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DATED 31 MARCH 2000
THE G O V E R N " OF THE REPUBLIC OF ZAMBIA
KONKOLA COPPER MINES PLC
PART A ..................................................................................................... 3
PART B ...................................................................................................
Right to Manage and Obligations to Develop .................................................
Rights To Export And Import ...................................................................
Supply and Procurement ..........................................................................
Local Business Development
Employment and Training Plan., ................................................................
Suspension or Curtailment of Production ......................................................
Social Assets and municipal infrastructure Services ..........................................
Records and Operating Reports .................................................................
PART C ...................................................................................................
11. ForeignExchange .................................................................................
PART D ...................................................................................................
by GRZ ...................................
16.Compensation for Breach of Stability
or compulsory acquisition Provisions............. 48
PART E ...................................................................................................
17. Assignment ......................................................................................... 50
18. Extensions to Time ................................................................................
19. Termination......................................................................................... 53
20 . Amicable Settlement of Disputes................................................................
21. Sole Expert ......................................................................................... 58
22 . Arbitration ..........................................................................................
23. Performance to Continue .........................................................................
24 . Waiver of Sovereign Immunity..................................................................
25 . Law Applicable ....................................................................................
26 . Force Majeure. Economic Force Majeure and Material Adverse Change
27 . Variation ............................................................................................
29 . Notices ..............................................................................................
30 . Waiver ..............................................................................................
31 . Severability .........................................................................................
32 . Further Acts ...................................................................................
33 . Counterparts ........................................................................................ 71
35 . and
agreement 36 . Entire
37 . Indexation...........................................................................................
ApprovedProgramme ofMining and Metal TreatmentOperations ..;;-.~... 74
SCHED-ULE 3 ..............................................................................................
PART I CONTRACT AREAS ..........................................................................
PART 11FORM OF THE LARGE SCALE MINING LICENCE-: ...............................
PART III MINING AREAS ............................................................................
SCHEDULE 4 ............................................................................................
PART I THE KCM ENVIRONMENTALPLANISINCQEWORATEDHERE
PART 11 THE ZCCMENVIRONMENTAL PLAN ISINCORPORATED HERE B Y
Employment and Training Plan .......................
Tax S c ~ ~ u.......................................................................
Working Schedule: .._................ .......................
The Resettlement Action Plan is Incorporated here by Reference. ......... 89
THIS AGREEMENT is made on 3 1 March 2000
THE REPUBLIC OF ZAMBIA, actingthroughthe
Minister of Mines and Minerals Development and the Minister
of Finance ("GRZ");
MINES PLC, a companyincorporated
in the Republic of
Zambia (registered no. 43628), whose registered office is at 74 Independence Avenue,
Lusaka, Republic of Zambia (which shall include any permitted assigns or successors
of the rights and obligations of Konkola Copper Mines Plc) ('IKCMtt).
of K M by the KCM Consortiumforthe
M i m g Project, the Nchanga Division
(including the Chmgola Refractory Ores), the Nampundwe Mine and associated assets
(including agreed social assets) of ZCCM m the Copperbelt and Lusaka Provinces of
Zambia(the "Facilities"),the location of which is more specifically identified by
reference to the plans annexed hereto as Exhibits to Schedule 3, Part 1. The SmelterCo
31 March 2000 providesthat, if K M
exercises its right thereunderto acquire the assets of SmelterCo and to novatethis
Agreement to cover such Assets, the provisions of this Agreement and the Schedules
will apply to such assets and such assets shall be deemed tobe part ofthe Facilities
except for the purposes of the Investment Commitment.
GRZ has approved these proposals, which
are hereafter referred to as the "Approved
are annexed hereto as
The development and operationof
significanceto the people of Zambia.
tie Facilities shall be of majoreconomic
GRZ wishes to ensure thatthecontinueddevelopmentandexploitationofthe
commercial deposits ofcopperoreatthe
Facilities together with the development of
KDMP shall securethemaximumbenefit
advancement and the social and economic welfare of, the people of Zambia, including
the people m the vicinity of the Contract Areas in a manner consistent with their needs
and the protection of the environment and secure an appropriate return on investment
for the Shareholders commensurate with the risks involved to K M .
GRZ and KCM haveagreed
on a numberofmatterswhich
are set out in this
Agreement and wish tie matters agreed upon to be an enduring arrangement of national
GRZ has granted to tie Minister of Mines and Minerals Development and the Minister
Agreement on behalf of GRZ and GRZ and KCM each agrees to be bound by all the
termsandconditionsrelating thereto. TheMinisterhasconsultedwiththeMinister
responsible for finance and economic development as required by Section 9 of the Act,
as mended, andhassoughtandreceivedtheadviceoftheMiningAdvisory
Committee in accordance with Section 88 of the Act and is acting in
GRZ, ZCCMand KCMhave enteredinto a SaleandPurchaseAgreementdated
15 December 1999 which requires on its Completion (asdefmed therein) the entry into
of this Agreement.
entered into anEnvironmentalLiabilitiesAgreementof
evendateherewithwhichprovides, infer alia, forresponsibility for preparation and
implementationof m environmental plan to be assumed by ZCCM m respect of assets
not acquired byKCM pursuant to tie provisions ofthe Sale and Purchase Agreement
referred to in (7) above and for the provision by GRZ of certain mdemnities m respect
of liabilities under Environmental Laws and laws relating to mine safety.
DEFINITIONS AND INTERPRETATIONS
In this Agreement,unlessthecontextotherwiserequires:
"Act"means the Mines and Minerals Act, 1995 (No. 31 of 1995) as from time to time
amendedand in effect, andincludes my regulations made thereunder, but subject, in
all cases, to the provisions of Clause 13.l(b) of this Agreement;
"Affiliate, AffiliatedParty, or A f f i t e d Parties"means:
m y companyinwhich K C M or a Shareholder (as the case m y be) holds fifty
per cent. (50%) or more of tie ordinary voting shares or which holds fifty per
cent. (50%) ormore of KCM's or a Shareholder's (as the case m y be)
i s controlled by orControls,or is
under Common Control with, KCM or a Shareholder (as the case m y be); or
anypersonorgroup of persons king directors or executiveofficersof,or
the employment of, any person referred to m (i) or (ii) above,
share capital, the possession of voting power, contract or otherwise to appoint
and/or remove all or such of the bard of directors or other governing body of
a person as are able to cast a majority of the votes capable of bemg cast by the
members of that board or body; and/or
of the beneficialinterests m and/or the
ability to exercise thevoting rights applicable to shares or other securities m
any person which confer in aggregate onthe holders, whether directly or by
means of holding such interests m one or more other persons (either directly
or indirectly), more than fifty per cent. (50%) of the voting rights exercisable
at general meetings of that person,
and "Controlledby" shall beconstrued accordingly and "CommonControl" means
the circumstances where two (2) or more persons are controlled by the same person or
"Agreement"means this agreement as varied from time to time m accordance with the
"ApprovedProgramme of Mining andMetalTreatmentOperations" means tie
proposals for rehabilitating, developing and operating the Facilities which are set out m
Schedule 1 (as varied from time to time in accordance with Clause 27);
''Assets"has the meaning given to it in the Sale and Purchase Agreement;
"Business" means the businessto be carried onby K C M , namely that of (a)
exploration, appraisal and mining of ore and waste; (b) the treatment of ore to produce
products and (c) sale of products, m each case whether within or outside Zambia, and
a d o r conducive to the foregoing which may be approved by the Directors from time
a Saturday or a Sunday) on which
commercial banks are generally open forbusinessinLondon,
Johannesburg and Lusaka;
"Calendar Month"means a monthcommencingonthe 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 be;
"Call Option Deed" means the call option deed of even date herewith made between
ZCCM, GFU and KCM andwhichprovidesthat,
m certaincircumstances, ZCCM
mayrequirethetransfer to it of the assets oftheKonkola Divisionandtheassets
comprising the KDMP;
"CEC"means the Copperbelt Energy Corporation PLC (as more particularly described
in the Sale and Purchase Agreement);
"Central Bank"means the Bank of Zambia or any successor thereto;
"Collective Agreement(s)"means the Standard Conditions of Employment and Service
as agreed with the Mineworkers Union of Zambia and which idare in force at tie date
hereof, as thesemay be re-negotiated by KCM prior to Completion and which shall
become effective as at Completion, as amended from time to time;
"Companies Act"means the Zambian Companies Act, 1994 (Act No. 26 of 1994) as
from time to time amended and in effect but subject, in all cases, to the provisions of
Clause 13.l(a) of this Agreement;
"Completion"has the meaning given to it in the Sale and Purchase Agreement;
available forinspection by GRZ underClause 10
(whether in writing, in disk or electronic form, orally or pursuant to discussions and m
any form or medium in which any such information may be recorded or kept);
"ContractAreas" means those land areas described m Schedule 3 Part I;
"Controlof Goods Regulations" meanstheControlofGoods
Fee) Regulations, 1997 (S.I. No. 20 of 1997), issued pursuant to an amendment (S.I.
No. 7 of 1997) to the Control of Goods Act (Chapter 690 of the Laws of Zambia), as
from time to time amended and m effect but subject, in all cases, to the provisions of
Clause 16.1 of this Agreement;
mining area m Zambia;
"Copper Floor Price" means onethousandsevenhundredUnited
(US$1,700) per tonne adjusted annually on the first and each succeeding anniversary of
the Effective Date (an "AdjustmentDate")bythe change m the Producer Price Index
for Finished Goodsnot seasonally. adjusted, as itappearsintheperiodicalMonthly
LaborReview as published by the US Departmentof Labor,Bureau of Labour
Statistics(the "Index")or, if suchindexisnot
replaces it on the basis set out below:
CFPn = (CFPn - 1) X
PPIn - 1
Where: CFPn is the adjusted Copper Floor Price
CFPn-l is the previous Copper Floor Price
PPIn is the Index for the month three (3) months prior to the Adjustment Date
PPIn-l i s the Index for the month fifteen (15) months prior to the Adjustment
"Copper Reference Price" means the spot price per tonne of Grade A Copper of the
London Metal Exchange as published in Platt's Metal Week averaged over a period of
twelve (12) Calendar Months as certified by the auditors of KCM from time to time or
upon the request of GRZ (as the case m y be). Intheeventthat Platt' S Metal Week
fails to publish quotations for Grade A Copper as aforesaid for any week, the Parties
shall agree an alternative source to establish the price ofGrade A Copper within five
(5) Business days of notification by KCM to GRZ of the failure topublishsuch
quotations as aforesaid, failing which the Parties may refer the matter for determination
in accordance with Clause 21;
"Dispute"means my dispute,disagreement,controversy,
claim ordifference of
whatsoever nature arising under, out of, m connection with or relating (in any manner
whatsoever) to this Agreement including (without limitation) m y dispute or difference
(i) concerning the initial or continuing existence
of this Agreement or any provision
thereof, (ii) as to whether this Agreement or any provision thereof is invalid, illegal or
(iii) as tothe
performance or breach of this Agreement (including whether any default notices served
under Clause 19 is valid or whether the default or failure alleged in any such Default
Notice has occurred), (iv) concerningthe legal capacity of my ofthe Parties, or the
signatories on theirrespectivebehalves to this Agreement,toenter into and validly
bind the Parties to the terms of this Agreement or any provisions (or any part
the provisions of
Parts C and D, (v) as to whether any compensation is payable under any provision of
this Agreement and as to the quantum
claim which is ancillary or connected, in each case
inanymanner whatsoever, to the
"DistributableProfits" meansaccumulatedafter tax profits and reserves ofKCM,
available for distribution as dividends in accordance with Section eighfy four of the
Companies Act, as shown in the financial statementsof KCM;
(which shall be
"Division"shall mean any one of them;
"EconomicForce Majeure" means a situation where tie Copper Reference price has
fallen and remains Mow tie Copper Floor Price and an "Economic Force Majeure
Event" shall mean the giving of notice of the occurrence of Economic
pursuant to Clause 26.3 (a);
"EffectiveDate"means the date of Completion;
"Employmentand Training Plan" means until such time as agreement is reached on
the f t i form of such plan pursuant to Schedule 6, the programme forming Schedule 6
hereto as approved by the Minister for the purposes of Section 25(l)(e) of the Act (and
appended to the Large Scale Mining Licences pursuant to Section 25(4) of the Act) and
thereafter means suchplan as m y be approved bytheMinisterandwhichreplaces
"EnablingLegislation"means tie following legislation:
the Mines and Minerals (Amendment) Act 2000;
the Companies (Amendment) Act 2000;
the National Pension Scheme (Amendment) Act 2000;
the Pension Scheme Regulation (Amendment) Act 2000; and
the Income Tax Amendment Act 2000.
Statutory Instruments""means the following statutory instruments:
tie Mines and Minerals (Environmental) (Exemption) Order;
the Pension Scheme Regulation (Investment) (Exemption) Order; and
the National Pension Scheme (Exemption) Order.
Companies (Fees) (Exemption) Order;
Companies (Resident Directors) Order;
Customs and Excise (Excise Duty) Suspension Regulations;
Mines and Minerals (Royalty) (Remission) Order; and
the Customs and Excise (Konkola Copper Mines Plc) (Remissions) Regulation
of the Development Agreement.
m y be necessarytogiveeffectto-Schedule
"Environment"means any ecological system and the living organism which live in it
(including m and his property) andthefollowingmedia:
air (including air within
buildings andthe air withinothernaturalormanmadestructureswhetheraboveor
land or in drains,culverts,
sewers or other manmade structures and inland waters) and land (including land under
"EnvironmentalLaws" means: the Act, tie Mining (Mineral Resource Extractions)
Regulations, 1994 (SI 119/1994); the Environmental Protection and Pollution Control
Act (Act No.12of 1990) andregulationsenactedthereunder;and
Minerals(Environmental)Regulations 1997 (SI No.29 1997) and m y otherlawor
regulations m force from time to time m Zambia (including tie common law) which
have as a purposeor effect the protectionofand/orprevention
of harm to the
Environment or to human health and/or the provision of remedies for harm or damage
health save for the provisions contained in each of
safety a d o r the safety of persons
rather than totheEnvironmentbut subject, in all cases, to the provisions of Clause
12.3 and 13.l(d) of this Agreement;
"Environmental Condition" means any or any combination of the following, in each
case to the extent they arise from, are connected with or affect the Assets or Normal
Operations: (a) pollutionof the Environment andlor harm tohuman health resulting
from pollution or harm to the Environment including noise, emissions,
of buildings, other man made structures or tie work place, and discharges or releases
of my substancesinto tie Environment; (b) contaminatedland; and (c) pollutionof
"Environmental Liabilities Agreement" means the agreement of even date herewith
between KCM, ZCCM and GRZ providing for, infer d i u , theadoptionof a ZCCM
EnvironmentalPlanand the indemnification ofKCM by GRZ inrespect of certain
environmental and mine safety liabilities;
"EnvironmentalPlans" means each ofthe KCM Environmental Plan and the ZCCM
"Environmental ProtectionFund" means the fund established by section eighty WO of
tie Act as the same applies to K C M pursuant to the Enabling Statutory Instruments;
"ExtensionofTime Event" means an event certified as suchby KCM and arising
anyaction by GRZ oractiontaken on its behalf other than inaccordancewith
this Agreement; or
anyactiontaken by a person not party to this Agreement (other than m
Affiliate of a party) or any event or circumstance where such action, event or
circumstance is beyond the reasonable controlof KCM ,
which in either case has the effect of delaying the implementation by K C M of any of its
obligations under this Agreement;
"ExtensionNotice" meansthe notice served by K C M on GRZ pursuantto Clauses
2.4(c) and 27.4, notifying GRZ that it has k e n unableto satisfy the condition
contained in Clause 2.4(b)(i) or thatany of theevents in Clauses 2.4(b)(ii) OR (iii)
have occurred and are continuing and wishes, therefore, to delay the implementation of
"Facilities"has the meaning given in Recital (1);
"Force Majeure" has themeaning given to theterm m Clause 26.2 and "Force
MajeureEvent" shall meanthe giving notice of the occurrence of Force Majeure
pursuant to Clause 26.l(b);
"Good MiningPractices" meansacceptable mining andmetaltreatment
conducted in SouthernAfrica (which shall includethe right to m e andprocess
material twenty four (24) hours a day, three hundred and sixty five (365) days a year
(including public holidays), if required);
"GRZ"shall include all of its agencies and inmumentalities;
established by Articles of Agreementamong its member countries,whoseprincipal
officeis at 2121 PennsylvaniaAvenue,Washington DC, 20433, UnitedStatesof
"InvestmentCommitment" means, an investmentof two hundred and eight million
United States dollars (US$208,000,000) (adjusted in accordance with Clause 37.2 and
(if applicable) m accordance with Clause 2.3) and as furtheradjusted in accordance
with Clause 37.2 to be expended m relation to the Facilities and which is capitalised m
the accounts of KCM; and
"KCMAssets" has the meaning given in Clause 16.2;
"KCM Consortium"means Zambia Copper Investments Limited and IFC;
"KCM Environmental Plan" means, until such t i e as agreement is reached onthe
K C M Final Environmental Plan pursuant to Clause 12.1, the framework programme
as approved by the Ministerfor the
purposes of Section 25(l)(d) and 76(2) of the Act (and incorporated by reference m the
Large Scale Mining Licences pursuant to Section 25(4) of the Act), and incorporated
by reference in Schedule 4 Part I hereto, and thereafter means such programme as m y
be approved by GRZ as the KCM Final Environmental Plan (asamended by the P m e s
fromtime to time) andwhich replaces tie previous version of tie plan set out m
Schedule 4, Part I pursuant to Clause 12.1 ;
"KCM FinalEnvironmental Plan" means the plan approved by GRZ m accordance
with Clause 12.1;
"KCM Losses" has the meaning given m Clause 16.1 ;
"KCM PowerPurchaseAgreement" shall have the meaning given toit m the Sale
and Purchase Agreement;
"KDMP"means the Konkola Deep Mmmg Project;
"KDMP DevelopmentDate" meansthe date onwhichKCMnotifies
accordance with Clauses 2S(a) and (b), that it has obtained the Third Party Finance;
"KDMP Investment Commitment" means an investment of five hundred and twenty
three million United States dollars (US$523,000,000) to be expended by or on behalf
o f KCM h connectionwiththeKDMP
or after the KDMP
Development Date or, if lower, the amount required to be invested in order to achieve
production a t KonkolaDivision of at least fivemillionsevenhundredthousand
may reasonably be expected to be a
sustainablebasis, in each case subject to adjustment m accordance with Clause 2.8 and
Clause 37.2 and capitalised m the accounts of KCM;
"Konkola Large Scale Mining Licence" meanstheLargeScaleMiningLicence
Number 34 the form of which is set out m Schedule 3, Part 11;
"Konkola ContractArea" meanstheland
area described m Part A of Part I of
"Konkola Division" means the Konkola division of ZCCM, situated at Chililabombwe ,
Copperbelt Province, Zambia;
"Konkola Mining Area" means the area covered by the Konkola Large
"Kwacha"means the lawful currency of Zambia;
"Large !kale Mmmg Licences" means the Konkola Large Scale Mining Licence, the
Licence each of which is held byKCM pursuant to the Act, the form of which is set
out m Schedule 3 Part 11;
"Leases"means the leases details of which are set out m Schedule 2 of t h e Sale and
Purchase Agreement; and %ease" means any one of these leases;
"LIBOR"means, in relation to any
mount on which interest for a given period is to
thepercentage rate per annwn equal to theofferedquotationwhich appears on
Telerate Screenwhichdisplays an averageBritishBankers
AssociationInterestSettlement Rate for US dollars (being currently "3750")
for onemonthdepositsat or about 11.00 m onthe date which is two (2)
Business Days preceding the fmal Business Day of each calendar month that
monies are outstanding or, if payment i s notmadeonthe final Business Day
of a Calendar Month, two (2) Business Days preceding the Business Day on
whichpayment is made or, if suchpageorsuch service shall cease to be
available, such other page or such other service for the purpose of displaying
month deposits m US dollars as the parties, after consultation with each other,
shall select; or
if no quotation for US dollars for onemonthdeposits is displayed andthe
parties have not selected an alternative service on which a quotation is
displayed, the arithmeticmean(roundedupwards to four decimal places) of
the rates (as notified to KCM) at which the principal London offices of each of
four major banks in theLondonInterbankMarket as selected by tie parties
was offering to prime banks in theLondonInterbank Market one (1) month
deposits m US dollars at or about 11.OO a m on such date;
"LocdBusinessDevelopmentProgramme"" means until suchtime as agreement is
reached on the final form of such plan pursuant to Schedule 2 the programme for local
businessdevelopmentformingSchedule 2 heretoandthereaftermeanssuchplan
m y be approved by the Minister and replaces Schedule 2;
"Material Adverse Economic Effect" means a material adverse effect on the financial
conditionof K M whichhas or mayhave a materialadverse effect onthe K C M
present or future ability to operate the Business as now conducted or to be conducted
pursuant to tie Approved Programme of Mining and Metal Treatment Operations;
"MaterialAdverse Change Event" means an event having a material adverse effect
on the condition (financial or otherwise) of K M and which is so declared pursuant to
"MineProducts"means the ores or concentrates or other minerals produced from tie
Mining Areas and a l l smelter and refineryproducts(produced in Zambia) derived
"Minister"means the person for tie time being entitled to exercise tie powers of tie
Minister of Mines and Minerals Development under the Act;
"Ministry"means the Ministry of Mines and Minerals Development or other successor
Ministry from time to time;
"'Mining" has themeaning
given to it in tie Actand, for thepurposeof
"Mining Areas" means thegeographic areas covered by tie Large Scale Mining
Licences; and a reference to the "relevantMining Area" shall mean the geographic
area covered by the Konkola, Nampundwe or Nchanga Large Scale Mining Licence, as
the case may be;
- 11 -
"Nampundwe Large Scale Mining Licence" means the Large Scale Mining Licence
No. 32, the form of which is set out m Schedule 3, Part 11;
"NampundwePower Purchase Agreement" shall have the meaning given to it in the
Sale and Purchase Agreement;
"NchangaLargeScale Mining Licence" means the Large ScaleMiningLicence
No.33, the form of which is set out in Schedule 3 Part II;
"Normal Operations"means the operations of KCM carried on in accordancewith the
ApprovedProgramme of MiningandMetalTreatmentOperations,
as amended from
time to time;
required or permitted to be given under Clause 29;
or other communication
"OECD"means the Organisation of Economic Co-operation and Development;
are from time totimeparties to this Agreement,
including the original parties hereto and parties added or substituted pursuant to Clause
17; and "Party"means any of them;
"Quarter'means, as the context requires:
April, May and June; or
July,August and September;or
October,November and December;
"Reasonable Commercial Terms"means limited recourse f m m g with:
to final repayment,
of twelve (12) years, where the weights are the amounts of each loan facility;
anaveragerate of interest, weighted both by the size of each loanfacilityand
by theexpected periods duringwhich different rates may apply under each
facility, of no more than LIBOR plus 3.25%;
anyguaranteesrequiredterminating on completion ofthe construction ofthe
KDMP and passing of customary completion tests; and
termsavailablefor a transaction of a similarnaturewith a similar class of
sponsortothatparty or partiesproviding the pre-completion guarantees for
the KDMP f m c i n g .
