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REPUBLIC OF LIBERIA)
MONTSERRADO COUNTY)
MINERAL EXPLORATION AGREEMENT
BETWEEN
THE REPUBLIC OF LIBERIA
AND
MAGMA MINERAL RESOURCES INC.
THIS MINERAL EXPLORATION AGREEMENT is entered into, by and
between the REPUBLIC OF LIBERIA, through its Government represented
by the Deputy Minister for Operations of the Ministry of Lands. Mines &
Energy (hereinafter referred to as the "Govornmont")
AND
MAGMA MINERAL RESOURCES INC., a corporation existing and doing
business under the laws of Liberia represented by Len Lindstrom its Chief
Executive Officer (hereinafter referred to as the "Operator"), hereby:
WITNESSETH:
WHEREAS, title to Minerals within the territory of the Republic of Liberia is
vested in the Republic of Liberia (the Republic) and all rights related to the
exploration for and exploitation of such minerals pertain exclusively to the
Republic; and
WHEREAS, the Ministry of Lands, Mines & Energy through the Minister of
Lands, Mines & Energy is by law charged with the responsibility of
administering the mineral laws of the Republic and in that process to ensure
the efficient development of the mining industry; and
WHEREAS, the Operator has successfully completed a program o!
reconnaissance work of the selected areas, and
WHEREAS, the Government is determined to accelerate the development of
the mining industry of Liberia, and therefore desires to promote the
Development of minerals which may exist m exploration areas for the
economic and social benefit of Liberia and recognizes that a large capital
expenditure is necessary to ensure that such minerals are economically and
efficiently developed; and
WHEREAS Government agrees to grant the Operator such mineral rights
and privileges in consideration of the undertaking by the Operator to make
annual payments, and to pay rents, royalties and other fees hereinafter
prescribed and to perform and observe the terms and conditions of this
agreement;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises exchanged between the parties hereto (the Parties), terms and
conditions herein contained, the Parties hereto mutually agree as follows:
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1.0 DEFINITIONS
Unless the context shall otherwise clearly indicate, the following terms
wherever used in this Agreement shall have the respective meanings
set forth below:
1.1 Affiliate: Means a Person that controls, is controlled by or is under
common control with the Operator. For purposes of this section control
means the possession, directly or indirectly, by one person of more than
fifty percent (50%) of the equity of or the voting power in another person
1.2 Associated Minorals l ho term "Associated Minerals" means any
mineral, metal element or precious or semi-precious stone(s) Other than
Gold which is found, discovered, mined, removed, extracted or otherwise
produced as an incident to the Operators activities in exploiting a Gold
Deposit or Deposits
1.3 Centro: tho term "Centre" means the International Centre for Settlement
of Investment Disputes established under the auspices of the
International Bank for Reconstruction and Development.
1.4 Convention: the term “Convention" means the Convention on the
Settlement of Investment Disputes between States and Nationals of
Other States opened to signature at Washington. DC. United States of
America on March 18, 1965.
1.5 Effective Date: The term "Effective Date" means the date, provided i
Section 26, on which this Agreement shall become effective
1.6 Exploration Area: The term "Exploration Area" means at any particular
time the area or areas then designated in accordance with Section 3.2
but only during the Exploration Period.
1.7 Exploration Period: The term "Exploration Period" means the period
described in Section 2.1.
1.8 Gold Deposit: The term "Gold Deposit" means a deposit whose
predominate economic value, as determined by the result of exploratory
drilling, is attributable to the Gold contained therein and winch is of such
character as to permit the economic production thereof
1.9 Government The term "Government” includes all of the branches,
divisions, instrumentalities and agencies of the Government ol the
Republic ot Liberia.
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1.10 Infrastructure: The term "infrastructure" means assets of the following
types
(a) Immovable transportation and communication facilities (including
roads bridges, railroads, airports, landing strips and landing pads
for aircraft, hangars and other airport facilities, garages, channels,
tramways. pipelines and radio, telephone, telegraph,
telecommunications, and electronic or other forms of
communications facilities);
(b) Immovable port facilities (including docks, harbors, piers, jetties,
breakwaters, terminal facilities and warehouses, and loading and
unloading facilities);
(c) Immovable power, water and sewerage facilities (including electrical
generating plants and transmission lines, dams, water drain;, water
supply systems and Systems for disposing of tailings, plant waste
and sewage).
(d) Immovable public welfare facilities (including schools hospitals and
public halls);
(e) Miscellaneous immovable facilities used primarily in connection with
the operation of other facilities (including offices, machine shops
foundries, repair shops and warehouses): and.
(f) Movable facilities and equipment affixed to and used as an integral
part of the immovable facilities described in paragraphs (a) through
(e).
1.11 Operations and Activities The term ’Operations and Activities’ means
the exploration, mining and management operations of- MAGMA
MINERAL RESOURCES INC
1.12 Operator The term ’Operator means MAGMA MINERAL
RESOURCES INC.
1.13 Plant and Equipment The term “Plant and Equipment" means the
following assets (other than infrastructure) used for Operations and
Activities:
(a) Movable and immovable facilities and equipment to mine, crush
sluice, dredge, wash, screen, dry. beneficiate. and otherwise
explore for or produce Gold and/or Associated Minerals.
(b) Movable and immovable facilities and equipment used primarily m
connection with the operation of the foregoing (including offices
machine shops, foundnes. repair shops and warehouses).
