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Water Supply Agreement


Execution Draft


 AGREEMENT








Between


The Government of Afghanistan (“Government”)





And


MCC-Jiangxi Copper Consortium (“MCC”)


Concerning Water Supply for the Aynak Copper Project (the “Water Supply Agreement”)


This Water Supply Agreement is made this 23rd day of February, 2009 between the





Government and MCC (the “Parties”).











Whereas


(a) The Government and MCC hav«; entered into a Mining Contract under which





MCC has been granted the mineral rights for the Aynak Copper Deposit (the


“Mining Contract”). The mineral rights were subsequently transferred from MCC


to the MCC-JCL Aynak Minerals Company Ltd (“MJAM”) pursuant to Section


61 of the Mining Contract;


(b) The Mining Contract incorporates a Memorandum of Agreement between the


Parties concerning Water Supply (the “Water Supply MOA”) which identifies the


development of an adequate water supply and efficient water use as essential


components of the development of the Aynak Copper Project. Subject to the


requirements of Section 37(c) of the Mining Contract concerning the protection of


local water use, the Parties agree in principle that MCC may obtain water from


local water sources to supply its needs;





(c) The Parties wish to allocate water supply responsibilities for the Aynak Copper


Project. MCC has made a commitment to the Government to construct water


supply wells and pipeline system, at MCC’s sole expense, in the vicinity of the


Aynak Copper Project to supply the Project’s fresh water requirements. MCC has


also committed to reuse and re-eirculate process water to the extent possible. The


Government of Afghanistan has made a commitment to MCC to make available


sufficient water resources for MCC’s use in the Aynak Copper Project;





The Parties agree that MCC’s exploration, development and use of the water


supply for the Aynak Copper Pioject shall be at MCC’s sole expense and in


compliance with all applicable requirements under the laws of Afghanistan. The


Parties agree that they will work co-operatively to locate potential areas in the


vicinity of the Aynak Copper Project where fresh water supplies are likely to be


sufficient to support the Aynak Copper Project. Upon identification of fresh


water supplies of suitable quantity and quality, the Parties agree that they will








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work diligently and cooperatively to expedite completion of the approval process,


including the preparation of appropriate environmental and social impact studies,


necessary to allow MCC to supply water to the Aynak Copper Project; and


(e) The Parties have agreed that the time period in which to conclude this Water


Supply Agreement shall run until March 1, 2009.


In consideration of the commitments and obligations set forth in this Water Supply Agreement,


the Parties agree as follows:





PART I - GENERAL TERMS








1. Organization


1'his Water Supply Agreement is organized to reflect and address the scope of


water supply issues identified by the Parties in the Mining Contract and the Water Supply


MOA. Part I of this Water Supply Agreement establishes general terms and definitions


that will apply to the entire Water Supply Agreement. Part II of this Water Supply


Agreement establishes the conditions and requirements under which MCC will be


authorized to develop, operate and supply fresh water to the Aynak Copper Project. Part


III of this Water Supply Agreement establishes the social and sustainable development


requirements and obligations applicable to MCC’s activities under this Water Supply


Agreement. Part IV of this Water Supply Agreement contains miscellaneous provisions


of this Water Supply Agreement.








2. Definitions





In this Water Supply Agreement, the following expressions (except where the


context otherwise requires) shall have the following meanings:


(a) Agreement Period: The term as set forth in Section_of this Water Supply


Agreement and any extensions or other modifications to the term agreed to by the


Parties.


(b) Aynak Copper Project: The copper project located in Aynak and the surrounding


area of Logar province for which a Mineral Right has been granted to MCC.


(c) Effective Date of the Water Supply Agreement: the date February 23, 2009.


(d) Environment: Physical factors of the surroundings of human beings, including


land, water, atmosphere, climale, sound, odors, tastes, artifacts, and biological


factors of animals and plants and the social factors of aesthetics.


(e) MCC-Jiangxi Copper Consortium (“MCC”): The entity comprised of China


Metallurgical Group Corporation and Jiangxi Copper Company Limited that was


selected as the Preferred Bidder during the Aynak Tender Process to negotiate and


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conclude the Mining Contract with the Ministry of Mines and which will be


bound by the terms of the Mining Contract, jointly and severally, together with


any successor entities.


(1) Mineral Right: The rights to explore and exploit minerals granted by the


Afghanistan Minerals Law.


(g) Ministry of Energy and Water: The Ministry of Energy and Water of the


Government of Afghanistan.


(h) Ministry of Mines: The Ministry of Mines of the Government of Afghanistan or


any successor entity, acting on behalf of the Government of Afghanistan with


respect to the Mining Contract and the Project.


