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EXHIBIT 10(a)
[GENERAL PETROLEUM & MINERAL ORGANIZATION LETTERHEAD]
CONTRACT
Between
PETROMIN
AND
NATIONAL AND ARABIAN SHIELD
DATE AND PARTIES:
This Contract, entered into in JEDDAH, SAUDI ARABIA, on 6th
day of the month of JUMADA II, 1391 H., corresponding to the 29th day
of the month of July, 1971, between GENERAL PETROLEUM AND MINERAL
ORGANIZATION, a public or organization under the laws of the Kingdom of
Saudi Arabia, (hereinafter referred to as "PETROMIN"), represented by
H.E. SHEIKH ▇▇▇▇▇ ▇▇▇▇ YAMANI, Chairman of its Board of Directors,
First Party,
and
NATIONAL MINING COMPANY, a Saudi Arabian company under the laws of
the Kingdom of Saudi Arabia, having its principal place of business in
the city of Jeddah, Saudi Arabia, (hereinafter called "NATIONAL"),
represented by His Highness ▇▇▇▇▇▇ ▇▇▇▇▇▇ bin Abdallah bin ▇▇▇▇▇
▇▇▇▇▇▇, Chairman of its Board of Directors and ARABIAN SHIELD
DEVELOPMENT COMPANY, a Delaware, U.S.A. corporation (hereinafter
referred to as "ARABIAN SHIELD") represented by ▇▇. ▇▇▇▇▇ El
Khalidi, its Vice President, both NATIONAL and ARABIAN SHIELD being
hereinafter referred to collectively as Second Party.
RECITALS:
WHEREAS, PETROMIN is entrusted by the laws of the Kingdom of
Saudi Arabia, inter alia, with the promotion and achievement of
development projects related to mining endeavours with the view to
enhance the industrial wealth and the national welfare in Saudi Arabia.
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WHEREAS, Second Party has represented to the Ministry of
Petroleum and Mineral Resources that it has the necessary technical
competence, financial resources and marketing skills and outlets to
undertake and perform, in accordance with the best accepted practice
in the mining industry, exploration, prospecting development,
exploitation, production, treatment, processing and marketing of
minerals in shape of ore and/or as finished product in world market;
and
WHEREAS Second Party submitted an application to the Ministry
of Petroleum and Mineral Resources for the grant of an exploration
licence for minerals over certain areas (Licence Area), and PETROMIN is
agreeable to accept the terms and conditions of the Exploration Licence
when granted; and
WHEREAS, Second Party, undertake to renounce their
preferential and exclusive rights, under Article 11 of the Saudi Mining
Code, to an Exploitation Concession for the benefit of PETROMIN and to
the extent set forth in this document, hereinafter called this
"Contract"; and
WHEREAS, PETROMIN and Second Party therefore, agree that all
the rights and claims Second Party may assume according to the
Exploration Licence and the Saudi Mining Code, are conditioned and
limited by the terms and provisions of this Contract, which Contract
Second Party undertake to append to their Application for an
Exploration Licence; and
WHEREAS, Second Party shall perform all obligations under the
Exploration Licence, make all payments required to be made to the
Government, the College of Petroleum and Minerals and/or as requested
by the Government, and shall be responsible to attain and prove a
discovery of minerals which can be commercially exploited; and
WHEREAS, upon proving a discovery by Second Party of a
commercially exploitable deposit of minerals, Second Party are willing
and prepared to form in accordance with the provisions of this
Contract a joint venture with PETROMIN for the exploitation of the
discovered mineral or minerals and PETROMIN is agreeable to this; and
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WHEREAS, Second Party shall forthwith notify PETROMIN of
the discovery to enable PETROMIN to exercise, at its own discretion,
its right of option to acquire a share in the Exploitation Concession,
which notification shall be served before application for an
Exploitation Concession; end
WHEREAS, in the event PETROMIN elects to participate in
exploitation the Exploitation Concession shall be issued, pro rata, in
the name of both PETROMIN end Second Party, failing which the
Concession shall be issued in the name of Second Party; and
WHEREAS, the Parties desire to set forth in this Contract,
the terms and conditions that shall govern their association and
relationship.
NOW, THEREFORE, THE PARTIES AGREE
AS FOLLOWS:
ARTICLE 1 - DEFINITIONS:
In this Contract the following words and expressions shall
(unless repugnant to the context) have the meanings hereby respectively
assigned to them, that is to say:-
(a) "this Contract" means this Contract between the Parties
hereto.
(b) "Licence" means the Exploration Licence granted in the name of
Second Party.
