1
Exhibit 3e
GEOEXPLORATION CORPORATION OF
THE FIRST GEOEXPLORATION BUREAU
- and -
TRIPLE EIGHT MINERAL CORPORATION
JOINT VENTURE CONTRACT
DECEMBER 25, 1995
2
I N D E X
Page
----
PARTIES 1
RECITALS 1
1.0 DEFINITIONS AND INTERPRETATION.................................................................... 3
1.1 Definitions............................................................................... 3
1.2 Headings.................................................................................. 7
1.3 Contract Paramount........................................................................ 7
1.4 Extended Meanings......................................................................... 7
1.5 Calculation of Time....................................................................... 7
1.6 Currency.................................................................................. 7
1.7 Severability.............................................................................. 7
1.8 Schedules................................................................................. 7
2.0 ESTABLISHMENT OF JOINT VENTURE.................................................................... 8
2.1 Legal Basis of Joint Venture.............................................................. 8
2.2 Status of TEMCO........................................................................... 8
2.3 Status of GEC-FGEB........................................................................ 8
2.4 Certificate of Approval and Business License.............................................. 8
2.5 Effect of Contract........................................................................ 8
2.6 Beneficial Interests...................................................................... 8
2.7 Liability of the Parties.................................................................. 9
2.8 Articles of Association................................................................... 9
2.9 Name of the Joint Venture................................................................. 9
2.10 Registered Office......................................................................... 9
2.11 Fiscal Year............................................................................... 9
3.0 PURPOSES AND SCOPE OF JOINT VENTURE............................................................... 9
3.1 Purpose and Scope......................................................................... 9
3.1.1 Purpose and Scope of Business................................................. 9
3.1.2 Use of International Mining Industry Standards................................ 10
3.2 Mutual Obligations of the Parties......................................................... 10
4.0 COMPOSITION OF BENEFICIAL INTERESTS............................................................... 10
4.1 Initial Investment........................................................................ 10
4.1.1 Total Initial Investment of the Joint Venture................................. 10
4.1.2 First Program and Budget...................................................... 11
4.1.3 Voting Interest............................................................... 11
4.2 Changing Beneficial Interests............................................................. 11
4.3 Contribution by GEC-FGEB and Warranty..................................................... 11
4.3.1 Assignment of Exploration Rights and Related Information ..................... 11
4.3.2 Warranty of Title ............................................................ 12
3
4.3.3 Continuing Obligation of GEC-FGEB .................................................. 12
4.4 Continuing Assistance of GEC-FGEI3 ............................................................. 12
4.4.1 Importation or Exportation of Equipment ............................................ 12
4.4.2 Public Relations and Monitoring of Legislation and Regulation....................... 13
4.5 Contribution by each Party to Project Expenditure............................................... 13
5.0 DURATION OF THE JOINT VENTURE............................................................................ 13
5.1 Duration........................................................................................ 13
5.2 Disposition of Property......................................................................... 13
5.3 Extension....................................................................................... 13
6.0 BOARD OF DIRECTORS....................................................................................... 14
6.1 Commencement.................................................................................... 14
6.2 Purpose and Scope of Authority of Board......................................................... 14
6.3 Composition..................................................................................... 14
6.4 Appointment and Removal of Directors............................................................ 14
6.4.1 Term and Eligibility................................................................ 14
6.4.2 Method of Appointment or Removal.................................................... 14
6.5 Casual Vacancies on Board....................................................................... 15
6.6 Alternate Directors............................................................................. 15
6.7 Convening and Place of Meetings................................................................. 16
6.7.1 Convening and Place of Meeting...................................................... 16
6.7.2 Notice Periods...................................................................... 16
6.7.3 Venues other than Beijing........................................................... 16
6.8 Quorum.......................................................................................... 16
6.8.1 Quorum.............................................................................. 16
6.8.2 Adjournment of Meeting if no Quorum................................................. 16
6.9 Votes at Meetings............................................................................... 17
6.9.1 Voting Deemed Beneficial Interest................................................... 17
6.9.2 Voting by Director of Non-Contributing Party........................................ 17
6.10 Powers of Attorney.............................................................................. 17
6.11 Special Resolutions............................................................................. 17
6.12 Written Resolutions............................................................................. 17
6.13 Decisions Binding............................................................................... 18
6.14 Sub-Committees of the Board..................................................................... 18
7.0 CHAIRMAN AND GENERAL MANAGER ............................................................................ 18
7.1 Role of Chairman ............................................................................... 18
7.2 Eligibility and Appointment of Chairman ........................................................ 18
7.2.1 Eligibility ........................................................................ 18
7.2.2 Right to Nominate .................................................................. 18
7.2.3 Agreement to Appoint ............................................................... 19
7.3 Eligibility and Authority ...................................................................... 19
7.4 No Casting Vote................................................................................. 19
7.5 Delegation of Authority......................................................................... 19
7.5.1 Confer with General Manager ........................................................ 19
4
7.5.2 Delegate to General Manager................................................................. 19
7.5.3 Nominate General Manager as Temporary Stand-in.............................................. 19
7.6 Authority over Property of Joint Venture................................................................ 20
7.7 Duties of Chairman...................................................................................... 20
7.8 Powers of Chairman...................................................................................... 21
7.9 Standard of Performance................................................................................. 21
7.10 Excess Expenditure...................................................................................... 22
7.10.1 General Permitted Overrun................................................................... 22
7.10.2 Additional Permitted Overrun in case of Accident or
Emergency .................................................................................. 22
7.11 Accounting Procedure ................................................................................... 22
7.11.1 International Standards for Record Keeping and Information
Disclosure.................................................................................. 22
7.12 General Manager and Deputy General Manager.............................................................. 23
7.12.1 Right to Nominate........................................................................... 23
7.12.2 Power to Appoint Deputy General Manager..................................................... 23
7.12.3 Duration of Appointments.................................................................... 23
........................................................................................................ 24
7.12.4 Act as General Manager...................................................................... 24
8.0 EXPLORATION RIGHTS AND AREA OF INTEREST............................................................................. 24
8.1 Exploration Rights...................................................................................... 24
8.1.1 Exploration Rights.......................................................................... 24
8.1.2 Schedule A.................................................................................. 24
8.1.3 Schedule B.................................................................................. 24
8.2 Maintenance of Exclusive Rights......................................................................... 24
8.3 Guarantee of Exploration Rights......................................................................... 25
8.3.1 GEC-FGEB's Obligation to Assist with Obtaining Additional
Exploration Rights ......................................................................... 25
8.3.2 GEC-FGEB's Obligation to obtain Land Access and to deal with
Local Landholders .......................................................................... 25
8.3.3 GEC-FGEB's Obligation to deal with Adverse Title Defects and
Claims...................................................................................... 25
8.3.4 Reimbursement of GEC-FGEB's Reasonable Costs................................................ 25
8.4 Purpose for the Area of Interest........................................................................ 26
8.5 Areas not Available for Exploration Rights.............................................................. 26
8.6 Revision of Schedule A and Schedule B................................................................... 26
8.7 Property Extensions..................................................................................... 26
8.8 Right of First refusal on Jingshan Mine................................................................. 27
9.0 PROGRAMS AND BUDGETS .............................................................................................. 27
9.1 Compliance with First Program and Budget ............................................................... 27
9.2 Setting of Programs and Budgets ........................................................................ 27
9.2.1 Periodic Setting of Programs and Budgets ................................................... 27
9.2.2 Periods for Exploration based on Program Parameters ........................................ 27
5
9.2.3 Periods for Mine Development and Mining................................................ 27
9.3 Supplementary or Revised Programs and Budgets...................................................... 28
9.4 Approval by Board of Directors..................................................................... 28
9.5 Budgetary Approval................................................................................. 28
9.6 Supply of information.............................................................................. 28
10.0 CONTRIBUTIONS TO PROJECT EXPENDITURE AND CHANGES IN
BENEFICIAL INTERESTS AND SHARE INTERESTS.................................................................... 29
10.1 Liability for Project Expenditure................................................................. 29
10.1.1 According to Beneficial Interests...................................................... 29
10.1.2 Project Overrun Contributions.......................................................... 29
10.2 Contribution by each Party........................................................................ 29
10.2.1 No Contribution by GEC-FGEB............................................................ 29
10.2.2 Post Initial Investment Contributions.................................................. 29
10.3 Election to Contribute............................................................................ 29
10.3.1 Permitted Election Not to Contribute................................................... 29
10.3.2 Required Notice upon Election Not to Contribute........................................ 30
10.4 Election of Contributing Party.................................................................... 30
10.5 Calculation of Beneficial Interest................................................................ 30
10.6 Chairman to Calculate Beneficial Interests........................................................ 31
10.7 Payments following Completion of TEMCO's Initial Investment....................................... 32
10.7.1 Call for Contributions................................................................. 32
10.7.2 Due Date for Contributions............................................................. 32
10.8 Periodic Statements............................................................................... 32
10.9 Challenge to Correctness.......................................................................... 32
10.10 Interest Payable on Overdue Payments.............................................................. 32
10.10.1 Interest Rate on Overdue Payments...................................................... 32
10.10.2 Method of Calculating Interest Rate.................................................... 33
10.11 Procedure for Adjusting Changes in Beneficial Interests........................................... 33
10.11.1 Provide all necessary Co-operation and Authority to Transfer
Shares................................................................................. 33
11.0 DEVELOPMENT AND PRODUCTION................................................................................... 33
11.1 Board of Directors to Rule on Development......................................................... 33
11.2 Obligation to Contribution........................................................................ 34
11.3 Sole Risk Development............................................................................. 34
11.4 Required Authorizations and Parameters for Mining Operation....................................... 34
11.4.1 GEC-FGEB's Obligation to Obtain all Required Authorizations............................ 34
11.4.2 Parameters of Mining Operations........................................................ 34
11.5 Marketing of Minerals from the Joint Venture...................................................... 35
11.5.1 Marketing Policy....................................................................... 35
11.5.2 Exporting Rights....................................................................... 35
12.0 LABOUR, TRAINING OF JOINT VENTURE PERSONNEL AND
TECHNOLOGY TRANSFERS ....................................................................................... 35
12.1 Labour Policy of the Joint Venture ............................................................... 35
6
12.1.1 Flexible Labour Requirements............................................................... 35
12.1.2 Priority to Efficiency of the Operations................................................... 36
12.2 Selection of Labour................................................................................... 36
12.3 Contributions to Statutory Labour Funds............................................................... 36
12.4 Training of Joint Venture Personnel and Transfer of Technology........................................ 36
12.4.1 Guidelines for Training Program............................................................ 36
12.4.2 Introduction of Appropriate Advanced Technology............................................ 37
13.0 LOCAL GOODS AND SERVICES...................................................................................... 37
14.0 ASSIGNMENT AND SUCCESSION..................................................................................... 37
14.1 Assignment............................................................................................ 37
14.2 Assumption Agreement.................................................................................. 38
14.3 Restrictions ......................................................................................... 38
15.0 ELECTION TO CAP CONTRIBUTIONS ................................................................................ 38
15.1 Election After First Work Program .................................................................... 38
15.2 Effective Date of Cap ................................................................................ 38
15.3 Effect of Cap ........................................................................................ 38
15.4 Withdrawal from Property ............................................................................. 39
16.0 ACCOUNTING, REPORTING, AUDITING AND BANK ACCOUNTS ............................................................ 39
16.1 Accounting ........................................................................................... 39
16.1.1 Yearly Financial Statements using International Accounting
Standards.................................................................................. 39
16.1.2 Treatment of Foreign Currency Exchange Rates............................................... 40
16.1.3 Treatment of Foreign Currency Exchange Gains or Losses..................................... 40
16.2 Financial aspects of Operations and Annual Reports.................................................... 40
16.2.1 Submission of Financial Summary of Prior Budgetary Period.................................. 40
16.2.2 Submission of Annual Report using International Accounting
Standards.................................................................................. 40
16.3 Audits................................................................................................ 40
16.4 Bank Accounts......................................................................................... 41
17.0 INSURANCE .................................................................................................... 41
17.1 Chairman to Devise Insurance Program ................................................................. 41
17.2 Insurance Coverage ................................................................................... 41
17.3 Party's Personal Accident Insurance .................................................................. 42
17.4 Reinsurance .......................................................................................... 42
17.5 Premiums as Project Expenditure ...................................................................... 42
18.0 CONFIDENTIALITY .............................................................................................. 42
18.1 Definition of Confidential Information................................................................ 42
18.2 Prohibition on Disclosure of Confidential Information................................................. 43
18.2.1 General Prohibition and Specified Exceptions............................................... 43
18.2.2 Application of Chinese Law when removing Confidential
7
Information from China..................................................................... 44
18.3 Public Announcements................................................................................... 44
19.0 PROTECTION OF THE ENVIRONMENT.................................................................................. 44
20.0 FORCE MAJEURE.................................................................................................. 44
20.1 Consequence of Force Majeure........................................................................... 44
20.2 Definition of Force Majeure............................................................................ 45
20.3 Notice Requirements.................................................................................... 45
21.0 APPLICABLE LAWS................................................................................................ 45
21.1 Chinese Law............................................................................................ 45
21.2 Treaties to Prevail.................................................................................... 45
21.3 Common Practice in Operations.......................................................................... 45
21.4 Changes in Law......................................................................................... 45
22.0 SETTLEMENT OF DISPUTES......................................................................................... 46
22.1 Consultation........................................................................................... 46
22.2 Expert Conciliation.................................................................................... 46
22.2.1 Notice of Intent to Submit to Expert Conciliation.......................................... 46
22.2.2 Appointment of Expert...................................................................... 46
22.2.3 Convening a Hearing........................................................................ 46
22.2.4 Rendering of Written Decision.............................................................. 46
22.2.5 When Decision Becomes Final and Binding.................................................... 47
22.3 Arbitration............................................................................................ 47
22.3.1 Use of Arbitration......................................................................... 47
22.3.2 Language of Proceedings.................................................................... 47
22.3.3 Relevant Matters to Consider............................................................... 47
22.3.4 Powers of Arbitrator Regarding Expert Conciliation......................................... 47
22.3.5 Decision is Final, Binding and Non-appealable.............................................. 48
22.3.6 Power to Award Costs....................................................................... 48
22.4 Failure to Comply with Binding Expert's Award.......................................................... 48
22.5 Validity During Arbitration............................................................................ 48
23.0 CHINESE LEGISLATION............................................................................................ 48
23.1 References in this Contract............................................................................ 48
23.2 Changes to Legislation................................................................................. 48
24.0 MISCELLANEOUS.................................................................................................. 49
24.1 Amendment of Contract.................................................................................. 49
24.2 Inurement.............................................................................................. 49
24.3 Notices................................................................................................ 49
24.3.1 Address for Delivery or Service............................................................ 49
24.3.2 Effective Date of Service.................................................................. 50
24.3.3 Change of Address.......................................................................... 51
24.4 Language of Text....................................................................................... 51
8
24.5 Preferential Treatment.............................................................. 51
24.6 Approval of Contract Amendments..................................................... 51
24.7 Additional Documents................................................................ 51
24.8 Time of the Essence................................................................. 51
24.9 Waivers and Remedies................................................................ 51
24.10 Counterparts........................................................................ 51
24.11 Transmission by Facsimile........................................................... 52
SCHEDULES
Schedule A Map of Exploration Rights and Property Boundary
Schedule B Particulars, Terms and Conditions of Exploration Rights
9
PREAMBLE
THIS FINAL JOINT VENTURE CONTRACT is entered into on this 25th day of December,
1995
BETWEEN
GEOEXPLORATION CORPORATION OF THE FIRST GEOEXPLORATION
BUREAU
(a subsidiary of the Ministry of Metallurgical Industry
("MMI") of the People's Republic of China, hereinafter called
the "GEC-FGEB")
Registration Place: Sanhe City, Hebei Province, China
Registered Office: Yianjao, Sanhe, Hebei, China
Legal Representative: Shi Yiandong; Position: President;
Nationality: Chinese
AND
TRIPLE EIGHT MINERAL CORPORATION (hereinafter called the
"TEMCO")
Registration Place: British Virgin Islands
Registered Office: East Asia Corporate Services
(BVI) Limited Columbus
Centre Building, Wickhams
Cay, Road Town, Tortola,
British Virgin Islands
Legal Representative: ▇▇▇▇▇ ▇. ▇▇▇; Position:
Chairman of Board;
Nationality: Canadian
WHEREAS:
1. All mineral resources within the territory of the People's Republic
of China ("CHINA") are owned by the State.
