Common use of EXPLOITATION PHASE Clause in Contracts

EXPLOITATION PHASE. 7.1 Within 2 (TWO) months of taking a Decision to Mine, the Participants shall decide whether to form a new legal entity to conduct Mining , and on failure to reach such an agreement, the Joint Venture will continue to operate in accordance with the terms and conditions set out hereunder. 7.2 The Participants shall procure at the commencement of the Exploitation Phase (or earlier if necessary), that an HDP Participant is introduced into the Joint Venture having a Participation Interest sufficient to satisfy the requirements of the MPRDA and the Charter; provided that by the commencement of Commercial Production the HDP Participant shall have a Participation Interest of at least 26% (TWENTY SIX PERCENT). The identity of the HDP Participant shall require the prior written approval of both Participants which approvals shall not be unreasonably withheld. CIS/AAP/669 Page 48 1256/AAP/KJW 26/04/2004 7.3 The balance of the Participation Interest after the introduction of the HDP Participant shall be divided between PPL and Plateau based on their respective contribution values as determined in the Bankable Feasibility Study. The value of the PPL Rights (“the PPL Value”) will be equal to the Net Present Value (“NPV”) of exploiting the PPL Rights as a stand alone Mining operation by applying an agreed discount rate. The discount rate for the farms Drenthe 778 L.R. and Overysel 815 L.R. shall be equal. If the Parties are unable to agree a discount rate for Witrivier 778 L.R. or if the inclusion thereof does not add value to the Joint Venture Project that property shall no longer form part of the Joint Venture. The value of the Plateau Rights (“the Plateau Value”) will be equal to the aggregate of all Exploration Expenditure incurred by Plateau up to the commencement of the Exploitation Phase and the Net Present Value (“NPV”) of exploiting the Plateau Rights as a stand alone Mining operation by applying an agreed discount rate. 7.4 Should the PPL Value and the Plateau Value differ then in the event that the Plateau Value is greater than the PPL Value, then PPL’s initial Participation Interest in the Exploitation Phase shall be reduced proportionately and PPL shall have the election to : 7.4.1 remain at its reduced Participation Interest (subject to dilution (as determined in accordance with 7.8) in the event that it elects to have a CIS/AAP/669 Page 49 1256/AAP/KJW 26/04/2004 Non-Contributory Participation Interest in accordance with 7.5 or is deemed to have so elected in accordance with 6.1.9.1); 7.4.2 if it elects to have a contributory Participation Interest in accordance with 7.5, make a cash payment to Plateau at the commencement of the Exploitation Phase to make up the difference in the respective values in which event PPL’s Participation Interest shall equal Plateau’s Participation Interest on the date of payment; or 7.4.3 if it elects to have a contributory Participation Interest in accordance with 7.5, fund a disproportionate share of the development expenditure of the Mine on an agreed funding schedule until such stage as incrementally PPL’s Participation Interest equals that of Plateau. 7.5 Subject to the provisions of 6.1.9.1, PPL shall further elect by notice in writing to Plateau at the commencement of the Exploitation Phase whether its Participation Interest shall be contributory or a Non-Contributory Participation Interest. 7.6 Subject to the provisions of 7.4.3, during the Exploitation Phase all Capital Expenditure and Operating Expenditure requirements of the Joint Venture Project shall be funded by the holders of Participation Interests in accordance CIS/AAP/669 Page 50 1256/AAP/KJW 26/04/2004 with their respective Participation Interests, save for PPL if PPL has made the election in clause 7.5 to have a Non-Contributory Participation Interest. If PPL has elected a Non-Contributory Participation Interest, the remaining contributory Participants shall contribute funding in the ratio that their contributory Participation Interest is to the total contributing Participation Interest. As between all the contributing Participants, they shall on commencement of the Exploitation Phase agree on a dilution formula in respect of Participation Interests should a Participant decide not be contribute to expenditure, which formula shall take account of prior contributions to the Joint Venture, and failing agreement between the Parties, the formula shall be determined in the manner set forth in clause 17. 