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Aynak Mining Contract - April 8, 2008 (Initialing)
TABLE OF CONTENTS
PAGE
PART I: GENERAL RIGHTS AND OBLIGATIONS......................................................6
1 Definitions............................................................ 6
2 MCC’s General Rights with Respect to the Aynak Copper Deposit..................................7
3 MCC’s General Obligations with Respect to the Aynak Copper Deposit..........................8
4 Project Schedule..................................................................................................................9
5 Project Financing................................................................................................................9
6 Exploitation of Other Minerals or Other Natural Resources..............................................9
7 Third-Party Agreements....................................................................................................10
8 Government Right of Access............................................................................................10
9 Use of Subcontractors.......................................................................................................10
10 Cooperation of the Parties.................................................................................................10
PART H: MCC’S TECHNICAL COMMITMENTS AND OBLIGATIONS.................11
11 Commencement of Activities...........................................................................................11
12 Bankable Feasibility Study and Mine Development Plan................................................11
13 Construction Period..........................................................................................................12
14 Commercial Production Period.........................................................................................12
15 Environmental Protection.................................................................................................13
PART HI: MCC’S FINANCIAL COMMITMENTS AND OBLIGATIONS...................14
16 Premium............................................................................................................................14
17 Financial Assurance..........................................................................................................15
18 Minimum Expenditures....................................................................................................16
19 Relinquishment.................................................................................................................16
20 Tax Obligations.................................................................................................................16
21 Royalties...........................................................................................................................18
PART IV: MCC’S SOCIAL AND SUSTAINABLE DEVELOPMENT
COMMITMENTS AND OBLIGATIONS................................................................................20
22 Local and Regional Benefits.............................................................................................20
23 Resettlement and Compensation Plan...............................................................................21
24 Housing.............................................................................................................................21
25 Medical Facilities..............................................................................................................21
26 Schools..............................................................................................................................21
27 Entertainment and Shopping.............................................................................................22
28 Protection and Respect of Religious Belief......................................................................22
29 Government’s and Third Parties’ Right to Use Company’s Facilities.............................22
PART V: COMMITMENTS AND OBLIGATIONS CONCERNING PROJECT
INFRASTRUCTURE, FACILITIES AND MANAGEMENT................................................23
30 Railway.............................................................................................................................23
31 Power Supply....................................................................................................................23
32 Water Supply....................................................................................................................24
33 Phosphate, Limestone and Quartz (Silica) Supply...........................................................24
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Aynak Mining Contract - April 8,2008 (Initialing)
34 Project Facilities................................................................................................................25
35 Control of Operations.......................................................................................................26
36 Project Security.................................................................................................................27
PART Vis OCCUPATION OF SURFACE AND OTHER RIGHTS................................27
37 General..............................................................................................................................27
PART VH: LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS ...29
38 Services and Supplies.......................................................................................................29
PART VIII: EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS................29
39 Employment of Afghan Nationals....................................................................................29
40 Training.............................................................................................................................30
41 Non-Afghan Personnel......................................................................................................30
42 Employee Accident Compensation...................................................................................31
PART IX: IMPORTS AND EXPORTS...............................................................................31
43 Imports..............................................................................................................................31
44 Exports..............................................................................................................................33
45 Cooperation.......................................................................................................................33
PART X: SUSPENSION OF OPERATIONS...................................................................23
46 General..............................................................................................................................33
PART XI: REVOCATION...................................................................................................24
47 Revocation for Cause........................................................................................................34
48 Notification and Remedy..................................................................................................35
49 Penalties............................................................................................................................36
PART XH: TERMINATION..................................................................................................37
50 Transfer of Property and Compensation at Termination..................................................37
51 Continuation of Rights and Duties....................................................................................38
52 Infrastructure.....................................................................................................................38
PART XIH: FORCE MAJEURE.............................................................................................38
53 General..............................................................................................................................38
54 Notice................................................................................................................................38
55 Disputes.............................................................................................................................39
PART XIV: SETTLEMENT OF DISPUTES.........................................................................39
56 Method of Dispute-Settlement..........................................................................................39
PART XV: REVIEW OF CONTRACT TERMS.................................................................40
57 Fiscal Provisions...............................................................................................................40
5 8 General Review.................................................................................................................41
PART XVI: DOMICILE; SERVICE OF PROCESS............................................................41
59 General..............................................................................................................................41
60 Notices..............................................................................................................................41
PART XVH: ASSIGNMENT.....................................................................................................41
Aynak Mining Contract - April 8, 2008 (Initialing)
61 General..............................................................................................................................41
PART XVIII: AGREEMENT PERIOD.....................................................................................43
62 General..............................................................................................................................43
PART XEX: RIGHT OF RENEWAL OF MINING CONTRACT.......................................43
63 General..............................................................................................................................43
PART XX: AMENDMENT....................................................................................................43
64 General..............................................................................................................................43
PART XXI: COMPLETE AGREEMENT.............................................................................44
65 General..............................................................................................................................44
APPENDICES
APPENDIX 1: LICENSE AREA............................................................................................45
APPENDIX 2: PROJECT SCHEDULE..................................................................................47
APPENDIX 3: REPORTS TO BE SUBMITTED...................................................................49
APPENDIX 4: DEVELOPMENT PLAN AND BUDGET.....................................................53
APPENDIX 5: ROYALTY DEFINITION..............................................................................54
APPENDIX 6: MCC PROPOSAL..........................................................................................56
APPENDIX 7: RAILWAY MEMORANDUM OF AGREEMENT.......................................57
APPENDIX 8: POWER SUPPLY MEMORANDUM OF AGREEMENT............................60
APPENDIX 9: WATER SUPPLY MEMORANDUM OF AGREEMENT............................63
APPENDIX 10: SECURITY MEMORANDUM OF AGREEMENT.......................................66
APPENDIX 11: PHOSPHATE, LIMESTONE AND QUARTZ (SILICA)
MEMORANDUM OF AGREEMENT...........................................................69
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Aynak Mining Contract - April 8, 2008 (Initialing)
MINING CONTRACT FOR THE AYNAK COPPER DEPOSIT
Between
The Government of Afghanistan
And
MCC-Jiangxi Copper Consortium (“MCC”)
This Mining Contract is made this_day of_, 2008
between the Government of Afghanistan and MCC (the “Parties”).
Whereas
(A) MCC was selected as the preferred bidder, through a transparent, competitive
tender process conducted in accordance with international best practice, to
negotiate the legal rights and authorizations to undertake exploration,
exploitation, processing, smelting and sale of the Aynak Copper Deposit, as
more particularly described in this Mining Contract;
(B) The Ministry of Mines and MCC have agreed to enter into a Mining Contract
in accordance with the requirements of the Aynak public tender and the laws
of Afghanistan, including the Minerals Law, in order to effectuate and enforce
the promises and commitments made by MCC in its bid;
(C) The Mining Contract has been prepared by the Ministry of Mines and
submitted for Inter-Ministerial Committee endorsement and final approval by
the Council of Ministers pursuant to Article 7 of the Afghanistan Minerals
Law;
(D) The Ministry of Mines wishes to maximize the value of the Aynak Copper
Deposit to Afghanistan while promoting sustainable development and
protecting important environmental, social and economic aspects of Afghan
society. To that end, the Ministry of Mines requires that MCC shall start
commercial production within 60 months following the effective date of the
Mining Contract and that processing of ores proceed to final copper product
within Afghanistan; and
(E) MCC understands and acknowledges the importance of the Aynak Copper
Deposit to the development of Afghanistan’s economy, and agrees to fully
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Aynak Mining Contract - April 8, 2008 (Initialing)
PART L GENERAL RIGHTS AND OBLIGATIONS
1 Definitions
In this Mining Contract the following expressions (except where the context
otherwise requires) shall have the following meanings:
(a) Agreement Period: The term as set forth in Part XVII of this Mining Contract and
any extensions or other modifications to the term agreed to by the Parties.
(b) Associated Minerals: Minerals which geologically occur together with, are
inseparable from and must necessarily be mined and economically processed
together with the principal mineral. For the purposes of this Mining Contract,
Associated Minerals shall include, but not be limited to lead, zinc, gold, silver and
cobalt. In the event of disagreement between MCC and the Ministry of Mines as
to what constitutes an Associated Mineral, the Ministry of Mine’s judgment shall
prevail.
(c) Aynak Copper Deposit: The economically recoverable copper mineralization
located in the Aynak area of Logar province for which the Mineral Right will be
granted.
(d) Bankable Feasibility Study: A feasibility study prepared in sufficient depth and
detail so that the study would be normally acceptable to international lending
institutions.
(e) Commence Commercial Production: the first day, after the completion of testing,
on which product that is suitable for sale is produced.
(f) Effective Date of the Mining Contract: the date two months from the date on
which the Parties sign the Mining Contract and the Parties obtain final approval
from the National Development and Reform Commission, in the case of MCC and
the Council of Ministers, in the case of the Ministry of Mines.
(g) 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) Exploitation: As defined in Article 3(13) of the Minerals Law, any activity by
which, from an identified deposit, exploration, pre-production development and
extraction of mineral substances takes place by means of open (surface) and/or
underground works for processing, use or sale.
(i) Exploration: As defined in Article 3(15) of the Minerals Law, any activity carried
out to discover, demarcate, or evaluate the quality and quantity or exploitation
potential of mineral substances.
(j) License Area: That land area described in Appendix 1 to this Mining Contract.
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Aynak Mining Contract - April 8, 2008 (Initialing)
(k) MCC-Jiangxi Copper Consortium (“MCC”): The entity comprised of China
Metallurgical Group Corporation and Jiangxi Copper Company Limited that was
selected as the Preferred Bidder during the Aynak Tender Process to negotiate and
conclude the Mining Contract with the Ministry of Mines and which will be
bound by the terms of the Mining Contract, jointly and severally, together with
any successor entities.
(l) Mineral Right: The rights to explore and exploit minerals granted by the
Afghanistan Minerals Law.
(m) Mining: All recovery activities aimed at the economic exploitation of a certain
ore deposit.
(n) Ministry of Mines: The Ministry of Mines of the Government of Afghanistan or
any successor entity, acting on behalf of the Government of Afghanistan with
respect to the Mining Contract and the Project.
(o) Month: All references to months in this Mining Contract shall be based on the
solar calendar specified in Article 18 of Afghanistan’s Constitution.
(p) Pollution: Any direct or indirect alteration of the physical, thermal, chemical,
biological, or radioactive properties of any part of the Environment by
discharging, emitting, or depositing wastes so as materially to affect any
beneficial use adversely, or to cause a condition which is hazardous or potentially
hazardous to public health, safety or welfare, or to animals, birds, wildlife, fish or
aquatic life, or to plants. The term “pollute” shall have a corresponding meaning.
(q) Processing: As defined in Article 3(38) of the Mnerals Law, ore dressing or other
metallurgical processes applied to ore or other mineral substances which results in
obtaining products for sale, including, without limitation, crushing, concentration,
beneficiation, smelting, washing and refining.
(r) Smelting: A metallurgical thermal processing operation in which the metal is
separated from non-metallic materials or other undesired metals with which it is
associated.
(s) The Project: MCC’s total operations under this Mining Contract.
(t) The Project Facilities: Facilities defined in Part V of this Mining Contract.
(u) 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.
MCC’s General Rights with Respect to the Aynak Copper Deposit
(a) In consideration of MCC’s performance of the various commitments and
obligations specified in this Mining Contract, including any ancillary agreements
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Aynak Mining Contract - April 8, 2008 (Initialing)
appended to this Mining Contract, the Ministry of Mines, hereby grants to MCC
and MCC hereby accepts the exclusive Mineral Rights, as defined under Article
15 of the Minerals Law, to conduct all of the operations hereinafter described, for
the term set forth in Part XVIII, in the License Area and in such other areas as
may be approved by the Ministry of Mines.
(b) MCC shall have the exclusive right and shall receive the necessary licenses and
authorizations required under the Minerals Law to (i) search for and mine copper
and Associated Minerals within the License Area, (ii) concentrate, smelt, refine or
otherwise process such minerals within the License Area or elsewhere in
Afghanistan as specifically approved by the Ministry of Mines, and (iii) subject to
limitations specified in this Mining Contract and in the Minerals Law, to transport
or sell or otherwise dispose of such materials abroad.
(c) MCC shall be entitled to the protections provided by Article 94 of the Minerals
Law with respect to expropriation, nationalization, deprivation and confiscation of
any Mineral Substances produced pursuant to this Mining Contract or any assets
owned and/or used by MCC in conducting Mineral Activities pursuant to this
Mining Contract.
MCC’s General Obligations with Respect to the Aynak Copper Deposit
(a) MCC hereby accepts the obligations to conduct its operations and activities in
accordance with the terms of this Mining Contract and the applicable laws and
regulations of Afghanistan. The Parties acknowledge and agree that MCC shall
have a reasonable time period in which to modify its operations and activities to
incorporate legally required technological advancements or to achieve compliance
with new laws or regulations that may apply to the Project in the future. MCC
acknowledges and agrees that it shall conduct all such operations and activities in
a sound manner in accordance with best international mining engineering
standards and practices and in accordance with modem and accepted scientific
and technical principles applicable to the mining and processing of copper ore and
to beneficiating, smelting, and manufacturing operations. All operations and
activities under this Mining Contract shall be conducted in accordance with
environmental protection and reclamation plans approved by the Ministry of
Mines prior to the commencement of operations so as to avoid waste or loss of
natural resources, to protect natural resources against unnecessary damage, and to
prevent pollution and contamination of the environment. MCC shall take all
appropriate risk management measures to prevent damage to the rights and
property 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 Mining
Contract, MCC will be liable for such injuries in accordance with the applicable
laws of Afghanistan.
(b) MCC shall install and utilize such internationally recognized modem safety
devices and shall observe such internationally recognized modem safety
precautions and risk management measures as are provided and observed
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Aynak Mining Contract - April 8, 2008 (Initialing)
internationally under conditions and operations comparable to those undertaken
by MCC under this Mining Contract.
(c) MCC shall observe internationally recognized measures, including risk
management measures, for the protection of the general health and safety of its
employees and of all other persons having legal access to the area covered by this
Mining Contract. MCC shall comply with such instructions as may from time to
time be given in writing by the Mine Inspectorate.
(d) MCC shall pay all applicable fees, rents, penalties and other non-tax charges to
the Ministry of Mines as set forth in this Mining Contract.
(e) Insofar as such obligations are not otherwise covered by the terms of this 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.
4 Project Schedule
MCC shall commence activities in accordance with the schedule and commitments set
forth in Appendices II and VI of this Mining Contract. The Ministry of Mines agrees to grant
to MCC a two month preparation period immediately prior to the six month period during
which MCC must commence pre-exploitation activities. As a result, the effective date of this
Mining Contract shall be the date two months from the date on which the Mining Contract is
signed by the Parties, following approval by the Parties’ respective governments.
