consultant Surgpzon

Consultant P a e d i a t r i c i a n

Specialist G y n a e c o l o g i s t



0

0



I



hfEIXCAL OFETCERWDOCTORS



I

23



Substantive

oveA?xashahine

L



0



2

25

298



hltems



S U B TOTAL



NURSES

~~



I



r P A R A M E D I C A L

Phamacist&chnologist



I



Labomoly

Mitxoscctpist

Physiothempist



Radiomwhcr

Dental surgery



-~~

~



S U B TOTAL

PUBLEC JXEUTE

AlwmJARYsERvIcEs



caterins

L



1



~~~~



4

11

0

2

3

1

319

15



11



First Aid

H i p i t i c~e-aning



4

~



~~~



24

9



Hospital laundry

Medical Stm keeping



I



Ckricd

Morhrary -



15



3

~



~~



Ambu'



l5



SUBTOTAL



82



18/02 '00 1O:Ol



TX/RX NO.7025



P.001



18/02 ' 0 0



1O:Ol



@002

l



NKANA HOSPITAL



F M 260 2 228917



- 2CATEZORY



I



LABOUR



I



1



I



h-uRsEsmsERMcE

T O W N S E I P L P CLINICS

~



GRAND TOTAL



18/02 '00 1O:Ol



1



37

492



TX/RX NO.7025



P.002



F M 260 2 228917



09:M



18/02 '00



NKANA BOSPITAL



c



Lnw4d3L

-2-



w

u

m



BUKLDINGSANDFACIIJTIES



t



SPECIALLST SERVICES

I n t e d Medicine



Obstetrkd~logy



A m c s t b e s i d h ~ vc

eare

Pain C l i n i d A c u p ~

Matcrnd ChildHealth Care



-



Trainee Hostels: Old

New

~~~



cottages



MedicalLibrary



surgical stoxe



I



I



hcmcrator



Mainte~zmceWorkshop



L



,AdministrafionBlock

~ t S T eRoom

a

PAmiMEDIcAL SERVICES



-



Laboratory

B



i



d



l



~



1



h4icrobiologym2tiology

Haematologyand Blood Transfbsion



Histology



18/02 '00 09:35



I



1



1

1



TX/RX NO. 7022



P.005



18/02 '00 OS:34



NKANA EOSPITAL



FAX 260 2 228917



-3-



r



BUILDINGS AND FACILITIES



I



WUSAKUZ



l



1



i



d



18/02 ' 0 0 09:35



TX/RX NO. 7 0 2 2



P.006



TABLE 8 -HOSPITAL BUILDlNCS AND E ' A c 1 3 L X ~ S



w u s m



BUILDINGS AND FAClLlTfES

WARDS:



Labour



1



Matemiw



1



Children's



l



3



c3lsnad

EkCSUtiVC



AIltE2-Natd



1

1



Isolation

MaltMedicai/s~cal



L-



1

2



Gynaecology/SurgidGwmd

OPD W

r

a

g

l p O S t Natal



1

2



Nu==7



1



FdeMedical



1



Labaratmy

corwhinR Roonls



1

6



Hospital Kitchen



1



Laundry



1



lat SWPY

N~xsesHostels~dFLats



L



S-msound



1



!



'IlUNSPORT

Amb&



*4



Other Motor vehicles



7



Note: *3 ofthe 4 ambulances arc non-runners



18/02 '0009:35



TX/RX NO.7022



P.004



18/02 ' 0 0



F M 480 2 228917



09:48



N l W U HOSPITAL



Boo1



R



TABLE 9 -LABOURDWIX.TBUTIONBY GRADE - WUSAKILX HOSPITAL

(&u?nLsRY2

ooo)

CATEGORY

CS.14

013



G12

G11

G1

G2

G3

04

05

c36



1



WCAJA



EXPATRIATE

1



TOTAL



0

1



2

13



0



8



2

12

8

27



.



27

94

123



94

123

6



G7



10

29

28



TOTAL



339



18/02 '00 0 9 : 4 8



1



6

10



29

28

341



2



TX/RX NO. 7023



d



P.001



Sundry expenses

Sundry revenue



E

Ix

R

a

t

e

s

lUS$= K



1257.5



12W.5



l 375



18/02 '0009:35



1387



TX/RX N O . 7 0 2 2



1750



1946.22



P.007



18/02 ' 0 0



F M 280 2 228917



09:34



tJm-uA



NlL4NA HOSPITAL



i\



-



T A B U 4 IPITPD,FXKO-



AT ZCCM NKANA PRtMARY SCHOOL



m

R

E

NOF MTNERSNONMrlwnts



PUPlL



ENROLMENT

1997



Childrem of M m m



-



PUPIL4



PUPIL



1998

797



1999



ENROLMENT ENROLMENT



765



TABLE 5 NuMaER OF "FA-



I



UUU3



690



AND SIPPORT STAFF BY PAY GBADE



PAY GRADE



NUMBJSR OF TEACRERS



G 1 2



3

16



G1



G2

G3



IWBEBER OF SUPPORT



srm



26



W

G5



03



G7



D1



G8



07

20



TOTAL



-



TAIBILE 6 MAIN FA-



IClassrooms



45



AT !

Z

C

mNXANA PRIMARY SCHOOL



BUILDINGSAND GROUNDS



I



PxmmER

36



Music room

Ho~nocdkroom

Print and costume room



01

01

02

01



Playing fields



M



C=&



02



costumemom



04



computixmom

store rooms



01



pm



POOb



I1

I7

Q2



Changc rooms



m



Netball courts



02



Ablution b



d



09



1



locks



18/02 '00 09:35



TX/RX NO.7022



I



d



P.003



SCHEDULE 5



PART I

ENVIRONMENTAL PLAN



This document is the framework Environmental Plan referred toinClause 12.l(b)(ii) ofthe

