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Railway Agreement





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Between





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The Government of Afghanistan


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MCC-Jiangxi Copper Consortium


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1 July 2010


 EX EC l TIVE SUMMARY





The Parties acknow ledge that construction of an operable raihvay is of extreme importance to


the economic development of Afghanistan and MCC has committed to construct such a


railway on a BOOT basis, subject to an approved positive feasibility study. Therefore the


goal of this Railw ay Agreement is to provide for the construction, initial operation, and a


suitable training environment to build and operate that railway. As defined in this Railway


Agreement:


1. Based on a positive Feasibility Study outcome, MCC agrees that it will provide the


investment to construct and operate the Railway on a timely, cost-efficient, and non¬


profit BOOT basis. MCC's investment is to be repaid as rapidly as possible, through


the operational fees of the Railway.


2. The Government agrees to provide tin environment which does not add to the


financial burdens of returning MCC's investment, in a manner that is as secure as


practical.


This Railway Agreement is designed to provide the general framework under which the


Railway can proceed to operation and construction as rapidly as possible. As the details


of construction and operation will not be known until the Feasibility Study is completed,


those details will be included in a separate Railw ay BOOT Agreement with a Security


annex, immediately upon completion of the Route Study and the Feasibility Study.













































































1 July 2010


 TABU OF CONTENTS





EXECUTIVE SUMMARY


TABLE OF CONTENTS


RECITALS...............................................................................................................................1


PART I - GENERAL TERMS AND CONDITIONS..............................................................2


1. General...........................................................................................................................2


2. Organization....................................................................................................................2


3. Definitions......................................................................................................................3


4. Incorporation of the Aynak Mining Contract...................................................................4


5. MCC’s General Rights under the Railway Agreement.....................................................5


6. MCC's General Obligations under the Railway Agreement.............................................5


7. Environmental Protection................................................................................................7


8. Government Right of Access...........................................................................................8


9. Use of Subcontractors.....................................................................................................9


10. Cooperation of the Parties...............................................................................................9


11. Security............................................................................... 10


12. International Coordination................................................... 10


13. Conditions Precedent.....................................................................................................11


PART II - RAILWAY ROUTE SELECTION AND FEASIBILITY STUDY.....................11


14. Route Identification and Evaluation...............................................................................11


15. Feasibility Study...........................................................................................................12


16. BOOT Agreement.........................................................................................................13


17. Route Acquisition..........................................................................................................14


PART III - RAILWAY CONSTRUCTION..........................................................................14


18. Railway Construction - General Requirements..............................................................14


19. Railway Construction - Technical Requirements...........................................................16


20. Construction Timetable.................................................................................................17


21. Railway Facilities..........................................................................................................17


22. Railway Route Land Use...............................................................................................18


PART IV- RAILWAY OPERATION..................................................................................18


23. Railway Operation........................................................................................................18


24. Recovery of Investment by MCC..................................................................................19


25. Review of Railroad Agreement Economic Terms..........................................................20


26. Tax Obligations and Financial Record Keeping.............................................................20


27. Compliance with Rail Transportation Requirements......................................................22


PART V - RAILWAY TRANSFER......................................................................................22


28. Railway Transfer Entity................................................................................................22


29. Railway Transfer Date...................................................................................................22


30. Assets to be Transferred................................................................................................22


31. Warranty.......................................................................................................................22


32. MCC Use of Railway Following Transfer to Government.............................................22








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PART VI - RAILWAY SOCIAL AND SUSTAINABLE DEVELOPMENT


COMMITMENTS AND OBLIGATIONS.............................................................................23


33. Resettlement and Compensation Plan............................................................................23


34. Protection and Respect of Religious Belief....................................................................23


35. Government's and Third Parties' Rights to Use Company's Facilities...........................23


PART VII - LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS......23


36. Services and Supplies....................................................................................................23


PART VIII - EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS.................23


37. Employment of Afghan Nationals.................................................................................23


38. Training............................................... 24


39. Non-Afghan Personnel.................................................................................................24


40. Employee Accident Compensation................................................................................24


PART IX - IMPORTS AND RE-EXPORTS.........................................................................24


41. Imports..........................................................................................................................24


42. Re-Exports....................................................................................................................26


43. Cooperation...................................................................................................................26


PART X - DOMICILE; SERVICE OF PROCESS...............................................................26


44. General.........................................................................................................................26


45. Notices................................................ 26


PART XI - MISCELLANEOUS PROVISIONS...................................................................27


46. Termination...................................................................................................................27


47. Notification and Remedy...............................................................................................28


48. Default......................... 29


49. Force Majeure...............................................................................................................29


50. Dispute Resolution.........................................................................................................30


51. Duration.....................................................................................................................31


52. Assignment...................................................................................................................31


53. Amendments.................................................................................................................32


54. Applicable Law.............................................................................................................32


55. Complete Agreement.....................................................................................................32


APPENDIX 1: RAILWAY ROUTE........................................................................................1












































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1 July 2010


 RAILWAY AGREEMENT





Between


The Government of Afghanistan (“Government”)


And


MCC-Jiangxi Copper Consortium (“MCC”)





This Railway Agreement (“Railway Agreement’") is made this 3*3. day


of S£rp. 2010 between the Government and MCC (the “Parties”).





RECITALS





Whereas:


1. The Government and MCC have entered into a Mining Contract under which MCC


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


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


Aynak Mining Contract;


2. The Aynak Mining Contract contains a Memorandum of Agreement between the


Parties concerning a Railway (the “Railway MO A”) which incorporates MCC’s


binding commitment to the Government to construct and operate a Railway, at its own


cost and consistent with the terms specified in MCC’s letter dated September 25, 2007


into the Aynak Mining Contract as an enforceable part of the Aynak Mining Contract.


3. MCC' made the following commitments to the Government concerning the Railway in


its September 25, 2007 letter:


a. MCC will conduct reconnaissance (survey) and prepare a feasibility study


according to the schedule provided in MCC's August 16, 2007 letter.


b. Upon completion of the feasibility study and on the basis of the Railway


project being feasible, MCC will build the Railway on a “BOOT" (Build,


Own, Operate, and Transfer) basis.


i. MCC will arrange 100% financing for the construction of the Railway.


ii. MCC will design and build the Railway on its own.


iii. MCC will own the Railway and be responsible for the overall


operation and management of the Railway upon completion of the


Rail wav' construction and commencement of operations.











1 Julv 2010 1 of 33


 c. Within the two years before the full recovery of MCC’s investment, the


Government should form an operating entity (or joint venture operating entity


with MCC) to work together with MCC for the purpose of studying and


formulating relevant issues and policies regarding the operation and


management of the Railway following its take-over by the Government.


d. After the full recover) of MCC’s investment, MCC will transfer the Railway


to the Government.





e. MCC will provide free training concerning the maintenance, operation and


management of the Railway.


4. The Government has made a commitment to MCC in the Railway MOA to use its


authorities to assist MCC in securing the land and route necessary to construct the


Railway.


5. The Parties agreed in the Railway MOA that the feasibility study will be provided to


the Government for review. In the event that the Government disagrees with the


conclusions of the feasibility study, the Government may retain an independent expert


to review the feasibility study.


6 The Parties agreed in the Railway MOA that MCC’s Railway activities shall be at


MCC’s sole expense and in compliance with all applicable requirements under the


laws of Afghanistan. In addition, the Government agreed to provide all necessary


assistance with respect to making available information and licenses to plan and


expedite the necessary Railway development and operation. The Parties agreed that


they will work diligently and cooperatively to expedite completion of the Railway,


including the preparation of appropriate environmental and social impact studies,


route survey, and feasibility study necessary to allow MCC to build and operate the


Railway.





Agreement





Tium fork, in consideration of the commitments and obligations set forth in this Railway


Agreement, the Parties agree as follows:


PART I - GENERAL TERMS AND CONDITIONS





1. General


MCC agrees to conduct its railway construction, operations and activities on a non¬


profit basis.


2. Organization





This Railway Agreement is organized to reflect and address the scope of


Railway issues identified by the Parties in the Aynak Mining Contract and the


Railway MOA. This Railway Agreement contains 11 parts as described in the Table


of Contents above.








1 July 2010 2 of 33


 Definitions





In this Railway 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 51 of this Railway


Agreement and any extensions or other modifications to the term


agreed to in writing by the Parties.