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(c) Movable and immovable facilities and equipment tot the
maintenance of personnel (including dwellings, stores, mess halls
and recreational facilities), and
(d) Movuble facilities and equipment used in connection with any of the
infrastructure
1.14 Produce The term "Produce" as used m lelerence to Gold. Associate
Minerals or any other mineral deposit shall include dnll. develop, extract,
strip, mine, sluice, dredge, process (including benefioate. concentrate or
otherwise treat), stockpile, transport, load, sell and export, for the
account of the operator.
1.15 Production: The term "Production" as used in reference to GokJ
Associated Minerals or any other minerals, shall mean the commercial
exploitation of Minerals found in the Exploration Area and all activities in
respect of or incidental thereto, including the design, construction,
installation, fabrication, operation, maintenance, drilling development,
extraction, stripping, mining, sluicing, dredging, processing (including
beneficiation, concentration or other treatment), stockpiling
transportation, loading, sale and exportation by the Operator
2.0 TERM OF THE AGREEMENT
2.1 The term of this Agreement shall commence on the Effective Date and
shall expire at the earlier of (a) such time as the Operator shall have
completed exploration activities, or (b) three (3) years after the
Effective Date, with an extension of another (2) years at the option of
the Operator plus any penod of renewal to which the Government may
agree
3.0 EXPLORATION RIGHTS:
3.1 Grant of Exploration Rights: On the terms and conditions herein
provided the Government hereby grants to the operator, during the
period hereinafter defined, commencing with the Effective Date plus
any extension of such penod to which the Government may agree
(referred to herein as the "Exploration Period”) the exclusive right to
explore for Gold. Diamonds, Associated Minerals and any other
mineral deposit ( except iron ore ) in the Exploration Area
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3.2 Exploration Area
(a) The Exploration areas shall lie in Nimba-South, Nimba County
as identified on the attached map. with metes and bounds or
coordinates attached hereto as Appendix "A"
(b) The Operator shall commence exploration as soon as possible
after the Effective Date but not later than 180 days after the
Effective Date.
(c) At the end of the Exploration Period, the Exploration Area shall
cease to exist
3.3 Surrender of Exploration Area Unless the Minister and the Operator
otherwise agree:
(a) At or before the end of the initial term of the Exploration Period,
the Operator shall surrender a minimum of fifty percent (50%) of
the Original exploration area
(b) At or before the end of the extension of the Exploration Period, me
Operator shall surrender the remairvder of the Exploration Area
and, upon such surrender, the Exploration License shall
automatically terminate
(c) Notwithstanding paragraphs 3.3 (b) above, if the Operator wishes
to retain all of. or any part of. the Exploration area upon expiry of
the exploration period it shall have the right to do so by apply* g
for a mineral development agreement over the area
3.4 Minimum Expenditures
(a) Commencing no later than six (6) months after the Effective Date,
the Operator shall diligently and without interruption explore for
gold, associated minerals and any other mineral depot* within the
Exploration Area, and should the Operator fail to so comply in
accordance with the provisions of this section, then this
Agreement shall be liable to cancellation
(b) During the Exploration Period, the Operator shall expend not less
than Two United States Dollars (US$2 00) per acre during each
calendar year as Exploration Costs, the latter being defined tp
comprise all of the Operator’s managerial and corporate costs
related to exploration
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4.0 Pilot Mining Rights
The Operator in addition to exploration, is hereby also granted the
right to produce gold, associated minerals and any other mineral under
a pilot mining plan to be approved by the Minister of Lands Mines and
Energy.
5.0 Mineral Dovolopmont Agroomont
During or by the expiry of the Exploration Period, the Operator may
apply for a Mineral Development Agreement. This agreement shall be
concluded in accordance with the Minerals and Mining I aws ind
Regulations of Liberia
6.0 INCIDENTAL RIGHTS:
6.1 Grant of Rights: Subject to the terms and conditions herein provided,
and solely for the purposes incidental to the exercise of the rights
granted to the Operator under Sections 3 and 4 of this Agreement, the
Government hereby grants to the Operator the right, within the
Exploration Areas:
(a) To acquire, build, and construct Infrastructure. Plant and
Equipment, and other facilities, and to maintain and operate the
same:
(b) To remove, extract and use solely for its own exploration
purpose, Irec of tax or other charge or fee imposed Dy the
Government, any water, gravel, sand. clay, stone and timber
(except protected fauna and flora), provided however, that where
any land, villages, houses, person or watering places for animals
have been supplied water by right through custom, the Operator
shall not deprive them of a constant and reasonably supply of
usable water, nor shall the Operator, without the Government's
consent, interfere with any water or other rights enjoyed by
anyone under any agreement with the Government
6.2 Reservation of Rights: The Government reserves the right, on
reasonable notice to and after consultation with, the Operator, to
construct roads, highways, railroads, telegraph and telephone lines and
other lines of communication within the Exploration Area
6.3 Condemnation: If the use of any privately owned or occupied property
within the Exploration Area is reasonably required for the conduct of
operations hereunder and the Operator is unable to come to an
agreement with the owner or occupant of such property for such use,
the Operator may request the Government, which request shah not ot
unreasonably denied, to exercise its right ot eminent domain with
respect to such property. The Operator shall reimburse the
Government for any compensation paid or payable to the private owner
or occupant as a result of the Government's exercise of such right
7.0 INFRASTRUCTURE
7.1 Construction by Operator: The Operator shall, at its own cost
undertake the construction, installation and improvement ot all or any
part of the infrastructure All such Infrastructure shall be maintained
and operated by the Operator in a reasonably good manner.
