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Qara Zaghan Gold Project Contract


Between


Afghan Krystal Natural Resources Company


And the


Ministry of Mines


of the Islamic Republic of Afghanistan








Contract Number: G001-89





10 January, 2011


 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





Table of Contents





1. Definitions:............................................................ ..3


2. Details of this Contract:........................................ ..5


3. Duration and Renewal of the contract:................. ..5


4. Financial Guarantee:............................................ .,6


5. Investment:....................................................•...... .,6


6. Exploration Phase:................................................ ..6


7. Exploitation Phase:.............................................. .,7


8. Royalties:............................................................. ..9


9. Funding:............................................................... ..9


10. Production Rate:.............................................. ..9


11. Accounting of Materials:................................... ...9





12. Access:............................................................. ...9


13. Reporting Requirements:................................. ...9





14. Employment of workers:................................... .10


15. Sub Contractors ............................................... 11


16. Supply of Equipment and Machinery:...............





17. Health and Safety Plan and Training:............... ,11


18. Environmental Protection:................................ .11





19. Transfer or Assignment of this Contract:.......... ,.12


20. Taxation & Fees Performance:......................... ,12


21. Surface Use fees:............................................. ..12





22. inspection. Supervision and Capacity-Building: .13


23. Explosives:........................................................ .13


24. Energy:............................................................. ,13


25. Amendments:................................................... ,13


26. Force Majeure:.................................................. .13


27. Observance of laws:.......................................... .14


28. Historical or Cultural Artifacts:.......................... ,14


29. Obligations:...................................................... ,14


30. Construction of Necessary Facilities.................. 15


31. Social: Services:................................................ 15


32. Dispute Resolution:.......................................... 15


33. Cancellation of Contract:.................................. 15


34. Notification and Remedy.................................. 16


35. Default............................................................. 17


36. Domicile; Service of Process............................ 17


37. Damage to Property;......................................... 18


38. Binding Effect of Contract................................. 18


39. Governing Law................................................. 18


40. Severability...................................................... X,'.


41. Complete Contract.......................................... ■j ■


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 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





THIS CONTRACT, dated as of 10 January, 2011, is entered into between Afghan Krystal


Natural Resources Company (AKNR), a company duly licensed under the laws of


Afghanistan, and the Ministry of Mines of the Islamic Republic of Afghanistan ("MoM"),


(together the "Parties").





WITNESSETH:


WHEREAS the Ministry of Mines is responsible for the control of all mineral rights within


Afghanistan, and specifically controls the mineral rights to the Qara Zaghan Gold Project


located near Qara Zaghan village in the Dushi District, Baglan Province, Afghanistan;


WHEREAS the Afghan Krystal Natural Resources Company desires to be engaged in


the business of mining of gold within Afghanistan;


WHEREAS the Afghan Krystal Natural Resources Company has been granted the right


to operate a business in Afghanistan by the Afghanistan investment Support Agency


(AISA) with license number D-27091 dated 13,10.2010, A copy of the investment


license D-27091 dated 13.10.2010 is attached;


WHEREAS the Parties hereto desire that the MoM grants the mineral rights, including


the necessary Exploration and Exploitation Licenses, to the Qara Zaghan Gold Project to


Afghan Krystal Natural Resources Company;


NOW, THEREFORE, in consideration of the mutual covenants and understandings


contained herein, and in return for good and valuable consideration, the acceptance of


which is hereby acknowledged, and subject to and on the terms and conditions herein


set forth, the Parties agree as follows:





1, Definitions;


The terms used in this Contract shall have the meanings set forth below:


1.1 "Afghan Krystal Natural Resources Company11 ("AKNR"): The entity that was


selected as the Preferred Bidder during the Qara Zaghan Gold Tender Process





to negotiate and conclude the Qara Zaghan Gold Project Contract with the


Government and which will be obligated by the terms of this Contract, jointly


and severally, together with any successor entities, AKNR has been granted





the right from Afghanistan Investment Support Agency with AISA license # (D-


27091 dated 13,10.2010) to start the investment. A copy of the investment


license is attached. The complete names of the Manager, Assistants, and





Executive Board of the Company are registered in the AISA Office and


appended to this contract.


1.2 Associated Materials'1: means copies of all studies, reports, records, files,


documents, correspondence and other similar printed or written commercial


materials to the extent related to the exploration, mining and processing


activities conducted at the Qara Zaghan Gold Project.


1.3 "Gold Production Facilities": means any and all facilities constructed, used, or


sub-contracted for the purpose of producing gold from the Qara Zaghan Gold


Project.


1.4 "Commercial Production": The date at which the activities associated with the


mine include the operation of facilities to begin recovery of gold for economic





purposes.


1 -5 "Construction Plan": A plan that sets forth the sequence and schedule for gold


plant construction and/or rehabilitation activities.


1.6 "Contract Period": the term as set forth in Article 3.1 of this Contract and any


extensions or other modifications to the term agreed to in writing by the Parties.