Agreement and sets out the Company’s environmental policies and broad outline plans.



L



U



The Company shall conduct environmental studies at its Mufulira and Nkana Operations and

prepareits

ownenvironmentalimpactstatement,whichshallcomprise

a detailed

EnvironmentalPlanwhichshall

be submittedtoGRZwithin15monthsofCompletion.

GRZ shall,withinthree (3) monthsofitsreceiptthereof,approvetheEnvironmentalPlan

and meets GoodMining

providedthatsuchEnvironmentalPlanisinaccordancewith

Practices as defined in theAgreement.Intheeventthereis

a disputeas to whetherthe

EnvironmentalPlanmeetsGoodMiningPractices

the mattershall be referredfor

determination by a Sole Expert in accordance with Clause 21 of the Development Agreement.

IftheSole Expxt determines t i t (a)theEnvironmentalPlan is m accordancewith Good

Mining Practices, GFU shall be deemed to have approved the Environmental Plan

and GRZ

shall notifytheCompanyaccordingly; or (b) theEnvironmentalPlandoesnotmeet

Good

Mining Practices, the Company shall make such amendments as directed by the Sole Expert m

order that the Environmental Plan shall conform to Good Mining Practice. If either party fails

to abide bytheSoleExpert’sdeterminationthiswillconstitute

a “material default” for the

purposes of Clause 19 of the Agreement .The Environmental Plan shall bring the Operations

(with the exception of Mufulira Smelter) into compliance with existing Environmental Laws

within a period of three (3) years from Completion.

In tie interim, the Company shall adopt ZCCM’s current environmental impact statement for

the Mufulira Division, and that for the Nkana Division m so far as it refers to the Company’s

Operations at that location, subject in both cases to any subsequent approved amendments or

updates which are to be approved by GRZ (acting reasonably). The two environmental

impact statements were originally prepared by the consultants Steffen, Robertson and Kirsten

on behalfofZCCM

in September1996andMarch1997,and

shall be deemedtobe

incorporated into the Environmental Plan. They have been approved by the Minister under the

Actforthepurpose of renewaloftheLargeScaleMiningLicences

for the Mufulira and

Nkana mining licence areas.



ThedetailedEnvironmentalPlan will includeproposals to bringtheMufulira Smelter into

compliancewithEnvironmentalLawswithin

a periodoffive (5) yearsofCompletionin

accordancewith and subjecttotheContingentCommitmentprovisionsoftheDevelopment

Agreement.

The Company shall assume any obligations for environmental clean-up, which result from its

own operations after Completion, following closure of the mine until suchtime as a closure

certificate is granted.



Londonasn6#m~



...l...



TheCompanyundertakestocomplywithitsobligationsregardingmakingpaymentstothe

Environmental Protection Fundas provided for under applicable laws m Zambia.

This framework Environmental Plan has identified the following issues:

(a)



TheMufblirasmelterhasnosulphurdioxideabatementfacility and consequentlyabout

98% of the total sulphur m feed to the smelter is emitted as sulphur dioxide gas at

a

rate of about 5,000 tonnes per month;



@)



At times there are emissions ofsulphurdioxidefromthe



Nkana CobaltPlantroaster



due to the inability of tie Nkana acid plants to accept tie gas;

(c)



Effluentsdischargedintostreams in or aroundbothplantareas are generallycompliant

with S.I. No. 72 of 1993, but occasional'upsets" m theprocessingoperations may

cause elevated concentrations of suspended solids, copper and sulphate

(and cobalt, at

Nkana) to enter the effluent drains.



As part of the ongoing activities of the environmental management programme, the Company

shall:

(a)



Examinewaystoimprovewatermanagement

and mineralprocessingprocedures

reduce contaminant levels m tie effluent discharges;



@)



Quantify thelevelsof

airemissionsfromprocessingandsmeltingactivities

propose measures to reduce sulphurdioxide emissions;



(c)



Implementmeasurestoreducesedimentreleaseandwinderosionfrom

dumps;



(d)



Assessaquaticresources dumg periods ofhighflow;



(e)



Assesstheeffectsof air emissionsonhealth,vegetation

most affected townships;