(b) Aynak Copper Project: The copper project located in the Aynak area of


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


(c) Build-own-operate-transfer (“BOOTH: An approach to public project





development in which a private entity is granted a concession by a


governmental authority to undertake the financing, construction,


operation and maintenance of a given infrastructure facility in


exchange for the right to collect tariffs or fees from its users in order to


repay the loans or other financial obligations utilized to make the


investment in the project Under tins arrangement the private entity


owns the facility and its assets until transferred to the governmental


authority, and typically seeks financing on either a limited recourse or


a non-recourse basis, where the lender (financing bank) looks only to


the project’s assets and revenue stream for repayment, and not to


additional sources of security, such as the total assets or balance sheet


of the private entity.


(d) BOO T Agreement: The Agreement addressing the specific


requirements, details and time schedules for the construction, operation


and transfer of the Railway which shall be signed by the Parlies as per


Section 16 of this Railway Agreement in accordance with the


definition of BOOT in this Railway Agreement.


(e) Commences Commercial Operation: The first day on which the


commercial transport of passengers or freight occurs.


Effective Date of the Railway Agreement: The date_.





Environment: Physical factors of the surroundings of human beings,


including land, water, atmosphere, climate, sound, odors, tastes,


artifacts, and biological factors of animals and plants and the social


factors of aesthetics.


(h) Feasibility Studv: A study performed to MCC specifications to assess


the suitability of the proposed Railw ay route and associated facility


locations, taking into consideration the results of national and regional


rail transportation planning and all currently known and forecasted


relevant technical, environmental, economic, operational and logistical


factors and requirements necessary for the successful construction and


operation of the Railway by MCC. including considerations of the


environmental and social impact assessment activities conducted as


required by Section 7 of this Railway Agreement.








July 2010 3 of 33


Government: The Government of Afghanistan or any successor entity,


acting on behalf of the Government of Afghanistan with respect to the


Aynak Mining Contract and the Railway Agreement.


(j) MCC-Jiangxi Copper Consortium (“MCC’T: 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 conclude the Aynak Mining Contract


with the Government and w hich w ill be bound by the terms of the


Aynak Mining Contract and this Railway Agreement, jointly and


severally, together with any successor entities.


(k) 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 Aynak Mining


Contract and the Aynak Copper Project.


Ministry of Transportation and Civil Aviation: The Ministry of the


Government of Afghanistan or any successor entity, acting on behalf


of the Government of Afghanistan w ith responsibility for rail


transportation issues.


(m) Month: All references to months in this Railway Agreement shall be


based on the solar calendar specified in Article I8 of Afghanistan's


Constitution.


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


chemical, biological, or radioactive properties of any part oflhe


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.


Railway Construction Plan: A plan that sets forth the sequence and


schedule for Railway construction activities.


Route Study: A study which evaluates the technical merits of various


alternative routes or courses for the Railway.


(q) 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.


4. Incorporation of the Aynak Mining Contract


This Railway Agreement is being entered into by the Parties in


accordance w ith the terms of the Aynak Mining Contract and the


Railway MO A.











1 July 2010 Z&47 4 of 33


 The Parties acknowledge and agree that one purpose of this Railway


Agreement is to support the development and operation of the Aynak


Copper Project through the development of a Railway. The Parties


further acknowledge and agree that the Railway developed in


accordance with this Railway Agreement is also intended by the


Government to become part of a national railway network. As a result,


in the event that a conflict arises between the terms of this Railway


Agreement and the Aynak Mining Contract, the terms of this Railway


Agreement shall control. Matters which are not explicitly covered by


the terms of this Railway Agreement shall be governed by the


applicable terms, provisions and procedures of the Aynak Mining


Contract. Insofar as such matters are not covered by the Aynak


Mining Contract or this Railway Agreement, both parties shall resolve


such matters through friendly consultation in compliance with the


terms of the Minerals Law and all other applicable laws and


regulations, from lime to lime in effect in Afghanistan.





5. MCC’s General Rights under the Railway Agreement


Pursuant to the requirements of the applicable Afghan Law and in





accordance with the terms of the Aynak Mining Contract and the


Railway MOA, the Government hereby grants to MCC and MCC


hereby accepts the rights to develop, design, engineer, finance,


procure, construct, ow n, maintain and operate a railway to conduct all


of the operations hereinafter described in such areas and along such


route as may be agreed to by the Parties. This Railway Agreement


shall remain in effect until MCC’s total investment, is actually


recovered, or it is terminated in accordance with Section 46 of this


Railway Agreement.


(b) MCC shall have the exclusive right and shall receive the necessary





licenses and authorizations required under the law's of Afghanistan to


(i) construct the Railway in accordance with the Feasibility Study and


Railway Construction Plan, (ii) operate and maintain the Railway and


regulate the use of the Railw ay by third parties until MCC recovers its


total investment and (iii) transfer the Railway to the Government in


accordance with the terms set forth in this Railway Agreement.





(c) MCC shall be entitled to charge and collect tariffs or usage fees as a


condition of use of the Railway as specified in Section 21 of this


Railway Agreement and in accordance w ith the HOOT Agreement.


(d) MCC shall be entitled to the protections provided bv all applicable





provisions of Afghan law. including, Article ‘M of the Minerals Law',


with respect to expropriation, nationalization, deprivation and


confiscation of any assets ow ned and/or used by MCC pursuant to this


Railway Agreement.




















1 July 2010 5 of 33


6. MCC’s General Obligations under the Railway Agreement


MCC hereby accepts the obligations to conduct its railway


construction, operations and activities, on a non-profit BOOT basis, in


accordance with all of the applicable terms of, this Railway


Agreement, the BOOT Agreement and the applicable laws and


regulations of Afghanistan.


MCC acknowledges and agrees that it shall conduct all such railway


operations and activities in a sound manner in accordance with those


international railway design, engineering, construction and operational


standards and practices which are incorporated in the BOOT


Agreement and mutually agreed upon by the Parties as best suited to


the physical, social, economic, environmental, political and security


conditions found in Afghanistan. All operations and activities under


this Railway Agreement shall be conducted in accordance with


environmental and social protection plans approved by the


Government prior to the commencement of operations so as to protect


natural resources against unnecessary damage, to prevent pollution and


contamination of the environment and protect affected communities


from negative impacts of railway construction and operation.


(c) MCC shall take all appropriate risk management measures to prevent


damage to the rights and proper!) of the Government of Afghanistan or


third parties. In the event of negligence or carelessness on the part of


MCC or its agents or of any subcontractor carrying on operations or


activities for MCC under this Railway Agreement, MCC will be liable


for such injuries in accordance with the applicable laws of


Afghanistan.


(d) 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 Railway


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 b> this Railway Agreement.


(e) MCC shall comply with such legally valid instructions as may from


time to time be given in w riting by the Government. MCC shall be


entitled to dispute the legality of any instruction which it believes may


adversely affect the rights, interests and protections provided by the


Aynak Mining Contract, and this Railway Agreement. Such disputes


shall be in accordance with the dispute resolution provisions


established in this Railway Agreement and BOOT Agreement.


(0 MCC shall pay all applicable fees, rents, penalties and other non-tax


charges to the Government as set forth in this Railway Agreement,


BOOT Agreement and the applicable laws of Afghaiislan.





1 inivimn of


(g) MCC shall have sole responsibility lor financing all construction and


operations authorized pursuant to this Railway Agreement and


determining the terms on which said financing shall be obtained. MCC


may, as authorized by the applicable laws of Afghanistan, pledge such


rights, licenses and authorizations obtained in accordance with


operations authorized b} this Railway Agreement.


MCC shall bear and pay all expenses, costs and charges incurred in the


fulfillment of its obligations under this Railway Agreement, except


where such expenses, costs and charges are the responsibility of the


Government or third parties.


During the term of this Railw ay Agreement, MCC shall maintain, with


financially sound and reputable insurers, insurance against injury to


persons, damage to property and related contingencies, of such types,


on such terms and in such amounts (including deductibles, co-


insurance and self-insurance, if adequate reserves are maintained with


respect thereto) as is consistent with international practice. MCC shall


provide evidence of insurance to the Government as specified in the


BOOT Agreement.


(j) MCC shall provide open access to commercial use the Railway. The


Parties agree that the Railway shall not be operated to the disadvantage


of other users (including passengers), and the country of Afghanistan


in general as specified in the BOOT Agreement.


(k) MCC shall comply with all reporting requirements as agreed to and


specified in this Railwa) Agreement, the BOOT Agreement and the


laws of Afghanistan.


Insofar as such obligations are not otherwise covered by the terms of


the Railway Agreement or the Aynak Mining Contract, MCC shall


comply with the terms of the Minerals Law' and all other applicable


laws and regulations, from time to time in effect in Afghanistan.