1.7 "Effective Date”: of this Contract is the date that the Contract is signed by both,


parties,


1 -8 "Environment:" Physical factors of the surroundings of human


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


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


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1.9 "Environmental and Social Impact Assessment (ESIAV: the study performed


by AKNR, and which must be accepted by MoM, which assesses the


Environmental and Social factors which will be caused by the implementation of


the Qara Zaghan Gold Project


1.10 "Environmental and Social Management Plan (ESMPV: the plan proposed by


AKNR, and which must be accepted by MoM, which details the measures to b©


taken to minimize or alleviate the Environmental and Social factors applicable


to the Qara Zaghan Project which are identified and detailed in the ESIA,


1.11 "Exploration Work": means all the activity or work of prospecting or


reconnaissance in the search for ore and minerals on, in, or under the Said


Lands, and the drilling, examining, measuring and sampling of a mineral


deposit when found, in order to determine the size, shape, position,


characteristics, and economic value of the deposit.


1.12 "Feasibility Study": A study performed to AKNR and MoM specifications to


assess the suitability of the proposed gold production facility and associated


facility locations, taking into consideration the results of national and regional


planning and ali currently known and forecasted relevant technical,


environmental, economic, operational and logistical factors and requirements


necessary forth© successful construction and operation of the gold plant by


AKNR, including considerations of the environmental and social impact


assessment activities conducted a© required by Article 7 of this Contract.


1.13 "force maieure,f: shall include wars, acts of terrorism, insurrections, civil


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


epidemics, earthquakes, storms, floods, or other extreme 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.


1.14 "Gold": means the element Au and its natural ores, specifically including the


noble elements commonly occurring with gold.


1.15 "Government": The Government of Afghanistan, or any successor entity, acting


on behalf of the Government of Afghanistan with respect to this Contract.


1.16 "Gross Gold Production": The total production of Gold produced by the mine.


1.17 Imminent Hazard: Anv event not intrinsic to normal operations that could lead to


serious iniurv, the loss of life or damage to physical property.


1.18 "Mining Law": means the 2009 Mineral Laws of the Islamic Republic of


Afghanistan.


1.19 "Ministry of Mines (MoMV1: The Ministry of Mines of the Islamic Republic of


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


Afghanistan with respect to this Qara Zaghan Gold Contract.


1.20 “Month": Ail references to months in this Contract shall be based on the solar


calendar specified in Article 18 of Afghanistan’s Constitution.


1.21 “Pollution11: 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.


1.22 "Regulation": includes any regulation, rule, official directive, request, or


guideline of any governmental, intergovernmental, or supranational body,


agency, department or regulatory, self-regulatory, or other authority or


organization;


1.23 "Royalties": Monetary payments by AKNR to the Government of Afghanistan •


as a certain percentage from gross gold production in recognition of tie Tight to '


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extract minerals in accordance with the laws and regulations of Afghanistan,


this contract, and as specified in the bidding proposal for the Qara Zaghan Gold


Project tender.


1 .24 "Said Lands11: means all the lands subject to this Contract and contained under


the Licenses which the Parties or a party has an interest, whether granted by


the MoM through option, claim, lease, or otherwise.


1.25 "Security": means the measures taken to insure the safety of persons and


facilities.


1.26 "Security Agreement": means an ancillary agreement between AKNR and the


Government which provides for the security measures to be implemented at the


Qara Zaghan Gold Project.


1.27 "USS": means the United States Dollar.


1 -28 "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.


2. Details of this Contract:


1. The MoM, in accordance with the agreed terms and conditions of the award of the





bidding tender for the Qara Zaghan Gold Concession and the 2009 Mineral Laws of


Afghanistan hereby grants Afghan Krystal Natural Resources Company (AKNR) the


right to explore for Gold mineralization within the said lands through issuance of an


Exploration License, and the right to mine the economic portions of the deposit as


defined through acceptance by both parties of the detailed Feasibility Study for the


Qara Zaghan Gold Project and issuance of an Exploitation License for that


delineated economic area; which will be properly undertaken under the reasonable


control and supervision of the MoM..


2. For purposes of clarification, this Qara Zaghan Gold Project Contract includes, but is


not limited to, articles concerning the exploration phase, exploitation phase, and


general terms of the contract.


3. The said lands of the Exploration Lease area shall be 1257 ha and are bounded by the


coordinates:





East: 68° 36' 83.1" North: 35° 55’ 75.3"


East: 68° 41* 13.9" North: 35° 55' 70,3"


East: 68° 4T 08.1" North: 35° 57' 05,3"


East: 68° 36' 64.4" North: 35° 55‘ 54.2"





4. AKNR shall be entitled to market and sell its gold production in accordance with the


provisions of this oontract and the laws of Afghanistan.


3. Duration and Renewal of the contract:


1. This contract shall be valid for a period of 6 months for preparation and a period of


up to two years for completing exploration and a period often (10) years for


exploitation from the Effective Date. This Contract may also be extended or


terminated in accordance with the terms and provisions in Article 33, other parts of


this contact, or as otherwise mutually determined and agreed to in writing by the


parties.