"Registered Dependants"m a n s (i) the dependants of TransferringEmployees who, at
the date of this Agreement, are registered in tie records ofZCCMand (ii) those t i t
shall be registered inaccordance with Clause 9.1 inthe records ofKCM
entitled to use some or all of the Social Assets;
"RelatedAgreement" meansthe Sale and PurchaseAgreement and anyagreement
entered into pursuant thereto, and includes the Articles of Association of KCM;
reference in Schedule 9 hereto and thereafter means any such report as the Parties m y
approve to replace the previous version set out in Schedule 9;
"Royalty"means the mineral royalty payable under the Act;
"Sale and Purchase Agreement" means the Agreement dated 15 December 1999 and
made between ZCCM, K C M and GRZ vestingthe Assets (as suchterm i s defined
therein) m K C M in consideration of inter alia thepaymentof cash andtheissueof
shares to ZCCM;
Mining and Metal
TreatmentOperations,the K C M Environmental Plan, theEmployment and Training
Plan and the Local Business Development Programme;
"Shareholder"means a registered holder of ordinary shares in K C M or the holder of
the Special Share whose rights are set out m K C M ' s Articles of Association;
"Shareholders'Agreement" means the agreement of evendateherewithamongst
certain Shareholders in KCM, including ZCCM, governing the relationshipbetween
them as Shareholders m KCM;
"Sole Expert" means a person appointed in accordance with the provisions of Clause
"SpeculativeCurrencyTransaction" means a transaction involving the purchase or
sale of Zambian currency, the primary object of which is the making of a profit on the
exchange of currency, but does notinclude the takingoutof forward cover against
reasonably predictable incomes or costs or other normal risk management operations;
"Stability Period"means the period commencing on the Effective Date and, subject to
18.4, ending on the twentieth (20th) anniversary of the Effective Date;
by whomsoever, on whomsoeverand
levies of anynatureandwhatevercalled,
wherever imposed, levied, collected, withheld or assessed and all interest and penalties
attributable to such taxes; and "Taxation"shall have a corresponding meaning;
"Third Party Finance"has the m e m g given to t i t term in clause 2.4;
"TransferringEmployees" means those employeespreviouslyemployed by ZCCM
whoseemployment has beentransferred (with theirconsent), onthetermsand
conditions set outin theSale and PurchaseAgreement to KCM,with effect from
"Umpent Potion oftheBudgetedCommitment" means in respect of any part or
p m of the Facilities where production is to be suspended or curtailed an mount equal
to the product of (i) capital allocated in the Approved Programme of M i m g and Metal
TreatmentOperations (as oftheEffectiveDate)forexpenditureonsuchfacilities
w i t h i i three (3) years following the Effective Date but which remains unspent as of the
date of suspension or curtailment and (ii) the quotient of $208,000,000and total capital
projected (as ofthe Effective Date) to be spent at the Facilities within three (3) years
following the Effective Date m accordance with the Approved Programme of Mining
and Metal Treatment Operations;
' W $ " , "US dollars" or "UnitedStates dollars" meansthelawfulcurrency
United States of America;
V A T " means value added tax payable under the Value Added Tax Act, 1995 (No.
of 1995) as from time to time amended and in effect;
"Zambia"means the Republic of Zambia;
"ZCI" has the meaning given to it in the Sale and Purchase Agreement;
"ZCCM Environmental Plan" means, until such time as agreement is reached on the
ZCCM Final Environmental Plan pursuant to the Environmental Liabilities Agreement,
the framework programme for environmental clean up and protection as approved by
the Ministerfor the purposes of Section 25(l)(d) and Section 76 of tie Act(and
incorporated by reference in the Large Scale Mining Licences pursuant to Section 25(4)
ofthe Act) and incorporated by reference in Schedule 4 Part 2 hereto, and thereafter
approved by GRZ as theZCCMFinal
EnvironmentalPlan (as amendedfromtimetotime
by the Parties)andreplacesthe
previous Schedule 4 Part 2 pursuant to Clause 12.2;
"ZCCMFinal Environmental Plan" means the plan approved by GRZ in accordance
with the Environmental Liabilities Agreement; and
"ZCCM"means Zambia Consolidated Copper Mines Limited;
In this Agreement, unless the context otherwise requires:
monetaryreferences are references to United States dollars unlessotherwise
theheadings do notaffectthe interpretationor construction;
subject to theprovisions of Clauses 12.3 and 13.l(d) ofthisAgreement,
references to an Act include the amendments to that Act for the time being m
force and also any Act passed m substitution therefor and any regulations for
the time being m force thereunder, except where specifically excluded;
tie plural and vice versa;
references to a personinclude a partnership, firm orcorporation and any
ministry, department, agency, instrumentality or agent of GRZ or my political
subdivision thereof; and
the recitals and Schedulesformpart of this Agreement; and
references to "reasonable" and "unreasonable" and relatedconcepts shall be
and shall not be construednarrowly by
reference to concepts of procedural or administrative law.
OPERATIONAL A N D EMPLOYMENT ISSUES
RIGHT TO MANAGE AND OBLIGATIONSTODEVELOP
Except as specificallyprovided m this Agreement,andsubject to the Act (as
excludedandmodified by this Agreement), KCM will have the unfettered
right to manage the development and continued operation of the Facilities.
KCM shall, following the issueofthe Large Scale Mining Licences and, subject
to the terms of the Act, regulations made thereder, the Large Scale Mining
Licences and this Agreement, implement the Approved Programme of Mining
and Metal TreatmentOperations m accordance with thetimetablecontained
therein and Good Mining Practices.
Without prejudice to the obligationscontained m Clause 2.l(b), but subject to
Clauses 2.2 to 2.4, KCM shall:
Effective Date: and
(3) years following tie
KCM's obligationtoexpend tie InvestmentCommitment m accordancewith Clause
2.l(c)(i) shall be suspended where a Force Majeure Event has been declared and for so
long as such Force Majeure Event i s continuing.
tothe satisfaction m full of the InvestmentCommitment KCM
suspends or curtails production at any part or parts of the Facilities m accordance with
Clause 8 and has met its associatedobligationsunderClause
27, the Investment
C o m m e n t shall be deemedto be reduced by, m the case of a suspension, the
Unspent Portion of tie Budgeted Commitment in respect of such
part or parts of the
Facilities or, m the case of a curtailment, by a percentage of the Unspent Potion of the
parts ofthe Facilitieswhere the
percentage is equal to the percentage represented by tie proportion which the proposed
curtailment of production bears to the production budgeted for at the relevant part or
parts ofthe Facilities had suchcurtailment not occurred; Provided however that,
KCM resumesoperations m wholeor m part at therelevantpartor
parts of the
Facilities, the Investment Commitment shall be increased by the Unspent Portion of the
BudgetedCommitment m respectthereof talung accountoftheextent
Commitmentmust be expended will be extended on a day for day basis equal to the
period of suspension or curtailment; provided further that the provisions of this Clause
2.3 shall not cause tie InvestmentCommitmentto exceed two hundredand eight
million United States dollars (U.S.$208,OOO,OOO)or prohibit KCM fiom expending at
tie Facilities s u m exceeding theInvestmentCommitmentorthe KDIW Investment
Commitment. A working example of the operation of 2.3 is attached as Schedule 8.
KCMshalluse its bestendeavourstoraisethirdpartyfmance
ReasonableCommercialTerms in theamountsspecifiedinClause
(the “Third Party Finance”) withineighteen
Completion or, ifnotpossiblewithinthatperiod,assoon
of doubt,such best endeavours
(or, its shareholders to transfer) m y equity m
KCM to such financiers if insisted upon
as a condition of provision of such
Third Party Finance;
Commitment m accordance with Clause 2.l(c)(ii) shall be suspended:
if, and for so long as, Third PartyFinanceonReasonableCommercial
Terms is not available:
for three hundred and thirteenmillionUnitedStatesdollars
KDMP Investment Commitment; and
refinancingof preexisting KCM thirdpartyloanswhich
r e m outstandingfor a furtheronehundredandtwenty
sixty per cent. (60%)of the Investment Commitment;
Provided however that the figure m (B) aboveshallbereducedby
mount equal to the aggregate of any repayments of principal made by
m respectofsuch preexisting
third party loans and my prior distributions made to the Shareholders;
if, butonlyforsolong as, KCMisunableto meet, or obtain a waiver
of, conditions precedent to drawdown of third party finance required to
finance the KDMP Investment Commitment as a result of circurnstances
Consortium; provided that nothing herein shall oblige any member
finance to waiveany
condition precedent to drawdown;
where a ForceMajeureEvent,Economic
Force MajeureEvent or a
Material Adverse Change Event has been declared and for so long as
Force Majeure or Material
AdverseChange is continuing;providedthatKCMundertakesnotto
declare an Economic Force Majeure Event within 18 months following
to obtain the
Third Party Finance within eighteen (18) months following Completion
or any of the events contained in Clause 2.4(b)(ii) or (iii) have occurred
and are continuing; and
satisfy such condition or until the event has ceased (as the case m y be),
KCM shall notify GRZ m accordance with Clause 27.4 and, if the inability to
satisfy such condition continues or any of the aforementioned events persists,
and further deferments are required, similar notices shall be delivered at six
(6) monthly intervals.For theavoidanceofdoubt,
notify GRZ of such a deferral shall not be construed such that KCM would be
required to obtain GRZ's consent (or that GRZ would be required to publicly
support such a deferral) for such a deferral.
KCM shall, withinone (1) month of obtaining the Third Party Finance, andprovided
2.4(b)(ii) or (iii) have occurred and are
advise GRZ as to whether or notitintendstoproceed
development and construction phase of KDMP in accordance with Clause 2.7
KCMnotifiesGRZ in accordancewithClause 2S(a) thatit has obtainedthe
Third Party Finance, but advises GRZ in accordance with C l a w 2S(b) that it
does not mtendto proceed or continue with the development and construction
phase of K D M P in accordance with Clause 2.7 below (other than by reason of
any of the events described in Clauses
2.4(b)(ii) or (iii) having occurred and
being still continuing); or
KCMnotifies GRZ inaccordancewithClause 27.4 thatit has beenunable to
obtain theThird Party Financebutsuchfinancingis
Reasonable Commercial Terms (and, in the event of a dispute, the availability
has been c o n f m d following a determination by a Sole Expert pursuant to
Clause 2 1 hereof).
GRZ shall have the right to exercise Clauses 2 . 1 , 2.2 and 2.3 of the Call Option Deed.
pursuant to Clause 2.4@)(ii) and (iii)
and to Clause 2.8 below, KCM shall commence or continue with the development and
constructionphase of KDMP, as specified m andprovided for bytheApproved
Programme of Mining and Metal Treatment Operations, no later than the date falling
upon the expiry of six (6) calendar months from the KDMP Development Date and,
except as specifically provided m this Agreement, and subject to the Act (as excluded
or modified by this Agreement), KCM:
shall not require m y furtherapprovalorconsentfrom
development of the KDMP;
operations of the KDMP; and
GRZ to commence
shall be the soleimplementor ofthe KDMP,
and GRZ shall cooperate with K C M to facilitate the implementationof the KDMP.
In the eventthat:
theThird Party Finance has notbeenobtained (or, m the eventsuchThird
Party Finance has beenobtained,and any ofthe events set outin Clauses
2.4(b)(ii) or (iii) hasoccurredand
are continuingon the fourth (4th)
anniversary of the Effective Date);
the K C M Board has determinedtoadoptanalternativeminingplantoaccess
and develop those mineral deposits originally intended to be developed as the
KCM has expendedonehundredandtwentyfivemillionUnited
(US$l2S,OOO,OOO) m planning, preparing andimplementingsuchalternative
the KDMP Investment Commitment shall be reduced to two hundred and fifty
(U.S.$250,000,000) or, if lower, theamount
required to achieve production at Konkola Division of at least two million four
hundredthousand (2,400,000) tomes per-annumon what may reasonably be
expected to be a sustainable basis; and
notwithstanding that theconditionstodevelopmentof
GRZ shall not be entitledtorequire
develop KDMP m the m e r contemplated by the KDMP Investment
Commitment without taking account of the extent of m y reduction pursuant to
this Clause 2.8.
(24) months of theEffectiveDate,commencean
Metal TreatmentOperations as at thedateofsignature
Subject m all cases to the provisions of this Agreement, GRZ hereby acknowledges the
compliance ofthe Scheduled Programmes with all the relevant requirements of the Act
(including without limitationSection 24(3) ofthe Act) and the Large Scale Mining
Scheduled Programmes will be deemed to constitute compliance with Section 27 of tie
GRZ confirms thatit considers (or shall consider) the proposed mining, smelting and
refinery practices described in the original Approved Programme of Mining and Metal
Treatment Operations or as variedfromtimetotime
accordance with Clause 27:
to complywithSection 25(l)(b), (c) and ( f ) oftheActinasmuch
tie area ofland overwhichthelicenceissoughtisnot
m excess of the
Mining and Metal Treatment Operations;
beneficial use of the mineral resources
of the Act; and
be in breach ofanyof
for thepurposeofSection 81 of
the Act and GRZ (eitheron its ownbehalf or throughtheMinister or tie
Director of Mines or tie Director of Mine Safety) shall not allege that K M is
usingwastefulminingpracticesif K M isconducting mining in accordance
with the mining practices specified in the Approved Programme of Mining and
Metal Treatment Operations;
Provided that, inthe case of any variation to which Clause 27 applies, tie Approved
m all material
as to what constitutes a Good
respectswithGood Mining Practices.AnyDispute
Mining Practice will be referred for determination by a Sole Expert in accordance with
m force for a
mmmum period equal to the term of the Large Scale Mining Licences; provided that,
where KCM is, at the expiry of the minimum period, compliant in all material respects
with all material terms of the Large Scale Mining Licences, tie term of this Agreement
shall be extended (and tie period of the Large Scale Mining Licences shall be deemed
to be renewed) for such further period not exceeding twenty-five (25) years as KCM
may reasonably require in order to complete the Approved Programme of Mining and
Licences. For tie avoidance of doubt, butsubjectto 18.4, tie StabilityPeriod shall
terminate on the twentieth (20th) anniversary of the Effective Date notwithstanding that
this Agreement may remain m force after such date.
- 20 -
Subjectto Clause 4 andthepaymentofapplicabledutiesand
taxes not otherwise
exempted or deferred pursuant to this Agreement, KCM mayimportwithoutfurther
reference to GRZ, materials, equipmentand services to be used in implementing the
ScheduledProgrammes,provided that theimport of suchmaterials,equipmentand
services wouldnot give rise to a breachorresult of thekind specified in Clause
3.2(a)(i) or (ii) and GRZ has notified K M accordingly.
K M (including for thispurposeeachmember of the KCM Consortium in its separate
capacitywhere it t i e s MineProductsfrom KCM) maymarketandexportwithout
shall have sole controland
furtherreference to GRZ all MineProductsand
management of sale of such Mine Products, including the forward selling of all Mine
Products and shall assume all risks therefor, except to the extent that:
A N D IMPORT
the export oftheMineProductsto
breach an obligation of GRZ arising underinternationallaw(including
mandatory sanctions imposed by the United Nations); or
result m dealing or contracting with nationals of a state with which GRZ
is in a state of declared or undeclared war;
and GRZ has notified KCM of such facts accordingly; or
nationals or residents of Zambia willing and able topurchasecopper in US
dollars payable offshore or in Zambia (such payment to be at the direction of
K M ) at the market rate are discriminated against m comparison with foreign
nationals or overseasresidents in so doing;providedthatthis Clause 3.2@)
shall notoperate so as to require KCM, in my way, to prefer ~ t i ~ nora l ~
residents of Zambia, incur any greater cost, receive or make payment m any
currency or country (other than a currency and country specified by KCM)
accept a different standard of work or otherwise suffer any prejudice; or
no order has been made by theMinister on K C M pursuanttoSection 69 of
the Act and remains in force.
SUPPLY AND PROCUREMENT
K C M shall, on a regular basis, and in anyevent no less than annually, identifyand
invite by advertisement in the local press registration of businesses in Zambia which
are capableofsupplying materials, equipmentand services to K C M and satisfy the
criteria set forth in Clause 4.3.
The supply of materials, equipmentand services may be tenderedforandprocured
internationally without restriction, provided that; where such materials, equipment and
services are procurable within Zambia from businesses registered pursuant
4.1, such businesses shall have the opportunity to tender and, if a tender submission
- 21 -
from such business meets the specifications of the invitation to tender, such businesses
shall not be discriminated against in comparison with international suppliers.
Whencalling for tendersfromcontractorsandsuppliers,KCMshallinvite
from Zambian contractors and suppliers where, to the best of
KCM's knowledge (all
4.1 shall be deemed to be withinthe
knowledge of KCM provided that; KCM shall only be required to send the invitation to
tender to the address ofthe contractor or supplier (as the case m y be) on the register
at that time):(a)
the contractorshaveprovenabilityandreputation in (i) performingworkof a
similar nature and sizetothatrequired
work within the specified time period; and
the suppliers areestablished,recognisedand
and/or equipment and have previously marketed or distributed such materials
and/or equipment (as applicable).
Nothingcontained in Clauses 4.1 to 4.3 shalloperate so as to requireKCM, in any
way,to prefer nationalsorresidents of Zambia,incur my greater cost, receive or
make payments m any currency or country (other than a currency or country specified
by KCM), accept a different standard of work or otherwise suffer any prejudice.
contractors and suppliers, KCMshallconsiderthe
extra costs it wouldincur if itwereto grant the contract to a foreignsupplier or
contractor. These extracostsshallinclude,but
wharfage costs, shippingcosts,stevedoringcosts,
custom clearance costs, customs
duties, and demurrage charges.
Subjectonly to theprovisionsofClauses 4.1 to 4.5, KCM shall be free to makesuch
arrangements with suppliers or contractorsas it wishes.
LOCAL BU!SlNESS DEVELOPMENT
complysubstantiallywiththe Local BusinessDevelopmentProgrammewith a
Zambia(particularly inthe Copperbeltandwith a particularemphasison
supply materials, equipment and services to KCM;
conductan annualreviewof progress beingmade on tie implementationof
the Local Business Development Programme and make such variations to it as
KCM considers to be reasonably required by changing circumstances; and
identify a memberofstaff
- 22 -
offer services to KCM and the Facilities;
or have set up businesses to
toassist m theimplementation of theLocalBusinessDevelopment
Programme and variations thereof;
referred toin Clause 4. l ; and
Nothing m Clause 5.1 shalloblige KCMto grant or lendanymcmYto,
with, any person or organisations.