5 Project Financing
MCC shall have sole responsibility for financing the Project and determining the
terms on which said financing shall be obtained, including the extent to which the financing
shall be accomplished through issuance of shares of, or borrowing by MCC. MCC may, as
authorized by Article 23 of the Minerals Law, pledge such rights, licenses and authorizations
obtained in accordance with this Mining Contract, to secure financing for the Project.
6 Exploitation of Other Minerals or Other Natural Resources
In the event that any other mineral or natural resources, other than Associated
Minerals, are discovered in the License Area and MCC wishes to mine, develop, or otherwise
exploit such mineral or other natural resources, MCC shall report such discovery to the
Ministry of Mines and request an amendment to this Mining Contract or, if required by the
Ministry of Mines, submit an application, in accordance with the applicable requirements of
the Minerals Law and the Mining Regulations, to develop such mineral or other natural
resource. Provided, however, that if, after six months from the date of such amendment
request or application, the Ministry of Mines and MCC fail to reach an agreement with regard
to the exploration and exploitation of such mineral or other natural resource^ the Ministry of
Mines shall have the right to negotiate and conclude an agreement with a third party.
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Aynak Mining Contract - April 8, 2008 (Initialing)
7 Third-Party Agreements
In the event that the Ministry of Mines authorizes a third party to explore and exploit
some mineral or other natural resource other than those which are the subject of this Mining
Contract within the License Area, but excluding the exploitation area, the Ministry of Mines
will exercise all reasonable precautions to minimize the impact of such third-party activities
on the activities and operations of MCC under this Mining Contract. The Ministry of Mines
will also require that such third party or parties make fair and reasonable compensation to
MCC for any loss of property rights sustained as a result of the establishment of additional
operations and for any unamortized development costs to the extent that such development
costs can be reasonably related to the discovery of such other mineral or other resources.
8 Government Right of Access
The Ministry of Mines reserves the right to access the License Area for the purpose of
any authorized investigation allowed by the laws of Afghanistan, provided that if damage
results to MCC’s property from such investigation, the Ministry of Mines agrees to provide
fair and reasonable compensation to MCC for such damage, except in cases where such
damage is caused by an act of MCC.
9 Use of Subcontractors
Without in any way detracting from MCC’s responsibilities and obligations under this
Mining Contract, MCC may engage subcontractors for the execution of such phases of its
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 Mining Contract. The records of such subcontractors shall be made available to
Ministry of Mines’ inspectors as provided in Appendix 3.
10 Cooperation of the Parties
The Ministry of Mines will cooperate with MCC to the extent permitted under the
laws of Afghanistan and will take such actions as may be desirable to achieve the mutual
objectives of this Mining Contract. ?
(a) The Parties of this Mining Contract agree that they will at all times use their best
efforts to carry out the provisions of this Mining Contract to the end that the
Project 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 Mining Contract in
accordance with the standards and requirements imposed elsewhere in this Mining
Contract for the sound and progressive development of the mining industry 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
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Aynak Mining Contract - April 8,2008 (Initialing)
and social structure, and pursuant to the provisions of this Agreement, at all times
to comply with the laws and regulations of Afghanistan.
(c) At any time during the term of this Mining Contract, upon request by either party,
the Ministry of Mines and MCC may consult with each other to determine
whether in the light of all relevant circumstances the financial or other provisions
of this Mining Contract need revision in order to ensure that the Mining Contract
operates equitably and without major detriment to the interests of either Party.
Such circumstances shall include the conditions under which the mineral
production is carried out, including, but not limited to, the size, location and
overburden of mineral deposits, the quality of the mineral, the market conditions
for the mineral, the prevailing purchasing power of money and the terms and
conditions prevailing for comparable minerals ventures. In reaching agreement on
any revision of this Mining Contract pursuant to this paragraph, the Parties shall
ensure that no revision of this Mining Contract shall prejudice MCC’s ability to
retain financial credibility abroad and to raise finance by borrowing
internationally in a manner and on terms normal to the mining industry. Such
consultation shall be carried out in a spirit of cooperation with due regard to the
intent and objectives of the respective Parties. Both Parties desire to realize the
success of the Project for the benefit of the people of Afghanistan, the
development of the nation, and economic and social growth and development.
PART U: MCC’S TECHNICAL COMMITMENTS AND OBLIGATIONS
MCC shall perform, undertake or otherwise comply with the following requirements:
11 Commencement of Activities
The Parties acknowledge and agree that upon the effective date of this Mining
Contract, MCC will commence pre-exploitation activities related to the Aynak Copper
Deposit including, but not limited to, additional prospecting, drilling, sampling, as well as
activities related to the development of a Bankable Feasibility Study and Mine Development
Plan for the Aynak Copper Deposit. MCC’s commitments and obligations related to pre-
exploitation activities are more fully specified in Appendix 6 of this Mining Contract and are
specifically adopted and incorporated by reference into Part II of this Mining Contract as an
enforceable part of this Mining Contract. The commencement and performance of such
activities shall occur according to a schedule proposed by MCC and approved by the MoM
(the “Project Schedule”). The Project Schedule shall be incorporated into this Mining
Contract and be fully enforceable under this Mining Contract. MCC acknowledges and
agrees that it shall commence these activities as soon as economically practicable, but no
later than six (6) months, following the effective date of this Mining Contract.
12 Bankable Feasibility Study and Mine Development Plan
The Parties acknowledge and agree that MCC shall submit it’s Bankable Feasibility
Study for the Aynak Copper Deposit to the Ministry of Mines for review no later than three
(3) months following the completion of its pre-exploitation activities or within sixteen (16)
months of the effective date of this Mining Contract, whichever is earlier. MCC’s
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Aynak Mining Contract - April 8, 2008 (Initialing)
commitments and obligations concerning the preparation of a Bankable Feasibility Study for
the Aynak Copper Deposit are more fully specified in Appendix 6 of this Mining Contract
and are specifically adopted and incorporated by reference into Part II of this Mining
Contract as an enforceable part of this Mining Contract. The Project Schedule shall include
deadlines for the preparation of the Bankable Feasibility Study. Within one (1) month of its
completion of the Bankable Feasibility Study, MCC shall submit its Mine Development Plan
to the Ministry of Mines for review and approval. The Ministry of Mines shall use its best
efforts to complete its review of the Mine Development Plan within two (2) months of receipt
from MCC.
13 Construction Period
The Parties acknowledge and agree that MCC shall commence construction of Project
facilities and structures in accordance with the approved Project Schedule. Construction shall
be completed within sixty (60) months from the effective date of this Mining Contract.
MCC’s commitments and obligations related to construction of Project facilities and
structures are more fully specified in Appendix 6 of this Mining Contract and are specifically
adopted and incorporated by reference into Part II of this Mining Contract as an enforceable
part of this Mining Contract. The Parties acknowledge and agree that delays which occur
during the construction period shall be subject to the following conditions, if the delays are
not subject to the force majeure provisions of Part XIII of this Mining Contract. The
construction period shall be extended for any delay in the construction period which is not
caused by the fault of MCC. The construction period shall not be extended for any delay
which is caused by the fault of MCC, its subcontractors or any entities affiliated with MCC.
MCC shall promptly notify the Ministry of Mines in writing of any event which MCC
believes will delay the construction period. The Ministry of Mines shall reply in writing
within two weeks from the date of receipt of MCC’s notice. The Parties shall agree as to the
amount of time necessary to address the delay.
14 Commercial Production Period
The Parties acknowledge and agree that MCC shall commence commercial
production no later than sixty (60) months from the effective date of this Mining Contract.
MCC’s commitments and obligations related to operations and commercial production are
more fully specified in Appendix 6 of this Mining Contract and are specifically adopted and
incorporated by reference into Part II of this Mining Contract as an enforceable part of this
Mining Contract,
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Aynak Mining Contract - April 8, 2008 (Initialing)
15 Environmental Protection
MCC’s commitments and obligations with respect to environmental protection are
more fully specified in Appendix 6 of this Mining Contract and are specifically adopted and
incorporated by reference into Part II of this Mining Contract as an enforceable part of this
Mining Contract. MCC has made broad commitments to the Ministry of Mines concerning
environmental protection including, without limitation, its commitment to comply with the
applicable environmental laws and regulations of Afghanistan, Afghanistan’s environmental
and social protection guidelines and policies, all World Bank Environmental and Social
Safeguard Policies, the Equator Principles and the Voluntary Principles on Security and
Human Rights. In the event of a conflict between the above referenced laws, regulations,
guidelines and policies, the Parties agree to adhere to the strictest applicable standard in order
to protect Afghanistan’s environment and people. In light of these commitments, the Parties
acknowledge and agree as follows:
(a) MCC shall manage its activities in a technically, financially, socially, culturally
and environmentally responsible manner to achieve the environmental protection
and sustainable development objectives and responsibilities required by this
Mining Contract, the laws of Afghanistan and any applicable international
conventions to which Afghanistan is or may become a signatory, including
without limitation the Kyoto Protocols.
(b) MCC shall prepare an environmental and social impact assessment in accordance
with the requirements of the Minerals Law, the Environment Law and the above
referenced environmental and social protection guidelines, principles and policies.
MCC shall, at a minimum, undertake the environmental and social impact
assessment program specified in Appendix 6 of this Mining Contract which is
specifically adopted and incorporated by reference into Part II of this Mining
Contract as an enforceable part of this Mining Contract. MCC shall submit its
environmental and social impact assessment program to the Ministry of Mines for
review and approval prior to commencing construction of project facilities and
structures. MCC acknowledges and agrees that the Ministry of Mines may require
additional assessment activities as a condition of approval.
(c) MCC shall prepare an environmental management plan that presents a detailed,
technically and scientifically sound approach to the management, mitigation or
elimination of Project impacts and risks to the environment and local residents.
At a minimum, MCC shall undertake the environmental management plan,
including all of the sub-plans identified by MCC, specified in Appendix 6 of this
Mining Contract which is specifically adopted and incorporated by reference into
Part II of this Mining Contract as an enforceable part of this Mining Contract.
MCC shall submit its environmental management plan to the Ministry of Mines
for review and approval prior to commencing mining operations or commercial
production. MCC acknowledges and agrees that the Ministry of Mines may
require additional or alternative environmental management provisions, including
ISO14001, as a condition of approval.
(d) MCC shall comply with the standards regulating the discharge or emission of
pollutants into the environment specified in Appendix 6 of this Mining Contract
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Aynak Mining Contract - April 8, 2008 (Initialing)
which are specifically adopted and incorporated by reference into Part II of this
Mining Contract as an enforceable part of this Mining Contract. MCC
acknowledges and agrees that it shall comply with additional or alternative
standards that may be required in the future by the Ministry of Mines in
connection with the enactment of new laws or the promulgation of new
regulations by the Government of Afghanistan. MCC further acknowledges and
agrees that it shall be subject to fines, penalties and fees in the event that MCC
breaches the terms of this Mining Contract, including without limitation,
emissions and discharge standards which MCC is required to comply with
pursuant to this Mining Contract.
(e) MCC shall not dispose of any overburden, waste rock, tailings, or waste created as
a result of its operations under this Mining Contract in an area or in a manner not
previously approved by the Ministry of Mines. MCC shall, when any overburden
dump or tailings impoundment established under this Mining Contract, ceases to
be utilized for such purpose, ensure that such structures are reclaimed in
accordance with the requirements of applicable laws and regulations and MCC’s
approved reclamation plan.
(f) MCC shall provide fair compensation, as determined by a mutually agreeable
third party, for any loss suffered by any local inhabitant resulting from any
damage done (whether to land, anything on land, water, or otherwise) or any
interference with any right to use land or water caused by MCC’s disposal of any
overburden removed in the course of, or tailings produced as a result of, its
operations under this Mining Contract.
(g) The Parties acknowledge and agree that MCC shall be responsible for the
preparation and submission of a final mine closure plan to the Ministry of Mines
for approval. At a minimum, the final mine closure plan should identify the
measures and financial requirements necessary to decommission the mine,
complete reclamation and rehabilitation and establish agreed upon post-mining
land uses.
PART ni: MCC’S FINANCIAL COMMITMENTS AND OBLIGATIONS
MCC shall perform, undertake or otherwise comply with the following requirements:
16 Premium
MCC acknowledges and agrees to pay the Ministry of Mines the amount of eight
hundred and eight million dollars (“USD 808,000,000.00”) for the rights specified in Section
2 of this Mining Contract (the “Premium”). The Parties agree that the Premium should be
paid to the Ministry of Mines in connection with certain milestones identified in the Project
Schedule specified in Section 4 of this Mining Contract. Failure by MCC to make scheduled
premium payments on time shall be subject to the non-performance provisions specified in
this Mining Contract. Within ten days of the effective date of the Mining Contract, MCC
shall pay to the Ministry of Mines the amount of eighty million, eight hundred thousand
dollars (“USD 80,800,000.00), which shall constitute ten percent (10%) of MCC’s premium
payment obligation. Immediately upon approval of the feasibility study, MCC shall pay to
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Aynak Mining Contract - April 8, 2008 (Initialing)
the Ministry of Mines the amount of one hundred sixty one million, six hundred thousand
dollars (“USD 161,600,000.00”), which shall constitute twenty percent (20%) of MCC’s
premium payment obligation. Immediately upon commencement of commercial production,
MCC shall pay to the Ministry of Mines the amount of five hundred-sixty five million, six
hundred thousand dollars (“USD 565,600,000”) which shall constitute the remaining seventy
percent (70%) of MCC’s premium payment obligation.
17 Financial Assurance
(a) In accordance with the Project Schedule developed and approved pursuant to
Section 4 of this Mining Contract, MCC shall submit to the Ministry of Mines as
security for performance of its commitments and obligations under this Mining
Contract an irrevocable bank guarantee in the amount of sixteen million, one
hundred sixty thousand dollars (“USD $16,160,000.00”) within 60 days of the
effective date of this Mining Contract. This amount is equivalent to two percent
(2%) of MCC’s total premium payment. This security deposit shall be released at
the commencement of commercial production. In the event that, during the time
period from the effective date of the Mining Contract to the commencement of
commercial production, MCC defaults in the making of minimum expenditure or
in undertaking working obligations or prematurely terminates its operations
without cause, or fails to make payments required under this Mining Contract to
the Ministry of Mines, or otherwise defaults in its obligations, all or part of such
security deposit shall be forfeited to the Ministry of Mines. Nothing in this
section shall limit the ability of the Ministry of Mines to invoke the sanctions or
remedies specified in this Mining Contract.