2. AKNR has the right to renewal of this contract, provided that full compliance of the


conditions of this contract are being upheld, and that the AKNR informs the MoM in


writing at least on© (1) year before the termination date of the contract,


3. In compliance with the 2009 Mineral Law, this contract may be renewed in five"(5);*


year incremental periods as detailed in Article Three, Section 2 above, until the-


deposit is depleted, or the Contract is otherwise terminated or cancelled. -


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4. Should AKN.R cease exploration activities related to the approved Exploration Plan


for a period of longer than six (6) consecutive months without the approval and


agreement of MoM, then the MoM may consider the Exploration License null and


void and the exploration right will revert back to the Government of Afghanistan.


5. AKNR has the right to renewal of the associated Exploration and Exploitation





Licenses through continuation of this contract as described in Article Three, Section 2


above.





6. Should AKNR cease exploitation activities relating to the approved Feasibility Study


for longer than twelve (12) consecutive months without the approval and agreement


of MoM once the Exploitation License has been issued, then MoM may consider this


contract and the Exploitation License null and void and the right to conduct gold


exploitation activates will revert back to the Government of Afghanistan.





4. Financial Guarantee:


A Guarantee Bond in the amount of one hundred thousand US Dollars ($100,000.00


US$) or its equivalent in Afghani will be provided by AKNR to the Government of


Afghanistan at no interest to be held in a dedicated bank account by the MoM. This is a


bond for compensation of, and reparation for, damage to the environment, property


rights, and any other violations resulting from the activities of AKNR, their employees, or


contractors during the period of the contract. The bond, or residual amount, will be


returned to AKNR, at the termination of this contract provided that all outstanding claims


for compensation and reparation have been satisfied.


5. Investment;





1. AKNR, as part of a detailed Exploration Plan, is obliged to provide th© MoM a


detailed investment plan for the exploration phase of the mine, which meets the


terms of its bid proposal which was submitted to the MoM. The Exploration Plan is


due to the MoM within 4 months of the effective date of this contact.


2. AKNR, as part of the detailed Feasibility Study, is obligated to provide the MoM a


detailed investment plan for the mining phase of this contract, which meets the terms


of its bid proposal which was submitted to the MoM. The investment plan is due to


the MoM within 6 months if delineating an economic deposit.





6. Exploration Phase:





AKNR is obligated to provide the MoM a detailed Exploration Plan within four (4) months


of the Effective Date of this contract. AKNR is obligated to begin actual exploration


activates as defined in the Exploration Plan within six (6) months of the Effective Date of


this contact.


1. AKNR agrees to provide an Exploration Plan detailing the following:





A, Technical Exploration Plan. A plan of anticipated physical activities related


to the defining and delineating of the mineral deposit, including but not limited


to access road construction, drilling program, sampling proposal, metallurgical


studies, and time schedule of activities.


B. Financial Plan. This plan will budget anticipated costs and expenditjup^^'


the exploration program and demonstrate AKNR's capacity to financltf/:^:;


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C, Environmental Action Plan. This plan will detail the anticipated effects of


the exploration work on the environment, and will include detailed plans to


minimize environmental disturbance and address reparation of damage


caused to the environment through the exploration activities of AKNR,





2. AKNR agrees that exploration activities will not commence until the Exploration Plan


has been accepted by the MoM. The MoM agrees to respond to AKNR on the


acceptance or rejection of the Exploration Plan within 2 weeks of receiving the


Exploration Plan. Should the Exploration Plan be rejected, the MoM shall give


specific reasons for rejection of part or the entire plan and cooperate with AKNR to


■remedy the concerns resulting in the rejection.





3. The MoM and AKNR agree that the accepted Exploration Plan will form the basis of


the exploration work and that the AKNR is bound to carry out the work as detailed


therein and as per a time schedule agreed on by both parties, Upon acceptance of


its exploration plan and time schedule, MoM will issue AKNR an exploration license


for the said lands.


4. AKNR agrees to compile maps, geological data and other related information


pertaining to the deposit, and alt of these records shall be available to the MoM upon


request. Upon termination, cancellation, or expiration of the contract these records


will become the exclusive property of the MoM.





5. If at the end of the Exploration work, or at any time during the exploration phase, and


at. its sole discretion, AKNR determines that the mineral resource is not sufficient to


warrant further exploration or does not constitute an economically mineable deposit,


then AKNR upon notice to and acceptance by the MoM, has a right to terminate


exploration activities and complete reclamation work as per the Environmental Action


Plan noted in Article 6 Section 1 Number G above.





6. Any and all costs incurred by AKNR relating to the Exploration work and reclamation


from exploration activities are not refundable.


7. AKNR agrees to retain for the MoM, representative splits of drilling samples and





duplicate sample pulps, and to provide assay results on a quarterly basis as


described in Article 13 above, and in accordance with the Laws and Regulations of


Afghanistan.


7. Exploitation Phase:





1. AKNR agrees to submit for approval to the MoM a Feasibility Report including the


following technical information. The investment plan is due to the MoM within 6


months if delineating an economic deposit.





