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EXECUTION COPY



DATED 31 MARCH 2000



THE G O V E R N " OF THE REPUBLIC OF ZAMBIA



AND



KONKOLA COPPER MINES PLC



DEVELOPMENT AGREEMJ3NT



CLIFFORD CHANCE



CONTENTS

Clause



pase



PART A ..................................................................................................... 3

1.



DefinitionsAndInterpretations



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



3



PART B ...................................................................................................



16



2.



Right to Manage and Obligations to Develop .................................................



16



3.



Rights To Export And Import ...................................................................



21



4.



Supply and Procurement ..........................................................................



21



5.



Local Business Development



22



6.



Employment and Training Plan., ................................................................



23



7.



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



24



8.



Suspension or Curtailment of Production ......................................................



25



9.



Social Assets and municipal infrastructure Services ..........................................



27



10



Records and Operating Reports .................................................................



28



PART C ...................................................................................................



31



11. ForeignExchange .................................................................................



31



.

12Environmental

Issues



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



33



PART D ...................................................................................................



43



by GRZ ...................................



43



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



13.GeneralStabilityandOperationalUndertakings



Tax ..................................................................



46



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



46



14General

.

ObligationtoPay

.

15Taxation

Stability



16.Compensation for Breach of Stability



or compulsory acquisition Provisions............. 48



PART E ...................................................................................................



50



17. Assignment ......................................................................................... 50

18. Extensions to Time ................................................................................



53



19. Termination......................................................................................... 53

20 . Amicable Settlement of Disputes................................................................



58



21. Sole Expert ......................................................................................... 58

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



63



23. Performance to Continue .........................................................................



65



24 . Waiver of Sovereign Immunity..................................................................



65



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



65



26 . Force Majeure. Economic Force Majeure and Material Adverse Change



................ 65



G2181/CKQ30



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



67



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



68



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



28Consultation

. Additional



<=-.-.



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



69



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



70



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



71



~~



~



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



~~~



.. 71



~~



33 . Counterparts ........................................................................................ 71



. Absence

of

34Representations



71



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



71



~~



payment

Compensation

35 . and

agreement 36 . Entire



and W-arranties...................................................



_ ...........................................



................................................................................... 72



37 . Indexation...........................................................................................

~~



72



SCHEDULE 1



ApprovedProgramme ofMining and Metal TreatmentOperations ..;;-.~... 74



SCHEDULE 2



Local

Business

Development

Programme



.... :................................

T



75



SCHED-ULE 3 ..............................................................................................



76



PART I CONTRACT AREAS ..........................................................................



76



PART 11FORM OF THE LARGE SCALE MINING LICENCE-: ...............................



77



PART III MINING AREAS ............................................................................



79



SCHEDULE 4 ............................................................................................



80