(f)



Assessthesocio-economicimpactofmmmgactivitiesand

closure m the local and regional environs.



to



and



tie tailings



and soils, particularly m the



the consequences of mine



Environmental Policies and Objectives

1.



Pollution Prevention



Prioritywill be given to technological modemsation and improved processmaintenance,

monitoring and control to complement conventional pollution control system for atmospheric

emissions and effluent discharges.

This approach will, inter alia:

(i)



reduce the volumeofwatexrequiring

treatment byincreasingrecyclingofprocess

water and minimise the use of fresh water. This will improve the efficiencyof rmtals

and solids removal in effluent treatment system; and



LOlldOD-2/572646/01



-2-



d



...i..



d



(ii)



minimiseprocessupsetconditionsandspills



2.



Reductionof Risks



to theenvironment.



Incidencesofinadvertentreleaseswill

be minimised by an improvedcapacityforthe

containmentofuntreatedwaterandreducedexternalstorageofsludges

and residues.The

implementation of spill prevention plans will further reduce risks.

3.



Reduction of EnvironmentalImpacts



Treated water discharges into the environment will be consolidated into one stream as far as

in improvedtreatmentefficiencyandwillreducestressonthe

possible.Thiswillresult

number of streams currently receiving untreated or partially treated water.

4.



ConductingProgressiveRehabilitation



be exercisedovertheoperatinglife

Whereappropriate,progressiverehabilitationwill

facilities when areas become inactive and plant t i t s redundant.



of



Generalhousekeepingimprovementswithintheplantsiteare

a part oftheinvestment

programme.Thisincludesappropriatestorageforconcentrates,residues,

full andempty

containersfor chemicals, sludgesand so forth.

5.



AchievingProductionEfficiency



A fundamentalobjectiveoftheCompanywill



be toachieve a highlevelofproduction

and processsolutions

ofmetalsthroughdischargesofconcentrates



efficiency.Losses

representunacceptableeconomiccostsandenvironmentaleffects.Optimisingprocessand

production efficiency will have a favourable environmental benefit.

6.



W



Protection of Human Health



The Company commits to a modernisation programme at Mufulira and N k a t~hat will reduce

emissions, discharges and releases into the environment and address, mter

alia, the issue of

the protection of human health. Major environmental capital expenditures as contemplated m

the Agreement will be required to bring these operations to an acceptable standard.

7.



Fhal EnvironmentalPlan



The final EnvironmentalPlanwilldescribetheCompany’scommitment(subjecttothe

provisionsoftheAgreement)

to bmg theenvironmentalperformance of itsAssetsinto

compliance,over a periodof time,withtheEnvironmentalLaws.Thetechnological

(36) monthsof

modemisationprogrammeisexpectedtobecompletedwithinthirtysix

Completion, with the exception of the Mufulira Smelter which shall be addressed as a separate

issue depending upon the Company’s future operating plans.

Areas of noncompliance will bediscussedandagreed to with GRZ. The timerequired to

bmg each process into compliance which will not exceed 5 years, will be detailed m the final

Environmental Plan.



-3-



...l...



a.



Timetable



In accordance with clause 1 2 . 1 of the Agreement and the second paragraph of P m 1 of this

Schedule 5 .



-4-



...1.. .



SCHEDULE 5

PART I1



ENVIRONMENTAL CLEAN-UP OBLIGATIONS

will be undertakenovertheremaininglifeof

Programmesofprogressiverehabilitation

MufuliraandNkanaMinesinpreparationfortheireventualclosure.Thecostsofthese

programmes for the areas which W11 fall under the control of the Company are estimated to

be W.0 million at Mufulira and $5.3 million at Nkana.



The Company undertakes that after Operations come to an end,

and plant areas with the objectives of:

(a)



Protectingpublichealthandsafety;



(b)



Minimising or eliminatingenvironmentaldegradation;



(c)



Allowing a productive use oftheland.



L



it will clean up tie m e site



Theglobal costs ofsuchrehabilitation are estimatedat$11millionatMufuliraand$19