(b) In accordance with the Mine Development Plan and the reclamation and closure
requirements of the Environmental Management Plan developed and approved in
accordance with Section 15 of this Mining Contract, MCC shall submit to the
Ministry of Mines financial assurance sufficient to fund the reclamation and
closure requirements applicable to the Project. The amount of such financial
assurance shall be determined by the Ministry of Mines following review of
MCC’s reclamation and closure plan. MCC shall establish an Aynak Mine
Closure Fund or other appropriate financial assurance with the Ministry of Mines
within sixty (60) days of the Ministry of Mines’ determination of the amount of
financial assurance. MCC’s financial assurance shall be in a form which is issued
and guaranteed by an institution acceptable to the Ministry of Mines and
immediately available to the Ministry of Mines in the event that MCC’s
reclamation and closure obligations are not fulfilled. This financial assurance
requirement is in addition to the performance security requirements specified in
subsection (a) above.
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Aynak Mining Contract - April 8, 2008 (Initialing)
18 Minimum Expenditures
(a) MCC shall, within 18 months of the effective date of this Mining Contract, and in
accordance with its approved Mine Development Plan, spend on the Project no
less than 90% of its proposed budget as defined in Appendices IV and VI on
exploration and development work within the License Area. Such expenses may
not include general organizational overhead and administrative expenses incurred
abroad.
(b) If at the end of 24 months from the effective date of this Mining Contract or any
time thereafter, it appears to the Ministry of Mines that MCC has seriously
neglected its obligations under this Mining Contract to develop the Project in
accordance with the agreed schedule and has failed to make the minimum
expenditures as provided in this Section, except where the failure is not
attributable to MCC, the Ministry of Mines may require MCC to deliver a
financial guarantee in a sum which shall not exceed the total outstanding
expenditure obligations remaining unfulfilled deposited in a new account and
notify the Ministry of Mines. Such guarantee may at the end of a 12 month period
be forfeited to the Ministry of Mines to the extent that MCC has failed to fulfill its
expenditure obligations.
(c) In connection with MCC’s obligations under this Part, MCC shall submit
quarterly reports to the Ministry of Mines setting forth the items and amounts in
expenditures during the preceding quarter. MCC shall support such reports with
documentation. Such reports shall be submitted to the Ministry of Mines on or
before 30 days after the end of the quarter. Reporting requirements are specified
in Appendix 3.
19 Relinquishment
(a) Subject to MCC’s obligations and liabilities under this Mining Contract, MCC
may, by written notice to the Ministry of Mines, relinquish all or any part of the
License Area at any time during the Agreement Period. Such notice shall comply
with the requirement of Article 24 of the Minerals Law.
(b) MCC shall, after consultation with the Ministry of Mines, relinquish any land
within the License Area which the parties determine is not needed by MCC for its
exploration and exploitation activities under this Mining Contract.
20 Tax Obligations
(a) Taxes shall be applied in accordance with the provisions of the Income Tax Law
of Afghanistan. The Government of Afghanistan and MCC acknowledge and
agree that, upon the grant of the Aynak Mineral Rights to MCC, MCC shall
qualify for treatment as a Qualified Extractive Industries Taxpayer (“QEIT”)
under Chapter 12 of the Income Tax Law.
Aynak Mining Contract - April 8, 2008 (Initialing)
(b) Maintenance of Accounting Books and Records
MCC shall submit accounting and income tax returns for the full term of
this Mining Contract 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 as usually
used in the copper mining industry 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.
MCC shall, at its offices in Afghanistan, maintain books of accounting
stated in United States Dollars in accordance with generally accepted
accounting principles. 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 internationally recognized
accounting firm acceptable to the Government of Afghanistan.
(iii) MCC shall permit the Ministry of Mines, through a duly authorized
representative, to inspect at all reasonable times the books of account and
records of MCC relative to any shipment, sale, utilization, or other
disposition of any ore or finished product. Such books of account and
records shall be maintained at MCC’s offices in Afghanistan. MCC shall
take reasonable steps to satisfy the Ministry of Mines by certificate of an
internationally recognized, competent independent party acceptable to the
Ministry of Mines as to all weights and analyses of finished product. Due
regard shall be given to any objection or representation made by the
Ministry of Mines as to any particular weight or assay of finished product
which may affect the amount of income tax payable by MCC.
(iv) The Government of Afghanistan shall be entitled to complete its audits of
MCC accounts in accordance with the Companies Law and the Income
Tax Law. MCC shall maintain all relevant records for a period of ten
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 and issue
assessments to income tax accordingly.
Aynak Mining Contract - April 8, 2008 (Initialing)
(c) In the event that the Government of Afghanistan enters into a contract or
agreement with a third party engaged in the mining or industrial sectors that,
based on the laws in force in Afghanistan at the time, affords more favorable
treatment with respect to the stability of fiscal or other tax terms than have been
granted to MCC under this Mining Contract, the Parties agree that the Mining
Contract shall be amended to apply the more favorable treatment to MCC.
21 Royalties
(a) MCC shall pay royalties on minerals mined and processed from the Aynak deposit
in accordance with the royalty details table attached to this Mining Contract as
Appendix 5. Royalties shall be paid in United States Dollars or such other
currency as may be mutually agreed and shall be paid on or before the last day of
the first month following the end of each calendar quarter. Each payment shall be
accompanied by a statement in reasonable detail showing the basis of computation
of royalties due in respect of production made during the preceding calendar
quarter.
(b) Royalties will be computed as follows:
(i) Metal Quantities
1. The tonnage or quantity of copper and Associated Minerals by weight
used in the computation shall be that quantity delivered for shipment or
for domestic sale. The quantity by weight of each mineral subject to
royalty shall be properly determined by internationally accepted assay
methods. The value of the Associated Minerals will be converted to
copper equivalent weight by using metal prices as defined below and
added to the tonnage of copper subject to the royalty calculation.
(ii) Metal Prices
1. For copper and Associated Minerals having a London Metal Exchange
(“LME”) price quotation or for which the saleable mineral content has
an LME price quotation. The price used in the computation shall be the
US Dollar price per unit for the same or most equivalent traded type of
grade of the Minerals concerned, calculated as the average of the LME
daily official settlement prices for the calendar quarter.
2. For those Associated Minerals having no London Metal Exchange
price quotation the price used in the computation shall be the average
calendar quarter US Dollar price as published in the Metals Week
Monthly Average Report for the calendar quarter.
(iii) Royalty Rates
1. The royalty rate is a sliding scale royalty based on the copper price and
is described in detail in Appendix 5. The formula for the calculation
is:
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Aynak Mining Contract - April 8, 2008 (Initialing)
a. When the copper price is equal to or less than US$ 1.00/pound,
the royalty rate = 2.5% x 120%, or 3.0%;
b. When the copper price is greater than US$1.00/pound and
equal to or less than US$2.00/pound, the royalty rate is based
on:
Royalty rate = (10 x copper price (US$/ pound) - 7.5) x 120%;
c. When the copper price is greater than US$2.00/pound, the
royalty rate=15% x 130%, or 19.5%.
(iv) Tax shall not be payable on any construction materials obtained from the
License Area and used by MCC for public purposes such as but not limited
to roads, bridges, railways, port facilities, airports, community buildings,
housing or any other infrastructure used in relation to the Project.
(c) MCC agrees that any mining, processing or treatment of ore prior to domestic sale
or export shipment by MCC shall be conducted in accordance with best
international mining standards as are economically and technically feasible, and in
accordance with such standards MCC undertakes to use all reasonable efforts to
optimize the mining recovery of ore and metallurgical recovery of minerals from
the ore provided it is economically and technically feasible to do so, and shall
submit evidence to the Ministry of Mines of compliance with this requirement.
(d) If in the opinion of the Ministry of Mines, MCC is failing without good cause to
recover Minerals in accordance with paragraph (c) of this Section, it may give
notice in writing of such deficiency to MCC. Within three (3) months of the
receipt of this notice, MCC shall either:
(i) Commence work to improve its mining method, treatment and processing
facilities to the reasonable satisfaction of the Ministry of Mines provided
that MCC shall in no event be obliged to conduct mining, processing or
treatment activities otherwise than as provided in its approved Bankable
Feasibility Study, or
Submit to the Ministry of Mines evidence justifying its performance. In
the event that the Ministry of Mines remains unsatisfied with MCC’s
performance, the Ministry of Mines shall have the right to commission
independent technical studies to determine a fair average recovery rate
taking into account the nature of the proven reserve and the ore and the
economic and technical feasibility of achieving increased recovery by
MCC. Such studies shall be carried out by internationally recognized
consultants appointed by the Ministry of Mines and agreed to by MCC.
(iii) The Ministry of Mines and MCC shall have the right to prepare
submissions to the consultants. If the said consultants find that the
performance of MCC’s operations is not satisfactory, then the cost shall be
19
Aynak Mining Contract - April 8,2008 (Initialing)
borne by MCC. If it is found that MCC’s performance of its obligation is
satisfactory, then the cost shall be borne by the Ministry of Mines.
(iv) If following the completion of such studies, MCC fails within a reasonable
period to achieve the recovery rate indicated by such studies, the Ministry
of Mines shall have the right to increase the amount of royalty applicable
to the Minerals delivered for export shipment or domestic sale in
proportion to the extent that the recovery of such Minerals by MCC falls
short of the fair average rate indicated by such studies. However, at no
time shall the payment of such increased royalty, free MCC from the
obligation to perform in a manner consistent with its approved Bankable
Feasibility Study and Mine Development Plan.
(e) The Ministry of Mines may, in lieu of some or all of the royalties prescribed in
this Section, elect to receive a part of the finished product produced by MCC.
Such election may be made by the Ministry of Mines giving not less than one
year’s notice to MCC, and when made shall continue for such period as was stated
in the notice given by the Ministry of Mines. Delivery of finished product which
the Ministry of Mines has elected to take shall be effected at such times and points
of delivery as may be agreed upon by the Parties. When the Ministry of Mines
takes payment in kind, MCC shall be deemed to have paid royalties in an amount
equal to the value of the finished product delivered to the Ministry of Mines. The
value of the finished product delivered to the Ministry of Mines shall be
calculated on the basis of the same formula used to calculate MCC’s royalty
obligation.
PART IV: MCC’S SOCIAL AND SUSTAINABLE DEVELOPMENT
COMMITMENTS AND OBLIGATIONS
MCC shall perform, undertake or otherwise comply with the following requirements:
22 Local and Regional Benefits
In order to adequately address the social impacts of the Project and to maximize and
sustain the regional economic and social benefits which the Project will generate, MCC shall:
(a) Coordinate all of its studies of the Project’s infrastructure requirements impacts
with infrastructure studies undertaken by the national and local Governments with
a view toward integration of the infrastructure of MCC’s operations with that of
the province, region, and country; and
(b) Assist and advise the Government of Afghanistan in its planning of the
infrastructure and regional development which MCC may deem useful to the
Project and to existing and future industries and activities in the region of the
Project.
'V
20
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Aynak Mining Contract - April 8, 2008 (Initialing)
23 Resettlement and Compensation Plan
MCC shall be required to compensate local residents adversely affected by mine
development activities at or in the vicinity of Aynak. Compensation shall be determined
through the application of applicable Afghan law and internationally accepted principles of
fairness and reasonableness. The Parties acknowledge and agree that in the event that certain
residents will be required to move their residences, such residents will be properly resettled in
a location and condition that does not result in a diminishment of the resettled resident’s
standard of living or adversely impact the resident’s livelihood. Such resettlement shall be
conducted in accordance with World Bank Resettlement Guidelines. In addition, the Parties
acknowledge and agree that mine development and operations will impact surrounding
villages and residents. To address such impacts, MCC shall, in consultation with appropriate
governmental officials, develop and finance an aid program established for the benefit of the
surrounding villages and residents. At a minimum, MCC’s efforts in this area shall be
coordinated with the local and regional benefits specified in Section 22 of this Mining
Contract.
24 Housing
MCC shall provide housing facilities of sufficient quality and quantity for its
employees and their immediate families at a reasonable rental rate. The precise number, type
and location of such housing facilities shall be determined through the previously approved
social impact assessment prepared by MCC and in consultation with appropriate
governmental officials. MCC agrees that sufficient housing facilities shall be completed and
available prior to need for each stage of the Project’s development. MCC agrees that the
rules, regulations and standards established by the Ministries of Social Welfare, Rural
Rehabilitation and Development and Urban Development and Housing shall be followed in
satisfying its housing commitment.
25 Medical Facilities
MCC shall furnish such free medical care and attention to all its employees and
families of employees and to all Government of Afghanistan officials working in the area
covered by this Mining Contract as is reasonable and shall establish, staff, and maintain
sufficient dispensary, clinic, and hospital facilities which shall be reasonably adequate under
the circumstances. The Parties acknowledge and agree that management and oversight of
these medical facilities shall be subject to the rules, regulations and standards of the Ministry
of Health. MCC shall be responsible for the construction, management, salaries and
operating expenses of these facilities.
26 Schools
MCC shall provide, free of charge, adequate primary and secondary school education
for the children of all employees and residents of the area surrounding Aynak specified in the
approved social impact assessment. At a minimum, MCC shall construct adequate schools,
of sufficient size and with sufficient equipment to provide such primary and secondary
21
Aynak Mining Contract - April 8, 2008 (Initialing)
education. In addition, MCC shall provide adequate nursery and kindergarten facilities for its
employees’ use. In connection with its commitment to train and employ Afghan citizens set
forth in Sections 38 and 39 of this Mining Contract, MCC shall also establish an adequate
facility for vocational training. MCC agrees that the rules, regulations, and standards
established by the Ministry of Education shall be followed.
27 Entertainment and Shopping
MCC shall construct and fund the operation of adequate recreational activity centers
such as gymnasiums and sports fields for the use of employees and local residents. The
Parties acknowledge and agree that, prior to construction, MCC shall engage in consultation
with appropriate governmental officials concerning such recreational activities in order to
select the location and features of the recreational activities centers. In addition, MCC shall
construct a market/shopping area for the use and convenience of employees and local
residents. The Parties acknowledge and agree that, prior to construction, MCC shall engage
in consultation with appropriate governmental officials concerning the market/shopping area
in order to select the location and features of the market/shopping area.
28 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 activities. 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.
29 Government’s and Third Parties’ Right to Use Company’s Facilities
(a) MCC shall:
(i) Allow the public and the Government of Afghanistan to use free of charge
any roads located outside the Project Area constructed and/or maintained
by MCC, provided, however, that such use shall not unduly prejudice or
interfere with MCC’s operations hereunder;
(ii) Allow the Government of Afghanistan to have access over the License
Area, provided that such access does not unduly prejudice or interfere with
MCC’s operations hereunder.
(iii) Allow the Ministry of Mines and third parties to explore for and exploit
minerals and other substances within the License Area in accordance with
Part I, Section 7 of this Mining Contract.