(i) Month: All references to months in this Mining Contract shall be based on the


solar calendar specified in Article 18 of Afghanistan’s Constitution.


G) Pollution: Any direct or indirect alteration of the physical, thermal, chemical,


biological, or radioactive properties of any part of the Environment by


discharging, emitting, or depositing wastes so as materially to affect any


beneficial use adversely, or to cause a condition which is hazardous or potentially


hazardous to public health, safety or welfare, or to animals, birds, wildlife, fish or


aquatic life, or to plants. The term “pollute” shall have a corresponding meaning.


(k) Waste: Any matter, whether liquid, solid, gaseous or radioactive, which is


discharged, emitted or deposited in the Environment in such volume, consistency,


or manner as to cause an alteration of the Environment.


(l) Water Use Right: the legal authorization granted to MCC, pursuant to the Water


Law, to use water which MCC locates, pumps or impounds in compliance with


the Water Supply Agreement.


(m) Water Supply Development Plan: A plan subject to the review and approval of the


Government that sets forth the plans, specifications, requirements and schedule


for water supply construction activities to be undertaken by MCC and which shall


address the results of the environmental and social impact assessment, including


the identification and ‘mplementation of necessary mitigation measures.


3. General Rights and Obligations


MCC shall receive the r ecessary governmental approvals required


under applicable Afgh; law to (i) explore for and develop water


supplies, (ii) construct a water supply system in the vicinity of the


Aynak Copper Project, (iii) operate the water supply system to


pump, treat and store such water supplies as specifically approved


by the Government and (iv) pipe such water supplies to the Aynak


Copper Project for use by MCC in accordance with the


requirements set forth in this Water Supply Agreement.


(b) MCC shall be entitled to the protections provided by applicable


Afghan law and agreed to in the Mining Contract with respect to





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expropriation, nationalization, deprivation and confiscation of any


assets owned and/or used by MCC in conducting activities


pursuant to this Water Supply Agreement.


(c) MCC’s General Obligations with Respect to Water Supply


Operations and Activities


(i) MCC hereby accepts the obligations to conduct its water


supply operations and activities in accordance with the


terms of the Mining Contract, this Water Supply


Agreement and the applicable laws and regulations of


Afghanistan.


(ii) MCC shall protect existing water usage. MCC shall not


adversely affect local agricultural water or deprive any


lands, villages, houses, or watering places for animals of a


reasonable supply ol water insofar as such water has,


through custom, been utilized for such lands, villages,


houses, or animals. Nor shall MCC interfere with any


water rights or existing uses of water enjoyed by any


persons under the law of Afghanistan.


(iii) MCC acknowledges and agrees that it shall conduct all


such water supply operations and activities in a sound


manner in accordance with best international hydrological,


environmental, mining, and engineering standards and


practices and in accordance with modem and accepted


scientific and technical principles applicable to fresh water


supply development, storage, pumping, and pipeline


transmission. All operations and activities under this Water


Supply Agreement shall be conducted in accordance with


environmental protection, water conservation and other


plans approved by the Government prior to the


commencement of operations so as to avoid waste or loss


of water or other natural resources, to protect water quality


and other natural resources against unnecessary damage,


and to prevent pollution and contamination of the


environment.


(iv) MCC shall take all appropriate risk management measures


to prevent damage to the rights and property of the


Government or third parties.


(v) In the event of negligence or carelessness on the part of


MCC or its ager.ts or of any subcontractor carrying on


operations or activities for MCC under this Water Supply


Agreement, MCC will be liable for such injuries in


accordance with the applicable laws of Afghanistan.











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 (vi)MCC shall install and utilize such internationally


recognized modern safety devices and shall observe such


internationally recognized modem safety precautions and


risk management measures as are provided and observed


internationally under conditions and operations comparable


to those undertaken by MCC under this Water Supply


Agreement. MCC shall observe internationally recognized


measures, including risk management measures, for the


protection of the general health and safety of its employees


and of all other persons having legal access to the area


covered by this Water Supply Agreement.


(vii) MCC shall comply with such legally valid instructions as


may from time to time be given in writing by the


Government.


(viii) MCC shall pay all applicable fees, rents, payments,


penalties and other non-tax charges to the Government as


set forth in this Water Supply Agreement.


(ix)The Parties acknowledge and agree that MCC shall have a


reasonable time period in which to modify its water supply


operations and activities to incorporate legally required


technological advancements or to achieve compliance with


new laws or regulations that may apply in the future.