million at Nkana, ofwhich in each case approximately 90% isrequiredfordemolition of

At Nkana, a large proportion of

buildings and clearance and resurfacing of the plant areas.

and acid plants.

thiscostwill be tie responsibility of the operators of the smelter, refinery

Studies will be undertaken m the context of the Environmental Plan to define more accurately

the costs ascribable to theCompany in each case.

Mine closure



Mine closurewillfollowexhaustion

of orereservesattheCompany’sOperations.The

following activities are expected tobe required:

all shafts by sealingallopeningsto

TheCompanywillundertaketodecommission

surfaceaftersalvage of undergroundequipment,dismantleandremoveallsurface

structures for which there is no further use, and contour andre-vegetatedisturbed

areas willbeprotectedfrominadvertentaccessby

surfaces.Openpitsandcaving

be monitored until

suitable bamers orwarningsigns.Waterlevelsandqualitieswill

results indicate that conditions have stabilised.



Overburden and waste rock dumps will be re-profded by appropriate methods in cases

where there is a possibility of instability, and re-vegetation will be encouraged if the

dams will be stabilisedby

dumpshaveno

furtherresourcepotential.Tailings

vegetation of surfaces and by construction of toe bunds, surface evaporation paddocks

or engineered discharge structuresas appropriate.



be removed.Structureswill

be

Plantfacilitiesandunwantedbuildingswill

disassembledandallscrapsteelandotherwaste

mtemls removed.Slabsand

foundationswill

be broken up, contaminatedsoilsremoved

or treated,and

be

contaminatedareascovered with a layer of waste rockorsoil.Thesitewill



-5-



...l . . .



contoured,naturaldrainage

vegetated as appropriate.

(d)



system will be reestablished, and the area will be re-



Monitoringofpollutioncontrolmeasuresandwater

flows andqualitywill

be

conducted regularly after the cessation of operations until the fmal closure certificate is

granted.



Environmental Safeguards - Key Aspects



The principal components of the Mining Area requiring

rehabilitation, decornmissioning and

closureactivitieshave been identifiedin theenvironmentalimpactstatements.Progressive

rehabilitation of disused workings and affected areas will be undertaken prior to mine closure.

dumg therehabilitation

Specificmeasuresthat will be takentosafeguardtheenvironment

stage will include:

Undertaking an environmentalmonitoringprogramme

to monitortheimpactof

mine site andreceivingenvironment.The

operationsandtocharacterisethe

programme will cover air quality, surface and ground water quality and meteorology;

Minimising discharge of liquid effluents to surface waters;

Preparation of an erosion and sediment controlplan;

Developmentofmanagementplans for handling, storage and disposal of chemicals,

reagents, fuels, oils, and other hazardous (reactive, inflammable, radioactive, corrosive

or toxic) materials and wastes;

a reclamationplanwiththeobjectiveof

Preparation and implementationof

progressively returning the land to conditions capable of supporting productive uses.

To theextentpossible,reclamationactivities

will be mmrrent withongoing

production activities.



d



-6-



...l...



SCHEDULE 6

TRAINING & HUMAN RESOURCES MANAGEMENT PROGRAMME

1.



Human Resources Policy



TheCompanybelievesthatthesuccessofOperationsdependsontheretentionof

a wellintegrated and trained labour force. The Company will invest

in the training and developing

of itsemployeeswith a viewtoensuring

tie availability of allnecessaryskillsfor

tie

successful development of its business in a changing business and technological environment.

2.



Formal Agreements



The Company undertakes to recognise for purposes of collective bargaining and negotiation

thetradeunionthatcurrentlyrepresentstheTransferringEmployees,atpresentbeing

tie

Mineworkers Union of Zambia, provided that Transferring Employees shall be free to form or

belong to any other trade union of their choice.

.

,



TheCompanywillabidebytheconditionsofthecollectiveagreementandredundancy

agreementcurrently m force,asagreedwith

tie MineworkersUnionofZambia.Itwill