A. Results of the Exploration Plan including all documentation to support studies,


maps, results, and conclusions as outlined in Article 6 above.





B. Proposed Technical Plan for the construction and operation of the Qara Zaghan


Gold Project. This plan will include but is not limited to proposals for Construction


Plan for development of the processing operations; Mining Plan outlining mine


development plans, equipment needs, development stage, etc.;


outlining expected numbers of employees, expected outputs, revenue, '1/


generations predictions and other pertinent Information.





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C. Financial Proposal budgeting and detailing expected expenditures and costs


necessary to accomplish the proposed Technical Pian.


D. Results of a detailed Environmental and Social Impact Assessment (ESIA). This


study will be conducted at the sole expense of AKNR through an approved third


party with demonstrated expertise in conducting such a study.


E. An Environmental and Social Management Plan (ESMP) addressing:


i. the environmental impact as noted in the ESIA and mitigating the effects


to the environment and include measures to safeguard the environment


from unnecessary damage.


ii. the social impacts as found in the ESIA and what measures will be


taken to mitigate the negative impact of the proposed mining to the local


populations. The plan will outline development projects to assist the local


peoples in social development.


iii. the health and safety of the employees as detailed in a Health and


Safety Plan


2. AKNR agrees that activity associated with the mining phase will commence only after


the Feasibility Study has been accepted and approved by the MoM. The MoM


agrees to respond to AKNR within one (1) month of receiving the Feasibility Study of


the acceptance or rejection of the Feasibility Study. Should the Feasibility Study be


rejected, the MoM shall give specific reasons for rejection of part or the entire plan


and cooperate with AKNR to remediate the concerns resulting in the rejection.


3. Both parties agree that the Feasibility Study is a legal and binding part of this


contract, and will become the basis for extraction activity: the AKNR is bound to carry


out works detailed within and the Feasibility Study. Upon acceptance of its


exploration plan, MoM will issue AKNR an exploitation license for the said lands.


4. Subject to the provisions of the Exploitation Plan AKNR is obligated to selectively


stockpile low-grade material separate from waste materials. These stockpiles will be


clearly marked and separated from other non-economlc repositories.


5. AKNR agrees to maintain mining standards as agreed in the exploitation plan. Upon


approval by the MoM, AKNR. may incorporate new technologies within its operations,


which modify the approved Feasibility Study If such changes will clearly improve the


optimization of the operation.


6. AKNR Is obligated to develop and maintain the gold recovery process such that the


"optimal" economic recovery is maintained. This optimization must be demonstrated


through standard metallurgical record keeping. The recovered gold shall be


assayed before sale. Records of all gold recovered and the assay results shall be


maintained and be available to inspection,


7. Should AKNR discover mineralization other than gold that is of potential economic


value, it will inform MoM immediately, and AKNR may but is not obligated to request


from the MoM the rights to process and recover said economic minerals. However,


until such a right has been granted the mineral remains the property of the


Government of Afghanistan. Appropriate modifications to the Feasibility Studymusfc


be included at the time of submission, or the approved Feasibility Study must


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updated and approved to include the new economic basis derived from, the


exploitation and sale of the new minerals.


8. Royalties;





Royalty Rate: After the start of commercial production and based upon a solar calendar,


AKNR agrees to pay, monthly, to the MoM, royalties at the rate of twenty six percent


(26%) of the gross revenue from sale of gold at a price set on the date of sale by the


London Metals Exchange for each sale of gold. Payment of Royalty to the MoM Is due


no later than on the seventh (7) working days after the end of that month, and Is based


on the sale of gold from that month.


9. Funding:





AKNR shall have responsibility for funding all exploration, construction, and operations


authorized pursuant to this Contract and determining the terms on which said funding


shall be obtained. AKNR may, as authorized by the applicable laws of Afghanistan,


pledge such rights, licenses and authorizations obtained in accordance with operations


authorized by this Contract,


10. Production Rate:


The projected production rates will be determined by the AKNR in the feasibility study





resulting from the exploitation program, and in line with the plan approved by the MoM


and will be set to optimize the extraction of the deposit. The MoM will be informed of the


production, rates on a monthly basis.


11. Accounting of Materials:





AKNR Is to Install an accurate scale for the weighing of the gold. All weights shall be


accurately recorded.


12. Access:





AKNR agrees that the MoM, or its designated authorized representative, will have


unrestricted access to the license area upon due written notice by the MoM to AKNR


with the exception of the Health and Safety Inspectorate as per Article 22 Section 1


below. The MoM shall compensate AKRN fairly and reasonably for any damage that


occurs as a result of said access by the MoM or authorized representative.





13. Reporting Requirements:





In all phases of the Qara Zaghan Gold Project, including but not limited to AKNR's


exploration and exploitation activities, AKNR agrees that it will:





1. AKNR agrees to maintain and retain financial records in accordance with


international Financial Reporting Standards (IFRS) or equivalent accounting


methods. AKNR agrees to maintain records and documentation of work activities


and any other documentation as may be required by the MoM or other authorities.