~~~



~



~



PART I THE KCM ENVIRONMENTALPLANISINCQEWORATEDHERE

BY

P~FERENCE...................................................................................... 80

~



~~~



.



~



PART 11 THE ZCCMENVIRONMENTAL PLAN ISINCORPORATED HERE B Y

REFERENCE ......................................................................................

80

SCHEDULE 5



Employment and Training Plan .......................



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



81



SCHEDULE 6



Required Insurances...............................................................



82



SCHEDULE 7



Tax S c ~ ~ u.......................................................................

le



8.



SCHEDULE 8



Working Schedule: .._................ .......................



SCHEDULE 9



The Resettlement Action Plan is Incorporated here by Reference. ......... 89



~



~~



~



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



d



87



G2181/CNM30



THIS AGREEMENT is made on 3 1 March 2000

BETWEEN:

(1)



THE REPUBLIC OF ZAMBIA, actingthroughthe

Minister of Mines and Minerals Development and the Minister

of Finance ("GRZ");



THE GOVERNRIENTOF



and

(2)



KONKOLACOPPER



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).

wHEREA!3



Proposalshavebeensubmittedonbehalf

of K M by the KCM Consortiumforthe

developmentandoperationofthemajormineandtreatmentplantsand

facilities of

KonkolaDivisionincludingtheKonkolaDeep

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

OptionandPre-EmptionAgreementdated

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

ProgrammeofMiningandMetalTreatmentOperations"and

are annexed hereto as

Schedule 1.

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

for, andadequatelycontribute

tothe



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

interest.

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

nine oftheActto

enterintothis

of FinancestatutoryauthorityunderSection

Lo~lon-U512730/12



-1-



G21811000M



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

accordance with

such advice.

(7)



GRZ, ZCCMand KCMhave enteredinto a SaleandPurchaseAgreementdated

15 December 1999 which requires on its Completion (asdefmed therein) the entry into

of this Agreement.



(8)



GRZ, ZCCMandKCMhave

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.



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G218MKW30



4



PART A

GENERAL

1.



DEFINITIONS AND INTERPRETATIONS



l.1



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:

(a)



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)

ordinary shares;



L



(b)



(c)



anypersonwhich,directlyorindirectly,

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,



m



and "Control"means:

((3



(e)



thepower(whetherdirectlyorindirectly)andwhether

by theownershipof

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

theholdingand/ortheownership

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

its Affiliates;

"Agreement"means this agreement as varied from time to time m accordance with the



terms hereof;

"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);



-3-



G2181KKO30



''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



suchotheractivities,includingrelatedtransportandtrading

of metals,incidental

a d o r conducive to the foregoing which may be approved by the Directors from time

to time;

"BusmessDay" meansanyday(otherthan



a Saturday or a Sunday) on which

commercial banks are generally open forbusinessinLondon,

New York,

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;

"ConfidentialInformation" meansanyreports,records



or otherinformationor

documentssuppliedtoormade

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

(Import Declaration

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



-4-



G2181KNM30



W



from time to time amended and m effect but subject, in all cases, to the provisions of

Clause 16.1 of this Agreement;

"Copperbelt"meansCopperbeltProvince



in Zambiacomprisingthe



main



copper



mining area m Zambia;

"Copper Floor Price" means onethousandsevenhundredUnited

States dollars

(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

published,suchotherindexthat

Statistics(the "Index")or, if suchindexisnot

replaces it on the basis set out below:

CFPn = (CFPn - 1) X



PPIn

PPIn - 1



L



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

Date

"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

unenforceable(whetherinitiallyorotherwise),

(iii) as tothe

interpretation,

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

of any

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



provision)thereofincluding,

Lod0~2/512730/12



m particular(butwithoutlimitation),

-5-



the provisions of

G21811000M



Parts C and D, (v) as to whether any compensation is payable under any provision of

this Agreement and as to the quantum

of suchcompensation,or(vi)anydispute

or

claim which is ancillary or connected, in each case

inanymanner whatsoever, to the

foregoing;



"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;

"Divisions"meanstheKonkolaDivision,theNchangaDivision

(which shall be

deemedtoincludetheChingolaRefactoryOres)andtheNampundweMineand

"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);



Force Majeure



"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

Schedule 6;

"EnablingLegislation"means tie following legislation:

1.



2.

3.

4.

5.



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.



""Enabling

Statutory Instruments""means the following statutory instruments:

1.



2.

3.

4.

5.

6.

7.



8.



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

2ooo.



-6-



G2181/CKN30



4



andsuchotherstatutoryinstrumentsas

of the Development Agreement.



m y be necessarytogiveeffectto-Schedule



7



L



-7-



G218UOWO



"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,

belowground);water(includingwaterunderorwithin

sewers or other manmade structures and inland waters) and land (including land under

water);

"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

the Minesand

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

totheEnvironmentortohuman

suchlawsandregulationswhichrelatetomine

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,

the conditions



of buildings, other man made structures or tie work place, and discharges or releases

of my substancesinto tie Environment; (b) contaminatedland; and (c) pollutionof

waters;

"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 Plan;

"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



from:

Gd



anyaction by GRZ oractiontaken on its behalf other than inaccordancewith

this Agreement; or



(b)



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 ,



-8-



G2181/W330



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

the KDMP;

"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

practices

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;

"IFC" meanstheInternationalFinanceCorporation,

m internationalinstitution

established by Articles of Agreementamong its member countries,whoseprincipal

officeis at 2121 PennsylvaniaAvenue,Washington DC, 20433, UnitedStatesof



America;

"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

forenvironmentalclean-upandprotection,

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;



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G2181/00030



"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

GRZ, m

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

at anytimebefore

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

(5,700,000) tonnesoforeperannumonwhat

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

Schedule 3;



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



Scale Mining



Licence;

"Kwacha"means the lawful currency of Zambia;



"Large !kale Mmmg Licences" means the Konkola Large Scale Mining Licence, the

NchangaLargeScaleMiningLicence,andthe

Nmpundwe LargeScaleMining

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

accrue:

(a)



mount on which interest for a given period is to



thepercentage rate per annwn equal to theofferedquotationwhich appears on

thepageofthe

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



- 10-



G2181KtW3O



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

an averageBritishBankersAssociationInterestSettlementRateforone

(1)

month deposits m US dollars as the parties, after consultation with each other,

shall select; or

(b)



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

as

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

Clause 26.3;

"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



therefrom;

"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



Agreement,includes

beneficial thereto;



given to it in tie Actand, for thepurposeof

this

with and

all smeltingandtreatmentoperationsassociated



"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 -



G2181KKM30



"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;

"Notices"meansanynotice,consent,demand,approval

required or permitted to be given under Clause 29;



or other communication



"OECD"means the Organisation of Economic Co-operation and Development;

"Parties"meansthepersonswho

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:

(4



January, February,andMarch;



or



(b)



April, May and June; or



(c)



July,August and September;or



( a



October,November and December;



"Reasonable Commercial Terms"means limited recourse f m m g with:

(a)



a weightedaverageminimumlifefromsigningoftheloans

to final repayment,

of twelve (12) years, where the weights are the amounts of each loan facility;



(b)



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%;



(c)



anyguaranteesrequiredterminating on completion ofthe construction ofthe

KDMP and passing of customary completion tests; and



(d)



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



- 12-



G2181/ooO30



J



shall be registered inaccordance with Clause 9.1 inthe records ofKCM

entitled to use some or all of the Social Assets;



as being



"RelatedAgreement" meansthe Sale and PurchaseAgreement and anyagreement

entered into pursuant thereto, and includes the Articles of Association of KCM;

"ResettlementActionPlan" meansthereportofthatname,andincorporated

by

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;

"ScheduledProgrammes" meanstheApprovedProgrammeof

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

21;

"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;

"Taxes" meansanypresentorfuturetaxation,statutory,governmental,



state,



provincial,localgovernmentalormunicipalimpositions,duties,contributionsand

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



Lmdon-2/512730112



- 13-



G2181100030



conditions set outin theSale and PurchaseAgreement to KCM,with effect from

Completion;

"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;



of the



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;



4



U



"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

as maybe

approved by GRZ as theZCCMFinal

means suchprogramme

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;

1.2



In this Agreement, unless the context otherwise requires:

(a)



monetaryreferences are references to United States dollars unlessotherwise

specificallyexpressed;



m



theheadings do notaffectthe interpretationor construction;



(c)



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;



hmdon-2/512730/12



- 14-



G2181KUl30



d



(a



wordsimportingthesingularinclude



(e)



words importinganygenderincludetheothergender;



(Q



c31

01)



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

accordedtheirnaturalmeaning

and shall not be construednarrowly by

reference to concepts of procedural or administrative law.



- 15-



G2181/OCKGO



PART B

OPERATIONAL A N D EMPLOYMENT ISSUES

2.



RIGHT TO MANAGE AND OBLIGATIONSTODEVELOP



2.1



(a)



2.2



2.3



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.



(b)



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.



(c)



Without prejudice to the obligationscontained m Clause 2.l(b), but subject to

Clauses 2.2 to 2.4, KCM shall:

(i)



expendtheInvestmentCommitmentwithinthree

Effective Date: and



(ii)



expendtheKDMPInvestmentCommitment;



J



(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.



If atanytimeprior



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

BudgetedCommitmentinrespectofsuchpartor

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,

if

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

of tie

resumption.Theperiodoverwhichtherenewedportion

ofthe

Investment

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.



- 16-



G218MNXBO



J



2.4



(a)



KCMshalluse its bestendeavourstoraisethirdpartyfmance

for.KDMP on

ReasonableCommercialTerms in theamountsspecifiedinClause

2.4(b)(i)

(the “Third Party Finance”) withineighteen

(18) monthsfollowing

Completion or, ifnotpossiblewithinthatperiod,assoon

as possible

thereafterprovidedthat,fortheavoidance

of doubt,such best endeavours

shallnotobligeKCMtoissue

(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;



(b)KCM’sobligationtoimplementtheKDMPandexpendtheKDMPInvestment

Commitment m accordance with Clause 2.l(c)(ii) shall be suspended:

(i)



if, and for so long as, Third PartyFinanceonReasonableCommercial

Terms is not available:

(A)



for three hundred and thirteenmillionUnitedStatesdollars

(US$313,000,000),representingsixtypercent

(60%) ofthe

KDMP Investment Commitment; and



(B)



m theeventthirdpartylenderstoKDMPrequire

refinancingof preexisting KCM thirdpartyloanswhich

r e m outstandingfor a furtheronehundredandtwenty

millionUnitedStatesdollars(US$124,800,000)representing

sixty per cent. (60%)of the Investment Commitment;



tie



Provided however that the figure m (B) aboveshallbereducedby

m

mount equal to the aggregate of any repayments of principal made by

KCM(andnotsubsequentlyredrawn)

m respectofsuch preexisting

third party loans and my prior distributions made to the Shareholders;

(U)



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

beyondthecontrolofKCMoranyofthemembersofthe

KCM

Consortium; provided that nothing herein shall oblige any member

of

finance to waiveany

theKCM Consortiumprovidingthirdparty

condition precedent to drawdown;



(iii)



where a ForceMajeureEvent,Economic

Force MajeureEvent or a

Material Adverse Change Event has been declared and for so long as

theunderlyingForceMajeure,Economic

Force Majeure or Material

AdverseChange is continuing;providedthatKCMundertakesnotto

declare an Economic Force Majeure Event within 18 months following

Completion;



If(c)



-



17-



G2181/00030



(i)



despitehavinguseditsbestendeavours,KCMisunable

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



(ii)



KCM wishestodefercommencementofKDMPuntilitisableto

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,

KCM's obligationto

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.

2.5



2.6



KCM shall, withinone (1) month of obtaining the Third Party Finance, andprovided

thatnoneoftheeventscontainedinClauses

2.4(b)(ii) or (iii) have occurred and are

still continuing:

W



notifyGRZthereof;



@)



advise GRZ as to whether or notitintendstoproceed

or continuewiththe

development and construction phase of KDMP in accordance with Clause 2.7

below.



and



In theeventthat:

(a)



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

m factavailableon

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.

2.7



Subjectalwaystoitscontinuingrighttosuspend

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,



Lcmdon-2512730/12



- 18-



G2181/ooO30



except as specifically provided m this Agreement, and subject to the Act (as excluded

or modified by this Agreement), KCM:

(a>



shall not require m y furtherapprovalorconsentfrom



development of the KDMP;

(b)



shall haveanunfettered



right tomanage



operations of the KDMP; and

(c)



GRZ to commence



the developmentandcontinued



shall be the soleimplementor ofthe KDMP,



and GRZ shall cooperate with K C M to facilitate the implementationof the KDMP.

2.8



In the eventthat:

(4



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);



@l



the K C M Board has determinedtoadoptanalternativeminingplantoaccess

and develop those mineral deposits originally intended to be developed as the

KDMP; and



L



(c)



KCM has expendedonehundredandtwentyfivemillionUnited

States dollars

(US$l2S,OOO,OOO) m planning, preparing andimplementingsuchalternative



mining plan,

then:

(iii)



W



2.9



the KDMP Investment Commitment shall be reduced to two hundred and fifty

millionUnitedStatesdollars

(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

KDMP may

subsequentlybesatisfied,

GRZ shall not be entitledtorequire

KCM to

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.



KCM shallwithintwentyfour



(24) months of theEffectiveDate,commencean



evaluation ofthe

ChingolaRefactoryOres

m accordancewiththeApproved

ProgrammeofMiningand

Metal TreatmentOperations as at thedateofsignature

hereof.

2.10



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



Lmdon-2/512730/12



- 19-



G2181KXW30



Licencesandfurtheracknowledges,withoutlimitation,thatcompliance

with tie

Scheduled Programmes will be deemed to constitute compliance with Section 27 of tie

Act.

2.11



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

bytheBoardofKCM

m

accordance with Clause 27:

(4



to complywithSection 25(l)(b), (c) and ( f ) oftheActinasmuch

(i)



tie area ofland overwhichthelicenceissoughtisnot

m excess of the

areareasonablyrequiredtocarryouttheApprovedProgrammeof

Mining and Metal Treatment Operations;