Aynak Mining Contract - April 8,2008 (Initialing)
PART V: COMMITMENTS AND OBLIGATIONS CONCERNING PROJECT
INFRASTRUCTURE, FACILITIES AND MANAGEMENT
MCC shall perform, undertake or otherwise comply with the following requirements:
30 Railway
MCC has made a commitment to the Government of Afghanistan to construct, at
MCC’s sole expense, a railway associated with the Project. The Government of Afghanistan
has made a commitment to use its authorities to assist MCC in securing the land and route
necessary to construct the railway. The Parties acknowledge and agree that, as of the date of
this Mining Contract, the specific conditions and requirements for the route, construction and
operation of the railway have not been definitively established by the Parties. Nonetheless, in
order to conclude this Mining Contract in a timely manner, the Parties acknowledge and
agree that MCC’s commitment to construct a railway shall be memorialized in a
Memorandum of Agreement(“MOA”), attached as Appendix 7, which shall be adopted and
incorporated into this Mining Contract as an enforceable part of this Mining Contract. The
MOA requires the Parties to negotiate in good faith to conclude a railway agreement within
twelve (12) months of the effective date of this Mining Contract. The Parties acknowledge
and agree that the failure to conclude a railway agreement within this timeframe shall
constitute cause for the Parties to revoke this Mining Contract pursuant to Section 47 of this
Mining Contract.
31 Power Supply
MCC has made a commitment to the Ministry of Mines to construct, at MCC’s sole
expense, one, four hundred (400) megawatt capacity coal fired power plant to supply
electrical power to the Project and to Kabul. The Ministry of Mines has made commitments
to MCC to make available sufficient coal resources for MCC’s use in the power plant and to
make available adequate land to establish the power plant. The Parties agree that the coal
resources shall be granted to MCC pursuant to a sole source process under the Minerals Law
and on the basis of MCC paying a reasonable royalty agreed to by the Parties. The Parties
also agree that MCC’s exploration, development, exploitation and use of the coal resources
shall be at MCC’s sole expense and in compliance with all applicable requirements under the
laws of Afghanistan, including those requirements concerning the payment of royalties and
income tax. The Parties agree that they will work co-operatively to locate suitable areas
where coal resources are likely to be of a sufficient quantity and quality to fuel the power
plant. MCC agrees that it will undertake all exploration, development, and exploitation
activities in the areas identified by the Parties. The Ministry of Mines agrees to provide all
necessary assistance with respect to making available information and licenses to plan and
expedite the necessary coal exploration and mine development. Upon identification by MCC
of a coal reserve of suitable quantity and quality, the Ministry of Mines will diligently
process the approvals necessary to allow MCC to exploit the coal reserve and fuel the power
plant. The Parties acknowledge and agree that, as of the date of this Mining Contract, the
specific conditions and requirements for the location, construction and operation of the power
plant, have not been definitively established by the Parties. With respect to the sale of
surplus power to the Government of Afghanistan by MCC, the Parties agree that the price of
surplus power shall be determined by the mutual agreement of the Parties. Nonetheless, in
23
Aynak Mining Contract - April 8, 2008 (Initialing)
order to conclude this Mining Contract in a timely manner, the Parties acknowledge and
agree that the Parties’ commitments concerning Project power supply shall be memorialized
in a MOA, attached as Appendix 8, which shall be adopted and incorporated into this Mining
Contract as an enforceable part of this Mining Contract. The MOA requires the Parties to
negotiate in good faith to conclude a power supply agreement within two(2) months of the
effective date of this Mining Contract and the negotiations can be extended for an additional
two (2) months if the Parties cannot reach agreement within the first two (2) months. The
Parties acknowledge and agree that the failure to conclude a power supply agreement within
this timeframe shall constitute cause to revoke this Mining Contract pursuant to Section 47 of
this Mining Contract.
32 Water Supply
MCC has made a commitment to the Government to construct water supply wells and
pipeline system, at MCC’s sole expense, in the vicinity of the Project to supply die Project’s
fresh water requirements. MCC has also committed to reuse and re-circulate process water to
the extent possible. The Government of Afghanistan has made a commitment to MCC to
make available sufficient water resources for MCC’s use in the Project. Subject to the
requirements of Section 37(c) of this Mining Contract concerning the protection of local
water use, the Parties agree in principle that MCC may obtain water from local water sources
to supply its needs. In the event that sufficient water is not available from these sources, the
Parties agree that they will work co-operatively to locate water supplies that are likely to be
of a sufficient quantity to meet MCC’s requirements. The Government agrees to provide all
necessary assistance with respect to making available information and licenses to plan and
expedite the necessary water supply development. Upon identification of water supplies of
suitable quantity, the Government will diligently process the approvals necessary to allow
MCC to utilize the water supplies. The Parties acknowledge and agree that, as of the date of
this MOA, the specific conditions and requirements for the location, construction and
operation of the water supply system have not been definitively established by the Parties.
Nonetheless, in order to conclude this Mining Contract in a timely manner, the Parties
acknowledge and agree that MCC’s commitments concerning water supply shall be
memorialized in a MOA, attached as Appendix 9, which shall be adopted and incorporated
into this Mining Contract as an enforceable part of this Mining Contract. The MOA requires
the Parties to negotiate in good faith to conclude a water supply agreement within three (3)
months of the effective date of this Mining Contract and the negotiations can be extended for
an additional three (3) months if the Parties cannot reach agreement within the first three (3)
months. The Parties acknowledge and agree that the failure to conclude a water supply
agreement within this timeframe shall constitute cause to revoke this Mining Contract
pursuant to Section 47 of this Mining Contract.
33 Phosphate, Limestone and Quartz (Silica) Supply
In order to fulfill its commitment to the Government to fund, construct and operate a
smelter in Afghanistan, MCC has requested that the Government provide access to deposits
of phosphate, limestone and quartz for MCC’s use in the Aynak Project. The Government
has made a commitment to MCC to make available potential sources of limestone and quartz
that MCC can use in the Aynak Project. In addition, the Government will use its best efforts
to make available potential sources of phosphate for MCC’s use in the Aynak Project. The
Aynak Mining Contract - April 8, 2008 (Initialing)
Parties agree that the phosphate, limestone and quartz resources shall be granted to MCC
pursuant to a sole source process under the Minerals Law and on the basis of MCC paying a
reasonable royalty agreed to by the Parties. The Parties also agree that MCC’s exploration,
development, exploitation and use of the phosphate, limestone and quartz resources shall be
at MCC’s sole expense and in compliance with all applicable requirements under the laws of
Afghanistan, including those requirements concerning the payment of royalties and income
tax. The Parties agree that they will work co-operatively to locate suitable areas where such
mineral resources are likely to be of a sufficient quantity and quality to meet MCC’s
requirements. The Government agrees to provide all necessary assistance with respect to
making available information and licenses to plan and expedite the necessary mineral
exploration and mine development. Upon identification of mineral reserves of suitable
quantity and quality, the Government will diligently process the approvals necessary to allow
MCC to exploit the mineral deposits. The Parties acknowledge and agree that, as of the date
of this Mining Contract, the specific conditions and requirements for the location and supply
of phosphate, limestone and marble have not been definitively established by the Parties.
Nonetheless, in order to conclude this Mining Contract in a timely manner, the Parties
acknowledge and agree that the Government’s commitments concerning phosphate,
limestone and marble shall be memorialized in a MOA, attached as Appendix 9, which shall
be adopted and incorporated into this Mining Contract as an enforceable part of this Mining
Contract. The MOA requires the Parties to negotiate in good faith to conclude a mineral
supply agreement within three (3) months of the effective date of this Mining Contract and
the negotiations can be extended for an additional three (3) months if the Parties cannot reach
agreement within the first three (3) months. The Parties acknowledge and agree that the
failure to conclude a mineral supply agreement within this time frame shall constitute cause
to revoke this Mining Contract pursuant to Section 47 of this Agreement.
34 Project Facilities
(a) Project facilities shall include, but not be limited to, the mines, processing
facilities, wastewater treatment, and transportation, communication, water supply,
power house, and other necessarily related facilities as set forth below, for which
MCC is, subject to the rights of third parties, authorized to construct and operate
in accordance with such reasonable safety regulations relating to design,
construction, and operation as required by best international mining practice and
the laws of Afghanistan. The facilities may include, but are not limited to:
(i) The mines and other operating facilities: development of mines will
require opening of roads, bridges, and storage areas, and may entail
construction of aerial tramways, conveyor belts, pipelines, and other
transportation facilities;
Additional roads, including roads to provide access to housing for MCC
personnel;
(iii) A modem wireless communications system that complies with Ministry of
Communication requirements;
(iv) Water supply facilities, including water dams, pumping stations,
purification systems, and distribution lines;
Aynak Mining Contract - April 8,2008 (Initialing)
(v) In addition, the project may require other buildings, workshops,
warehouses, storage areas, sewage disposal, foundries, machine shops,
repair shops, and all such additional or other facilities, plant and
equipment as MCC shall consider necessary for its operations or to
provide services or to carry on activities ancillary or incidental to such
operations. The Parties acknowledge and agree that the Government shall
make available appropriate land in Kabul on which MCC shall construct
an office. The land and all appurtenant structures shall be returned to the
Government upon the expiration of this Mining Contract.
(b) All Project Facilities shall be the personal property of MCC and may be
mortgaged, pledged or otherwise encumbered during the term of this Mining
Contract, with written notification to the Government, by MCC subject to the
provisions of Part XVII relating to Assignment and Part XII relating to
Termination of the Mining Contract.
(c) Subject to the security requirements that may be established in accordance with
the security agreement to be negotiated between the Parties pursuant to Section 35
of this Mining Contract, MCC shall be entitled to import necessary raw materials
and manufacture explosives solely for MCC’s use in connection with the Project.
Prior to commencing imports of the raw materials to manufacture explosives,
MCC shall provide the Government with a detailed inventory of the types and
amounts of raw materials to be imported, a transportation and storage security
plan, and a detailed calculation of the amount of explosives to be manufactured
and used in order to allow the Government to track the import of raw materials,
and the manufacture and use of explosives in connection with the Project. MCC
shall be required to maintain records of its raw material imports and explosives
manufacture and use and make such records available for Government review and
confirmation.
35 Control of Operations
MCC shall have full and effective control and management of all matters relating to
the operation of the Project including the production and marketing of its products in
accordance with sound, long-term policies. MCC may, subject to complying with the
applicable requirements of the Minerals Law and this Mining Contract and receiving
approval from the Ministry of Mines, make material expansions or modifications of the
Project Facilities, and may add new facilities, as MCC shall consider necessary for the
operation of the Project or to provide services or to carry on activities ancillary or incidental
to the Project. All such expansions, modifications, improvements, replacements, and
additions shall be considered part of the Project Facilities.
Subject to periodic review by the Government, MCC shall be entitled to maintain off¬
shore bank accounts in connection with the Project. MCC shall submit detailed quarterly
reports to the Ministry of Mines for each such off-shore bank account which provide
information concerning the use of each such account for Project purposes. In addition, MCC
shall be entitled to open and maintain local and foreign currency accounts in Afghanistan and
to freely convert and move foreign currency into and out of Afghanistan.
26
Aynak Mining Contract - April 8, 2008 (Initialing)
36 Project Security
The Parties acknowledge and agree that security for the Project is a necessary
condition for the successful construction and operation of the Project. The Parties
acknowledge and agree that the Government shall be responsible for the overall security of
the Project. The Parties also agree that MCC shall cooperate with the Government in taking
security measures requested by the Government The Parties further acknowledge and agree
that, as of the date of this Mining Contract, the specific conditions and requirements for the
establishment and maintenance of adequate Project security have not been definitively
established by the Parties. Nonetheless, in order to conclude this Mining Contract in a timely
manner, the Parties acknowledge and agree security commitments shall be memorialized in a
MOA, attached as Appendix 10, which shall be adopted and incorporated into this Mining
Contract as an enforceable part of this Mining Contract. The MOA requires the Parties to
negotiate in good faith to conclude a comprehensive security agreement within two (2)
months of the effective date of this Mining Contract. The Parties acknowledge and agree that
the failure to conclude a security agreement within this timeframe shall constitute cause to
revoke this agreement pursuant to Section 47 of this Mining Contract.
PART VI: OCCUPATION OF SURFACE AND OTHER RIGHTS
37 General
(a) Right to use land:
Subject to the provisions of this Mining Contract and Article 34 of the
Minerals Law, MCC shall have the right to enter and occupy any land
within the License Area for the purpose of undertaking operations and
activities under this Mining Contract. During the term of this Mining
Contract, MCC shall pay a nominal rent for its use of public lands,
whether inside or outside the License Area, calculated on a per hectare
basis. In the event that exemptions from the surface rent requirements of
the Minerals Law are established in the future, the Parties agree that the
Project shall be eligible to receive the benefits of such exemptions.
Subject to the applicable laws and regulations of Afghanistan, MCC shall
have the right to occupy and utilize for the duration of this Mining
Contract, or for a lesser period, the surface of such suitable areas outside
the License Area as may be necessary for the construction and operations
of roads, railways, and pipelines necessary for its activities and operations
under this Mining Contract. With regard to public lands lying outside the
License Area, MCC shall apply to the Government for the right to use such
land. The right to use such land shall not be unreasonably denied by the
Government. With regard to private lands lying either within or without
the License Area, the Government shall, at MCC’s expense, complete the
requirements necessary to obtain the rights to use the private land,
including the requirements for buying, leasing or transferring land or
relocating privately owned buildings, as may be necessary. MCC shall
make reasonable compensation, as determined by a mutually agreeable
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Aynak Mining Contract - April 8, 2008 (Initialing)
third party, for those owners of private lands who suffered economic loss
due to the aforesaid relocation.
Blasting or other dangerous operations may only be conducted in
accordance with the requirements of an approved blasting plan which
includes the type of explosive, blast design, blast frequency, blast distance,
and necessary safety precautions.
(b) Accessory works and installation:
Subject to the provisions of section (a) above, MCC shall have the right to
construct, maintain, alter, and operate the following types of facilities:
1. Industrial buildings and installations including mining, crushing,
milling, ore refining, leading and pumping stations, warehouses,
storage places and storage tanks;
2. Facilities for shipping;
3. Living accommodations and amenities, including but not limited to
hospitals;
4. Schools and recreational facilities, for MCC’s employees and their
families;
5. Other buildings, installations, and works necessary for MCC’s
operation and activities under this Mining Contract.
(ii) Rights of way shall be acquired and maintained in accordance with
applicable law and regulations.
(c) Subject to the approval of the Government and consistent with the requirements
specified in the water supply MOA attached as Appendix 9 to this Mining
Contract, MCC may appropriate and use water found within or outside the
License Area for MCC’s operations and activities under this Mining Contract.