10
2.
2. The Chinese central government and the Hebei provincial government both
desire to encourage further exploration for economic deposits of Minerals
(as defined herein) which may occur within Hebei Province.
3. In China, the exploration of Minerals is conducted in three stages:
reconnaissance, detailed investigation, and exploration. The right to
conduct each of these three stages of exploration with respect to a
specified geographical area is evidenced by a form of permit (any one or
combination of which as used in these recitals and as more fully defined
herein, an "EXPLORATION RIGHT") which has associated with it specified
rights and obligations. Upon receiving the first of such three forms of
permits, the entity to which it has been issued (the "PERMIT HOLDER") has
the exclusive right to conduct such mineral exploration activity in such
geographic area as is specified therein and, provided that the Permit
Holder satisfies or performs all obligations associated with any such
permit, the Permit Holder is automatically and exclusively entitled to be
issued the next succeeding level of permit.
4. The authority to issue various kinds of permits to conduct exploration as
discussed above and defined as Exploration Rights is held by the Ministry
of Geological and Mineral Resources ("MGMR") and its provincial bureaus.
5. The authority to grant the right to develop mines and to produce Minerals
is held by MGMR and its provincial bureaus and MGMR evidences that it has
granted such right to an entity which wishes to develop a mine and to
produce Minerals by issuing to such entity a Mining License (as defined
herein).
6. GEC-FGEB has been granted certain Exploration Rights with respect to
certain mineral properties in Hebei province (as such mineral properties
are more fully defined herein) and wishes to form a sino-foreign joint
venture (the "JOINT VENTURE"; also as more fully defined herein) for
purposes (the "JOINT VENTURE PURPOSES") of the exploration of Minerals on
such mineral properties and, if such exploration results in the discovery
of an economic deposit of Minerals, for the further purposes of applying to
obtain a Mining License to develop one or more mines and produce and
process Minerals.
7. TEMCO holds all of the non-Chinese interests in the Joint Venture on behalf
of the Canadian side.
8. By entering into this Contract, each of GEC-FGEB and TEMCO desire to
confirm and record their respective rights and obligations participation in
the proposed Joint Venture.
NOW THEREFORE THIS CONTRACT WITNESSES THE PARTIES AGREEMENT AS FOLLOWS:
11
3.
1.0 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Contract, unless the context otherwise requires, the following
expressions shall bear the following meanings:
(a) "ACCOUNTING PROCEDURE" means the procedure referred to in SECTION 7.11 and
set out in SCHEDULE C;
(b) "AREA OF INTEREST" means the area covered by the Exploration Rights listed
in SCHEDULE A but does not include the Core Area;
(c) "BENEFICIAL INTEREST" means, subject to as provided in SECTION 2.6, the
right to which a Party under this contract has to hold a specified
percentage of the capital of the Joint Venture and includes without
limitation the obligation to contribute to the Joint Venture and the right
to share in the profits of the Joint Venture in accordance with such
percentage interest;
(d) "BOARD OF DIRECTORS" means the management organization comprised of
directors appointed by TEMCO and GEC-FGEB respectively pursuant to ARTICLE
6 hereof;
(e) "BUSINESS LICENSE" means the business license issued to the Joint Venture
by the Government department in charge of the administration for industry
and commerce or any other authorized Government agency;
(f) "CERTIFICATE OF APPROVAL" means the certificate of approval issued to the
Parties in respect of this Contract by the Ministry of Foreign Trade &
Economic Co-operation and or any other Government Agency authorized to
issue certificates of approval;
(g) "CHAIRMAN" means the Chairman of the Board of Directors appointed in
accordance with SECTION 6.4;
(h) "COMMENCEMENT DATE" shall have the meaning associated with it in
SUB-SECTION 2.4.2;
(i) "CONTRACT" means this Joint Venture Contract and shall include the Recitals
set out above and all Schedules attached to this Contract;
(j) "CORE AREA" means the area chosen by the Joint Venture to be the initial
target area for Operation of the Property during the initial Program and
Budget referred to in SECTION 4.1.2;
(k) "DETAILED INVESTIGATION PERMIT" means the permit for the second stage of
mineral exploration activities issued by MGMR pursuant to which an entity
enjoys the exclusive right to conduct the second stage of mineral
exploration activities on such mineral properties as are specified in such
permit;
12
4.
(l) "DIRECTORS" means collectively the Chairman, the Vice Chairman and each of
the other Directors appointed by TEMCO and GEC-FGEB respectively to the
Board of Directors which term also includes any alternate Director duly
acting as such pursuant to SECTION 6.7;
(m) "EXPLORATION PERMIT" means the permit for the third stage of mineral
exploration activities issued by MGMR pursuant to which an entity enjoys
the exclusive right to conduct the third stage of mineral exploration
activities on such mineral properties as are specified in such permit;
(n) "EXPLORATION RIGHTS" means any one, or a combination, as the context
requires, of the rights associated with Reconnaissance Permits, Detailed
Investigation Permits and Exploration Permits pursuant to which the Joint
Venture has the exclusive right to explore a geographic area which the
Joint Venture holds, or is granted from time to time, pursuant to the
Mineral Resources Law, as more particularly described, as at the date of
this Contract, in SCHEDULE A and SCHEDULE B;
(o) "FEASIBILITY STUDY" means a study which includes the confirmation of ore
reserves by conducting delineation drilling, hydrological and geo-technical
programs, environmental studies, and the mining of one or more bulk samples
for metallurgical evaluation which may require the construction of
underground workings including shafts or inclines, or other works
associated with mine development. In the process of conducting the
Feasibility Study different mining and processing alternatives will be
considered. The Feasibility Study shall describe the proposed mining
methods, and will contain estimates of both capital and operating costs to
an estimated accuracy level of plus or minus ten percent (10%) to thirty
percent (30%) and will analyze how to proceed to economically and
commercially extract Minerals and produce Products and will also include
relevant marketing and financial data referenced in the Feasibility Study;
(p) "GENERAL MANAGER" means the General Manager of the Joint Venture appointed
pursuant to SECTION 7.2;
(q) "GOVERNMENT" means the Government of the People's Republic of China, at
Central, Provincial and local levels which term shall be deemed to include
all Government departments and their authorized agencies thereof;
(r) "INITIAL INVESTMENT" has the meaning ascribed to it in SECTION 4.1.1;
(s) "INITIAL INVESTMENT PERIOD" means the period which commences on the
Commencement Date and ends on the date which is the earlier of the date on
which TEMCO completes its Initial Investment and the date on which TEMCO
delivers a notice pursuant to SECTION 15.1 that it wishes to cap its
contribution;
(t) "JOINT VENTURE" means the joint venture which pursuant to ARTICLE 2 the
Parties are to establish as a separate legal person in accordance with the
Law of the PRC on Sino-Foreign Co-operative Joint Venture Enterprises;
13
5.
(u) "MINERAL RESOURCES LAW" means the Law of the PRC on Mineral Resources and
the Implementation Regulations thereunder and all relevant supplementary
provisions and interpretations as may be amended from time to time;
(v) "MINERAL RIGHTS" means either or both of Exploration Rights and Mining
Licenses held by the Joint Venture in relation to a Property or Properties
subject to this Contract;
(w) "MINERALS" means all minerals extracted from the Property and includes
without limitation, zinc, silver and gold and all other minerals commonly
and necessarily found in association with zinc, silver or gold in whatever
form or state. However, the term "Minerals" does not include minerals of
which exploitation by Sino-foreign Joint Ventures is prohibited by the
Government;
(x) "MINING LICENSE" means a license granted by MGMR to an entity pursuant to
which such entity is authorized to develop a mine and to conduct Mining
Operations in connection with the Property as specified in such Mining
License;
(y) "MINING OPERATIONS" means every kind of work in connection with the mining,
beneficiation and sale of Minerals, without limiting the generality of the
foregoing, the engineering, developing, mining, treating, refining,
transporting, handling and marketing of Products won from the Property;
(z) "MMI" means the Ministry of Metallurgical Industry of the People's Republic
of China;
(aa) "MONTH" means a Gregorian calendar month and "MONTHLY" shall bear a similar
meaning;
(ab) "OPERATIONS" means the activities of the initial startup, development and
operation of a fully integrated mine, mill and processing complex and
industrial endeavour and includes all activities which have for their
purpose the discovery and location, delineation and trial mining of
commercial deposits of Minerals within the area covered by Mineral Rights,
the testing of such deposits including drilling and other underground
reconnaissance, bulk sampling, Pre-Feasibility and Feasibility Studies, the
acquisition, maintenance and administration of Exploration Rights, and
specifically includes all development work, design and production
engineering and all activities constituting Mining Operations as well as
the administration of field and the management and administrative offices
for the performance of any of the functions specified above and all matters
inherent in or incidental to the business of the Joint Venture;
(ac) "PARTIES" means the parties to this Contract collectively when expressed in
the plural form, and "PARTY" shall mean any party to this Contract
individually when expressed in the singular form;
(ad) "PRC" means the People's Republic of China;
14
6.
(ae) "PRE-FEASIBILITY STUDY" means a study which assesses the viability of
conducting Mining Operations within the Property and upon which a decision
to conduct a Feasibility Study is based;
(af) "PRODUCTS" means any ore, metals, concentrates or Minerals produced or
processed at or from the Properties;
(ag) "PROGRAM AND BUDGET" means a "PROGRAM" being a description in reasonable
detail of Operations to be conducted and objectives to be achieved by the
Chairman within the Property; and "BUDGET" means, in relation to each
Program, a detailed estimate of all Project Expenditure required in order
to conduct such Operations;
(ah) "PROJECT EXPENDITURE" means all costs and charges, whether of a capital or
operating nature, incurred, by or on behalf of the Joint Venture, on or
after the Commencement Date in relation to:
(i) acquiring and maintaining the Joint Venture's Exploration Rights; and
(ii) conducting the Operations;
A detailed list of those costs and charges characterized as Project
Expenditure (including an appropriate management fee) shall be incorporated
into the Accounting Procedure;
(ai) "PROPERTY OR PROPERTIES" means the Mineral Rights, and any interests into
which such Mineral Rights may be converted or exchanged, and shall also
include all equipment, buildings, machinery, data, analysis and other like
items acquired, as used in, or in respect of, the Mineral Rights, and the
Joint Venture formed under this Contract;
(aj) "RECONNAISSANCE PERMIT" means the permit for the first stage of mineral
exploration activities issued by MGMR pursuant to which an entity enjoys
the exclusive right to conduct the first stage of mineral exploration
activities on such mineral properties as are specified in such permit;
(ak) "VOTING INTEREST" means the percentage of the votes which a Party has a
right to vote during all meetings of the Board of Directors which shall be
determined as follows: (i) during the Initial Investment Period, TEMCO
shall have the right to vote a fifty-five percent (55%) Voting Interest and
GEC-FGEB shall have the right to vote a forty-five percent (45%) Voting
Interest; and (ii) at all times thereafter, the percentage of the votes
which each Party shall have the right to vote shall be the same as the
Beneficial Interest of each Party as is calculated from time to time in
accordance with ARTICLE 10 and subject to the approval of appropriate
Government agency.
1.2 HEADINGS
The division of this Contract into Articles and sections, and the provision of
headings relating thereto, is for convenience of reference only, and shall not
affect the construction or
15
7.
interpretation of this Contract. Unless otherwise specified, a reference to an
Article, section or Schedule is a reference to an Article, section or Schedule
to this Contract.
1.3 CONTRACT PARAMOUNT
In the interpretation of this Contract, should any inconsistency exist between
an Article or Section and any part of a Schedule attached hereto, then the
relevant Article or Section in this Contract (as the case may be) shall prevail.
1.4 EXTENDED MEANINGS
When the context so requires, the singular number shall be read as if the plural
were expressed and the provisions of this Contract shall be read with all
necessary grammatical changes depending upon the nature of the Person, or of the
word or phrase which has been specifically defined in this Contract, to which
reference is made.
1.5 CALCULATION OF TIME
When calculating the period of time within which or following which any act is
to be done or step taken pursuant to this Contract, the date which is the
reference date in calculating such period shall be excluded. If the last day of
such period is not a Business Day, then the time period in question shall end on
the first Business Day following such non-Business Day.
1.6 CURRENCY
Unless otherwise provided for herein, all monetary amounts referred to herein
shall refer to the lawful money of the United States of America.
1.7 SEVERABILITY
If any Article, Section, or any portion of any Section, of this Contract is
determined to be unenforceable or invalid for any reason whatsoever then that
unenforceability or invalidity shall not affect the enforceability or validity
of the remaining portions of this Contract and such unenforceable or invalid
Article, Section or portion thereof shall be severed from the remainder of this
Contract.
1.8 SCHEDULES
The following schedules are attached hereto, and incorporated by reference
herein, and deemed to be a part hereof.