7.2 The Government warrants not to exercise its rights to expropriate land
in the Exploration Area if such expropriation Shall in any way hinder the
development of the Operation and Activities
8.0 CONDUCT OF OPERATIONS
8.1 Best Exploration Practices: The Operator shall conduct all of its
operations hereunder using appropriate modem and effective Plant
and Equipment. Infrastructure, materials and methods Such
operations shall be conducted in a proper ana workmanlike manner
with due diligence, efficiency and economy, in accordance with the
laws of Liberia and with the best mining and engineenrig practices
used by efficient operators in similar operations, elsewhere in the
world
8.2 Maximum Economic Operation
(a) The Operator shall use its best efforts to produce Gold and
associated minerals from each Pitot Mining Area and at the
maximum capacity of each Production Area consistent with the
optimum economic development of all Production Areas
Production shall not be restricted to high grades of Gold and other
minerals, to the neglect of lower grades.
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(b) The Operator shall use its best efforts to sell Gold and any
Associated Minerals produced at the maximum prices possible in
the light of the prevailing international market prices and
conditions, and in accordance with good competitive business
practices generally accepted at the time. The Operator hereby
undertakes to sell at least 95% of all Gold or Associated Minerals
within forty- five (45) days after their production Notwithstanding
the foregoing, with the pnor approval of the Government, the
Operator shall have the right to delay the sale of a greater
proportion of the Gold, and/or Associated Minerals produced
beyond the said forty five (45) day period, upon such terms and
conditions as the parties may agree
9.0 HEALTH AND SAFETY
The Operator shall install, maintain and use modern health and safety
devices and shall practice modern health and safety procedures and
precautions (including, regular safety training instruction for its
employees) as are in accordance with the best exploration and mining
engineering practices, and acceptable labor safety standard In this
respect, the Operator shall comply with health and safety rules
regulations, and Laws ol the Government.
10.0 EMPLOYMENT. TRAINING AND SECONDMENT
10.1 Employment of Liberians: The Operator shall not employ foreign
unskilled labor. To the maximum extent feasible, the Operator shall
employ Liberian citizens at all levels
10.2 Training of Liberians The Operator shall provide on a' continuing
basis for the training of its Libenan employees, in order to qualify them
for skilled, technical administrative and managerial positions.
10.3 At least two (2) professionals (mining engineers/geologists) from
the Ministry shall be seconded to the Operator's operations at the
expense of the Operator
11.0 CONSERVATION
11.1 The Operator shall encourage economic and social development
dunng the term of his operation and shall provide for meetings on a
regular basis between representatives of the Operator and the local
communities for the purposes of considering and making
recommendations to the Operator and to the Government with respect
to matters of community interest, such that it shall not hinder the
Operator’s work
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11.2 Natural Resources: The Operator shall take preventive, corrective
and/or restorative measures to ensure that all streams and water
bodies within or bordering Liberia, all dry land surfaces, and the
atmosphere be protected from pollution, contamination or damage
resulting from operations hereunder, as per Section 7 0 hereof, and
that any existing pollution, contamination and damage of or to such
water bodies, land surfaces, and atmosphere resulting from operations
hereunder be rectified, and that the terrain, in general, be restored to
and left in a usable state for purposes which are economically or
socially desirable.
12.0 ADEQUATE CAPITAL AND STOCK OWNERSHIP
The Operator shall provide all capital necessary tor the economic and
profitable exploration for Gold and Associated Minerals and the
production of these Minerals under this Agreement. In this connection,
the Operator shall at all times maintain a reasonable and prudent
capital structure.
13.0 TAXATION
13.1 In General The Operator shall be liable to all taxes, fees, duties,
excises, and other charges imposed by Liberian Laws of general
application, except as may be otherwise provided by other laws and
administrative regulations granting exemptions from customs duties
and excise taxes
13.2 INCOME TAX. The Operator shall be subject to Liberian Income lax
Law of General Application, except that notwithstanding any provisions
of such laws, the rate of tax applicable to all the taxable income of the
Operator shall be thirty percent (30%).
14.0 ROYALTIES
14.1 Gold The Operation shall pay to the Government a royalty in respect
of all gold discovered during exploration and produced under pilot
mining The amount of such royalty shall be 3% of the selling prices
f o b Monrovia for the Gold and Diamond The royalty shall be paid
within thirty days of export.
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14.2 Associated Minerals and other Mineral Deposits: The Operator
shall also pay to the Government a Royalty in respect of any
Associated Minerals or any other mineral, as defined In Section 1.2
produced hereunder and shipped or otherwise disposed of by the
Operator. The amount of said royalty shall be negotiated and agreed
upon by the parties.