For water appropriated from outside the License Area, the Government will
facilitate the acquisition of water resources. MCC shall not utilize agricultural
water or deprive any lands, villages, houses, or watering places for animals of a
reasonable supply of water insofar as such water has, through custom, been
utilized for such lands, villages, houses, or animals. Nor shall MCC interfere with
any water rights or existing uses of water enjoyed by any persons under the law of
Afghanistan.
(d) Subject to the approval of the Ministry of Mines, MCC may appropriate and use
gravel, sand, clay, or stone found within the License Area for purposes necessary
and useful to MCC’s operations and activities under this Mining Contract.
Provided, however, that such gravel, sand, clay, or stone shall be sold only with
the approval of the Ministry of Mines and subject to such conditions as may be
imposed (including conditions relating to fees to be paid to the Government) and
provided further that upon termination of this Mining Contract, any excavation
28
shall be rehabilitated by MCC in accordance with its approved mine development,
environmental management and reclamation plans.
(e) 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
License Area, subject to the general forestry laws of Afghanistan. Such cutting,
appropriation, and use shall be permitted only to the extent necessary to the
operations and activities of MCC under this Mining Contract. Such cutting,
appropriation, and use may be for the purpose of facilitating ingress and egress
into and from the License Area, for the purpose of clearing land for the erection of
machinery, plant and buildings connected with MCC’s operations and activities,
and for the purpose of construction required for MCC’s 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
(including conditions relating to fees to be paid to the Government).
PART VII: LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS
38 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 price than goods available from abroad.
In comparing prices of goods available in Afghanistan to the prices of goods imported by
MCC. the following conditions shall apply. For goods and services imported during the
construction period, customs duties shall not be added to the other expenses incurred up to
the time the imported goods are landed in Afghanistan. For goods and services imported
during operations, customs duties for raw materials shall be added to the other expenses. The
Parties agree that the process of comparing locally available goods and services to imported
goods and services shall not delay MCC’s construction activities or operations.
PART VHI: EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS
39 Employment of Afghan Nationals
(a) 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 operations in Afghanistan.
The following
percentages of all positions in each employment classification shall be held by
Afghanistan nationals within the periods agreed to by the Parties, starting with the
commencement of production. The classifications of employment for the purpose
of this Part shall include the following: managerial, technical, professional,
administrative, clerical and skilled labor:
29
Up to 3 years 5 years 8 years
Skilled labor 50 percent 100 percent 100 percent
Clerical and supervisory 50 percent 75 percent 85 percent
Technical 50 percent 75 percent 90 percent
Management; Profession 50 percent 75 percent 85 percent
;.«n . \MCC’s failure to achieve said percentages will be
considered a breach of contract in accordance with Section 47 of this Mining
Contract except where MCC can justify such failure on grounds acceptable to
the Government. The employment and the terms and conditions of such
employment and the discharge or disciplining of Afghan personnel shall be
carried out in compliance with the applicable labor laws and regulations of
Afghanistan.
4© Training
(a) MCC shall provide for the training of suitable persons of Afghanistan citizenship
in order to qualify them for skilled, clerical and supervisory, technical, and
management and professional posts in MCC’s operations and activities in
Afghanistan.
(b) Education Grants. MCC shall establish and cooperate in a program of foreign
scholarships for Afghan nationals and grants to educational institutions of
Afghanistan.
41 Nom-Afgia&ES Personnel
(a) Subject to the requirements of Sections 38 and 39 of this Part, MCC and its
subcontractors may bring into Afghanistan such non-Afghan personnel as in
MCC’s judgment are required to carry out construction and operations efficiently
aitd 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 within a reasonable time period and without hampering the
continuous and efficient performance of MCC under this Mining Contract. In this
connection MCC shall have the right periodically to submit manpower
requirement plans and the Government will, within a reasonable time 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.
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Aynak Mining Contract - April 8, 2008 (Initialing)
(b) 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.
42 Employee Accident Compensation
MCC shall be responsible for the medical and rehabilitation costs for any employee
injured performing his or her duties while employed by MCC at the Project. Injured
employees shall be entitled to return to the same or similar positions following recovery from
injury. In the event that an employee is killed performing his or her duties while employed
by MCC at the Project, MCC shall be responsible for the payment of an adequate death
benefit to the immediate family of the deceased employee.
PART IX: IMPORTS AND EXPORTS
43 Imports
This Mining Contract authorizes MCC, including its subcontractors, to import
into and for use in Afghanistan all equipment and materials, such as
machinery, supplies, and equipment necessary for the operation of the Project,
including its Kabul office, subject to the payment of the customs duties
specified in this Mining Contract. 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 Ministry of Mines for review and shall provide
all necessary documents required bv the Customs Office of the Ministry of
Finance, as necessary', for customs clearance. This authorization shall apply to
the following categories of imports:
(i) All of the capital assets, construction materials and raw materials
related to the Project including, but not limited to, machinery, machine
units, vehicles (excluding sedan cars), mine facilities and equipment,
smelter facilities and equipment, refinery facilities and equipment,
office equipment; appliances, office buildings, employee housing,
security facility equipment, schools, hospitals, domestic goods and
personal effects including ncusch...^ cr.o .iving 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 construction period, which shall expire sixty (60)
months from _th o elective date of this Mining Contract unless extended
bv mutual agreement of the Parties:
(ii) During the operations period which shall commence immediately upon
expiration of the construction period. MCC shall be required to pav
ini1.:.or; duties c-rfo on rav. materials in accordance with the Customs
Law:
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Aynak Mining Contract - April 8, 2008 (Initialing)
lb) Re-exports. Any items imported by MCC or its subcontractors for use in
connection with the Project 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
(c) customs and import laws and regulations which shall at the time of such sale
be in effect.
The exemption from import duties set forth in this Section shall not apply
where MCC, including its subcontractors, fails to use best efforts to purchase
goods in accordance with the requirements of Section 38 of this Mining
(d) Contract concerning local purchasing.
Subject to the requirements of Section 43(a) of this Mining Contract, the
Government, through the Ministry of Finance, shall have the right to inspect
and inventory any articles imported by MCC for which MCC claims import
(e) duty exemption.
Imports not exempted from duties under this Section shall be subject to the
payment of the appropriate duty in accordance with applicable Afghanistan
(0 law.
If MCC, including its subcontractors, intends to sell or transfer any articles
which 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
(g) 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.
If MCC applies any article which has been imported free of duty under this
Mining Contract to a nonexempt purpose, a declaration shall be made to the
Ministry of Finance within thirty days of such initial use of nonexempt
purposes and such import duty shall be paid as may be assessed by the
(h) Ministry of Finance in accordance with the laws and regulations governing
customs.
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
(0 name or marks of MCC in a manner difficult to delete.
MCC, including its subcontractors, shall be liable for violations of the
requirements of Afghanistan’s Customs Law.
(j) MCC shall maintain depreciation records for all imported items subject to the
exemptions established by this Section and submit such records to the
Ministry of Finance annually.
32
Aynak Mining Contract - April 8, 2008 (Initialing)
44 Exports
(a) MCC shall, subject to the conditions set forth in Part II, have the right to export
and sell free of customs duties all products obtained from its operations under this
Mining Contract.
(b) It is understood and agreed that exemption from customs duties shall not liberate
MCC, including its subcontractors, or its agents and personnel from the obligation
to fulfill all customs formalities necessary for statistical verification and other
purposes.
45 Cooperation
All imports and exports of articles under this Mining Contract 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 agrees to establish a customs facility in the License Area, which shall be funded,
constructed and operated by MCC, to facilitate and complete the customs clearance of all the
import and export items. The Parties agree that import shipments will receive customs seals
at the border, but shall only be opened upon arrival at the Project’s customs facility.
PART X: SUSPENSION OF OPERATIONS
46 General
At any time after the effective date of this Mining Contract, MCC may notify the
Government that MCC is suspending, in whole or in part, its operations because in MCC’s .
judgment economic or other conditions make it necessary to do so. MCC may, following
consultation with the Government during which the Government will express its view as to
the basis for suspension, suspend operations and may continue such total or partial
suspension of operations for a period of up to six (6) months. MCC shall not be entitled to
suspend operations for a period of longer than six (6) months except where the Government
defaults under the Mining Contract; a force majeure exists that lasts longer than six (6)
months; or if the LME copper price continues to be lower than the break-even copper price,
identified in the Bankable Feasibility Study, for more than 6 months and MCC runs into a
loss, MCC shall, with the agreement of the Ministry of Mines, have the right to partially or
fully suspend the production operations until the LME copper price returns above the break¬
even copper price. In all other cases, MCC’s suspension of material operations for a period
of longer than six (6) months shall constitute cause for the Government to revoke the Mining
Contract pursuant to Section 47 of this Mining Contract. Suspension of operations shall not
relieve MCC of its obligations under this Mining Contract. MCC shall consult with the
Government and keep it fully informed regarding any suspension of operations under this
Part. During any suspension of operations, MCC shall remain obligated to comply with all
applicable provisions of Afghanistan’s Labor Law.
■r
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Aynak Mining Contract - April 8, 2008 (Initialing)
PART XI: REVOCATION
47 Revocation for Cause
(a) In the event that:
(0 MCC fails to commence commercial production within 60 months of the
effective date of this Mining Contract as required by Section 13 and 14 of
(ii) this Mining Contract, or
No commercial shipment of finished product is made within 12 months
after commercial production, or
(iii) Any tax or other payment payable by MCC under this Mining Contract or
the laws of Afghanistan shall be in arrears or unpaid for a period of 6
calendar months, or
(iv) MCC assigns to a third party the whole or part of the rights held by it
under this Mining Contract without the previous written consent of the
Government provided in Part XVII, or
(v) MCC has knowingly submitted to the Government any false statements
which were a material consideration for the execution of this Mining
Contract, or
(Vi) MCC intentionally extracts any minerals other than copper ore, or
Associated Minerals without express authorization by the Government, or
(vii) MCC fails to produce fifty percent (50%) of its proposed copper
production rate, as defined in its Bankable Feasibility Study and Mine
Development Plan, during the first year of commercial production or
eighty percent (80%) of its proposed copper production rate for each
subsequent year, as measured in metric tonnes of finished product, or
(viii) MCC fails to comply with any final decisions by the arbitral tribunal in
controversy arising with the Government under this Mining Contract, or .
(ix) There exists any other material breach or nonobservance by MCC of any
of the terms, obligations, or conditions of this Mining Contract, or of any
law of Afghanistan, or
(x) MCC shall make or enter into any agreements for composition with
creditors that are unacceptable to the Government or shall go into
liquidation, whether compulsory or voluntary, or if a receiver is
appointed, other than for the purpose of reconstruction of the Project and
only if the interest expected by the Government under or from this Mining
Contract is materially or fundamentally damaged by such composition,
liquidation or reception, or
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Aynak Mining Contract - April 8, 2008 (Initialing)
(xi) MCC fails to establish a smelter and refinery in accordance with Appendix
4 and 6 of this Mining Contract.
The Government may, subject to the provisions of this Part, revoke this Mining
Contract and be entitled to the rights specified in Section 49.
(b) In the event that:
The Government takes back or revokes the exclusive mineral right without
cause or legal justification, or
The Government allows other parties to exploit copper and associated
metals in the License Area in violation of this Mining Contract, or
(iii) MCC’s operations are interfered so seriously by the Government that
MCC is not able to maintain the normal operation, or
(iv) The Government fails to provide sufficient security for the Project in
accordance with the terms of an executed security agreement, or
(v) The Government fails to comply with any final decisions by the arbitral
tribunal in controversy arising with the Government under this Mining
Contract, or
(vi) There exists any other material breach or nonobservance by the
Government of any of the terms, obligations, or conditions of this Mining
Contract, or of the laws of Afghanistan.
MCC may, subject to the provisions of this Part, revoke this Mining Contract and be
entitled to the rights specified in Section 49.
(c) In the event that the Parties fail to conclude any of the definitive agreements
specified in the Memoranda of Agreement identified in Sections 30, 31, 32, 33
and 36 of this Mining Contract, the following conditions shall apply. If the failure
to conclude any of the agreements is due to the fault of the Government, the
Government will return the premium paid to the Government and compensate
MCC for its reasonable expenses incurred prior to termination. If the failure to
conclude any of the agreements is due to the fault of MCC, the Government shall
retain any premium paid to the Government and any property which the
Government is entitled to retain under this Mining Contract. If the failure to
conclude any of the agreements cannot be attributed to either Party, the Parties
shall submit the dispute to dispute resolution in accordance with Part XIV of this
Mining Contract. In the event the Parties fail to conclude any of the agreements,
MCC’s performance guarantee under Section 17(a) shall be returned to MCC.
48 Notification and Remedy
(a) In the event that the Government seeks to revoke this Mining Contract pursuant to
this Part, the Government shall give notice in writing specifying the particular
Y
35
Aynak Mining Contract - April 8, 2008 (Initialing)
breach 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 revoke this Mining Contract
pursuant to this Part, MCC shall give notice in writing specifying the particular
breach and proposing a time period of at least three calendar months during which
the Government must remedy the breach.
(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 breach,
revoke this Mining Contract, provided, however, that where there is any dispute
between the Parties as to:
Whether there has been any breach or nonobservance by MCC or the
Government of any term, obligation, or condition of this Mining Contract,
or
(ii) Whether any breach or nonobservance is remediable or as to the manner in
which it should be remedied, MCC or the Government may, within one
year of notice refer the dispute to arbitration, and the Government or MCC
shall not exercise its power of revocation 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.
(c) Upon the revocation of this Mining Contract by the Government, all rights granted
to MCC hereunder shall terminate, subject to, and without prejudice to, any
obligation or liability imposed or incurred under this Mining Contract prior to the
effective date of revocation and subject to, and without prejudice to, the rights and
obligations of the parties under this Part. Upon the revocation of this Mining
Contract by MCC, MCC shall be entitled to the rights specified in Section 49 of
this Mining Contract.
49 Penalties
(a) Unless otherwise specifically provided for in this Mining Contract or any law
referred to in this Mining Contract and notwithstanding the Government’s right of
revocation under this Part, the penalty for any breach of this Mining Contract shall
be damages which shall be fixed by applicable laws and regulations currently in
effect or which may be enacted or promulgated in the future.
(b) Notwithstanding the provisions of this Part, in the event MCC shall be in default
in the making of any payment of money to the Government which MCC is
required to make pursuant to Part El, the period within which MCC must cure
such default shall be 30 days after the receipt of notice thereof. The penalty for
late payment shall be an interest charge on the amount as defined by the Ministry
of Finance, based on the current LIBOR rate (London Interbank Overnight Rate).