(ii)



theproposedpracticesshallbeconsideredtoensure

the efficientand

beneficial use of the mineral resources

oftherelevantMining Area;

and



(5)



@)



as:



KCM shallbeconsiderednotto

of the Act; and



be in breach ofanyof



tie provisions



nottoconstitute"wastefulminingpractices"

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

Programme ofMiningandMetal

TreatmentOperationscomplies

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

Clause 21.

2.12



SubjecttothetermsofthisAgreement,thisAgreementshallremain

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

MetalTreatmentOperationsbeingundertakenpursuanttotheLargeScaleMining

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 -



G2181m30



d



3.



RIGHTSTOEXPORT



3.1



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.



3.2



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)



A N D IMPORT



the export oftheMineProductsto

(i)



(ii)



a particularcountrywould:



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

@>



(c)



4.

4.1



4.2



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

to Clause

4.1, such businesses shall have the opportunity to tender and, if a tender submission



- 21 -



G2181100030



from such business meets the specifications of the invitation to tender, such businesses

shall not be discriminated against in comparison with international suppliers.

4.3



Whencalling for tendersfromcontractorsandsuppliers,KCMshallinvite

tenders

from Zambian contractors and suppliers where, to the best of

KCM's knowledge (all

businessesregisteredpursuanttoClause

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

by KCM,and(ii)completingsuch

similar nature and sizetothatrequired

work within the specified time period; and



(b)



the suppliers areestablished,recognisedand

reputable suppliersofmaterials

and/or equipment and have previously marketed or distributed such materials

and/or equipment (as applicable).



4.4



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.



4.5



Inassessingthetendersfromlocal

contractors and suppliers, KCMshallconsiderthe

extra costs it wouldincur if itwereto grant the contract to a foreignsupplier or

contractor. These extracostsshallinclude,but

are notnecessarilyrestrictedto,

wharfage costs, shippingcosts,stevedoringcosts,

custom clearance costs, customs

duties, and demurrage charges.



4.6



Subjectonly to theprovisionsofClauses 4.1 to 4.5, KCM shall be free to makesuch

arrangements with suppliers or contractorsas it wishes.



5.



LOCAL BU!SlNESS DEVELOPMENT



5.1



KCM shall:



00



complysubstantiallywiththe Local BusinessDevelopmentProgrammewith a

viewtoencouragingandassistingtheestablishmentofbusinesses

withii

Zambia(particularly inthe Copperbeltandwith a particularemphasison

businessesdirectlyorindirectlymajorityowned

byZambiancitizens)to

supply materials, equipment and services to KCM;



(b>



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



(c>



identify a memberofstaff

business enterprises:



experiencedinsettingupandmanagingsmall



- 22 -



G2181KKKXO



(i)



(a



7%-



toassistZambiancitizenswhowishto

offer services to KCM and the Facilities;



or have set up businesses to



(ii)



toassist m theimplementation of theLocalBusinessDevelopment

Programme and variations thereof;



(iii)



toliaisewiththe



(iv)



tocompileandmaintaintheregister



appropriateofficialsfromGRZ;and

referred toin Clause 4. l ; and



informGRZannuallyontheimplementationandresultsoftheLocalBusiness

Development Plan.



5.2



Nothing m Clause 5.1 shalloblige KCMto grant or lendanymcmYto,

with, any person or organisations.



6.



EMPLOYMENT AND TRAINING PLAN



6.1



KCM shall comply with the Employment and Training Plan.



6.2



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

ofKCMwithimproved

opportunitiestodeveloptheirpotentialtocontributetothe

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.



6.3



If KCMisunabletocomplywithsome

as a result of:



Or



to ~ ~ n t x t c t



4



aspects of the EmploymentandTrainingPlan



(4



circumstancesor eventsbeyondits control; or



@>



a direction ofthe Director ofMineSafetyunderthe

thereunder),



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.

6.4



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

terms andconditionsofsuchemploymentand

personnelwithinZambiashallbe

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.



6.5



KCMshall, in itsrecruitment,selection,

promotion andassignment of personnel

comply m all respects with nondiscrimination laws of general application in Zambia.



London-2/512730/12



- 23 -



G2181/00030



6.6



KCM acknowledges GFU's policy to attract qualifiedZambiancitizerisworking

overseasbacktoemploymentwithintheZambian

mining industry. h order to

facilitatethefulfilment of thispolicy, KCM shalltakeallreasonable

efforts inits

recruitment and employment of employees in professional, managerial, engineering and

scientificgrades(including,

but notlimitedtotheadvertisingofpositionsin

internationalpressandtrade

journals likelytohavecirculationamongstsuitably

qualifiedpotentialemployees)tobringtotheattention

of suchqualifiedZambians

positions of employment available within KCM.



6.7



K M shall recognise, for collective bargaining purposes, (i) the trade union that at the

relevanttimerepresentstheemployees

ofKCMand (ii) the CollectiveAgreements

covering the Transferring Employees.



6.8



Notwithstandingtheprovisions of this Clause 6, KCM(andits contractors or s u b

contractors) maybringintoZambiasuchnon-Zambiancitizens

as, in thereasonable

judgment of KCM's management, are required to carry out operations efficiently and

permits (including

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

whoisdisqualified

from entry by reason of previous c r i m i i convictions,health

regulations and likerestrictions set outinimmigrationregulations

of general

applicationinZambia from time to time.Withoutlimitingthegenerality

of tie

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

informationconcerningtheeducation,experienceandotherqualifications

of the

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.



7.



N3URANCE



7.1



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.



7.2



GRZ agreesthattheinsurance

date hereof, is:



cover specified in Schedule 6 is that which, as at the



-24-



G2181/CKKEQ



U



4



(a)



(b)



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

unreasonably withheld).

7.3



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

in Zambiatoassigntheir

rights underanyre-insurancecontractstowhichthey

are

party to K C M or any lender to W M .

8.



SuSPENSION OR CURTAILMENTOFPRODUCTION



8.1



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.



8.2



GRZ herebyagreesthat:

(a)



cb)



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



either:

(i)

(ii)



8.3



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.



Where:

(a)



in the case ofNchangaDivision,atanytimeprior

anniversary of the Effective Date;



-



25 -



to thefifteenth (15th)



G2181KKM30



(b)



m thecaseoftheNampundweMineand

(unless(iii)belowapplies)Konkola

Division,atany

time priorto the twenty-fifth (25th) anniversary of the

Effective Date; or



(c)



m thecaseofKonkolaDivision,

m circumstanceswhereKCMhasexpended

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

Date



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:

(0



theprovisions ofClause8.2(a)shallapply;and



(ii)



tie provisions ofClause 8.5, 8.6, 8.7, 8.8, 8.9 and 8.10 shall notapply.



8.4



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.



8.5



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

projection oftheCoststoResumeOperationsandofprojectedOperatingCostsand

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)

and (b).



8.6



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.



Lmdon-2/512730/12



- 26 -



G2181KXWO



J



8.7



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.



8.8



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.



8.9



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)

monthsofsuchdirectionby

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:



1



G4



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

Sole

Expert gave its opinion on the projections or option as the case may be.

8.10



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.



9.



SOCIAL ASSETS AND MUNICIPAL INFRASTRUCTURE SERVICES



9.1



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.



9.2



Municipal Infrastructural Services



I



GRZ will procure tie provision of the following municipal infrastructure

the areas m which K C M will operate:

(a)



services m



water;



- 27 -



G2181/00030



(b)



Sewerage

services;



(c)



Solid

waste;



W



Domestic

electricity

supply;



(e)



Street

lighting;



(0



Storm

water

drainage;



(€9



Roads;



00



Markets;

and



(0



Cemeteries



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.



I



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.

10.



RECORDS A N D OPERATING REPORTS



10.1



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

miningandsmeltingoperationsandprospectingand

appraisal activitiesunderthis

Agreement(suchreportstocontainanyinformation

relating to tie progress of

operations in eachMiningArea as theMinistry may from timeto t h e reasonably

require).



10.2



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:

(a)



quantitiesof ore minedand average head grades;



0)



quantities of waste mined;



(c)



quantitiesofcopper

and cobalt concentrates produced andquantities

contained copper and cobalt;



(4



quantitiesofownMine Products producedand quantities sold;



L.odon-2/512730/12



- 28 -



of



G21W00030



d



(e)



(Q



quantities of sulphurcontainedinpyriteminedandquantitiesofpyrite

concentrates produced;



W



operatingcosts;and



(h)



10.3



10.4



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

prospecting activities.

All informationfurnishedto



GRZ pursuant to Clause 1 0 . 2 shall be inEnglishand



United States dollars.

10.5



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

opentoinspectionby

GRZ throughanauthorisedrepresentativeduringnormal

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

years.

-



10.6



10.7



10.8



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

be submitted,kept,produced,retained,deliveredorotherwisemade

available for

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:

(a)



useallConfidentialInformationonlyforthepurposeforwhich

to GRZ and not for any other purpose;



- 29 -



it wassupplied



G2181/ooO30



10.9



(b)



treatandsafeguardasstrictlyprivateandconfidential

Information;and



(c)



ensureproperandsecurestorage



all Confidential



of allConfidentialInformation.



Subject t o theprovisionsof tie Act, all documents,reports, records orinformation

made available to GRZ will remain the property of KCM.



d



- 30 -



G2181KklO30



PART C

UNDERTAKINGS NECESSARYFOR OPERATIONS

11.



FOREIGN EXCHANGE



11.1



ThePartiesacknowledgethat,underlegislationandpracticecurrently

in force in

Zambia, there are no foreign exchange controls and K C M is free, among other things

to:

64

@)



(c>



L.



11.2



remitforeigncurrencyout



ofZambia;



maintainanymonetaryassets(includingforeigncurrencyaccounts)outside

and within Zambia; and

remitforeigncurrencyaccruing

Zambia.



to orearned



by itoutsideZambiainto



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:

(a)



retain both outsideZambiaand

within Zambia(at K M ' S discretion), in

accounts established for that purpose, foreign currency, and to have paid to it

all sourcesassociated

andmaintain m suchaccountsamountsarisingfrom

with the Business, including but not limited to the following:

(0



(ii)



(b)



sale proceeds;

payments made by insurersorre-insurersnotresident

under contracts of insurance in KCM's favour;



in Zambia



(iii)



profits;



W



proceeds of any disposal of capital assets;



W



foreign loan proceeds;



W



proceedsoftheissue

Zambia);



(vii)



penalties and damages undercontracts(payable

Zambia); and



(viii)



proceeds of swaps and hedges (payable by non-residents of Zambia);



of sharecapital(payable



by non-residents of

by non-residentsof



usefreely the foreigncurrencyaccountsmaintained by KCM to:

(i)



servicepayments of principalandinterest, service charges and other

fees and expenses in respect of any loans arranged with non-Zambian

entities;



-



31 -



G218"COO



(ii)



makepaymentsdueto

suppliers outsideZambia for thesupplyof

goods and services to KCM;



(iii)



financethepaymentofdividendsto

shareholders, interestand

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



(iv)



pay

employees;



remitprofits(incurrency,products

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

currency, subject

to Clause 11.7) and to invest funds without restrictions;

pay smelters of KCM products outside Zambia;

usenon-Zambianentitiesfor

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



pensionfunds,aswellasanyincome

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.

11.3



KCM shall submit to the Central Bank:

(4



@>



11.4



withii fifteen (15) days oftheendof



each calendarmonth



-



(i)



a statement ofthe foreign currency amountsrepatriated to Zambia

within the previous month from accounts maintained overseas by KCM;



(ii)



a statementofthebalanceof KCM's foreign currency accounts[To be

agreed by KCM] at the end of the previous month;



(iii)



a forecast ofthe foreign currency amountsthatKCMintends

repamate to Zambia during the ensuing calendar month, and



to



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

rightsto buyandsellcurrenciesfromauthorised

dealers and enter intoswapsand

hedging

arrangements

(which

expression

shall

include,

without

limitation,

arrangements for taking out forward cover against local and other currency fluctuations



London-2612730/12



- 32 -



G2181/00030



orotherfluctuationsinincomesorcostsorotherexpensesincurred

as -part of the

management operations but shall not include Speculative Currency Transactions) with

non-Zmbian entities as other commercialconcernsinZambia.

Inthe eventforeign

sale of

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.

11.5



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

notifytheCentral

Bank of transfers of a substantial mount which are notin

accordance with the normal pattern of transfers.

11.6



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



agreementsordinarilyutilised

industry.

11.7



11.8



by



miningcompanies



m theinternationalmining



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



sell foreigncurrencyheld

by it, it shall not

Bank if the Central Bank is willing and able to

discrimmateagainsttheCentral

purchase foreign exchange at market rates andon terms that are no less favourable to

K C M than terms available from other buyers.



12.



ENVIROIVMENTALISSUES



12.1



KCM and GRZ eachherebyagrees that:

(0



subjectto (ii) below, K M shallnegotiate m goodfaithwith GRZ (which

undertakes tonegotiate m goodfaith with KCM) with a view to agreeing



-



33 -



G2181KKKUO



within two (2) years (or such longer period as KCM and GRZ shall agree) of

Final

the Effective DatethedetailedtermsandconditionsoftheKCM

Environmental Plan;

(ii)



KCM shallnotberequiredtoagreetheKCM

Final EnvironmentalPlanwith

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;



(iii)



GRZ shall agree toandapprovetheprovisions

oftheKCMFinal

EnvironmentalPlanprovidedthatsuchplanincorporatestheobjectives

requirements ofthe IFC in respect ofthe conduct of Normal Operations

each of the relevant Assets;



(iv)



W



or

at



KCM shallcomplywith

and implementtheKCMEnvironmentalPlanin

accordancewiththetimetablecontainedthereinandGoodMiningPractices

and,withoutprejudiceto

tie timetable, KCM shallachievetheobjectives

specified m tie KCM Final Environmental Plan no later than the last day of

the Stability Period.

GRZ shallpromptlytakeallsuchactionsas



are necessaryto

implementation of the KCM Environmental Plan.



p e m t the



12.2



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

EnablingStatutoryInstruments

and/or anyrelevantEnvironmentalLaws

andlor

applicable p e m t s todisapplythestandardspreviouslyappliedtotheAssetsunder

EnvironmentalLawsand

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

after KCMhas

fully implemented tie otherrequirements of the KCMFinal

Environmental P h .



12.3



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

acting onitsbehalfoverwhich

Period:

12.3.1



t i e any action under, or m enforcing, any applicableEnvironmental Laws

with the intent or the effect o f

(i)



securing KCM'scompliancewithEnvironmentalLaws

earlier or to a

greater extent than thatenvisagedunder

tie agreedtimetableand

conditions set out in this Agreement, the KCM Environmental Plans

or tie Enabling Legislation or Enabling Statutory Instruments; or



- 34 -



G2181/lXKBO



I



(ii)



12.3.2



12.3.3



otherthan as contemplated by Clause 12.2, repealor mend theEnabling

Legislationor theEnablingStatutoryInstruments

orotherwiseeffect any

changes thereto; or

inthe case of Environmental Laws, effect any changes thereto or enact new

legislationcovering theEnvironmentwhich

individuallyorcumulatively

would:

0)



(ii)



prevent KCM fromcomplyingwiththe

terms ofthe

KCM

timetable,contamedthereinwithout

Environmental Plans andthe

making provision for KCM to be exempted therefrom;

materiallyalteroraffect

the scope,enforcementorapplicationof