15.0 Exploration Fees and SURFACE RENTAL
15.1 The Operator shall make an annual payment of Five Thousand
United States Dollars (US$5.000 00) for the grant or renewal of the
Exploration License
15.2 The Operator shaH make annual lump sum rental payments of
US$20,000 00 to the Government for all unsurrendered portions of the
Exploration Area in the first two years and Eighteen US Cents (US$0 18) per
acre thereafter The Operator shall also make a payment of Three United
States Dollars (US$3.00) per acre for all areas oporatod under pilot mining
16.3 The first payment for the exploration license fee and surface
rental shall be made in accordance with a plan to be mutually agreed between
the parties Subsequent payments shall be made within thirty (30) days after
each subsequent anniversary of the Effective Date
16.0 RECORDS. REPORTS, AND INSPECTION
16.1 Aval lability of Records The Operator sha* maintain at its
principal office *i Liberia, or at such other office as the Government
may approve
(a) Copies of all maps, geological, mmmg. or other earth science
reports and mineral analysis (together with an field data which
supports such reports or data), production records, marketing
report and any other data obtained or compiled by the Operator
as a result mining Operations and Activities. All information data
and material specified in this paragraph shall be in a form
suitable tor reproduction, use or processaig as Vie cate may
be The Operator she! have the right to temporariy ramove
such samples and other data from such location and (on pnor
notice to the Government) from Liberia for the purpose of stody
and evaluation
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(b) The Operator shall keep the Government fully informed of all
Operations and Activities, wherever conducted and of its plans
respect thereof The Government shall have the right to monitor
exploration and pilot mining operations and Activities from time to
time and a reasonable number of Government personnel may.
upon prior notice to the Operator, at reasonable times and subject
to compliance with the Operator’s security requirements, attend
and inspect Mining Operations and Activities conducted in Liberia
(c) Within thirty (30) days after the end of each calendar quartoi, the
Operator shall provide the Government with a report on al
Operations and Activities for that calendar quarter including
Minerals recovered and sold. Within ninety (90) days after the end
of each Financial Year, the Operator shall furnish the Government
with a report on all Mining Operations for that Financial Year,
including Minerals recovered and sold
16.3 Reports. The Opeiatoi shall submit such repoits to the Government, in
such form, in such detail, and at such time, as may be required by law.
or as the Government may otherwise require with respect to
exploration, production, employment and training, marketing and such
other matters as may be related to the conduct of operations
hereunder.
16.4 Inspection: The Government may, upon reasonable notification to the
Operator, inspect the books and records of the Operator, and any ali
facilities and area related to the Operator's operation as provided
hereunder The Operator shall make its appropriate employee available
to render assistance with respect to any such inspection.
16.5 Confidentiality of Operator’s Reports: The Government shall treat all
information supplied by the Operator hereunder as confidential and
shall not reveal such information to a third party without the prior
wntten consent of the Operator which consent shall not be
unreasonably withheld
Financial information about the Operator shall however be treated as
confidential for a period of one (1) year, commencing as of the date of
submission of such information. The Government may nevertheless
use any such information received from the Operator for the purpose of
prepanng and publishing general records or statistics on natural
resources or other conditions in Liberia, and in connection with any
dispute between the Government and the Operator
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17.0 NON-ASSIGNABIUTY
This Agreement and any interest therein may not be transferred or
assigned, or mortgaged, pledged or otherwise encumbered, in whole or
in part, without the Government's prior written approval unless to an
affiliate. However, any request to joint-venture any rights to a third
party, will be fully allowed and any assignment that is legally required
to protect the interest of the joint-venture partner will be accepted
18.0 FORCE MAJEURE
18.1 Except as provided in this Section, failuie on the pad ot the Operator to
comply with any of the conditions hereof (except the obligation to make
payment of monies to the Government) shall not be grounds for
cancellation or give the Government any claim for damages insofar as
such failure arises from force majeure. if the Operator has taken nil
appropriate precautions, due care and reasonable alternative
measures with the objective of avoiding such failure and of carrying out
its obligations hereunder
The Operator shall take all reasonable measures to cure such laiure
and to fulfill the terms and conditions herool with a minimum of delay
The Operator shall notify the Government withm fourteen (14) days of
an event of force majeure affecting its ability to fulfill the terms and
conditions hereof or any event which may endanger the natural
resources of Liberia and similarly notify the Government of efforts
being made to rest normal conditions within twenty-four (24) hours
thereof For purpose of this Section 17. force majeure includes an act
of God, war, insurrection, civil commotion, earthquake, storm, flood or
any other extraordinary event which the Operator could not reasonably
be expected to prevent or control, but shaB not include any event
caused by a faBure to observe the best mining and engineering
practices or by the negligence of the Operator or any of its employees
or contractors ft. as a consequence of force majeure operations
hereunder remain in substantially total suspension for an unmterruptea
period of more than six months, the duration of the term of th«
Agreement shall be extended by the time of such suspensions
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1* 2 Except m hereinafter prowded. the tome tor the performance of any
obkgatoon (except the obkgatoon to make payment of money) of the
Operator under or arising out of this Agreement which performance *
hindered prevented or delayed by force majeure as well as any other
tome periods and dates set forth m this Agreement, snal be extended
by the period of delay but not longer than the continuance thereof and
such additional period as may be reasonable *i the circumstances, and
the Operator shall not be liable m damages or otherwise to the other
nor shall any action, claim or demand be taken or made against the
Operator by reason solely of such delay in the performance of such
obligation
18.3 The Operator shall use al reasonable diligence to remove the cause of
the force majeure as quickly as practicable after notice of the same
shall have come to its attention save and except that this provision
Shan not in and of itself require the Operator to settle any stnke.