36
Aynak Mining Contract - April 8,2008 (Initialing)
PART XII: TERMINATION
50 Transfer of Property and Compensation at Termination
(a) In the event that this Mining Contract is revoked by the Government for cause
pursuant to Section 47:
Subject to the environmental protection and reclamation obligations
established in Part I of this Mining Contract, upon the expiration or earlier
revocation for cause of this Mining Contract, MCC shall leave, in good
and safe running order, the mine and its associated structures including,
but not limited to, all shafts, pits, and underground workings, all fixed
assets such as buildings, roads, railroad, or airstrips constructed by MCC
under this Mining Contract, and all plants and equipment necessary for the
continued operation of the mine, and the same shall revert to the
Government free of any liens, charges, encumbrances or liabilities and
shall become the property of the Government without compensation to
MCC.
(ii) Subject to any claims which the Government may have against MCC,
arising under this Mining Contract or otherwise, all normal stockpiles and
other liquid assets used by MCC in connection with its operations and
activities under this Mining Contract shall remain the property of MCC
and may be freely withdrawn, exported, sold, or otherwise disposed of in
accordance with applicable laws and regulations and the terms of this
Mining Contract, without payment of any duty, provided, however, that
the Government shall have the first right to purchase, at a fair price to be
determined between the parties, any such stockpiles or other liquid assets.
In the event that the Government fails to exercise such right of purchase
within ninety days after the termination of concession, MCC may remove
such stockpiles and other liquid assets.
(b) In the event that this Mining Contract is revoked by MCC for cause pursuant to
Section 47:
(i) MCC shall be entitled to receive fair compensation from the Government.
For the purposes of this Mining Contract, the term “fair compensation”
may include any or all of the following components: premium payments,
investment and working capital, purchased inventory, and partially
finished or finished products produced through MCC’s investment. The
actual amount of fair compensation shall be determined by the Parties
either through agreement or by arbitration. The Parties shall endeavor to
reach agreement on the amount of compensation which is fair under the
circumstances of the revocation. In the event that the Parties cannot reach
agreement on the amount that constitutes fair compensation, the amount of
fair compensation shall be determined by an international arbitration
tribunal or pursuant to Section 55 of this Mining Contract.
37
Aynak Mining Contract - April 8,2008 (Initialing)
51 Continuation of Rights and Duties
Rights and obligations which have come into effect prior to the termination of this
Mining Contract and rights and obligations relating to transfer of currencies and properties
which have not yet been completed at the time of such termination, shall continue in effect
for the times necessary or appropriate fully to exercise such rights and discharge such
obligations.
52 Infrastructure
At the end of the term as provided in Part XVIII or upon termination of the Mining
Contract as provided in this Part XII, or when no longer needed by MCC, and at no cost to
MCC, any such property of MCC in Afghanistan moveable and immovable, as shall be in use
for public purposes such as roads, schools, and hospitals, shall be transferred as a gift to the
Government.
PART XHI: FORCE MAJEURE
53 General
Any failure by the Government or any of its Ministries or subdivisions, or by MCC, to
cany out any of its obligations under this Mining Contract shall not be deemed a breach of
contract or default if such failure is cause by force majeure. If, through force majeure, the
fulfillment by either Party of any terms and conditions of this Mining Contract is delayed,
curtailed or prevented, then, anything in this Mining Contract to the contrary
notwithstanding, the time period for fulfilling the obligation thereby affected and the term of
this Mining Contract specified in Part XVIII 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 Mining Contract, force majeure shall include wars, 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.
54 Notice
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 party shall be obligated to resolve or terminate any disagreement with third parties,
38
Aynak Mining Contract - April 8,2008 (Initialing)
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.
55 Disputes
Any differences regarding interpretation or application of this Part, including
differences concerning the period by which the terms of this Mining Contract and of rights
and obligations thereunder should be extended, shall, if not otherwise amicably resolved, be
determined through means of settlement stipulated under Part XTV.
PART XIV: SETTLEMENT OF DISPUTES
56 Method of Dispute-Settlement
(a) If, during this Mining Contract or thereafter, there shall be any question or dispute
with respect to the structure, meaning, or effect of this Mining Contract, or arising
out of or in connection with this Mining Contract, either Party shall have the right,
subject to no conditions precedent, to refer the dispute to the International Centre
for Settlement of Investment Disputes (“ICSID”) for settlement by conciliation
and/or arbitration as hereinafter provided. Any of the parties to such dispute 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 Mineral Right or any part
thereof by MCC as per provisions of Section 60 of this Mining Contract shall not
prejudice MCC’s rights under this Section 55.
(b) The 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 award, 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.
(d) The decision of the arbitrator shall be final and binding upon the parties to this
Mining Contract and upon any person who participated as a party in such
arbitration proceedings, and he shall comply in good faith with the decision.
(e) Should ICSID be replaced by, or its functions substantially devolve upon or be
transferred to, any new international body of similar type and competence, the
function of the Arbitration Tribunal of ICSID provided by this Article shall be
39
Aynak Mining Contract - April 8,2008 (Initialing)
exercisable by the chief officer of such international body without further
agreement among the parties hereto.
(f) Principles of fairness and good faith shall apply during the arbitration if no
applicable law or regulation exists.
(g) If the services of ICSID are unavailable to the parties to this Mining Contract,
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 award of the arbitration tribunal shall be final
and binding on the Parties to this Mining Contract and on any persons who
participated as a party in such arbitration proceedings. Both Parties agree to
accept the jurisdiction of the said Arbitration Institute of the Stockholm Chamber
of Commerce and execute voluntarily the award 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.
PART XV: REVIEW OF CONTRACT TERMS
57 Fiscal Provisions
(a) The parties shall, at five-year intervals from the effective date of this Mining
Contract, review the economic terms of this Mining Contract to determine
whether the Mining Contract shall be amended to provide for 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
toward providing a fair 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 following factors:
(i) the economic value of the license,
terms of other copper agreements of comparable investment size and
resource conditions negotiated by the Government within the five-year
period preceding the date of review,
(iii) terms of other copper agreements of comparable investment size and
resource conditions negotiated by MCC within the five-year period
preceding the date of review,
(iv) terms of other copper agreements of comparable investment size and
resource conditions negotiated by third parties .
40
Aynak Mining Contract - April 8,2008 (Initialing)
(d) Disputes arising pursuant to this Section shall be resolved in accordance with the
requirements of Section 55 of this Mining Contract.
58 General Review
(a) The Parties shall, at 5 year intervals from the effective date of this Mining
Contract, review the Mining Contract (excluding those sections covered in Section
56 above) to determine whether, in the light of changed circumstances, the Mining
Contract should be amended.
(b) The Parties agree that they shall each carry out such review in good faith and shall
give due regard to the legitimate interests of the other party.
(c) Disputes arising pursuant to this Section shall be resolved in accordance with the
requirements of Section 55 of this Mining Contract.
PART XVI: DOMICILE; SERVICE OF PROCESS
59 General
MCC shall be domiciled and 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 this 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.
60 Notices
(a) Notices for the purpose of this Mining Contract shall be sufficiently served if
delivered or sent by registered post: /< S
(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.
All notices, requests or other communications required by, provided for in, or
relative to this Mining Contract shall be in writing. E-mails and facsimiles
shall be considered as written communications.
PART XVII: ASSIGNMENT
61 General
In accordance with the requirements of Article 23 of the Minerals Law, MCC may not
assign, transfer, lease or pledge, the mineral rights or any part thereof granted under this
41
Aynak Mining Contract - April 8,2008 (Initialing)
Mining Contract or any rights, privileges, liabilities or obligations granted or imposed by this
Mining Contract, or any interest in the mineral rights without the previous consent in writing
of the Government. The consent of the Government shall not be required where (i) 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 within thirty days of
the assignment.
(a) The Government shall not give its consent unless it is satisfied:
(i) That the proposed assignee is itself of good reputation or is a member of a
group or groups of companies of good reputation or is owned by a
company or companies of good reputation;
(ii) that there is likely to be available to the proposed assignee either from its
own resources or through other companies in the group of which it is a
member, or otherwise, sufficient technical knowledge, experience and
know-how and sufficient financial resources to enable it effectively to
carry out a program satisfactory to the Government for the operations
hereunder; and
(iii) That 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
and obligations of the assignor with respect to what is assigned without relieving MCC of
such liabilities and obligations unless the Government expressly consents to such a release.
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Aynak Mining Contract - April 8,2008 (Initialing)
PART XVIII: AGREEMENT PERIOD
62 General
This Mining Contract shall continue in force for a period of 30 years following the
effective date of this Mining Contract. As provided in Section 62, this Mining Contract is
subject to renewal in accordance with the terms and conditions specified in Article 22 of the
Minerals Law, and other applicable provisions of this Mining Contract. It is understood and
agreed that if, at any time, MCC shall propose a substantial new investment in the Project or
shall require an extension of the term of this Mining Contract in order to facilitate additional
financing, long-term sales contracts or otherwise, and in any event at least five years prior to
the expiration date of this Mining Contract, the Government will give sympathetic
consideration to a request by MCC to extend the term of this Mining Contract to permit
continuation of the Project on the basis of long-term planning and sound mining and
operating practices and to assure continuing employment of those devoting their time and
efforts to the success of the Project.
PART XIX: RIGHT OF RENEWAL OF MINING CONTRACT
63 General
(a) This Mining Contract can be renewed for consecutive five year periods until
exhaustion of the deposits being exploited on the same conditions except those
relating to taxation, royalty payments, land rent, and other provisions relating to
MCC’s fulfillment of its financial obligations to the Government.
(b) Provided however, that such rights of renewal are subject to MCC’s fulfillment of
its obligations under this Mining Contract.
PART XX: AMENDMENT
64 General /> / \
This Mining Contract may be amended by the mutual agreement of the Parties. Each
amendment shall be in writing and shall be effective according to the specific terms of the
amendment. \ \
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Aynak Mining Contract - April 8, 2008 (Initialing)
PART XXI: COMPLETE AGREEMENT
65 General
This Mining Contract, consisting of the above Parts 1-XX1, Sections l-65_and
Appendices I-I I, constitutes die complete agreement of the Parties and shall become
effective in accordance with the terms of this Mining Contract. This Mining Contract shall
be executed in English in four (4) originals with each Party holding two (2) originals and in
Dari. In the event that a dispute arises under this Mining Contract, 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 Mining Contract.
Agreed:
44
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 1: LICENSE AREA
The Aynak Exploration and Exploitation areas are defined as follows:
Coordinates of the Aynak Reserved Areas
Exploration Area - D Area = 106.332 km2
Points Longitude Latitude Decimal Degrees
A 69° 16’ 00" 34° 14’ 30" 69.26666E 34.24166N
B 69° 25' 30" 34° 14' 30" 69.425E 34.24166N
C 69° 25’ 30" 34° 19’ 30" 69.425E 34.325N
D 69° 16' 00" 34° 19’ 30” 69.26666E 34.325N
H 69° 16' 00" 34° IT 30” 69.26666E 34.29167N
G 69° 20' 00" 34° IT 30" 69.33333E 34.29167N
F 69° 20' 00" 34° 15’ 00" 69.33333E 34.25N
E 69° 16’ 00" 34° 15’ 00" 69.26666E 34.25N
Exploitation Area - E Area = 28.357 km2
E 69° 16' 00" 34° 15'00" 69.26666E 34.25N
F 69° 20' 00" 34° 15' 00" 69.33333E 34.25N
G 69° 20' 00" 34° IT 30" 69.33333E 34.29167N
H 69° 16’ 00" 34° IT 30" 69.26666E 34.29167N
The following graphic depicts the relative positions of the points described above:
45
Avnak Mining Contract - Anril 8. 2008 (Initialing)
69.26666,34 325 S3.425 34 325
D- ■Q
Aynak Exploration Area = 106.332 km2
66.26666 34.26167
69 42S, 34 24166
The Exploitation Area (“E”) provides sufficient coverage for the development of the
resources and reserves of the Aynak Central and Western mineralized zones. As defined in
the Mineral Laws of Afghanistan, Article 3:13, Exploitation “means any activity which, from
an identified Deposit (the Central and West Aynak zones), exploration, pre-production
development and extraction of Mineral Substances (all contained minerals) takes place by
means of open [surface] and/or underground works, from a natural Deposit or an Artificial
Deposit for its processing, using or selling.”
The Exploration Area (“D”) covers other known copper prospects and land with
potential for discovery of additional economic mineralization. As defined in the Mineral
Laws of Afghanistan, Article 3:15, Exploration “means any activity carried out to discover
Mineral Substances, to demarcate it, to evaluate the quality and quantity of the reserves
contained within it, or to evaluate the possibilities of exploiting it.”
Ultimately, successful negotiation and execution of an Agreement to exploit the
copper and other associated minerals at the Aynak copper deposit, will include the right to
undertake a program of exploration, development, construction, mining, processing,
marketing and sales under terms and subject to the conditions of the Agreement and on the
basis of laws and regulations of the Islamic Republic Afghanistan.
Y 46
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 2: PROJECT SCHEDULE
Schedules taken from MCC Proposal (Appendix 6 of this Mining Contract). Modified to reflect months and quarters.
No Description Y1 Y2
I 2 34 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7
INVESTIGATION AND STUDY
1.1 Geologic investigation and research for Aynak deposit
1.2 Investigation on potential copper resources
1.3 Hydrogeological condition at mine site
1.4 Environmental background investigation
1.5 Investigation on auxiliary and raw materia) resources
EXPLORATORY DRILLING AT SITE AREA
2.1 Verification for exploratory hole
2.2 Supplementary exploratory drilling at central area
2.2 Prospecting bore hole at west area
PROCESSING AND SMELTING SAMPLING AND TEST
ROCK MECHANICS TEST
WATER SOURSE EVALUATING
6 DEVELOPMENT SCHEME RESEARCH
6.1 PrefeasibHity study
6.2 Environmental management scheme
6.3 Feasibility study
6.4 Pit snutoff scheme
Fig. 3-2 Due diligence and pre-development plans
47
Aynak Mining Contract - April 8, 2008 (Initialing)
Year Y1 Y2 Y3 Y4 Y5
Quarter m. 21 21 2_ 21 21 2i £ 21 21 21 Q3 04 Qi Q2 Q3 24
EFFE C'TIVENESS OF MC
DUE DILIGENC E
V enfication Dulling LEGEND
Data Collecting and Analysing Due Diligence
Resources Modelling Preconstruction work
pre-dem;lopmext Purchasmg
Infill Drilling and Bulk Sampling Construction
Test and Research Commissioning
Feasibility Study mmwmm mm m
Basic Engineering
Detail Design
PURCHASING
CONSTRUCTION
Open Pit Prestripping
Concentrator Construction
Smelter Construction
SX-EW Plant
Township C onstnicoon
Infrastructure Construction
COMMISSIONING
Months 1 1 10 13 16 19 22 25 23 31 31 37 10 43 46 49 52 55 53
Fig. 4-9-1 Schedule of project execu ion
Aynak Mining Contract - April 8,2008 (Initialing)
APPENDIX 3: REPORTS TO BE SUBMITTED
Subject to the promulgation of reporting requirements in the Mining Regulations as may be
adopted by the Ministry of Mines in the future, the following reports shall be prepared and
submitted by MCC to the Ministry of Mines:
1. Reports to the Government and Records to be Maintained
(a) With respect to the Company’s obligation to pay taxes on net income, the
Company shall submit such information and documents as required in the Income
Tax Law.