These books and records will be made available to authorized representatives of the


MoM or other authorized persons upon request.





2. AKNR agrees to provide Quarterly Reports to the MoM documenting all work


progress made over the quarter, the current status in regard to the planned schedule.*^


and all expenditures for the quarter, year to date, and project to date. The


Report is due no later than 30 days after the end of the quarter. ,' f


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3, AKNR is bound to record daily all metals, pertaining to the license, produced during


mining, processing, and concentration, in a journal under the supervision of the MoM


representative and include such in the quarterly and annual reports to MoM.





4. AKNR shall report to the Mining Inspectorate, Environmental Protection Department,


and the relevant administrative and judicial authorities, any loss time accident or fatal


accident that occurs in connection with its activities as well as any imminent hazard


that arises.





14. Employment of workers:


1. Employment of Afghan Nationals: AKNR shall employ Afghan personnel, to the


extent practicable In all classifications of employment, for its Gold Production


Facilities construction and operations in Afghanistan.


2. Training: AKNR shall develop a training program and facility of suitable capacity for


the training of persons of Afghanistan citizenship in ail classifications of employment


for its Gold Production Facilities.


3. Non-Afghan Personnel: Subject to the requirements established In this Part, AKNR


and its subcontractors may bring into Afghanistan such non-Afghan personnel as In


AKNR's judgment: are required to carry out Gold Production Facilities construction


and operations efficiently and successfully, and at AKNR’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 AKNR under this Gold Project


Contract, in this connection AKNR 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 AKNR’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. AKNR shall bear all costs related to


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


employees entering Afghanistan shall respect the religious and cultural traditions of


Afghanistan.


4. Equality; 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.


5. Employee Accident Compensation: AKNR shall maintain adequate insurance for the


medical and rehabilitation costs for any Gold Production employee injured performing


his or her duties while employed by AKNR. Injured employees shall be entitled to


return to the same or similar positions foliowing recovery from injury. In the event


that a Gold Production employee is killed performing his or her duties while employed


by AKNR, AKNR shall be responsible for the payment of an adequate death benefit


to the immediate family of the deceased employee as per the laws of Afghanistan.


Demonstration of this insurance will be provided in the quarterly report required as


per Article 13 above.

















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15. Subcontractors


1. Without in any way detracting from AKNR’s responsibilities and obligations under this


Contract, AKNR may engage subcontractors for the execution of such phases of its


Gold Production Facilities activities and operations as AKNR deems appropriate,


2. AKNR will, have full responsibility and assume all risks related to the activities of its


subcontractors in accordance with the terms and conditions of this Contract. The


records of such subcontractors shall be available to MoM Government inspectors.


16. Supply of Equipment and Machinery:


1. The supply of equipment and machinery, for al! phases of prospecting, exploration,


mining and processing of material are the responsibility of AKNR.


2. AKNR is to supply in its technical proposal, a planned list of equipment and


machinery to the MoM together with an estimate of the cost, After purchase a copy


of the proof of purchase and cost shall be supplied in the quarterly reports,


3. AKNR may procure its equipment and machines within Afghanistan or outside the


country according to the applicable laws. In the case where existing law prevents the


import of any equipment required by the mining operation, the MoM will assist with


the importation of such essential equipment,


4. AKNR, 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 delivery time, and at comparable


price than goods available from abroad Including freight.


17. Health and Safety Plan and Training:


1. In accordance with the Minerals Law, AKNR shall produce and implement a health


and safety plan. The details of this health and safety plan will be displayed in a


prominent place and: be made known to illiterate workers.


2. AKNR is bound to observe ail regulations with regard to the supply of personal


protective equipment. Should death, injury or disability result from a work related


accident AKNR shall be responsible for compensation.


3. AKNR shall implement a specific training program for the workers detailed in the


Health and Safety Plan.





18. Environmental Protection:


1. AKNR shall observe all environmental laws and adhere to the Environmental and


Social Mitigation Action Plan as agreed to by both parties at the commencement of


the mining phase.


2. AKNR as Holder of a Exploitation License is obliged to include in its plans details for


its usage of water and for the protection of local community water supplies, which


must be presented to the Environmental Directorate. •











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3. In order to protect and prevent environmental contamination, the AKNR is obligated


to do all activates according to specified standards of hygiene and workplace


environment according to the laws of Afghanistan.


4. The AKNR shall spend a minimum of fifty thousand dollars (US$ 50,000) for the


enhancement of the environment for the community in the neighboring area of the


mine. This is in addition to the amount spent directly on the mine.


19. Transfer or Assignment of this Contract:


1. AKNR may not assign, transfer, lease, or pledge any of the rights, privileges,


liabilities, or obligations established under this Gold Project Contract without the prior


written consent of the MoM in accordance with the 2009 Mineral Laws.


2. 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 as per the


MoM and the Mineral Laws.


3. if AKNR is rendered incapable of performing any of the conditions under the terms of


this contract for any reason, application to transfer of the rights granted under this


contract should be requested by a demonstrated authorized representative within


three (3) months of incapability to perform. If the application is received after the


three (3) month period, these rights and privileges will expire.