SCHEDULE SUBJECT MATTER
A Map of Exploration Rights and Property Boundary
B Particulars, Terms and Conditions of
Exploration Rights
16
8.
2.0 ESTABLISHMENT OF JOINT VENTURE
2.1 LEGAL BASIS OF JOINT VENTURE
Subject to SECTION 2.4, the Parties agree to form a Joint Venture constituted as
a separate legal person in accordance with the Law of the PRC on Sino-Foreign
Co-operative Joint Venture Enterprises and other relevant Chinese laws and
regulations.
2.2 STATUS OF TEMCO
TEMCO is a corporation incorporated under the laws of the British Virgin
Islands.
2.3 STATUS OF GEC-FGEB
2.3.1 GEC-FGEB has been authorized by The First Geoexploration Bureau of MMI to
carry out its duties and enjoy the benefits under this Contract.
2.4 CERTIFICATE OF APPROVAL AND BUSINESS LICENSE
2.4.1 The efficacy of this Contract is conditional upon the Parties being
granted a Certificate of Approval for the Contract in terms satisfactory
to both TEMCO and GEC-FGEB by no later than the date ninety (90) days
after the date on which this Contract has been fully executed.
2.4.2 Subject to sub-section 2.4.1, the Commencement Date of the Joint Venture
shall be the date upon which the Business License is issued.
2.5 EFFECT OF CONTRACT
This Contract is to govern each Party's respective rights and obligations in
the Joint Venture.
2.6 BENEFICIAL INTERESTS
Each Party's Beneficial Interest shall be calculated in accordance with ARTICLE
10.
2.7 LIABILITY OF THE PARTIES
No Party shall have any greater legal interest or claim in the property, rights
and entitlements of the Joint Venture than the Beneficial Interests which such
Party holds at any time and bears in proportion to each other Party's Beneficial
Interest in relation to such property, rights and entitlements, which shall be
adjusted in accordance with Section 10.5.
17
9.
2.8 ARTICLES OF ASSOCIATION
2.8.1 The Parties shall prepare articles of association consistent with the
terms of this Contract to comply with the Law of the PRC on Sino-Foreign
Co-operative Joint Venture Enterprises and the accompanying Regulations to
that Law.
2.8.2 Any articles of association prepared by the Parties shall be submitted for
approval to the relevant Government authority and shall bind the Parties
in accordance with the terms thereof from the date of approval by the said
Government authority.
2.9 NAME OF THE JOINT VENTURE
The Chinese name of the Joint Venture shall be "Chengde Huajia Kuangye Youxian
Gongsi. The English name of the Joint Venture shall be "Chengde Huajia Mining
Industry Co., Ltd.
2.10 REGISTERED OFFICE
The registered office of the Joint Venture shall be: ▇▇ ▇▇▇▇ ▇▇▇ ▇▇., ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇. The Joint Venture may set up representative
offices in Beijing or other places as required.
2.11 FISCAL YEAR
The fiscal year of the Joint Venture shall be that nominated by the Board of
Directors at their first meeting.
3.0 PURPOSES AND SCOPE OF JOINT VENTURE
3.1 PURPOSE AND SCOPE
3.1.1 PURPOSE AND SCOPE OF BUSINESS
The purpose and scope of business for the Joint Venture shall be mineral
exploration, development, production and processing. The Joint Venture
shall undertake Operations with a view to the creation and operation of
fully integrated mining, milling and processing facilities on the
Properties subject to this Contract and without limitation, initially with
a view to delineating one or more ore deposits amenable to commercial
development by the Joint Venture, to thereafter undertake further
exploration drilling and sampling to confirm the size and extent of the
potential ore deposits and undertake development and mining and
metallurgical testwork to analyze alternative mining and milling methods,
recovery rates, grades and products related to commercial exploitation of
the ore deposits delineated and thereafter to construct and operate mines,
▇▇▇▇▇ and other processing facilities as necessary to produce Products from
the Properties subject to this Contract.
18
10.
3.1.2 USE OF INTERNATIONAL MINING INDUSTRY STANDARDS
The Joint Venture will undertake all Operations having due regard to sound
internationally accepted exploration, development, production and
processing standards and practices. For greater certainty, the Parties
agree that the Board of Directors may, in its sole discretion, adopt
policies and standards or make decisions regarding the Operations.
3.2 MUTUAL OBLIGATIONS OF THE PARTIES
Each of the Parties covenants, undertakes to, and agrees with the other Party
that it will:
(a) observe and perform its obligations and commitments in respect of the
Properties subject to this Contract;
(b) not engage (whether alone or in association with others) in any activity
apply for, or grant any Exploration Right or Mining License in respect of
Minerals within the Properties or the Exploration Rights except as
provided or authorized by this Contract, or as agreed in writing by the
Parties;
(c) not do, or cause, or permit to be done, any act, matter or thing
which might cause an Exploration Right or any part thereof to be
revised, canceled, forfeited, not issued, not renewed or not
extended, or which in any way may jeopardize the continued enjoyment
of an Exploration Right;
(d) subject to SECTION 4.1 and ARTICLE 10, contribute, according to the
ratio of Beneficial Interests, to the capital of the Joint Venture or
the Project Expenditures for the purposes of conducting the
Operations;
(e) be just and faithful in all of its dealings with each other Party.
4.0 COMPOSITION OF BENEFICIAL INTERESTS
4.1 INITIAL INVESTMENT
4.1.1 TOTAL INITIAL INVESTMENT OF THE JOINT VENTURE
The total initial investment and registered capital of the Joint
Venture is to be US$8,000,000.
GEC-FGEB will contribute the Exploration Rights held by it in the
Core Area and in the Area of Interest and the geologic data and
research results relating thereto, with a value of US$3,600,000,
representing 45% interest of the Joint Venture.
19
11.
TEMCO shall, subject to SECTION 15.1, within five (5) years subject
to extension due to Force Majeure, from the Commencement Date, expend
on a Program by Program basis up to US$4,400,000 on Project
Expenditures (the "INITIAL INVESTMENT") to the Joint Venture,
representing 55% interest of the Joint Venture.
4.1.2 FIRST PROGRAM AND BUDGET
The Parties agree that starting from the Commencement Date the Joint
Venture shall conduct Operations initially in accordance with an
initial Program and Budget to expend no more than 15% of the Initial
Investment. Within 90 days of the Commencement Date, TEMCO will
contribute to the Joint Venture bank account US$660,000 to fund the
initial Program and Budget. The results achieved from the initial
Program and Budget will meet the requirements of SECTION 15.1.
4.1.3 VOTING INTEREST
During the Initial Investment Period, so long as TEMCO contributes
towards the Project Expenditures required for each exploration stage
in accordance with each Program and Budget in a timely fashion, TEMCO
shall have a 55% Voting Interest notwithstanding that its Beneficial
Interest will be different during this Initial Investment Period.
4.2 CHANGING BENEFICIAL INTERESTS
At all times during this Contract, both Parties' Beneficial Interest shall be
calculated in accordance with the formula set out in ARTICLE 10. For greater
certainty, it is acknowledged by the Parties that: (i) upon completion of the
Initial Investment by TEMCO, TEMCO shall have a 55% Beneficial Interest and
GEC-FGEB shall have a 45% Beneficial Interest; and (ii) thereafter, the
Beneficial Interest of each Party is subject to dilution as calculated in
accordance with the formula set out in ARTICLE 10.
4.3 CONTRIBUTION BY GEC-FGEB AND WARRANTY
4.3.1 ASSIGNMENT OF EXPLORATION RIGHTS AND RELATED INFORMATION
As its contribution to the Joint Venture, GEC-FGEB shall, on the
Commencement Date, transfer and assign, or cause to have transferred
and assigned, to the Joint Venture all of those Exploration Rights
referred to in SUB-SECTION 8.1.1 and, in relation to those
Exploration Rights, all of the drilling cores and other samples and
assays, and all maps, geological, geophysical and geochemical data
and interpretations thereof.
4.3.2 WARRANTY OF TITLE
During the term of this Contract, GEC-FGEB warrants to TEMCO that, as
at the Commencement Date, it will have full title at Chinese Law to
all of the Exploration Rights which are to be transferred as at such
date to the Joint Venture and that it will have obtained approval
from all relevant Government authorities and landholders to
20
12.
allow the Joint Venture to enter into and work upon land which is the
subject of such Exploration Rights for purposes of the Operations.
4.3.3 CONTINUING OBLIGATION OF GEC-FGEB
GEC-FGEB shall provide all necessary assistance and support to the Joint
Venture requiring government or local support required to conduct the
Operations of the Joint Venture currently and in the future. The
assistance and support referenced shall include without limitation the
following:
(a) to provide all necessary assistance and support to the Joint Venture
to obtain all necessary business, exploration, mining, environmental
permits, licenses, rights or permissions, including Exploration
Rights and Mining Licenses in respect of any of the Properties,
required to conduct the operations of the Joint Venture currently
and in the future to conduct Mining Operations;
(b) to assist the Joint Venture with the supply of all necessary
services, including water, electricity and transportation;
(c) to assist the Joint Venture in recruiting Chinese management
personnel, technical personnel, workers and other personnel as
needed;
(d) to assist foreign staff and visitors in applying for entry visas,
work permits and in processing and effecting their travel
arrangements;
(e) keep confidential the technical and commercial information of both
Parties; and
(f) to handle other matters entrusted to it by the Joint Venture.
4.4 CONTINUING ASSISTANCE OF GEC-FGEB
4.4.1 IMPORTATION OR EXPORTATION OF EQUIPMENT
GEC-FGEB shall provide the Joint Venture with all assistance which he
may require from time to time in relation to the importation or
exportation of any equipment including, without limitation, any drilling
or geophysical equipment obtained for the purposes of the Operations.
4.4.2 PUBLIC RELATIONS AND MONITORING OF LEGISLATION AND REGULATION
As the Board of Directors requires from time to time, GEC-FGEB shall
also advance the interests of the Joint Venture by exercising a public
relations role in relation to relevant Government authorities.
Particularly, GEC-FGEB shall be responsible for monitoring any changes
in Government policy towards mineral resource projects and GEC-FGEB
shall assist the Joint Venture to obtain assurance from the Government
in respect of certain regulatory objectives which the Joint Venture
desires.
21
13.
4.5 CONTRIBUTION BY EACH PARTY TO PROJECT EXPENDITURE
Following completion of TEMCO's Initial Investment, each Party may contribute to
Project Expenditure in proportion to their respective Beneficial Interests. All
such contributions to Project Expenditure shall be made in accordance with
ARTICLE 10, and any subsequent adjustments to the Beneficial Interests held by
any Party by virtue of a decision to support to a greater or lesser degree, any
Program and Budget for the Operations shall be made in accordance with the
formula contained in ARTICLE 10.
5.0 DURATION OF THE JOINT VENTURE
5.1 DURATION
Subject to as is provided in ARTICLE 15, and elsewhere in this Contract, the
duration of the Joint Venture will be thirty (30) years from the Commencement
Date.
5.2 DISPOSITION OF PROPERTY
Upon the expiration or termination before the expiry date of the Joint Venture,
the Joint Venture shall carry out liquidation in accordance with the relevant
law. Any property remaining after the payment of all debts of the Joint Venture
shall be distributed to the Parties in proportion to their Beneficial Interest
in the Joint Venture.
5.3 EXTENSION
The Parties agree to extend and offer whatever assistance is required to extend
the duration of the Joint Venture until the last date of Mining Operations on
any of the Properties subject to this Contract. Applications for such extensions
of the duration of the Joint Venture shall be submitted to the original
examination and approval authority, or to any other Government ministry or
department at that time responsible for administering foreign investment.
GEC-FGEB will use its best efforts to assist in obtaining such an extension.
6.0 BOARD OF DIRECTORS
6.1 COMMENCEMENT
The Board of Directors shall function with effect from the Commencement Date.
6.2 PURPOSE AND SCOPE OF AUTHORITY OF BOARD
The Board of Directors shall be formed by and on behalf of the Parties to:
(a) establish policies which will achieve the aims and objectives of the
Joint Venture as set out in SECTION 3.1.1;
22
14.
(b) approve Programs and Budgets submitted for the Operations by the
Chairman;
(c) review performance reports submitted by the Chairman;
(d) make a decision, if appropriate, to implement a Feasibility Study;
(e) establish the initial Accounting Procedure and amend it from time to
time as appropriate; and
(f) consider all other matters appropriate for deliberation by the Board.
6.3 COMPOSITION
Until TEMCO has completed its Initial Investment, the Board of Directors shall
be comprised of seven (7) directors of whom four (4) shall be appointed by TEMCO
and three (3) shall be appointed by GEC-FGEB.
6.4 APPOINTMENT AND REMOVAL OF DIRECTORS
6.4.1 TERM AND ELIGIBILITY
Subject to earlier termination caused by the operation of SECTION 6.3, a
FOUR (4) year term of office shall apply to anyone appointed as
Director, Chairman or Vice Chairman of the Board. Subject to SUB-SECTION
6.4.2, any person serving as Director, Chairman or Vice Chairman shall
be eligible for reappointment to the Board for one or more further terms
of office. By the execution of this Contract, the Parties as
shareholders evidence their agreement to vote in favour of the nominees
of each of them for the office of Director as provided in SECTION 6.3.
6.4.2 METHOD OF APPOINTMENT OR REMOVAL
Each Party shall be entitled to appoint (pursuant to the occurrence of a
casual vacancy or otherwise) or remove any of the number of Directors
which it is entitled to appoint to the Board of Directors. Any such
appointment or removal of a Director shall be made by instrument in
writing signed by a person duly authorized by the relevant Party and
will by effective upon it being delivered to the registered office and
being approved by the original Government registration agency.
6.5 Casual Vacancies on Board
Any person having been appointed as a Director, Chairman or Vice Chairman shall
occupy that office at the pleasure of the Party having appointed the particular
Director. Where a casual vacancy occurs within the Board of Directors the Party
having appointed the person whose death, removal or resignation gave rise to the
casual vacancy shall be entitled to appoint the replacement Director. Persons
appointed to fill casual vacancies shall only hold office for the remainder of
the term of office which the person who was replaced would have occupied.
23
15.