7. 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 w ith 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 Human Rights. The Parties acknowledge and agree that


these commitments shall extend equally to all of MCC’s railway activities and operations, in


so far as these commitments are applicable to MCC’s railway activities. On this basis,


MCC's commitments and obligations with respect to environmental and social protection, as


more fully specified in Appendix 6 of the Aynak Mining Contract, are specifically adopted


and incorporated by reference into this Railway Agreement and are fully enforceable


pursuant to the terms of the Aynak Mining Contract and this Railway Agreement. In the


event of a conflict between the above referenced laws, regulations, guidelines and policies,


the Parties agree to adhere to the most applicable standard or combination of standards to








1 Julv 2010 7 of 33


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protect Afghanistan's environment and people. In light of these commitments, the Parties


acknowledge and agree as follows:


(a) MCC shall manage its railway activities and operations in a


technically, financially, socially, culturally and environmentally


responsible manner to achieve the environmental protection and


sustainable development objectives and responsibilities required by


this Railway Agreement and the Avnak Mining Contract, the laws of


Afghanistan and any applicable international conventions to which


Afghanistan is or may become a signatory;


(b) MCC shall prepare on a timely basis and as soon as practical an


environmental and social impact assessment of the Railway and related


facilities, activities and operations in accordance with the requirements


of the Aynak Mining Contract, this Railway Agreement, the


environmental laws of Afghanistan, and the above referenced


environmental and social protection guidelines, principles and policies.


MCC shall submit its environmental and social impact assessment for


the Railway and related facilities, activities and operations to the


Government for review and approval prior to commencing


construction of the Railway and its related facilities and structures.


MCC acknowledges and agrees that the Government may require


reasonable additional environmental and social impact assessment


activities as a condition of approval of the impact assessment;


(c) As specified in the BOO T Agreement, MCC shall prepare a railway


impact management plan that presents a detailed, technically and


scientifically sound approach to the management, mitigation or


elimination of railway impacts and risks to the environment and local


residents. MCC shall submit its railway impact management plan to


the Government for review and approval prior to commencing railway


construction and operation,


(d) MCC shall comply with the standards regulating the discharge or


emission of pollutants and waste into the environment associated with


railway construction and operation as specified in the railway impact


management plan; and


MCC shall provide fair compensation, as specified in the BOOT


Agreement and the law s of Afghanistan, for any loss suffered by any


local inhabitant resulting from any damage done or any interference


with any right to use additional land or water caused by MCC’s


construction or operation of the Railway under this Railway


Agreement. This Section excludes railway land acquisition,


resettlement, and relocation activities.


8. Government Right of Access


The Government reserves the right to access any and all areas covered by this


Railway Agreement for the purpose of any authorized legal activity, provided that if damage


results to MCC's property from such activity, the Government agrees to provide fair and








i inii> on i a o


 reasonable compensation to MCC for such damage, except in cases where such damage is


I caused by an act of MCC.


9. Use of Subcontractors


I i


Without in any way detracting from MCC’s responsibilities and obligations under this


Railway Agreement and the Aynak Mining Contract, MCC may engage subcontractors for


I the execution of such phases of its railway 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 Railway Agreement


I and the Aynak Mining Contract. The records of such subcontractors shall be made available


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


are adopted and incorporated by reference into this Railway Agreement as an enforceable


I part of this Railway Agreement.


10. Cooperation of the Parties





I The Parties will cooperate and take such actions as may be desirable to achieve the


mutual objectives of this Railway Agreement.


I (a) The Parlies agree that they will at all limes use their best efforts to





carry out the provisions of this Railway Agreement to the end that the


activities authorized by this Railway 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 Railway


Agreement in accordance with the standards and requirements imposed


elsewhere in this Railway Agreement and the Aynak Mining Contract


for the sound and progressive development of rail transportation in


Afghanistan, 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


w ith the laws and regulations of Afghanistan.


(c) At any time during the term of this Railway Agreement, upon request





by either Party, the Government and MCC may consult with each other


to determine whether, in the light of all relevant circumstances, this


Railway Agreement requires revision in order to ensure that the


Railway Agreement operates equitably and without major detriment to


the interests of either Party. Such consultation shall be carried out in a


spirit of cooperation w ith due regard to the intent and objectives of the


respective Parties. Both Parties desire to realize the success of the


Railway for the benefit of the people of Afghanistan and the economic


and social growth and development of the nation.


(d) The Government shall provide all available data and information to


MCC for the preparation of the Feasibility Study.














1 July 2010 9 of


(e) An adequate reporting procedure is required and will be established for


the purpose of enabling each Party to be informed and capable of


proceeding with the performance of its activities in a timely and


efficient manner.


An Aynak BOOT Railway Committee will be formed and comprised


of MCC and the Government as members to ensure cooperative


development of the Railway.


11. Security


(a) The Parties acknowledge and agree that the Government shall be


responsible for the security of all facilities and structures, constructed


and operated in accordance with this Railway Agreement and for the


security of all persons involved in the preparation of the Feasibility


Study, construction and operation of the Railway. Security for the


Railway shall be separated into two parts, both of which will be the


responsibility of the Government. The purpose of the first part shall


consist of security measures necessary for the execution of the Route


Study and the Feasibility Study. The second part shall specifically


address security measures for the construction and operation of the


Railway. The full, detailed description of the second part shall be


negotiated by the Parties and referral to as "the Railway Security


Agreement, ' and attached to Ihe BOOT Agreement.


(b) MCC. through its Feasibility subcontractor, will prepare ami deliver a


timeline for and description of the execution and completion of Ihe


Route Study and Feasibility Study upon award ol the Feasibility Study


contract as defined in Section 15 of this Agreement The (iovemmenl


will prepare and deliver to MCC a security plan for the Route Study


and Feasibility Study within one month of receipt of MCC s timeline


Upon acceptance of the security plan for the Route Study and


Feasibility Study by the Parties, MCC will commence activities in


accordance with the timeline.


(c) In the event MCC believes the Government has failed to fulfill the


security responsibilities established under this Railway Agreement,


MCC shall notify the Government of such failure. In the event the


Government defaults on the obligations of this Section, the


Government shall compensate MCC for the actual loss, including


human and property loss, attributable to the Government default. If the


default is disputed by the Government, the Parties agree to pursue


dispute resolution as specified in Section 50 of this Railway


Agreement.


12. International Coordination


The Parties acknowledge and agree that the Railway constructed pursuant to this


Railway Agreement should be routed, designed, engineered, constructed, operated and


maintained in a manner that is consistent with the Government's regional and international


rail transportation planning efforts.





1 July 2010 siiS# 10 of 33


 13. Conditions Precedent





The Parties acknowledge and agree that the rights and obligations granted to MCC


pursuant to this Railway Agreement are subject to the full satisfaction by the Parties of the


following conditions precedent:


(a) MCC shall:


i Prepare a Feasibility Study to determine the technical and economic


feasibility of constructing and operating the Railway in order to assist


MCC's decision making concerning the Railway;


ii. Prepare an environmental and social impact assessment for


Government review and approval;


iii. Prepare a railway construction plan for Government review and


approval as described in Section 19(a);


iv. Submit the Feasibility Study to the Chinese Government for approved


in the event the Feasibility Study shows the Railway project studied is


feasible in accordance with the generally accepted principles and


standards forjudging similar projects;


\ After the submission of the f easibility Study, obtain approval of the


Railway project from the Chinese Government;


vi. Obtain all necessary licenses and authorizations for railway


construction from the Government;


vii. Acquire adequate funding provided that the Feasibility Study is


acceptable to any lender or lenders selected by MCC.


(b) The Government shall:


1 Obtain the land and rights of way necessary' for railway construction


and operation in accordance with this railway agreement and the


Railway Security Agreement.


ii. Grant to MCC the exclusive right to use the surface of such lands and


such portions of the subsurface as may be necessary for the


construction, operation and maintenance of the Railway.


iii. Establish adequate security for survey, railway construction and


operation of the Railway in accordance with Railway Security


Agreement.


PART II - RAILWAY ROUTE SELECTION AND FEASIBILITY STUDY


14. Route Identification and Evaluation


(a) The Parties acknoyvledge and agree that the route of the railway shall


run from Torkham at the Pakistan border through Kabul and end at





1 July 2010 11 of 33


Hairatan on the Uzbekistan border. A spur will extend from Kabul to


the Aynak Copper Project. A more detailed route for the Railway and


proposed tentative locations for certain Railway facilities including,


terminals, depots and junctions will be identified by the Parties through


good faith discussion and consultation taking into consideration the


results of national and regional rail transportation planning and all


currently known and relevant technical, environmental, economic,


operational and logistical factors and requirements necessary for the


successful construction and operation of the Railway by MCC. The


Government has proposed a preferred route, which is described in


Appendix 1 to this Railway Agreement.