EMPLOYMENT AND TRAINING PLAN
KCM shall comply with the Employment and Training Plan.
Subject to KCMcomplying at all times with any and all applicable labour
or such other
relevant legislation of general application as m y be in force from time to time, it may
amend or alter the Employment and Training Plan, with a view to providing employees
operations of KCM. For the avoidance of
doubt, any such amended plan, provided it
complies with all relevant legislation, shall bedeemedtohavebeenapprovedbythe
Minister for the purposes of Section 25 l(e) and Section 25(4) of the Act.
as a result of:
to ~ ~ n t x t c t
aspects of the EmploymentandTrainingPlan
circumstancesor eventsbeyondits control; or
a direction ofthe Director ofMineSafetyunderthe
Act (or regulationsmade
then such non-compliance shall not constitute a default under this Clause 6 nor a breach
of theconditions of tie LargeScaleMining Licences and KCM maygive notice of
alternative or revised plans to that part of the Employment and Training Plan affected.
KCMshall not, save as providedbelow,be restricted in its employment, selection,
assignment or discharge of personnel; provided however, that the employment and the
the discharge or disciplining of
carried out m compliancewith (i) thelawsand
regulations ofZambiawhich are, fromtimeto time, ofgeneralapplication, (ii) the
CollectiveAgreement(s)and (iii) the terms of individual employment contracts from
time to time.
KCMshall, in itsrecruitment,selection,
promotion andassignment of personnel
comply m all respects with nondiscrimination laws of general application in Zambia.
- 23 -
KCM acknowledges GFU's policy to attract qualifiedZambiancitizerisworking
mining industry. h order to
facilitatethefulfilment of thispolicy, KCM shalltakeallreasonable
recruitment and employment of employees in professional, managerial, engineering and
positions of employment available within KCM.
K M shall recognise, for collective bargaining purposes, (i) the trade union that at the
ofKCMand (ii) the CollectiveAgreements
covering the Transferring Employees.
Notwithstandingtheprovisions of this Clause 6, KCM(andits contractors or s u b
as, in thereasonable
judgment of KCM's management, are required to carry out operations efficiently and
successfully and, at KCM's request GRZ shall cause all necessary
entry and exit permits, work permits, visas and such other
permits or permissions as
may be requested) to be issued to such persons and their entitled dependants promptly
and without hampering the continuous and efficient performance of KCM's operations
and its obligations under this Agreement (including allowing such non-Zambian citizens
the right to import and export personal effects free of taxes); Provided that, GRZ shall
be under no such obligation to issue the
p e m t s aforesaid to any non-Zambian citizen
from entry by reason of previous c r i m i i convictions,health
regulations and likerestrictions set outinimmigrationregulations
applicationinZambia from time to time.Withoutlimitingthegenerality
foregoing provisions of this Clause 6.8, nothing contained in Clauses 6.1 to 6.7 shall
operate so as to require KCM, in any way, to prefer nationals or residents of Zambia
or accept a different standard of work from such persons, to require the Employment
and Training Plan to include quotas for the employment of Zambian citizens (or other
similarprovisions) or for KCM to otherwisesufferanyprejudice.
K M shall,in
respect of such non-Zambian citizens referred to above, provide GRZ with the requisite
personnel concerned. Notwithstanding the foregoing, but subject to the rights of GRZ
hereinprovided, the provision of suchinformationshall innoway be construed as
granting GRZ the right to object to KCM employing such persons at the Facilities or to
withhold the granting of all necessary permits.
The terms and conditions of the insurance by KCM of its assets and potential liabilities
K M ;Provided that, K M shall ensure
shall be at the sole discretion of the Board of
that it t i e s out such insurance as is consistent with Good Mining Practices.
date hereof, is:
cover specified in Schedule 6 is that which, as at the
prescribed by the statutory instrument referred to m Section onehundred and
one (one) of the Act; and/or
required by theDirectorofMinespursuant
(three) of the Act,
to Section one hundred and one
and that no Statutory Instrument and/or direction of the Director of Mines as aforesaid
applicable to and binding upon KCM and inconsistent with Schedule 6 shall be issued
ormade without the prior writtenconsent of K M (suchconsent not to be
GRZ shall be advisedoftheinsurancepolicy
or policies in placewhichcomply with
Clause 7.2 and Schedule 6 and KCM shall forward copies to GRZ whereupon GRZ, if
appropriate, shall acknowledge that such murances constitute the insurance coverage
prescribed by my statutory instrument issued under Section one hundred und one of the
Actand/orrequired by or a direction of theDirectorofMines pursuant to Section
l O l ( 3 ) of the Act. GRZ undertakes to pemt, to the extent necessary, insurers resident
party to K C M or any lender to W M .
SuSPENSION OR CURTAILMENTOFPRODUCTION
Subject tothesucceeding provisions of this Clause 8, the partiesacknowledge that
K C M ' s right to suspend or curtail production is governed by Section twenty eight of
the Act and that, m the event of any such suspension or curtailment, the Minister m y
exercise powers under Section twenty eight (three) of the Act.
the Minister's approval shall be given (or failing which shall be deemed given)
m accordance with Section twenty eight (three)(u) of the Act upon compliance
by KCM with this Clause, so that, in circumstances of such compliance, tie
Minister shall not give KCM a direction under Section rwenfy eight (three) (b)
of the Act; and
in tie eventofanysuspensionorcurtailment,anydirectioncapableofbeing
given pursuant to Section twenty eight (three)@)of the Act shall only be given
m compliance with this Clause; or
if K C M has not complied with anymaterialprovision of this Clause
and has not remediedsuchnon-compliance within tlurly (30) days of
being given notice of such non-compliance by GRZ.
in the case ofNchangaDivision,atanytimeprior
anniversary of the Effective Date;
to thefifteenth (15th)
time priorto the twenty-fifth (25th) anniversary of the
Effective Date; or
the KDMP InvestmentCommitment (as adjusted, if applicable, m terms of
Clause 2.8) at any time prior to the fiftieth (50th) anniversary of the Effective
K M elects to suspend or curtail production in respect of a Division or Divisions or
any part or parts of one or more Division or Divisions, and it has complied with its
obligations under Clause 27 and continues to comply with its obligations pursuant to
Clause 8.4, it shall be deemed to have complied with this Clause 8 and, accordingly:
tie provisions ofClause 8.5, 8.6, 8.7, 8.8, 8.9 and 8.10 shall notapply.
Where pursuant to Clause 8.3 or otherwise m accordance with Section menfy eight of
subject to fair wear
the Act, KCM has elected to suspend production, it shall maintain,
and tear, the assets comprising the Division or Divisions or the relevant part or parts of
such Division or Divisions m respect of which production has been suspended so as to
prevent significant deterioration until operations are resumed.
Where KCM elects to suspend or curtail production m circumstances where Clause 8.3
does not apply it shall, no later than eleven (11) months from the date on which KCM
suspended or curtailed production at tie relevant Division or Divisions or the relevant
part or parts of suchDivision or Divisions,submit to GRZ a report showing its
Revenues. In the event the Minister does not give a direction to resume operations m
accordance with Clause 8.6, reportsshall be submittedto GRZ byKCM at six (6)
monthly mtervals m order toallow the Minister to reassess whether it is economic to
resume operations at the relevant Division or Divisions or any part or parts thereof at
the date such a report is presented. K M ' S obligation to submit such reports to GRZ
shall terminate: (a) on the resumption of operations; or (b) in the event KCM does not
resume operations, when it sells the relevant Division or Divisions or the relevant part
or parts thereof; or (c) on the occurrence of the circumstancesset out m Clauses 8.9(a)
Subject to Clause 8.3, m the event that production a t a Division or Divisions or any
part or parts thereof, has been suspended or curtailed for a continuous period of twelve
(12) months or longer and it is economic to resume operations at the relevant Division
orDivisions or any part orparts thereof, the Minister may direct KCMtoresume
operations and KCM shall,subjecttoClause
8.7 below, as soon as practicable
thereafter take such measures as are necessary to resume operations at tie level that the
Division or Divisions or part or parts thereof were operating at m the year prior to the
time operations were suspended or curtailed.
- 26 -
Subject to Clause 8.3, if KCM disagrees that it iseconomic toresumeoperations m
accordance with the Minister's direction pursuant to Clause 8.6, it may elect to submit
the matter for determination to a Sole Expert in accordance with Clause 21.
Where the matterhasbeenreferredto a Sole Expert pursuant to Clause 8.7, the Sole
Expert shall determine, m the light of Good Mining Practices, whether it is economic
to resume production or not. The opinion ofthe Sole Expert shall be binding on the
Parties and, if the Sole Expert determines that it would be uneconomictoresume
production, the direction given by the Minister pursuant to Clause 8.6 shall be deemed
to have been withdrawn.
Where,pursuant to Clause 8.6, the Minister has directed KCM toresume operations
and such direction has not been or is not deemed to have been withdrawn, KCM, if it
does not promptly take such measures as may be required either to resume operations
orto sell the relevantdivisionordivisionsorpartor
parts thereof within six (6)
the Minister, shall be deemed to haveabandoned its
operations or the relevant part of such operations (as the case may be) for the purpose
of Clause 8 so that:
if suchabandonment is in respect of partonly of m area covered by a Large
Scale Mining Licence, such Large Scale Mining Licence shall
be amended to
delete such area from its application; and
if suchabandonmentis in respect of all of such area covered by the Large
Scale Mining Licence, the Large Scale Mining Licence is terminated;
providedhowever that, where the Minister's direction has, pursuantto Clause 8.7,
been referred to a SoleExpert, the timeperiod shall run fromthedatesuch
Expert gave its opinion on the projections or option as the case may be.
Nothing herein contained shall prejudice KCM's rights to suspend or curtail operations
under Section nvemy eighi ofthe Act for any other reason or the consequent exercise
by the Minister of his powers under that section.
SOCIAL ASSETS AND MUNICIPAL INFRASTRUCTURE SERVICES
The Partiesacknowledgethat K C M has reachedagreementwith the M U 2 regarding
the levels of remuneration and other employment benefits which shall be provided to
the Transferring Employees ofKCM and their Registered Dependants. These benefits
and educational services and
include the provision or procurement of certain medical
access to other recreational assets.
Municipal Infrastructural Services
GRZ will procure tie provision of the following municipal infrastructure
the areas m which K C M will operate:
- 27 -
These willbeprovided by the local councils, and in the case of domestic electricity
supply - ZESCO Limited, except that for an m t e m period of approximately five years
water, sewerage services and solid waste services will be provided by a wholly owned
not be required to
subsidiary of ZCCMunder a GRZ fundedprogram.KCMwill
provide these services.
KCM will co-operate with tie local councils, the ZCCM subsidiary, and ZESCO
Limited, m ensuring t i t any transitional arrangements to be agreed with KCM and put
m place for recovering costs of such services from KCM's employees m effective.
RECORDS A N D OPERATING REPORTS
KCM shall, pursuant to Section one hundred and four of the Act, keep GRZ, through
the Ministry, advisedconcerning KCM's operations through submissionof annual
reports, the first report to be submitted three months after the first financial year end of
KCM following tie date of this Agreement, as to the progress and results of KCM's
relating to tie progress of
operations in eachMiningArea as theMinistry may from timeto t h e reasonably
Pursuant to Sections 2(d) and (e) of the Fourth Schedule to the Act, KCM shall provide
quarterly reports to tie Ministry, tie first report to be submitted on 30* June 2000 and
thereafter on 30 September, 3 1 December, 3 1 March and 30 June annually broken out
on a m e by t i e basis:
quantitiesof ore minedand average head grades;
quantities of waste mined;
and cobalt concentrates produced andquantities
contained copper and cobalt;
quantitiesofownMine Products producedand quantities sold;
- 28 -
quantities of sulphurcontainedinpyriteminedandquantitiesofpyrite
prices obtained on sales of own products;
progress in implementing the ScheduledProgrammes, tie extentofany
continuingnoncomplianceby KCM withEnvironmental Laws and progress
made in remedying this in accordance with the Environmental Plan.
KCM shallfile with the Ministry annual reportssummarising any geological and
metallurgical investigations and such other material data as may be obtained from any
GRZ pursuant to Clause 1 0 . 2 shall be inEnglishand
United States dollars.
K M shall maintain all originalrecords and reportsrelatingto
its activities and
operations under this Agreement at its principal office m Zambia. These records (other
thanthosewhichare the subject of legal professional privilege) and reports shall be
workinghoursupon GRZ givingreasonablenotice of itsintention to inspectthe
records and reportsprovidedthat GRZ maynot requiremorethan six (6) such
inspections in any twelve ( 1 2 ) month period (for the avoidance of doubt any inspections
required to be carried out pursuant to any law, statutory instrument or other regulation
of general application (other than inspections required under Section 104 of the Act)
shall be additional to andshall not be includedwithinthe six inspections permitted
pursuant to this Clause). Such records and reports shall be maintained in the English
language. A l l such records and reports shall be retained by K C M for a period of six
One copy ofany records,reports, plans, maps, charts,accounts,andinformation
whichKCM is or m y be from time to time reasonably required to supply under the
provisions of this Agreement shall be supplied at the expense of KCM.
Compliance by K C M in all material respects with the provisions of this Clause 10 shall
be deemed to constitute compliance with the provisions of Section 104 and the Fourth
Schedule of the Act and no further reports, records or information shall be required to
inspection under those provisions of the Act.
GRZ undertakes that it shall (and shall procure that its relevant employees and offkers
shall), in relation to any Confidential Information:
to GRZ and not for any other purpose;
- 29 -
Subject t o theprovisionsof tie Act, all documents,reports, records orinformation
made available to GRZ will remain the property of KCM.
- 30 -
UNDERTAKINGS NECESSARYFOR OPERATIONS
in force in
Zambia, there are no foreign exchange controls and K C M is free, among other things
and within Zambia; and
In the event foreign exchange controls were to be re-introducedinZambia within the
Stability Period, K M shallhave(withoutanyfurtherapprovalsfrom
G R Z or any
entity thereof being required) the right to:
retain both outsideZambiaand
within Zambia(at K M ' S discretion), in
accounts established for that purpose, foreign currency, and to have paid to it
andmaintain m suchaccountsamountsarisingfrom
with the Business, including but not limited to the following:
payments made by insurersorre-insurersnotresident
under contracts of insurance in KCM's favour;
proceeds of any disposal of capital assets;
foreign loan proceeds;
penalties and damages undercontracts(payable
proceeds of swaps and hedges (payable by non-residents of Zambia);
by non-residents of
usefreely the foreigncurrencyaccountsmaintained by KCM to:
servicepayments of principalandinterest, service charges and other
fees and expenses in respect of any loans arranged with non-Zambian
suppliers outsideZambia for thesupplyof
goods and services to KCM;
principal on loans advanced to KCMby its shareholders or payments
madeby or onbehalfof ZCCM in repayment of amounts advanced
under repayable carried interest arrangements applicable to it; and
or otherwise)and repatriate capital (in
cash or assets)outsideZambia(whichrightshall
be extended to theKCM
Consortium individual members in respect of the proceeds
of the disposal or
liquidation of all or part of their investmentishares in KCM).
fund its operations from whatever sources are deemed appropriate (including
rights to borrow funds wherever it chooses and in whatever
to Clause 11.7) and to invest funds without restrictions;
pay smelters of KCM products outside Zambia;
tie -provisions of services to KCM (e.g.
insurance and re-insurance); and
maintain an mount equal to thirty per cent. (30%) of all contributions to its
or g a m fromsuchcontributions,
offshore. No restrictionsshallapplytoanypension
funds maintained for
expatriates. KCM shall not be discriminated against in comparison with other
like mining and metal treatment operations m this regard.
KCM shall submit to the Central Bank:
withii fifteen (15) days oftheendof
a statement ofthe foreign currency amountsrepatriated to Zambia
within the previous month from accounts maintained overseas by KCM;
a statementofthebalanceof KCM's foreign currency accounts[To be
agreed by KCM] at the end of the previous month;
a forecast ofthe foreign currency amountsthatKCMintends
repamate to Zambia during the ensuing calendar month, and
withinfive (5) monthsoftheendof
each year, auditedfinancialstatements
which comply with Zambian law and regulations.
In the absence of foreign exchangecontrols m Zambia, K M shall havethesame
dealers and enter intoswapsand
arrangements for taking out forward cover against local and other currency fluctuations
- 32 -
as -part of the
management operations but shall not include Speculative Currency Transactions) with
non-Zmbian entities as other commercialconcernsinZambia.
exchangecontrolswere to be reimposed m relation tothepurchase.and
currencies (and withoutprejudiceto K M ' S rights under Clause 11.2), such controls
shall not be applied to KCM m a manner less favourable to it than the manner in which
they are generally applied toother large commercial concerns in Zambia. KCM shall
be entitled to buy and sell foreign currency in accordance with such controls at rates of
exchange no less favourable than those available to other commercial buyers and sellers
of the currency concerned.
K C M shall remit to Zambia, and convert into Kwacha for credit to a bank account in
the name of KCM, sufficient of its foreign currency earnings to pay such commitments
as K C M may have incurred in Kwacha, but only to the extent K C M does not already
have Kwacha available to meet such commitments (including, without limitation, taxes,
royaltiesandcustomsduties and obligations to paydividends to localshareholders
payable m local currency, if applicable). KCM shall use its reasonable endeavours to
Bank of transfers of a substantial mount which are notin
accordance with the normal pattern of transfers.
KCM shall not engage in oruse any provisions of this Clause 1 1 or any authority or
approval given by theCentral Bank, to engage in Speculative Currency Transactions.
For the avoidance ofdoubt, this Clause shall notprohibitorpreventnormalrisk
management operations which shall be deemed to include the entering into of hedging
GRZ shall notintervenetoprevent
access by K C M to localcurrencymarketsor to
prevent exchange at market rates and on a nondiscriminatory basis (and shall procure
that the Central Bank will not so interfere); Provided that KCM shall ensure that any
borrowings it may incur denominated m Kwacha shall not exceed five per cent (5%)of
anmal sales revenues as recorded in the latest set of audited annual accounts of K C M
or, in the period prior to finalisation of KCM's first audited annual accounts, five per
cent. (5%)of ZCCM's annual sales revenues as recorded m the latest set of audited
annual accounts of ZCCM published prior to Completion.
h the event KCM determinesto
by it, it shall not
Bank if the Central Bank is willing and able to
purchase foreign exchange at market rates andon terms that are no less favourable to
K C M than terms available from other buyers.
KCM and GRZ eachherebyagrees that:
subjectto (ii) below, K M shallnegotiate m goodfaithwith GRZ (which
undertakes tonegotiate m goodfaith with KCM) with a view to agreeing
within two (2) years (or such longer period as KCM and GRZ shall agree) of
the Effective DatethedetailedtermsandconditionsoftheKCM
GRZ until such time as GRZ procures that ZCCM negotiates and agrees with
GRZ and KCM (ina form reasonably satisfactory to KCM) the detailed terms
and conditions and timetable of the ZCCM Final Environmental Plan;
GRZ shall agree toandapprovetheprovisions
requirements ofthe IFC in respect ofthe conduct of Normal Operations
each of the relevant Assets;
tie timetable, KCM shallachievetheobjectives
specified m tie KCM Final Environmental Plan no later than the last day of
the Stability Period.
implementation of the KCM Environmental Plan.
p e m t the
Uponagreementofthe KCM Final Environmental Plan, GRZ willtakepromptly, or
procure that all necessaryactionistakenpromptly,
to approve andto p e m t the
implementation of such plan.Suchactionshallinclude
mending or replacingthe
applicable p e m t s todisapplythestandardspreviouslyappliedtotheAssetsunder
to replacethese in anyEnvironmentalLawswhichare
applicable to KCM with those requirements specified in the KCM Final Environmental
Plan for the conduct of Normal Operationsat each of the relevant Assets for the period
fully implemented tie otherrequirements of the KCMFinal
Environmental P h .