6.6 ALTERNATE DIRECTORS
Each Director shall have power to appoint (but not retrospectively) a suitable
and an appropriate person (including another Director) to act as an Alternate in
his place on the Board of Directors whether for a stated period or periods or
until the happening of a specified event or whenever by absence or illness or
otherwise he shall be unable to attend his duties as a Director, and the
following provisions shall apply to any such Alternate Director:
(a) he may be appointed, removed or suspended from office by notice from the
Director for whom he is acting as an Alternate;
(b) he shall be entitled to receive notice of meetings of Board of Directors
and to attend and he shall be entitled to vote thereat should the
Director by whom he was appointed not be present;
(c) he shall be entitled to exercise all the powers (except the power to
appoint an Alternate Director) and perform all the duties of a Director
insofar as the Director by whom he was appointed had not exercised or
performed them;
(d) he shall automatically vacate office if the Director by whom he was
appointed shall vacate office or die;
(e) he shall not be taken into account in determining the number of
Directors for the purposes of the required composition of the Board of
Directors as set out in SECTION 6.3;
(f) he shall, while acting as a Director, be responsible to the Joint
Venture for his own acts and defaults and shall not be deemed to be the
agent of the Director by whom he was appointed; and
(g) one person may be appointed and serve as an alternate for more than one
Director at any one time or at different points in time.
6.7 CONVENING AND PLACE OF MEETINGS
6.7.1 CONVENING AND PLACE OF MEETING
The Board of Directors shall meet at least once within any calendar
year. Meetings shall take place in Beijing, or in such other place as
shall be agreed upon from time to time by the Parties. The Chairman
shall be responsible for ensuring that each of the Directors receives
timely notice of the occurrence of scheduled meetings.
24
16.
6.7.2 NOTICE PERIODS
The giving by either Party of at least sixty (60) days notice is
required for the convening of each Board of Directors meeting, including
any extraordinary meeting, although a majority of the Directors may
consent to shorter notice being given. The proposed agenda for each
Board meeting shall be circulated to all Directors at least fourteen
(14) days prior to the date appointed for the particular meeting.
6.7.3 VENUES OTHER THAN BEIJING
At the discretion of the Directors, meetings of Board of the Directors
may from time to time be conducted at venues outside of China.
6.8 QUORUM
6.3.1 QUORUM
Until TEMCO shall have competed its Initial Investment, the quorum for
meetings of the Board of Directors shall be four (4) comprising at least
two (2) Directors nominated by TEMCO and two (2) Directors nominated by
GEC-FGEB.
6.8.2 ADJOURNMENT OF MEETING IF NO QUORM
Where a meeting of the Board of Directors is called pursuant to section
6.7 but is adjourned because a quorum is not present as required
pursuant to SUB-SECTION 6.8.1, then, if a quorum is not present within
sixty (60) minutes of the time called for a meeting, the meeting shall
be adjourned to a date seven (7) days thereafter at the same time and
place and notice of the adjourned meeting shall be given to all
Directors; at such adjourned meeting, the representatives present shall
be deemed to be a quorum and shall be automatically authorized and
empowered to conduct business thereat in the normal manner.
6.9 VOTES AT MEETINGS
6.9.1 VOTING DEEMED BENEFICIAL INTEREST
At every meeting of the Board of Directors, each Party through its
Directors present or by power of attorney shall have a percentage of
votes equal to its Voting Interest provided that TEMCO has complied with
its obligations contained in CLAUSE 4.1.3. With the exception of those
matters set forth in CLAUSE 6.12, all matters at the Board's meeting
shall be decided by a simple majority of votes cast.
25
17.
6.9.2 VOTING BY DIRECTOR OF NON-CONTRIBUTING PARTY
Any Directors appointed on behalf of a Non-contributing Party (as such term is
defined by SUB-SECTION 10.3.1) shall only be entitled to vote upon those matters
referred to in section 6.12.
6.10 POWERS OF ATTORNEY
Any Director may, by any duly executed power of attorney, appoint an attorney to
vote on his behalf and such power of attorney or proof thereof to the
satisfaction of the Board of Directors shall be produced for inspection at the
Registered Office of the Joint Venture or at such other location as the Board
may from time to time direct together with such evidence of the due execution
thereof as the Board may require before the attorney shall be entitled to act
thereunder. Any person (including another Director) may be appointed the
attorney of one or more Directors for these purposes.
6.11 SPECIAL RESOLUTIONS
The following resolutions made by the Board of Directors shall be passed only by
unanimous votes of all Directors:
(a) proposals that the Joint Venture should form another enterprise or
business or merge all of the business of this Joint Venture into another
enterprise or business with any third party;
(b) any decision to terminate the business of the Joint Venture;
(c) those decisions required to be passed unanimous votes of all Directors
by Chinese laws and regulations from time to time.
6.12 WRITTEN RESOLUTIONS
Except for special resolutions as provided in 6.12, a resolution in writing
under the hands of more than 50% of the Directors shall be as valid and
effectual as a resolution duly passed at a meeting of the Board of Directors
duly called and held and may consist of several documents in like form each
signed by one or more of the Directors or may be in telexed form, or other
written form of communication, indicating that the signature of the Director
concerned has been duly affixed to the original provided that confirmation that
such signature has been affixed is forwarded to the registered office of the
Joint Venture within fourteen (14) days from the date upon which the original
was signed.
6.13 DECISIONS BINDING
All lawful decisions of the Board of Directors shall be binding on the Parties.
Both Parties are responsible to implement each board decision or resolution.
26
18.
6.14 SUB-COMMITTEES OF THE BOARD
The Board of Directors shall form and regulate such technical and administrative
sub-committees as it considers form time to time to be appropriate. Such
sub-committees may be made responsible to either the Board, or to the Chairman,
as the case may be.
7.0 CHAIRMAN AND GENERAL MANAGER
7.1 ROLE OF CHAIRMAN
The Joint Venture shall be managed by the Chairman who is authorized by the
Board of Directors to manage, supervise and control the Operations on behalf of
the Parties. Within the scope of SECTIONS 7.7 and 7.8 the Chairman alone shall
have the right to enter into legally binding agreements on behalf of the Joint
Venture or the Parties in connection with any and all activities contemplated by
this Contract.
7.2 ELIGIBILITY AND APPOINTMENT OF CHAIRMAN
7.2.1 ELIGIBILITY
Only persons who are suitably experienced and competent shall be
eligible to be appointed to be Chairman.
7.2.2 RIGHT TO NOMINATE
The right to nominate the Chairman depends upon the point in time during
the term of this Contract and upon the Beneficial Interest held by each
Party as set out more fully below:
(a) notwithstanding the Beneficial Interest held by either Party,
during the Initial Investment Period, TEMCO shall be entitled to
nominate the person to be the Chairman;
(b) thereafter, whichever Party holds the larger Beneficial Interest
shall be entitled to nominate the person to be the Chairman;
(c) unless only one Party holds a Beneficial Interest which is greater
than ten percent (10%), no Party shall nominate both the Chairman
and the General Manager.
7.2.3 AGREEMENT TO APPOINT
Subject to the final approval of the Board of Directors, the Board of
Directors shall duly appoint as Chairman the person who is nominated in
accordance with SECTION 7.2 and such Chairman shall report to the Board
of Directors.
27
19.
7.3 ELIGIBILITY AND AUTHORITY
Only persons who are Directors shall be eligible to be appointed to the
positions of Chairman or Vice-Chairman. The authority of the Chairman
and the Vice-Chairman shall be subject to the authority of the Board of
Directors.
7.4 NO CASTING VOTE
The Chairman shall not have a casting vote.
7.5 DELEGATION OF AUTHORITY
7.5.1 CONFER WITH GENERAL MANAGER
The Chairman shall confer on a regular basis with the General Manager
with respect to the full range of the Chairman's responsibilities
pursuant to SECTION 7.7.
7.5.2 DELEGATE TO GENERAL MANAGER
The Chairman shall, in appropriate circumstances, delegate certain of
his responsibilities to the General Manager subject to the ongoing
authority and control of the Chairman.
7.5.3 NOMINATE GENERAL MANAGER AS TEMPORARY STAND-IN
If necessary, as circumstances dictate, the Chairman may nominate the
General Manager to temporarily stand-in and act for and on his behalf
for any or all of the purposes contained in SECTION 7.7. The Party
nominating same will notify the other Party of any such nomination as
soon as practicable. In making any decision as to the delegation of his
responsibilities, the Chairman shall have regard to the experience and
qualifications of all persons available to act in each capacity, with
the interests of the Joint Venture being considered of paramount
importance.
7.6 AUTHORITY OVER PROPERTY OF JOINT VENTURE
For the purposes of managing the Operations, the Chairman shall, under the
supervision and control of the Board of Directors, alone have the authority to
make decisions, or enter into legally binding agreements concerning or relating
to the property of the Joint Venture.
7.7 DUTIES OF CHAIRMAN
The Chairman shall have the power and authority to conduct the day to day
Operations of the Joint Venture and shall have all the necessary and incidental
powers required to carry out such Operations, subject to the overall direction
and control of the Board of Directors as they determine policies from time to
time.
28
20.
In addition to the Chairman's obligations specified elsewhere in this
Contract, the Chairman shall undertake on behalf of the Parties the following
actions:
(a) make timely preparation and submission of Programs and Budgets as
provided by ARTICLE 9;
(b) in accordance with those general directions, instructions and
parameters for action issued from time to time by the Board, the
ability to enter into contracts for the purposes of the Operations on
behalf of the Parties;
(c) in consultation with the project exploration manager or the General
Manager and with GEC-FGEB's assistance in accordance with ARTICLE 8,
use all reasonable endeavour to procure that the Mineral Rights are
maintained, including without limitation the payments of all rentals,
taxes, royalties or other charges and in particular, use all
reasonable endeavour to procure that the Mineral Rights are renewed
or replaced by other titles or rights in substitution for them before
the current titles or rights expire;
(d) in consultation with the project exploration manager or the General
Manager and with GEC-FGEB's assistance in accordance with ARTICLE 8,
apply for such additional Mineral Rights as are required for the
purposes of Operations;
(e) duly prepare and lodge all reports required by law relating to the
Exploration Rights;
(f) make all Project Expenditure and commitments for the Operations on
behalf of the Parties in accordance with Programs and Budgets approved
by the Board of Directors;
(g) furnish to the Board of Directors as soon as practicable reports on
any matters of importance and, in particular, advise the Board of any
factual information on the Exploration Rights or other property held
by the Joint Venture (or by one Party on behalf of the other) which
comes to his attention and which might reasonably be expected to
result in material gains or losses to the Parties or to the Joint
Venture;
(h) furnish to the Board the summary of the Operations provided for in
SUB-SECTION 9.6 (a) and such other information as the Board may
reasonably be expected to require;
(i) maintain full true and accurate records and accounts as provided in
SECTION 16.1;
(j) arrange for and cooperate in the annual audit as provided in SECTION
16.3;
(k) maintain in full force and effect insurance coverage in respect of the
risks of the Operations in accordance with ARTICLE 17;
(l) if required by the Board, undertake and/or commission Pre-Feasibility
Studies and Feasibility Studies;
(m) perform Programs and comply with Budgets approved by the Board, and
29
21.
(n) generally do all acts necessary or desirable for the efficient and
economic conduct of the Operations.
7.8 POWERS OF CHAIRMAN
The Chairman alone shall have the following rights and powers to enable him
to conduct his obligations for the benefit of the Joint Venture:
(a) the power to negotiate and reach agreement on matters relevant to the
Mineral Rights, the Properties or to the Operations with competent
Government authorities;
(b) the power to select, engage and dismiss workers, agents and
independent contractors necessary for the efficient conduct of the
Operations;
(c) the right to take such action as may in his judgement be necessary for
the protection of life, or reasonably necessary for the protection of
property, and all such costs reasonably incurred shall be deemed
Project Expenditure;
(d) subject to any limits imposed by the Board of Directors and herein
referred to, the power to contract and to dispose of surplus and
obsolete property of the Joint Venture; and
(e) such other rights and powers as are reasonably incidental to
conducting the Operations as may be entrusted to the Chairman by the
Board of Directors.
7.9 STANDARD OF PERFORMANCE
The Chairman shall conduct all Operations in accordance with sound
internationally accepted exploration, mining and engineering methods and
practices and within the policy determinations and general direction of the
Board of Directors.
7.10 EXCESS EXPENDITURE
7.10.1 GENERAL PERMITTED OVERRUN
The Chairman is authorized to make all expenditures and commitments
for Operations in accordance with Budgets for Project Expenditure
approved pursuant to SECTION 9.4 (for the purposes of this section
7.10 called "APPROVED BUDGETS"). The Chairman shall take all
reasonable care to avoid such expenditures or commitments in excess of
any Approved Budget without first seeking approval of the Board of
Directors PROVIDED that the Chairman shall be entitled to expend in
any budgetary period up to twenty percent (20%) in excess of any
Approved Budget without requiring any further approval, and all such
expenditure shall be deemed to be Project Expenditure. Subject to
SUB-SECTION 7.10.2, the Chairman shall not be entitled to recover from
any Party any excess over and above such permitted overrun and such
excess shall not be included as
30
22.
any Party's contribution to Project Expenditure for the purpose of
this Contract unless the Board shall approve or ratify such excess
expenditure.
7.10.2 ADDITIONAL PERMITTED OVERRUN IN CASE OF ACCIDENT OR EMERGENCY
In the relevant budgetary period, as an additional permitted overrun
but only in the case of accident or any other emergency relating to
the Operations, the Chairman shall be entitled (without the need to
obtain approval pursuant to SECTION 9.4) to take such action as in his
judgement may be necessary for the protection of life or property and
to incur all reasonable costs up to an amount no greater than
forty-five percent (45%) of an Approved Budget. The said emergency
expenditure shall be treated as Project Expenditure and be outlayed on
behalf of the Parties in proportion to their respective Beneficial
Interests. The Chairman shall notify the Parties of any such emergency
expenditure as soon as practicable and in any event within seven (7)
days after it has been incurred.
7.11 ACCOUNTING PROCEDURE
7.11.1 INTERNATIONAL STANDARDS FOR RECORD KEEPING AND INFORMATION DISCLOSURE
The financial affairs of the Joint Venture shall be subject to the
supervision of the Chairman in accordance with, and governed by, the
Accounting Procedure. The books of account shall also be kept in
accordance with international accounting standards for mining joint
ventures and the Accounting Procedure will ensure that each of the
Parties to the Joint Venture has the accounting information, data and
analyses necessary to comply with their respective disclosure
requirements.
7.11.2 FILING OF INITIAL ACCOUNTING PROCEDURE
A copy of the Accounting Procedure shall be filed with the relevant
Government departments for their records.
7.11.3 AMENDMENTS TO ACCOUNTING PROCEDURE
The Accounting Procedure may be amended from time to time, subject
always to approval of any proposed amendments by the Board. Any
amendments to the Accounting Procedure shall be filed with the
relevant Government departments for their records.
7.12 GENERAL MANAGER AND DEPUTY GENERAL MANAGER
31
23.