(c) "the Concession" means the Exploitation Concession granted or
to be granted in the name of the Parties hereto, in the event
PETROMIN elects to acquire a share in the Concession and in
default of which shall be granted in the name of Second Party.
(d) "Government" means the government of the Kingdom of Saudi
Arabia.
(e) "Ministry" means the Ministry of Petroleum and Mineral
Resources, Government of the Kingdom of Saudi Arabia.
(f) "Company" means the company formed by PETROMIN and Second
Party under Article 6 of this Contract.
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(g) "Exploitable Discovery" means such a discovery of mineral
deposits in the License Area which shall be considered to be
found if it is calculated that it will bring annually from its
exploitation, and for the life of the proven ore reserves, a
reasonable percentage of the capital investment, above
provision for capital return, which percentage shall be set by
ARABIAN SHIELD after the amount, type, average grade, and
amenability to treatment of the ore becomes known, and
considering the then prevailing rates of return in the mining
industry in comparable situations.
(h) "Treatment Plant" or "Plant" means any or all of the
facilities to be constructed in accordance with this Contract
together with the necessary off-sites and such
transportation, if any, as shall be required to service such
Plant and any extensions thereof.
(i) "the Site" means the PETROMIN Industrial Areas at Jeddah/
Dammam or such other area in Saudi Arabia as may be mutually
selected by the Parties for the location of Treatment Plant.
(j) "the product" means any product or by-product manufactured by
Treatment Plant or Plant.
(k) "Year" and "Month" shall mean a calendar year and a calendar
month of the Gregorian Calendar.
(1) Words importing persons include corporations.
(m) Words importing the singular include the plural and
vice-versa where the context so permits.
(n) "Minerals" means the minerals with respect to which rights
are granted by the Licence and Concession.
ARTICLE 2 - OBJECTS OF THIS CONTRACT:
2.1 The immediate object of this Contract is two-fold:-
(a) The regulation of the relationship of the Parties
with respect to the acquisition by PETROMIN of 25%
of the Concession.
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(b) The formation of a company by PETROMIN and Second
Party or, in the event PETROMIN does not acquire a
share, by ARABIAN SHIELD and NATIONAL, for the
purpose of undertaking exploration, prospecting,
development and production operations for winning and
obtaining minerals from the area covered by the
Exploitation Concession (the Concession Area) and
such other operations as nay be necessary to
transport and market minerals ore.
2.2 The long-term objective of this Contract is the treatment,
processing, upgrading and/or manufacture of the recovered
minerals ore by the Parties or by agreement of Parties any
other mineral or minerals Exploitation Concession whereof has
been duly granted by the Government, with, where appropriate,
participation by the Saudi public, and for such operations,
provided the same are agreed or determined to be commercially
feasible, as set forth in Article 1 hereof, to set up the
necessary Treatment Plant and or obtain Transportation
Concession so that Operator shall undertake and hereby
undertakes to arrange that the products of such Plant, which
shall be available for export, shall be sold in world market
by Second Party on sell or take basis.
ARTICLE 3 - PERFORMANCE DURING THE PERIOD OF LICENCE
3.1 Second Party shall during the period of the Exploration
License have the exclusive management and control of all
operations authorized by the License, and accordingly hereby
agrees to make all payments, conduct all operations and
promptly and properly carry out all obligations which are
required under the License until such time as commercially
exploitable discovery of minerals shall have been made and
proved and the Exploitation Concession shall have been
granted by the Government.
3.2 Second Party shall furnish evidence to PETROMIN as to the
faithful performance by Second Party of all the obligations to
be performed under the terms of the License on a reasonably
current basis.
3.3 Promptly after the discovery of minerals in commercially
exploitable quantities, Second Party shall give written notice
thereof to PETROMIN. PETROMIN hereby agrees that when after
it has been so notified to inform Second Party of its stand as
to the acquisition by it of a share in the
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Concession. Such option shall be made by PETROMIN within two
months after the receipt of said request from Second Party.
Second Party, promptly after the receipt of an answer from
PETROMIN, shall apply for the grant of an Exploitation
Concession in accordance with Article II of the Mining Code.
ARTICLE 4 - ACQUISITION OF INTEREST IN THE CONCESSION:
4.1 If PETROMIN does not elect to exercise its right to acquire in
accordance with Articles 2 and 3 of this Contract or if
PETROMIN elects to acquire a percentage less than 25% in the
Concession, then PETROMIN may establish a Saudi Arabian
Company which shall acquire all or part of that right.