Save as providedinClause 1 2 . 4 below,GRZhereby c o n f i i that itshall not (and
shall procure that its Ministries, and departments, and all agencies or instmnentalities
it has operational control shall not), for the Stability
t i e any action under, or m enforcing, any applicableEnvironmental Laws
with the intent or the effect o f
earlier or to a
greater extent than thatenvisagedunder
conditions set out in this Agreement, the KCM Environmental Plans
or tie Enabling Legislation or Enabling Statutory Instruments; or
- 34 -
otherthan as contemplated by Clause 12.2, repealor mend theEnabling
changes thereto; or
inthe case of Environmental Laws, effect any changes thereto or enact new
prevent KCM fromcomplyingwiththe
Environmental Plans andthe
making provision for KCM to be exempted therefrom;
(butwithout prejudice to the generality ofthe
provisions of such legislation or regulation regarding:
the predominance of industry
administering this fimd;
the independent management of cash contributed by mining companies to
this fund; or
work obligations upon K C M (or
under Environmental Laws (or enacting new fines penalties or works
which fall within the
EnvironmentalPlansor m respectofwhichexemptionshavebeen
granted to K M pursuanttotheEnabling
Statutory Instruments or
other Environmental Laws; or
in red t e r m s , of carrying out the
Environmental Plans or of Normal Operations;
applyanyenvironmentalprovisions toKCMunder Section seventysix and
requirements that are more onerous than those specified in the Environmental
Plans or Enabling Statutory Instruments; or
sewnzy seven ofthe
take any other action which would inhibit, prevent or render it impractical or
materially more costly for KCMtocomplywith the relevant Environmental
Plan or to undertake Normal Operations or which impose liabilities on K C M
for which KCM had not previously been liable or was not to be liable under
tie terms of this Agreement (and related agreements and legislation).
- 35 -
12.4 Subject to Clause 12.7, in the event that GRZ considers KCM to be m non-compliance
with the KCMEnvironmentalPlanandsuchnon-compliance
does notresult from
actions or omissions of GRZ andor ZCCM, it shall:
notify KCMof suchfact m writing,specifyingthe facts andcircumstancesit
noncompliance a d theactionsit
necessary to remedy the same;
specify i n writing, a time period (being such period agreed between GRZ and
than six (6) CalendarMonths)whichit
considersappropriate to remedysuchnon-complianceandthereasonswhy
such t h e period is appropriate.
In the event of expiry of the period specified by GRZ in Clause 12.4, (and unless KCM
has referred the matter to expert determination under Clause 12.6 below) ifKCM has
under Clause 12.4 above (or such other manner as may have been agreed m writing
betweenGRZ and KCM),GRZwillceasetobeboundbytheprovisionsof
12.3 but only m respect of such breach and matters arising out of such breach (and m
respect of no other matters) and the P m e s acknowledge that GRZ (or its Ministries,
departments or suchagenciesacting on itsbehalf)shall be free to take such action
under, or in enforcing, applicable Environmental Laws in relation thereto as it or they
shall consider appropriate or necessary.
IfKCM contests the noncompliance asserted by GRZ it shall serve a counter-notice
specifying its reasons for disagreeing with GRZ within one month of receiving GRZ’s
notice under Clause 12.4 above. Thereafter any Dispute regarding:
whether or not GRZ is entitled to serve a notice under Clause 12.4.1; or
GRZ considernecessarytoremedy,suchnoncompliance specified m such notice are necessary and reasonable; or
to remedy such non-compliance or not; or
whether or not the reasons specified by GRZ as to the appropriateness of such
time period are justified; or
any action by GRZ arising out ofanysuch matter
may be referred byKCMto
12.4.2 is appropriate
KCM shall not be m breach of the KCM Environmental Plan or its obligations under
noncompliance, partial compliance or delay in
compliance with a particular aspect or aspects of the KCM Environmental Plan to the
extent t i t this is attributable to any of the following reasons:
- 36 -
anyfailure by GRZ orZCCMto comply with theirobligationsunder this
Agreement, the Enabling Legislation, the Enabling Statutory Instruments,
Laws, or the
by K M (or its
shareholders(excluding ZCCM) orthoseofitsrepresentativeswho
responsibility for preparing and agreeing the Final KCM Environmental Plan)
performance by KCMofany task undertheKCM Final Environmental Plan
or any obligation in respect of the K C M Environmental Plan; or
any material unexpected difficulty (and my associated delay) which could not
additional costs over and above the funds specified for such task by K M , m
performing a task specified in the K C M Environmental Plan or in achieving
the improvement anticipated from such t a s k s ,
PROVIDED that this Clause 1 2 . 7 shall onlyapply totheextentthat my suchnoncompliance,partialcompliance or delay is not attributable to either any refusalor
failure on KCM’s part to spend funds which it has committed to spend under the K M
K C M orits
contractors or agents or K M ’ S refusal to comply with such plan.
GRZ may proposeanamendmenttothe
Environmental Plan in the following circumstances only, i f
with the relevant
a materialdanger to public
health and safety; or
be likely to result m significant
made by the Minister, unless he reasonably
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
Any formal proposalfromthe Minister toamend the KCMEnvironmentalPlan shall
be delivered in writing to KCM. This shall include a written statement of the reasons
why the Minister considers the proposed variation to be necessary,
setting outto the
extent it is reasonably practicableto do so:
the danger to public health and safety or the environmental damage which may
result from Normal Operations if tie Environmental Plan is not amended and
the risk and materiality of such damage;
- 37 -
the tmescale within which it considers the actions should be
12.10 In the event that the Minister proposes
a variation to the KCM Environmental Plan on
behalf of GRZ under the circumstances set forth in Clause
12.8, K M undertakes to
and, unless by notice of objection m
(2) CalendarMonths of receipt of the
proposed variation to be unreasonable, it shall be deemed to have agreed the same.
notice of objection shall include a written statement of the reasons why K M considers
the proposed variation to be unnecessary or unreasonable, setting out to the extent it is
reasonably practicable to do so:
its estimate of the direct costs to implement such change;
its analysis of the variation in the environmental and health and safety impact
that would be effected by such change; and
its appraisal oftheeconomicandothereffectsofthechangeproposed
12.11 Followingreceipt of a notice of objectionunderClause
12.10, theMinister shall,
within two (2) Calendar Months and having considered the notice
of objection m good
or not the Minister's proposalfor
faith, inform K M bynoticeinwritingwhether
variation of the K M Environmental Plan is or is not withdrawn. h the event that the
not withdrawnitwill be deemed to havebeen
agreed unless KCM elects; within a further period oftwo (2) Calendar Months from
receipt of notification from tie Minister that his proposal is not withdrawn, to submit
the question of whether GRZ's proposal for variation is unnecessary or unreasonable
for determination by a Sole Expert in accordance with Clause 21.
12.12 Should KCM refer the proposed change to expert determination, the determination will
be binding on the parties with the effect that:
GRZ's proposalfor variation isnot
unnecessary or unreasonable the proposal for variation will be deemed to have
been agreed; or
if the Sole Expert determines that GRZ's proposal for variation is unnecessary
or unreasonable the proposal will be deemed to have been withdrawn;
Provided that tie Sole Expert may m his sole discretion suggest alternative proposals
or time schedules or mitigation of cost proposals to the parties who will consider the
same in good faith prior to the determination being rendered by the Sole Expert. The
period during which such proposals suggested by the Sole Expert shall be considered
by tie Parties shall be specified by him but shall not exceed six (6) Calendar Months.
- 38 -
Where a variation to the KCM Environmental Plan has been agreed by K C M and GRZ
or is determinedpursuant to Clause 2 1 , thatEnvironmentalPlan shall be mended
accordingly and GRZ shall procuretheamendment, if necessary, of anyEnabling
Statutory Instrument or Environmental Laws to reflect any such variation.
Nothing m this Clause 12 shall affect or l m t the powers under the Act ofthe Director
of Mine Safety designated bytheActto t i e such emergency actions as he considers
safeguarding the lives orhealthof
personsengaged m KCM's operations. Tothe extent that KCM is required to
undertake works or incur expenditure by the Director of Mine Safety in respect of any
matter addressed by the K C M Environmental Plan which go beyond the requirements
of the KCMEnvironmentalPlan, K C M shall be entitled to recover the costs ofthe
works or expenditure from GRZ.
12.15 K C M
shall be entitled to mend the K M Environmental Plan from time to time:
if m its view at my time the conduct of Normal Operations in accordance with
the relevant Environmental Plan for whatever reason poses
to public health and safety;
if m its view theimpactofNormalOperationswould
a material danger
be likely to result m
was not anticipated m the relevant
to make any necessary andor reasonable amendments to take account of any
issues of noncompliance, partial compliance or delay which fall withinthe
provisions of Clause 12.7 above and which would otherwise render KCM noncompliant with the K C M Environmental Plan; or
so as to reflect changes in operations and other circumstances considered to be
appropriate by KCM, provided that following such amendment (and in respect
of amendments under this Clause 12.15.4 only):
the KCM EnvironmentalPlan
is in accordancewithaccepted
environmental standards as applicable to Good Mining Practice; and
such amendment will not result in GRZ's liabilityunder
Environmental Liabilities Agreement bemg materially increased or m
a liability thereunder being incurred or arising on a date earlier than
wouldotherwisehave been the case but for the making of such
amendment (unless the effect of such earlier mcurrence is to make it
materially likely that GRZ's potentialexposureto c l a m underthe
Environmental Liabilities Agreement will be reduced by a more than
Prior to any formal proposal being made by KCM, it shall allow a period of four (4)
- 39 -
In the event that KCM proposes a variation of the KCM Environmental Plan under the
circumstancessetforth in Clause 12.15, GRZ undertakestoconsidertheproposed
variation in good faith andto accept theproposal unless it believes that the proposal
falls outside the scope permitted under C l a w 12.15 and unless, by notice of objection
m writing served on KCM within 2 (WO) Calendar Months of receipt of the proposal
madepursuanttoClause 12.15, GRZ informsKCMthatit
variation to be unnecessary orunreasonable it shall be deemed to haveagreed 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:
its reasonsforconcludingthere is no risk to publichealth and safetyor of
significant environmental damage
its reasons for concluding t i t the amendments proposed under Clause 12.15.3
are not necessary or reasonable; or
i n relation toamendmentsproposedunder 12.15.4 its reasons for concluding
that the amendment would not meet Good Mining Practice andor its analysis
of the increase in liabilities under the Environmental Liabilities Agreement.
The provisions of Clauses 12.12 and 12.13 shall apply in respect of changes proposed
by KCM save that references to GRZ shall be read as K M and references to K C M
shall be read as GRZ respectively.
Notwithstanding the provisions of this Clause 12, KCM shall, at the invitation of tie
individually or on an
industry-wide basis, in discussions regarding environmental standards in Zambia or my
prospective changes thereto on the basis that such participation will inno way qualify
any rights which K C M has hereunder (including the rights to challenge amendments
proposed by GRZ to the KCM Environmental Plan).
Pending amendment of an Environmental Plan pursuant to
Clauses 12.8 t o 12.17, the
existing Environmental Plan shall continue to apply. h proposing or considering my
such proposed amendments, the Parties shall have regard to relative costs and benefits,
the potential risks and impacts of any action proposed and Good Mining Practice.
For the avoidance ofdoubt,nothing i n this Clause 12 shall be construedtorender
K C M liable for penalties or fines imposed, or third party claims made, in respect of
activities undertaken prior to the Effective Date by ZCCM.
GRZ agrees t i t a Force Majeure Event which renders compliance with tie provisions
Planimpractical shall not constitutenon-compliance
providedthatKCM shall use all reasonable endeavours to bring such Force Majeure
Event to an end.
Nothiigheremcontained shall prevent GRZ assuming(through the enactmentof
my or all obligations of
legislation,issue of regulation, bycontractorotherwise)
- 40 -
ZCCM under the ZCCM Environmental Plan, such obligations either to be assumed by
GRZ jointly with ZCCM orinplaceof
and in substitutionfor,ZCCMand
discharge of ZCCM from any such obligations.
12.23 KCM shall provide to GRZ within one month
following Closing a list of those matters
relating to m e safety and/or occupational health and safety at or concerning
the Assets,whichneed to be improvedor upgraded,repairedorsubjected toother
remedialmeasures m orderfortheAssetstocomply
regulations relating to mine safety and/or occupational health and safety (whether under
Environmental Laws or other laws and regulations) andlor Good Mining Practice.
12.24 K C M and GRZ shall negotiate with each other
withii three (3) monthsfollowingClosing (or
ingood faith with a view to agreeing
such longer period as KCM and GRZ
shall agree) an interm programme of upgrades,repairs,improvementsandother
Clause 12.23 abovewith a view to agreeingwithin six (6) months (or suchlonger
period as KCM and GRZ shall agree) following Closing a final programme in respect
thereofand the terms, conditions and timetablepursuanttowhich
implement them. These upgrades, repairs, improvements and other measures shall then
be treated as formingpartofthe K M Environmental Plan, save that the provisions
relating to the agreement of a Final K M Environmental Plan shall not apply to them.
Thetimetablewhich K M and GRZ shall agreeunderClause
12.24 above shall
provide for all such upgrades, repairs, improvements and other measures shall each be
commenced as soon as reasonably practicable and in any event no later than 12 months
after Closing and each such upgrade, repair, improvement and other measure
completed as soon as reasonably practicable after commencement, having regard to the
need to continue N o d Operations and to comply with K M ’ S obligations under this
Agreement, any applicable pemts, and any other relevant agreements.
While such upgrades, repairs, improvements and other measures are being planned and
implemented, GRZ shall afford andextend to KCM andlor the Assets all such
exemptions and/or safety letters in respectofmine safety and/or occupational health
and safety matters (i) as were enjoyed by ZCCM intheperiod immediately prior to
Closing and/or (ii) as may be necessary in view of the condition of the Assets and/or
the programme agreed pursuant to Clause 12.24 aboveto p e m t the lawful operation
of the Assets (and to extend the same where necessary) until such time as the planned
satisfaction of GRZ and KCM.
its obligationsunder (i) Clauses 12.23 to 12.26
above, (ii) anyrequirements in the K C M EnvironmentalPlanwhichrelateto
occupational health and safety and (iii) anyrequirements as to mine safety in tie
Mining Regulations which fall outside the scope of the exemptions and/or safety letters
referred to m Clause 12.26 above and GRZ undertakes m respect of any matter where
KCM has complied with itsobligationsunder (i) to (iii) above, not toenforceany
to mine safety andor occupational
health and safety m respect of matters which fall within my exemption andor safety
letter and to uphold and give full effect to such exemptions and/or safety letters.
shall, orshall procure thatZCCMshall,provide written confirmationto KCM
within 1 monthof Closing that ZCCM will finance all of the actual
costs that may be
incurred byKCM m relation to the implementation of the Resettlement Action Plan set
out m tie form incorporated by reference m thisAgreement as at the date hereof.
GFU agrees that it shall guarantee the financial obligations of ZCCM under this Clause
- 42 -
GENERAL STABILITY AND TAXATION
GENERAL STABILITY AND OPERATIONAL UNDERTAKINGS BY GRZ
GRZ undertakes that, for the Stability Period, it shall not:
in the case of legislationorregulationsgoverning
the regulation and
management of companies, effect any changes thereto or to their application
whichwouldimpose a requirementthat the directors of K C M comprise a
two hundred and eight of the Companies Act, being more than 30%;
m the case of legislation or regulations governing the operation of mines or
relatedactivities but subject to Clause 12, effectanychangestheretoor
their application which, individually or cumulatively, would have
Adverse Economic Effect on the implementation of the Approved Programme
of Mining and MetalTreatmentOperations;and/or tie conductofNormal
m the case of import and export regulations and procedures within Zambia,
implementation of the Approved Programme of
Mining and Metal Treatment
Operations and/or conduct of Normal Operations;
inthe case of legislation or regulations governing the terms and conditions of
employment within Zambia, effect any changes thereto or to their application
which would prevent KCM from:
operating on a seven (7) days a week,twenty-four (24) hours a
day, three hundred and sixty five (365) days a year basis; or
negotiating with employees
employees or terminating their contracts of employment m such a
be likely tohave
Economic Effect, individually or cumulatively, on
implementation of the Approved Programme of Mining and Metal
Treatment Operations and/ortie conduct of Normal Operations.
the case of legislationrelating tothe regulation and management,
individually or cumulatively would be likely to prejudice:
the validity orenforceability ofthe Pledge, the Charges (as defined m
the Pledge) or the rights of tie KCM Consortium under Clause 1 4 of
the Shareholders' Agreement; or
theranking or priority oftheCharges.
GRZ further undertakes that, for the Stability Period, it shall not by general or special
legislation or by administrative measures or decree or byany other action or inaction
whatsoever (other than an act of nationalisation such as is referred to m Clause 13.7)
(I'GRZ Action") vary, amend, cancel or terminate this Agreement or any other Related
Agreement or therightsandobligations ofthe PartiesunderthisAgreement or any
other Related Agreement, or cause this Agreement or any other Related Agreement or
thesaid rights andobligationsto be varied,amended,cancelled or terminated, or
prevent or hinder performmce of this Agreement or any other Related Agreement by
any party thereto; Provided that this Agreement and any other Related Agreement and
the rights and obligations of the Parties under this Agreement and
any other Related
Agreement may be varied,amended,cancelled or terminated as expressly provided
therein. GRZundertakes that K M anditsofficers,
directors, employees and
shareholders shall be held free and made exempt from m y GRZ Action or any change
m thelaw of Zambiawhichwould,but
for suchfreedom or exemption,adversely
affect KCM's rights under, or K M ' S ability to comply with its obligations under, this
Agreement or m y other Related Agreement to which KCM is a party.
In the event that the Parties disagree as to whether any action (including changes to any
legislation, regulations or procedures specified m Clause 13.l(b), (c) or (d)) will have
a Material Adverse Economic Effect, any Party may refer the disagreement to a Sole
Expert for determination m accordancewithClause 21 and m determiningwhether
such changes have a Material Adverse Economic Effect, the Sole
Expert shall have
regard to the individual and cumulative effect (whether adverse or beneficial) of such
Effect, GRZ shall
compensate KCM m accordance with Clause 16.
GRZ shall ensure that no law, statute, regulation or enactment shall be passed or made
which would discriminate against KCM in respect ofanysuch matters as are referred
to m this Clause 13 (including without limitation Clause 13.8) or Clauses 15.1 or 15.2
or otherwise m its conduct of Normal Operations or any other circumstancesunder this
or jomt venturesconductingsimilar
operations in Zambia under Large Scale Mining Licences. For the avoidance of doubt,
the provisions of this Clause shall apply dumg and after the Stability Period.
GRZshall t i e suchactionrequired
to ensure all of its ministries, departments,
agencies, instrumentalities, agents andanypolitical subdivision thereof comply with
the provisions ofthisAgreementapplicabletoGRZandreferences
to GRZ m such
provisions shall be construed accordingly.
Subjectto compliance by K M with:
each case as modified m its application to KCM by this Agreement) and
GRZ undertakes to issue and renew expeditiously all necessary licences and approvals
requiredfor NormalOperations and notto withdraworchange the terms ofsuch
licences and approvalsorattachanyonerousconditions
tothemon that issueor
renewal (which conditions are not reasonably justified by the operations proposed).
GRZ hereby covenants that it shall not acquire compulsorily the Facilities or any other
assets of KCM or any interest in or over any property comprising tie Facilities or any
other assets of KCM, except for public purposes under an Act of Parliament relating to
the compulsory acquisition of property which provides for payment of compensation at
fair value as between an independent buyer and seller in respect thereof.
In the event that either the Energy Regulatory Board (whether by virtue of any order,
resolution, notice, directive, standard, code ofconductor licence or any revocation,
amendment or change of interpretation thereof or otherwise) or GRZ:
requires that KCM pays a higherelectricitytariffunder
the NampundwePower PurchaseAgreement (tie
'"PowerAgreements") than would otherwise have been the case under these
otherwise makes orrequires m y amendment,variation or modificationthereof
or terminates or
cancels such agreements otherwise than in accordance with their terms; or
KCM under the PowerAgreements
(or any corresponding obligation of any other party to K C M under the Power
Agreements)orany right (orcorrespondingobligation)createdpursuant
any agreement or arrangement contemplated by the Power Agreements, other
than in accordance with the terms of the Power Agreements
this Clause 13 shall be deemed to be breached and GRZ will compensate KCM for any
increased costs or
m respect of
any losses m accordance with Clause 16.
Notwithstandingtheprovisionsof this Clause 13 andthe terms of Schedule 7, GRZ
shall m no way be restricted from introducing legislation relating to transfer pricing
ensure that all transactions between companies and their Affiliates are conductedon
arms' length terms.
Notwithstanding termination of this Agreement by either Party, GRZ shall not t i e any
GRZ Action which would not be permitted under any of the provisions of Parts C or D
(where such provisions still m force and binding on GRZ), in respect of any action or
omission of KCM taken or occurring prior to termination if K M or any memberof
the KCM Consortium would be likely to suffer or be subject to any additional liability,
loss, cost, expense or other obligation as a result of such GRZ Action.
- 45 -
GENERAL OBLIGATION TO PAY TAX
The provisions of Schedule 7 correctlyreflect, in respect ofthe matters therein
specifically described, the tax regime applicable to KCM m the conduct of its activities
7 is notintendedto
legislation, m the event of any ambiguity between applicable legislation and Schedule
7, GRZ andKCMagreethattheprovisionsofSchedule
7 shall apply, itbeing tie
intent of the parties that Schedule 7 clarify any ambiguities m the legislation and tax
regime applicable to KCM or its operations.