4. Incorporation of the Mining Contract


(a) This Water Supply Agreement is being entered into by the Parties in


accordance with the terms of the Mining Contract and the Water Supply


MOA. To facilitate the negotiation and conclusion of this Water Supply


Agreement, the Parties acknowledge and agree that certain provisions of


the Mining Contract shall apply to the Water Supply Agreement and shall


be adopted by the Parties and incorporated into the Water Supply


Agreement as enforceable terms and provisions of the Water Supply


Agreement. The Parties agree '.hat the following Parts and Sections of the


Mining Contract shall apply to this Water Supply Agreement:





Section 17, Financial Assurance;


Section 18, Minimum Expenditures;


Section 19, Relinquishment;


Section 20, Tax Obligations;


Section 38, Services and Supplies;


Section 39, Employment of Afghan Nationals;


Section 40, Training;


Section 41, Non-Afghan Personnel;


Section 42, Employee Accident Compensation;





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Section 43, Imports;


Part XIII, Force Majeure;


Part XIV, Settlement of Disputes;


Part XX, Amendment


The Parties acknowledge and agree that the purpose of this Water Supply


Agreement is to support the development and operation of the Aynak


Copper Project. In the event that a conflict arises between the terms of


this Water Supply Agreement and the Mining Contract, the terms of the


Mining Contract shall control. Matters which are not explicitly covered


by the terms of this Water Supply Agreement shall be governed by the


applicable terms, provisions and procedures of the Mining Contract.


Insofar as such obligations are not covered by the Mining Contract or this


Water Supply Agreement, both parties shall resolve such matters through


friendly consultation in compliance with the terms of the Water Law and


all other applicable laws and regulations, from time to time in effect in


Afghanistan.


5. Environmental Protection


MCC has made broad environmental and social protection commitments


to the Government concerning the Aynak Copper Project including, without


limitation, its commitment to comply with the applicable environmental laws and


regulations of Afghanistan, Afghanistan’s environmental and social protection


guidelines and policies, all World Bank Environmental and Social Safeguard


Policies, the Equator Principles and the Voluntary Principles on Security and


I luman Rights. The Parties acknowledge and agree that these commitments shall


apply equally to all of MCC’s water supply activities and operations On this


basis, MCC’s commitments and obligations with respect to environmental and


social protection, as more fully specified in Appendix 6 of the Mining Contract,


are specifically adopted and incorporated by reference into this Water Supply


Agreement and are fully enforceable pursuant to the terms of the Mining Contract


and this Water Supply Agreement. In the event of a conflict between the above


referenced laws, regulations, guidelines and policies, the Parties agree to adhere to


the strictest applicable standard in order to protect Afghanistan's environment and


people. In light of these commitments, the Parties acknowledge and agree as


follows:


(a) MCC shall manage its water supply activities and operations in a


technically, financially, socially, culturally and environmentally


responsible manner to achieve 1he environmental protection and


sustainable development objectives and responsibilities required by this


Water Supply Agreement and the Mining Contract, the laws of


Afghanistan and any applicable international conventions to which


Afghanistan is or may become a signatory. In particular, MCC has


committed to reuse and re-circulate process water to the extent possible, in








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order to minimize the amount of fresh water necessary for the Aynak


Copper Project.


(b) MCC shall prepare an environmental and social impact assessment of the


water supply facilities, activities and operations in accordance with the


requirements of the Minerals Law, the Water Law, the Environment Law


and the above referenced environmental and social protection guidelines,


principles and policies. At a minimum, MCC shall undertake the


environmental and social impact assessment program specified in


Appendix 6 of the Mining Contract which is specifically adopted and


incorporated by reference into this Water Supply Agreement as an


enforceable part of this Water Supply Agreement. MCC shall submit its


environmental and social impact assessment program of the water supply


facilities, activities and operations to the Government for review and


approval prior to commencing construction of water supply related


facilities and structures. MCC acknowledges and agrees that the


Government may require additional assessment activities as a condition of


approval.


(c) MCC shall prepare a detailed, technically and scientifically sound plan for


the management, mitigation or elimination of water supply project impacts


and risks to the environment and local residents. MCC shall submit this


plan to the Government for review and approval prior to commencing the


construction and operation of water supply facilities and structures. The


Parties acknowledge and agree that MCC may submit this plan as part of


its Environmental Management Plan which MCC is required to submit for


review and approval by the Government pursuant to the Mining Contract.


MCC acknowledges and agrees that the Government may require


additional or alternative environmental management provisions, including


ISO 14001, as a condition of approval.