7.12.1 RIGHT TO NOMINATE
The right to nominate the General Manager and the Deputy General
Manager depends upon the point in time during the term of this
Contract and upon the Beneficial Interest held by each Party as set
out more fully below:
(a) notwithstanding the Beneficial Interest held by either Party,
during the Initial Investment Period, GEC-FGEB shall be entitled
to nominate the General Manager and TEMCO shall be entitled to
nominate the Deputy General Manager;
(b) thereafter, so long as both Parties hold a Beneficial Interest
which is greater than ten percent (10%), the Party which holds
the larger Beneficial Interest shall be entitled to nominate the
Deputy General Manager and the Party which holds the smaller
Beneficial Interest shall be entitled to nominate the General
Manager;
(c) if, at any point in time, only one Party holds a Beneficial
Interest which is greater than ten percent (10%), such Party
shall be entitled to nominate the General Manager, the Deputy
General Manager and the Chairman.
7.12.2 POWER TO APPOINT DEPUTY GENERAL MANAGER
The Party that is not entitled to appoint the General Manager pursuant
to SECTION 7.12 herein shall be entitled to nominate a suitably
experienced and qualified person for appointment as Deputy General
Manager of the Joint Venture. The Board of Directors shall duly
appoint such person be the Deputy General Manager. The Deputy General
Manager shall report to the General Manager.
7.12.3 DURATION OF APPOINTMENTS
Each of the General Manager and the Deputy General Manager shall serve
for a period of four (4) years subject, as the case may be, to the
right of TEMCO or GEC-FGEB to remove their nominees at an earlier
time. Each of TEMCO and GEC-FGEB undertake that they will pay due
regard to the interests of the Joint Venture and to the objectives of
each current Program and Budget before implementing any decision to
withdraw a nominee from the Joint Venture. Subject to approval of the
Board of Directors, any person may serve the Joint Venture for more
than one term as General Manager or Deputy General Manager as the case
may be.
7.12.4 ACT AS GENERAL MANAGER
The General Manager, or in his absence the Deputy General Manager,
shall act in accordance with the instructions and control of the
Chairman. As may be authorized by the Board of Directors or the
Chairman from time to time, the General Manager, or in his absence the
Deputy General Manager, may perform other functions of the Joint
Venture as may be appropriate.
32
24.
8.0 EXPLORATION RIGHTS AND AREA OF INTEREST
8.1 EXPLORATION RIGHTS
8.1.1 EXPLORATION RIGHTS
With effect on and from the Commencement Date, GEC-FGEB shall pursuant
to SUBSECTION 4.3.2 either procure the transfer, or transfer to the
Joint Venture the Exploration Permits, and the Joint Venture shall be
entitled to become the legally registered holder of the following
Exploration Rights, namely:
Qiujiayin area, Guzigou - Duanjiayin area and Yantongshan
area of Liangjia District, Hebei. Total area 120 square
kilometres, including Core Area of 20 square kilometres and
Area of Interest of 100 square kilometers.
8.1.2 SCHEDULE A
The Exploration Rights referred to in SUB-SECTION 8.1.1 are delineated
within the map attached as SCHEDULE A.
8.1.3 SCHEDULE B
Detailed particulars, terms and conditions attaching to each of the
Exploration Rights are set forth in SCHEDULE B.
8.2 MAINTENANCE OF EXCLUSIVE RIGHTS
Subject to the Joint Venture's compliance with all terms and
conditions attached to the Exploration Rights, at the direction of the
Board of Directors, GEC-FGEB will undertake on behalf of the Joint
Venture to ensure that for the duration of each Exploration Right the
Joint Venture will be entitled to have exclusive possession of the
area the subject of each Exploration Right for all the purposes of
conducting the Operations.
8.3 GUARANTEE OF EXPLORATION RIGHTS
8.3.1 GEC-FGEB'S OBLIGATION TO OBTAIN ADDITIONAL EXPLORATION RIGHTS
The Joint Venture may apply to the relevant Government authorities for
additional Exploration Rights within the Area of Interest in addition
to those referred to in SUB-SECTION 8.1.2 (for greater certainty, to
include higher level of Exploration Rights and additional geographic
area subject to Exploration Rights) certainty, so as to explore for
further mineralization, and GEC-FGEB shall be obliged to bring all
reasonable effort to bear so as to assist the Joint Venture in making
such applications and to facilitate the grant of such additional
Exploration Rights.
33
25.
8.3.2 GEC-FGEB'S OBLIGATION TO OBTAIN LAND ACCESS AND TO DEAL WITH LOCAL
LANDHOLDERS
GEC-FGEB shall be responsible on behalf of the Joint Venture for
making all applications for the additional Exploration Rights referred
to in SUB-SECTION 8.3.1 and shall guarantee all necessary land access
agreements to all Properties. Further, GEC-FGEB shall be responsible
for liaising with the government department in charge of geology and
mineral resources and all other relevant Government authorities and
with local landholders to ensure that good relations are maintained
between the Joint Venture and other persons during the conduct of
Operations.
8.3.3 GEC-FGEB'S OBLIGATION TO DEAL WITH ADVERSE TITLE DEFECTS AND CLAIMS
GEC-FGEB shall be responsible to deal with, and to cover all costs,
expenses and charges relating to, any claims or interest of third
parties in and to the Mineral Rights. If any such interest in the
Mineral Rights arises or is claimed by any third party including,
without limitation, the Government, GEC-FGEB shall, on behalf of the
Joint Venture, and at its sole expense, proceed to defend any such
claim and expunge any such interest. For greater certainty, it is
acknowledged and agreed by GEC-FGEB that if, in order to satisfy its
obligations under this SECTION 8.3.3, any such third party who
successfully claims an interest in and to the Mineral Rights requires
or is entitled to be paid some consideration, whether such
consideration is cash or a percentage interest in the Joint Venture or
otherwise, such consideration shall be paid solely by GEC-FGEB and not
by the Joint Venture.
8.3.4 REIMBURSEMENT OF GEC-FGEB'S REASONABLE COSTS
The Joint Venture shall bear all costs reasonable incurred by GEC-FGEB
in its provision of the services pursuant to SUB-SECTIONS 8.3.1, 8.3.2
AND 4.3.3.
8.4 PURPOSE FOR THE AREA OF INTEREST
The Area of Interest has been created for the following reasons:
(a) to identify those are as within which the Parties believe that
successful Operations may be conducted by the Joint Venture in order
to attain its purposes as defined in SECTION 3.1;
(b) to ensure that neither Party shall act independently of each other, or
of the Joint Venture by engaging in Operations within the Area of
Interest during the existence of the Joint Venture;
(c) to define the area within which the Joint Venture may next expand its
Operations by applying for additional Exploration Rights to the
relevant Government authorities for Mineral Rights at no cost to the
Joint Venture, other than regular maintenance costs of keeping such
Exploration Rights in good standing in addition to those that the
Joint Venture shall acquire under SECTION 8.1 in the Core Area and the
Area of Interest; and
34
26.
(d) to identify the geographic area in which the Joint Venture will pay to
maintain Exploration Rights to be contributed to the Joint Venture by
GEC-FGEB.
8.5 AREAS NOT AVAILABLE FOR EXPLORATION RIGHTS
The Joint Venture shall not be entitled to apply for further Exploration
Rights where:
(a) Exploration Rights (with the exception of those referred to in
SUB-SECTION 8.1.2) or a Mining Licence has been issued to other
persons; or
(b) exploitation of mineral resources is prohibited by or pursuant to the
Mineral Resources Law.
8.6 REVISION OF SCHEDULE A AND SCHEDULE B
The map comprising SCHEDULE A and the description comprising SCHEDULE
B may be revised so as to accurately represent the current status from
time to time of the Exploration Rights (including the addition or
relinquishment of any Exploration Rights) and the Properties.
8.7 PROPERTY EXTENSIONS
Neither party, either alone or in association with others, shall
proceed for its own account, but only for the account of the Joint
Venture to obtain Minerals Rights to any natural extension of an
orebody on the Property of the Joint Venture onto new ground beyond
the boundary of a Property. Any interest obtained in contravention of
this SECTION 8.6 by either Party shall be held for the account of the
Joint Venture.
8.8 RIGHT OF FIRST REFUSAL ON JINSHAN MINE
The Joint Venture shall have a right of first refusal to match any
offer to purchase or otherwise earn an interest in whole or in part in
the Jinshan Mine more particularly described in SCHEDULE F hereto.
GEC-FGEB shall provide notice of any offer of any kind received in
respect of the Jinshan Mine forthwith to TEMCO and the Joint Venture
and no offer may be accepted by GEC-FGEB in respect of the Jinshan
Mine without receipt of a notice from TEMCO and the Joint Venture
expressing no interest or a waiver of the right of first refusal
within ninety (90) days of the initial notice of offer. If a closing
shall not have occurred on the same terms and conditions as set out in
the offer within one hundred and twenty (120) days of the receipt of
the waiver or notice expressing no interest in the Jinshan Mine, the
property shall again be subject to the right of first refusal set out
in this SECTION 8.7.
35
9.0 PROGRAMS AND BUDGETS
9.1 COMPLIANCE WITH FIRST PROGRAM AND BUDGET
With effect from the Commencement Date the Chairman shall proceed to
undertake the Operations by reliance upon the First Program and Budget
referred to in SECTION 4.1.
9.2 SETTING OF PROGRAMS AND BUDGETS
9.2.1 PERIODIC SETTING OF PROGRAMS AND BUDGETS
As soon as reasonably practicable before the scheduled end of current
Program and Budget, or by such other date which the Board of Directors
may determine, the Chairman shall prepare, for approval by the Board,
a Program for Operations proposed for the next period, as appropriate
together with a Budget showing in detail the estimated Project
Expenditure and proposed scheduling of activities.
9.2.2 PERIODS FOR EXPLORATION BASED ON PROGRAM PARAMETERS
Unless the Board of Directors specifies otherwise, the Programs and
Budgets shall be prepared to cover the next logical step in the
development and analysis of the Property. Each step and proposed
Program prior to the completion of a Feasibility Study may or may not
correspond to a calendar year.
9.2.3 PERIODS FOR MINE DEVELOPMENT AND MINING
During the mine construction and mining stages, the Program and Budget
shall be based on calendar year, with each period commencing on
January 1st of each year.
9.3 SUPPLEMENTARY OR REVISED PROGRAMS AND BUDGETS
The Chairman may from time to time prepare supplementary or revised
Programs and Budgets which shall be submitted as aforesaid to the
Board of Directors at least one (1) month prior to the meeting of the
Board convened for their approval.
9.4 APPROVAL BY BOARD OF DIRECTORS
The Board of Directors shall consider and vote for approval (with or
without modification) upon Programs and Budgets as close as
practicable to but no later than thirty (30) days prior to the
proposed commencement date of such Program.
9.5 BUDGETARY APPROVAL
The Board of Directors will not refuse approval for, or confirmation
of, such portion of a Budget as is required to maintain Exploration
Rights and/or to fulfil commitments under existing contracts.
36
28.
9.6 SUPPLY OF INFORMATION
The Chairman shall promptly furnish to each Party:
(a) up to the time of the delivery of a Feasibility Study, on a program by
program basis within ninety (90) days of the end of each such Program,
and thereafter yearly, a detailed summary of Operations including the
expenses thereof, the progress and available results of all
geological, geophysical, geochemical, drilling, construction, mining,
milling and other Operations and such other information as the Board
of Directors may reasonably be expected to require;
(b) up to the completion of a Feasibility Study, quarterly progress
reports of Operations including the expenses incurred during the
quarter and estimates of cash flow needs for the succeeding two
quarters as well as significant results;
(c) during construction, a quarterly report setting out expenditures to
date by cost categories identified in the Feasibility Study and to
date in the aggregate, for that quarter and against budget for the
quarter and in the aggregate;
(d) during Mining Operations, summary quarterly reports detailing mining,
milling and production throughput, grades and recovery rates and such
other information as may be prescribed by the Board of Directors from
time to time; and
(e) copies of all reports, studies, analyses and other documents relating
to the Exploration Rights and the Property.
10.0 CONTRIBUTIONS TO PROJECT EXPENDITURE AND CHANGES IN BENEFICIAL
INTERESTS AND SHARE INTERESTS
10.1 LIABILITY FOR PROJECT EXPENDITURE
10.1.1 ACCORDING TO BENEFICIAL INTERESTS
Subject to the following provisions of this ARTICLE 10, each Party
shall be liable to the Joint Venture to contribute to Project
Expenditure to the extent of its Beneficial Interest.
10.1.2 PROJECT OVERRUN CONTRIBUTIONS
Where Project Expenditure is, pursuant to a Program and Budget,
approved by the Board of Directors, subject to SUB-SECTION 10.2.1, the
liability of the Party who is not nominating the Chairman shall not
extend to Project Expenditures which exceed the approved Budget by
more than twenty percent (20%) unless:
(a) the excess shall have been approved by the Board of
Directors;
37
29.
(b) the expenditure shall have been incurred in circumstances referred to
in SUB-SECTION 7.10; or
(c) such excess shall have occurred in circumstances not directly
controllable by the Chairman such as under contracts which contain
escalation provisions and/or opportunities for significant variations
in scope.
10.2 CONTRIBUTION BY EACH PARTY
10.2.1 NO CONTRIBUTION BY GEC-FGEB
Until TEMCO shall have fully discharged its obligations pursuant to
SECTION 4.1, GEC-FGEB shall not be required to make any contribution to
Project Expenditures.
10.2.2 POST INITIAL INVESTMENT CONTRIBUTIONS
When TEMCO has completed its Initial Investment pursuant to SECTION
4.1, subject to SECTIONS 10.3 AND 10.4 and to ARTICLE 15, each Party
shall pay its share of Project Expenditures determined pursuant to this
Contract (for the purposes of this ARTICLE 10 referred to as its
"CONTRIBUTION").
10.3 ELECTION TO CONTRIBUTE
10.3.1 PERMITTED ELECTION NOT TO CONTRIBUTE
At any meeting of the Board of Directors convened to consider a Program
and Budget for the next budgetary period towards which, pursuant to
SUB-SECTION 10.2.2, the Parties are invited to contribute, either
Party, subject to SECTION 6.14, may elect not to provide funds for that
purpose with effect from the first day of such next budgetary period.
The Party electing not to contribute to Project Expenditure (the
"NON-CONTRIBUTING PARTY") shall serve the other Party (the
"CONTRIBUTING PARTY") with a notice formally recording such decision
within three (3) Business Days following the relevant meeting of the
Board.
10.3.2 REQUIRED NOTICE UPON ELECTION NOT TO CONTRIBUTE
A notice given by a Non-contributing Party pursuant to SUB-SECTION
10.3.1 shall state that the Non-contributing Party does not wish to
contribute to the Program and Budget submitted by the Chairman for the
next budgetary period.