EnvironmentalLawsregardingtheestablishment,maintenance

and

operation oftheEnvironmentalProtectionFundincluding

m particular

(butwithout prejudice to the generality ofthe

foregoing)those

provisions of such legislation or regulation regarding:



(a>



the predominance of industry

representatives

administering this fimd;



(b)



the independent management of cash contributed by mining companies to

this fund; or



(iii)



12.3.4



imposing fines,penaltiesor

work obligations upon K C M (or

undertakingworksandthenseekingtorecover

the coststhereof)

under Environmental Laws (or enacting new fines penalties or works

obligationsthereunder) inrespectofmatters

which fall within the

EnvironmentalPlansor m respectofwhichexemptionshavebeen

granted to K M pursuanttotheEnabling

Statutory Instruments or

other Environmental Laws; or



on

the



Board



materiallyincreasethecost,

in red t e r m s , of carrying out the

Environmental Plans or of Normal Operations;



applyanyenvironmentalprovisions toKCMunder Section seventysix and

Act totheextentthat

suchprovisionsimpose

requirements that are more onerous than those specified in the Environmental

Plans or Enabling Statutory Instruments; or



sewnzy seven ofthe



12.3.5



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 -



G218”l



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:

12.4.1



notify KCMof suchfact m writing,specifyingthe facts andcircumstancesit

considersgiverisetosuch

noncompliance a d theactionsit

considers

necessary to remedy the same;



12.4.2



specify i n writing, a time period (being such period agreed between GRZ and

KCM,failingwhichbeingnotless

than six (6) CalendarMonths)whichit

considersappropriate to remedysuchnon-complianceandthereasonswhy

such t h e period is appropriate.



12.5



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

notremediedthenon-compliancenotified

by GRZinthemannerrequiredby

GRZ

under Clause 12.4 above (or such other manner as may have been agreed m writing

betweenGRZ and KCM),GRZwillceasetobeboundbytheprovisionsof

Clause

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.



12.6



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:

12.6.1



whether or not GRZ is entitled to serve a notice under Clause 12.4.1; or



12.6.2



whetherornottheactions

GRZ considernecessarytoremedy,suchnoncompliance specified m such notice are necessary and reasonable; or



12.63



whetherthetimeperiodspecifiedbyGRZunderClause

to remedy such non-compliance or not; or



12.6.4



whether or not the reasons specified by GRZ as to the appropriateness of such

time period are justified; or



12.63



any action by GRZ arising out ofanysuch matter



may be referred byKCMto

determination.

12.7



a SoleExpertin



12.4.2 is appropriate



accordace withClause



21, for



KCM shall not be m breach of the KCM Environmental Plan or its obligations under

thisClause12

m relationtoany

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:



L0d0~-U512730/12



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G2181KKO30



d



12.7.1



anyfailure by GRZ orZCCMto comply with theirobligationsunder this

Agreement, the Enabling Legislation, the Enabling Statutory Instruments,

tie

Environmental Liabilities

Agreement,

Environmental

Laws, or the

Environmental Plans;



12.7.2



anEnvironmentalConditionnot

previouslyknown

by K M (or its

shareholders(excluding ZCCM) orthoseofitsrepresentativeswho

have

responsibility for preparing and agreeing the Final KCM Environmental Plan)

whichrendersimpossibleormoredifficultorcostlyorwhich

delays the

performance by KCMofany task undertheKCM Final Environmental Plan

or any obligation in respect of the K C M Environmental Plan; or



12.7.3



any material unexpected difficulty (and my associated delay) which could not

reasonablyhavebeenforeseen,orovercomewithout

incumg material

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

EnvironmentalPlanortheApprovedProgrammeorthenegligenceof

contractors or agents or K M ’ S refusal to comply with such plan.

12.8



TheMinister

onbehalfof

GRZ may proposeanamendmenttothe

Environmental Plan in the following circumstances only, i f

12.8.1



KCM



atanytimetheconductofNonnalOperationsinaccordance

with the relevant

EnvironmentalPlanforwhateverreasonposes

a materialdanger to public

health and safety; or



12.8.2theimpactofNormalOperationswould

environmentaldamagewhichwasnotanticipatedin

Environmental Plan.



be likely to result m significant



the relevant



made by the Minister, unless he reasonably

Priortoanyformalproposalbeing

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

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

Environmental Plan.

12.9



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:

12.9.1



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 -



G218MNO30



12.9.2



theactionsitconsidersnecessarytoremedythesame;



12.9.3



the tmescale within which it considers the actions should be



12.9.4



thecostofsuchactions.



completed; and



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

consider theproposedvariationingoodfaith

and, unless by notice of objection m

writingservedontheMinisterwithintwo

(2) CalendarMonths of receipt of the

proposalmadepursuanttoClause

12.9 itinformstheMinisterthatit

considers the

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

A

notice of objection shall include a written statement of the reasons why K M considers

the proposed variation to be unnecessary or unreasonable, setting out to the extent it is

reasonably practicable to do so:

12.10.1



its estimate of the direct costs to implement such change;



12.10.2



its analysis of the variation in the environmental and health and safety impact

that would be effected by such change; and



12.10.3



its appraisal oftheeconomicandothereffectsofthechangeproposed



by



GRZ.

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

Minister's proposalforvariationis

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:

12.12.1



if theSoleExpertdeterminesthat

GRZ's proposalfor variation isnot

unnecessary or unreasonable the proposal for variation will be deemed to have

been agreed; or



12.12.2



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.

L.Qndon-2/512730/12



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G2181KXWO



4



12.13



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.



12.14



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

reasonablynecessary andforthepurposesof

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:



12.15.1



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;

12.15.2



if m its view theimpactofNormalOperationswould



significantenvironmentaldamagewhich

Environmental Plan;

12.15.3



12.15.4



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):

0)



(ii)



the KCM EnvironmentalPlan

is in accordancewithaccepted

environmental standards as applicable to Good Mining Practice; and

such amendment will not result in GRZ's liabilityunder

the

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

compensatory mount).



Prior to any formal proposal being made by KCM, it shall allow a period of four (4)

CalendarMonthsforinformaldiscussionsof

any proposedamendmentstoan

Environmental Plan.

- 39 -



G2181/CNlO30



12.16



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

considers theproposed

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:

12.16.1



12.16.2



12.16.3



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



U



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.

12.17



12.18



12.19



12.20



12.21



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

Ministerresponsiblefor theEnvironment,participateeither

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



of theKCMEnvironmental

Planimpractical shall not constitutenon-compliance

providedthatKCM shall use all reasonable endeavours to bring such Force Majeure

Event to an end.

12.22



Nothiigheremcontained shall prevent GRZ assuming(through the enactmentof

my or all obligations of

legislation,issue of regulation, bycontractorotherwise)



L0ndon-Z512730/12



- 40 -



G2181/CXXXO



d



ZCCM under the ZCCM Environmental Plan, such obligations either to be assumed by

GRZ jointly with ZCCM orinplaceof

and in substitutionfor,ZCCMand

the

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

my of

the Assets,whichneed to be improvedor upgraded,repairedorsubjected toother

with anyapplicablelawand

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

measuresnecessaryand/orappropriatetoaddressthemattersidentifiedpursuantto

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

KCM shall

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.



12.25



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

shall be

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.



12.26



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

upgrades,repairs,improvements

andothermeasureshavebeencompletedto

the

satisfaction of GRZ and KCM.

undertakestocomplywith

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

applicablelaw orpermitrequirementsrelating

to mine safety andor occupational



12.27 KCM



Lmdon-2/512730/12



-41 -



G2181/00030



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

12.28.



12.28 GFU



- 42 -



G218llOOO3O



PART D

GENERAL STABILITY AND TAXATION

13.



GENERAL STABILITY AND OPERATIONAL UNDERTAKINGS BY GRZ



13.I



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

higher numberofZambianresidentsthanthatpresentlyrequiredbySection

two hundred and eight of the Companies Act, being more than 30%;



1



m the case of legislation or regulations governing the operation of mines or

relatedactivities but subject to Clause 12, effectanychangestheretoor

to

a Material

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

Operations;

m the case of import and export regulations and procedures within Zambia,

effectanychangestheretoortotheirapplicationwhich,individuallyor

cumulatively,wouldhave

a MaterialAdverseEconomicEffecton

the

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:

(0



(ii)



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

or

relevant

unions

or engaging

employees or terminating their contracts of employment m such a

mannerwhichwould

be likely tohave

a MaterialAdverse

Economic Effect, individually or cumulatively, on

the

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,

insolvency,bankruptcy,receivership,administrationorwinding-up

of

companies,effectanychangestheretoor

to theirapplicationwhich,

individually or cumulatively would be likely to prejudice:

m



0)



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

-43 -



G21W00030



(ii)



theranking or priority oftheCharges.



13.2



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.



13.3



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

changescomparedwiththepositionattheEffectiveDate.WheretheSole

Expert

determinesthattherehasbeen

a MaterialAdverseEconomic

Effect, GRZ shall

compensate KCM m accordance with Clause 16.



13.4



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

Agreementwhencomparedtoothercompanies

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.



13.5



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.



13.6



Subjectto compliance by K M with:

(a)



allapplicablelegislationandregulations,theLargeScaleMiningLicences(m

each case as modified m its application to KCM by this Agreement) and



-44-



G2181/"30



(b>



this Agreement,



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).

13.7



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.

13.8



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:

(a)



(b)



(c)



requires that KCM pays a higherelectricitytariffunder

the KCMPower

PurchaseAgreementor

the NampundwePower PurchaseAgreement (tie

'"PowerAgreements") than would otherwise have been the case under these

agreements;

otherwise makes orrequires m y amendment,variation or modificationthereof

orsupplementsorotherwisechangestheinterpretationof,

or terminates or

cancels such agreements otherwise than in accordance with their terms; or

otherwiseadverselyaffectsanyrightof

KCM under the PowerAgreements

(or any corresponding obligation of any other party to K C M under the Power

to

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



13.9



13.10



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

to

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 -



G218MMO30



14.



GENERAL OBLIGATION TO PAY TAX



14.1



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

underthisAgreement.WhilstSchedule

7 is notintendedto

override applicable

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.



14.2



Subject to Clause 1 4 . 1 and 15, KCM shall pay tax, royalties and duties from time to

time in accordance with applicable legislation.



15.



TAXATION fXABILITY



15.1



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

Effective Date;

increase the Royaltyrateapplicableto

KCM or changethebasis

of

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

Normal Operations;

increase withholding taxes applicable to KCM, its shareholdersor lenders to it

ontheremittancebyKCMofprincipal,

interest, dividends, royalties or

management fees above the rate prevailing at the Effective Date

(as set out m

Schedule 7);

imposeanyadditionalTaxes

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

position

wouldhavebeenbutfortheamendment)onKCM'sDistributable

Profits or the

dividends, interest or other amounts received by its shareholders or lenders to it.



Lmdon-2512730/12



- 46 -



G2181/00030



15.2



Without prejudice to the provisions of Clause 13.4, GRZ further undertakes that for the

Stability Period, it shall not:

(a)



@)



(c)



(d)



15.3



alter the right ofnon-Zambian citizens(andentitleddependants)

arrival or permanent departure from Zambia to:



on their



(i)



importwithinsix (6) CalendarMonthsfromthedateof arrival free of

duty and tax, for personal use, household and personal effects;



(ii)



export, withouthindranceortheimpositionofduty

or tax on export

all personal effects originally imported and acquired during residency

in Zambia; and



imposenew laws toremovetherightofnon-Zambian

citizens(andentitled

dependants)tofreelyremit

all income earnedwithinZambiaduringsuch

residency.

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

materialsrequired fortheApprovedProgrammeofMiningandMetal

TreatmentOperationsorNormalOperations,risingabove

a level of fifteen

per cent. (15%); or

imposeotherroyaltiesorduties

onNormal Operations,so as tohave a

materialadverseeffect on KCM’s Distributable Profitsorcashflowsor the

dividends or other amounts received by its shareholders.



GRZ undertakesthatforthe

Stability Period it shall ensure that VAT rehates and

refunds are made within 10 days ofthesubmission by KCMofitsmonth-end VAT



return.

15.4

I



15 .S



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

if

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

legislation.

To the extent that GRZ delegates or authorises tie collection of m y Taxes leviable on

KCMto provincial,orlocal

orotherauthoritiesor

mtrumentalities, GRZ shall

procure that such authorities comply with the provisions of this Clause 15. GRZ shall

shall not levyorimpose my

also procurethatsuchauthoritiesorinstrumentalities

Taxes on KCM.

- 47



-



G2181”l



15.6



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

individualandcumulativeeffect(whetheradverse

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.



15.7



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:

W



RJ)



the term ofthe StabilityPeriod or other time periods set out m Clause 12, the

KCM EnvironmentalPlan,KCMFinalEnvironmentalPlanandthe

EnvironmentalLiabilitiesAgreementshallbeextendedby

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

arbitration; and

GRZ willtakesuchadministrative,legislative



or other action(including,

withoutlimitation,amendment

ofapplicableexistinglegislation)

as is

necessary or appropriate to give effect to the relevant time period extension

referred to in paragraph (a) above.



16.



COMPENSATION FOR BREACH OF STABILITY OR COMPULSORY ACQUISITION

PROVISIONS



16.1



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

or enactmentapplicabletoKCM)

as wouldresult m KCMbeingfullyand

fairly

compensated for any loss or detriment suffered or expenses or costs incurred byKCM

("KCM Losses") by reason of

(a)



a breach by GFZ ofanyof tie provisions of Parts C or D of thisAgreement;

or



(b)



an act or series of acts of compulsoryacquisitionofanyoftheFacilities

or

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.

16.2



I



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



L~~d0~-2/512730~12



- 48 -



G2181KMXBO



d



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:

(a)



@)

Y



(c>



thecumulative effect ofany or all pastandexisting:

(i)



breaches by GRZ of theprovisions of Parts C or D ofthisAgreement,

as compared with the position that existed at Completion;



(ii)



breaches ofanyotherprovision of thisAgreementwheresuchbreach

has a materialadverseeffect onthevalueofthe

Facilities or other

assets of KCM (the "KCM Assets'");



(iii)



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

a willing

buyer and a willing seller) of:

(i)



the KCM Assets(taken as a whole or anyone or more of them); or



(ii)



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.

16.3



Where GFU electstoreduceamountsotherwisepayableto

KCM bywayof

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

of mcurrenceofsuchKCMLossestothe

date of

per cent. (5%) fromthedate

payment.