(d) MCC shall comply with all applicable standards regulating the discharge


of pollutants into the environment. At a minimum, MCC shall comply


with the standards specified in Appendix 6 of the Mining Contract which


are specifically adopted and incorporated by reference into this Water


Supply Agreement as an enforc eable part of this Water Supply


Agreement. MCC acknowledges and agrees that it shall comply with


additional or alternative standards that may be required in the future by the


Government in connection with the enactment of new laws or the


promulgation of new regulations by the Government. MCC further


acknowledges and agrees that it shall be subject to fines, penalties and fees


in the event that MCC breaches the terms of this Water Supply


Agreement, including without l imitation, discharge standards which MCC


is required to comply with pursuant to this Water Supply Agreement and


the Mining Contract.


(e) MCC shall not dispose of any waste created as a result of its water supply


operations under this Water Supply Agreement in an area or in a manner


not previously approved by the Government. MCC shall, when any water


 storage structure or impoundment, or waste disposal area established


under this Water Supply Agreement, ceases to be utilized for such


purpose, ensure that such structures are reclaimed in accordance with the


requirements of applicable laws and regulations and MCC’s approved


reclamation plan.


(f) MCC shall provide fair compensation, as determined by a mutually





agreeable third party, for any loss suffered by any local inhabitant


resulting from any damage done (whether to land, anything on land, water,


or otherwise) or any interference with any right to use land or water


caused by MCC’s water supply activities under this Water Supply


Agreement.








6. Water Supply Financing








MCC shall have sole responsibility for financing all construction and


operations authorized pursuant to this Water Supply Agreement and determining


the terms on which said financing shall be obtained, including the extent to which


the financing shall be accomplished through issuance of shares of, or borrowing


by MCC. MCC may pledge such rights, licenses and authorizations obtained in


accordance with the Mining Contract or this Water Supply Agreement, to secure


financing for the construction and operations authorized by this Water Supply


Agreement.








7. Government Right of Access


The Government reserves the right to access, with prior notice to MCC,


any and all areas covered by this Water Supply Agreement for the purpose of any


authorized investigation allowed by the laws of Afghanistan, provided that if


damage results to MCC’s property from such investigation, the Government


agrees to provide fair and reasonable compensation to MCC for such damage,


except in cases where such damage is caused by an act of MCC.








8. Use of Subcontractors


Without in any way detracting from MCC’s responsibilities and


obligations under this Water Supply Agreement and the Mining Contract, MCC


may engage subcontractors for the execution of such phases of its water supply


activities and operations as MCC deems appropriate. MCC will have full


responsibility and assume all risks related to the activities of its subcontractors in


accordance with the terms and conditions of this Water Supply Agreement and the


Mining Contract. The records of such subcontractors shall be made available to


Government inspectors as provided in Appendix 3 of the Mining Contract, which


arc adopted and incorporated by reference into this Water Supply Agreement as


an enforceable part of this Water Supply Agreement.





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9. Cooperation of the Parties


The Government will cooperate; with MCC to the extent permitted under


the laws of Afghanistan and will take such actions as may be desirable to achieve


the mutual objectives of this Water Supply Agreement.





(a) The Parties agree that they will at all times use their best efforts to carry


out the provisions of this Water Supply Agreement to the end that the


activities authorized by this Water Supply Agreement may at all times be


conducted efficiently and for the optimum benefit of the Parties.


(b) MCC agrees to plan and conduct all operations under this Water Supply


Agreement in accordance with the standards and requirements imposed


elsewhere in this Water Supply Agreement and the Mining Contract for


the sound and progressive development of the Aynak Copper Project, to


give at all times full consideration to the aspirations and welfare of the


people of Afghanistan and to the development of Afghanistan, and to


cooperate in promoting the growth and development of Afghanistan’s


economic and social structure, and pursuant to the provisions of this


Agreement, at all times to comply with the laws and regulations of


Afghanistan.


PART II - WATER SUPPLY


10. Identification of Water Supply Area


The Parties acknowledge and agree that the Government, in consultation


with MCC, has identified and will make available to MCC for hydrological


investigation, an area in the vicinity of the Aynak Copper Project which the


Government believes contain sufficient fresh water supplies to support the Aynak


Copper Project. In identifying this area, the Government has taken into


consideration all currently known and relevant hydrological, environmental,


operational, social and logistical factors and requirements necessary for the


successful construction and operation of a water supply system for the Aynak


Copper Project. The area proposed for hydrological investigation is further


described in Appendix 1 to this Water Supply Agreement. The Government


agrees that it shall take those steps necessary to ensure that access to the proposed


area is made available to MCC, its employees, contractors, subcontractors and


advisors. MCC shall commence investigation and pre-development activities in


the proposed water supply area, pursuant to an authorization to be issued by the


Government. MCC’s investigation and pre-development activities shall include,


but not be limited to, additional hydrological investigation, drilling, sampling, and


activities related to the development of a Water Supply Development Plan which


is required by this Water Supply Agreement and more fully described in Section


13 of this Water Supply Agreement.