Participation of shares in such Company may be offered to the
Government, any of its agencies or organizations, or Saudi
Arabian persons or any of these, either alone or in
conjunction with any of the others, but ARABIAN SHIELD shall
not acquire directly or indirectly, any of such shares. In
this case the Saudi Arabian Company shall replace PETROMIN in
this Contract and shall have the same rights and obligations
under the Contract that it would have had had it been one of
the original parties to the Contract.
4.2 If the 25% of the Concession earmarked for PETROMIN or any
part of that percentage is not used up by PETROMIN in the
manner set out in Article 4.1, Second Party shall acquire such
unused percentage of the Concession. PETROMIN shall
however retain the right to acquire at any time during the
currency of the Concession all or any part of the 25% of the
Concession earmarked for it upon giving written notice to
Second Party of its intention to do so. In that event Second
Party shall promptly take all due legal measures to secure
for PETROMIN the acquisition of the requested share with
retroactive effect as from the date PETROMIN served such
written notice.
4.3 In the event that PETROMIN elects to resume twenty-five
percent (25%) interest in the Concession by so notifying in
writing to Second Party, at a later stage during the life of
the Concession, all the relevant Articles of this
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Contract shall immediately come into force and effect and
PETROMIN shall make payment to Second Party in the following
amounts:-
(i) an amount equal to twenty-five percent of "the
Exploration Expenses" as defined in Article 5
hereof at the rate of one-thirtieth thereof per year
from the date of the granting of the Concession to
the date of such election by PETROMIN, which rate is
calculated on the basis of a thirty year period
Concession.
(ii) an amount equal to twenty-five percent (25%) of the
total costs and expenses incurred in further
exploration and prospecting operations carried out
from the date of coming into force of the Concession
to the date of such election by PETROMIN, after
writing down such total costs and expenses on a
straight line basis to extend from the year in which
they were incurred to the end of the initial 30 year
period of the Concession.
(iii) an amount equal to twenty-five percent of sums
expended on assets after depreciating such sums on a
straight line basis over the expected useful life of
the assets concerned.
All such amounts shall be audited and certified by an
internationally recognized auditing firm as being consistent
with the above-mentioned provisions and in case of doubt as
to whether any sum falls within paragraph (ii) or paragraph
(iii) hereinabove the decision of such firm shall be final
and binding. Such amounts shall be paid to Second Party in the
same manner as provided in Article 5.4.
4.4 In the event that the right of conversion of the Licence to an
Exploitation Concession is lost on account of non-
performance of obligations or any default done by Second
Party, or non-discovery of the mineral in exploitable
quantities by Second Party, as laid down in Article 11 of the
Mining Code, this Contract shall thereupon automatically
terminate and PETROMIN shall not be liable for the
reimbursement of any expenses whatsoever of Second Party
incurred pursuant to this Contract and the Licence and all
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rights and obligations of the Parties under this Contract
shall cease and be of no further effect provided that Second
Party shall be bound to meet and clear all obligations and
liabilities up to and including such date of termination. This
clause, however, does not impede the right of PETROMIN, if
circumstances so justify, to hold Second Party responsible for
compensation and/or damages.
4.5 Second Party shall, severally and jointly, be strictly bound
by and duly to perform all the terms, covenants, conditions
and obligations of the Concession to the extent of the
interest held by them and shall always act in the best
interest of the Kingdom of Saudi Arabia and the welfare of
the Saudi people.
ARTICLE 5 - PAYMENT BY PETROMIN AND/OR NATIONAL:
5.1 PETROMIN and/or NATIONAL depending on their relative
participation in the Concession, shall, severally, pay to
ARABIAN SHIELD a total sum equal to fifty percent (50%) of the
Exploration Expenses, as defined hereinafter. Thus if PETROMIN
retains 25% and NATIONAL has 25% participation interest in the
Concession each shall pay 25% of such expenses to ARABIAN
SHIELD, while if PETROMIN does not acquire an interest and
NATIONAL has 50% interest in the Concession then NATIONAL
shall pay the entire 50% of the Exploration Expenses.
5.2 The Exploration Expenses shall be those costs and expenses
falling within sub-paragraphs 5.2-1, 5.2-2, 5.2-3, 5.2-4
and 5.2-5, and paragraph 5.3 wholly reasonably and
necessarily incurred by Second Party in discharging
obligations expressed under the License to be carried out
until the date of the granting of the Concession. Such costs
and expenses shall be calculated on the basis of actual
expenditure with no element of profit to be included insofar
as the work has been carried out by the Second Party.