16.4



Wherethemarket

value or othermeasuresofcompensationcannot

be readily

be determined m accordancewithgenerally

ascertained, thecompensationshall

accepted principlesof valuation and equitable principles, taking into account the capital

invested, depreciation,discountedfuturecash

flows, capitalalreadyrepatriatedand

other relevant factors.



- 49 -



G2181/ooO30



PART E

FOFWAL CLAUSES

17.



ASSIGNMENT



17.1



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.

17.2



If K C M assigns its entire interest in a Large Scale Mining Licence and its rights and

obligationsunder this AgreementinaccordancewithClause

17.1, thenuponthe

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.



17.3



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

54 oftheAct

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 :

(a)



(b)



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

its undertaking,

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



real orpersonal

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 -



G2181/C"



4



(c)



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

my

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

arrangementsorotherminingprojects

in Zambiaand GRZ confirm and

agrees:

(9



(ii)



17.4



17.5



thatthe sharesecurity m y be grantedwithout any furtherwritten

consentfrom GRZ, whetherpursuantto Section %(l) ofthe Act or

otherwise; and

anytransferee ofsuch shares pursuanttoenforcementoftheshare

security will be approved by GFU subjectonly to suchtransferee

meeting the criteria set out m Clause 17.5.



Therightsofanymortgageeorchargeeunder

a mortgageor charge given byKCM

pursuant to Clause 17.3 shall be subject to and limited by the rights of K M under this

Agreementand,subject

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

to undertakeNormalOperations(or

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)



a change of controlunderSection$& $ve



0-9



an assignmentpursuanttoClause



(one) of



the Act;or



17.1,



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

ofKCM,theacquiringparty

standinghavingregard,

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 -



G218MWN



control has or shall result from a transfer between members of the KCM Consortium or

their Affiliates.

17.6



17.7



In theeventthatKCMconsidersthattheMinisterhasactedunreasonably

m

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

determines:

(a)



thattheproposedassignee

or theacquiringpartyhasnotdemonstratedthe

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

KCM

anyliabilityon GRZ's part(whetheractual or contingent).Intheeventthat

gives notice to GRZ that it has charged its interest m any Large Scale Mining Licence

or thisAgreementinaccordancewithClause

17.3, GRZ shall if so requested bythe

Secured Parties, executea consent and acknowledgement of assignment which shall:

(a)



containGRZ'agreementtoperformitsobligations

hereunder andthereunder

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

as such

notice is served on K M ;



(c)



recogniserights of Secured Parties to cure defaults as provided m Clauses

19.3, 19.6(a) and 19.10; and



(a



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

Programmeswhichdonotinvokeanyattendant

costs, reductions in revenue or any

liabilities on GRZ's part (whether actual or contingent).



Lmdon-25l273CW12



- 52 -



G2181/MKBO



-



18.



EXTENSIONS TO TIME



18.l



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

timeextendanyperiodreferredto

in thisAgreement,orsubstitutefor

m y date

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



18.2



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

its

determinationby the Sole Expert or settlement by agreement or arbitration, as the case

may be.



18.3



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).



18.4



Subject always to Clause 15.7, but notwithstanding the foregoing, the provisions of this

26 hereofshallnotin

m y waybe construed so as to, or be

Clause18andClause

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.



19.



TERMINATION



19.1



KCMmay terminate this Agreement at any time after the twentieth anniversary

Effective Date by giving twelve (12) Calendar Months notice to GRZ.



19.2



GRZ may terminate this Agreement by notice to KCM i f



19.3



of the



(a)



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"):

(a)



is m materialdefault intheperformanceofanyofitsobligations

this Agreement; or



- 53 -



set forth m



G2UWCK"



(b)



failstocomplywithanybindingdeterminationmadeby

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

specify the

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.

19.4



The issue of a Default Notice under Clause 19.3 shall be without prejudice to:

(a)



anyaward or determination madeby

Expert under Clause 21 ; and



a TribunalunderClause22



or a Sole



P4



anyrights on thepart oftheNon-Defaulting Party to enforce such award or

determination (including by the institution of legal or other proceedings),



4



provided, however, that thefailure to makewhenduethe

payment m respect of a

monetaryaward m y result m additionalcompensationbeingpayableunderClause

19.5.

19.5



19.6



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

compensation (including

payments m respectofinterest)shall

be takenintothecomputationofthe

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):

(4



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



Lomjon-2512730/12



- 54 -



G218MMM30



d



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

@>



whetherornot

tie defaultor failure iscapableof

remedy, adequate

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

19.5),



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").

19.7



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

Termination Date.

19.8



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.



19.9



Without prejudice tothe generality of the provisions of Clause 22, if either Party

contests:

G4



the groundsfortheissueof



a DefaultNotice;or



(b)



the materiality of tie default; or



(c)



whetherthedefaultor failure has beenremedied; or



(d)



tie adequacy ofanycompensationpaidorofferedpursuantto



- 55 -



Clause 19.6(b),



G2181/ooO30



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

Partymustremedythedefault

or failure referred to m Clause19.6(a)and payany

compensationpayableunderClause19.6(b).TheTribunalshallalsodetermine(if

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

has notbeenremediedbythe

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

andpaythecompensation(ifany)

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

andthatanycompensationpaid

or offered is inadequate,theTribunalshallfixthe

amountofcompensationpayableandthedate

for itspayment.

In each case,

compensationpayableunderthisClauseshall

be increased (as appropriate) in

accordance with Clause 19.5.

19.11



In the event GRZ terminates this Agreement pursuant to Clause 19.2 or 19.6:



W



KCMshallsurrendertoGRZtheLargeScaleMiningLicences

and theLeases

but without prejudice to the liability

of any of the Parties in respect of any

antecedentbreach or defaultunderthisAgreement

or m respect ofany

indemnity given;



@)



each Party shallforthwithpaytotheother

to the other Party hereunder;



(c)



GRZ shallhavetheoption:



Party allmoniesthat m y be owing



(i)



torequestthatKCMabandontheFacilitieswithin

timetable specified by GRZ; and



a reasonable



(ii)



topurchase(subject to anyencumbrancesthereon)all oftheFacilities

at a price equivalent to the fair market value of such assets, which fair

marketvalueisto

be determined by agreementbetween GRZ and

KCM.



Suchoptionisto be exercisable by notice to KCM givenwithin thirty (30)

days following the date of temnation of this Agreement. If requested to do

a

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

to GRZ;

(d)



KCM shallhavetheright,withintheone

(1) yearperiodfollowingthe

(30) day notice period referred to in Clause lg.ll(c):



- 56 -



hrty



G2181KXXOO



(e)



I



19.12



(i)



to assign or otherwisedispose of all or any portion of the remab@

Facilities to any person; or



(ii)



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

are notremoved

from tie Contract Areas; and



KCM shallleavetheFacilitiesandtherelevantMiningArea

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

standards ofgoodminingand

metallurgicalindustry practice; providedthat

KCM shall not be required to alter the physical condition of the Facilities and

MiningAreabeyondtherequirements

ofthe EnvironmentalPlanapplicable

from m e to t h e .



In the event this Agreement is terminated by KCM pursuant to Clause 19.6:

W



K M shallsurrendertoGRZ tie LargeScaleMiningLicencesandtheLeases

but without prejudice to tie liability ofanyofthe

Parties m respect ofany

antecedentbreachordefaultunderthisAgreement

or inrespect ofany

indemnity given;



(b)



eachPartyshallforthwith paytothe otherPartyallmoniesthat

to the other Party hereunder;



(c>



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

KCM.



ThePutOptionshall be exercisable bynoticetoGRZgivenwithin

following the date of termination of this Agreement.



m y be owing



thirty (30) days



19.13



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

compensationtierefor.



19.14



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

this Agreement.



- 57 -



G2181MKJ30



20.



AMICABLE !WlTLEMENT OF DISPUTES



20.1



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

invokedanyprocedureavailableelsewhere

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

procedure.



20.2



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.



21.



SOLE EXPERT



21.1



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.



21.2



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.



21.3



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

Centre for

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

TheRequestforProposalshallset

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

Partiesagreetoacceptthe

expert proposed bytheICC

Centre as theSoleExpert

selected under this Clause 21.



21.4



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

case.



21.5



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

five (5)BusinessDays,

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



L~ndon-2/512730/12



- 58 -



G218MCKl30



I



J



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

accepts appointment.

21.6



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

contract of

appointment are agreed.



21.7



Theappointmentof the SoleExpert shall bedeemedtohavebeen

signing the contract of appointment.



21.8



The Parties shall select or (if applicable) the I C C Centre shall propose a SoleExpert

meeting the following criteria:

(a)



@)



made



upon his



The SoleExpertshall

be a personreasonablyqualified

by education,

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



his



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.

(c)



(d)



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.

The SoleExpertshall

not be a citizenor a national ofnor

resident in Zambia or South Africa.



a permanent



21.9



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.



21.10



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

theproceduretobefollowed

m the

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



- 59



-



G2181100030



(4



The SoleExpertshallnotlater

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

Expert ProceedingswhichrulesshallcomplywiththetermsofthisClause

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.



(b)



The Partiesshall be entitledtosupplydata,information

and documentation

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

are

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

inaccordancewithClause21.10(e),

to data,information,documentation or

submissions by the other Party).



(c)



The SoleExpertshall

be entitledtoobtainsuchindependentprofessional

andlor technicaladvice as he may reasonably require andtoobtainany

secretarial assistance as is reasonably necessary.



(d)



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

be relatedtotheDisputeand

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.



(e)



Copies of all data, information,documentationandsubmissionssupplied

or

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

from

receipt of such data, information, documentation or submissions to comment

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

be

promptly supplied to the other Party.



(0



NomeetingbetweentheSoleExpert

and the Parties or either of them shall

take place unless both Parties are given a reasonable opportunity to attend any

such meeting.



(g)



If, withoutshowingsufficient cause, a Party fails to complywithany rule,

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



kmdon-2/512730/12



-60-



G218l&MO3O



I



4



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

doing may:

(i)



continuetheExpertProceedingsintheabsenceof

document, information or submission;



that Party or ofthe



(ii)



drawsuchinferencesfromthatfailure

to complyorproduce as may,

in the opinion of the Sole Expert, be justified; and



(iii)



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

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

noticeissued,givenormadeunder

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

the periodprovided

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.

21.11



TheSoleExpertshallactimpartially

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.

informationordocumentationdisclosedordeliveredto

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,



L0d0~-2/512730/12



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G2181KKKUO



suchemployeesorAffiliates

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:

(a)



relinquishes,resigns

or abandonshisappointment

or dies or becomes

incapacitatedbeforetheissue

of hisdetermination on costsunderClause

21.17(b); or



@)



shall nothaveissuedhisdeterminationwithinthetimelimit

21.10(k)



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

shall be

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

Expert

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



Parties save



in the event of fraud or manifest error.

21.17

(a)



@)



WhilsttheExpertProceedings



are in progress:



(i)



eachPartyshallbearthe

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



(ii)



eachPartyshallcomplywithitsobligations

as topaymentofthe

Expert set out in his contract of appointment.



Sole



The costsreferredtoin(a)aboveandthecostsandexpensesof

the Sole

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



Lcmdon-2/512730/12



- 62 -



G21W00030



determinationoftheDisputeunder

Clause 21.1O(k).

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.

21.18



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

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

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

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).



22.



ARBITRATION



22.1



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.



22.2



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

Convention.



22.3



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



22.4



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.

22.5



Any arbitrationproceedingpursuant



to thisAgreement shall beconducted in

accordance with theArbitration Rules of ICSID in effect onthe date on whichthe

"Arbitration Rules"). SuchArbitration Rules shall be

proceedingisinstituted(the

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 -



G2181/MKDO



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

manner providd m Clause 29.

22.6



Any arbitration proceedings commenced pursuant to this Agreement shall

be heldin

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

forum.



22.1



The language of any arbitration proceedings shall be English.



22.8



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

for thepurpose.SubjecttoClause

24, GRZ irrevocablyandgenerallyconsents

m

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).

22.9



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.



22.10 Thecostsincurred



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

borne:

(a)



equallybythePartieswhere

otherwise,



tie Dispute has been referred jointlybythem;



@)



in accordancewithArticle 61(2) of theConvention.



or



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

of non-payment).



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.

Y



-64-



G218"30



I



23.



PERFORMANCETOCONTINUE



23.1



Unless tie Agreementhasalreadybeenrepudiatedorterminated,

the Parties shall

continue to observeandperform all theobligationscontamedm,and

may exercise

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 .



24,



WAIVEROFSOVEREIGN



24.1



GRZ irrevocably agrees that should any proceedings m relation to, arising out of or

in

connection with this Agreement be taken in any jurisdiction against it or its assets, no

immunity(totheextentthat

it m y atanytimeexist,whetheronthegrounds

of

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.



24.2



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.



25.



LAW APPLICABLE



25.1



IMMUNITY



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).



26.



FORCE MAJEURJ3, ECONOMICFORCE

CFIANGE



26.1



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:

(a)



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 -



G2181KKO30