20. Taxation & Fees Performance:


1. AKNR shall pay all applicable taxes, fees, custom duties, rents, penalties and other


charges to the Government as set forth in this Contract, and the applicable laws of


Afghanistan. AKNR must deliver a copy of its tax settlement documentation to the


MoM at end of each tax period as specified in the Tax Laws of Afghanistan upon


receipt from the Ministry of Finance. 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 Government.


2. AKNR 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.


3. According to the articles of this contract, if AKNR delays specified payments owed,


due and payable to the MoM by more than one month, then AVKNR shall be liable as


per the bidding proposal defined as starting at 0.6% the first month and doubling


each month thereafter.


21. Surface Use fees:


AKNR shall, during the exploration and exploitation phase, pay annually in advance


surface use fees to the MoM for the area of the operations and any neighboring areas


that they are using for the direct support of the mining operation according to the laws of


Afghanistan, The annual rate of payment for surface rights shall be twenty five dollars-. ;■


(US$ 25) per hectare according to the decision made on 31/2/1386 by thest^er#1§^"','i'ri: ■;


committee of Ministry of Mines. .yt -


Page 12, of 19.


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 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





22. inspection, Supervision and Capacity-Building:


1. For the purpose of Health and Safety inspection the MoM inspectorate reserves the


right to access any and ail areas covered by this Contract for the purpose of any


authorized legal activity, at any time.


2. AKNR agrees that the MoM may assign up to 5 trainees to work with AKNRfor


limited periods in order to facilitate the development of professional expertise within


the MoM or other government agencies, provided that the MoM has given AKNR


reasonable notice in writing, and MoM. covers all of the costs associated to these


trainees. AKNR may not charge the MoM for this training.


23. Explosives:


1. Should the use of explosives b© necessary, AKNR shall apply for and obtain all the


necessary permits and permissions for the purchase, transport, and storage of


explosives. The MoM agrees that all necessary assistance will be given to the AKNR


to obtain these permits.


2. AKNR shall be responsible for the safe transport, storage, and use of explosives,


3. AKNR shall maintain records of all explosives purchased, stored, and used,


4. AKNR. Is responsible for ensuring compliance with all laws, regulations, and


procedures relating to the use of explosives.


24. Energy:


The supply and procurement of the energy necessary for the Qara Zaghan Cold Project


is the responsibility of AKNR.


25. Amendments:


The Parties mutually agree that this Gold Project Contract may be amended by the


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


Gold Project Contract, the Ministry of Mines is authorized to approve decisions


concerning amendments for the Government and AKNR, or its successor, is authorized


to approve decisions concerning amendments for AKNR


26. Force Majeure:


1. Any failure by the Government or any of its Ministries or subdivisions, or by AKNR, to


carry out any of its obligations under this Contract shall not be deemed a breach of


the Contract if such failure is cause by force majeure.


2. If, through force majeure, the fulfillment by either Party of any terms and conditions of


this Contract is delayed, curtailed, or prevented, then anything in this Contract to the


contrary notwithstanding, the time period for fulfilling the obligation thereby affected


shall each be extended for a period equal to the total of the periods during which


such force majeure causes or their effects were operative.


3. Provided, however, that only such loss, damage or injury as could not have been


avoided by the taking due care or such reasonable alternative measures as aforesaid


shall be regarded as the consequences of any failure caused by force majeure.


4. If AKNR’s ability to perform its obligations as affected by force majeure1 AKNR shall


notify the MoM within forty-eight (48) hours of the event in writing, stating the type of


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 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





force majeure and estimating the additional time period necessary to address the


force majeure.





5, The Parties shall agree as to the amount of time necessary to address the force


majeure and the parties shall endeavor to do everything 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 dispute with third parties, including labor disputes, except under


conditions acceptable to it or pursuant to the final decision of any arbitral, judicial, or


statutory agencies having jurisdiction to finally resolve the dispute.


27, Observance of laws:





1. AKNR, in carrying out this contract, hereby accepts the obligations to conduct ail of


its gold facilities construction, operations, and activities in compliance with ail of the


applicable terms of this Contract, and the applicable laws and regulations of


Afghanistan.





2. Any future changes to existing Mineral Laws shall have no bearing on the terms,


conditions, or validity of this contract, unless incorporated within a jointly agreed


addendum.


3. Subject to notification by the MoM, AKNR agrees to observe any changes to Mineral


Laws and ministerial procedures that are designed to improve health and safety.


4. AKNR shall not perform illegal acts or operate illegally in the areas specified in this





Contract.





28. Historical or Cultural Artifacts:


If, during prospecting, exploration, and mining, any historical or cultural artifacts,


monuments, buried treasures and (noble metals and non-noble metals) are found; these


historic items and works (according to the applicable laws of Afghanistan) will belong to


the government. If AKNR, during its operations becomes aware of the existence of this


kind of treasure or monuments, AKNR is bound to inform the Ministry of Mines and


Ministry of Culture within 24 hours.