continue to apply the terms and conditions of employment as specified in the Standard Code

Book 1996 until such time as any revised terms are agreed with the employees and their trade

union.

3.



Manpower Plans



The Company will continually review the size and composition of its labour force to ensure

thatitremainsconsistent with projectedproductionlevels and methods.Themanagement

team will have a primaryresponsibility for assessingthe future manpowerneedsofthe

as well as detailing

businessand

detimg organisationalstructuresandinterfaces

accountabilitiesof each major functional area.



L



of the

AtCompletion, all existingemployeesofMufuliraDivision,andthemajority

employees at those Operations at Nkana Division which are to be acquired by the Company,

who have been selected and have agreed to transfer, will become employees of the Company.

The current relevant numbers are 4,800 at Mufulira and 5,951 at Nkana.

m

Over the subsequent five years, the Company will progressively reduce employee numbers

line with production requirements. Initial projections suggest that the number ofemployees

over the period of the plan may be as follows:



Division



Current



Post

End2000 End 2001 End2002 End2003 End2004

Completion



Mufulira



4800



4208



3808



3628



3448



3268



3088



Nkana



5951



4479



3879



3699



3519



3339



3159



Total



10751



8687



7687



7327



6967



6607



6247



L.ondon-ZS72646lO1



-7-



...1. ..



4.



Expatriates / Zambian Citizens and Equal Opportunities



The Company m y recruit and retain m Zambia such expatiate employees as the Company

its busmess.TheCompany

judgesnecessaryfortheefficientandsuccessfuloperationof

envisages that there will be a net addition of 20 expatiates at senior management level and

approximately 40 others to support operations at lower levels. These numbers will

be subject

to continual review, andit is the Company’s intention that many of tie expatriates will not be

retamed for an extended period but will use their expertise to raise the skills of the Zambian

workforce to the requisitelevelsuchthattherequirementsforexpatriatelabourshould

progressively reduce.

its

Notwithstandingtheabove,theCompany’shumanresourcesdepartmentshall,in

recruitment,selection,promotionandassignment

of personnel,notdiscriminateagainst

comparablyqualified and experiencedZambiancitizens and shall focus onsecuringand

maxhisiig training and development opportunities for Zambian citizens. Importance will be

to return to employment

accorded to attracting qualified Zambian citizens working overseas

within the Zambian mining and metallurgical industry.



Formal managementdevelopmentprogrammes shall be instituted to meet thedevelopment

to ensure

needs of the business. Promising young professionals shall be specifically targeted

are accorded equal opportunitiesforrecruitment,promotion,

training and

thatthey

development

5.



S W €Development



The Company expects to spend approximately USO.8 million on training its workforce each

year, although this figure will be subject to review in tie light of total workforce numbers and

specific training requirements. Funds will be allocated to both local and overseas t r m g .

Consideration shall be given to the long-term manpower requirements of the business and the

need to ensure that senior and key positions are appropriately manned. Career Development

plans will therefore be established for the guidance of individual employee development and

will ensure that employees receive relevant mining and experience consistent with operational

and promoting

skillrequirements.TheCompanyshalladopt

a policyoffillingpositions

employees from within tie Company wherever appropriate.



to provide broad

The Company shall consider and target opportunities for overseas training

based experience to managerial and technical staff where appropriate. These may include:

(a)



Formal secondment to associate companies of the joint venture partners overseas;



(b)



Businessmanagement courses;



(c)



Technical courses based upon requirements of the Company’soperations;



(d)



Scholarshipsforundergraduate or graduatestudies in exceptionalcases.