(b) MCC shall commence its evaluation, referred to in this Railway


Agreement as "the Route Study," of the selected Railway route and


facility locations as soon as practicable following the establishment of


adequate security in the areas to be evaluated. MCC’s route evaluation


activities may include, but not be limited to, additional surveying,


mapping, geotechnical analyses, sampling, and activities related to the


development of the Feasibility Study, which are required by this


Railway Agreement and more fully described in Section 15 of this


Railway Agreement.


(c) The Parties acknowledge and agree that in the event that they are


unable to select a mutually agreeable, proposed general route for the


Railw ay, the disputed portions of the route shall be evaluated in the


Feasibility Study as alternatives. The Parties agree that any disputed


portion or location of the Railway route which is determined to be


infeasible in the Feasibility Study shall not be included as part of the


Railway route. The Parties urther agree that any dispute concerning


the determination that a disputed portion of the Railway route is


infeasible shall be resolved per Section 50 of this Railway agreement.


In accordance with the terms of the Aynak Mining Contract, the


Government agrees that it shall take those steps necessary to ensure


that access to the proposed route and facility locations is made


available to MCC, its employees, contractors, subcontractors and


advisors conducting the evaluation.


15. Feasibility Study


(a) The Parties acknowledge and agree that the completion of a Feasibility


Study is a necessary prerequisite for the Railway. In its September 25,


2007 letter, MCC stated that it would proceed willi the Railway only


on the basis of the Railway being feasible. The Feasibility Study will


assess the suitability of the proposed railway route and associated


facilitv locations, taking into consideration the results of national and


regional rail transportation planning and all currently known and


relevant technical, environmental economic, operational and logistical


factors and requirements necessary for the successful construction and


operation of the Railway by MCC and will include consideration of the


environmental and social impact assessment required by Section 7(b)


of this Railway Agreement. The Parties acknowledge and agree that


the Feasibility Study shall be prepared by an independent third party


subcontractor selected in a competitive international tender process


conducted by YICC. The initiation of the competitive bidding process


shall be within 6 months of the signing of this Agreement. The


Feasibility Study shall be prepared in sufficient depth and detail so that


it would be acceptable to international lending institutions.


The Parties acknowledge and agree that the Feasibility Study must be


completed and demonstrate the feasibility of the Railway prior to


commencement of railway construction. Upon awarding the


Feasibil ity Study contract and acceptance of the Phase 1 Security Plan


(Section 11). the f easibility study shall be completed within 2 years or


as specified in the Feasibility Study contract. MCC shall promptly


submit its Feasibility Study to the Government for review. The


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


Feasibility Stud} w ithin three (3) months of receipt from MCC and


notify MCC, in writing,, of any concerns it may have regarding the


Feasibility Stud} W ithin two (2) months of being notified of the


Government's concerns. MCC will respond to the Government’s


concerns, and the Parties shall have two (2) months in which to reach a


mutually agreeable resolution of those concerns. At any time, either


Party may retain, at Us own expense, a recognized railway consulting


firm on the matter or matters of concern to recommend the best manner


of addressing the concerns.


ii. After the efforts described in Section I5(»)(i), the Parties may agree to


meet and consider alternate development scenarios, to include the


possibility of different means of funding construction and or operation


of the Railway. If the Parties are unable to agree on an alternate


development scenario, either Parly may choose to arbitrate the


unresolved issues in the Feasibility Study in accordance with Section


50.


(b) The Parties agree that MCC shall not be obligated to commence the


Route Study and Feasibility Study until each of the following


preconditions is satisfied:


i. This Railway Agreement is signed and in full force and effect;


Sufficient security measures have been taken by the Government with


respect to the Route Stud}- and Feasibility Study activities;


iii. The Government has notified MCC in writing that all necessary actions


to ensure MCC's access to the proposed route and facility locations


have been taken and such access is available to MCC.


16. BOOT Agreement


(a) When all conditions precedent established by Sections 13 and 15 of


this Railway Agreement are satisfied, the Parties shall:


 i. Prepare and execute a detailed BOOT Agreement which will identify


I and allocate the specific rights, obligations and requirements between


the Parties and provide the legal basis upon which the construction and


I operation of the Railway will be undertaken in accordance with the


principles of this Railway Agreement;


Cooperate, and MC'(' shall obtain all necessary licenses and


I authorizations for Railway construction from the Government;


in Cooperate, and MCC shall obtain funding, if necessary, for railway





I construction, provided that the Feasibility Study is bankable and


acceptable to lenders selected by MCC.





17. Route Acquisition


I


Upon completion of the Feasibility Study and signing of the BOOT Agreement, the





Government shall obtain, at their own expense, and retain ownership of the railway right-of-


way and other property necessary for construction and operation of the Railway. The


Government will also conduct, at its own expense, the relocation and resettlement of people


displaced by the construction and operation of the Railway. The Government shall then


obtain and provide to MCC the proper authorization for the exclusive right to use the surface


of such lands and such portions of the subsurface as may be necessary for the construction,


operation and maintenance of the Railway. Subject to the applicable laws and regulations of


Afghanistan, MCC shall have the right to occupy and utilize for the duration of this Railway


Agreement, the surface of such areas selected by the Parties for use pursuant to this Railway


Agreement as may be necessary for the construction, operation and maintenance of the


Railway.





PART III - RAILWAY CONSTRUCTION





18. Railway Construction - General Requirements


(a) Following the acquisition of the land necessary/or the railway route


and associated operations and facilities, MCC shall undertake, at its


sole expense, the design, engineering, construction and testing of a


railway that meets the service requirements specified in the Feasibility


Study and this Railway Agreement. MCC shall be solely responsible


for the design, engineering, construction and testing of the Railway.


MCC acknowledges and agrees that all construction activities related


to the Railway shall be conducted in accordance with the Feasibility


Study, all applicable Afghan laws and regulations and all applicable


international practice standards and guidelines, including


environmental protection standards, adopted in this Railway


Agreement.


(b) All construction and pre-operation costs incurred in connection with


the Railway shall be borne by MCC and MCC shall be responsible for


arranging all funding necessary to construct the Railway.














1 Julv 2010 14 of 33


 4





%














(c) The Parties agree that the Government shall be responsible for


reasonable improvements to existing infrastructure necessary for the


construction and operation of the Railway.


(d) MCC shall, where possible, aw ard 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 MC’C's construction activities or operations.


(0 MCC shall be responsible for the importation and transportation of


equipment to the Railway site MCC shall comply with the import and


export requirements established in this Railway Agreement


(g) The Government shall be entitled, at its own cost, to moniloi lailwav


construction. For this purpose, MC( shall:





i. Ensure that the Government and any experts appointed by the


Government are afforded reasonable access to the Railway site at times


to be agreed with MCC provided that such access does not materially


interfere with railway construction activities or expose any person on


the railway site to any danger;





Make copies of all plans and designs available for inspection; and


Within tw o months of the completion of the Railway, supply the


Government w ith one set of reproducible copies, one digital copy in a


commonly used format and five sets of white print copies (or


equivalent) of all "as built" plans, maps and designs.


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





an\ review by the Government, the Government is responsible for the


engineering soundness of the Railway and shall, subject to the security


provisions of this Railway Agreement, be solely responsible for the


economic and technical feasibility, operational capability and


reliability of the Railway, until the Railway is transferred to the


Government in accordance w ith the requirements of this Railway


Agreement.





1 July 2010 15 of 33


During construction and operation of the Railway, MCC shall own the


Railway and all facilities, machinery and equipment used in connection


w ith the Railway which have been purchased or supplied by'MCC.


The Railway and all appurtenant structures, facilities, machinery and


equipment shall be transferred to the Government in accordance with


the transfer provisions of this Railway Agreement.


19. Railway Construction - Technical Requirements


(a) Railway Construction Plan - The Parties acknowledge and agree that


MCC shall prepare a railway construction plan that meets international


railway design, engineering and construction standards. The railway


construction plan shall include a proposed construction schedule. At a


minimum, the railway construction plan shall address the following:


track materials (rails, ties, fasteners); rail gauge; track configurations


(curves, lengths, clearances); rights of way; road crossings; buildings;


signal information: track culverts; track bridges; over track or under


track structures; utilities; and trackside devices. A copy of all planning


documents shall be provided to the Government.