Exploration and prospecting expenses and costs wherever
incurred in connection with the operations under the License
shall be determined under the following classifications and
according to the following conditions:-
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5.2-1 Costs end expenses for exploration and prospecting activities
carried out by Second Party inside Saudi Arabia shall be
calculated on the basis of their original book value provided
that they are directly or indirectly identifiable with the
aforesaid activities and provided also that such costs shall
not exceed normal commercial rates for such works.
5.2-2 Costs and expenses for exploration and prospecting activities
carried out by third parties inside or outside Saudi Arabia in
connection with Second Party's exploration and prospecting
activities in Saudi Arabia and incurred by Second Party shall
be calculated on the basic of the cost to Second Party of such
work, which costs shall not exceed the normal commercial rates
for such work.
5.2-3 Costs and expenses incurred by Second Party and/or its
affiliates outside Saudi Arabia in connection with exploration
and prospecting activities of Second Party in Saudi Arabia
shall be calculated on the basis of their original book value
based on normal accounting practices consistently followed in
previous years, provided that they do not include any profit
elements and further provided that they are directly or
indirectly identifiable with the afore-mentioned activities.
5.2-4 Any bonus paid or payable to the Government as provided for in
the Mining Code or the License shall not be considered as
part of such exploration expenses.
5.2-5 Rentals, paid or payable to the Government and contributions
made or to be made to the College of Petroleum and Minerals
prior to the grant of the Concession shall not be considered
as part of such exploration expenses.
5.3 All such costs rind expenses shall be audited and certified by
an internationally recognized auditing firm to be nominated by
PETROMIN as being consistent with the above-mentioned
provisions and the cost of this audit shall be considered to
be an Exploration Expense.
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5.4 PETROMIN and/or NATIONAL, severally, shall effect such payment
under Sub-paragraphs 5.2-1, 5.2-2, 5.2-3, 5.2-4 and 5.2-5 and
paragraph 5.3 hereof to ARABIAN SHIELD in the shortest
possible time and, if PETROMIN shall so elect, by quarterly
installments each amounting to not less than twenty-five
percent (25%) of the total amount payable. Any payments in
quarterly installments shall be made by PETROMIN to Second
Party on the first day of January, April, July and October of
each calendar year. If both PETROMIN and NATIONAL hold an
interest then they and ARABIAN SHIELD shall join in the
formation of the Company, hereinafter provided for, while if
PETROMIN does not acquire an interest then only NATIONAL and
ARABIAN SHIELD form such Company. The Parties to the Company
shall be referred to hereafter as "the Parties concerned".
ARTICLE 6 - NON-PROFIT JOINT COMPANY:
6.1 For the purpose of operating the Exploitation Concession, the
Parties having an interest therein, shall form nonprofit Saudi
Arabian Joint Company (hereinafter referred to as "the
Company"), the charter of which shall be laid down in Annex
"A" hereof as an integral part of this joint venture Contract
and shall function as herein provided to explore, develop and
operate the said Exploitation Concession and the Treatment
Plants, if any, for the joint account of the Parties concerned
in accordance with the terms of the Contract and in conformity
with provisions of the said Concession.
6.2 The duration of the Company shall be the duration of the
Exploitation Concession, including any extensions thereof. The
Company shall be wound up and put in liquidation if said
Concession is terminated.
6.3 The function of the Company shall be to carry out in Saudi
Arabia, as agent for the Parties concerned, the Mining
Operations as defined hereunder in paragraph 6.8.
6.4 The authorized capital of the Company shall be nominal and
arrived by mutual agreement of the Parties concerned and the
stock shall be transferred only with the interest in the
Concession. Each party shall subscribe and pay up its
appropriate percentage of such authorized share capital.
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6.5 The Parties concerned shall share, in proportion to their
interest, the cost and expenses in connection with the
creation of the Company. The costs and expenses required for
equipping, staffing, maintaining and operating the office or
offices of the Company shall also be shared equally between
said Parties.
6.6 The Company shall not own any right, title, interest or
estate in the Exploitation Concession or in any of the mineral
ores produced from the Concession Area, or in the proceeds
from the sale thereof, or any of the assets, equipment or
other property obtained or used in connection therewith, and
shall not be obliged for the financing or performance of any
of the duties or obligations of any party under the Contract
or the Concession. The Company, as agent only, shall receive
and disburse only the moneys received by it and on behalf of
the Parties concerned contributed or advanced to it, including
payments for its capital stock, by the Parties concerned for
and in connection with obligations under this Contract and the
Concession.