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11. Commencement of Hydrological Investigation and Pre-Development


Activities


The Parties acknowledge and agree that upon the effective date of this


Water Supply Agreement and issuance of an authorization by the Government,


MCC shall commence a hydrological investigation in the proposed water supply


area including, but not limited to, additional drilling, sampling, as well as


activities related to the development of a Water Supply Development Plan. In


addition, pursuant to the requirements of Section 5(b) of this Water Supply


Agreement, MCC shall prepare an environmental and social impact assessment of


the impacts of water supply development for the Aynak Copper Project. The


Parties acknowledge and agree that the water supply environmental and social


impact assessment may be prepared as part of the Aynak Copper Project


environmental and social impact assessment required under the Mining Contract.


The commencement and performance of such activities shall occur according to a


project schedule proposed by MCC and approved by the Government. The


project schedule shall be incorporated into the Water Supply Development Plan


and be fully enforceable under this Water Supply Agreement and the Mining


Contract. MCC acknowledges and agrees that it shall commence these activities


as soon as possible, but no later than six (6) months following the completion of


de-mining and adequate security arrangements in the water supply area. Upon


completion of its evaluation and confirmation that the proposed area contains


suitable water supplies to support the Aynak Copper Project, MCC shall notify


the Government of its agreement as to the suitability of the proposed area. Upon


MCC’s agreement as to the suitability of the proposed water supply and the


Government’s review and approval of MCC’s Water Supply Development Plan,


the Government shall provide MCC with the governmental approvals necessary to


make the water supply exclusively available to MCC, as necessary, and taking


into account the limitations imposed by this Water Supply Agreement on MCC’s


use of water resources.











12. Identification of Additional Water Supply Areas


In the event that MCC’s hydrological investigation in the proposed water





supply area indicates that the available fresh water supply is insufficient to


provide an adequate source of fresh water for the Aynak Copper Project, MCC


shall notify the Government of this finding and provide the Government with


information supporting MCC’s position. The Government shall promptly review


the information provided by MCC. Following its review, the Government shall,


in consultation with MCC, determine if additional water supply areas are


necessary to meet the fresh water supply requirements for the Aynak Copper


Project. In the event that the Parties agree that additional water supplies are


necessary, the Government shall identify and make available additional areas for


hydrological investigation by MCC. Such additional areas may include surface


water suitable lor dam storage or groundwater sources. The Parties acknowledge





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and agree that the Parties will continue this process until adequate fresh water


supplies are identified or until the Parties agree to an alternate approach for


supplying fresh water to the Aynak Copper Project.








13. Water Supply Development Plan


The Parties acknowledge and agree that a Water Supply Development


Plan is a necessary prerequisite to construction of the water supply system for the


Aynak Copper Project. The Water Supply Development Plan shall set forth the


plans, specifications, requirements and schedule for water supply construction


activities to be undertaken by MCC, which may include an evaluation of the


feasibility of dam storage of surface water. In addition, the Water Supply


Development Plan shall address the results of the environmental and social impact


assessment performed to evaluate the effects of the Aynak Copper Project on


surface and groundwater resources in the vicinity of the Aynak Copper Project in


Logar Province, including the identification and implementation of necessary


mitigation measures. MCC shall submit its Water Supply Development Plan to


the Government for review no later than three (3) months following the


completion of its water supply exploration and pre-development activities. The


Government shall use its best efforts to complete its review of the Water Supply


Development Plan within two (2) months of receipt from MCC. The Government


shall review the Water Supply Development Plan to confirm that it meets the


commitments made by MCC in its Aynak Copper Project proposal and that


MCC’s proposed water supply system complies with applicable Afghan laws and


regulations and applicable international standards adopted and incorporated by


reference into the Mining Contract and this Water Supply Agreement.








14. Water Supply Construction


(a) Following approval of the Water Supply Development Plan by the


Government, MCC shall commence construction of the Aynak Copper


Project water supply facilities and structures in accordance with the


schedule specified in the approved Water Supply Development Plan.


Construction shall be completed within the time period necessary to


support the commencement of operations at the Aynak Copper Project.


The Parties acknowledge and agree that delays which occur during the


construction period shall be subject to the delay conditions and to the force


majeure provisions of the Mining Contract which are incorporated into


this Water Supply Agreement as an enforceable part of this Water Supply


Agreement.


(b) Construction of the Aynak Copper Project water supply facilities and


structures shall be conducted in accordance with the approved Water


Supply Development Plan, all applicable Afghan laws and regulations and


all applicable best international practice standards and guidelines.