(b) General Design and Construction Requirements - Tracks should be


designed and constructed in accordance with track design and


construction standards as defined in the BOOT Agreement.


Line Capacity - The railway line must provide adequate capacity so as


to allow efficient, reliable and economical movement of rail services in


Afghanistan for goods and passengers as determined in the Feasibility


Study and specified in the BOOT Agreement.


Interoperability - The Parties acknowledge and agree that the Railway


shall be designed and constructed to allow the efficient transport of


international goods and containers. As a result, the Railway and


related infrastructure and equipment shall meet international


requirements, including those for the transport and transfer of heavy


trains carrying goods such as coal, mineral ores, cement and grain.


Further, the Parties acknowledge and agree that the Railway design


and construction shall take into consideration technical requirements of


neighboring countries and endeavor to minimize or eliminate technical


barriers to interoperability between railways.


Construction Monitoring - During the Construction Period, MCC shall


furnish to the Government progress reports, as specified in the BOOT


Agreement, of actual progress of the construction of the Railway and


shall give all such other relevant information as may be required by the


Government. For the purposes of determining that construction is


being undertaken in accordance with the requirements of this Railway


Agreement, MCC shall employ quality assurance and quality control


methods as may be necessary and specified in the BOOT Agreement.


MCC shall promptly carry out such remedial measures as may be


necessary to cure the defects or deficiencies, if any, indicated in such








i ink, min 1 A of


test results and furnish a report to the Government confirming the


curative actions.


20. Construction Timetable





The Construction Timetable shall be determined following completion of the


Feasibility Study and included in the detailed BOOT Agreement.








21. Railway Facilities


Railway facilities to be constructed shall include, but not be limited to,


the tracks, rail yards, switches, sidetracks, depots, fuel stations, loading


and unloading facilities, communication, water supply, and other


necessarily related facilities for which MCC is, subject to the rights of


third parlies, authorized to construct and operate in accordance with


such reasonable safely regulations relating to design, construction, and


operation as required by international railway practice most suitable


for Afghanistan. The facilities may include, but are not limited to:


The tracks (rails, lies and fasteners), road bed, embankments; rail


yards; rights of way; drainage structures; road crossings; bridges;


sw itches, depots; fuel stations; and loading and unloading facilities;


ii. Access and maintenance roads;


iii. A modem wireless communications system that complies with


Ministry of Communication requirements;


iv. Water supply facilities;


v In addition, the Railway may require other buildings, workshops,


w arehouses, storage areas, sewage disposal, machine shops, repair


shops, and all such additional or other facilities, plant and equipment


as MCC shall consider necessary for its operations or to provide


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 Railway Agreement.


All Railw ay facilities and structures shall be the personal property' of


MCC and may be mortgaged, pledged or otherwise encumbered during


the term of this Railw ay Agreement, with written notification to the


Government, by MCC subject to (i) the provisions relating to


Assignment and to Termination established in the Aynak Mining


Contract which are adopted and incorporated by reference into this


Railw ay Agreement and (ii) the provisions related to Railway transfer


established in Part V of this Railway Agreement.

















1 July 2010 17 of 33


 22. Railway Route Land Use





(a) Subject to the approval of the Government, MCC may appropriate and


use gravel, sand, clay, or stone found within the Railway Route Area


for purposes necessary and useful to MCC’s railway operations and


activities under this Railway Agreement. Provided that upon


termination of this Railway Agreement, any excavation shall be


rehabilitated by MCC in accordance with its approved mine


development, environmental management and reclamation plans.


MCC shall have the right to cut, appropriate and use the brushwood,


undergrowth and timber (except protected trees) which may be found


on public lands within the Railway route area, subject to the general


forestry law s of Afghanistan. Such cutting, appropriation, and use


shall be permitted only to the extent necessary to MCC’s railway


operations and activities. Such cutting, appropriation, and use may be


for the purpose of facilitating ingress and egress into and from the


Railway route, for the purpose of clearing land for the erection of


machinery, plant and buildings connected with MCC’s railway


operations and activities, and for the purpose of construction required


for MCC’s railway operations and activities. Provided, however, that


such timber shall be sold by MCC only with the prior approval of the


Government and subject to such conditions as may be imposed.


(c) MCC shall describe and provide a detailed estimate of its railroad


construction water supply requirements to the Government Subject to


the approval of the Government and consistent with the requirements


specified in any water supply agreement reached by the Parlies


pursuant to the Aynak Mining Contract or the Water Supply


Agreement, MCC may appropriate and use water found within or


outside the Route Area for MCC's railway construction activities


under this Railway Agreement. For water appropriated from outside


the Route Area, the Government w ill facilitate the acquisition of water


resources. MCC shall not adversely affect local agricultural water or


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


reasonable supply of w ater insofar as such water has, through custom,


been utilized for such lands, villages, houses, or animals. Nor shall


MCC interfere with any w ater rights or existing uses of water enjoyed


by any persons under the law of Afghanistan.


PART IV - RAILWAY OPERATION


23. Railway Operation


Subject to the provisions of this Railway Agreement addressing the recovery of


MCC's investment, during the period of its ownership and operational control of the Railway,


MCC shall have full and effective control and management of all matters relating to the


operation of the Railw ay. MCC may, subject to complying with the applicable requirements


ot this Railway Agreement and receiving approval from the Government, make material


expansions or modifications of the Railway facilities, and may add new facilities, as MCC











1 July 2010 i s


shall consider necessary for the operation of the Railway. All such expansions,


modifications, improvements, replacements, and additions shall be considered part of the


Railway facilities.


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


operation, testing, inspection, maintenance and repair of the Railway


and shall ensure that the Railway is in good operating condition and


capable of carrying freight in a safe, uninterrupted manner which is


sufficient to meet the transportation requirements agreed to by the


Parties in this Railway Agreement.


(b) MCC shall operate the Railway in accordance with the licenses and


authorizations granted by the Government, all applicable Afghan laws


and regulations pertaining to railway operation and all applicable


international standards and guidelines adopted by the Parties as


enforceable requirements of this Railway Agreement, including


environmental requirements.


(c) The Government shall inspect the Railway on a periodic basis to


confirm that the Railway is being operated in conformance with


applicable Afghan laws and regulations and international standards


adopted by the Parties as enforceable requirements of this Railway


Agreement. The Parties shall jointly inspect the Railway on a periodic


basis to confirm that it meets the applicable structural, engineering,


operational and maintenance requirements identified in this Railway


Agreement, international practice standards most suitable for


Afghanistan, the Feasibility Study and the railway construction plan.


(d) During the period of its ownership and operational control of the


Railway, all operational and maintenance costs incurred in connection


with the Railway shall be borne by MCC. Subject to the provisions of


this Railway Agreement addressing the recovery of MCC’s


investment, MCC shall be responsible for obtaining the funds


necessary' to operate the Railway.


(e) MCC agrees that it shall provide sufficient training concerning all


aspects of railway operations and maintenance to allow the


Government to continue normal and established operations of the


Railway upon transfer of the Railway from MCC to the Government


As part of this training, MCC shall prepare an operations and


maintenance manual for the Government's use following transfer.


24. Recovery of Investment by MCC


The method by which MCC shall recover its investment will be through the collection


of tariffs and fees on Railway users.


(a) MCC shall negotiate with the Government railway authority to


establish tariffs and fees. MCC shall have the right at any time to


request the Government railway authority authorize an adjustment of


tariffs and fees.








I lnlv90in i o


(b) If MCC is unable to recover its investment as scheduled due to reasons


that are beyond the control ol MCC, MCC will notify the Government.


i. In the case of a negative operating cash flow, the Government will use


its best efforts to assist the Railway to continue operations.


In the event either party believes there is reason for early termination


of this Railwax Agreement, both Parties shall negotiate and mutually


agree to the terms of early termination of this Agreement, transfer of


railroad assets, and recover}' of MCC's outstanding investment.


(c) One year before commencement of commercial operation, and to set


the initial tariff, MCC's investment will be reported to the Government


railway authority responsible for establishing railway tariffs and fees.


(d) For accounting purposes, MCC's Railway investment shall be initially


estimated in the Feasibility Study, refined in the BOO T Agreement,


with the final amount of the initial investment determined within six


(6) months following the date upon which MCC Commences


Commercial Operation. MCC s initial investment will include


expenditures up to and including the date that MCC Commences


Commercial Operation including but not limited to any interest and


other charges directly regarding financing of the Railway project over


the life of the loan.