(b)



hasgivennoticetotheotherPartyoftheoccurrenceofForceMajeure

becoming aware of such an event.



on



Thefirst-mentioned Party shalltakeallreasonablemeasurestoovercomethe

Force

Majeure andtofulfiltermsandconditions

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.

26.2



For tie purposes of thisAgreement, Force Majeuremeansact

of war (whether

declared or undeclared),invasion,armedconflict,act

of foreign enemy, act of

terrorism, martiallaw,military

or usurpedpower, insurrection, revolution, civil

disturbances, blockades, not, embargoes, strikes, lock-outs and other labour conflicts,

sabotage, criminaldamage, land disputes,epidemics,plague,volcanic

eruptions,

earthquakes, subsidence, heave, landslip, collapse, rock falls, storms, cyclones, floods

(including floodingofunderground

m e works),explosions(including

nuclear

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

or those

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.



26.3



KCM may, at any time, serve notice upon GFtZ that either:

(a)



an EconomicForceMajeure Event; or



0)



a MaterialAdverseChange



Event;



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 -



G218”30



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).

26.4



Theoccurrence of a EkonomcForceMajeureEvent

andor a MaterialAdverse

in

Change Event shall have theconsequences(butonlythoseconsequences)setout

Clause 2. K C M shall t i e all appropriateprecautions,due care andreasonable

alternativemeasureswiththeobjective

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

shall forthwithgivenotice

to GRZ of a EconomicForceMajeureEventand/or

Material Adverse Change Event ceasing to be continuing.



26.5



In tie event that:

(a)



@>



a Economic ForceMajeure Event occursand the auditorsof K M deliver a

certificate in respect thereof; or

a MaterialAdverseChangeEventoccurs,



and GRZ disputesthe occurrence of either of the aforementioned events, GRZ shall,

and

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.

27.



VARIATION



27.1



The Parties mayfromtimetotime

by agreement inwritingaddto,substitutefor,

cancel or vary all or any of the provisions of this Agreement, the Large Scale Mining

Licences andtheEnvironmentalPlanforthepurposeofmore

efficientlyor

satisfactorily implementing or facilitating the objectives of this Agreement.



27.2



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.



27.3



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:



-



67 -



G218MNO30



(a)



m)

(c)



theaggregateamountofcapitalexpenditureto

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

reducedbyatleasttenpercent.

(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

dulyvariedormodifiedApprovedProgramme

of MiningandMetalTreatment

Operationsand, within thirty (30) days of GRZ notifying K M that it wishes to receive

an explanation ofsuchproposedchanges,butwithout,inanywayfettering

or

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,

KCM's obligationstoexplain

the factorsmotivatingtheproposedvariation

or

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.

27.4



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

defer KDMP.



27.5



If:



4



(a)



theInvestmentCommitmentisreducedinaccordancewithClause2.3;



or



@l



tie KDMP InvestmentCommitment is reducedinaccordancewithClause



2.8,



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.

28.



ADDlTIONAL CONSULTATION



28.1



G-4



KCM shallnominate a representative,who i n theopinion of K M is of

appropriate seniorityandexperience,to

a committeecomprisingofone

member from each of theMinistry, KCMandthe local government,which



- 68 -



G2181/030



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



appropriateseniorityandexperience,

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

information:

(i)



(ii)



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).

29.

i



NOTICES



29.1



G4



Any notice,consent,demand,approvalorothercommunication

(a "Notice")

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)



(ii)



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.

@)



EachsuchNotice

shall, as elected by the Party givingsuchnotice,

personally delivered or transmitted by fax to the other Party as follows -



l~ndon-2/512730/12



- 69 -



be



G2181/CKKDJ



A Notice to GRZ



Ifbyfm-



Ifbyhd-



Permanent Secretary

M h k t r y of Mines and Minerals

Development

Fax: 260 l 251 2441252916



Permanent Secretary

M h i s t r y of Mines and Minerals

Development

PO Box 31969

W e Salassie Avenue

Lusaka, Zambia



A Notice to KCM



29.2



Ifbyfu-



Ifbybd-



The Secretary



The Secretary



Fax: 260 1 250 658



Konkola Copper Mines PLC

74 Independence Avenue

LUSdCii

Zambia



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



(ii)



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

or m

connection with this transaction shall be m the English language.

29.3



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.



30.



WAIVER



30.1



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 -



G218MKXl30



31.



SEWRABILITY



31.1



The provisions of this Agreement shall be separateand severable eachfromtheother

totheextentthat

if anyportion or any oneprovision or portion is deemedtobe

inoperativethentheremainderof

this Agreement shall remainbindingupon

and

shall precludeone Party from

enforceable by the Partieshereto.Nothingherein

requesting the other Party to renegotiate any provision herein.



32.



FURTHER

ACTS



32.1



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

Facilities.



33.



COUNTERPARTS



33.1



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.

34.



ABSENCEOFREPRESJNTATIONS AND WARhWTJES



34.1



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.



35.



COMPENSATION A N D PAYMENT



35.1



Anycompensationorotheramountpayableunderanyprovisionof

this Agreement

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.



35.2



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).

35.3



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 -



G2181100030



36.



ENTIRE AGREEMENT



36.1



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.



37.



INDEXATION



37.1



The InvestmentCommitmentandtheKDMPInvestmentCommitmentshall

be subject

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"').



37.2



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

from the



followmg:

quotient =



37.3



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

that the

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.



L0ml0n-U5l273Ofl2



- 72 -



G2181/00030



IN WITNESS WHEREOF this Agreement has beendulyexecutedby the Parties .on the thirty

f m t day of March,



2000



SIGNED for and on behalf of the

GOVERNMENT OF THE

FtJZPUBLIC OF ZAMBIA



n



SIGNED for and on behalf of

1

KOIWOLA COPPER MINES PLC }



Y



-73 -



G218llOOD30



scHEDuLE1

APPROVED ~ O G R A M M E

OF " I N G

AND "

I

,

TREATMENT OPERATIONS



J



h1d0dBl273W12



- 74 -



G2181moo30



KONKOLA COPPER MINES PLC



4



PROGRAMME OF MINING AND METAL

TREATMENT OPERATIONS



December 1999



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



I



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

products, andthe



proposed treatmentand



disposal of ore andminerals



recovered.

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

4



Programme addresses the operations at Konkola, Nchanga and Nampundwe.



Programme of Mining& Metal Treatment Operations



KCM Project

..... __.

..



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coPmwTs

PREAMBLE

1. DESCRIPTION OF THE MINING OPERATIONS

-



Konkola Mim



l.1



-.



.



-



.-



Undermund Inhstmcture

StoDim Methods and Efficiencies

OreProductionForecast

Concentrator

SurfaceInfkstmcture



1.1.1



1 .l .2

1.1.3



1.1.4



1.1S



Nchanga Mine



1.2



1.2.1 TheUnderground Mine

l .2.l .l UnderwoundInfrmtructure

1.2.1.2 Stopirw Methods and Eficiencies

l .2.l .3 Production Forecast



1.2.2 TheOpennit Mine



I .2.2.I 0-permithhzmucture

1.2.2.2 Life ofMine Desim

l .2.2.3 Production Forecast



1.2.3 Concentrator

1.2.4 Tailings Leach Plant



1.2.5 Surfacehfkstructure

1.2.6 Chineola Refi-actow Ore

1.2.7 Hvdrometallurgical Treatment

Nampundwe Mine



13



1 -3.1 UndermoundMine

l .3.1.l UnderwoundInfrastructwe

l .3.l .2



Stopinp methods and Eficiencies



l .3.l .3



ProductionForecast



1.3.2 Concentrator



1.3.3 Surface Infiastructure

1.4

2.



Consolidated Sales Forecast



CAPITAL COST ESTIMATE

. . .



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Zambia Copper Investments Limited



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Page No 2



: .-;.-.;I=-:.-=-.;.



1.1 Konkola



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



VS3B



ventilation shafl (to be re-named No.4 Shaft) will be slyped and deepened

6 million tom of ore and its



to provideannualhoistingcapacityfor



m May



associated waste. No.4 Shaft will be commissioned for hoisting



2006, fiom whichdate ore hoistingthroughNo.1andNo.3Shafiswill



cease.

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

variousupcastshaftsin



smes with tie present mainsurface fans.



This willallow the currentlyinstalledboosterfans

therebyensuringnegativepressure



to be removed



m the retum airways andthe



elimination of the majority ofthe re-circulation.

Provisionhasbeenmade

underground mobile fleet.



for newpurchases andrebuilds



of tie



Programme of Mining& Metal Treatment Operations



KCM Project



- __



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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

.



.



-.

-.



--



~'-iiip~is

s t e q ind iiy scraping~ofh oken ore m flatter dipping StopeS, These

methodshavebeenpractisedextensivelyover



a numberofyearsat



Konkola but With variations to suit tie level of mechanisation, mode of

stope drilling, orebody width etc.

3



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



areas at



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.

Twofidlymechanisedtotal



backfill methods have been planned for



tie



KDI'vP. Theseare:

l



Square excavation level fill (SELF); and



l



Post pillar cut and fill (PPCF).



The K J 3 M P stoping design is based on the following average dilution and

extraction factors:

SELF

Dilution:14.8%

Extraction: 84.8%

PPCF

Dilution:13.0%

Extraction: 77.4%

. . . . . . . . .



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



- . . . . . . . ..... . ....

. . .



Zombia Copper investments Limited



.



:

.



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.

.

.



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7.



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--Page No 4



_.__:__-_::1s____



KCM Project

...



.

:

;



Programme of Mining & Metal Treatment Operations



. . . . :.:.:-z.z



. -



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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



of the



reserves and the indicated resources will be extracted during the project

life.

Table: Konkola Ore Reserves and Resources



Orebody



Tons(Mt)



%TCu



% MCU



No 1 Shaft



3.88



4.11



0.43



No 3 Shaft



5.68



3.18



0.24



No 1 Shaft



8.79



4.33



0.48



18.35



3.93



0.40



CATEGORY

Konkola Reserves

Proved

Probable

Total Konkola



1



Reserve



I



KonkolaResources



d



Indicated



KDMP



124.0



4.26



0.32



Inferred



KDMP



97.0



3.94



0.28



221.0



4.12



0.30



Total Konkola

Resource



....



.

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

.

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

......



.Zambia Copper Investments Limited



-.~.--___-_____.__.l_

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Page No 5



Programme of Mining & Metal Treatment Operations



KCM Project



_- -



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

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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

WhI., dewateringdevelopmentandthe

extensionoftheexisting

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

2005.

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



K Mhject

:... .=:...



. . . - . . . . . . . ....

. .

. .. . .-. .. .. .. . . . . .

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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

con.cenmteper



.-



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. .. . .



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&mbw-Copper Invesbnents Limited



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Page No 7



i-.:~~i-L--i-~-~=.



KCM Project



rogramme of Mining & Metal Treatment Operations

I



I



Table: Konkola Production Forecast



i



2006- 2007



2008



2009



1 2010



2011



m



4636



6046



6037



6038



6044



5984 :

I



~~



5902



I



!



3.44



3.54



3.57



3.60



3.66



3.69



L



3.73



!



3.85



4.01



90.22



90.l l



I



88.90



89.59



90.06



90.05



90.04



90.06



90.09 1

I



47.5



47.5



47.5



47.5



47.5



47.5



141.8



187.2



194.3



195.5



199.1



200.9



1



47.5 :



201.1 j

i



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. .



.



.



.



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.



.



Zambia Copper Investments Limited



.



47.5



47.5



I



i



Page No 8



KCM Project



Metal Treatment Operations

/rogramme of Mining &i

l



Table: Konkola Production Forecast (ctd)



Ore



2015



2016



2017



2018



2019



2020



2021



2022



2023



2024



2025



20281



6026



6076



5910



6082



606 1



5978



6060



5950



5966



6020



6039



5997'



Production

I



(000 tons)

Ore Grade



4.03



4.14



4.16



4.13



4.19



4.19



4.27



90.09



90.05



90.01



90.08



90.04 90.04



90.01



89.74 89.80 89.92



90.01



47.5



47.5



47.5



47.5



47.5



47.5



47.5



47.5



47.5



221.4



226.3 228.6



225.4



228.4



228.0 229.2



4.28



4.26



4.21



3.87 1



%TCu



L

I



Concentrator

Recovery

W)



Concentrate



47.5



47.5



90.19



47.5



47.5



47.5



224.1



218.7



209.1



Grade

(TCu%)

Copper

219.1

226.6



230.5- 228.9



Contained In

Cons (000

tons)



.



.



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

U

PT

h.



. . . . . .



.



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.



Provision has been made m the capital estimate to upgrade certain of the

winder electricdmechticals and for upgrades to the 1600 and 2800 pump

stations.

Theplannedre-commissioning



of theNo



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



purchasesandrebuilds



of tie



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

110%.

J



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.



is based



Copper Reserves

Underground Resources

Indicated



Inferred

Total Underground

CopperResources

Inferred

Total Underground

CobaltResources



1.19

2.70

19.80



LOB "thin rich"

Block A



Chingola B

River Lode



UOB Cobalt



6.95



6.61



2.83



0.64



3.31



1.82



1.11



5.43



3.27



1.79



3.48



1.14



10.49



5.75



2.53



23.16



2.15



0.45



23.16



2.15



0.45



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



KCM Project

.



-. ..



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. . . . . . . .. . .



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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

m



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-&&a Copper Investments Limited



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concentrate



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Page No 1 3



i



KCM Project



Programmeof Mining & MetalTreatm



wrations

l



Table: Nchanga Underground Production Summary

I



Ore Production



(000 tons)

I



Grade %TCu



1



2.212.362.502.50



Grade % ASCu

TCu Contained in



1.18



1.16



1.12



1.10



63.772



47.68 1



44.334



39.443



Ore (000 tons)



30.183

22.061

20.950

19.570



ASCu Contained in

Ore (tons)

Overall



50.19

51.94

52.67

51.88



Recovery



l



( W



MG



40.0

40.0

40.0

40.0



Cons

Grade



(TCu%)

HG



43.0



43.0



43.0



43.0



50.0



50.0



50.0



50.0



43.981



50.580



49.572



43.131



33.086



25.1 13



23.026



19.794



Cons

Grade



(TCu%)



Cu



Contained



in



Cons (000 tons)



Zambia Copper hvestments Limited



Page No



14



1.22. I



oDe&



r&&&&&~



. . . . . . .



-.



.



.



.



. .



-



...



life of tie NchangaOpenPit,

only limited

Due to theshortremaining

refurbishment of t i e openpit inhstructure has been allowed for in thecost

estimates.

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.



U



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.



1.2.2.3 Production Forecast



d



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.



.



&m&



.



. .



.



- .....



a p p e r Investmentsiinzited



-



.....

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

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



.-- . .......

.........

............. . . ..-.. . . ...................



-



~



.-



...

-.__

.

.... _ _

Page No 13

__~.7._.



.



-



-



-



CATEGORY



. ..



Orebody



__



..



Tom



.



%TCu



.



%ASCu



.



-



% TCo



...



--



__



.-



%ASCo



W )



NOP Reserves



U



Proved Copper



LOBRJOB



12.26



2.75



1.35



Reserve



copper

UOB Cobalt



2.82



1.79



0.40



Proved Cobalt

Reserve

NOP Resources

Measured

Indicated

Total NOP Copper

Resource

Indicated

Total NOP Cobalt

Resource



0.67



0.07