(b) With respect to MCC’s exploratory and mining activities, MCC shall submit such
information and documents as required in Section 4 below.
(c) In addition, the following shall be delivered to the Government: Environmental
Reports, Social Reports and Other Reports as may be required by the Ministry of
Mines.
(d) MCC shall furnish to the Ministry of Mines all other information of whatever kind
which the latter may request in order that the Ministry of Mines may be fully
apprised of the Company’s exploration and exploitation activities.
(e) All information furnished to the Government shall be in English and translated
into one of the official languages of Afghanistan. All translations shall be
acceptable to the Ministry of Mines. All financial data shall be recorded in [US
Dollars].
(f) MCC shall maintain all original records and reports relating to its activities and
operations under this Agreement including all documents relating to financial and
commercial transactions with Independent Parties and Affiliates in its principal
office in Afghanistan. These records and reports shall be opened to inspection by
the Government through an authorized representative during normal working
hours. Such reports and records shall be maintained in the English language and
all financial data shall be recorded in [US Dollars].
(g) The provisions of this Schedule shall apply to MMC’s co-participants, affiliates,
contractors, and subcontractors to the extent that such co-participant, affiliate,
contractor, or subcontractor carries out operations and activities in furtherance of
the Company’s obligations, activities and operations under this agreement.
2. Confidential Reports
(a) Any information supplied by the Company shall (except with the consent in
writing of the Company which shall not be unreasonably withheld) be treated by
all persons in the service of the Government as confidential, but the Government
shall nevertheless be entitled at any time to make use of any information received
from the Company for the purposes of preparing and publishing aggregated
returns and general reports on the extent of prospecting or mining operations in
Afghanistan, promoting mineral exploration and development in Afghanistan and
49
Aynak Mining Contract - April 8, 2008 (Initialing)
for the purpose of any arbitration or litigation between the Government and the
Company.
(b) All records, reports, plans, maps, charts, accounts, and information which the
Company is or may be from time to time required to supply under the provisions
of this Agreement shall be supplied at the expense of the Company. MCC shall
supply such information in three paper copies and a digital form as prescribed
from time to time.
3. Reasonable Inspection
Any person or persons authorized by the Government shall be entitled at all
reasonable times to enter into and upon any part of the premises of the Company and inspect
its work, activities, and operations to insure the proper implementation by the Company of
the provisions of any law applicable to the work, activities and operations of the Company,
including the provisions of this Agreement and any regulations and decisions issued for the
implementation of any applicable law.
4. Progress Reports
(a) The Company will keep the Government, through the Ministry of Mines advised
concerning the Company’s operations through submission of quarterly progress
reports, beginning with the first quarter following the Date of this Agreement, as
to the progress and results of the Company’s development operations and
activities under this Agreement. All reports shall be supplied in a form as agreed
by the Parties.
(b) The Company shall file with the Ministry of Mines a summary of its geological
and metallurgical investigations, all geological, geophysical, topographic, and
hydrographic data obtained from the general survey and exploration and a sample
representative of each principal type of copper-bearing mineralization encountered
in its investigations.
(c) Exploration Reports. Quarterly reports relating to any exploration activities shall
include:
(i) The results of geological and geophysical investigations and
proving of ore deposits in the exploration area and the sampling of
such deposits, including but not limited to the following to be supplied
in 3 paper copies and a digital form as prescribed from time to time:
i. Copies of all raw and processed digital data, survey parameters and
reports resulting from all geophysical and geochemical surveys;
ii. Copies of all geological and other technical reports including reports
on reserve estimates, mining, environmental and social assessments;
iii. Copies of all drill logs including hole location and elevation, all
descriptions of all formations intersected and depths, all geophysical
down hole logs, analyses of all samples taken, and appropriate core
splits from holes on the Exploitation and Exploration licenses;
50
Aynak Mining Contract - April 8, 2008 (Initialing)
iv. MCC shall maintain a core library from all drilling at properties on
the Exploration and Exploitation licenses. The Ministry of Mines
will have access to the Core Library.
The results of any general reconnaissance of the various sites of
proposed operations and activities under this Agreement;
(iii) Information concerning the selection of routes for roads and
railways;
Information concerning the planning of suitable townsites,
including information of suitable water and power supplies for the
townsites and other facilities;
(v) Such other plans and information as to the progress of operations in
the exploration area as the Ministry of Mines may from time to time
reasonably require.
(d) Exploitation Reports:
The Company shall submit to the Ministry of Mines a monthly
statistical report beginning with the first month following the
commencement of mining operations which shall set forth the number
and location of the workings on which work was begun during the
preceding month; the number of workmen employed thereon at the end
of the month, a list of the equipment at the workings at the end of the
month and a brief description of the work in progress at the end of the
month and of the work contemplated during the following month.
The Company shall furnish to the Ministry of Mines quarterly
reports beginning with the first quarter following the commencement
of the exploitation period concerning the progress of its operations in
the License Area. This report shall specify in full:
i. Those workings in which ore is considered to have been found,
regardless of whether the deposits are deemed to be commercial or
not (together with all data relative to the estimated volumes of the
reserves, ,the kind or kinds of such ore encountered, and the analyses
thereof) the number and description of workings which have been
placed in commercial production and the full particulars concerning
the disposition of such production; the number of workmen
employed on each such working as of the work in progress at the end
of the quarter in question and of the work contemplated during the
ensuing quarter.
ii. The work accomplished during the quarter in question with respect to
all installations and facilities directly or indirectly related to its
exploitation program such as, but not limited to, those accessory
works and installations described in Part IV hereof, together with the
work contemplated for the ensuing quarter with respect to the same
installations and facilities and indicating actual and estimated
Y
51
Aynak Mining Contract - April 8, 2008 (Initialing)
investment in such installations and facilities made, committed, or to
be committed with respect to such installations and facilities.
iii. The Company shall furnish to the Ministry of Mines an annual report
beginning with the first complete year following the First Mining
Day which shall include:
The number and description of the workings which were in
progress at the end of the year preceding the years in
question (with a showing as to which are in commercial
production); the number and description of workings
abandoned during the year; the production of each of the
workings, regardless of whether in commercial production
or not, with a full description of the kind and quality and
analysis of ore produced from each working, the number of
workings on which activities are continuing at year end, but
which have not gone into commercial production.
(b) The total volume of ores, kind-by-kind, broken down
between volumes mined, volumes transported from the
mines and their corresponding destination, volumes
stockpiled at the mines or elsewhere in Afghanistan,
volumes sold or committed for export (whether actually
shipped from Afghanistan or not), volumes actually shipped
from Afghanistan (with full details as to purchaser,
destination and terms of sale), volumes refined, processed
and/or manufactured within Afghanistan with full
specifications as to the intermediate products, byproducts,
or final products, outtumed with Afghanistan (with full
showing as to the disposition of such intermediate products,
byproducts or final products and of the terms on which they
were disposed); and
(c) Work accomplished and work in progress at the end of the
year in question with respect to all of the installations and
facilities related to the exploitation programs, including, but
not limited to those referred to in this Schedule herein,
together with a full description of all work programmed for
the ensuing year
iv. Monthly and quarterly reports shall be submitted to the Ministry of
Mines in quadruplicate within thirty days of the end of the month or
quarter in question, as the case may be. Annual reports shall be
submitted in quadruplicate within ninety days of the end of the year
in question.
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Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 4: DEVELOPMENT PLAN AND BUDGET
See Appendix 6 for the MCC Proposal Development Plan. This is to be replaced by the
Development Plan and Budget resulting from the completion of the Feasibility Study.
At
53
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 5: ROYALTY DEFINITION
Section 21 of Mining Contract: Royalties
(a) MCC shall pay royalties on minerals mined and processed from the Aynak deposit
in accordance with the royalty details below. Royalties shall be paid in United
States Dollars or such other currency as may be mutually agreed and shall be paid
on or before the last day of the first month following the end of each calendar
quarter. Each payment shall be accompanied by a statement in reasonable detail
showing the basis of computation of royalties due in respect of production made
during the preceding calendar quarter.
(b) Royalties will be computed as follows:
(i) Metal Quantities
1. The tonnage or quantity of copper and Associated Minerals by weight
used in the computation shall be that quantity delivered for shipment or
for domestic sale. The quantity by weight of each mineral subject to
royalty shall be properly determined by internationally accepted assay
methods. The value of the Associated Minerals will be converted to
copper equivalent weight by using metal prices as defined below and
added to the tonnage of copper subject to the royalty calculation.
(ii) Metal Prices
1. For copper and Associated Minerals having a London Metal Exchange
(“LME”) price quotation or for which the saleable mineral content has
an LME price quotation. The price used in the computation shall be
the US Dollar price per unit for the same or most equivalent traded
type of grade of the Minerals concerned, calculated as the average of
the LME daily official settlement prices for the calendar quarter.
2. For those Associated Minerals having no London Metal Exchange
price quotation the price used in the computation shall be the average
calendar quarter US Dollar price as published in the Metals Week
Monthly Average Report for the calendar quarter.
(iii) Royalty Rates
1. The royalty rate is a sliding scale royalty based on the copper price.
The formula for the calculation is:
a. When the copper price is equal to or less than US$ 1.00/pound,
the royalty rate = 2.5% x 120%, or 3.0%;
b. When the copper price is greater than US$ 1.00/pound and
equal to or less than US$2.00/pound, the royalty rate is based
on:
54
Aynak Mining Contract - April 8, 2008 (Initialing)
Royalty rate = (10 x copper price (US$/ pound) - 7.5) x 120%;
and
c. When the copper price is greater than US$2.00/pound, the
royalty rate=15% x 130%, or 19.5%.
(iv) Royalty shall not be payable on any construction materials obtained from
the License Area and used by MCC for public purposes such as but not
limited to roads, bridges, railways, port facilities, airports, community
buildings, housing or any other infrastructure used in relation to the
Project.
Royalty Rate
Gross Royalty
Y 55
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 6: MCC PROPOSAL
The MCC Avnak Financial and Technical Proposal is adopted and incorporated by reference
in its entirety in this Mining Contract. The definitive version of MCC’s Proposal is
maintained in the Ministry of Mines office in Kabul. Afghanistan.
V
56
Aynak Mining Contract - April 8,2008 (Initialing)
APPENDIX 7: RAILWAY MEMORANDUM OF AGREEMENT
y
57
Aynak Mining Contract - April 8, 2008 (Initialing)
MEMORANDUM OF AGREEMENT CONCERNING MCC’s RAILWAY
COMMITMENT
l. Parties
This Memorandum of Agreement (“MOA”) is entered into this_day of_, 2008 by
and between the Government of Afghanistan (“Government”) and MCC-Jiangxi Copper
Consortium (“MCC”), collectively known as the “Parties.”
II. Purpose of MOA
The purpose of this MOA is to incorporate 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. The Parties acknowledge and agree that, as of the date of
this MOA, the specific conditions and requirements for the route, construction and operation
of the railway have not been definitively established by the Parties, thereby precluding the
Parties from concluding a definitive railway agreement at the same time as the Aynak Mining
Contract. Nonetheless, in order to conclude the Aynak Mining Contract in a timely manner
and to recognize the importance which the Government places on MCC’s commitment
concerning the railway, the Parties acknowledge and agree that MCC’s railway commitment
shall be memorialized in this MOA which shall be adopted and incorporated into the Aynak
Mining Contract as an enforceable part of the Aynak Mining Contract. The Parties
acknowledge and agree that this MOA shall be binding on the Parties and shall form the basis
for a definitive railway agreement to be negotiated and concluded by the Parties.
m. Commitments of the Parties
MCC has made the following commitments to the Government concerning the railway in its
September 25, 2007 letter:
1. MCC will conduct reconnaissance (survey) and prepare a feasibility study according
to the schedule provided in MCC’s August 16, 2007 letter.
2. 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.
2.1 MCC will arrange 100% financing for the construction of the railway.
2.2 MCC will design and build the railway on its own.
2.3 MCC will own the railway and be responsible for the overall operation and
management of the railway upon completion of the railway construction and
commencement of operations.
3. 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.
58
Aynak Mining Contract - April 8,2008 (Initialing)
4. After the full recovery of MCC’s investment, MCC will transfer the railway to the
Government.
5. MCC will provide free training concerning the maintenance, operation and
management of the railway.
The Government has made a commitment to MCC to use its authorities to assist MCC in
securing the land and route necessary to construct the railway. The Parties agree that the
feasibility study shall 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.
IV. Definitive Agreement
Based on the scope of MCC’s commitments specified above, the Parties shall use their best
efforts to conclude a definitive railway agreement on mutually acceptable terms and
conditions. Pursuant to section 30 of the Aynak Mining Contract, the Parties shall negotiate
in good faith to conclude a definitive railway agreement within 12 months of the effective
date of the Aynak Mining Contract. The Parties acknowledge and agree that the failure to
conclude a railway agreement within this timeframe shall constitute cause to revoke the
Mining Contract pursuant to Section 47 of the Mining Contract.
V. Miscellaneous
1. This MOA and the Parties’ actions in implementing this MOA shall be subject to the
applicable provisions of the Aynak Mining Contract, including without limitation, the
provisions of the Aynak Mining Contract concerning dispute resolution, default and
termination.
2. This MOA may be modified by the written agreement of the Parties.
IN WITNESS WHEREOF, the Parties hereby execute this MOA by the signatures of their
authorized representatives:
Ministry of Mines MCC-Jiaisgxl Copper Consortiums
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 8: POWER SUPPLY MEMORANDUM OF A
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Aynak Mining Contract - April 8, 2008 (Initialing)
MEMORANDUM OF AGREEMENT CONCERNING POWER SUPPLY
I. Parties
This Memorandum of Agreement (“MO A”) is entered into this_day of_, 2008 by
and between the Government of Afghanistan (“Government”) and MCC-Jiangxi Copper
Consortium (“MCC”), collectively known as the “Parties.”