Subject to Clause 1 4 . 1 and 15, KCM shall pay tax, royalties and duties from time to
time in accordance with applicable legislation.
GRZ undertakes that it shall not for the Stability Period:
increase any rates of Taxation (including, without limitation, corporate income
tax or withholding tax rates)applicabletoKCM
(or change the basis of
calculation which would result m a decrease of deductions, rebates or other
allowancesavailableto KCM incomputingitsliability
to such Taxes or
change the basis of computation of such Taxes) from those prevailing at tie
increase the Royaltyrateapplicableto
KCM or changethebasis
computation of Royalties from those prevailing at the Effective Date (as set
out m Schedule 7) m a manner which would result m an increase in Royalties
payable by KCM;
otherwise amend tie VAT and corporate Taxation regimes applicable to KCM
from those prevailing as at the Effective Date (asset out inter alia m Schedule
7), including but not limited to, the rules regarding carry forward losses, in a
manner which would result in an increase in Taxes payable by KCM;
impose new Taxes or fiscal imposts (including export duties) on the conduct of
increase withholding taxes applicable to KCM, its shareholdersor lenders to it
interest, dividends, royalties or
management fees above the rate prevailing at the Effective Date
(as set out m
or levies onKCM relating to its purchase of
electricity, water or other utility services;
Provided that, in thecaseofClause 15(l)(c), (d) and (Q only, amendments m y be
madewhich do nothave a materialadverseeffect(comparedwithwhatthe
Profits or the
dividends, interest or other amounts received by its shareholders or lenders to it.
- 46 -
Without prejudice to the provisions of Clause 13.4, GRZ further undertakes that for the
Stability Period, it shall not:
alter the right ofnon-Zambian citizens(andentitleddependants)
arrival or permanent departure from Zambia to:
importwithinsix (6) CalendarMonthsfromthedateof arrival free of
duty and tax, for personal use, household and personal effects;
or tax on export
all personal effects originally imported and acquired during residency
in Zambia; and
imposenew laws toremovetherightofnon-Zambian
all income earnedwithinZambiaduringsuch
increaseimport duty ratesapplicable to KCM so as toresult m the weighted
average import duty rate to which KCM is subject on the import of goods and
a level of fifteen
per cent. (15%); or
onNormal Operations,so as tohave a
materialadverseeffect on KCM’s Distributable Profitsorcashflowsor the
dividends or other amounts received by its shareholders.
Stability Period it shall ensure that VAT rehates and
refunds are made within 10 days ofthesubmission by KCMofitsmonth-end VAT
Without prejudice to tie provisions of Clause 13.4, GRZ shall be at liberty to pass or
the performance or
make any such law, structure, reguiation or enactment to enable
amendmentof a developmentagreemententeredinto by it and anothercompanyor
joint venture prior to the expiry ofsuch stability period. If, after tie Effective Date,
there is in anyrespect a generallyapplicablemorefavourableTaxation,dutiesor
royalties regime applicable totheminingindustry generally, than applies to K M at
the dateof this Agreement, then GRZ agrees that KCM shall be entitledto t i e
advantage of suchchanges inany law,statute,regulationsorenactment,and,
necessary, GRZ will agree changestothisAgreementtoconfirmorapplythese
changes and t i e such steps as shall be necessary including amending my applicable
To the extent that GRZ delegates or authorises tie collection of m y Taxes leviable on
mtrumentalities, GRZ shall
procure that such authorities comply with the provisions of this Clause 15. GRZ shall
shall not levyorimpose my
Taxes on KCM.
h the event that the Parties disagree as to what amounts to a material adverse effect
under Clause 15.1 or 15.2(d), any Party may refer the disagreement to a Sole Expert
for determination m accordancewithClause21
and, m determiningwhethersuch
changeshave a materialadverse effect, theSoleExpertshallhaveregardtothe
or beneficial) of such changes
compared with the position at the date hereof. Where the Sole
Expert determines that
there has been a materialadverse effect, GRZshallcompensateKCM m accordance
with Clause 16.
Notwithstanding the provisions of Clause 18.4, ifKCM is prevented or hindered m the
manner described m Clause 18.2 as a result of actions or omissions by GRZ then:
the term ofthe StabilityPeriod or other time periods set out m Clause 12, the
a period equal to
the period during which such prevention or hmdrmce continues or dumg the
period from the m e when the question, dispute or difference arose until the
m e of its determination by the Sole Expert or settlement by agreement or
or other action(including,
necessary or appropriate to give effect to the relevant time period extension
referred to in paragraph (a) above.
COMPENSATION FOR BREACH OF STABILITY OR COMPULSORY ACQUISITION
GRZ covenants to make such payments (net of any Taxes, withholdmgs or deductions)
to KCM (or, at its option, make such off-setting changes m my law, statute, regulation
as wouldresult m KCMbeingfullyand
compensated for any loss or detriment suffered or expenses or costs incurred byKCM
("KCM Losses") by reason of
a breach by GFZ ofanyof tie provisions of Parts C or D of thisAgreement;
an act or series of acts of compulsoryacquisitionofanyoftheFacilities
other assets ofKCM or any interest m or over any Property comprising tie
Facilities or any other assets of KCM,
to tie extentsuch KCM Lossescannot, as a matterof law, be offset by reducing
amounts otherwise payableby KCM to GRZ.
In tie event of a disputearising as towhetheranycompensationispayableunder
Clause16.1 or whether the compensationoffered or payable by GRZ underClause
16.1 represents full and fair compensation for any KCM Losses, either Party may refer
the issue to a Tribunal for arbitrationunder Clause 22 and can make such arguments or
- 48 -
assertions to the Tribunal upon such issue as it considers appropriate. Without limiting
the generality of the foregoing, the Tribunal shall consider any arguments or assertions
made by either Party m relation to:
thecumulative effect ofany or all pastandexisting:
breaches by GRZ of theprovisions of Parts C or D ofthisAgreement,
as compared with the position that existed at Completion;
breaches ofanyotherprovision of thisAgreementwheresuchbreach
has a materialadverseeffect onthevalueofthe
Facilities or other
assets of KCM (the "KCM Assets'");
acts of compulsoryacquisition referred to m Clause 13.7;
m y diminution (as a result ofanyofthe
mattersreferredto m (i), (ii) or (iii)
above, inthe marketvalue(on a goingconcernbasis,assuming
buyer and a willing seller) of:
the KCM Assets(taken as a whole or anyone or more of them); or
KCM's investment m KDMP; and
m y otherbreaches or failures of eitherParty m respectoftheirobligations
under this Agreement,
m each case adjusted to take into account compensation already paid by either Party (if
any) m respect of any matters referred to above, mcludmg any amounts paid m respect
of interest under any provision of this Agreement.
Where GFU electstoreduceamountsotherwisepayableto
compensation m accordance with Clause 16.1 (either by making offsetting changes m
any law, statute, regulation or enactment or by setting off amounts otherwise payable
by KCM to GRZ), it willneverthelesscompensateKCM
for the time value o f the
money represented by relevant KCM Losses by payment of interest at LIBOR plus five
per cent. (5%) fromthedate
value or othermeasuresofcompensationcannot
be determined m accordancewithgenerally
accepted principlesof valuation and equitable principles, taking into account the capital
other relevant factors.
- 49 -
KCM m y , with theconsentofthe Minister (in accordance with Sectionjififour (one)
of the Act), assign its interest m a Large Scale Mining Licence and this Agreement and
GRZ covenants that theconsentofthe
Minister to such an assignment shall not be
17.3 and 17.5. No assignment of an
withheld in the circumstances set out in Clauses
interest in a Large Scale Mining Licence may be made without the assignment to such
person of a concomitant interest m this Agreement and vice versa.
If K C M assigns its entire interest in a Large Scale Mining Licence and its rights and
obligationsunder this AgreementinaccordancewithClause
assignee becoming party to this Agreement, KCM shall be discharged from any further
liability in respect of any obligation which accrues after the date of that assignment,
without prejudice to pre-existing rights accrued to GRZ against K C M and vice versa.
Notwithstanding the foregoing provisions of this Clause 17, and subject to Clause 17.4,
KCM m y charge by way of fixed or floating charge the Large Scale Mining Licences
together with this Agreement to secure therepayment of principal, and payment of
interest and other fees, costs and expenses relating to all loans made to KCM to finance
or refinance the Scheduled Programmes and any hedging arrangements relating thereto
or other mining projects within Zambia and G M covenants and will procure that the
consentof the MinisterpursuanttoSection
to suchmortgages and
charges shall be given; provided that such mortgages
and charges are notifiedtothe
Minister upon their grant (and, in any event, within sixty (60) days thereof). Subject
to Clause 17.4, my mortgagee or charge under a mortgage or charge given by KCM
pursuantto this Clause (each a "Secured Party") may exercise all rights of sale and
other rights included in such instrument of mortgage or charge provided
it shall first
give to GRZ at least thirty (30) days notice of its intention to exercise my rights of sale
and five days notice in all other cases. For the avoidance of doubt, it is recorded t i t :
save as contemplatedabove m respectoflicencesand
p e m t s and this
Agreement, there is no restriction on KCM's right to sell, mortgage, charge
orotherwise assign orencumber the wholeorpartof
including the Leases, the Facilities, theMineProducts (or theproceeds of
sale), surfacerightsand ail otherrightsessential to the maintenanceand
operation of the Facilities, together with any assets and relevant agreements to
which KCM is a party;
K C M may mortgageandchargeanyspecifiedasset(whether
property) to secure the purchase price thereofwheresuchamount has been
borrowed to finance the purchase of that asset and this asset is to be used as
part of Normal Operations or other mining projects w i t h i i Zambia.
- 50 -
providedsuchmortgages and chargesarenotified tothe Minister upon their
grant (and, in any event, within sixty (60) days thereof) each member ofthe
K C M Consortiumandothershareholders
in K M fromtimetotime
mortgage, charge, pledge, transfer in security or conditionally assign its right,
title and interest m the shares ("sharesecurity")m K C M as security for tie
Third Party Finance or other financing raised or to be raised by KCM either
to finance or re-finance the Scheduled Programmes and any related hedging
in Zambiaand GRZ confirm and
thatthe sharesecurity m y be grantedwithout any furtherwritten
consentfrom GRZ, whetherpursuantto Section %(l) ofthe Act or
anytransferee ofsuch shares pursuanttoenforcementoftheshare
security will be approved by GFU subjectonly to suchtransferee
meeting the criteria set out m Clause 17.5.
a mortgageor charge given byKCM
pursuant to Clause 17.3 shall be subject to and limited by the rights of K M under this
to curerights granted to K C M andthe SecuredParties
pursuant to Clause 19, to GRZ's right to terminate those rights under Clause 19. The
rights of such mortgagee or chargee to sell an interest in a Large Scale Mining Licence
and this Agreement so charged shall be exercisable if tie interest in such Large Scale
Mining Licence and this Agreement which are charged by the mortgage or charge are
soldtogetherwith all orsufficient ofthe assets and undertakings ofKCM as are
suffkient (or would be sufficient (a) following cessation of any period of suspension or
curtailment ofproduction as may then applypursuant to Clause 8 ancVor (b) in
conjunction with such additional assets as the buyer may contribute) to enable the buyer
with suchexceptions as GRZ may agree),
(approval of which sale GRZ covenantsnot to unreasonablywithholdand notto
withhold m the circumstances set out in Clause 17.5).
Where the Minister's consent is necessary to effect:
a change of controlunderSection$& $ve
GRZ shall procure that the Minister shall not withhold his consent where, m the case
ofan assignment, theproposed assignee has demonstrated its financialcapacityand
technical ability to meet its obligations hereunder or, in the case of a change of control
has demonstratedthat it is of appropriatefinancial
inter alia, tothe obligations it shall assumeunder the
the Minister shall not
Shareholders'Agreement. GRZ shallfurtherprocurethat
withhold his consent where, m the case of a change of control of KCM, such change of
- 51 -
control has or shall result from a transfer between members of the KCM Consortium or
considering that a proposed assignee or the acquiring party has not demonstrated such
financial capacity or technical ability as is referred to in Clause 17.5, it m y refer the
issue to a Sole Expert for its option in accordance with Clause 21. If the Sole Expert
requisitelevels of financialcapacity or technical ability, the Minister's
determination shall stand; or
hasdemonstrated tie requisitelevels of financialcapacity or technicalability,
the Minister's determination shall be set aside and the consents referred to in
Clause 17.5(a) or Clause 17S(b) (as the case may be) shall be deemed to be
given and the change of control or assignment (as the case m y be) shall be
permitted without fiuther action on the part of GRZ or the Minister.
In tie context of thefinancing of theKDMP, GRZ undertakestoprovidesuch
consents, opinions and certificates to or for the benefit of senior lenders to KDMP as
m y be customary or otherwise reasonably required by such lenders, provided that the
provision ofsuch consents, opinions and certificates is not inconsistent with legislation
or this Agreement and does not involve any attendant
costs, reductions m revenue or
anyliabilityon GRZ's part(whetheractual or contingent).Intheeventthat
gives notice to GRZ that it has charged its interest m any Large Scale Mining Licence
17.3, GRZ shall if so requested bythe
Secured Parties, executea consent and acknowledgement of assignment which shall:
for the benefit of the Secured Party if such security is enforced in accordance
with the terms of this Agreement;
contain GRZ's agreementtodeliver a copyofanyDefaultNoticeservedon
KCM pursuanttoClause 19.3 ofSecuredPartiesatthesametime
notice is served on K M ;
recogniserights of Secured Parties to cure defaults as provided m Clauses
19.3, 19.6(a) and 19.10; and
contain GRZ's agreement t o grant anystatutory or regulatoryconsents
necessary in connection with the creation
or enforcement of such security in
accordance with the terms of this Agreement,
in addition to such other provisions as may be reasonably requested by Secured Parties
of the KDMPandScheduled
from h e to time m connectionwiththefinancing
costs, reductions in revenue or any
liabilities on GRZ's part (whether actual or contingent).
- 52 -
EXTENSIONS TO TIME
Notwithstanding m y provision of this Agreement, the Parties by agreement in writing
between the persons responsible for giving Notices under Clause 29, m y from time to
m y date
referred to m this Agreement such later date, as they think fit.
IfKCM is preventedorhindered byany circumstances or event of a kind set out in
Clause 26 or by an Extension of Time Event or by a reference to a Sole Expert or by
an arbitration under Clauses 21 and 22 respectively from undertaking all or any of its
obligations hereunder or exercising any right granted, the period of time allowed for
the perforrnmce ofthat obligation or exercise of thatrightandall periods of time
thereafter allowed for the performance of obligations or exercise of rights which are
dependent upon the first mentioned obligation or
right, shall be extended by a period
equal to the period during which such prevention or hindrance continues or during tie
period from the time when the question, dispute or difference arose until the time of
determinationby the Sole Expert or settlement by agreement or arbitration, as the case
Where any period is, or is deemed to b e , extended or any later date substituted for an
earlier date underthisClause,thatextended
or substitutedperiod or date shall be
deemed to constitute the period or date referred to in this Agreement (notwithstanding
that at the time of such extension or substitution such period m y have expired or such
date m y have passed).
Subject always to Clause 15.7, but notwithstanding the foregoing, the provisions of this
m y waybe construed so as to, or be
deemed to, extend the term of tie Stability Period or any other time periods set out in
Clause 12, the KCM EnvironmentalPlan,the KCM Final Environmental Plan or the
Environmental Liabilities Agreement.
KCMmay terminate this Agreement at any time after the twentieth anniversary
Effective Date by giving twelve (12) Calendar Months notice to GRZ.
GRZ may terminate this Agreement by notice to KCM i f
alloftheLargeScale M m g Licenceshave expired byeffluxion oftimeand
have not been renewed or deemed to have been renewed; or
subjecttoClause 8, thelandthesubject of the Large ScaleMiningLicencesis
abandoned by KCM under Section 49 of the Act.
h the event that either GRZ or KCM (the "DefaultingParty"):
is m materialdefault intheperformanceofanyofitsobligations
this Agreement; or
- 53 -
set forth m
a Sole Expert or
award made by a Tribunal pursuant to Clauses 21 and 22 respectively,
and it or, in the case of KCM (if KCM is the Defaulting Party) a Secured Party, if the
Secured Party elects to do so, has notremediedsuchdefault or failure within thirty
(30) days of a noticebythe other Party (the "Non-Defaulting Party") to do so, the
Non-DefaultingParty m y givenotice of suchdefault or failure (hereinafter m this
Clausecalled a "Default Notice") totheDefaultingPartywhichshall
default or failure alleged. In the event that KCM is the Defaulting Party, GRZ shall at
thesametimegive a copy oftheDefaultNoticetoeachlender
to KCM, where the
nameandaddress of thatlender has previouslybeennotified to GRZ, and to each
mortgagee or chargee of any of K M ' S assets under any mortgage or charge notified to
the Minister m accordance with Clause 17.3.
The issue of a Default Notice under Clause 19.3 shall be without prejudice to:
anyaward or determination madeby
Expert under Clause 21 ; and
or a Sole
anyrights on thepart oftheNon-Defaulting Party to enforce such award or
determination (including by the institution of legal or other proceedings),
provided, however, that thefailure to makewhenduethe
payment m respect of a
monetaryaward m y result m additionalcompensationbeingpayableunderClause
Where the failure or default in respect of which the Default Notice is issued relates to a
matter m respect of which compensation is payable or other payment is due under this
Agreement, or otherwise results in material loss, detriment, cost, expense or damage to
theNon-Defaulting Party (the "Compensatable Losses"), theDefaulting Party must
pay to the Non-Defaulting Party (in addition to any compensation that would otherwise
be payable under this Agreement m respect of the failure or default) interest calculated
at LIBOR plus five per cent. (5%)on the amount of the Compematable Losses for the
periodcommencing on thedatewhentheCompensatableLosses
first occurred and
ending on the date when the default or failure is remedied (if capable of remedy) or
compensation is paid. Any mounts already paid or payable under this Agreement by
theDefaulting Party during therelevantperiod bywayof
payments m respectofinterest)shall
Compensatable Losses and any interest payable thereon.
If following the expiry of a period of three hundred and sixty (360) days following the
giving of a DefaultNotice(orsuchlongerperiod
as may be fixed by a Tribunal
pursuant to Clause 22):
wherethe default or failurespecifiedintheDefaultNotice
is capable of
remedy, such default or failure has not been remedied by the Defaulting Party,
or ifKCM is the Defaulting Party, by KCM or a Secured Party if the Secured
- 54 -
Party elects to do so, (or active steps have not been commenced and continued
to remedy tie default or failure if it is not capable of speedy remedy); or
tie defaultor failure iscapableof
compensation is notpaid in respectthereof (it being agreed thatsuch
compensationshall be increased to reflect any further diminution m the value
of the K C M Assets due to the delay in payment together with interest thereon,
calculated at LIBOR plus five per cent. (5%) in the manner set out m Clause
then tie Non-Defaulting Party m y by notice (hereinafter in this Clause 19 called a
"Termination Notice") to the Defaulting Party (which, m the event that K C M is the
Defaulting Party, shall also be copied to each lender, mortgagee or chargee who was
given a copy of the Default Notice) not less than 30 days prior to the Termination Date
(as hereinafterdefined)bring aboutthetermination
of this Agreement on a date
specified in the Termination Notice which is not less than thirty (30) days after tie date
of giving of the Termination Notice (in this Clause called the "TerminationDate").
In tie event that K C M is the Defaulting Party, GRZ shall ensure that the Minister does
not make a decision to suspend or cancel any of the Large Scale Mining Licences and
thatnoaction istaken by or on behalf of GRZ without the approvalof KCM to
terminatesuch Large Scale Mining Licences or any of the Leases prior tothe
In tie event that either Party serves on the other Party a notice challenging tie validity
of a Default Notice or challenging whether tie default or failure alleged in such Default
Notice has occurred,theNon-Defaulting Party shall not serve a TerminationNotice
until the Dispute is settled by arbitration proceedings under Clause 22 or by earlier
agreement between the Parties and if a Termination Notice has already been served the
Determination Date shall be postponed to a date which is five (5) days after the date of
settlement of such Dispute. If the Tribunal finds m favour of tie Defaulting Party, or
within any period fixed by the Tribunal tie default or failure is substantially remedied
and, if applicable, the compensation is paid,neitherParty shall serve a Termination
Notice and any Termination Notice already served shall be ineffective for all purposes
and shall be deemed withdrawn.
Without prejudice tothe generality of the provisions of Clause 22, if either Party
the materiality of tie default; or
whetherthedefaultor failure has beenremedied; or
tie adequacy ofanycompensationpaidorofferedpursuantto
- 55 -
the matter shall, subject to compliance with the provisions of Clause
for arbitrationpursuant to Clause 22.