lockout, ban 'go slow" activity stoppage restraint of labor or other
similar ("Industrial Dispute")
19.0 SURRENDER OF OPERATOR S RIGHT
Dunng the Exploration Period, the Operator may surrender by not less
than sixty (60) days notice to the Government, all its rights hereunder
in respect of all or any part of the Exploration Area and the Operator
shall be relieved of all obligations in respect of area so surrendered
except those obligations that may have accrued poor to the Effective
Date of. or arising out of or rolated to the surrender
20.0 SECTION 24: FINANCIAL REPORTING AND CURRENCY
24.1 Accounting. Al of the Operator s accounting under this Agreement
shal be in Dolars and al amounts paid or received and obkgatoon*
incurred or transactions carried out in currency that is legal tender m
the Republic or m any Foreign Currency other than Dollars shall be
converted to Dollars w accordance with and pursuant to generally
accepted accounting principles w the United Kingdom. Canada or
internationally accepted (except to the extent inconsistent with the
terms of this Agreement) based upon the Prevailing Market Rate of
Exchange of Dollars and any such currency at the date of the
applicable transaction
24.2 Exchange Control. The Operator shall at all times have the right,
without restriction, directly or indirectly, of the Government, to obtain,
hold, deal with and disburse funds in such manner, currencies and
places as it chooses Without prejudice to the generality of the
foregoing, the Operator shall have the unrestncted and unencumbered
right to sell and receive payment for Minerals in any currency, including
the currency in which the Minerals are sold, and all proceeds therefrom
may be deposited in bank accounts outside of the Republic and field
there or remitted therefrom to anywhere in the world, in any currency,
Notwithstanding the foregoing, the Operator shall maintain at least one
bank account with a bank or financial institution in the Republic. The
Operator shall also have the right to acquire from, and sell to, any
Person currency that is legal tender in the Republic at the Prevailing
Market Rate of Exchange Additionally, any and all transactions
between the Government and the Operator dealing with or referring to
currency that is legal tender in the Republic will be converted to Dollars
at the Prevailing Market Rate of Exchange on the date of such
transaction. Currency gains or losses for purposes of Section 20 shall
be determined by reference to the Prevailing Market Rate of Exchange
24.3 Curroncy of Payment. Payment of the Operator's direct obligations to
the Government for Taxes and Duties payable under Sections 20. 21
22 and 23 of this Agreement shall be in Dollars, unless the Parties
otherwise agree. Any obligation originally stated in currency that is
legal tender in the Republic, or in any currency other than Dollars, will
be converted to Dollars at the Prevailing Market Rate of Exchange on
the date such obligation is paid, or shall fall due. whichever is eadier
However, the Operator shall make payments of sums it collects or
behalf of the Government, including, but not limited to. taxes withheld
from the salaries or wages of the employees of the Operator and any
other sums payable to other Persons from which a portion is r.quued
by Law to be withheld or retained by tne Operator on behalf of the
Government, in the currency in which such salaries or wages or such
other sums are collected The Operator shall have the right to make all
other payments whether to the Government or to other Persons in
currency that is legal tender in the Republic
24.4 Right to Remit and Receive Payments. The Operator sfiai have the
right to remit and receive in Dollars all payments of dividends, interest,
pnncipal and other property payable items arising from, as a result of.
or related to Operations, and to do so free of Taxes and Duties on such
remittances or receipts, and without penalties, any required total or
partial surrender, exchange or confiscation of such Dollars, or other
direct or indirect restrictions on such remittances or receipts
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24.5 Audit
a The Operator shall cause its books of accounts to be auditec
within three (3) months, or such longer period of time as the
Minister may approve, after the dose of each Financial or Fiscal
Year by an internationally recognized independent auditor
selected by the Operator and satisfactory to the Government and
a copy of the annual financial statement duly certified by said
auditor shad be furnished to the Government within twenty (20>
days after its recent by the Operator The foregoing shall not. in
any way. imply acceptance of any such audit or certification by the
Government, or predude the Government from auditing such
books of accounts but at the Government's expense
b. The foregoing shall not in any way imply acceptance of any such
audit or certification by the Government or preclude the
Government from auditing such books of accounts at its own
expense and as provided under Law. provided that the
Government shall provide the Operator with a copy of any such
audit within forty five (45) days of rece<>t However, once either
the Government or the Operator has audited any book of
accounts the financial statement thus audited shall be corsider.-o
acceptable and the audit results binding and conclusive as to its
findings, unless a Party shall have indicated to the contrary wilt
ninety (90) days alter its receipt of a copy of the audited financi.il
statement.