LU&*2Ci72646/01



-8-



...l...



4



(e)



The Companywillcontinue

tosponsorZambianemployeescurrentlyundertaking

appropriate specialised courses locally and abroad.



7.



Remuneration

Policy



TheCompany,consistentwith its cashflows,shallreviewtheremunerationofemployees

with a view to improving base salaries to attract and retain competent and experienced staff..

The Company shall progressively reduce the dependence of employees upon tie Company by

grossing-up non-cash benefits into the wage structure.

8.



Employee

Shareholding



The Company shall establish a profit sharing scheme with its managers and employees.

9.



L/,



Retrenchment

Mitigation



Given the need for retrenched employees to be re-equipped to direct their talents and energies

outside of the Company, an additional expense of $12.5 million is budgeted over the fkst five

years for retraining those employees whose jobs have been made redundant. The Company

shall also investigate assisting retrenched employees to find formal employment elsewhere.

10.



Safety tmining and Awareness



The Companyattachesgreatimportancetothesafetyofemployees

at theworkplace and

believes that the successof safety programmes will only be guaranteed by tie involvement and

participation of employees. Safety training will be given where appropriate to create greater

safety awareness, develop expertise and encourage ownershipof safety concerns by the entire

workforce.

11.



L



EmergencyResponse Teams



Promptandpropermedicalattentionforinjuredpersonsandpreventionofinjuryto

employeesandmembersofthepublicareprimaryconsiderations.Emergencyandmedical

services at workplaces will be evaluatedtoensure t i t they are appropriate to needs. First

Aid trammg will continue to be offered to employees to enable them to deal with emergency

situations.

12.



T r a i i g and Human ResourcesManagementPlan



The Company will produce, within 12 months of Completion, a detailed training and human

resources management plan (which will be submitted to GRZ for approval under clause 6.2 of

the Agreement), encapsulating and expandingupon all of the above issues.



-9-



...l...



SCHEDULE 7

INSURANCE POLICIES



Schedule 9 of tie Sale and Purchase Agreement shall be incorporated here by reference



- 77 -



G2181100030



SCHEDULE 8

TAXSCHEDULE



TheprincipalapplicabletaxesandtheratesapplicabletotheCompany

Normal Operations as at the date hereof are as follows:

(1)



m theconductof



hwmeT a r :

The Company shall pay to GRZ income tax m accordance with the provisions

of thisAgreementonitsnettaxableincomearisingfromallmining,

concentration, smelting and refining and other operations.

The income tax rate applying as at the date of this Agreement shall be twenty

five per cent. (25%).

The carry forward of losses shall be permitted for a period of ten (10) years

from the date at which the loss was incurred. Losses should be used on

a first

in, first out basis with earlier losses used before later losses.



L



TheCompanyshall be entitledtomaintainbooksofaccountandtorender

income tax returns and returns in respect of royalties and custom and excise

dutiesstated in UnitedStatesdollars m accordancewithgenerallyaccepted

accounting principles.

For the purposes of Part VI of tie Fifth Schedule to the Income Tax Act, the

Facilities shall be deemed a "1975 new mine" allowing the deduction of one

hundred per cent. (100%)of capital expenditure (as defined m the Act) m the

year m whichthecapitalexpenditurewasincurredprovidedtheFacilities

h thecalculation ofthe

continueto be ownedby a singlelegalentity.

Company'sliabilitytoincome tax, theCompanyshall be entitledtodeduct

"price participation payments" payable pursuant to Clause 4.2(c) of the Sale

and Purchase Agreement.

Any PriceParticipationPayments(asdefinedintheSaleandPurchase

Agreement) shall be regarded as an expense of the Company and deductible in



calculating the income tax payable by the Company.

(2)



Roy&s:

(0



TheCompany shall payto GRZ MineralRoyalty tax (the "Royalty")onthe

m theMmmgArea at a rate of 0.6%

grossrevenueofmineralsproduced