20, be submitted
19.10 If the Tribunal finds (in the case of Clause 19.9(a) or (b)) that proper grounds exist for
issue of the Default Notice, the Tribunal shall fix a period during which the Defaulting
or failure referred to m Clause19.6(a)and payany
applicable) the amount of such compensation payable. If the Tribunal finds (m the case
of Clause 19.9(c)) in favour of the Non-Defaulting Party and that any default or failure
Defaulting Party, or m thecaseofKCM(ifitisthe
Defaulting Party) by a Secured Party, if the Secured Party elects to do so, the Tribunal
shall fix a period during which the Defaulting Party must remedy the default or failure
due m respect ofsuchdefault or failure. If the
Tribunal finds ( m the case of Clause 19.9(d)) m favour of the Non-Defaulting Party
or offered is inadequate,theTribunalshallfixthe
In each case,
be increased (as appropriate) in
accordance with Clause 19.5.
In the event GRZ terminates this Agreement pursuant to Clause 19.2 or 19.6:
but without prejudice to the liability
of any of the Parties in respect of any
antecedentbreach or defaultunderthisAgreement
or m respect ofany
each Party shallforthwithpaytotheother
to the other Party hereunder;
Party allmoniesthat m y be owing
timetable specified by GRZ; and
topurchase(subject to anyencumbrancesthereon)all oftheFacilities
at a price equivalent to the fair market value of such assets, which fair
be determined by agreementbetween GRZ and
Suchoptionisto be exercisable by notice to KCM givenwithin thirty (30)
days following the date of temnation of this Agreement. If requested to do
so by GRZ, KCM shall also assign to GRZ such contracts towhichitis
party as GRZ determines and deliver all records of the Facilities held by KCM
(30) day notice period referred to in Clause lg.ll(c):
- 56 -
to assign or otherwisedispose of all or any portion of the remab@
Facilities to any person; or
toremoveand recoverfromtheMiningAreaand export from Zambia
any of the remaining Facilities on the condition that such removal does
not cause irreparable damage to major assets which
from tie Contract Areas; and
m a safe and
stable condition to the reasonable satisfaction ofthe Director of Mine Safety
having regard to natural conditions m the area and applying generally accepted
metallurgicalindustry practice; providedthat
KCM shall not be required to alter the physical condition of the Facilities and
from m e to t h e .
In the event this Agreement is terminated by KCM pursuant to Clause 19.6:
K M shallsurrendertoGRZ tie LargeScaleMiningLicencesandtheLeases
but without prejudice to tie liability ofanyofthe
Parties m respect ofany
or inrespect ofany
eachPartyshallforthwith paytothe otherPartyallmoniesthat
to the other Party hereunder;
K M shall be entitled to requireGRZtopurchase
all of tie Facilitiesat a
priceequivalenttothe fair marketvalue ofsuch assets (the "Put Option"),
which fair market value is to be determined by agreement between GRZ and
ThePutOptionshall be exercisable bynoticetoGRZgivenwithin
following the date of termination of this Agreement.
m y be owing
thirty (30) days
h the event that GRZ terminates this Agreement pursuant to Clause 19.2 or 19.6 and
upon the expiry of the one (1) year period referred to m Clause 19.1 l(d) all facilities
which have not been disposed of and which remain on the Contract Areas shall become
GRZ or any liability for GRZ topay
theproperty of GRZ withoutanycostto
WithoutprejudicetoClause 13.10, Clauses 16, 19.5, 19.10, 19.11 and 19.12, 20, 21,
22, 24, 25, 26, 29 and 35 shall continue in force notwithstanding tie termination of the
rest of this Agreement by KCM. Termination of this Agreement shall not operate so as
to discharge or otherwise affect tie accrued rights or obligations of either party under
- 57 -
AMICABLE !WlTLEMENT OF DISPUTES
A Dispute shall be deemed to arise when one Party serves on the other Party a notice
("Notice of Dispute") statingthenatureoftheDispute,providedthatnoNoticeof
Dispute m y be served unless the Party wishingtodo so has fust taken m y steps or
in thisAgreement in connectionwiththe
has either taken such step or invoked such procedure as
Dispute and the other Party
m y be required, or been allowed a reasonable time to t i e such step or invoke such
Following service of a Notice of Dispute the Parties shall attempt m good faith to settle
such Dispute amicably. The provisions
ofClauses21and 22 shall notapply to any
Disputeuntil a period of thirty(30)BusinessDays,
or m y longerperiodagreed
between the Parties, shall have elapsed following service of a Notice of Dispute.
Where so provided by Clauses 2.11, 12.6, 12.10, 13.3, 15.6, 17.6 and 26.5 of this
Agreement any Disputeshallbe
referred to a Sole Expert for determinationin
accordance with the provisions of this Clause 21.
The Party wishing tie appointment to be made shall serve written notice to that effect
on the other Party ("Notice to Appoint") and with such Notice to Appoint shall give
details of the matter which it is proposed shall be resolved by
the Sole Expert.
If within ten (10) Business Days from the service of the Notice to Appoint the Parties
have failed to agree upon the selection of a Sole Expert, either Party may then submit a
request inwriting ("Request for Proposal") totheICCInternational
Expertise (the "ICC Centre") for the proposal of a Sole Expert as quickly as possible.
out thenames, description and addresses ofthe
Parties, shallattach a copyofthisAgreement,shall
set out m y relevant indications
concerning the choice of the Sole Expert (including a reference to the provisions of this
Clause21)and shall setout a descriptivesummary ofthe Sole Expert'sbrief.The
expert proposed bytheICC
Centre as theSoleExpert
selected under this Clause 21.
Upon a Sole Expert being selected under the foregoing provisions of this C l a w 21,
the Parties or either of them shall forthwith notify the 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 in fact) accept appointment as Sole Expert and to
c o n f i i thattherequirementsofClauses
21.8(b), (c) and (d) are allsatisfiedin his
Ifthe Sole Expert shall be either unwilling or unableto accept such appointment or
shallnothave given theconfirmationinresponse to the request tobe made under
Clause 21.4 (the "Confirmation") withinthesaidperiodof
then (unless the Parties areable to agree upon the selection o f anotherSoleExpert)
either Party m y submit a Request for Proposal in the manner provided m Clause 21.3
- 58 -
to the ICC Centre which shall be requested to make a proposal or (as the case m y be)
a further proposal and the process shall be repeated until a Sole Expert is selected who
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
and the Sole Expertcannotwithin
five (5) BusinessDays ofthe givingof the
Confirmation agree on the mount 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
upon the selection ofanotherSoleExpert)eitherParty
m y submit a Requestfor
Proposal or (as the case may be) a further Request for Proposal in the mnner provided
in Clause 2 1 . 3 tothe ICC Centre which shall be requested to make a proposal or (as
the case m y be) a furtherproposalandtheprocess
shall be repeateduntil a Sole
Expert is selected whoacceptsappointmentandwhosetermsof
appointment are agreed.
Theappointmentof the SoleExpert shall bedeemedtohavebeen
signing the contract of appointment.
The Parties shall select or (if applicable) the I C C Centre shall propose a SoleExpert
meeting the following criteria:
be a personreasonablyqualified
experience and training to d e t e m e the Dispute to be referred to him.
Neither the Sole Expertnor
(if he i s an individual)anymemberof
immediate family nor (in other cases) any partner inor director of the Sole
Expert shall be (or within ten ( 1 0 ) years before his appointment have been) a
director, ofice holder or an employee of or directly or indirectly retained as a
consultant or m adviser to either Party or an Affiliate of either Party.
The SoleExpert shall be independentofthe Parties and shall have no interest
or duty which conflicts or m y conflict with his function as Sole Expert.
not be a citizenor a national ofnor
resident in Zambia or South Africa.
If, in respect of m y 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.
The terms of appointment of the Sole Expert shall contain confirmation from the Sole
Expert as tothe mattersrequiredbyClause
21.8, shall require the SoleExpertto
21.11 and 21.12, and shall contain at
comply with the obligations set out in Clauses
least tie followingprovisionsregarding
proceedings before the Sole Expert (the "Expert Proceedings"):
than fourteen (14) BusinessDays after his
appointment call the Parties to a meeting at which he shall raise any matters
requiring clarification (whether arising out of his contract of appointment or
otherwise) and give directionsas to the procedural rules to be applicable m the
2 1.10. Such directions m y 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 h accordance with this Agreement or with such directions.
The Partiesshall be entitledtosupplydata,information
and to make submissions (writtenand/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 data, information, documentation and submissions
supplied and made after such fifteen (15) Business Days unless the same
furnished m response to a specific request from him or are made in response,
to data,information,documentation or
submissions by the other Party).
andlor technicaladvice as he may reasonably require andtoobtainany
secretarial assistance as is reasonably necessary.
The SoleExpertshall be entitledtorequest from theParties (and the Parties
shall supply to the Sole Expert) all documents and other information which the
Sole Expert 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 in
an action m the High Court be entitledtorefusetodisclose
on grounds of
legal professional privilege.
Copies of all data, information,documentationandsubmissionssupplied
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 in the presence of
theother Party. TheotherParty
shall, notwithstanding the limitations in
Clause 21.10(b), have the right for the period of ten (10) Business Days
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
promptly supplied to the other Party.
and the Parties or either of them shall
take place unless both Parties are given a reasonable opportunity to attend any
If, withoutshowingsufficient cause, a Party fails to complywithany rule,
request, direction or timetable 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 m accordance with Clause 21.1OQ) and (k), and in so
document, information or submission;
that Party or ofthe
to complyorproduce as may,
in the opinion of the Sole Expert, be justified; and
make his determination onthe basis of the informationbefore him
attaching such weight as he thinks fit to any evidence submitted to him
outside any period he may have requested or directed or as required
by the rules applicable m the Expert Proceedings.
The Sole Expert shall havethepowertoopen
up,reviewand revise any
this Agreement and to determine all
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 my country as m y appear to the Sole Expert to be reasonable.
Notmore than ten (10) BusinessDaysafterexpiryof
under Clause 21. l q e ) the Sole Expert shall furnish the Parties with a draft of
his proposeddeterminationof the Dispute (including a draft ofthe reasons
required by Clause 2 l . l O ( k ) below) m respect of which both Parties shall be
entitled to make representations tothe Sole Expert for the period of five (5)
Business Days after receipt of the said draft.
The Sole Expert shall issue his determination of the Dispute m writing within
ten (10) Business Days after expiry of the period under Clause 2 1 . 1 0 0 ) and
shall give full written reasons for that determination.
m carrying out his duties and shall doso m
accordance with any relevant terms of this Agreement and shall make his determination
in accordance with the applicable law in relation to this Agreement.
the SoleExpert m
connection with his appointment as Sole Expert shall be treated as confidential and tie
Sole Expert shall not disclose to any person or company any such data, information or
documentation. All such d a t a , informationanddocumentation
shall remain the
property of tie Party disclosing or delivering thesameand shall (togetherwith all
copies thereof) be returned to that Party on completionof 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 ofthe Sole Expert or his firm or
company or Afflliates (if my) of the Sole Expert or his or its professional advisers if
2 1 . l 2 All data,
- 61 -
or professional advisers have prior to such disclosure
entered into specific undertakings to maintain the confidentiality of such information
data and documentation.
2 1 . 1 3 Without prejudice to the
Parties' obligation to comply with any request made by the
Sole Expert underClause 21.1qd) above,the Parties shallnot be entitled to, or to
apply for, discovery of documents m the Expert Proceedings.
2 1 . 1 4 If the Sole Expert:
or dies or becomes
of hisdetermination on costsunderClause
set out m Clause
then, at therequest of either Party, a replacement Sole Expertshall be appointed m
accordance with the provisions of Clauses 21.3 to 21.6 and on such appointment being
made (asdefined m Clause 21.7) the appointment of the Sole Expert shall cease unless
prior to the date of appointment of the replacement Sole Expxt the Sole Expert shall
have rendered his determination thereunder in which case such determination
binding on the Parties and the proposed appointment of the replacement Sole
shall be withdrawn.
as an expert and not as an arbitrator and the laws relating to
arbitration shall not apply to theSoleExpert
or hisdetermination or theExpert
Proceedings or the procedure by which he reaches his determination.
2 1 . 1 5 The Sole Expert shall act
2 1 . 1 6 Any determination of the Sole Expert shall be f m l and binding upon the
in the event of fraud or manifest error.
are in progress:
costs ofproviding all data, information,
documentation and submissions supplied or made by it and the costs of
all lawyers, advisers, witnesses, employees and other Persons retained
by it; and
Expert set out in his contract of appointment.
Expert and any independent advisers to the Sole Expert retained m connection
with a determinationhereunderandany
costs of hisappointment ifhe is
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 of how
the said costs are to be borne within five (5) Business Days of the issue of his
- 62 -
In rexhing that
determinationthe Sole Expert shall be guided by the principlethatthe
unsuccessfid Party should pay the costs of the successful Party, and shall take
into account the relative extent of success or lack thereof by each Party.
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
ofthe determination,and if not paid within that time, intereston t i t mount shall
accrue and be payable at the rate of LIBOR plus 5 % per annum (to be compounded on
the first day of each calendar month of non-payment).
Subject to the provisions of Clauses 20 and 21, GRZ and KCM herebyconsentto
submit to the International Centre for Settlement of Investment Disputes ('WSID")any
Dispute for settlement by arbitration pursuant to the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States (tie "Convention").
in this Clause 22 shall bear the same
Save where the contraryappears,termsused
meaning as they do m the Convention.
The Parties hereby agree that KCM, because of foreign control, shall be treated as a
national of a stateother than tie Republic ofZambiafor
t i e purposes of tie
The Parties agree t i t the transaction to which this Agreement relates is an investment.
Any arbitral tribunal (tie "Tribunal")constitutedpursuantto this Agreement shall
consist of three arbitrators. Each Party shall appoint (1) one arbitrator withii fourteen
( 1 4 ) days of the registration of t i e request for arbitration. The third arbitrator, who
shall be President of the Tribunal, shall be appointed by agreement of the arbitrators
appointed by the Parties or, failing such agreement within twenty eight (28) days of
registration of the requestfor arbitration by the Chairman oftheAdministrative
Council at tie request of either Party. None of the arbitrators may be a citizen or a
national of, or a permanent resident in, Zambia or South Africa. Without prejudice to
its otherpowers,theTribunal shall have tie powerto fix a longer period than the
period of 360 days referred to in Clause 19.6 in any case in which the question whether
a Default Notice is valid or whether the default or failure alleged in any such Default
Notice has occurred has been submitted for settlement by arbitration.
to thisAgreement shall beconducted in
accordance with theArbitration Rules of ICSID in effect onthe date on whichthe
"Arbitration Rules"). SuchArbitration Rules shall be
subject to the express provisions of this Clause 22. In the event of my conflict the
provisions of this Clause 22 shall take precedence over such Arbitration Rules. Any
communications by the Secretary-General with either Party under either the Institution
- 63 -
Rules or the Arbitration Rules of ICSID m y be sent by tie Secretary General in tie
manner providd m Clause 29.
Any arbitration proceedings commenced pursuant to this Agreement shall
Londonwhichshall be theseatofthe
arbitration proceedings. h relationtoany
arbitration proceedings commenced under or in connection with this Agreement, GRZ
irrevocably submits to the jurisdiction of the United Kingdom and waives, to the extent
pemtted by applicable law, any objection to such arbitration whether on the ground of
venue or on tie ground that the arbitration has been commenced in m inconvenient
The language of any arbitration proceedings shall be English.
Any award in arbitration proceedings held pursuant to tie Convention shall be binding
on the parties and judgement thereon may
be entered in my court having jurisdiction
24, GRZ irrevocablyandgenerallyconsents
respect of the enforcement of any arbitral award or determination of a Sole Expert
against it in 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,enforcement or executionagainst or inrespect of my property
whatsoever (irrespective of its use or intended use) of any decision, award, order or
judgment which m y be made or given m such proceedings and the granting of any
injunction or order for specific performance or for recovery of land or other property).
The Parties waive any right to appeal to any court of law or other judicial authority in
connection with any arbitrationproceedings conductedpursuant to this Agreement.
bythe Parties inconnectionwith my arbitrationprocedure (to
include both Parties' legal and other professional costs and other expenses, tie fees and
expenses of the Tribunal, and the charges for the use of tie facilities of ICSID) shall be
tie Dispute has been referred jointlybythem;
in accordancewithArticle 61(2) of theConvention.
22.11 The mount (if m y ) which is required by
a determination or award of tie Tribunal
under this Clause 22 to be paid by one Party to tie other Party shall be paid within ten
(10) Business Days of the issue of the determination
or award and, ifnot paid w i t h
that time, interest on that mount shall accrue and be payable at tie rate of LIJ3OR plus
five per cent. per annum (to be compounded on the first day of each Calendar Month
22.12 The provisions of this clause shall not preclude any
Party from applying for mterirn
relief on m urgent or any other basis to a court of cmmetent iurixiiction.
Unless tie Agreementhasalreadybeenrepudiatedorterminated,
the Parties shall
continue to observeandperform all theobligationscontamedm,and
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
election arising h consequence of any alleged default by the other arising out of the
subject matter of the Dispute until the Dispute has been resolved by the Sole Expert or
by arbitration or by agreement of the Parties as the case may b e .
GRZ irrevocably agrees that should any proceedings m relation to, arising out of or
connection with this Agreement be taken in any jurisdiction against it or its assets, no
it m y atanytimeexist,whetheronthegrounds
sovereignty or otherwise) from those proceedings shall be claimed by it or on its behalf
or with respect to its assets, and GRZ hereby irrevocably waives my such immunity
which it or any of its assets now has or m y acquire in the future in any jurisdiction.
The waiver of munities referredto m Clause 2 4 . 1 constitutesonly a limited and
specific waiver for the purposes of this Agreement and under no circumstances shall it
be interpreted as a general waiver by GRZ or a waiver with respect to proceedings
unrelated to this Agreement. GRZ has not waivedsuch immunity inrespect of
property which is (i) located in Zambia, (ii) used by a diplomatic or consular mission
of GRZ (except as m y be necessary to effect service of process), or (iii) property of a
military character and under the control of a military authority or defence agency.
This Agreement shall begovernedbyandconstrued
in accordancewith tie laws of
Zambia as in force at the date of execution of this Agreement, supplemented by the
rules of international law where necessary to give effect to the express provisions of
this Agreement (m particular, but without limitation, to give effect to the provisions of
Clauses 11, 13, 15 and 16).
FORCE MAJEURJ3, ECONOMICFORCE
Any failure onthe part of a Party hereto to comply with any of the terms, conditions
and provisions of 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 any claim for damages insofar as such arises from Force Majeure, if the firstmentioned Party:
MAJEURE AND MATERIAL ADVERSE
has taken all appropriateprecautions,due care and reasonablealternative
measures with the objective ofavoidingsuchfailureandof
carrying out is
obligations under this Agreement; and
- 65 -
becoming aware of such an event.
Thefirst-mentioned Party shalltakeallreasonablemeasurestoovercomethe
of thisAgreement withtheminimum of
delay (provided that no Party has an obligation to settle a labour dispute or to test the
constitutionality of any legislation or law) and shall give notice to the
other Party on
the restoration of normal conditions.
For tie purposes of thisAgreement, Force Majeuremeansact
of war (whether
declared or undeclared),invasion,armedconflict,act
of foreign enemy, act of
or usurpedpower, insurrection, revolution, civil
disturbances, blockades, not, embargoes, strikes, lock-outs and other labour conflicts,
sabotage, criminaldamage, land disputes,epidemics,plague,volcanic
earthquakes, subsidence, heave, landslip, collapse, rock falls, storms, cyclones, floods
m e works),explosions(including
and the explosion
explosions), fires, lightning,methaneandotherundergroundgases
‘thereof, radioactive or chemical contamination or ionising radiation unless the source
or cause of the contamination, radiation or other hazardous thing is brought or has been
brought onto or near KCM’s operations by the Party claiming Force Majeure
employed or engaged by the Party claiming Force Majeure unless it is or was essential
for the construction or operation of the Facilities, non-availability of electrical power,
gas, water or otherutilitiesother than due tothenegligence or default of KCM,
restrictions imposed by the government or other authorities of any country which has
jurisdiction either over KCM or its operations (provided that GRZ will not be entitled
to claim a ForceMajeureEvent
as a result of restrictionsimposed by Zambian
governmental authorities) or destruction of, damage to or unavailability of materials,
equipment or suppliesand m y othereventwhich the Party claimiig Force Majeure
could not reasonably be expected to prevent or control.
KCM may, at any time, serve notice upon GFtZ that either:
an EconomicForceMajeure Event; or
has occurred andiscontinuing.The
service of an EconomicForceMajeureEvent
notice shall be accompanied by a certificate from tie auditors ofKCM certifying that
an Economic Force Majeure Event has
occurred and is continuing. The
service of a
Material Adverse Change Event Notice shall be accompanied by a certificate signed by
two (2) Directors ofKCM summarising the reasons for service of such notice and the
events or circumstances constituting suchmaterial adverse change.