10.4 ELECTION OF CONTRIBUTING PARTY
Within a reasonable time after receipt of the notice from a
Non-contributing Party pursuant to SUB-SECTION 10.3.1 (not to exceed
six (6) months), the Contributing Party may elect among the following
options:
38
30.
(a) to contribute all of the Non-contributing Party's share of Project
Expenditures and proceed with the Program and Budget as approved;
(b) to contribute only its share in accordance with then current Beneficial
Interest to the approved Program and Budget;
(c) to contribute its share in accordance with its then current Beneficial
Interest and to redesign and adopt an amended Program and Budget matching
this contribution level;
(d) to contribute its share in accordance with its then current Beneficial
Interest and some but not all of the Non-contributing Party's share of
Project Expenditures and to redesign and adopt an amended Program and
Budget matching this contribution level; or
(e) not to contribute.
10.5 CALCULATION OF BENEFICIAL INTEREST
After receipt of appropriate Government agency approval and prior to the
implementation of each Program and Budget and based on the contributions
committed by each Party to that Program and Budget, the level of Beneficial
Interests of each of the Parties shall be immediately adjusted and calculated in
accordance with the following formulae:
Up to the completion of the Initial Investment by TEMCO
I = R x 55%
---
C
Where:
"I" is the Beneficial Interest of TEMCO
"R" is the total actual contributions to Project Expenditure of TEMCO
after the Commencement Date
"C" is US$4,400,000
The Beneficial Interest of GEC-FGEB will equal 100% minus I above.
Following the completion of the Initial Investment by TEMCO
I = R x 100
-------
S
Where:
"I" is the Beneficial Interest of one of the Parties:
39
31.
"R" is the total of the actual contributions to Project Expenditure of that
Party after the Commencement Date and the deemed contribution of that Party
as set out below; and
"S" is the total of the actual contributions to Project Expenditure of all the
Parties after the Commencement Date plus the deemed contribution of all the
Parties as set out below:
TEMCO: US$O
GEC-FGEB: US$3,600,000
A Party's Beneficial Interest shall be subject to dilution to a minimum level of
ten percent (10%) at which time such interest will be a carried interest. The
Accounting Procedure attached as Schedule C addresses the nature of the carried
interest and the rights and obligations attaching thereto as well as the rules
relating to recovery of costs by the Parties from the Joint Venture.
10.6 CHAIRMAN TO CALCULATE BENEFICIAL INTERESTS
If an election is made under SECTIONS 10.3 or 10.4, the Chairman shall, from
time to time, and at least at the initiation of each Program and Budget or
annually, whichever is more frequent, calculate the Parties' respective
Beneficial Interests and, when submitting each Program and Budget pursuant to
SECTION 9.2, the Chairman shall advise the Parties of their respective
Beneficial Interests as at the first day of each such Program and Budget
calculated pursuant to SECTION 10.5 and on the assumption that all contributions
to Project Expenditure which any Parry is obliged to make will be made as and
when they fall due according to this Contract.
10.7 PAYMENTS FOLLOWING COMPLETION OF TEMCO'S INITIAL INVESTMENT
10.7.1 CALL FOR CONTRIBUTIONS
Each Party shall pay to the Joint Venture at call (payable at such
frequency as the Accounting Procedure shall set out, or as the Board of
Directors may from time to time amend) as the Chairman so requests, its
Contribution. Such request shall be made on or before the last day of the
end of the month and shall be accompanied by a statement showing
expenditures now payable and expenditures to be incurred and payable in the
immediately following month. Contributions may be called sixty (60) days in
advance, all in accordance with the Accounting Procedure.
10.7.2 DUE DATE FOR CONTRIBUTIONS
Contributions so requested shall be received by the Joint Venture on or
before the 20th day following the date of the cash call (or such other date
as the Accounting Procedure shall set out or the Board of Directors may
amend from time to time). The amount of any such Contribution payable in
advance shall be calculated by the Chairman having
40
32.
regard to the amount of previous Contributions and the anticipated level of
Project Expenditure in the relevant following months.
10.8 PERIODIC STATEMENTS
The Chairman shall render to each of the Parties a cost statement (summarizing
Project Expenditure paid and/or accrued by classifications set out in the
Accounting Procedure or otherwise as appropriate) for such periods as may be
determined by the Board of Directors from time to time and each Party's share of
such Project Expenditure, each Party's Contribution during such period, and the
amounts with which the Party was credited at the beginning and at the end of
such period, shall all be in accordance with the provisions of the Accounting
Procedure.
10.9 CHALLENGE TO CORRECTNESS
Payment by a Party of any Contribution requested by the Chairman shall not
prejudice such Party's right to challenge the correctness of any statement or
request for Contribution PROVIDED HOWEVER that all statements rendered to a
Party during any calendar year shall be presumed to be conclusively true and
correct after two (2) years following the end of that said year unless
challenged in writing by a Party within such period.
10.10 INTEREST PAYABLE ON OVERDUE PAYMENTS
10.10.1 INTEREST RATE ON OVERDUE PAYMENTS
All payments herein provided for shall be paid to the Joint Venture on or
before the due date and, if not so paid, the Party in arrears shall be
liable to attract interest calculated daily and compounding, being a rate
of interest equal to the London Interbank Offered Rate ("LIBOR") plus two
percent (2%) governing from time to time for the duration of the arrears.
Any Contribution in arrears and the interest due and payable thereon shall
be a debt due and payable to the Joint Venture.
10.10.2 METHOD OF CALCULATING INTEREST RATE
For the purposes of this SECTION 10.10 the LIBOR Rate applicable to the
period of default shall that rate which is on the first day of default (or
the first business day after such default) published for United States
Dollars in the Financial Times in London as the London Interbank Offered
Rate for six (6) months or, if no such rate has been so published on such
date, then the rate most recently published in the Financial Times in
London immediately preceding such date, provided that if no such rate has
been so published during the seven (7) day period immediately preceding
such date, then such term means the rate at which deposits in United States
Dollars in the amount of US$5,000,000 for a period of six (6) months are
offered by the principal London branch of Citibank, N.A. to prime banks in
the London interbank market at approximately 11:00 a.m. (London time) on
such date.
41
33.
10.11 PROCEDURE FOR ADJUSTING CHANGES IN BENEFICIAL INTERESTS
10.11.1 PROVIDE ALL NECESSARY CO-OPERATION AND AUTHORITY TO TRANSFER SHARES
The Parties shall sign, execute and do all such transfers, deeds,
documents, matters and things as may be necessary to transfer or vest
sufficient of the Non-contributing Party's interest in the Joint Venture in
the other Party so as to reflect the adjustments required by SECTION 10.5,
and for such purposes each of the Parties hereby irrevocably appoints the
other Party and its officers who have signing authority jointly and
severally to be its attorney in its name and on its behalf to sign and do
all assurances, deeds, instruments, acts and things whatsoever which such
Party ought to sign and do under the provisions of this SECTION 10.11.
11.0 DEVELOPMENT AND PRODUCTION
It is agreed and acknowledged by the Parties that if a commercially viable
deposit is outlined on the Properties, the Joint Venture has the right to
proceed expeditiously to develop a mine or mines on the Property or Properties.
11.1 BOARD OF DIRECTORS TO RULE ON DEVELOPMENT
The Board of Directors is entitled to decide as to whether investment in any
Mining Operations is to occur and, if so, as to the commencement time and scope
of such Mining Operations.
11.2 OBLIGATION TO CONTRIBUTION
Should the Board of Directors decide to conduct Mining Operations, each of the
Parties shall thereafter be required to contribute towards the capital
requirements of the Joint Venture in proportion to each Party's respective
Beneficial Interest in the Joint Venture as at the date of such decision.
11.3 SOLE RISK DEVELOPMENT
If the Board of Directors does not approve of the conduct of Mining Operations,
then either Party which is willing to undertake Mining Operations shall be
permitted to do so and the Non-contributing Party shall be subject to dilution
in accordance with the terms of SECTION 10.5.
11.4 REQUIRED AUTHORIZATIONS AND PARAMETERS FOR MINING OPERATION
11.4.1 GEC-FGEB'S OBLIGATION TO OBTAIN ALL REQUIRED AUTHORIZATIONS
Before the conduct of Mining Operations, GEC-FGEB shall have the
obligation, and its efforts and expenses shall be compensated as Project
Expenditures, to obtain all necessary permits, licenses, and approvals as
may be required to conduct Mining Operations.
42
34.
11.4.2 PARAMETERS OF MINING OPERATIONS
The Chairman shall insure that any proposed Program for the implementation
of Mining Operations would, depending upon the size and style of the
indicated Mineral resource and proposed scope of Mining Operations, address
the following topics:
(a) the obtaining of licenses necessary for the influx of all foreign
capital required. As circumstances dictate, such licenses may address:
(i) the basis upon which TEMCO as the sole foreign party is to invest
capital; or
(ii) it may give approval to the formation of a Sino-Foreign consortium
to undertake a large-scale development;
(b) as an adjunct to SUB-PARAGRAPH 11.4.2 (a) (ii), the approval of other
reputable financially sound parties recommended by the Board of
Directors to invest in the Joint Venture at the appropriate time. In
this latter regard, suitable consortium parties could be drawn from the
mineral resource industry, smelting and/or minerals marketing spheres,
or from within the financial sector;
(c) subject to SECTION 11.5, the obtaining of export licenses as are
permitted under Chinese law which the Joint Venture may require for
Products derived by the Mining Operations;
(d) the incorporation of a fully expounded policy relating to staff and
manpower requirements, salaries, wages and employee benefits (the
"EMPLOYMENT POLICY"), a dispute resolution process specifically to
govern employment disputes and those disputes concerning employment
matters between the Joint Venture and Government authorities, and a
mechanism to govern review of the Employment Policy in the event of
fundamentally altered economic circumstances affecting the viability of
the Joint Venture;
(e) incorporation of the most favourable Government policies available for
Sino-Foreign Co-operative Joint Ventures, including without limitation
the right of the Joint Venture to carry forward losses incurred by it
with respect to all Operations so as to reduce the taxable income of
the Joint Venture; and
(f) as the Joint Venture's business requires the choice of banks and
establishment of accounts both within and, in special circumstances,
beyond China appropriate to that business.
43
35.
11.5 MARKETING OF MINERALS FROM THE JOINT VENTURE
11.5.1 MARKETING POLICY
This policy should be based in principle on the best interests of the Joint
Venture. It is agreed and acknowledged by the Parties that, especially in
respect of marketing decisions, the best interests of the Joint Venture
means the best interest of the Joint Venture as an entity as opposed to the
interests of either of the Parties individually.
11.5.2 EXPORTING RIGHTS
The Parties recognize that it is of fundamental importance to the viability
of any Mining Operations that the Joint Venture shall have the right to
sell all Products derived from the Properties to any market, international
or Chinese. With this objective in mind, GEC-FGEB shall continue to lobby
relevant Government authorities so that the Joint Venture may be granted
such export rights.
12.0 LABOUR, TRAINING OF JOINT VENTURE PERSONNEL AND TECHNOLOGY TRANSFERS
12.1 LABOUR POLICY OF THE JOINT VENTURE
12.1.1 FLEXIBLE LABOUR REQUIREMENTS
The labour requirements of the Joint Venture will fluctuate considerably
depending upon the requirements of particular Programs and Budgets proposed
for the Operations. Both the First Program and Budget and each Program and
Budget subsequently prepared by the General Manager and subsequently
approved by the Board of Directors shall pay specific attention to the
labour requirements and training component of each Program.
12.1.2 PRIORITY TO EFFICIENCY OF THE OPERATIONS
The Joint Venture, shall give priority to the efficiency of the Operations
when devising and implementing its labour policies but full weight will
also be given to the requirements of the Regulations of the PRC on Labour
Management in Joint Ventures using Chinese and Foreign Investment (for the
purposes of this ARTICLE 12, the "LABOUR REGULATIONS").
12.2 SELECTION OF LABOUR
The Chairman shall select the Joint Venture's employees and contractors,
determine the number thereof and the terms and conditions of their engagement
depending upon the requirements of Programs and Budgets scheduled for any year.
It is preferred to engage workers as contractors or consultants rather than as
employees. In selecting employees and contractors the Chairman shall, consistent
with the Labour Regulations, and principally for the efficient management of the
Joint Venture and its Operations, and subject to a fair bidding procedure open
to such numbers
44
36.
of participants as is in the best interest of the Joint Venture in the sole
opinion of the Chairman, give GEC-FGEB preferred consideration, provided that
services are of similar quality and at competitive prices, for employment and
shall endeavour to employ qualified and experienced Chinese employees of
GEC-FGEB. However the Joint Venture shall be free to introduce expatriate
personnel into China as is deemed to be necessary for the efficient performance
of the Operations. For greater certainty, the primary principle shall be the
acquisition of the best services and labour to conduct the Operation of the
Joint Venture for the most reasonable cost and that a fair bidding process be
used to find those services and labour.
12.3 CONTRIBUTIONS TO STATUTORY LABOUR FUNDS
The Joint Venture shall comply with all requirements of the Labour Regulations
concerning contributions to the awards, welfare and social insurance funds of
its employees while they are in the employment of the Joint Venture.
12.4 TRAINING OF JOINT VENTURE PERSONNEL AND TRANSFER OF TECHNOLOGY
12.4.1 GUIDELINES FOR TRAINING PROGRAM
The Board of Directors shall provide guidelines if necessary to the Chairman to
develop and establish a comprehensive program for training Joint Venture
employees and contractors engaged to undertake their various functions within
the operative Joint Venture.
12.4.2 INTRODUCTION OF APPROPRIATE ADVANCED TECHNOLOGY
(a) Each of the Parties shall wherever possible introduce to the Joint Venture
appropriate advanced equipment, technology and managerial experience
necessary for efficient and productive conduct of the Operations. The
Chairman shall ensure that Joint Venture employees and contractors engaged
by the Joint Venture receive training to ensure their comprehension and
efficient deployment of such technology and management practice in the
context of Operations to be undertaken.
(b) The technology transfer envisaged by PARAGRAPH 12.4.2 (a) above shall not
require either Party capable of transferring technology to disclose or
introduce restricted proprietary know-how, patents or other commercially
confidential information to the Joint Venture. However, wherever possible a
Party which intends to transfer technology shall endeavour to have the
Joint Venture licensed to use technology appropriate to the Operations,
subject always to the prior approval of the proprietor of such technology
costs and expenses incurred by the Joint Venture in the course of its
personnel training program under SUB-SECTIONS 12.4.1 and 12.4.2 shall be
charged to Project Expenditure in a way to ensure full tax deductibility in
respect of income derived subsequent from Mining Operations.