25. Review of Railroad Agreement Economic Terms


(a) The Parties shall, as needed, from the date on which the Railway


commences operations, review the economic terms of this Railway


Agreement and the BOOT Agreement, to determine whether the


existing economic terms of the Railway Agreement require amendment


to achieve the outcomes providing lor an adjusted allocation of


economic benefits between MCC and the Government.


(b) In undertaking such review, the Parties shall bargain in good faith with


a view tow ard providing a lair and equitable division of profits in light


of the economic factors prevailing at the time of the review.


(c) In undertaking such review the Parties shall be guided by, but not


limited to, consideration of the follow ing factors:


i The economic value of the Railway concession,


ii. The progress tow ards the recox ery of MCC's investment.


26. Tax Obligations and Financial Record Keeping


(a) Taxes shall be applied in accordance with the provisions of the Laws


of Afghanistan and as agreed to in the Aynak Mining Contract.


(b) Maintenance of Accounting Books and Records.








1 July 2010 20 of 33


 I


MCC shall submit accounting and income tax returns for the full term


of this Railway Agreement in accordance with the provisions of


Afghanistan’s Income Tax Law. In determining MCC’s taxable


income as defined in the Income Tax Law, International Financial


Reporting Standards using sound, consistent, and generally accepted


accounting principles shall be employed, provided, however, that


where more than one accounting practice is found by the Government


of Afghanistan to prevail with regard to any item, the Government of


Afghanistan shall determine which practice is to be applied by MCC


with regard to the particular item.


ii. MCC shall, at its offices in Afghanistan, maintain books of accounting


stated in United Slates Dollars in accordance with generally accepted


accounting principles ("GAAP"). All payments to the Government of


Afghanistan shall be calculated in Afghanis in accordance with the


official exchange rate of the Da Afghanistan Bank and paid in


Afghanis or in such other currencies as may be acceptable to the


Ministry of Finance or any Government of Afghanistan agency which


is a successor in function thereto. MCC shall within a period as


provided by the prevailing law and regulations furnish annually to the


Government of Afghanistan audited financial statements prepared in


accordance with International Financial Reporting Standards together


with production statistics in reasonable detail. The accounts shall be


audited by an internationall\ recognized accounting firm acceptable to


the Government of Afghanistan.





iii. MCC shall permit the Government, through a duly authorized


representative, to inspect at all reasonable limes the books of account


and records of MCC relative to the construction and operation of the


Railway. Such books of account and records shall he maintained at


MCC’s offices in Afghanistan.


iv. The Government of Afghanistan shall be entitled to audit MCC





accounts in accordance with applicable Afghan law in order to confirm


MC'C's progress towards recovering its investment. MCC shall


maintain all relevant records for a period of ten (10) years for each tax


year that is necessary to audit MCC’s accounts. In the event that MCC


fails to maintain all relevant records and make available to the


Government of Afghanistan those records upon reasonable request, the


Government of Afghanistan shall be entitled to make reasonable


estimates of the information normally provided by such records.


v. In the event that the Government of Afghanistan enters into a similar





BOOT Agreement with a third party engaged in a similar BOOT


railway that, based on the laws in force in Afghanistan at the lime,


affords more favorable treatment with respect to the stability of fiscal


or other tax terms than have been granted to MCC under the Aynak


Mining Contract or this Railway Agreement, the Parlies agree that this


Railway Agreement and BOOT Agreement shall be amended to apply


the more favorable treatment to MCC.











1 Julv 2010


27. Compliance with Rail Transportation Requirements


The Parties acknowledge and agree that during the period of MCC’s ownership and


operational control of the Railway, MCC shall be subject to applicable Afghan law's and


regulations governing rail transportation, including the transportation of goods provisions set


forth in Afghanistan's Commercial Law. The Parties further acknowledge and agree that


MCC shall have a reasonable time period in which to modify its railway operations and


activities to achieve compliance with new laws or regulations that may apply to the Railway


in the future.


PART V - RAILWAY TRANSFER


28. Railway Transfer Entity


In accordance w ith the terms of the Railway MOA, the Parlies agree that no later than


two years prior to the dale on which the Parties anticipate that MCC will transfer ownership


and operational control of the Railway to the Government, the Government shall identify the


entity w hich the Government intends to operate the Railway. The Parties agree that this


entity shall consult with MCC to identify issues and develop policies regarding the operation


and management of the Railway after the transfer to the Government


29. Railway Transfer Date


The Parties agree that ownership and operational control of the Railway shall occur


no later than 30 days following a determination by the Parties tliat MCC has achieved the


recover}- of its investment specified in Section 24 of this Railway Agreement


30. Assets to be Transferred


The Parties acknow ledge and agree that the Railway assets will be transferred free of


charge from MCC ownership to Government ownership upon transfer of the assets from


MCC to the Government. The Parties agree that a list of Railway assets and the method of


transfer shall be prepared and agreed to by the Parties prior to the transfer date specified in


Section 29 of this Railway Agreement.


31. Warranty


The Parties acknowledge and agree that any and all Railway assets transferred to the


Government by MCC shall be in good working order and suitable for normal use on the date


of transfer. Any issue regarding the transfer of assets that is disputed shall be resolved in


accordance with Section 50.


32. MCC Use of Railway Following Transfer to Government


Once the Railway is transferred to the Government, MCC, or its successor, as


operator of the Railway, shall have the status of any normal public user of the Railway.




















1 July 2010 22 of 33


 I





PART VI - RAILWAY SOCIAL AND SUSTAINABLE DEVELOPMENT


COMMITMENTS AND OBLIGATIONS


33. Resettlement and Compensation Plan


The Government shall be required to compensate local residents adversely affected by


development activities authorized by this Railway Agreement. Compensation shall be


determined through the application of the Laws of Afghanistan and internationally accepted


principles of fairness and reasonableness.


34. Protection and Respect of Religious Belief


MCC has expressed its commitment to respect and protect the religious beliefs of the


Afghan people. To demonstrate this commitment, MCC shall provide employees and their


families with special places to conduct their religious actn ilies. The Parties acknowledge


and agree that MCC shall engage in consultation with appropriate religious and governmental


officials concerning the implementation of its commitment to protect and respect religious


belief.


35. Government’s and Third Parties’ Rights to Use Company’s Facilities.


Although it is expected that the Government will have laws governing the Railway,


MCC shall allow the Government and third parties the use of Railway facilities as more


particularly described in the BOOT Agreement and the laws of Afghanistan.


PART VII - LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS


36. Services and Supplies


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 total price than goods available from


abroad including freight. 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 Railway 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 Railway 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.


PART VIII - EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS


37. Employment of Afghan Nationals


MCC shall employ Afghan personnel, to the maximum extent practicable, and upon


terms which are acceptable to MCC, in all classifications of full-time employment, for its


railway construction and operations in Afghanistan. Such percentages and classifications


shall be specified in the BOOT Agreement.


38. Training





As specified in the BOOT Agreement, MCC shall provide for the training of suitable


persons of Afghanistan citizenship for Railway employment.


39. Non-Afghan Personnel


(a) Subject to the requirements established in this Part, MCC and its


subcontractors may bring into Afghanistan such non-Afghan personnel


as in MCC's judgment are required to carry out railway construction


and operations efficiently and successfully, and at MCC’s request


(which shall be accompanied by information concerning the education,


experience, and other qualifications of the personnel concerned), the


Government shall cause all necessary permits and visas to be issued


w ithin a reasonable time period and without hampering the continuous


and efficient performance of MCC under this Railway Agreement. In


this connection MCC shall have the right periodically to submit


manpower requirement plans and the Government will, within a


reasonable lime period during which it will conduct its review' of


MCC's proposal, thereupon issue the necessary permits and visas for


all personnel covered by any such plan subject only to completion of


the required security checks. MCC shall bear all costs related to the


issuance of such permits and visas for non-Afghan personnel. All


MCC employees entering Afghanistan shall respect the religious and


cultural traditions of Afghanistan.


(b) The Parties agree that work visas shall, subject to the Laws of


Afghanistan, remain valid for one to three years.


(c) There shall at all times be equal treatment, facilities, and opportunities


for all employees, both Afghan and non-Afghan, in the same job


classification regardless of nationality.


40. Employee Accident Compensation


MCC shall be responsible for the medical and rehabilitation costs for any Railway


employee injured performing his or her duties while employed by MCC. Injured employees


shall be entitled to return to the same or similar positions following recovery from injury. In


the event that a Railway employee is killed performing his or her duties while employed by


MCC, MCC shall be responsible for the payment of an adequate death benefit to the


immediate family of the deceased employee.