7.7 In the event that PPL’s Value is greater than Plateau’s Value at the commencement of the Exploitation Phase and PPL has elected in terms of 7.5 to have a contributory Participation Interest, Plateau shall either : 7.7.1 pay to PPL a cash amount forthwith after the commencement of the Exploitation Phase so as to equalise the difference and after such payment the Participation Interests of Plateau and PPL shall be equal; or CIS/AAP/669 Page 51 1256/AAP/KJW 26/04/2004 7.7.2 fund a disproportionate share of development expenditure of the Mine on an agreed funding schedule until such stage as incrementally Plateau’s Participation Interest equals that of PPL. In the event that PPL’s Value is greater than Plateau’s Value at the commencement of the Exploitation Phase and PPL has elected in terms of 7.5 to have a Non-Contributory Participation Interest, PPL’s initial Participation Interest shall dilute in terms of 7.8. 7.8 Should PPL make an election in terms of 7.5 to have a Non-Contributory Participation Interest during the Exploitation Phase then PPL’s Non-Contributory Participation Interest shall be revised at the end of each 3 (THREE) month period from the commencement of the Exploitation Phase by the following formula : A = ---- where : A is the revised Non-Contributory Participation Interest of PPL at the end of each 3 (THREE) month period; CIS/AAP/669 Page 52 1256/AAP/KJW 26/04/2004 X is PPL’s Value (plus any other agreed expenditure incurred by PPL for and on behalf of the Joint Venture); Y is the aggregate of PPL’s Value, Plateau’s Value and all expenditure incurred by the Participants for and on behalf of the Joint Venture from the commencement of the Exploration Phase up to the end of the relevant 3 (THREE) month period. 7.9 Should the operation of the formula in 7.8 result in PPL’s Non-Contributory Participation Interest diluting down to 12½% (TWELVE AND A HALF PERCENT) it shall reduce no further; provided that for every full percentage point or part thereof that the royalty rate in the Mineral and Petroleum Royalty Act, once enacted is reduced, from that proposed in the draft Mineral and Petroleum Royalty ▇▇▇▇ of 4% (FOUR PERCENT) on platinum group metals, the rate of 12½% (TWELVE AND A HALF PERCENT) shall be increased by an equivalent percentage point or part thereof to a limit of 15%. (FIFTEEN PERCENT); provided further that if the prescribed royalty under the Mineral and Petroleum Royalty Act, once enacted, is not based on published tradable values or gross sales values, or if the royalty is in a different form such as a tax, then the Parties shall negotiate and agree the import of such royalty or tax, or 1256/AAP/KJW 26/04/2004 other impost on the basis of the provisions of this clause 7.9 and agree a methodology to calculate the limits imposed upon the Non-Contributory Participation Interest in this clause 7.9 so as to place the Parties in the same commercial position as if the said proposed royalty rate had been enacted. Should the Parties be unable to agree on a percentage for purposes of this clause 7.9, within 30 (THIRTY) days after their first meeting either one of the Parties shall be entitled to refer the determination of the percentage to the expert referred to in 6.11.7 for expert determination and his decision shall be final and binding on the Parties and not capable of review or appeal. In making such a determination the said expert shall impose a percentage Non-Contributory Participation Interest of between 12½% (TWELVE AND A HALF PERCENT) and 15% (FIFTEEN PERCENT) and the said expert shall make all reasonable assumptions necessary to come to a determination, which will, as near as is reasonably possible place the Parties in the same financial position they would have been had the royalty been based on the published tradable values or gross sales values as proposed in the draft Mineral and Petroleum Royalty ▇▇▇▇. 7.10 In regard to management of the cash of the Joint Venture during the Exploitation Phase: 1256/AAP/KJW 26/04/2004 7.10.1 all of the Proceeds and all the other revenue of the Joint Venture derived from the sale of anything else by or on behalf of the Participants, or any insurance proceeds as a result of a claim for loss of Profits, will be paid into a bank account in the name of the Joint Venture; 7.10.2 Operating Expenditure and Capital Expenditure of the Joint Venture shall be paid for by the Manager out of the bank account referred to in clause 7.10.1; 7.10.3 the Manager shall retain sufficient funds in the said bank account to fund working capital of the Joint Venture required for Operating Expenditure and Capital Expenditure of the Joint Venture in an amount to be determined by the Manager, which amount may be varied by the Management Committee at any time; 7.10.4 subject to clause 7.14, the Participants will maintain the Profit distribution policy whereby, subject to the making of