45
37.
13.0 LOCAL GOODS AND SERVICES
The Joint Venture shall use services, foodstuffs, supplies, fuels, materials,
plant and machinery ("GOODS AND SERVICES") supplied, produced or manufactured in
China whenever the same can be obtained in economically viable quantities, at a
competitive price and on competitive terms, conditions and delivery dates
provided that the Goods and Services which can be acquired in China are in all
substantive respects of a quality comparable with those produced or available
outside of China.
14.0 ASSIGNMENT AND SUCCESSION
14.1 ASSIGNMENT
Subject to SECTIONS 14.2 AND 14.4, either Party may sell, transfer, mortgage,
lease or in any manner dispose of in any other way the whole or any part of its
Beneficial Interest. For greater certainty, it is understood and agreed by the
Parties that the Property and the assets and undertaking of the Joint Venture,
including the Beneficial Interests of each Party, may be required as collateral
in any project financing and the Parties hereby agree to allow the granting of a
security interest in any of the foregoing interests of the Parties and the Joint
Venture for the purpose of securing financing for the project.
14.2 ASSUMPTION AGREEMENT
Any new entity who receives an interest in a Party's Beneficial Interest as
contemplated in SECTION 14.1 shall only be entitled to the benefits of such
interest following the execution and delivery of an assumption agreement
relating to that interest and the terms and conditions of this Contract
attaching thereto in form and substance satisfactory to the other Party to this
Contract.
14.3 RESTRICTIONS
Notwithstanding any of the preceding provisions of this ARTICLE 14, each of the
Parties covenants and undertakes that except as unanimously resolved by the
Board of Directors it shall not sell, mortgage, lease or in any manner dispose
of in any other way any of its rights under this Contract or the whole or any
part of its Beneficial Interest in a manner which would result in either Party
being prevented in practice from continuing, or prejudicing their (or its)
ability to continue the Operations.
15.0 ELECTION TO CAP CONTRIBUTIONS
15.1 ELECTION AFTER FIRST WORK PROGRAM
While it is the intention of TEMCO to proceed to spend the Initial Investment
and develop the Property as quickly as is reasonable on a technical basis to
develop the Property assuming positive results of each Program and
Budget completed, by notice writing to GEC-FGEB,
46
38.
TEMCO may, at any time after the completion of the First Program and Budget,
give an election-to-cap-further-contribution notice to GEC-FGEB which shall take
effect at the end of any Program and Budget which has been approved by the Board
of Directors.
15.2 EFFECTIVE DATE OF CAP
Upon the effective date of a notice to cap contributions pursuant to SECTION
15.1 the Beneficial Interest of TEMCO shall be frozen at the level calculated at
the completion of that last Program and Budget to which TEMCO has just completed
its contribution and TEMCO shall cease to have any right to contribute to any
Program and Budget beyond that frozen level of Beneficial Interest under this
Contract.
15.3 EFFECT OF CAP
If TEMCO has sent the election notice pursuant to SECTION 15.1, it shall, on the
date upon which its election to cap becomes effective:
(a) have the voting rights attaching to its actual Beneficial Interest and no
further right to the deeming voting rights it enjoyed pursuant to
SUB-SECTION 6.10.2;
(b) have liability, in accordance with its Beneficial Interest from time to
time, to contribute to approved Programs and Budgets or suffer dilution in
accordance with the terms and provision of ARTICLE 10;
(C) continue to be bound by ARTICLE 18; and
(d) be and remain liable for payment of any amount due and owing by it at the
date of its election notice and for its proportion of Project Expenditure,
but only pursuant to an approved Program and Budget in respect of which it
was a Contributing Party as at the effective date of the election notice,
where such amount due and owing had not been invoiced by the Chairman at
the date of such election notice.
15.4 WITHDRAWAL FROM PROPERTY
At any time after the effective date of a TEMCO election-to-cap-expenditure
notice, TEMCO shall have the option to completely withdraw from any Mineral
Rights and terminate its right, title and interest in any Mineral Right held by
the Joint Venture by giving 60 days written notice of its intention to do so to
GEC-FGEB, and the Joint Venture may assign its entire right, title and interest
in said Mineral Right to GEC-FGEB without compensation therefor, except for any
applicable transfer fees, taxes, or similar levies. After any such termination
and assignment, the assigning party shall have no further obligation with
respect to the Mineral Right in question. Any such Mineral Right may be
explored, developed, mined or sold for the sole account of the party to which it
has been assigned. Notwithstanding the foregoing, however, a termination
hereunder shall not relieve the terminating party from its obligations under
previously approved Program and Budget relating to the Mineral Right in
question, including the payment of Project
47
39.
Expenditures thereof, or from any of its other obligations under this Agreement,
incurred up to the date of the assignment of its interest.
16.0 ACCOUNTING, REPORTING, AUDITING AND BANK ACCOUNTS
16.1 ACCOUNTING
16.1.1 YEARLY FINANCIAL STATEMENTS USING INTERNATIONAL ACCOUNTING STANDARDS
The Chairman shall, prior to the conclusion of each fiscal year, prepare
financial accounting books and records of the Operations using both the Chinese
and English language and denominated in United States Dollars being maintained
to the extent permissible under relevant Chinese laws and regulations in
accordance with international accounting principles generally accepted in the
mining industry and in compliance with the Accounting Procedure. Original copies
of all such financial accounting books and records shall be maintained by the
Chairman for the Board of Directors.
16.1.2 TREATMENT OF FOREIGN CURRENCY EXCHANGE RATES
If any expenditures or receipts are made in a currency other than United States
Dollars, with the exception of expenditures in RMB, such expenditures and
receipts shall be converted to United States Dollars at the mean of the average
daily buying and selling rate for United States Dollars established by the Bank
of China at the time of such expenditure or receipt. Conversions of RMB of the
PRC into United States Dollars shall be made at rates of exchange quoted to the
Chairman by the Bank of China at the time of conversion or as otherwise
prescribed by relevant Chinese laws and regulations.
16.1.3 TREATMENT OF FOREIGN CURRENCY EXCHANGE GAINS OR LOSSES
At the end of each accounting period, any gains or losses in the Joint Venture's
financial books of account attributable to variations in foreign exchange, shall
to the extent permissible under relevant Chinese laws and regulations be
accounted for in accordance with internationally recognized accounting
principles generally accepted in the mining industry.
16.2 FINANCIAL ASPECTS OF OPERATIONS AND ANNUAL REPORTS
16.2.1 SUBMISSION OF FINANCIAL SUMMARY OF PRIOR BUDGETARY PERIOD
At each meeting of the Board of Directors at which the Chairman is to submit, in
accordance with ARTICLE 9, a proposed Program and Budget, the Chairman shall
also submit a summary of financial aspects of the Operations for the prior
budgetary period.
48
40.
16.2.2 SUBMISSION OF ANNUAL REPORT USING INTERNATIONAL ACCOUNTING STANDARDS
The Chairman shall prepare and deliver to the Board of Directors for
consideration and approval within sixty (60) days following the end of each
fiscal year an annual report containing financial statements including a
balance sheet and profit and loss statement which shall consolidate the
information contained in the quarterly statements of Project Expenditure
furnished in respect of such year by the Chairman to the Board pursuant to
SUB-SECTION 16.2.1 and any variations made thereto. Such annual report shall
be accompanied by a verification report prepared by a Chinese certified
accountant chosen by the Board of Directors. The financial statements
included in the annual report shall be prepared in accordance with
international accounting principles generally accepted in the mining
industry and in compliance with the Accounting Procedure. Upon consideration
and approval of such financial statements by the Board, the Chairman shall
thereafter deliver within ninety (90) days of the end of each fiscal year
copies of the approved annual report to all appropriate Government
authorities.
16.3 AUDITS
An audit of the Joint Venture's financial books, reports and records shall be
conducted annually by an internationally recognized firm of auditors registered
to undertake business in China. In accordance with relevant Chinese law and
accounting practice, the Board of Directors shall make all appointments of
auditors, and accordingly, shall be entitled to remove and replace such
appointees as it considers fit.
16.4 BANK ACCOUNTS
16.4.1 The Joint Venture shall hold all Contributions in a separate interest
bearing bank account to be used solely for the payment of Project
Expenditure.
16.4.2 Under the direction of the Board, the Chairman may open, maintain and
operate such other bank accounts as are necessary or convenient in
connection with the performance of the responsibilities of the Chairman
under this Contract.
16.4.3 Any foreign currency account of the Joint Venture shall be subject to
the relevant regulations of the Government.
17.0 INSURANCE
17.1 CHAIRMAN TO DEVISE INSURANCE PROGRAM
The Chairman shall devise an insurance Program for the Operations and submit it
to the Board of Directors for review and approval prior to the commencement of
any Operations and, in any event, no later than one hundred and twenty (120)
days after the Commencement Date. The Chairman shall obtain insurance required
in accordance with such Program as approved by the Board before commencement of
the Operations.
49
41.
17.2 INSURANCE COVERAGE
The insurance Programs shall include, but not be limited to, the following
insurance covering:
(a) damage incurred in relation to all aspects of Operations;
(b) damage to data packages, computer software or hardware utilized by the
Joint Venture for the Operations;
(c) liability to third parties arising by reason of the Operations;
(d) liability for injury or death to third parties or damage to property
of third parties pertaining to the use of any motor vehicle in the
service of, or the property of, the Joint Venture;
(e) expenses incurred during the transportation and storage in transit of
goods shipped to or from the Joint Venture; and
(f) such other insurance as is usual and customary in the mining industry
to cover the risks of Operations and as may be specifically mandated
by the Board of Directors from time to time.
17.3 PARTY'S PERSONAL ACCIDENT INSURANCE
In the course of the Operations, each Party shall cover separately personal
accidental death and injury insurance with respect to personnel assigned or
seconded by them to the Joint Venture respectively. The premiums in respect
thereof shall be dealt with in the following way: the premiums for accidental
death and injury insurance with respect to personnel whose costs are charged
to Project Expenditure pursuant to the provisions of the Contract shall be
charged to the Joint Venture, and those with respect to other personnel shall
be borne respectively by the Parties by which they are assigned.
17.4 REINSURANCE
Insurance companies owned by either Party may approach the People's Insurance
Company of China for reinsurance if they are interested in covering any part
of the insurance Program hereof.
17.5 PREMIUMS AS PROJECT EXPENDITURE
Any premium required for the insurances of the agreed insurance Program shall
be charged to Project Expenditure, and any recovery made from insurers shall
be credited to the Joint Venture's benefit.
50
42.
18.0 CONFIDENTIALITY
18.1 DEFINITION OF CONFIDENTIAL INFORMATION
Unless otherwise agreed by each of the Parties, this Contract, the Articles of
Association of the Joint Venture Company, any offer documents or drafts of this
Contract, all agreements, all documents and all information that is not in the
public domain (other than that which has been improperly disclosed) relating to:
(a) exploration practices and techniques, and data arising from exploration and
evaluation activities conducted within the Mineral Rights and/or the
Properties;
(b) engineering, evaluation, mining and processing techniques and practices
relating to or developed in the course of the Operations and which are
property of the Joint Venture;
(c) all third party dealings related to Operations including without limitation
dealings with the Government relating to Operations; and
(d) financial and general commercial data relating to the Joint Venture;
shall be confidential to the Joint Venture and to the Parties.
18.2 PROHIBITION ON DISCLOSURE OF CONFIDENTIAL INFORMATION
18.2.1 GENERAL PROHIBITION AND SPECIFIED EXCEPTIONS
No information that is confidential under the terms of SECTION 18.1 shall be
disclosed by a Party without the prior approval of the other Party otherwise
than:
(a) to the other Party or the Chairman;
(b) to officers and employees of either of the Parties or to their affiliates,
but only to those employees and officers with a "need to know" and only
after each such person has executed a confidentiality acknowledgement
reciting the specific terms of this ARTICLE 18;
(c) (subject to SECTION 18.3) if and to the extent required pursuant to any
necessarily applicable legislation or pursuant to the rules or regulations
of a recognized stock exchange applicable to a Party or to an affiliate
thereof;
(d) to a financial institution and its technical and professional advisers in
connection with any loan or other financial accommodation sought to be
arranged by the disclosing Party for purposes directly related to the
provision of financing for the Joint Venture or the Parties and to bona
fide potential assignees of all or part of the Beneficial Interest of that
Party (but such disclosure shall only be made for the purposes of and shall
be limited to the information necessary for satisfying such institution or
potential assignee as to the
51
43.
value of the Beneficial Interest and the value and commercial viability of
the Operations or contemplated Mining Operations);
(e) independent consultants, contractors and technical and professional
advisers of the Parties or the Chairman whose duties in relation to the
Joint Venture reasonably require such disclosure;
(f) to relevant government departments having direct responsibility for and
oversight of the business and objectives of the Joint Venture and,
additionally, to other government departments having statutory authority to
gather information from mineral explorers and miners PROVIDED HOWEVER that
any disclosure pursuant to SUB-SECTIONS 18.2(d) AND 18.2(e) shall only be
made subject to the institution and/or person to whom disclosure is made
covenanting and agreeing with the disclosing Party in a form enforceable by
any other Party to the Joint Venture that such information shall not be
disclosed to any other person for any purpose whatsoever or used for its or
his own benefit and provided further that a Party shall ensure that any
such information disclosed to an affiliate of it shall not be disclosed by
that affiliate except as would be permitted by this SECTION 18.2; and
(g) to securities commissions and stock exchanges and any other government
departments or agencies to whom the Parties owe disclosure obligations in
respect of the happening of a material event or fact, where material is in
relation to the Party doing the disclosing.
18.2.2 APPLICATION OF CHINESE LAW WHEN REMOVING CONFIDENTIAL INFORMATION FROM
CHINA
All relevant statutory procedures of the Chinese Government shall be complied
with when any Party wishes to remove confidential information from China.
18.3 PUBLIC ANNOUNCEMENTS
The Parties shall use their reasonable endeavours to agree in advance to the
text of all public announcements to be made in relation to the Joint Venture,
including those described in SUB-SECTION 18.2.1(d); however, given the legal
disclosure obligations of the Parties, notwithstanding anything to the contrary
contained in this Contract, a Party shall be entitled to release a public
announcement. Neither Party shall attribute any such public announcement to the
other Party or to the Joint Venture without the prior consent of that other
Party.
19.0 PROTECTION OF THE ENVIRONMENT
The Joint Venture is concerned and will be cognizant of the environment within
the area described in the Exploration Rights when conducting Operations. The
Joint Venture will have an environmental policy determined by the Board of
Directors which will be specifically developed to address the needs of the Joint
Venture. In particular, the Joint Venture shall observe standards
52
44.
which are no less stringent than those set out in laws of the Chinese Government
pertaining to environmental management and control.