PART IX - IMPORTS AND RE-EXPORTS


41. Imports





(a) This Railway Agreement authorizes MCC, including its





subcontractors, to import into and use in Afghanistan all equipment


and materials, such as machinery, supplies, and equipment necessary


for the construction and operation of the Railway, including its Kabul


office in accordance with the Law s of Afghanistan and the Aynak








1 July 2010 24 of 33


 Mining Contract. Some operational items that are difficult to control


may receive different treatment with regard to customs and duties as


provided in the BOOT Agreement. The import of equipment and


materials by MCC shall be in accordance with expedited customs


procedures, by routes selected by MCC and identified to the


Government and any means of transport. Prior to commencing


imports, MCC shall provide a list of equipment and materials to the


Government for review and shall provide all necessary documents


required by the Customs Office of the Ministry of Finance, as


necessary, for customs clearance. This authorization shall apply to the


following categories of imports:


All of the capital assets, construction materials and raw materials


related to the Railway including, but not limited to, machinery,


machine units, vehicles (excluding sedan cars), Railway facilities and


equipment, office equipment; appliances, office buildings, employee


housing, security facility equipment, schools, hospitals, domestic


goods and personal effects including household and living equipment


and goods belonging to foreign personnel employed in the project and


especially provided from abroad shall be exempted from the payment


of import duties during the railway construction period;


ii. During the operations period which shall commence immediately upon


expiration of the construction period, MCC shall be required to pay


import duties only on raw materials in accordance with the Customs


Law;


(b) The Government shall have the right to inspect and inventory any





articles imported by MCC.


(c) If MCC. including its subcontractors, intends to sell or transfer any


articles w hich have been imported free of duty under this Section, a


declaration shall be made to the Ministry of Finance before such sale


or transfer is effected, and, unless such goods are sold or transferred to


another company or contractor entitled to the same exemption, such


import duty shall be paid as may be assessed by the Ministry of


Finance in accordance with the customs laws and regulations as from


time to time in effect.


(d) If MCC applies any article which has been imported free of duty under





this Railway Agreement to a nonexempt purpose, a declaration shall be


made to the Ministry of Finance w ithin thirty days of such initial use of


nonexempt purposes and such import duty shall be paid as may be


assessed by the Ministry of Finance in accordance with the laws and


regulations governing customs.





(e) In order to enjoy the benefits granted by this Part, all articles which are


imported and for which a duty exemption is claimed must be marked


with the name or marks of MCC in a manner difficult to delete.











1 July 2010 25 of 33


MCC, including its subcontractors, shall be liable for violations of the


requirements of Afghanistan's Customs Law.


MCC shall maintain depreciation records for all imported items subject





to the exemptions established b> this Section and submit such records


to the Ministry of Finance annually.


42. Re-Exports





Any items imported by MCC or its subcontractors for use in connection with the


Railway and no longer needed for such use may be sold outside Afghanistan and re-exported


free of all customs duties and levies. No imported items shall be sold domestically except


after compliance with customs and import laws and regulations which shall at the time of


such sale be in effect.


43. Cooperation


All imports and exports of articles under this Railway Agreement shall be handled


simply and expeditiously and the Government will, at MCC's request, cooperate with MCC


in making appropriate arrangements between MCC and the customs authorities to this end.


The Government has agreed to establish a customs facility for the importation by MCC of


material necessary for the construction, operation and maintenance of the Railway, which


shall be funded, constructed and operated by MCC, to facilitate and complete the customs


clearance of such items. The Parlies agree that import shipments will receive customs seals at


the border, but shall only be opened upon arrival at the railway customs facility.


PART X - DOMICILE; SERVICE OF PROCESS


44. General


MCC shall be licensed to do business in Afghanistan, be subject to the jurisdiction of


Afghan courts for disputes that are not subject to the dispute resolution provisions specified


in Section 55 of the Aynak Mining Contract, and shall maintain an office or agent in


Afghanistan for receipt of service of process or notification or other official or legal


communication.


45. Notices


Notices for the purpose of this Railway Agreement shall be sufficiently


served if delivered or sent by registered post:


i. In the case of the Government, to the Ministry of Mines.


ii. In the case of MCC, to the manager of the Kabul office.


(b) All notices, requests or other communications required by, provided


for in, or relative to this Railway agreement shall be in writing. L-


mails, when acknowledged, and facsimiles shall be considered as


written communications.











1 July 2010 26 of 33


PART XI - MISCELLANEOUS PROV ISIONS





46. Termination


(a) In the event that:


MCC assigns to a third party all or a portion of the rights held by MCC


under this Railway Agreement without the previous written consent of


the Government as provided in Section 53, or


ii. MCC has know ingly submitted to the Government false statements


which were a material consideration for the execution of this Railway


Agreement, or


MCC fails to comply with any final decisions by the arbitral tribunal


with respect to a dispute with the Government under this Railway


Agreement, or


iv. There exists another material breach or nonobservance by MCC of any


of the terms, obligations, or conditions of this Railway Agreement, or


of any law of Afghanistan, or


\ MCC fails to construct or operate the Railway in accordance with this


Railway Agreement.


The Government may. subject to the provisions of this Section 46. revoke this


Railway Agreement and be entitled to recover any damages it may have sufibred due


to MCC committing one or more of the above actions.


(b) In the event that:


i. The Government revokes or otherwise terminates this Railway


Agreement without cause or legal justification, or


ii The Government violates MCC’s rights under this Railway


Agreement, or


MCC’s operations are interfered so seriously by the Government that


MCC is unable to maintain the normal operation of the Railway, or


The Government fails to provide sufficient security for the Railway


project in accordance with the terms of an executed Railway Security


Agreement, or


\ The Government fails to comply with any final decisions by the


arbitral tribunal in controversy arising with the Government under this


Railway project, or


\ i. There exists another material breach or nonobservance by the


Government of any of the terms, obligations, or conditions of this


Railway project, or of the laws of Afghanistan.








1 July 2010 27 of 33


MCC may, subject to the provisions of this Section 46, revoke this


Railway Agreement and be entitled to recover any damages it may


have suffered due to the Government committing one or more of the


above actions. MCC may also be entitled to recover the un-recouped


portion of its investment.


(d) If any Party believes it has suffered damages due to the actions or


inactions of the other Party, the Party shall submit the claim of


damages for dispute resolution in accordance with Section 50 of this


Railway Agreement.


47. Notification and Remedy


In the event that the Government seeks to terminate the Railway


Agreement pursuant to this Part, the Government shall give notice in


writing specifying the particular cause for termination and requiring,


within three calendar months of such notice (or within such extended


time as the Government may deem fair having regard to the


circumstances of the particular case), to remedy the same or make


reasonable compensation to the Government, as the case may be, in a


manner acceptable to the Government. In the event that MCC seeks to


terminate this Railway Agreement pursuant to this Part, MCC shall


give notice in writing specifying the particular cause of termination


and proposing a time period of at least three calendar months during


which the Government must remedy the same.


(b) If MCC or the Government shall fail to comply with said notice, the


Government or MCC may, after the expiration of the time period for


remedying the cause for termination, terminate this Railway


Agreement, provided, however, that where there is any dispute


between the Parties as to:


i. The existence of the cause for termination identified by the terminating


Party, or


ii. Whether there has been any breach or nonobservance by MCC or the


Government of any term, obligation, or condition of this Railway


Agreement, or


Whether any cause, breach or nonobservance can be remedied or as to


the manner in which it should be remedied,


(c) MCC or the Government may, within one year of notice refer the


dispute to arbitration, and neither the Government nor MCC shall


exercise its power of termination until the result of arbitration is


known, and then subject to the terms of the award. Provided, however,


that if MCC or the Government elects to refer the dispute to


arbitration, it shall be prompt in prosecuting its claim before the


arbitral tribunal.


48. Default





Failure by a Party to perform or comply with any of the terms,


provisions or obligations of this Railway Agreement, expressed or


implied, shall not automatically terminate this Railway Agreement. In


the event of a default, the aggrieved Party may notify the other Party in


writing of the default or breach, and the notified Parly shall have a


period of thirty (30) days after receipt of such notice to cure, or


commence and diligently pursue activities if the breach cannot


reasonably be cured within thirty (30) days; provided that the period of


lime for remedying the breach shall be extended by any time that a


Party is prevented from acting because of an event of circumstances


beyond its control, including Government action or inaction. If a Party


fails to commence corrective activities within such time for remedying,


the other Party may terminate this Railway Agreement by giving


written notice.


(e) In the event that a failure by a Party to perform or comply with any of


the terms, provisions or obligations of this Railway Agreement causes


economic loss including the outstanding portion of MCC’s investment


to the other Party, the defaulting party shall compensate the other Party


for the amount of the economic loss sustained by the other Party.