c If the Operator has. pursuant to this Agreement, underpaid its
liability for Taxes and Duties the Government may. subject to the
Revenue and Finance Law, assess interest and penalties but rot
to exceed the London Interbank Offering Rale (LIBOR) existing ai
the lime of such assessment, plus one (1) peicentage pomt
multiplied by the amount underpaid If LIBOR should cease to be
reported, then the rate to be applied shall be another agreed
substitute rate If the Operator has overpaid its liability for Taxes
and Duties then, at its option, it may elect either to be reimbursed
by the Government or to apply such overpayment against future
Taxes and Duties
d In case a review of records or books oirfside of the Republic is
required the Operator writ cooperate to provide the Government
with copies of the information, books and records needed to
complete the audit If the Government nonetheless deems it
necessary for any part of such audit to be performed outside of
the Republic, the cost of associated travel will be borne by the
Government
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SECTION 25: INCIDENTAL RIGHTS
25.1 Grant of Rights Subject to the terms and conditions heroin provided
and solely for the purposes incidental to the exercise of tho rights
granted to the Operator under Sections 3 and 4 of this Agreement, the
Government hereby grants to the Operator the right, within the
Exploration Areas:
(a) To acquire, build, and construct Infrastructure. Plant and
Equipment, and other facilities, and to maintain and operate the
same:
(b) To remove, extract and use, solely for its own exploration
purpose, free of tax or other charge or fee imposed by the
Government, any water, gravel, sand, clay, stone and timber
(except for protected species, insofar as they do not interfere with
or hinder Operations): provided however, that where any land
villages, houses, person, or watering places for animals have
been supplied water by right through custom, the Operator shall
not deprive them of a constant and reasonably supply of usable
water, nor shall the Operator, without the Government's consent,
interfere with any water or other rights enjoyed by anyone under
any agreement with the Government The Government will
provide information to the Operator of any such agreements
affecting the Exploration Area upon the Operator’s request
25.2 Imports. The Operator shafl be entitled to xnport and use m respect of
Operations, and subsequently export any and aU machinery,
equipment, consumable items, fuels, explosives and any other thing
whatsoever reasonably requiied with respect to Operations and in
accordance with the terms of this Agreement, provided, however, that
the Operator shall not re-export fuels and explosives surplus to
requirements if such surplus can be sokJ at competitive international
prices within the Republic. The Operator shall at all time comply with
Law regarding the safe use. sale, disposal and security of explosives
25.3 Taxes on Resale. The Operator may sell, in the Republic, all imporleo
items that are no longer needed for Operations However if such
imports were exempted from Taxes and Duties, the Operator shall fulfill
all formalities required in connection with the payment by the purchaser
of all Taxes and Dubes on the depreciated value of the imports
imposed on such sales by Law
17
SECTION 26: ASSIGNMENT AND ENCUMBRANCE
26.1 Right of Assignment. The Operator shall have the right to assign or
otherwise dispose of all or part of its interest under this Agreement wrth
the prior written consent of the Government (which consent shall not be
unreasonably withheld) provided, however, that such consent shall not
be required in the case of an assignment or other disposition to an
Affiliate in which latter event the Operator shall not be relieved of its
obligations under this Agreement other than to the extent fulfilled by the
Affiliate
26.2 Right to Encumbor. The Operator shall have the nght to mortgage,
charge or otherwise oncumber all or part of its interest under this
Agreement for the purpose of raising, from one or more Affiliates or
third parties, financing for its obligations under this Agreement, but any
power of sale arising under any such mortgage, charge or other
encumbrance shall only be exercised with the prior written consent of
the Minister, which consent shall not be unreasonably withheld
26.3 Notice of Assignment or Encumbrance. The Operator shall
promptly give Notice to the Minister of any assignment, mortgage,
charge or other disposition or encumbrance pursuant to this Section
26
SECTION 27: TERMINATION
27.1 Termination by the Operator. During the Exploration Period the
Operator may surrender by not less than sixty (60) days notice to the
Government, all its rights hereunder in respect of all or any pan of the
Exploration Area, and the Operator shall be relieved of all obligations m
respect of area so surrendered except those obligations that may have
accrued poor to the Effective Date of. or arising out of or related to the
surrender
27.2 Termination by the Government Subject to the provisions of
Section 29. the Government shall have the right to terminate this
Agreement if any of the following events (hereinafter called "Events of
Default") shall occur and be continuing
a) where the Operator shall fail to make any of the payments
described in this Agreement on the doe payment date and such
default is not cured within thirty (30) days after notice by the
Government (or within such longer period as may be specified m
said notice),
is
b) where the Operator shall materially fail to comply with its
obligations or any other conditions under this Agreement and such
failure shall have a materially adverse effect on the Government
and is not cured within ninety (90) days after notice by the
Government or within such period as may be specified in said
notice;
c) where the Operator shall (i) voluntarily dissolve, liquidate or wind
up its affairs, or make an assignment of all or substantially all of its
assets for the benefit of creditors other than an assignment made
to secure indebtedness incurred in the ordinary course of
business, (ii) file a petition or application to any tribunal for the
appointment of a trustee or receiver for all or any substantial pan
of the Operator's assets, (ill) commence any proceedings for its
bankruptcy, reorganization, arrangement. insolvency or
readjustment of debt under the laws of any jurisdiction, whether
now or hereafter in effect, or if any such petition or application is
filed, or any such proceedings are commenced against it. shall
indicate its approval thereof, consent thereto or acquiescence
therein, or (iv) if any order is entered appointing any such trustee
or receiver, or adjudicating the Operator bankrupt or insolvent, or
approving the petition in any such proceedings, and provided that
the Operator shall fail to take corrective measured) to have such
order removed or lifted within sixty (60) days
d. where the Operator shall fail to carry out Exploration as required
by Section 5.1. cease Exploration for a period of twelve (12)
consecutive months or cease Production with respect to ail
Production Areas for a period of twenty four (24) consecutive
months unless such failure or cessation is consented to by the
Government or is caused by a state of force majeure in particular
relating to security issues preventing safe access to the
Exploration or Production Areas
27.3 Opportunity to Cure. In the case of an alleged Event of Default
described in Section 27.2. the Government before taking any further
action, shall provide Notice to the Operator of the alleged occurrence of
such Event of Default and of the Government’s views in that regard
and shall offer the Operator a fair opportunity to consult with the
Government to resolve the matter If. after a reasonable period of time
of consultation, the Government is of the reasonable opinion that the
matter cannot be resolved by further consultation, the Government may
then send to the Operator Notice of the Government s intention to
terminate this Agreement If the Event of Default is not cured within
sixty (60) days after said Notice, or within such longer period as may
be necessary to allow a reasonable period of time to effect such cure,
then this Agreement shall be terminated
IV
27.4 Disputes Regarding Events of Default Notwithstanding the
provisions of Sections 27.2 and 27.3, if the Operator disputes whether
there has been an Event of Default described in Sector 27.2 ana
within sixty (60) days after receipt by the Operator of the Government s
Notice of its intention to terminate, refers such dispute to arbitration m
accordance with Section 29. then termination of this Agreement shall
not take effect until the finality of. and in accordance with, an arbitration
award upholding the Government s right to terminate.