provided that the Royalty otherwise payable hereunder shall be exempt from

payment m the fist five (5) years following Completion.



(ii)



GRZ confirms that for the Stability Period,royaltypayableunder

be deductible against liability for income tax.



- 78 -



the Actshall



G218UOOO30



The circumstances where the discretion available to GRZ under Section 67 of

the Act to defer the payment of royalty would be exercised are:



(iii)



(aa)



underthetermsofSection67(3)wherethecashoperatingmarginof

the Company's mining operations is less than nil; and



(bb)undertheterms

of Section67(2) on samples of mineralsacquiredfor

the purposes of assay, analysis or other examination.

W)



(3)



For the purposes of the foregoing "cash operating margin" means the amount

dumg

derived by deducting operating costs (not including capital expenditure

or required for the development of the Facilities) from revenue.



Other Tares, Charges and Fees:

(0



Custom and Eicise Lhties



Subject to the provisionsof Clause 14 and Section 97 of the Act, the Company

imported for the

shall be liable to pay customs and excise duties on all items

purposes oftheApprovedProgrammeofMiningandMetalTreatment

Operations at such rates and on the terms and conditions as are set out m the

Customs and Excise Act save that:

forthetwelve(12)monthperiodcommencingfromtheCompletion

Date, the Company shall pay such customs and excise duties at rate of

zero per cent. (0%) on all consumableitems imported dumg that

period for the purposes of the Approved Programme of Mining and

Metal Treatment Operations and which imports, but for the conditions

setforth in thissection,wouldhaveresultedincustomsandexcise

dutiesbeingpayableupto

a valueofsixteenmilliondollars

(US%16,000,000);

forthenextfollowingtwelve(12)months,theCompanyshallpay

such customs and excise duties at a rate of zero per cent. (0%)on all

consumable item imported during that period for the purposes of the

Approved Programme of Miniig and Metal Treatment Operations and

which imports, but for the conditions set forth in this section, would

have resulted m customs and excise duties being payable up to a value

of twelve million dollars (US$12,000,000);

shall pay

forthenextfollowingtwelve(12)months,theCompany

such custom and excise duties at a rate of zero per cent. (0%)on all

consumable items imported dumg that period for the purposes of the

Approved Programme of Mining and Metal Treatment Operations and

i n this section, would

which imports, but for the conditions set forth

have resulted in custom and excise duties being payable up to a value

of ten million dollars (US$10,000,000); and



Lmxionam7952m



- 79 -



G218MNMM



d



forthenextfollowingtwelve(12)months,theCompanyshallpay

such customs and excise duties at a rate of zero per cent. (0%)on all

consumable items imported during that period for the purposes of the

Approved Programme of Mining and Metal Treatment Operations and

which imports, but for the conditions set forth in this section, would

have resulted in customs and excise duties being payable up to a value

of ten million dollars (US$10,000,000); and

97 oftheAct

theCompanywillalsoenjoythebenefitofSection

namely that the Company shall be entitled to exemption from custom

and excise duties, and from any other duty or impost levied under the

Customs and Excise Act, in respect of all machinery and equipment

(includingspecialisedmotorvehicles)

or otheritems of a capital

nature required for any of the activities carried on or to be carried on

m pursuance oftheright

or otherwiseforthepurposes

of its

investment in miniig metal treatment operations or prospecting. GRZ

andtheCompanyagreethatsuchmachinery,equipmentandother

item of a capitalnatureimportedbycontractorsoftheCompany

engagedbytheCompany

for thepurposesofimplementingthe

ApprovedProgrammeofOperations,NormalOperations,

or any

m theScheduled

otherproposedcapitalexpenditureassetout

Programmesshallsimilarlyenjoythebenefit

ofthe Company's

97 ofthe

exemptionfromcustomsandexcisedutiesunderSection

GRZ andtheCompany

furtheragreetoestablishan

Act.

administrative mechanism to achieve this post Completion of which an