KCM shall procure that the delivery of a certificate(s) as referred to above, shall be
repeatedon a monthlybasis by reference to theimmediatelypreceding one month
period until such time as the Economic Force Majeure Event andor Material Adverse
- 66 -
Change Event (as the case m y be) ceases to be continuing or the K M board have
adopted an alternative mining plan for the KDMP as contemplated in Clause 2.8(b).
Theoccurrence of a EkonomcForceMajeureEvent
andor a MaterialAdverse
Change Event shall have theconsequences(butonlythoseconsequences)setout
Clause 2. K C M shall t i e all appropriateprecautions,due care andreasonable
of avoiding the service of a noticeof a
Economic Force Majeure Event or a Material Adverse Change Event (as the case may
be) and shall t i e allreasonablemeasures toovercomesuchevents (so far as it is
within its reasonable control) and to fulfil the terms and conditions of this Agreement
with the minmum of delay, provided however that K C M shall not have an obligation
to settle a labour dispute or test the constitutionality of any legislation
or law. K M
to GRZ of a EconomicForceMajeureEventand/or
Material Adverse Change Event ceasing to be continuing.
In tie event that:
a Economic ForceMajeure Event occursand the auditorsof K M deliver a
certificate in respect thereof; or
and GRZ disputesthe occurrence of either of the aforementioned events, GRZ shall,
within thirty (30) days of receiving thenoticeinformingitoftheoccurrence
continuation of the Economic Force Majeure Event or Material Adverse Change Event
(as the case may be) notify KCM that it disputes the occurrence of the relevant event
and, where this matter has not been resolved within a further thirty (30) days of GRZ
notifying KCM of such dispute, the matter shall be referred for determination by a Sole
Expert in accordance with Clause 21 hereof.
The Parties mayfromtimetotime
by agreement inwritingaddto,substitutefor,
cancel or vary all or any of the provisions of this Agreement, the Large Scale Mining
satisfactorily implementing or facilitating the objectives of this Agreement.
Subject to the provisions of Clause 27.3, KCM may from time to time and without the
need for agreement m accordance with Clause 27.1 add to, substitute for or vary all or
any of the Scheduled Programmes (excluding the Environmental Plan changes to which
shall only be made in accordance with Clause 27.1) or any other programme, proposal
or plan approved for the purpose of more efficiently or satisfactorily implementing or
facilitating the objectives of this Agreement.
WhereKCM, m its sole discretion,proposes tomodifyor
vary tie Approved
Programme of Mining and Metal Treatment Operations and as a consequence of such
modification or variation any of the following occur:
be expended at theFacilitiesis
either increased or reduced by at least ten per cent. (10%)of the sum set out
in tie Approved Programme of Mining and Metal Treatment Operations;
tie aggregate annual productionlevels ofthe Facilitiesis either increased or
(10%) ofthose figures set out m the
Approved Programme of Mmmg and Metal Treatment Operations; or
theaggregatenumber of peopleemployedattheFacilities
is either increased
or reduced by at least ten per cent. (10%) of those employed at the Facilities
prior to any such reduction.
KCM shall provide notice of such variation or modification to GRZ together with a
Operationsand, within thirty (30) days of GRZ notifying K M that it wishes to receive
an explanation ofsuchproposedchanges,butwithout,inanywayfettering
restricting K M ' S discretion to make them, the parties shall meet in
order that K M
may so explain the reasons for the proposed variation or modification to the Approved
Programme of Mining and Metal Treatment Operations.
For the avoidance of doubt,
modification to the Approved Programme of Mining and Metal Treatment Operations
shall m no way be construedsuch that KCMwould be requiredtoobtain GRZ's
consent (or that GFCZ would be required to publicly support such a proposed variation
or modification)prior to effecting the proposed variation or modification.
In the event K M wishes to defer commencement of KDMP m accordance with Clause
2.3(c) it shall, as soon as reasonably practicable, notify GRZ of such fact by serving an
Extension Notice and, within thirty (30) days of such notification, the parties shall meet
in order that KCM may explain the reasons which have given rise to KCM's wish to so
tie KDMP InvestmentCommitment is reducedinaccordancewithClause
K M shallnotify GRZ m writingpromptlyfollowingitsdecisiontomakesuch
reduction (and in any event prior to any public announcements thereof) and (in the case
of (a) only)provide GRZ withadditionalinformationsettingout
tie mount ofthe
Investment Commitment which is to be delayed as a result thereof.
KCM shallnominate a representative,who i n theopinion of K M is of
member from each of theMinistry, KCMandthe local government,which
- 68 -
shall have no powers to bind KCM but shall monitor the implementation of tie
Employment and Training Plan.
Thiscommitteeshalloperate during thetermof this Agreementand K C M
shall furnish it with reports every three (3) months outlining the progress of
the Employment and Training Plan, problems encountered, positions filled and
the number of Zambian citizens employed.
KCM shall only be liable for the costsassociated with itsrepresentative in
respect of the committee formed pursuant to Clause 28.l(a).
KCM shall nominate a representative, who intheopinionof
KCM is of
to a committee,comprisingofone
memberfrom each ofthe Ministry, the local governmentand KCM, which
shall have no powers to bind KCM but shallmonitorthesupplyand
procurement of goods and services to the Facilities.
The committee shall operate during the term of this Agreement and K C M shall
furnish it with reports every three (3) monthscomprisingthefollowing
a list of successfultendererswhich shall includetheitemssupplied,
and the residence of tenderers; and
a list of unsuccessful locally basedtenderers.
KCM shall only be liable for the costsassociated with itsrepresentative in
respect of the committee formed pursuant to Clause 28.2(a).
required or permitted to be given, delivered or served under this Agreement
or in connection with the transaction as evidenced by tie Sale and Purchase
Agreement or under the Act shall be deemed to have been given, delivered or
served if (i)
in the case of a Notice given by GRZ, such Notice is signed on behalf of
GRZ by either the Minister or Permanent Secretary tothe Ministry as
their respective responsibilities require; or
m the case of a Notice to be given by KCM, such Notice is signed by a
director or by the Secretary of KCM.
shall, as elected by the Party givingsuchnotice,
personally delivered or transmitted by fax to the other Party as follows -
- 69 -
A Notice to GRZ
M h k t r y of Mines and Minerals
Fax: 260 l 251 2441252916
M h i s t r y of Mines and Minerals
PO Box 31969
W e Salassie Avenue
A Notice to KCM
Fax: 260 1 250 658
Konkola Copper Mines PLC
74 Independence Avenue
Except as otherwise specified herem, a Notice or other communication shall be deemed
to have been duly given on the earlier of (9
if deliveredpersonally,the date atwhichitwasleftat
tie address referredto
m Clause 29.1 andsigned for at that address by someonewithapparent
authority to do so; or
if transmitted by facsimile the date of transmission to tie fax number set out m
Clause 29.1 with confiied answerback.
Party given m accordance
Either Party m y change its address by Notice to the other
with the provisions of this Clause. All Notices
and all communications, documents or
instruments given, transmitted,delivered or servedunderthisAgreement
connection with this transaction shall be m the English language.
Where KCM is required tosubmitanyplans,proposals
or other materialfor tie
approval of GRZ, the date of submission shall be deemed to be tie date on which GRZ
received the said plans, proposals or other materials.
The failure of any Party to enforce at any time m y of tie 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 tiereafter to enforce each and every part of the provision m respect
of any subsequent default or breach.
- 70 -
The provisions of this Agreement shall be separateand severable eachfromtheother
if anyportion or any oneprovision or portion is deemedtobe
this Agreement shall remainbindingupon
shall precludeone Party from
enforceable by the Partieshereto.Nothingherein
requesting the other Party to renegotiate any provision herein.
The Parties shall execute suchdocumentsanddoand perform such acts that lie within
theirpowerand are necessaryto give full effectto, and to give eachother the full
benefit of, this Agreement and GRZ undertakes, so far as possible and m accordance
withthetermsof this AgreementandZambianlawand
regulation, to expeditiously
provide all necessary approvals and assistance for the development and operation of the
This Agreement may beexecutedin any numberof counterparts, each of which when
executed shall be deemedto be an original, and suchcounterparts shall together
constitute one Agreement.
ABSENCEOFREPRESJNTATIONS AND WARhWTJES
Except as expresslystated in this Agreement, no representation,inducement or
warranty was, prior to the execution of this Agreement, given or made by one of the
Parties hereto with the intent of including the other Party to enter into this Agreement,
and any representations, inducements or warranties that
m y havebeen so given are
hereby denied and negated.
COMPENSATION A N D PAYMENT
shall be madepromptlyand shall be paid in any freely convertible OECD currency,
fully transferable, without withholdings or deductions for taxes, levies and other duties
except where those were due.
If any amount which is required by any provision of this Agreement to be paid by one
Party totheother Party is not paid onthedue date, interest on that amount shall
(unless already payable under Clause 2 1 or 22) 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).
Intheeventof a dispute arising as to the compensation payable by a Party pursuant to
a dispute as tothe
anyprovisionof this Agreement(including,withoutlimitation,
quantumofthecompensation or whether the compensation is payable or not), either
Party may refer the issue to a Tribunal for determination m accordance with Clause 22.
- 71 -
This Agreementand the EnvironmentalLiabilitiesAgreementtogethercontain all the
express provisions agreed onbythe partieswithregardtothesubjectmatterofthe
agreement and the parties waive tie right to rely on m y alleged express provision not
contained in this agreement.
to revaluation on the basis set out i n Clause 37.2 by reference to any change m the
Producer Price Index for Finished Goods as it appears in the periodical Monthly Labor
Review as published by the US Department of Labor, Bureau of Labor Statistics or, if
such index is not published, such other index that replaces it (the "Index"').
At the endof each month,theInvestmentCommitment
and the K D M P Investment
C o m m e n t shall be adjusted by multiplicationbythequotientresulting
theIndex as attheendofthepreviousmonthdivided
at three (3) months prior to Completion.
by theIndex as
Any Party may request that an adjustment pursuant to Clause 37.2 is determined by a
f m of charteredaccountants of recognisedinternationalstandingprovided
Party requesting such determination procures that such firm provides its determination
within ten (10) Business Days of the date of adjustment specified m Clause 37.2.
- 72 -
IN WITNESS WHEREOF this Agreement has beendulyexecutedby the Parties .on the thirty
f m t day of March,
SIGNED for and on behalf of the
GOVERNMENT OF THE
FtJZPUBLIC OF ZAMBIA
SIGNED for and on behalf of
KOIWOLA COPPER MINES PLC }
APPROVED ~ O G R A M M E
OF " I N G
- 74 -
KONKOLA COPPER MINES PLC
PROGRAMME OF MINING AND METAL
Thisdocument, tie ProgrammeofMiningandMetalTreatmentOperationsforthe
assets that W11 be owned by Konkola Copper Mines PLC (KCM), has been produced to
satisfy the requirements of Part 3 of The Mines And Minerals Act, 1995 in relation to
tie application for a large-scale mining licence. Section
24 (3) of Part 3 of the Act
states, inter alia:
a) A comprehensive statement ofthe mineral deposits in the area over which the
licence is sought, including details of all known minerals proved, estimated or
inferred, ore reserves and mining conditions;
b) Every application for a large scale mining licence shall include or be
accompanied by the proposed programme ofmining operations, including a
forecast of capital investment, the estimated recovery rate of ore and mineral
disposal of ore andminerals
The Progamme of Mining and Metal Treatment Operations for
t i e KCM assets has
been based, h general, on t i e Class 1 Feasibility Study that was undertaken by Zambia
CopperInvestmentsLimited (ZCI) inJune1999.Whereveravailable,theFeasibility
Study programme has been updated withmorerecentlyestimatedinformation.The
Programme addresses the operations at Konkola, Nchanga and Nampundwe.
Programme of Mining& Metal Treatment Operations
._=. :=.-.. __?-_.. --.---i~:.z-:_.........
. -. . .. _.. . . . -.
. . . . . . . . . .
1. DESCRIPTION OF THE MINING OPERATIONS
StoDim Methods and Efficiencies
1 .l .2
1.2.1 TheUnderground Mine
l .2.l .l UnderwoundInfrmtructure
188.8.131.52 Stopirw Methods and Eficiencies
l .2.l .3 Production Forecast
1.2.2 TheOpennit Mine
I .2.2.I 0-permithhzmucture
184.108.40.206 Life ofMine Desim
l .2.2.3 Production Forecast
1.2.4 Tailings Leach Plant
1.2.6 Chineola Refi-actow Ore
1.2.7 Hvdrometallurgical Treatment
1 -3.1 UndermoundMine
l .3.1.l UnderwoundInfrastructwe
l .3.l .2
Stopinp methods and Eficiencies
l .3.l .3
1.3.3 Surface Infiastructure
Consolidated Sales Forecast
CAPITAL COST ESTIMATE
. . .
r l - 2......
Zambia Copper Investments Limited
. . . . . .. . . - . . .............
Page No 2
er-.Er0-.ma I n ~ m c t u i e
The existing hoisting installations at Konkola will be upgraded to comply
with modempractice and therelevantlegalrequirements.The
ventilation shafl (to be re-named No.4 Shaft) will be slyped and deepened
6 million tom of ore and its
associated waste. No.4 Shaft will be commissioned for hoisting
2006, fiom whichdate ore hoistingthroughNo.1andNo.3Shafiswill
Additional pumps W11 be installed in an extension to the 985m.Lpump
chamber and a new pump chamber on the 138OmL will be established.
At present, the main surface fans at No.1 and No.3
Shafts operate at
unacceptable pressures and underground booster fans are usedto keep
the production sections ventilated. The location and relatively small
capacity of these booster fans have resulted
m pressurisation of the
return airways with consequent high re-circulation. h turn, this has
resulted in inadequate heat dissipation and the slow clearing of fiunes
at blasting times.
New higher duty booster fans will be installed above the production
levels to extract fi-om the workings below and to force the air up the
smes with tie present mainsurface fans.
This willallow the currentlyinstalledboosterfans
to be removed
m the retum airways andthe
elimination of the majority ofthe re-circulation.
underground mobile fleet.
for newpurchases andrebuilds
Programme of Mining& Metal Treatment Operations
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1.1.2 StoDing Methods and Efficiencies
The current mining operation is based mainly on sub level open stopmg
methods (SLOS) using gravity ore flow within stopes where the orebody
s t e q ind iiy scraping~ofh oken ore m flatter dipping StopeS, These
Konkola but With variations to suit tie level of mechanisation, mode of
stope drilling, orebody width etc.
The post pillar cut and fill method (PPCF) has been introduced at No
Shaii - using waste rock backfill. SLOS With benching and longitudinal
room and pillar (LW)have also been planned for use in some
No.1 and No.3 Shafts during the interim period
before changing totally to
the backfill methods for the Konkola Deep Mining Project( K D M P ) .
A temporary backfill plant With a capacity of about 40000m3 per month
will be built at the existing concentrator and commissioned
m early 2001.
Following this, the bulk of the No.3 Shafl stoping will be by the post pillar
cut and fill (PPCF) method.
backfill methods have been planned for
Square excavation level fill (SELF); and
Post pillar cut and fill (PPCF).
The K J 3 M P stoping design is based on the following average dilution and
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Zombia Copper investments Limited
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Programme of Mining & Metal Treatment Operations
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A new large capacity backfill plant will be constructed next to the new
concentrator at No.4 Shaft to provide the required volumes of classified
Tidings fill for the stopmg operations. The temporary'backfill plant at
No. 1 Shaft will be closed when the new backfill plant is commissioned.
1.l .3 Ore Production Forecast
The estimate of ore reserves and resources for Konkola
as at May 1998 is
shown m tie following Table. The estimate is based on
a 1% copper cut-
off (the same as usedby ZCCM) and is for Ore Shale only. All
reserves and the indicated resources will be extracted during the project
Table: Konkola Ore Reserves and Resources
No 1 Shaft
No 3 Shaft
No 1 Shaft
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.Zambia Copper Investments Limited
Page No 5
Programme of Mining & Metal Treatment Operations
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It is planned to increase the ore production capacity from the current level
of about2.0mtpa to 24mtpa inthe short termand thereaflerbuild-up
production until it reaches thelevel of 6mtpa planned for KDMP.
Thelimitedore reservesremaimngabove 59OmL atNo.3Shaft require
stoping of reserves below that level to commence m about four years time.
To achieve timely dewatering of those reserves, tie 95OmL dewatering
development W11 re-commence after vesting.
The dewatering plan over the thirty year project period is based on tie
development of the 1 1 5 O m L and 135OmL levels. This has been scheduled
to tie in with theestablishmentofNo. 4 Shaft The development is also
timed to ensure that tie relevant stopes W 1 1 be dewatered before they are
required for production.
TheNo.1Shaft area has moreorereservesthanNo.3
Shaft, a larger
geographical extent to provide for more stoping faces and a higher grade
than thatof No.3 Shaft.Thereforeoutofthetotalundergroundore
production of 2.4mpta, 1.4mtpa will be produced from the No.1 Shafi area
in the early years. No.3 Shaft's production of 1O
. mpta will come fiom a
limited number of stoping faces andby relativelynew methods.
Oreproduction fiom the KDMP resourcescommences m 2004. No.3
Shafl stops hoisting ore in 2005. KDMP production increases rapidly h m
2004 andreachestherate of 6.0mtpa fiom January 2007. Ore hoisting
through No. 1 Shaft closes in 2006.
The temporary backfill plant will remain in operation until the first module
ofthe KDMP backfill plantcomesintooperationinSeptember
FromSeptember 2005, all stoping will be by backfill methodsand the
second backfill module of the KDMP backfill plant will be commissioned
m April 2006.
Programme qf Mining cfi Metal Treatment Operations
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The combined m u d oreproductior,forecastfor No.1 Shaft, No.3 Sh&
and No.4 Shaft fiom 2000 to 2028 is shown in the following Table. The
Table also shows the forecast conamtitorrecovery and the tons of copper
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rogramme of Mining & Metal Treatment Operations
Table: Konkola Production Forecast
Zambia Copper Investments Limited
Page No 8
Metal Treatment Operations
/rogramme of Mining &i
Table: Konkola Production Forecast (ctd)
89.74 89.80 89.92
Zambia CopperInvestments Limited
Page No 9
A minor expansionwill be made to the existing concentrator during2000 to increase its
capacity by 20%. The existing concentratorwill be shut down following commissioning
of the new plant m 2005.
The new concentrator, which W11 be positioned approximately three kilometres northwest of the existing concentrator, W11 consist of two 3 million tons per annum modules
that will include mill feed silos, SAG and ball mills, large cell flotation and concentrate
thickening. The thickened concentrate W11 be pumped to tie existing concentrator site
for filtering in a new filterplant.
The flotation tailings W11 be classified m the new backfill plant and the underflow will
be used as the backfill material for the stopmg operations.
1.1.5 Surface Infiastructure
Most of the surface infhtructure requires general refiu-bishment. Some of the surface
workshop facilities W11 be re-equipped and others will have to be extended to cater for
all of the KDMP requirements. A new changehouse will be required fortie underground
workers to replace the existing changehouse that will have to be demolished to make
way for a major extension to the mainelectrical substation.
The Lubengele tailings dam wall will be raised progressivelyover the thuty years and a
new spillway will be constructed to replace the existing decant tower.
Programme of Mining & Metal Treatment Operations
K M Project
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1.2 Nchanga Mine
12.1 The Undermund Mme
I.i rider oundIn m-m-~&re
. . . . . .
Provision has been made m the capital estimate to upgrade certain of the
winder electricdmechticals and for upgrades to the 1600 and 2800 pump
4 Shaft upcastfanwill
supplement the twin fan system at No 5 Shaft and will allow the use of the
735ftL drain drive as a return system fiom Chingola B. This will increase
the total circulating quantity by 200m3/s for the remaining pmod during
which the Chingola B reserves are being mined.
Provision has been made fornew
underground mobile fleet.
I.2.I . 2 StoDinp Methods and Eficiencies
There are no planned changes to the basic design
of the stoping methods. To
reduce the amount of banded sandstone dilution that is encountered from the
Lower Ore Body, the maximum percentage draw t i l l be reduced fiom 125% to
Chingola B production will be increased fiom the current rate
of 300000tpa to
480000tpa with an overall recovery factor willbe 0.85.
I .2.1.3 Production Forecast
The estimate of ore reserves and resources for the Nchanga Underground Mine
as published by ZCCM is shown in the following Table. The estimate
on the same cut-off parameters used by ZCCM.
LOB "thin rich"
The current forecast of metal prices excludes tie above quoted resources fiom
being regarded as viable at this stage. However, tie resources are significant m
quantum and will be tie subject of careful re-evaluation when tie forecast of
metal prices improves.