SECTION 29: ARBITRATION
29.1 Submission to Arbitration. Any dispute between the Government
and the Operator arising out of. m relation to or in connection with this
Agreement or its formation, or the validity, interpretation, performance
termination. enforceatxWy or breach of this Agreement (including any
dispute concerning whether the Government or the Operator has
violated or is in breach of this Agreement or of any Law affecting the
rights, obligations or duties of any Party under this Agreement), for
which resolution oy suormssion to an expert is not specifically provided
elsewhere this Agreement shall be exclusively and finally settled by
binding arbitration pursuant to the Convention m accordance with the
rules of the Centre in effect on the Effective Date except to the extent
in conflict with this Section 29 which shall prevail in that event The
Parties agree that this Agreement and the Operator s Operations
pursuant thereto constitute an "investment" by reason of the
expenditure of a considerable amount of money in the Republic .in.)
that for purposes of Article 25(1) of the Convention, any dispute subject
to this Section 29 is a legal dispute arising directly out of an
investment. Either of the Parlies to such dispute may institute
arbitration proceedings by giving Notice to the other Party and Notice
to the Secretary-General of the Centre including in each a statement of
the issues in dispute
29.2 Nationality for Purposes of Arbitration. The Operator is
incorporated in Liberia and notwithstanding the incorporation in the
Republic of any of the Operator's successors or assignees, or of any of
its other Affiliates, all such entities shall be treated for purposes of
arbitration under this Section 29 as nationals of the United States of
America for purposes of the Convention and of this Agreement, except
that the Operator and any other such entity may. alternatively, elect to
be treated instead as a national ol any othor state of which undei the
Convention, international law or the law of such slate it is a national
20
29.3 Arbitrators. Any arbitral tribunal constituted pursuant to th«s
Agreement shall consist of one (1) arbitrator to be appointed by the
Government, one (1) arbitrator to be appointed by Operator and one
(1) arbitrator, who shall be the president of the tribunal and shall be a
citizen neither of the Republic nor of the United States of America (or of
any other state of which a Party is a national under Section 29 2) to be
appointed by the Secretary-General of the Centre No such arbitrator
shall have an interest in the matters in dispute.
29.4 Referee. At the request of a Party, any matter otherwise subject to
arbitration under this Agreement shall instead be referred for resoiuton
to a single referee to be appointed by the Secretary-General of the
Centre, or of any successor entity as provided for by Section 29 10
below, except for any dispute arising out of or related to Sections 3. 4
5. 6. 20. 21, 23. 24. 27. 29. 31 and 33 and Sections 18.7 18 8 and
18.9 of this Agreement, which must be referred to arbitrators appointed
pursuant to Section 29.3 above unless the Parties jointly agree that any
such dispute is not material, in which event it may be referred to the
referee for decision at the option of either party. The decision of the
referee shall be rendered pursuant lo Section 29.6 of this Agreement
(except as regards the requirement for a decision by majority vote) and
shall be final and binding unless appealed by any Party to arbitrators
appointed as provided in this Section 29.3. who shall examine the
referee’s decision only as to manifest enor of law. findings of fact that
are not supported by any credible evidence, and abuse of aiXhonty
misconduct or other unauthorized act by the referee
29.5 Venue. Arbitration proceedings conducted pursuant to this Agreement
shall be field in Washington, D.C or such other place as the Parties
may agree and shall be conducted in the English language I he costs
of the proceedings shall be assessed and borne in such manner ns the
arbitral tribunal shall decide. Any procedural issues that cannot bt
determined under the arbitral rules ol the Centre shall be determined
pursuant to applicable law as set forth in Section 33 below
29.6 Award. The arbitrators shall, by majority vote, render a written
decision slating the reasons lor ll>oir award within three (3) months
after any hearing conducted has been concluded Any monetary
award shall be assessed and payable in Dollars (determined at the
Prevailing Market Rate of Exchange as of the date of the award if the
award involved an obligation expressed in any currency other than
Dollars) through a bank designated by the recipient, and in the case of
an award to the Operator, shall be exempt from any Taxes and Duties
imposed by Government Each Party shall bear its own costs mid
attorney fees.