49. Force Majeure


(a) General.


(b) Any failure by the Government or any of its Ministries or subdivisions,


or by MCC, to carry out any of its obligations under this Railway


Agreement shall not be deemed a breach of the Railway Agreement if


such failure is cause by force majeure. If, through force majeure. the


fulfillment by either Party of any terms and conditions of this Railway


Agreement is delayed, curtailed or prevented, then, anything in this


Railway Agreement to the contrary notw ithstanding, the time period


for fulfilling the obligation thereby affected shall each be extended for


a period equal to the total of the periods during which such causes or


their effects were operative. For purposes of this Raihvay Agreement,


force majeure shall include wars, acts of terrorism, insurrections, civil


disturbances, blockades, embargoes, strikes and other labor conflicts,


riots, epidemics, earthquakes, storms, floods, or other adverse weather


conditions, explosions, fires, lightning, orders or directions of any


government de jure or de facto or instrumentality or subdivision


thereof, and acts of God or the public enemy. Provided, however, that


only such loss, damage or injury as could not have been avoided by the


taking of proper precautions, due care or such reasonable alternative


measures as aforesaid shall be regarded as the consequences of any


failure caused by force majeure.


(c) Notice.











i T.,K-onin /yy /! y?


The Party whose ability to perform its obligations as affected by force


majeure shall, as soon as possible after the occurrence, notify the other


Party thereof in writing, stating the force majeure and identifying the


additional time period necessary to address the force majeure. The


Parties shall agree as to the amount of time necessary to address the


force majeure and the parties shall endeavor to do all reasonable within


their power to remove such cause and resume activities within the


agreed upon time period; provided, however, that neither parly shall be


obligated to resolve or terminate any disagreement with third parties,


including labor disputes, except under conditions acceptable to it or


pursuant to the final decision of any arbitral, judicial, or statutory


agencies having jurisdiction to finally resolve the disagreement. As to


labor disputes, the Government and MCC will cooperate in a joint


endeavor to alleviate any conflict which may arise.


50. Dispute Resolution


Disputes arising under this Railway Agreement, which cannot be amicably resolved


by the Parlies, shall be settled through the follow ing dispute settlement process;


Either Party shall have the right, subject to no conditions precedent, to


refer the dispute to the International Centre for Settlement of


Investment Disputes ( TCSID^) for settlement by conciliation and/or


arbitration as hereinafter provided. Either Parly may commence


conciliation or arbitration proceedings by giving notice to the other


Party and to the Secretary-General of ICSID (including in such notice


a statement of the question or dispute and of the claim or contention of


the Party giving the notice). The assignment, transfer, lease or pledge


of the right authorized by the Government to build, own, operate and


transfer the railw ay line or any part thereof by MCC as specified in the


railway agreement shall not prejudice MCC’s right under this section.


I he Rules of Conciliation and Arbitration of ICSID shall govern the


conciliation and arbitration. The place of conciliation or arbitration


shall be such as may be agreed by the parties and in default of


agreement shall be as provided in the Rules of ICSID.


(c) Pending the issue of a decision or aw ard, the operations or activities


that shall have given rise to the arbitration need not be discontinued,


but if the decision or award recognizes that a complaint was justified,


provision may be made in the award for such reparation or


compensation in respect of such continued operations and activities as


shall be decided by the arbitrator to be appropriate.


The decision of the arbitrator shall be final and binding upon the


Parties to this Railway Agreement and upon any person who


participated as a party in such arbitration proceedings, and they shall


comply in good faith with the decision.


(e) Should ICSID be replaced by, or its functions substantially change, or


are transferred to any new international body of similar type and








1 July 2010 30 of 33


competence, the function of the Arbitration Tribunal of ICSID


provided by this Article shall be exercised by the chief officer of such


international body w ithout further agreement of the Parties.


Principles of fairness, good faith and fair dealing shall apply during the


arbitration if no applicable law or regulation exists.


If the services of ICSID are unavailable to the parties to this Railway


Agreement, then such unsettled dispute shall be referred to the


Arbitration Institute of the Stockholm Chamber of Commerce for


arbitration pursuant to the Rules of Arbitration of the United Nations


Commission on International Trade Law (‘'UNCITRAL”). The place


of the arbitration shall be in Stockholm and the arbitration tribunal


shall be composed of three arbitrators appointed in accordance with the


Rules of UNCITRAL. The aw ard of the arbitration tribunal shall be


final and binding on the Parties to this Railway Agreement and on any


persons who participated as a party in such arbitration proceedings.


Both Parties agree to accept the jurisdiction of the Arbitration Institute


of the Stockholm Chamber of Commerce and execute voluntarily the


aw ard of the said Arbitration Tribunal of this Arbitration Institute of


the Stockholm Chamber of Commerce.


(h) The arbitration fee shall be borne by the losing party.


51. Duration


The Parties agree that this Railway Agreement will take effect immediately upon


execution by the Parties. This Railway Agreement shall remain valid until MCC has


recovered its total investment regarding the Railway as described in this Railway Agreement.


This agreement may also terminate in accordance with the terms and provisions of this


Railway Agreement, or as otherwise mutually determined and agreed to in writing by the


parties.


52. Assignment


MCC may not assign, transfer, lease or pledge any of the rights, privileges, liabilities


or obligations established under this Railway Agreement without the prior written consent of


the Government. The consent of the Government shall not be required where:


The assignment is solely for the purpose of providing security for the


financing of the Project or,


ii. The assignment is to another company controlled by MCC through


share-holding, provided that the Government shall be informed of any


such assignment with 30 days advance notice prior to the assignment.


(a) The Government shall not give its consent unless it is satisfied that:


i. The proposed assignee is itself of good reputation or is a member of a


group or groups of companies of good reputation or is owmed by a


company or companies of good reputation;








1 July 2010 31 of 33


ii. There is likely to be available to the proposed assignee either from its


ow n resources or through other companies in the group of w hich it is a


member, or otherwise, sufficient technical know ledge, experience,


know-how and sufficient financial resources to enable it to effectively


carry out a program satisfactory to the Government for the operations


hereunder; and


iii. The proposed assignee is in all other respects acceptable to the


Government. The Government may impose such conditions on the


assignment as it considers appropriate.


The assignee shall have all the rights and privileges and shall assume all the liabilities


apd obligations of the assignor with respect to what is assigned w ithout relieving MCC of


such liabilities and obligations unless the Government expressly consents to such a release.


53. Amendments


The Parties mutually agree that this Railway Agreement may be amended by the


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


Railway Agreement, the Ministry of Mines is authorized to approve decisions concerning


amendments lor the Government and MCC, or its successor, is authorized to approve


decisions concerning amendments for MCC.


54. Applicable Law.


This Railway Agreement is subject to and governed by all applicable laws of the


Government of Afghanistan.


55. Complete Agreement


This Railw ay Agreement, consisting of the above Sections 1-55, together with the


herein referenced documents, constitutes the complete agreement of the Parlies with respect


to the Railway for the Aynak Copper Project and supersedes all prior agreements and


understandings between the parties regarding the Railway. This Railway Agreement shall be


e 'cuted in English in four (4) originals with each Party holding two (2) originals and in


1 i. In the event that a dispute arises under this Railw ay 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 Railway Agreement.


*** SIGNATURES FOLLOW ON NEXT PAGE ***



































1 July 2010 4^ 32 of 33


Agreed to and a V*) dav of S' It ,2010:


Accepted this


Ministry of Mines rr


MCC-Jiangxi Copper


Consortium















































































































































1 July 2010


33 of 33


 APPENDIX 1: RAILWAY ROUTE











































































































1 July 2010


The general Railway rouljn„ ^ shown in Figure L is described as transiting the following


towns, mine locations r


’ and provinces of:


1. At the border Pakistan near Torkham in Nangarhar; west to





2. -ru UA’ m ? Province; with a spur line to


3. pie Aynak Mine# in Logar Province.


4. rom abu , north to Parwan Province; west to


5. Bamiyan in Province; north l0


6. Baghlan Proving northto


7. “z’in ^duz Province; west to


8. Naibabad ana north to Hairatan, in Balkh Province on the Uzbekhistan border.



































































































































1 July 2010


 iTakhar






































Samangan
















































































s ®i2Q'lO^Gne^Spo|t^mage


^>/2Q1Q£u(?Suechrioloa'e6 Peihawari














Figure 1. - PREFERRED RAILWAY ROUTE

















1 July 2010