20.0 FORCE MAJEURE
20.1 CONSEQUENCE OF FORCE MAJEURE
Any failure on the part of either Party, or of the Joint Venture, to fulfil any
obligation proposed under this Contract including any Program and Budget shall
be excused if and to the extent that such failure arises from Force Majeure and,
if through Force Majeure the fulfilment by such Party or the Joint
53
Venture of any obligations under this Contract be delayed, the period
of such delay, together with such period as may be necessary for the restoration
of any damage done during such delays and for the resumption of Operations,
shall be added to the time given in this Contract for the performance of such
obligation and for the performance of any obligation dependent thereon and to
the term of this Contract.
20.2 DEFINITION OF FORCE MAJEURE
"Force Majeure", within the meaning of CLAUSE 20.1 shall mean any order,
regulation or direction of any government or state whether promulgated in the
form of law or otherwise, or any act of the public enemy, perils of navigation,
fires, floods, storms, typhoons, earthquakes, epidemics, accidents, hostilities,
war (declared or undeclared), blockades and unpredicted embargoes or other enemy
action, strikes and other labour disturbances, insurrections, riots, or any
other cause not due to the fault or negligence of the Party claiming Force
Majeure, whether or not similar to the foregoing provided that any such cause is
beyond the control of such Party.
20.3 NOTICE REQUIREMENTS
The Party claiming Force Majeure shall give notice thereof to the other Party
without delay, stating the cause and the date of its commencement and adducing
evidence in support, and both Parties shall thereafter take all reasonable steps
within their power to remove or mitigate the effects of such cause, If the cause
is not removed within ONE (1) year and the Operations within that period have
been severely curtailed the Parties shall enter into negotiations to discuss in
good faith the continuance of this Contract. Upon an event of Force Majeure
ceasing, the Party claiming Force Majeure shall notify the other Party without
delay.
21.0 APPLICABLE LAWS
21.1 CHINESE LAW
The Law applicable to this Contract is the law of the People's Republic of
China.
54
45.
21.2 TREATIES TO PREVAIL
Where international treaties or conventions to which China is a signatory are in
conflict with a pertinent Chinese law, such treaties or conventions shall
prevail with the exception of any reserved provisions made by the Chinese
Government at the time of signing such treaties or conventions.
21.3 COMMON PRACTICE IN OPERATIONS
Where there is no provision of relevance to the Joint Venture existing either in
Chinese law nor in any relevant international conventions or treaties in
existence to which China has acceded then the common practices of the mining
industry internationally shall apply to this Contract.
21.4 CHANGES IN LAW
Any changes in law shall be dealt with in accordance with the provisions of
ARTICLE 23.
22.0 SETTLEMENT OF DISPUTES
22.1 CONSULTATION
The Parties shall meet periodically to discuss the conduct of the Operations
covered by this Contract and shall make every effort to settle, amicably and in
good faith, disputes of any kind whatsoever arising out of or related to the
performance of this Contract.
22.2 EXPERT CONCILIATION
22.2.1 NOTICE OF INTENT TO SUBMIT TO EXPERT CONCILIATION
If the Parties are unable to resolve amicably through consultation any dispute
within one hundred and twenty (120) days of one Party receiving the other
Party's notice of dispute, then on or before the thirtieth day following the
expiration of such one hundred and twenty (120) day period (or such other time
as the Parties may mutually agree) either Party may give the other Party notice
of its intent to submit the matter in dispute to an independent expert (the
"EXPERT") for conciliation pursuant to this CLAUSE 22.2.
22.2.2 APPOINTMENT OF EXPERT
The Parties shall mutually agree upon the appointment of the Expert, who shall
be a person suited by reason of his qualifications, experience and expertise for
the determination of the matter in dispute. The Expert's fees shall be shared
equally by the Parties. If the Parties fail to agree upon the appointment of the
Expert within thirty (30) days of the notice to submit the dispute to the
Expert, then the dispute shall be referred to settlement by arbitration in
accordance with CLAUSE 22.3.
55
46.
22.2.3 CONVENING A HEARING
No later than thirty (30) days after the Expert is appointed, the Expert
shall convene a hearing at which the Parties shall have the full
opportunity to explain their respective positions and present supporting
documentation. The hearing shall not last more than seven (7) days. The
Parties may also mutually agree to not convene a hearing and may make a
request to the Expert in writing that the Expert make a decision on the
basis of written submissions by the Parties.
22.2.4 RENDERING OF WRITTEN DECISION
No later than thirty (30) days following the conclusion of the hearing, or
the date on which the Parties together request that no hearing for the
matter should be convened, the Expert shall render a decision in writing
concerning the matter in dispute.
22.2.5 WHEN DECISION BECOMES FINAL AND BINDING
If the Expert has provided his decision concerning the matter in dispute
and no Party provides notice of its intent to submit the matter to
arbitration in accordance with CLAUSE 22.3 then on the thirtieth day after
the Expert issues his decision in accordance with SUB-CLAUSE 22.2.4 the
decision of the Expert shall become final and binding on the Parties.
22.3 ARBITRATION
22.3.1 USE OF ARBITRATION
Any dispute in respect of which:
(a) amicable settlement has not been reached within one hundred and
twenty (120) days of written notice of the dispute;
(b) neither Party requests resolution of the dispute by the Expert
within the thirty (30) day period set forth in SUB-CLAUSE 22.2.1, or
a decision by the Expert pursuant to CLAUSE 22.2 has not become
final and binding pursuant to SUB-CLAUSE 22.2.5, or
(c) pursuant to SUB-CLAUSE 22.2.2 the Parties fall to agree upon the
appointment of a Expert
shall be finally settled by arbitration in Singapore under the Statutes of
Singapore.
56
47.
22.3.2 LANGUAGE OF PROCEEDINGS
The language of the arbitral proceedings shall be Chinese and English.
All materials utilized in the hearing, statements of claims or
defense, and awards and the reasons supporting them shall be in
Chinese and English.
22.3.3 RELEVANT MATTERS TO CONSIDER
In rendering its decision, the arbitrator shall comply with and pay
full regard to the terms of this Contract including principles
contained in ARTICLE 21, and this CLAUSE 22.3 and shall consider the
intention of the Parties at the time of entering into this Contract
insofar as it may be ascertained from the Contract.
22.3.4 POWERS OF ARBITRATOR REGARDING EXPERT CONCILIATION
The arbitrator shall have the full power to review and revise any
decision, recommendation or opinion of the Expert related to the
dispute. No Party shall be limited in the arbitral proceedings to
evidence or arguments submitted to the Expert pursuant to CLAUSE 22.2,
and nothing shall prevent the Expert from being called as a witness
to give evidence before the arbitrators.
22.3.5 DECISION IS FINAL, BINDING AND NON-APPEALABLE
The award of the arbitral tribunal shall be final, binding and
non-appealable upon the Parties, and any Party may seek to enforce or
execute the award in any court of competent jurisdiction.
22.3.6 POWER TO AWARD COSTS
The arbitrator shall have the authority to award costs to the winning
party and otherwise to settle matters relating to proceedings before
the arbitrator.
22.4 FAILURE TO COMPLY WITH BINDING EXPERT'S AWARD
Notwithstanding any preconditions to arbitration set forth in CLAUSE 22.3, if a
Party fails to comply with an Expert's decision that has become final and
binding pursuant to SUB-CLAUSE 22.2.5, the other Party shall have the right to
immediately refer the matter to final arbitration in accordance with CLAUSE
22.3.
22.5 VALIDITY DURING ARBITRATION
During arbitration, this Contract shall continue to be performed by the Parties
except for matters in dispute.
57
48.
23.0 CHINESE LEGISLATION
23.1 REFERENCES IN THIS CONTRACT
Any references in this Contract to any law, by-law, rule, regulation, order
or act of any Government, governmental body or other regulatory body shall be
construed as a reference thereto as amended or re-enacted from time to time
or as a reference to any successor thereto.
23.2 CHANGES TO LEGISLATION
If, after the signing of this Contract, there is any change in existing laws,
regulations, rules or policies (a "CHANGE") or any new laws, regulations,
rules or policies are introduced (a "NEW PROVISION") in the PRC which is
applicable to the Joint Venture, or to the activities of any Party in
relation to matters dealt with herein, and the effect of the Change or New
Provision is either to provide for preferential treatment to or,
conversely, to have an adverse effect on the Joint Venture or any of the
Parties then:
(a) if the Change or the New Provision is more favourable to the Joint
Venture or one of the parties than the relevant laws, acts, rules or
regulations in effect on the date this Contract was signed (and the
other Parties are not materially and adversely affected thereby),
the Joint Venture and the Party concerned shall promptly apply to
receive the benefits of such Change or New Provision. All of the
Parties shall use their best efforts to cause such application to be
approved by the relevant Government authorities; and
(b) if, because of the Change or New Provision, the economic benefits to
any Party or the Joint Venture existing or to arise under this
Contract are materially and adversely affected, directly or
indirectly, then, in accordance with the provisions of Article 40 of
the Law of the People's Republic of China on Foreign Economic
Contracts, this Contract shall continue to be implemented in
accordance with its original terms. If, for any reason the provision
in the preceding sentence cannot be implemented, upon notice by the
affected Party to the other Parties, the Parties shall consult
promptly and make all such amendments to this Contract and any other
related documentation as are required to maintain or preserve the
economic benefits of the affected Party or the Joint Venture
hereunder, provided, however, that the Parties other than the
affected Party are not materially and adversely affected thereby.
24.0 MISCELLANEOUS
24.1 AMENDMENT OF CONTRACT
24.1.1 The mutual written consent of the Parties shall be required to
annul, amend, modify or supplement the provisions of this Contract;
and all amendments, modifications or supplements to the Contract
(hereinafter collectively called the "Amendments"), if any, shall be
expressed in writing and signed by the Parties or their authorized
representatives.
58
49.
24.1.2 All proposed Amendments shall be subject to approval by the original
Government examination and approval authority or such other
Government department at that time responsible for administering
foreign investment.
24.1.3 No Amendments shall be contrary to the terms of Chinese Law and
Regulations.
24.2 INUREMENT
Subject to the provisions of ARTICLE 14, this Contract shall be binding upon,
and inure to the benefit of, the Parties and their successors and respective
assignees.
24.3 NOTICES
24.3.1 ADDRESS FOR DELIVERY OR SERVICE
Any and all notices and other types of communication ("Notices")
required by or given pursuant to this Contract by either Party to
the other shall be written in Chinese and English, and shall be
validly served when delivered personally, or sent by recognized
courier service, telex or facsimile communication ("facsimile") to
the following address:
if to GEC-FGEB:
FIRST GEOEXPLORATION BUREAU
MINISTRY OF METALLURGICAL INDUSTRY
YANJAO ON EASTERN OF BEIJING
PEOPLE'S REPUBLIC OF CHINA
101601
ATTENTION: ▇▇. ▇▇▇ ▇▇▇▇▇
TELEPHONE: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇ Ext. 371
FACSIMILE: 011-86-10-954-6876
if to TEMCO:
TRIPLE EIGHT MINERAL CORPORATION
▇/▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
SCOTIA PLAZA
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TELEPHONE: ▇▇▇-▇▇▇-▇▇▇▇
FACSIMILE: ▇▇▇-▇▇▇-▇▇▇▇
59
50.
WITH A COPY TO:
TRIPLE EIGHT MINERAL CORPORATION
c/o PACIFIC CANADA RESOURCES INC.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
ATTENTION: ▇▇. ▇▇▇ ▇▇▇
TELEPHONE: ▇▇▇-▇▇▇-▇▇▇▇
FACSIMILE: ▇▇▇-▇▇▇-▇▇▇▇
24.3.2 EFFECTIVE DATE OF SERVICE
The effective date of service of a Notice shall be the date upon which
it is received at the address of the Party to which it is addressed as
evidenced, in the case of hand/courier delivery, by a signed receipt,
and in the case of telex or facsimile, by telex or facsimile
acknowledgment.
24.3.3 CHANGE OF ADDRESS
Any Party hereto may change or add parties to whom Notices to it shall
be addressed by giving ten (10) days' written notice thereof to the
other Party. Change of address of any Party may be made by giving ten
(10) days' written notice to the other Party.
24.4 LANGUAGE OF TEXT
This Contract is written in duplicate in both Chinese and English, with both
texts being equally authentic.
24.5 PREFERENTIAL TREATMENT
The Parties agree that at all times everything will be done to ensure most
favoured treatment from the Government to the Joint Venture and to the Parties.
24.6 APPROVAL OF CONTRACT AMENDMENTS
All Contract Amendments proposed pursuant to CLAUSE 24.1 shall be submitted for
approval by the relevant Government authorities.
24.7 ADDITIONAL DOCUMENTS
The Parties shall sign such further and other documents, cause such meetings to
be held, resolutions passed and by-laws enacted, exercise their vote and
influence, do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Contract and every part thereof.
60
51.
24.8 TIME OF THE ESSENCE
Time shall be of the essence of this Contract and of every part hereof and no
extension or variation of this Contract shall operate as a waiver of this
provision.
24.9 WAIVERS AND REMEDIES
No delay or omission by any Party in exercising any right or remedy hereunder
shall operate as a waiver thereof, or of any other right or remedy, and no
single or partial exercise thereof shall preclude either the further exercise
thereof, or the exercise of any other right or remedy. All rights and remedies
granted or recognized herein by any Party are cumulative and may be exercised at
any time and from time to time independently or in combination.
24.10 COUNTERPARTS
This Contract may be executed in several counterparts, each of which so executed
shall be deemed to be an original and such counterparts together shall be but
one and the same instrument.
24.11 TRANSMISSION BY FACSIMILE
The Parties agree that this Contract may be transmitted by facsimile or such
similar device and that the reproduction of signatures by facsimile or such
similar device will be treated as binding as if originals and each Party
undertakes to provide each and every other Party with a copy of the Contract
bearing original signatures forthwith upon demand.
61
IN WITNESS WHEREOF the Parties have duly executed this Contract as evidenced by
the signatures set out below.
GEOEXPLORATION CORPORATION OF TRIPLE EIGHT MINERAL
THE FIRST GEOEXPLORATION BUREAU CORPORATION
By: [SIGNATURE By: /s/ ▇▇▇▇▇ ▇▇▇
------------------------------ --------------------------
Title: NEEDS TO BE Title: Director
------------------------------ --------------------------
Date: TRANSLATED] By: /s/ ▇▇▇ ▇. ▇▇▇
------------------------------ --------------------------
Title: Director
--------------------------
Date: December 25, 1995
--------------------------