29. Obligations:


AKNR shall:


1. Manage its Gold Production Facilities activities and operations in a technically,


financially, socially, culturally and environmentally responsible manner to achieve the


environmental protection and sustainable development objectives and responsibilities


required by this Contract and the laws of Afghanistan and any applicable


international conventions to which Afghanistan is a signatory, and mutually agreed


upon by the Parties as best suited to the physical, social, economic, environmental,


political, and security conditions found in Afghanistan.;


2, AKNR is not allowed to conduct exploration or mining activates outside of the areas


specified in this contract; except when additional mining contracts have been


awarded to AKNR by the Ministry of Mines.





The MoM shall








10/01/2011


 Clara Zaghart Gold Project Contract (Afghan Krystal & MoM)





1. Provide the licenses, land, and rights of way necessary for Gold Production facilities


construction and operation in accordance with this Contract and the associated


Security Contract.


2. Grant to AKNR the exclusive right to use the surface of such lands, and such





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


maintenance of the Gold Production facilities.


3. The MoM will grant rights to subsurface water, and facilitate the use of surface water,


as may be necessary for this Contract.


4. The MoM will facilitate to the extent possible ail governmental licensing within


Afghanistan pertaining to this contract.





5. The government shall be responsible for the security of the Gold Production


Facilities, as detailed in the Security Agreement to be executed between the parties.


30. Construction of Necessary Facilities





1. As part of its initial investment, AKNR shall perform ali necessary construction during


the period of the contract e.g. offices; stores; buildings; roads, and etc. at its sole


expense, and a copy of the expenses incurred shall be part of the quarterly report.





2. When the contract ends, or is cancelled before its scheduled period, the immovable


properties and infrastructure such as roads, clinics, parks, buildings and water


resources, will become the property of the government without compensation. AKNR


is only entitled to retain ownership of movable properties.





3. When the contract expires, terminates, or Is cancelled, AKNR shall remove its


movable property and exploited material from the mining site within six months.


Failure to do so will result in removal by the MoM, who will not be liable for any


damage, and any expenses incurred for removal or storage must be repaid by


AKNR.


31. Social Services:





During the first two years of this contract AKNR shall spend a minimum amount of fifty


thousand dollars (US$ 50,000) for the implementation of social programs as per the


Social Development Plan,


32. Dispute Resolution;


Either party to the contract should try to manage and resolve conflicts arising from


disagreement in the interpretation of the contract, via negotiations, mutual agreement,


and other non-confrontational means. Both sides should resolve their conflict within sixty


days (60) after receiving written notice of an issue related to the contract. If unable to


reach a solution, as per the Mineral laws then both sides hereby agree to refer their


disagreement to arbitration which shall be the International Court of Arbitration as the


independent arbitrator.





33. Cancellation of Contract:


After the signing of the contract, any inability or failure of AKNR to carry c


will result In the contract being canceled and the Guarantee Bond of AKN


refunded. In the event that there are outstanding fees, tax repayments/g


reparation of environmental damage, these expenses will be recovered I


AKNR. ly


10/01/2011








* *


 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)








A. Termination bv the Government, In the event that:


1. AKNR assigns to a third party ail or a portion of the rights held by AKNR under


this Gold Project Contract without the previous written consent of the


Government, or


2. AKNR has knowingly submitted to the Government false statements which were


a material consideration for the bidding, granting, or execution of this Gold Project


Contract, or


3. AKNR fails to comply with any final decisions by the arbitral tribunal with respect


to a dispute with the Government under this Gold Project Contract, or


4. There exists another material breach or nonobservance by AKNR of any of the


terms, obligations, or conditions of this Gold Project Contract, or of any law of


Afghanistan, or


5. AKNR fails to construct or operate the Gold Production Facilities in accordance


with this Gold Project Contract;


Then the Government may, subject to relevant provisions of this contract, revoke this


Gold Project Contract and be entitled to recover any damages it may have suffered due


to AKNR committing one or more of the above actions. The extent of the damages shall


be determined by a reputable third party who has been agreed to by both parties.


B. Termination bv AKNR. In the event that:





1. The Government revokes or otherwise terminates this Gold Project Contract


without cause or legal justification, or


2. The Government violates AKNR’s rights under this Gold Project Contract, or


3. AKNR’s operations are interfered so seriously by the Government that AKNR is


unable to maintain the normal operation of the Gold Production Facilities, or


4. The Government fails to provide sufficient security for the Gold Production project


in accordance with the terms of an executed Gold Production Security Contract,


or


5. The Government fails to comply with any final decisions by the arbitral tribunal in


controversy arising with the Government under thus Gold Production project, or


6. There exists another material breach or nonobservanoe by the Government of


any of the terms, obligations, or conditions of this Gold Production project, or of


the laws of Afghanistan;


Then AKNR may, subject to relevant provisions of this contract, revoke this Gold Project


Contract and be entitled to recover any damages it may have suffered due to the


Government committing one or more of the above actions. The extent of the damages


shall be determined by a reputable third party who has been mutually agreed to by both


parties.