II. Purpose of MOA
The purpose of this MOA is to incorporate the Parties’ commitments to each other with
respect to the location, construction and operation of the power supply for the Aynak Project
into the Aynak Mining Contract as an enforceable part of the Aynak Mining Contract. The
Parties acknowledge and agree that, as of the date of this MOA, the specific conditions and
requirements for the location, construction and operation of the power supply have not been
definitively established by the Parties, thereby precluding the Parties from concluding a
definitive power supply agreement at the same time as the Aynak Mining Contract
Nonetheless, in order to conclude the Aynak Mining Contract in a timely manner and to
recognize the importance which the Parties place on development of an adequate power
supply for the Aynak Project, the Parties acknowledge and agree that the Parties’ power
supply commitments shall be memorialized in this MOA which shall be adopted and
incorporated into the Aynak Mining Contract as an enforceable part of the Aynak Mining
Contract. The Parties acknowledge and agree that this MOA shall be binding on the Parties
and shall form the basis for a definitive power supply agreement to be negotiated and
concluded by the Parties.
in. Power Supply Commitments
MCC has made a commitment to the Ministry of Mines to construct, at MCC’s sole expense,
one, four hundred (400) megawatt capacity coal fired power plant to supply electrical power
to the Project and to Kabul. The Ministry of Mines has made commitments to MCC to make
available sufficient coal resources for MCC’s use in the power plant and to make available
adequate land to establish the power plant. The Parties agree that the coal resources shall be
granted to MCC pursuant to a sole source process under the Minerals Law and on the basis of
MCC paying a reasonable royalty agreed to by the Parties. The Parties also agree that
MCC’s exploration, development, exploitation and use of the coal resources shall be at
MCC’s sole expense and in compliance with all applicable requirements under the laws of
Afghanistan, including those requirements concerning the payment of royalties and income
tax. The Parties agree that they will work co-operatively to locate suitable areas where coal
resources are likely to be of a sufficient quantity and quality to fuel the power plant. MCC
agrees that it will undertake all exploration, development, and exploitation activities in the
areas identified by the Parties. The Ministry of Mines agrees to provide all necessary
assistance with respect to making available information and licenses to plan and expedite the
necessary coal exploration and mine development. Upon identification by MCC of a coal
reserve of suitable quantity and quality, the Ministry of Mines will diligently process the
approvals necessary to allow MCC to exploit the coal reserve and fuel the power plant. The
Parties acknowledge and agree that, as of the date of this Mining Contract, the specific
conditions and requirements for the location, construction and operation of the power plant,
have not been definitively established by the Parties. With respect to the sale of surplus
Aynak Mining Contract - April 8,2008 (Initialing)
power to the Government of Afghanistan by MCC, the Parties agree that the price of surplus
power shall be determined by the mutual agreement of the Parties.
IV. Definitive Agreement
Based on the scope of power supply commitments described above, the Parties shall use their
best efforts to conclude a definitive power supply agreement on mutually acceptable terms
and conditions. Pursuant to section 31 of the Aynak Mining Contract, the Parties shall
negotiate in good faith to conclude a power supply agreement within two (2) months of the
effective date of the Mining Contract. The Parties agree that the negotiations can be extended
for an additional two (2) months if the Parties cannot reach agreement within the first two (2)
months. The Parties acknowledge and agree that the failure to conclude a power supply
agreement within this timeframe shall constitute cause to revoke this Mining Contract
pursuant to Section 47 of this Mining Contract.
V. Miscellaneous
1. This MOA and the Parties’ actions in implementing this MOA shall be subject to the
applicable provisions of the Aynak Mining Contract, including without limitation, the
provisions of the Aynak Mining Contract concerning dispute resolution, default and
termination.
2. This MOA may be modified by the written agreement of the Parties.
IN WITNESS WHEREOF, the Parties hereby execute this MOA by the signatures of their
authorized representatives:
Ministry of Mines MCC-Jiangxi Copper Consortium
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 9: WATER SUPPLY MEMORANDUM OF AGREEMENT
63
Aynak Mining Contract - April 8, 2008 (Initialing)
MEMORANDUM OF AGREEMENT CONCERNING WATER SUPPLY
I. Parties
This Memorandum of Agreement (“MOA”) is entered into this_day of_, 2008 by
and between the Government of Afghanistan (“Government”) and MCC-Jiangxi Copper
Consortium (“MCC”), collectively known as the “Parties.”
II. Purpose of MOA
The purpose of this MOA is to incorporate the Parties’ commitments to each other with
respect to the location, construction and operation of the water supply for the Aynak Project
into the Aynak Mining Contract as an enforceable part of the Aynak Mining Contract. The
Parties acknowledge and agree that, as of the date of this MOA, the specific conditions and
requirements for the location, construction and operation of the water supply have not been
definitively established by the Parties, thereby precluding the Parties from concluding a
definitive water supply agreement at the same time as the Aynak Mining Contract.
Nonetheless, in order to conclude the Aynak Mining Contract in a timely manner and to
recognize the importance which the Parties place on development of an adequate water
supply for the Aynak Project, the Parties acknowledge and agree that the Parties’ water
supply commitments shall be memorialized in this MOA which shall be adopted and
incorporated into the Aynak Mining Contract as an enforceable part of the Aynak Mining
Contract. The Parties acknowledge and agree that this MOA shall be binding on the Parties
and shall form the basis for a definitive water supply agreement to be negotiated and
concluded by the Parties.
III. Water Supply Commitments
MCC has made a commitment to the Government to construct water supply wells and a
pipeline system, at MCC’s sole expense, in the vicinity of the Project to supply the Project’s
fresh water requirements. MCC has also committed to reuse and re-circulate process water to
the extent possible. The Government of Afghanistan has made a commitment to MCC to
make available sufficient water resources for MCC’s use in the Project. Subject to the
requirements of Section 37(c) of this Mining Contract concerning the protection of local
water use, the Parties agree in principle that MCC may obtain water from local water sources
to supply its needs. In the event that sufficient water is not available from these sources, the
Parties agree that they will work co-operatively to locate water supplies that are likely to be
of a sufficient quantity to meet MCC’s requirements. The Government agrees to provide all
necessary assistance with respect to making available information and licenses to plan and
expedite the necessary water supply development. Upon identification of water supplies of
suitable quantity, the Government will diligently process the approvals necessaiy to allow
MCC to utilize the water supplies. The Parties acknowledge and agree that, as of the date of
this MOA, the specific conditions and requirements for the location, construction and
operation of the water supply system have not been definitively established by the Parties.
IV. Definitive Agreement
Based on the scope of the general water supply commitments described above, the Parties
shall use their best efforts to conclude a definitive water supply agreement on mutually
acceptable terms and conditions. Pursuant to section 32 of the Aynak Mining Contract, the
Aynak Mining Contract - April 8, 2008 (Initialing)
Parties agree to negotiate in good faith to conclude a water supply agreement within three (3)
months of the effective date of the Mining Contract. The Parties agree that the negotiations
can be extended for an additional three (3) months if the Parties cannot reach agreement
within the first three (3) months. The Parties acknowledge and agree that the failure to
conclude a water supply agreement within this timeframe shall constitute cause to revoke the
Mining Contract pursuant to Section 47 of the Mining Contract.
V. Miscellaneous
1. This MOA and the Parties’ actions in implementing this MOA shall be subject to the
applicable provisions of the Aynak Mining Contract, including without limitation, the
provisions of the Aynak Mining Contract concerning dispute resolution, default and
termination.
2. This MOA may be modified by the written agreement of the Parties.
IN WITNESS WHEREOF, the Parties hereby execute this MOA by the signatures of then-
authorized representatives:
Ministry of Mines MCC-Jiangxi Copper Consortium
65
Aynak Mining Contract - April 8, 2008 (Initialing)
Aynak Mining Contract - April 8, 2008 (Initialing)
MEMORANDUM OF AGREEMENT CONCERNING SECURITY
I. Parties
This Memorandum of Agreement (“MOA”) is entered into this_day of_, 2008 by
and between the Government of Afghanistan (“Government”) and MCC-Jiangxi Copper
Consortium (“MCC”), collectively known as the “Parties.”
II. Purpose of MOA
The Parties acknowledge and agree that the establishment and maintenance of acceptable
security for the Project is a necessary condition for the successful construction and operation
of the Project. The Parties further acknowledge and agree that security is the general
responsibility of the Government, although specific security tasks may be the responsibility
of MCC. The purpose of this MOA is to incorporate the Parties’ commitment to develop,
install and maintain adequate security structures, procedures and personnel for the Project
into the Aynak Mining Contract as an enforceable part of the Aynak Mining Contract. The
Parties acknowledge and agree that, as of the date of this MOA, the specific conditions and
requirements for the establishment and maintenance of adequate Project security have not
been definitively established by the Parties, thereby precluding the Parties from concluding a
definitive security agreement at the same time as the Aynak Mining Contract. Nonetheless,
in order to conclude the Aynak Mining Contract in a timely manner and to recognize the
importance which the Parties place on security, the Parties acknowledge and agree that the
Parties’ security commitments shall be memorialized in this MOA which shall be adopted
and incorporated into the Aynak Mining Contract as an enforceable part of the Aynak Mining
Contract. The Parties acknowledge and agree that this MOA shall be binding on the Parties
and shall form the basis for a definitive security agreement to be negotiated and concluded by
the Parties.
ID. Security Commitments
The Parties acknowledge and agree that the Government shall be responsible for the overall
security of the Project. The Parties also agree that MCC shall cooperate with the Government
in taking security measures requested by the Government.
IV. Definitive Agreement
Based on the scope of the security commitments specified above, the Parties shall use their
best efforts to conclude a definitive security agreement on mutually acceptable terms and
conditions. Pursuant to section 35 of the Aynak Mining Contract, the Parties shall negotiate
in good faith to conclude a definitive security agreement within 2 months of the effective date
of the Aynak Mining Contract. The Parties acknowledge and agree that the failure to
conclude a security agreement within this timeframe shall constitute cause to revoke the
Mining Contract pursuant to Section 47 of the Mining Contract.
67
-V
Aynak Mining Contract - April 8, 2008 (Initialing)
V. Miscellaneous
1. This MOA and the Parties’ actions in implementing this MOA shall be subject to the
applicable provisions of the Aynak Mining Contract, including without limitation, the
provisions of the Aynak Mining Contract concerning dispute resolution, default and
termination.
2. This MOA may be modified by the written agreement of the Parties.
IN WITNESS WHEREOF, the Parties hereby execute this MOA by the signatures of then-
authorized representatives:
Ministry of Mines MCC-Jiangxi Copper Consortium
68
Aynak Mining Contract - April 8, 2008 (Initialing)
IV. Definitive Agreement
Based on the scope of the commitments described above, the Parties shall use their best
efforts to conclude a definitive agreement concerning these minerals on mutually acceptable
terms and conditions. Pursuant to section 33 of the Aynak Mining Contract, the Parties agree
to negotiate in good faith to conclude a mineral supply agreement within three (3) months of
the effective date of the Mining Contract and the negotiations can be extended for an
additional three (3) months if the Parties cannot reach agreement within the first three (3)
months. The Parties acknowledge and agree that the failure to conclude a mineral supply
agreement within this time frame shall constitute cause to revoke this Mining Contract
pursuant to Section 47 of this Agreement.
V. Miscellaneous
1. This MOA and the Parties’ actions in implementing this MOA shall be subject to the
applicable provisions of the Aynak Mining Contract, including without limitation, the
provisions of the Aynak Mining Contract concerning dispute resolution, default and
termination.
2. This MOA may be modified by the written agreement of the Parties.
IN WITNESS WHEREOF, the Parties hereby execute this MOA by the signatures of their
authorized representatives:
Ministry of Mines MCC-Jiangxi Copper Consortium
71
Aynak Mining Contract - April 8, 2008 (Initialing)
MEMORANDUM OF AGREEMENT CONCERNING PHOSPHATE, LIMESTONE
AND QUARTZ (Silica) SUPPLY
I. Parties
This Memorandum of Agreement (“MOA”) is entered into this_day of_, 2008 by
and between the Government of Afghanistan (“Government”) and MCC-Jiangxi Copper
Consortium (“MCC”), collectively known as die “Parties.”
H. Purpose of MOA
The purpose of this MOA is to incorporate the Parties’ commitments to each other with
respect to the location and supply of phosphate, limestone, quartz) identified by MCC as
necessary for the operation of the Aynak Project into the Aynak Mining Contract as an
enforceable part of the Aynak Mining Contract. The Parties acknowledge and agree that, as
of the date of this MOA, the specific conditions and requirements for the location and supply
of these minerals have not been definitively established by the Parties, thereby precluding the
Parties from concluding a definitive agreement concerning these minerals at the same time as
the Aynak Mining Contract. Nonetheless, in order to conclude the Aynak Mining Contract in
a timely manner and to recognize the importance which the Parties place on the location and
supply of these minerals for the Aynak Project, the Parties acknowledge and agree that the
Parties’ commitments concerning these minerals shall be memorialized in this MOA which
shall be adopted and incorporated into the Aynak Mining Contract as an enforceable part of
the Aynak Mining Contract. The Parties acknowledge and agree that this MOA shall be
binding on the Parties and shall form the basis for a definitive agreement concerning these
minerals to be negotiated and concluded by the Parties.
IH. Commitments Concerning Phosphate, Limestone and Quartz
In order to fulfill its commitment to the Government to fund, construct and operate a smelter
in Afghanistan, MCC has requested that the Government provide access to deposits of
phosphate, limestone and quartz for MCC’s use in the Aynak Project. The Government has
made a commitment to MCC to make available potential sources of limestone and quartz that
MCC can use in the Aynak Project. In addition, the Government will use its best efforts to
make available potential sources of phosphate for MCC’s use in the Aynak Project. The
Parties agree that the phosphate, limestone and quartz resources shall be granted to MCC
pursuant to a sole source process under the Minerals Law and on the basis of MCC paying a
reasonable royalty agreed to by the Parties. The Parties also agree that MCC’s exploration,
development, exploitation and use of the phosphate, limestone and quartz resources shall be
at MCC’s sole expense and in compliance with all applicable requirements under the laws of
Afghanistan, including those requirements concerning the payment of royalties and income
tax. The Parties agree that they will work co-operatively to locate suitable areas where such
mineral resources are likely to be of a sufficient quantity and quality to meet MCC’s
requirements. The Government agrees to provide all necessary assistance with respect to
making available information and licenses to plan and expedite the necessary mineral
exploration and mine development. Upon identification of mineral reserves of suitable
quantity and quality, the Government will diligently process the approvals necessary to allow
MCC to exploit the mineral deposits.
Aynak Mining Contract - April 8, 2008 (Initialing)
APPENDIX 11: PHOSPHATE, LIMESTONE AND QUARTZ (SILICA)
MEMORANDUM OF AGREEMENT
69