~~~



UOB



42.24



1.94



0.91



LOB



11.45



4.63



1.99



53.69



2.51



1.14



13.05



1.22



0.33



0.31



0.04



13.05



1.22



0.33



0.31



0.04



UOB 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

will

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



Production



Production



m cons (ooo tom)



1.2.3 Concentrator

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



-__.



-- . ~ ~ - .__=

-_.,



__



-.-. _-_- __



..>

.

.

- -A--’,.::-.:

.

4

“2:.

.

.:”.

’.

-- :

.-..



-



-



-__



.. _. .. -.



--.

.



....- -..

.

-.__.



-



c%



Metal Treatment Operations



... .... . . ..._.. .. .. . - 5 . . .

.-- - - . ... .- ..-



-.

..



~



. ..



, ..



_- .--- . -. . - --..

.- -



.



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.



KCM Project



F



wme of Mining & MetalTreatmentOperations

I



2000



2001



2002



2003



2004



2005



7764



7719



7440



2424



2473



1846



r0-z



68.39



70.60



72.60



74.00



74.00



74.00



74.00



56.107



62.600



59.386



23.1 12



19.476



14.236



13

519

12.628



6360



10520



10799



13076



13027



13654



23.964



40.861



43.145



82.570



102.985



106.018



59.989



56.570



50.611



80.081



103,458



102.123



66.655



62.855



56.235



Table: Nchanga Tailings Leach



Total Flotation



Plant Production Summary



Tailings (000

tons)

Recovery of

ASCu (%)

Cu Recovered

(000 tons)

Tailings

Reclamation

(000 tons)

Cu Recovered



1



1



*O07;

1739



'



74.00,



l-



(000 tons)

TLP Finished

Cathodes (000

tons)

TLP Total Cu

Recovered



1



54.000



33.198

I



(000 tons)

Zambia Copper Investments Limited



\



Page No 1 9



programme of Mining c% Metal Treatment Operations



KCM Project

__



::_:__

I-:r



- .



-



-



~-~~-a--.i-~~;.~~:~.--i.-~..~;.-i;-~':----.--



. . . .



-



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



-. .............



-



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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.

A



1.2.7 Hvdrometallurtical Treatment

A hydrometallurgical routeW11 be evaluated as a possible replacement



topyrometallurgicaltreatmentformost,

i f not all, ofthe K M

concentrates.Theevaluationprogramme,which

will includebench

and pilot scaletestwork, is beingcompiledand

isexpectedto

commence as a high priority immediatelyafterclose.

If the

hydrometallurgical route is shown to be tie more attractive then tie

project would enter

the

financing

and construction

phase.

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

facilities.

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.



. . . .



-



..



__

~



Zumbia Copper Investmmtr Limited



.



.



. . . . . . .



-.



.-



.



.



. --.



.



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



.



.



.



-_



.



;_-



.



___.

- _



Page No 20



_ _ _



programme of Mining &

Metal

i

Treatment Operations



KCMhject

.......



:.--- :--_:-.: .



.



.......

.........



-zt=;.?Ci-z:iii



.... ~=::::.--=

2;.

- ::-.:-::----.

.... - .....................



..



>.i.3:3.

_;::--;:_.--.~~:__.

=:- -.>;_..=



i.:.



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



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



practised throughout



theNampundwemineanddilutionisplannedat



15% and



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



11.8



Total Resources



15.0



The

current

bottom

production

level,



has



tie 48OftL,



approximately eighteen months of ore reserves left for production

at a relatively low grade. The reserves below t i e 48Ofi.L are close

totheshaftstationandhave



a highergrade.To



achieve tie



targeted concentrate requirements, tie 730% W11 be equipped

with tracks, pipes and a main tip grizdey as soon as possible.



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



&&a



. . . . . . . . . . .



Copper Investments Limited



._I-..



..



....



-............. . . . . . . . . . . . . . . .. ...-.-. ...-.

..



--



__ ............



.-



“ > L . & . % A . - ; z . . z m . ~ - ;



__



Page No 2 1



..L*



programme of Mining & Metal Treatment Operations



K M Project

.



-I.



-:.~

....



::.



- .... ~ ~ ~ - ~ : ~ - ~ , ~ . . - ~ ~ =....

~ . ~ . ~ ~ - ~ ~ = . .

~

.-...~... . . ~ = . ~ ~ ~ = : ~ : = - =.: . ~ ~ - - ~ = ~

....

......7

r........



,-=_i-.~_-..7.-x&-.i



~~



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



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



Ore Production

(000 tons)

Grade

Sulphur



%



2000



2001



2002



2003



2004



249.852



363.519



393.070



95.929



59.828



10.8



10.8



10.8



12.2



14.8



.



1.3.2 Concentrator



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.



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



:.....



.....

. .i

. . . . . . . . . . .... . . . . . . . . . . . ._..

. . .

. . .



Zambia Copper InvestmmtsLmited



-



.



.



.



.

.



.



.



_-.



.



.



.



.___



.



.



_ 1



......



.



.



.



.



.



i-



..



-



'Pige NO 22-



..



-



~~



2020 2021



2022



2023



218



220



220



221



222



0



0



0



0



0



&pp&

Cobalt



Note



l



**



2024 2025 2026



2027



2028



221



216



211



210



0



0



0



0



000 tom

tom



'



d



....



...........

........



...G.



.- .



-.................

..-...........e

^.



Zambia Copper h~hents

Limited



_......

. L . _ . ..



._L_;



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



- ..._:

.....



:L.:_--.

-.-----:-:.- L



.......

-=.:



..__:_

-A__;



--i..:..---.i



i



&



~



,



~



Page No 23



-



.



programme of Mining & Metal Treatment Operations



K M Project

__



.

~

~

r

i

~

;

.

_

.

i

?

i

'

.

;

-



...



.



.



. .



.



.



.



-



._



.



- ._....

.



-..



-.



___



.--,:-~.~:,,-._7.2;-----z



-.



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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

Description

~



US$000



Kodcola Deep M m g Project

Konkola Division

Nchanga Division

Nampundwe Division

Johannesburg, Zambiad k Partners Cost

~~



PROJl3CT TOTAL



522 680

72 124

174 655



1 0 729

18 751

798 939



Programme of Mining & Metal Trealment Operalions



KCM Project



Table: Capital Cost Estimate Project Summary Cashflow



ussm



DESCRIPTION



Konkola Deep Mining Project

Konkola Division

Nchangr D i v i s i m

Nampundwe Division

Johannesburg. Zambia B Partners

cost



P R O J E C T TOTAL



.-



.



.



.



.



.



.



..



.