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including environmental protection standards, adopted in this Water


Supply Agreement.


(c) All construction and pre-opera:ion costs incurred in connection with the


Aynak Copper Project water supply system shall be borne by MCC and


MCC shall be responsible for arranging all funding necessary to construct


the water supply system. MCC' shall be responsible for the payment of all


taxes, duties and assessments, rents and other charges related to the


construction of the water supply system and associated structures,


buildings and improvements.


(d) Pursuant to its obligations under this Water Supply Agreement and in


accordance with the local purchasing obligations established by Section 38


of the Mining Contract, which are adopted and incorporated by reference


into this Water Supply Agreement, MCC shall, where possible, award


contracts to Afghan contractors and suppliers of materials and services


provided that, in its opinion, the quality, delivery times, costs, reliability


and other terms are comparable to those offered by foreign contractors


and/or suppliers.


(e) MCC, including its subcontractors, shall use its best efforts to purchase


goods and services in Afghanistan if there are available in Afghanistan


goods and services of suitable and reasonably comparable quality, and at


no higher price than goods available from abroad. In comparing prices of


goods available in Afghanistan to the prices of goods imported by MCC,


the following conditions shall apply. For goods and services imported


during the construction period, customs duties shall not be added to the


other expenses incurred up to the time the imported goods are landed in


Afghanistan. For goods and services imported during operations, customs


duties for raw materials shall be added to the other expenses. The Parties


agree that the process of comparing locally available goods and services to


imported goods and services shall not delay MCC’s construction activities


or operations.


(f) MCC shall be responsible for the importation and transportation of


equipment to the water supply system site. MCC shall comply with the


import and export requirements established in the Mining Contract, which


are incorporated and adopted by reference into this Water Supply


Agreement.


(g) The Government shall be entitled, at its own cost, to monitor water supply


system construction. For this purpose, MCC shall:


(i) ensure that the Government and any experts appointed by the


Government are afforded reasonable access to the water supply


system site at times to be agreed with MCC provided that such


access does not materially interfere with water supply system


construction activities or expose any person on the water supply


system site to any danger;








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 (ii) make copies of all plans and designs available for inspection; and


(iii) within two months of the completion of the water supply system,


provide the Government with one set of reproducible copies and


five sets of white print copies (or equivalent) of all "as built" plans


and designs.


(h) MCC shall in no way represent to any third party that, as a result of any


review by the Government, the Government is responsible for the


engineering soundness of the water supply system and shall, subject to the


security provisions of this Water Supply Agreement, be solely responsible


lor the economic and technical feasibility, operational capability and


reliability of the water supply system.


(i) MCC shall own the water supply system and all facilities, machinery and


equipment used in connection with the water supply system which have


been purchased or supplied by MCC. The land and all appurtenant


structures shall be returned to the Government upon the expiration of this


Water Supply Agreement.


(j) All water supply system facilities and structures shall be the personal


property of MCC and may be mortgaged, pledged or otherwise


encumbered during the term of this Water Supply Agreement, with written


notification to the Government, by MCC subject to the provisions relating


to Assignment and to Termination, which are established in the Mining


Contract and adopted and incorporated by reference into this Water


Supply Agreement as an enforceable part of this Water Supply


Agreement.








15. Water Supply System Operation


(a) MCC shall, at its own cost, be responsible for the testing, operation,


management, metering, maintenance and repair of the water supply system


and shall ensure that the water supply system is in good operating


condition and capable of provic mg sufficient water to the Aynak Copper


Project, taking into account the applicable restrictions and water


recycling/reuse requirements established by this Water Supply Agreement.


(b) MCC shall operate the water supply system in accordance with all


applicable Afghan laws and regulations and all applicable best


international standards and guidelines adopted by the Parties as


enforceable requirements of this Water Supply Agreement, including


environmental requirements. Li particular, MCC shall reuse and re¬


circulate process water to the extent possible in order to minimize the


amount of fresh water necessary for the Aynak Copper Project.


(c) The Government may, at its discretion, inspect the water supply system on


a periodic basis to confirm that the water supply system is being operated


in conformance with applicable Afghan laws and regulations and the best





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 international standards adoptee by the Parties as enforceable requirements


of this Water Supply Agreement. The Parties shall jointly inspect the


water supply system on a periodic basis to confirm that it meets applicable


structural and operational requirements specified under Afghan law and


regulations, international best practice standards and the Water Supply


Development Plan.