2I
Neither Party shall have any liability lot either consequential damage*
(except for purposes of set off) or exemplary or punitive damages, but
interest at a rate not to exceed the London Inter-bank Offering Rate
(LIBOR) existing at the time of such award, plus one (1) percentage
point, multiplied by the amount of the award, ahull be assessed from
the date of any monetary award until Its satisfaction If LIBOR should
cease to be reported, then the rate to be applied shall be another
substitute rate agreed to by a majority of the arbitrators In any case
the liability of the Operator shall be lanited to the net book value of its
investment m the Republic at the hme of the award. If the decision of
the arbitral tribunal is adverse to the Operator, then the arbitral tribunal
may. in its discretion, specify a reasonable penod of grace to cure any
defect or default on the part of the Operator, provided that such period
of grace shall not exceed one hundred eighty (180) days for the making
of any payment required by such award
29.7 Waiver of Sovereign Immunity. The Government fiereby irrevocably
waives all claims of immunity from the Arbitrators' jurisdiction, and from
the enforcement of any arbitral awurd rendered by a tribunal
constituted pursuant to this Agreement including immunity from service
of process and immunity from fhe jurisdiction of any court situated in
any state, country or nation
29.8 Reservation of Rights. The right lo refer a claim or dispute lo
arbitration hereunder shall not be affected by the (act that a claimant or
respondent has received fui or partial compensation from another
Person for a loss or nfury that m the object of the daim or depute end
any such other Person may participate m such proceedings by right of
subrogation
29.9 Nature of Award. The Parties agree that the arbitral award of any
arbitral tribunal constituted pursuant to this Agreement may contain
such orders (including orders for specific performance other equitable
relief or monetary damages) m leaped of or affecting any of the Parties
(and any loss or damago suffered by any of them) as such arbitral
tnbunal determines to be appropriate in the circumstances The
Parties, subject to their respective obligations contained elsewhere in
this Agreement, shall take all such actions as are necessary to give full
and complete effect to the award which, in accordance with Ms terms,
shall be binding upon and enforceable against them
22
29.10 Successor*. The consent to the jurisdiction of the Centre at set forth
in this Section 29 shall equally bind any successor of or successors-m-
Interest to either Party to this Agreement Should the Centre be
replaced by. or its functions be substantially conferred upon or be
transferred to, any new international body of a similar type and
competence, the Parties shall have the right to submit any disput.- to
such body for settlement by arbitration in accordance with the
foregoing provisions of this Section 29
23.0 NOTICES
(a) AM notices requests, reports approvals consents designations
or other communications (coaectivety referred to heresi as
“communications") required by. provided for. in. or relative to this
Agreement shall be in writing All communications shall be
delivered, in case of Ihe Government to
The Minister of Lands. Mines & Energy
Ministry of Landa, Mines & Energy
P.O. Box 10-9024
1000 Monrovia 10, Liberia
And in the case of the Operator to
The President
MAGMA MINERAL RESOURCES INC.
Monrovia, Liberia
or such other address as may be designated m writing by the
Operator
A delivery of a communication shall be deemed effective only
when mailed, postage prepaid and return recent requested
telefaxed or. hand-delivered and rece*rt
(b) Nothing in this Section shal be deemed to refceve the Operator
from fifcng any report, return or other communication required by
Liberian Laws of general application at the time and si the manner
therein prescribed
23
24.0 NONWAIVER
The failure of either party at any time to require performance by the
other party of any provisions hereunder shall m no way affect the right
of that party thereafter to enforce the same or shal it effect the party's
right to enforce any of the other provisions of this Agreement nor shall
the waiver by either party of the breach of any provisions hereof be
taken or held to be a waiver of any subsequent breach of such
provision or as a wavier of the provision itself
25.0 AFFIRMATIONS
25.1 The Operator shad, during the term of this Agreement and for such
period thereafter as may be reasonable, continue to have corporate
existence as well as aM corporate rights, powers, purposes and duties
set forth and described in this Agreement and in its Articles of
Incorporation and By-Laws, as the same may from time-to-time be
amended in accordance with their terms
25.2 The ownersh*) of any Mneral shal pass from the Government to the
Operator at the bme that the Mmeral m the Exploration Area is
excavated by the Opeiatur
25.3 Subject to the obligations of the Operator and the Government
elsewhere contained in this Agreement, the Operator shall ensure that
it complies with the Agreement.
25.4 The Government and Operator shall each be the beneficiary of the
nghts granted to it under this Agreement No other person shall have
any nghts under this Agreement unless a Party or unless otheiw.se
specifically provided in this Agreement
25.5 Each Party shall execute such documents and do such furfiier things
as may be necessary to give ful and complete effect to the provisions
of this Agreement
26.0 EFFECTIVE DATE: This Agreement shall become effective and be
binding on the Parties when executed by them.
24
IN WITNESS WHEREOF, the Parties have executed this Agreement, through
their respective duly authorized representatives, on the day, month and year
indicated below.
Signed in_originals on the ^day of AD 2005
IN PRESENCE OF:
[Signature]
FOR THE GOVERNMENT OF THE
REPUBLIC OFLIBERIA:
[Signature]
FOR THE OPERATOR:
[Signature]
MAGMA MINERAL RESOURCES INC.
25
Mineral and Exploration Area for Magma Mineral Resources Inc., Nimba South
UTM Coordinates of the Mineral and Exploration Area for Magma Mineral
Resourse Inc., Nimba South
r
Point Easting Northing
0 490000 705000
1 490000 720000
2 495000 720000
3 495000 725000
4 500000 725000
5 500000 730000
6 515000 730000
7 515000 735000
8 525000 735000
9 525000 740000
10 530000 740000
11 530000 700000
12 520000 700000
13 520000 690000
14 515000 690000
15 515000 710000
16 52000C 710000
17 520000 715000
18 525000 715000
19 525000 720000
20 515000 720000
21 515000 715000
22 510000 715000
23 510000 710000
24 505000 710000
25 505000 _ 705000
490000
Area = 1000 Sq Km