Zambia CopperInvestments Limited



2ooo



I



2001



2002



2003



2004



2005



2006



25 593



53 933



I04 145



156213



94 611



6O 074



31 l49



2 362



961



S O 138



26 295



7746



5095



2 943



469



2012



13 201



I355



3 848



1025



1023



1023



:BEYOND







6576



TOTAL



S22 680

72 I24

174 655



3 491



657



10 729



6751



2 525



18751



17 522



I I2 852

85 772

-



. .



161308



91614



60543



13201



13-55



3 848



1025



1023



I023



6 576



I



Page No 25



798 939



Table: Capital Cost Estimate Nchanga Division



Base Dale Janua~y1999



. .



. . .



-



-



..



...



-



uswoo



Description



.



Sh& and Underground



l5 400



Open Pit



41 583



Copper Concentrator



14 563



Cobalt Concentrator



3 389



Tailings Leach Plant



54 1 8 8



Surfacehfiastmcture



9 463



.



18 462



Indirect Costs

SUB TOTAL



157 048



CONTINGENCY AMOUNT



17 607



PROJECT TOTAL



174 655



The capital estimate for Nchanga includes the following significant items:



SHAFTS AND UNDERGROUND



Localised Services

Shaft Equipment

Capital Development

Mining Equipment

Arterial Tmnspozt

Locomotives and Rolling Stock

Ore Storage and Transport

Ventilation

Underground Workshops

Electrical power

Pumping and Dewatering



US% '000



US$ '000



,671

,208

2,800

7,083

,674

,411

,595

1,548

,264

,246

.900



15.400



40,700

882



41.582



4



OPEN PIT



Stripping of over burden

Miscellaneous



.



.



.



. . . .



.



..



-



.



__



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

-. .

- _ .... :

:



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



h n b i a Copper Invemnentr Limited



.-...



.

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



. . . . . . . .

~



-



. . . . . . .



_ . _ L _



...



.:-&+-



Page No 27



COPPER CONCENTR4TOR



Civil Works

Mechanical

Equipment Piping.and Vd-ves-



.



--



Electrics

Instrumentation

Preliminmes and general

Operating spares



..



.



1,030

6,622

- ,429

1,674

1,631

2,733

444



14.563



,146

1,218

,911

,025

,040

,235

,759

.OS



3.389



13,234

12,698

10,469

5,452

2,662

2,048

1,926

1,637

1,384

1,345

,201

,l 1 8

,037

.977



54.188



2,109

1,520

1,223

,942

,239

298

1,373

1.760



9.464



COBALT CONCENTRATOR



Civil Works

~tmmral

Steel and Platework

MechanicalEquipment

Piping and Valves

Electrics

Instrumentation

Preliminaries and general

Operating Spares

TAILINGS LEACH PLANT



Electrownning Plant

Filter Plant

Thickening

Solvent Extraction

Dams

Leaching

Lime Plant

Acid Offloading

Pregnant Leach Liquor

Muntimpa Pump House

hnama Pump Station

Reagent P l a n t Filters

Reagent Plant Thickness

Gl3Xd



SURFACEINFRASTRUCTURE



Imalised S m c e s



Housing



Railways

Stores, Offices and Building

Workshops

Electrical Power

Instrumentation

Road Transport



INDIF€ECT COSTS

Reimbursables and Indirect Costs

._ -



-



...-



.



-



-



-.



._



.



.



18,462

-



.



- - --



.



-



..



-



~



Subtotal



~



157,048



Contingency



17,607



174,655



TOTAL ESTIMATE



__



.



.. ._ _ _ > .



i...



_. .2 . _ _ L _

... .-.

. L

~



Zambia Copper Investments Limited



....



_.



_.



.-::

...



.



.



--._.:



..



__



.-



i



-.---.:--.



.



.



....



-. . .

_L



.



..



. _.



.



Page No 29



KC34 Ptqject

.



.........

.



. -- .-



-.

.



. . . . .



Programme of Mining &Metal Treatment Operations

......



-



..



..



--. . .--. .



...



. ...

. .



-



.- .



.



.-2



.



:-.- - _ .



.



.



.



.



. .-



.



_____



._i?zc=.

..:--7.-z-.-:



.



.-



__



. . . ... . .. . .. . ... .. . ....?__.

. _ . . . ... . .



.



Table: Capital Cost Estimate Nampundwe Division



Base Date January 1999

..



--



..........



Description.



- -



.



-



.



usmoo



Shafts and Underground



6 662



Concentrator



1 295



Surface Infiastructure



1 553

SUB TOTAL



9 510



CONTINGENCY AMOUNT



1219



PROJECT TOTAL



1 0 729



..



SCHEDULE 2

LQCXLBUSINESSD~~~~TPROGRA”E



- 75 -



G2181KXXl3O



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

L



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

operations.

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.



d



SCHEDULE 3



PART I



CONlR4CT AREAS

Schedule 2 of the KCM Sale and Purchase Agreement is Incorporated here by Reference



La~lon-251Z730~12



- 76 -



G21WUOO3O



PART IT

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

Address ......................................................................................................................

Prospecting LicenceNo. ...............................................................................................

The mining area shall be the area described m the Schedule and annexed hereto and bordered

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

.on the Plan.

TheLicenceisgrantedfor

a period of ..........................................

........ day of ..................................................

The programme of mining anddevelopmentoperationsshall

hereto.



commencing on the



be as shown m the Appendix



The following conditions included m Prospecting Licence No. PL ........................

shall continue to apply:



Issued at .......................



this .........................



day of



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



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

Director



ENDORSEMENT OF REGISTRATION

This large-scale mining licence has this

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

been registered in the Register of Miniig Rights.



day of .......................................



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

Director



- 77 -



G21wooo30



RENEwALsANDAMEmMENTs

Date of



.4mendment



Details of Renewal

orAmendment



Date of Registration

and Registration No.



Signature of

Director



d



- 78 -



G2181/00030



PART 111

MINING AREAS



Schedule 2 of tie KCM Sale and Purchase Agreement is Incorporated here by Reference



- 79 -



G2181/UXOO



SCHEDULE 4



PART I

THE KCM ENVIRONMENTAL PLAN IS INCORPORATED HERE BY REFERENCE

PART 11

THE ZCCM ENVIRONMENTAL PLAN IS INCORPORATEDHERE BY REFERENCE



- 80 -



G2181/00030



SCHEDULE 5

E&PKWMENTANDTR”NG~AN



4



- 81



G2181KNX30



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



a varietyoffactorssuchas



the



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

ofclosure.



A FmalEmploymentandDevelopmentPlan



Wthin



six months



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 6

~UIFtEDbSURANCES



SCHEDULE 1 4 OF THE KCM SALE AND PURCHASE AGREEMENT IS

INCORPORATED HERE BY REFERENCE



- a2 -



G21wooo3o



SCHEDULE 7

TAXS~HED~LE



Theprincipalapplicable taxes and the ratesapplicableto

Operations from tie date hereof are as follows:

(1)



KCM m theconduct of Normal



Income Tax:

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.



L



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

principles.



For the purposes of Part VI of tie Fifth Schedule to the Income Tax Act, the

Facilities shall be deemed a "1975 new mine" allowing the deduction of one

hundred per cent. (100%)of capital expenditure (as defined m the Act) m the

year in which the capital expenditure was incurred.

In the calculation of KCM's liability for income tax, KCM shall be entitled to

deductanycopper'~priceparticipationpaymentsandanycobalt

price

pr+ei~ipatiun

Payments made pmuant totheCopper Price Participation and

theCobaltPrice

hrticipation Agreements respectively between KCMand

ZCCM.



W



(2)



Royakties:

(9



KCMshallpay to GRZ theRoyaltyonthegrossrevenueofmineralsproduced

m the Mining Areas at a rate of nought point six per cent. (0.6%), subject to

paragraph (6) below.



(ii)



GRZ confirms that for a period oftwenty (20) yearsfromtheEffective Date,

theRoyaltypayableunder

tie Actshall be deductibleinthecalculationof

K M ' S liability for income tax.



- 83 -



G218VOMEO



The circwsmces wherethediscretion avtiable ta GRZ underSection 67 of

the Act to defer or exempt, as applicable the payment of the Royalty would be

exercised are:



(iii)



(aa)



under the terms ofSection 67(3) wherethe cashoperatingmarginof

KCM mining operations is less than nil; and



(bb)underthe

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

derivedbydeductingoperating

costs (notincludingcapitalisedexpenditure

during or required for the development of the Facilities) from revenue.



(iv)



(3)



aquired for



Other Taxes, Charges and Fees:



Custom andExciseDuties



(9



(a)



.

-



(b)



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,

m

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

item

imported for thepurposes of effecting or incurring capital expenditure

andwhicharereferredto

in Section 2 (Capital Cost Estimate) of the

Metal Treatment Operations

ApprovedProgrammeofMiningand

relating to the Facilities. GRZ andKCM agree that g o d s k & T d by

contractors, agentsandsuppliersofKCM

e n g a p i byKCM for the

purposes ofimplementing t k Approved Programme ofMining and

Metal TreatmentC

C

~

~excise

i duties

d under Section 97 of the Act, such benefit

from c

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

Completion.

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

Mining

and Metal Treatment Operations (other than those items exempt in terms

of Section 97 as detailed in paragraph 3(i)(a) of this Schedule)

at such

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



-84-



G218lfUMEW



d



value ofthematerials

below.

(ii)



and assetsimported,subjecttoparagraph



(6)



Excise Duty on Power

GRZ confirms that ExciseDutyonpowershall



be leviedat zero per cent.



(0%).

(iii)



Other Taxes, Charges and Fees:



be liable to pay (and these provisions

For the avoidance of doubt, KCM shall

fees

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:

(aa)



any annual fees, company fees, landrentsfallmgduepostCompletion

or other payments due to GRZ m accordance with applicable legislation

and tie provisions of this Agreement; and



(bb)



taxes, charges and fees forservicesrenderedbygovernmental



authorities on request or to public or commercial enterprises generally.

(4)



Value Added Tax("VAT"):

(0



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.



(ii)



GRZ confirms that input VAT m excess of VAT payable m respect of the

be creditedtoKCMwithin

a reasonable

supply ofgoodsandservicesshall

10 days) from the date of submission

period of time (and in any event within



of KCM's monthlyVAT



return in respect of eachprescribedaccounting



period.

(iii)



(5)



For thepurposesofthisClause,"input

VAT" shallmeanVATclaimable

respect ofallowablebusiness purchases of goods and services supplied by

registered supplier during a prescribed accounting period.



m



a



ReliefMm Withholding Tax

tax on dividends,royalties andmanagement fees to

KCM shallpaywithholding

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

cent. (0%).



(6)



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)



- 85 -



G2181100030



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.

(7)



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

treatment operation.



-86-



G2181KOD30



SCHEDULE S

WORKING %HEDULE



Working example of the operation of Clause 2.3 of The Development Agreement deemed reduction of tie Investment Commitment

A.



Suspension



Assumptions

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

tie budgetedcommitmentateachshaftisUS$llOm

total budgeted commitment of US$220m)



(i.e. a



suspensionhmtailment (in the case of B) occurs at shaft Y and

(in the case of B) (a)

atthetimeofsuspensionkurtailment

US$75m has been spent at shaft Y (b) nothing has been spent

at shaft Y.

Calculation (a):

The Investment Commitment is deemed reduced by

(110 - 75) X



208

= us$33.09m

220



Calculation (b):

The Investment Commitment is deemed reduced by



B.



Curtailment



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



- 87 -



G2181/ooO30



208

(110 - 75) X 220



X



25%



= US8.27m



d



Lo1don-2/51Z730/12



- 88 -



G2181lWO30



SCHEDULE 9

THE ~SEXTLEMENT

ACTIONF”IS bJCORPORATED ZKERE BY Rlm3tENCJ3



- 89 -



G2181/00030