essential part shall be the implementation of an audit trail for purposes

ofproving to GRZ that tie importedequipmentreferredtoabove

have been used for purposes falling within Section 97 of the Act.

(ii)



Excise Duty on Power:

GRZ confirms that this is ten per cent. (10%) of the amount paid to ZESCO

by the Copperbelt Energy Corporation PLC for the purchase of electricity.



L



For the avoidance of doubt and as provided in Clause 16.6, the Company will

not be required to pay the Excise Duty on Power applicable to the Company's

purchasesofelectricityinrelationtotheoperation

ofthe Facilitiesforthe

Stability Period.

(iii)



Other Taxes, Charges and Fees:

Fortheavoidanceofdoubt,theCompanyshallbeliabletopay(andthese

provisions will be without prejudice to such liability) all other taxes, charges

and fees payable to GRZ or to any governmental authority m Zambia as of the

date ofthisAgreementinrelationtoitsmining,concentration,smeltingor

limited

refining and other operations carried out in Zambia, including but not

to:



- 80 -



G2181rQOO30



(aa)



anyannualfees,companyfees, land rentsfallingduepostCompletion

to GRZinaccordancewithapplicable

orotherpaymentsdue

legislation and the provisions of this Agreement; and



(bb)taxes,chargesandfeesforservicesrendered

bygovernmental

authorities onrequest

or topublicorcommercialenterprises

generally;

save that such liability will not include any mounts owed by ZCCM and still

outstanding as of the date of this Agreement.

(4)



ValueAdded Tax("VAT"):



In accordance with the provisions of the Value Added Tax Act, Chapter 331

of the laws of Zambia 1995, Plant Products are chargeable to VAT at a rate of

zero per cent. (0%) if exported and are otherwise taxable at a standard rate.



(0



(5)



(ii)



GRZ c o n f i i that input VAT shall be credited to the Company within thirty

(30) days from the date of submission of the Company's monthly VAT return

in respect of each accounting period.



(iii)



For the purposes of this Clause, "input VAT" shall mean VAT claimable m

respect of allowable business purchases of goods and services supplied

by a

registeredsupplier(which,fortheavoidance

of doubt,shallincludethe

treatmentofMineProducts)during

a prescribedaccounting period forthe

purposes of the Facilities andor the activities contemplated m the Scheduled

Programmes andor the conduct of Normal Operations.



09



In accordance with the VAT Letter issued by the Commissioner General of the

Zambia Revenue Authority, the transfer of the business of ZCCM's Mufulira

Division and the Nkana mines, concentrate and cobalt plant to the Company

shall not be treated as a taxable supply of goods and services for the purposes

of the Value Added Tax Act Chapter 331 of the laws of Zambia 1995.



Relief from WithholdingTax

Therateofwithholding tax applicable to theCompanyshall be ten per cent. (10%)

save that for the Stability Period the Company shall pay withholding tax on dividends,

royalties,patents,principalorinterestpaymentstolenders

or Shareholders or their

AffiliatesandmarketingandmanagementfeestoShareholders

or theirAffiliates(in

any such case who are not resident in Zambia for withholding tax purposes) at a rate of

zero per cent. (0%).

GRZ confirms its intention to enter into Double Taxation Agreements with its major

trading partners which should, inter alia, reduce the level

of withholding tax suffered

on distributions and paymentsof interest by the Company.



LmdonUS57952m7



- 81 -



G21811WO30



d



(6)



Deductions for Mining Expenditure on a non-produtig and non-contiguous mine



For tie purpose of ascertainingtie Company's allowable deductions under Section five

(one) (5(1)) of Part VI, Paragraph 23 of the Fifth Schedule to tie Income Tax Act, tie

be regarded as a singlelargescaleminingandmetal

Facilitiesshallatalltimes

treatmentoperation,provided tie Facilitiescontinueto be ownedby a singlelegal

entity.



L



- 82 -



G2181/00030



SCHEDULE 9

TRWSFERRING SOCIAL A!SSER3



Schedule 15 of t i e Sale and Purchase Agreement shall be mcorporated here by reference



- 83 -



G2181/ooo30