16. Financial Assurance for Water Supply System Closure


The Parties acknowledge and agree that MCC shall be responsible for the


preparation and submission of a water supply closure plan to the Government for


approval. The water supply closure plan shall be consistent with the requirements


of the Environmental Management Plan developed and approved in accordance


with Section 15 of the Mining Contract. At a minimum, the water supply closure


plan shall identify the measures and financial requirements necessary to


decommission or transfer operational responsibilities for the water supply system


and complete reclamation and rehabilitation of land affected by the water supply


system. In particular, the water supply closure plan shall describe how closure


and reclamation of the water supply system, if necessary, will occur within the


closure of the Aynak Copper Project. MCC shall submit to the Government, as


part of its financial assurance for closure of the Aynak Copper Project, financial


assurance sufficient to fund the reclamation and closure requirements identified in


the water supply closure plan. The amount of such financial assurance shall be


determined by the Government following review of MCC’s water supply closure


plan. MCC shall establish a separate water supply closure fund or other


appropriate financial assurance with the Ministry of Mines within sixty (60) days


of the Government’s determination of the amount of financial assurance. MCC’s


financial assurance shall be in a form which is issued and guaranteed by an


institution acceptable to the Ministry of Mines and immediately available to the


Ministry of Mines in the event that MCC’s reclamation and closure obligations


are not fulfilled. This financial assurance requirement is in addition to the


performance security requirements specified in Section 17 of the Mining


Contract.











17. Water Price


The Parties acknowledge and agree that, in the future, MCC may be





required to pay the Government for fresh water utilized by the Aynak Copper


Project, including the coal mine and power plant constructed pursuant to the


Power Supply Agreement. The Parties further acknowledge and agree that any


future price for water will be established in the Water Law and applicable


regulations. In the event that a price for water is established in the future, the


Parties agree that they shall engage in friendly consultation and cooperatively





15


negotiate an appropriate price for water. Any payments required in the future shall


be paid in United States Dollars or such other currency as may be mutually agreed


and shall be paid on or before the last day of the first month following the end of


each calendar quarter. Each payment shall be accompanied by metering


information and a detailed statement showing the basis of computation of


payment.











18. Water Supply Facilities


(a) Water supply facilities shall include, but not be limited to, the pumping


stations, wells, dams, impoundments, pipelines, wastewater treatment, and


other necessarily related facilities as set forth below, for which MCC is,


subject to the rights of third parties, authorized to construct and operate in


accordance with such reasonable safety regulations relating to design,


construction, and operation as required by best international practice and


the laws of Afghanistan. The facilities may include, but are not limited to:


(i) The pumping stations, wells, dams, impoundments, pipelines,


wastewater treatment, other operating facilities: development of


the water supply system may require the establishment of roads,


bridges, or other transportation facilities;


(ii) Additional roads, including roads to provide access to MCC


personnel;


(iii) A modem wireless communications system that complies with


Ministry of Communication requirements;


(iv) In addition, the water supply system may require other buildings,


workshops, warehouses, storage areas, sewage disposal, foundries,


machine shops, repair shops, and all such additional or other


facilities, plant and equipment as MCC shall consider necessary for


its operations or to prov ide services or to carry on activities


ancillary or incidental to such operations. The land and all


appurtenant structures shall be returned to the Government upon


the expiration of this Water Supply Agreement.


(b) All water supply system facilities and structures shall be the personal


property of MCC and may be mortgaged, pledged or otherwise


encumbered during the term of this Water Supply Agreement, with written


notification to the Government, by MCC subject to the provisions relating


to Assignment and to Termination, which are established in the Mining


Contract and adopted and incorporated by reference into this Water


Supply Agreement as an enforceable part of this Water Supply


Agreement.














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19. Control of Operations


MCC shall have full and effective control and management of all matters


relating to the operation of the water supply system including the production and


use of fresh water in accordance with sound, long-term policies. MCC may,


subject to complying with the applicab le requirements of the laws of Afghanistan


the Mining Contract and this Water Supply Agreement and, receiving approval


from the Government, make material expansions or modifications of the water


supply facilities, and may add new facilities, as MCC shall consider necessary for


the operation of the water supply system and the Aynak Copper Project. All such


expansions, modifications, improvements, replacements, and additions shall be


considered part of the water supply system of the Aynak Copper Project.