appropriate specific reservations, the portion of annual Profit to be distributed and the portion thereof to be retained, will be commensurate with the maintaining of a sound financial position of the Joint Venture provided that: CIS/AAP/669 Page 55 1256/AAP/KJW 26/04/2004 7.10.4.1 the Profits of the Joint Venture shall be distributed on a quarterly basis; 7.10.4.2 should there be insufficient funds in the Joint Venture bank account when a Profit distribution is due, owing to the incurring of Capital Expenditure, PPL’s percentage of such Profit (should PPL have a Non-Contributory Participation Interest), shall accrue interest at the prime interest rate charged by Standard Bank of South Africa Limited (Sandton Branch) plus 3% (THREE PERCENT) from time to time from the due date to the date of distribution. 7.11 The Participants shall investigate the raising of project finance during the Exploitation Phase if this is possible and economical, and the contributing Participants shall jointly cede their Participation Interests as a whole if required as security for project finance. In the event that PPL has a Non-Contributory Participation Interest, the other Participants shall be entitled to pledge the assets of the Joint Venture as security for project finance provided that the financier recognises and acknowledges PPL’s Rights in terms of this Agreement and subordinates its rights to those of PPL under this Agreement and makes it a term of the financing agreements that upon foreclosure under the security any purchaser of the assets of the Joint Venture or the Participation 1256/AAP/KJW 26/04/2004 Interests of the other Participants, shall become a party to this Agreement with PPL. 7.12 It is recorded that all liabilities and obligations of the Joint Venture shall be borne by the holders of Participation Interests according to their respective Participation Interests, save for PPL, if PPL has made the election in clause 7.5 to have a Non-Contributory Participation Interest. 7.13 All Capital Expenditure and Operating Expenditure will only be incurred in terms of the Annual Budget and/or the Manager’s schedule of authority. The Management Committee shall be required to approve budgets, cash flow forecasts and cash call procedures. 7.14 Should PPL hold a Non-Contributory Participation Interest, PPL shall be entitled to receive Profits from the Joint Venture in accordance with its Non-Contributory Participation Interest only once the Capital Expenditure required to reach an initial steady state as per the Bankable Feasibility Study has been repaid, provided that: 7.14.1 if the Joint Venture Project is identified in the Bankable Feasibility Study as having an after tax IRR of more than 16% (SIXTEEN PERCENT) then PPL shall be entitled to payments of Profits simultaneously with CIS/AAP/669 Page 57 1256/AAP/KJW 26/04/2004 repayment of Capital Expenditure in terms of a repayment schedule to be agreed between the Participants as part of the Bankable Feasibility Study, taking the contributing Participants’ project financing obligations into consideration; 7.14.2 in the event of the Participants being unable to agree on the repayment schedule referred to in clause 7.14.1 or the extent of the IRR the matter shall be referred to determination in accordance with clause 17. 7.15.1 It is recorded that in the event of dilution of the HDP Participant interest below that required to satisfy the provisions of MPRDA, then that portion of the diluted interest by which the HDP Participant’s holding falls below the required interest (“Default Participation Interest”), together with the pro-rata portion of liabilities associated with the Default Participation Interest, will be placed in escrow with a firm of attorneys to be appointed by the Management Committee. 7.15.2 The HDP Participant may reacquire the Default Participation Interest by making the required Capital Expenditure contribution payment which caused the dilution, as well as interest on that amount, levied at Prime CIS/AAP/669 Page 58 1256/AAP/KJW 26/04/2004 plus 10% (TEN PERCENT), from the due date of the Capital Expenditure contribution up to the date of settlement. 7.15.3 The trustees may enter into an agreement to sell the Default Participation Interest to a bona fide HDP (“Acquirer”) on market related terms after giving the HDP Participant 30 (THIRTY) days’ written notice of the impending sale, during which 30 (THIRTY) day period the HDP Participant may reacquire the Default Participation Interest as set out above. Failure to complete the sale to the Acquirer for whatever reason will lead to the reinstatement of this clause. 7.15.4 Neither Anooraq nor PPL shall be entitled to acquire the Default Participation Interest.