34, Notification and Remedy





In the event that the Government seeks to terminate this Gold Project Contract for a


material breech:


1. the MoM shall give notice in writing specifying the particular cause for termination





and a time period to address the concern based upon the circumstances but shall not


be less than three (3) months.








3. or AKNR may choose to compensate the MoM at a value determined by a'-r^yfabl^.ry>


third party who has been mutually agreed to by both parties, at which Jnha AKNR' ;





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 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





has three (3) months following the determination to submit such compensation to the


MoM.


4. If AKNR or the Government shall fall to comply with said notice, the Government or


AKNR may, after the expiration of the time period for remedying the cause for


termination, terminate this Gold Project Contract, provided, however, that where


there is any dispute between the Parties as to:


a. The existence of the cause for termination identified by the terminating Party,





or


b. Whether there has been any breach or nonobservance by AKNR or the


Government of any term, obligation, or condition of this Gold Project Contract, or


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


manner in which it should be remedied,


Then AKNR or the Government may, within three (3) months of notice refer the





dispute to arbitration as per Article 32 of this contract.


35. Default





1. If notice of termination is not remedied within the allowed period this gold contract


shall; not automatically terminate but shall constitute default.





2. In the event of a default, the aggrieved Party may notify the other Party in writing of


the default, and the notified Party shall have an additional period of thirty (30) days


after receipt of such notice to cure, or commence and diligently pursue activities if the


breach cannot reasonably be cured within thirty (30) days; provided that the period of


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


prevented from acting because of an event of circumstances beyond its control,


including Government action or inaction.


3. If a Party fails to commence corrective activities within such time for remedying, the





other Party may terminate this Gold Project Contract by giving written notice.


4. In the event that a failure by a Party to perform or comply with any of the terms,


provisions, or obligations of this Gold Project Contract causes economic loss


including the outstanding portion of AKNR’s investment to the other Party, the


defaulting party shall compensate the other Party for the amount of the economic


loss sustained by the other Party as determined by a mutually agreed reputable third


party,





36. Domicile; Service of Process





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


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


specified in this Contract, and shall maintain an office or agent in Afghanistan for receipt


of service of process or notification or other official or legal communication.





AKNR is responsible to establish an office in Kabul and Baghlan and appoint an official


representative and notify the MoM of these details.





Any and all notices or other instruments or papers to be sent to any party


other party hereto pursuant to this Contract shall be official in writing fron^autpie'


persons and delivered personally or by fax, or such other method as agnbed^^z©^


Parties to the following person or authorized representative: l'-,J: f $ f V


\ i,_ 'i y’s I i jj*


10/01/2011A.


'^3


 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





The AKNR:


Name


Address





City


Country


Phone


E-Mail





The MoM:


Name


Address





City


Country


Phone


Facsimile


E-Mail •





All notices, requests or other communications required by, provided for in, or relative to


this Gold Project Contract shall be in writing. E-mails, when acknowledged in writing,


and facsimiles shall be considered as written communications,


37. Damage to Property:


AKNR shall take all appropriate risk management measures as outlined in the approved


plant 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 AKNR or its


agents or of any subcontractor carrying on operations or activities for AKNR under this


Contract, AKNR will be liable for such injuries or damage in accordance with the


applicable laws of Afghanistan.


38. Binding Effect of Contract


This Contract and the covenants and agreements ot it shall legally bind and inure to the


benefit and responsibilities of the Parties, and their respective heirs, personal


representatives, successors, and assigns. Unless the Contract otherwise requires, the


covenants of this Contract shall survive the transfer of title.


39. Governing Law


This Contract is subject to and governed by all applicable Laws and Regulations of the


Government of Afghanistan.


40. Severability


Should any part of this contact be found to be unenforceable all other elements


shall remain valid and in full effect. . wA &


41. Complete Contract AT > ^


This Qara Zahgan Gold Contract, consisting of the above Sections 1*40, togetheft^th


the herein referenced documents, constitutes the complete legal Contract between the


.ffage 18. of 19.


10/01/2011


 Qara Zaghan Gold Project Contract (Afghan Krystal & MoM)





Parties and supersedes all prior Contracts and understandings between the parties. It


shall not be terminated, revoked, rescinded, altered, or modified in any respect without


the prior written consent of the parties. This Contract shall be executed in English and in


Dari in four (4) originals, with each Party holding one (1) original in English and one (1) in


Dari. In the event that a dispute arises under this 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 Contract. In case of conflict the Dari version will take


precedence.








IN WITNESS WHEREOF, the Parties have executed or caused this Contract to be


executed. Agreed to and Accepted this_day of_, 2011











/>


Sadif M^nsdor Naderi





Wahidulla&HfdHiarf^^' /


M inister wjwlnes. *3 ^ / clhairrrk/ian^Presi^ent





Islamic RepubliKof AfgfianlstSTf Jj/ AfghaVKtysfal.NaturayResources


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10/01/2011 Page 19. of 19.