20. Land Use


Subject to the applicable laws and regulations of Afghanistan and the


requirements of the Mining Contract and this Water Supply Agreement, for the


duration of the Aynak Copper Project or such time period as may be agreed to by


the Parties, to the extent not already established by the Mining Contract, MCC


shall have the right to enter and utilize the surface of those areas identified as the


water supply area as may be necessary for the construction and operations of


roads, pumping stations, pipelines and water storage structures necessary for its


activities and operations under this Water Supply Agreement. During the term of


this Water Supply Agreement, MCC shall pay a nominal rent to the Government


for its use of public lands calculated on a per hectare basis. With regard to private


lands located in the water supply area, to the extent not already addressed in the


Mining Contract, the Government shall, at MCC’s expense, complete the


requirements necessary to obtain the rights to use the private land, including the


requirements for buying, leasing or transferring land or relocating privately


owned buildings, as may be necessary. MCC shall make reasonable


compensation, as determined by a mutually agreeable third party, for those


owners of private lands who suffered economic loss due to the aforesaid


relocation.








21. Water Supply System Security





The Parties acknowledge and agree that security responsibilities for all


facilities and structures constructed and operated in accordance with this Water


Supply Agreement shall be allocated between the Parties in accordance with the


principles, terms and conditions established in the Aynak Security Agreement,


which is adopted and incorporated by reference into this Water Supply


Agreement. On this basis, the Government shall be responsible for security,


including de-mining, in all areas outside of the water supply facility boundaries


covered by this Water Supply Agreement. MCC shall be responsible for security


inside the water supply facility boundaries. The Parties acknowledge and agree





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that the Security Coordination Committee established by the Parties in the Aynak


Security Agreement shall also review security matters associated with this Water


Supply Agreement. The Parties further agree to establish an Operational Security


Committee, if necessary, for the water supply area and facilities.








PART III - WATER SUPPLY SOCIAL AND SUSTAINABLE DEVELOPMENT


COMMITMENTS AND OBLIGATIONS





22. Resettlement and Compensation Plan


MCC shall be required to compensate local residents adversely affected by


development activities authorized by this Water Supply Agreement. Compensation shall


be determined through the application of applicable Afghan law and internationally


accepted principles of fairness and reasonableness. The Parties acknowledge and agree


that in the event that certain residents will be required to move their residences, such


residents will be properly resettled in a location and condition that does not result in a


diminishment of the resettled resident’s standard of living or adversely impact the


resident’s livelihood. Such resettlement shall be conducted in accordance with World


Bank Resettlement Guidelines. In addition, the Parties acknowledge and agree that water


supply development and operations will impact surrounding villages and residents. To


address such impacts, MCC shall, in consultation with appropriate governmental


officials, develop and finance an aid program established for the benefit of the


surrounding villages and residents. At a minimum, MCC’s efforts in this area shall be


coordinated with the local and regional benefits specified in Section 22 of the Mining


Contract.








23. Other Social and Sustainable Development Commitments and Obligations


The Parties acknowledge and agree that the social and sustainable development


commitments made by MCC in the Mining Contract concerning housing, medical


facilities, schools, entertainment and shopping, and the protection of religious belief shall


be adopted and incorporated by reference into this Water Supply Agreement as an


enforceable part of this Water Supply Agreement. The Parties further acknowledge and


agree that compliance with the social and sustainable development commitments and


obligations set forth in Part TV of the Mining Contract shall constitute compliance with


the social and sustainable development commitments referenced in this Section of the


Water Supply Agreement.








24. Government's and Third Parties’ Right to Use Company’s Facilities


MCC shall:





(a) Allow the public and the Government of Afghanistan to use, free of charge, any


roads constructed and/or main.ained by MCC pursuant to this Water Supply





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Agreement, however, that such use shall not unduly prejudice or interfere with


MCC’s operations hereunder;


(b) Allow the Government of Afghanistan to have access over the water supply area,


provided that such access does not unduly prejudice or interfere with MCC’s


operations hereunder.


PART IV - MISCELLANEOUS PROVISIONS


25. Duration


The Parties agree that this Water Supply Agreement will take effect immediately


upon execution by the Parties. This Water Supply Agreement shall expire upon the


expiration or termination of the Mining Contract, or as otherwise mutually determined.


26. Amendments


The Parties mutually agree that this Water Supply Agreement may be amended by


the written consent of the Parties and will be revised as necessary.


27. Complete Agreement


This Water Supply Agreement, consisting of the above Sections 1-27 constitutes


the complete agreement of the Parties with respect to water supply matters for the Aynak


(tapper Project and shall become effective in accordance with the terms of this Water


Supply Agreement. This Water Supply Agreement shall be executed in English in three


(3) originals with each Party holding one (1) original and one in Dari. In the event that a


dispute arises under this Water Supply Agreement, between the English and Dari


versions, the English text shall be definitive as to the terms, conditions, rights and


obligations of the Parties under this Water Supply Agreement.






































19


Agreed




























































































































































































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 APPENDIX 1


WATER SUPPLY AREA






























































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