The production forecast for the Nchanga underground mine is presented in tie
following Table.To reduce tie amount of Banded Sandstone in tie ore stream,
Programme of Mining c% Metal Treatment Operations
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the maximum percentage draw has been reduced fiom 125% to 110%. All of
the estimated reserves W11 be cxtracted during the remaining life of t i e mine.
--TheTabie.&so shows-the expected c&kmtratorr & o v q and the tons of copper
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-&&a Copper Investments Limited
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Page No 1 3
Programmeof Mining & MetalTreatm
Table: Nchanga Underground Production Summary
Grade % ASCu
TCu Contained in
Ore (000 tons)
ASCu Contained in
Cons (000 tons)
Zambia Copper hvestments Limited
. . . . . . .
life of tie NchangaOpenPit,
Due to theshortremaining
refurbishment of t i e openpit inhstructure has been allowed for in thecost
I . 2 . 2 . 2 Life ofMineDesim
All of the ore lying to the west of section 12 East W 1 1 be mined through the
undergroundmine and is unavailable to t i e openpit. A major back-filling
operation has taken place in this area of the Eastern Extension. Some of tie
overburden removal has beencapitalised.
Explorationdrilling will be undertaken to evaluate the viability of any downdip
extension to tie Upper Orebody fiom t i e bottom of the Nchanga OpenPit. The
programme, which will commence during tie first year after close, is estimated
to cost $1 million and will becompleted by theend of thesecond year. A
detailed exploration programmewill be compiled which W11 be presented as an
addendum to tie Programme of Mining and Metal Treatment Operations.
220.127.116.11 Production Forecast
The statement of ore reserves and resources for the Nchanga Openpit Mine as
estimated in April 1999 is shown in the following Table. The estimate is based
on tie same cut-off parameters for copper and cobalt as are used by ZCCM. All
of the estimated reserveswill be extractedduring the remaining life of the mne.
a p p e r Investmentsiinzited
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Total NOP Copper
Total NOP Cobalt
The current forecast of metal prices excludes the above quoted resources from
being regarded as viable at this stage. However, the resources are significant m
quantum and W11 be the subject of careful re-evaluation when the forecast of
metd pricesimproves. The explorationprogrammediscussedabove
contributesignificantly to this re-evaluation.
The life-of-mine production forecast for t i e Nchanga Open Pit mine is shown
in t i e following Table. A primary objective of the mining plan for the Nchanga
Open Pit mine is to ensure that t i e resources tabled above are not sterilised by
bad mining practices. The Table also shows the expected concentrator recovery
and the tons of copper in concentrateper annum.
Table: Nchanga Openpit ProductionForecast
m cons (ooo tom)
Total copper flotation recoveries at Nchanga are expected to improve followingt i e
general refbrbishmmt of the plantand the splittingof the openpit and underground
flotation streams. The flotation recovery for the open pit copperore is forecast to
improve fkom 31% to 35% and for the underground ore from 53% to 55%.
Programme of Mining
K M Project
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1.2.4 Tailims Leach Plant m P )
Generalrefiubishmentandupgrading of tie Nchanga Tailings LeachPlant will be
-- ._ -_ _ --_ -. __ _..- . undertaken. T h e maximum capacity of the ‘TLP h a been estimated at 15.5 million tom
of tailings per annum. Excess capacity beyond that required for the treatment of the
current msmgs W11 be filled with reclaimed tailings. The reclamation of tailings W11
cease m 2007with tie finaldepletionof tie old tailings dams. TLP recoveries are
projected to increase fkom 68% to an estimated 74%. Productionofcathodesof
marketable qualityis expectedto increase to 90%.
The production forecast for theTLP is shown in the following Table.
wme of Mining & MetalTreatmentOperations
Table: Nchanga Tailings Leach
Plant Production Summary
TLP Total Cu
Zambia Copper Investments Limited
Page No 1 9
programme of Mining c% Metal Treatment Operations
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1.2.5 Surface Infrastructure
General refbrbishment of much of thesurfaceinhtructure W 1 1 be
1.2.6 Chineola Refractom Ore
comprehensive tilling, compositesampling,laboratoryandpilot
plantscaletestworkprogramme will beundertaken to evaluate tie
technical and financialviability of the Chingola Refiactory Ore at an
estimatedcostof U S 4 . 2 5 million. The evaluationprogramme will
t i e m estimated two and a half years to complete and is scheduledto
commence at tie start of tie third year t i e r close.
1.2.7 Hvdrometallurtical Treatment
A hydrometallurgical routeW11 be evaluated as a possible replacement
i f not all, ofthe K M
and pilot scaletestwork, is beingcompiledand
commence as a high priority immediatelyafterclose.
hydrometallurgical route is shown to be tie more attractive then tie
project would enter
Commissioning of a suitable treatment facility is not expected before
theend of thethird yearafterclose.
It is probablethat if a
hydrometahrgicd route is implemented, it would to utilise the TLP
1 3 Nampundwe Mine
1.3.1 Undemround Mine
1.3. I.l Undermound Infkm-ucture
Provision has been made in the capital estimate to upgrade
certain of the winder electricsand mechanicals.
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Zumbia Copper Investmmtr Limited
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Page No 20
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programme of Mining &
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Two ncw 3 O O k W centrifbgal fans will be installed to provide
the zdditional air volume required by the proposed increase
m ore production.
I .3.I .2 & D i m Methods andEficiencies
Sub-level open stoping will continue to be
extraction at 60%.
I.3.1.3 Production Forecast
The statement of ore reserves and resources for tie Nampundwe
Mine as estimatedby ZCCM is shown in the following Table.
Table: Nampundwe Ore Reserves and Resources
approximately eighteen months of ore reserves left for production
at a relatively low grade. The reserves below t i e 48Ofi.L are close
targeted concentrate requirements, tie 730% W11 be equipped
with tracks, pipes and a main tip grizdey as soon as possible.
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. . . . . . . . . . .
Copper Investments Limited
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Page No 2 1
programme of Mining & Metal Treatment Operations
K M Project
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The quipping of the belt level and loading boxes on the 83Oft.L
i n %l Shaft is a priorityand B Shafl W11 be deepenedto
pmwde a second outlet to the lowest level.
. . . . .
The preliminary production forecast for Nampundwe for the first
five years is shown m the following Table. The programme will
be finalised when the total Zambian oflhke potential is known.
It is anticipated at this stage that Nampundwe will continue m
operation for the thirty years.
Table: Nampundwe Production Forecast
Rehabilitation and extension to the existing concentrator will be
undertaken to allow for the expanded underground production.
1.3.3 Surface Infrastructure
Limited refurbishment will be undertaken of the surface infkstructure.
1.4 Consolidated Sales Forecast
The following Table shows the estimated annual copper and cobaltsales over
tie life ofproject.
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Zambia Copper InvestmmtsLmited
'Pige NO 22-
2024 2025 2026
Zambia Copper h~hents
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Page No 23
programme of Mining & Metal Treatment Operations
K M Project
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2. CAPITAL COST ESTIMATE
The required capitd expenditure for tie mining assets at Konkola, Nchanga and
- Nampundwe has beenestimakdm detail. A l l costs associated with refurbishment
of the assets or an increase m productionhavebeen capitalised. These include
additional equipment and the development required to b m g the relevant mines up
to their expanded levelof output.
The capital requirements have been estimatedby site, with Konkola further divided
into the capital required for the current mine and thatrequiredfor KDMP. The
scope of worksthat will be undertaken for the current mine at Konkola andKDMP
has been detailed in the fifteen volume
K D M P Feasibility Study report that has
already been presentedto GRZ. The details of all estimatedcapitalcostsat
Nchanga are described below together with the summmsed estimates of capital
expenditureat each of thesites.
Table: Capital Cost Estimate Project Summary
Base Date January 1999
Kodcola Deep M m g Project
Johannesburg, Zambiad k Partners Cost
1 0 729
Programme of Mining & Metal Trealment Operalions
Table: Capital Cost Estimate Project Summary Cashflow
Konkola Deep Mining Project
Nchangr D i v i s i m
Johannesburg. Zambia B Partners
P R O J E C T TOTAL
Zambia CopperInvestments Limited
S O 138
I I2 852
Page No 25
Table: Capital Cost Estimate Nchanga Division
Base Dale Janua~y1999
. . .
Sh& and Underground
Tailings Leach Plant
54 1 8 8
The capital estimate for Nchanga includes the following significant items:
SHAFTS AND UNDERGROUND
Locomotives and Rolling Stock
Ore Storage and Transport
Pumping and Dewatering
Stripping of over burden
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Equipment Piping.and Vd-ves-
Preliminmes and general
,l 1 8
Steel and Platework
Piping and Valves
Preliminaries and general
TAILINGS LEACH PLANT
Pregnant Leach Liquor
Muntimpa Pump House
hnama Pump Station
Reagent P l a n t Filters
Reagent Plant Thickness
Imalised S m c e s
Stores, Offices and Building
Reimbursables and Indirect Costs
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Table: Capital Cost Estimate Nampundwe Division
Base Date January 1999
Shafts and Underground
1 0 729
- 75 -
SCHEDULE 2: LOCAL, EUSINESS DEVELOPMENT PLAN
A number of employees have been retrenched recently by ZCCM fiom the assetsthat
will be owned by KCM. Further retrenchments will be necessary, both before and
after transfer of ownership, to transform the operations fiom the previously overmanned condition toa position where they can become more competitivem terms of
internationally acceptable productivity performance.h the medium term, certain of
the Nchanga operations will closeas they reach the end of their economc lives. This
will result m additional loss ofjob opportunitiesat the KCM operations.
h years gone by, the direct impact of pastZCCM retrenchment programmes was not
as obviousas those affected opted, m general, to return to their home districts.
However, more recently, therehas been a significant reversal of this trend and
employees who lose theirjobs now prefer, m the main, to remain resident on the
copperbelt. The recent decision to allow ZCCM employees to purchase their mine
houses will reinforce this tendency. This has resultedm the effects of retrenchment
programmes becoming more localised and with more obvious impact on the general
community m which the mines operate.
Although the current formula used byZCCM to calculate the terminal benefitsis
relatively generousby international standards, it is commonplace m Zambia that the
affected individuals exhaust their cash retrenchment package withina short period. As
most of those affected have no alternative sources ofcash income, they become
increasingly reliant on family support and subsistence farming.
One way of lessening the effects of retrenchment is to encourage and assist the
individuals concerned to establish their own commercial enterprises.K M ,as a
responsible employer,will put into place a programme to facilitate the generation of
these small busmess initiatives.A fidl time facilitator will be appointed by KCM
shortly aftertie-over whose sole task will be to nourish these alternative
opportunities. The facilitator will be experiencedm setting up and managing small
busmess enterprisesand he will be provided with an adequate budget by KCM to
support this ideal. Emphasis will be placed on the development of businessesm which
the ownership is held by Zambian citizens. The facilitator will liaise wth the
appropriate officials andhe will assist in maintaininga registrar of busmesses m
Zambia that are capable of suppiying materials, equipmentaad services to tie KCM
The Anglo American Grouphas had a significant success with similar initiatives at its
operations m South Africa and KCM will draw on that experienceto ensure that its
programme achieves sustainable results.
In accordance with Clause5 of the Development Agreement, KCMwill encourage
and assistthe establishment of businesses, particularly on the Copperbelt,to supply
materials, equipment andsemices to KCM.
An interim Local Business Development Programme will
be assembled within six
months of Closure. A final Local Business Development Programmewill be issued
twelve months after Closure.
Schedule 2 of the KCM Sale and Purchase Agreement is Incorporated here by Reference
- 76 -
FCRM OF THE LARGE SCALE MINING LICENCE
Mines Form 1031%
Stocked by Mines Development Department
l m B1 43991%
REGISTRATION No. LML ....................................
REPUBLIC OF ZAMBIA
LARGESCALE MINING LICENCE
(Section 25 of the Mines and Minerals Act, 1995, No. 31 of 1995)
Applicant'S name .........................................................................................................
Prospecting LicenceNo. ...............................................................................................
The mining area shall be the area described m the Schedule and annexed hereto and bordered
.on the Plan.
a period of ..........................................
........ day of ..................................................
The programme of mining anddevelopmentoperationsshall
commencing on the
be as shown m the Appendix
The following conditions included m Prospecting Licence No. PL ........................
shall continue to apply:
Issued at .......................
ENDORSEMENT OF REGISTRATION
This large-scale mining licence has this
been registered in the Register of Miniig Rights.
day of .......................................
- 77 -
Details of Renewal
Date of Registration
and Registration No.
- 78 -
Schedule 2 of tie KCM Sale and Purchase Agreement is Incorporated here by Reference
- 79 -
THE KCM ENVIRONMENTAL PLAN IS INCORPORATED HERE BY REFERENCE
THE ZCCM ENVIRONMENTAL PLAN IS INCORPORATEDHERE BY REFERENCE
- 80 -
SCHEDULE 5: EMPLOYMENT AND DEVELOPMENT PLAN
It is recognisd that appropriate training and development of the employees is central
to the future success of the KCM operations. To
that end, priority emphasis will be
given by KCMto the prowsion of adequate training facilities and the requisite levelof
training skills. These fimdamental prerequisites willbe provided for through adequate
fimding m the operating and capital cost budgets.
A primary fimction that will be addressed directly after tie-over is a skills needs
analysis across each of the KCM operations. 'Ibis, m turn, will provide a basis on
which the actual details of the training requirement can be assessed and programmed.
The assessment will cover thefull range of training needs fiom the basic requirements
of the semi-skilled employees to the training of supervisors and managers. The main
focus m management and leadership development would be to broaden the scope and
depth of thesecompetenciesatvariouslevelsthroughouttheorganisation.The
s@fics of individualtrainingwilldependon
available potential, existing skills levelsand defined needs.
It is planned that KCM apprentice training will be centred at the Kitwe Trades School
which is included m the KCM assets.
A n Interim Employment and Development Plan will be assembled
W11 be submitted to the
Ministerof Mines and Minerals Development for approval Wthin twelve months after
closure m accordance with Clause6 of the Development Agreement.
Zambia Copper Investments Limited
Page No I
SCHEDULE 1 4 OF THE KCM SALE AND PURCHASE AGREEMENT IS
INCORPORATED HERE BY REFERENCE
- a2 -
Theprincipalapplicable taxes and the ratesapplicableto
Operations from tie date hereof are as follows:
KCM m theconduct of Normal
KCMshallpay to GRZ income tax m accordance with the provisions of this
Agreement and tie Income Tax Act, Chapter 323 ofthe Laws of Zambia as
from h e to m e amended and in effect on its net taxable income arising from
all mining, concentration, smelting and refining and other operations.
The income tax rate shall be twenty five per cent. (25 %).
Thecarryforward of lossesshall be permittedfor a period oftwenty (20)
years from the date at which the loss was incurred. Losses should be used on
a first m, first out basis with earlier losses used before later losses.
K M shall be entitled to maintain books of account and to render income tax
return and returns in respect of royalties and customs and excise duties stated
m United Statesdollars m accordancewithgenerallyacceptedaccounting
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 in which the capital expenditure was incurred.
In the calculation of KCM's liability for income tax, KCM shall be entitled to
Payments made pmuant totheCopper Price Participation and
hrticipation Agreements respectively between KCMand
KCMshallpay to GRZ theRoyaltyonthegrossrevenueofmineralsproduced
m the Mining Areas at a rate of nought point six per cent. (0.6%), subject to
paragraph (6) below.
GRZ confirms that for a period oftwenty (20) yearsfromtheEffective Date,
tie Actshall be deductibleinthecalculationof
K M ' S liability for income tax.
- 83 -
The circwsmces wherethediscretion avtiable ta GRZ underSection 67 of
the Act to defer or exempt, as applicable the payment of the Royalty would be
under the terms ofSection 67(3) wherethe cashoperatingmarginof
KCM mining operations is less than nil; and
terms ofSection 67(2) onsamplesofminerals
the purposes of assay, analysis or other examination.
For the purposes ofthe foregoing"cashoperating margin" means t h e amount
during or required for the development of the Facilities) from revenue.
Other Taxes, Charges and Fees:
KCM shall enjoy the benefit of Section 97 of the Act namely that KCM
shall be entitled to exemption from customs and excise duties, and from
any other duty orimpostleviedundertheCustomsandExciseAct,
respect of all machinery and equipment(includingspecialisedmotor
vehicles) required for any ofthe activities carried on or to be carried on
in pursuance of the right or otherwise for the purposes of its investment
in Mining or prospecting. For the purposes of the application of Section
97 of the Act to KCM, machines and equipment shall include all
imported for thepurposes of effecting or incurring capital expenditure
in Section 2 (Capital Cost Estimate) of the
Metal Treatment Operations
relating to the Facilities. GRZ andKCM agree that g o d s k & T d by
e n g a p i byKCM for the
purposes ofimplementing t k Approved Programme ofMining and
d under Section 97 of the Act, such benefit
to be strictly limited to the implementation of the Approved Programme
of Mining and Metal TreatmentOperations. GRZ and K M further
agree to establish an administrative mechanism to achieve this post
Subject to the provisions ofClause 13 and Section 97 of the Act, KCM
shall be liabletopay custom andexcise duties on allmaterials and
assets imported for the purposes of the Approved Programme of
and Metal Treatment Operations (other than those items exempt in terms
of Section 97 as detailed in paragraph 3(i)(a) of this Schedule)
rates and on the terms and conditions as are set out m the Custom and
Excise Act provided that t h e aggregate duty payable by KCM in m y one
year shall not exceed a sum equivalent to fifteen per cent. (15%) of the
Excise Duty on Power
GRZ confirms that ExciseDutyonpowershall
be leviedat zero per cent.
Other Taxes, Charges and Fees:
be liable to pay (and these provisions
For the avoidance of doubt, KCM shall
shall be withoutprejudicetosuchliability)allothertaxes,chargesand
payable to GRZ or to any governmental authority in Zambia as ofthe date of
this Agreement m relationtoitsmining,concentration,smeltingorrefining
and other operations carried out m Zambia, including but not limited to:
any annual fees, company fees, landrentsfallmgduepostCompletion
or other payments due to GRZ m accordance with applicable legislation
and tie provisions of this Agreement; and
taxes, charges and fees forservicesrenderedbygovernmental
authorities on request or to public or commercial enterprises generally.
Value Added Tax("VAT"):
Inaccordance with theprovisionsoftheValueAdded
Tax Act,Chapter 3 3 1
of the laws of Zambia 1995, goods and services produced by the Facilities are
taxable at a standard rate and zero rated if exported.
GRZ confirms that input VAT m excess of VAT payable m respect of the
10 days) from the date of submission
period of time (and in any event within
of KCM's monthlyVAT
return in respect of eachprescribedaccounting
respect ofallowablebusiness purchases of goods and services supplied by
registered supplier during a prescribed accounting period.
ReliefMm Withholding Tax
tax on dividends,royalties andmanagement fees to
Shareholdersor Affiliates at a rate of zero per cent. (0%) and on interest payments to
Shareholdersor their Affiliates, or any lender of money to KCM at a rate of zero per
Exemptionfrom custom and excise duties and Royalties
m terms of
The aggregate ofthevalueofthe
customs and excisedutypayable
paragraph 3(i)(b) above and tie value of tie Royalty payable in terms of paragraph 2(i)
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above is exempt to the extent of sixteen million United States dollars
ir, tie first year
following Completion and the sum of fifteen million United States dollars per annum
inclusive of the four years thereafter.
Deductionsfor Mining Expenditure on a non-producing and non-contrguous mine
For the purpose of ascertaining K M ' S allowable deductions under Section five (one)
(5(1)) of Part VI, Paragraph 23 ofthe Fifth Scheduieto tie Income Tax Act, tie
Facilities shall atalltimes be regarded as a singlelargescale m m g andmetal
Working example of the operation of Clause 2.3 of The Development Agreement deemed reduction of tie Investment Commitment
there are only two shafts m operation - shaft Y and shaft Z
the Investment Commitment is US$208m and is to be spent as
to US$104m on shaft Y and $lWm on shaft Z
total budgeted commitment of US$220m)
suspensionhmtailment (in the case of B) occurs at shaft Y and
(in the case of B) (a)
US$75m has been spent at shaft Y (b) nothing has been spent
at shaft Y.
The Investment Commitment is deemed reduced by
(110 - 75) X
The Investment Commitment is deemed reduced by
Assumption - as above plus
budgeted production at each shaft is 100 tons over
of each of the shafts
tie anticipated life
production is to be curtailed at shaft Y to 75 tons over the anticipated
life of the shaft i.e. a 25% reduction in production
Calculation of deemed reduction in the Investment Commitment is
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(110 - 75) X 220
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ACTIONF”IS bJCORPORATED ZKERE BY Rlm3tENCJ3
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