6.7 The Company shall have the physical custody of all equipment,
material and supplies used, acquired or obtained to carry out
its duties as Operator of the Concession.
6.8 Mining Operations shall mean:-
(i) the exploration, prospecting, development and
production operation/operations to win and obtain
Minerals by geological and related methods including
drilling, excavating and extracting by mechanical or
other means;
(ii) the transportation of Mineral from Concession Area
to stock depots, rail road, ports, or other
facilities; and
(iii) treatment and processing of minerals and/or other
related operations.
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ARTICLE 7 - DESIGNATION OF THE COMPANY AS COMMISSION OPERATOR:
7.1 The Company is hereby designated from and after its formation
for and during the balance of the period covered by the
Concession as the operator of the Concession with physical
custody of all the equipment and other property used, had or
obtained in connection therewith for the joint account of the
Parties concerned to the extent that such operations are made
the obligations of the Parties concerned and to the extent
that said equipment and other movable property are purchased
or obtained by or for the joint account. It shall have the
usual and customary duties of an operator of mining
properties, except as elsewhere herein adversely provided, and
shall pursue all its duties in a good and workmanlike manner
pursuant to modern and prudent practice.
ARTICLE 8 ANNUAL WORK PROGRAM AND BUDGET:
8.1 On or before October 1st of each year the Company shall
prepare and submit to its Board of Directors a proposed work
program and annual budget for the ensuing calendar year. A
work program and annual budget shall, after due consideration
of the recommendations of the share-holders in relation
thereto, be settled by the Board of the Company by December
15th.
8.2 Prior to the first day of the month preceding a calendar
quarter the required cash for payment of operating expenses
(all expenses which are not capital items) shall be called
for by the Company from the Parties concerned. Each Party
shall put at the disposal of the Company not later than the
day before the first of each calendar quarter amounts
sufficient to cover such Party's share of the expenditures
envisaged for the then next two succeeding calendar quarters,
and if a remittance is late, the Company shall give notice to
the Party in default demanding payment within fifteen (15)
days from the date such notice is served. Any Party may
satisfy its obligations in whole or part under this paragraph
by authorizing the Company to use for such expenditures the
whole or part of its share of joint account funds held by the
Company for it. The required cash for capital expenditures
shall be handled in a similar manner although the Company
shall not require payments in advance except to the extent
reasonably necessary.
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8.3 The Board of Directors or the Technical Manger shall from time
to time determine the rates of production of minerals, taking
into consideration all relevant factors including availability
of labour, transportation end economically attractive markets.
Such rates of production shall prevail until changed by the
Board of Directors or by the Manager Technical.
ARTICLE 9 - ACCOUNTING PROCEDURE:
Each Party and the Company shall maintain, at their main
business offices in Saudi Arabia, books of account in
accordance with generally accepted first-class accounting
practices used in mining industry, and such other books and
records as may be necessary to show the work performed under
this Contract, including the quantity and value of all
mineral ore/ores produced or exported hereunder. The Company
shall furnish to the Parties concerned monthly returns showing
the quantity of mineral ores produced, transported or exported
by it hereunder. Such returns shall be prepared in the form
required by the Parties concerned and shall be delivered to
each Party within thirty (30) days after the end of the month
covered in the return.
Company shall also prepare and submit all forms returns etc.,
required to be prepared or submitted under provisions of the
Mining Code. Company shall furnish copies of all such forms or
documents to Parties concerned also.
ARTICLE 10 - INSURANCE:
10.1 Adequate insurance shall be maintained by the Company and
charged to the joint account, which insurance coverage shall
include Fire and Extended Coverage, ▇▇▇▇▇▇▇'▇ Compensation,
Employers' Liability, General Liability, and Aircraft
Liability, and when necessary Marine Insurance.
10.2 A Party desiring additional insurance in excess of that
mutually agreed upon, may do so for its own account and
benefit in connection with its interest under the Concession
and this Contract.
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10.3 The Company shall require all contractors and subcontractors
to furnish certificates of their insurance evidence of such
types and limits of insurance which in the opinion of the
Company are deemed sufficient and in accordance with good
industry practice.
ARTICLE 11 - TREATMENT PLANT AND TRANSPORTATION FACILITIES:
11.1 The Parties concerned agree and undertake with each other that
they will exercise their right under the Concession and this
Contract for optimum benefit of Parties and to that extent it
is specifically agreed that if the Parties agree or it is
determined as provided hereinafter that the ultimate
profitability of treating processing or manufacturing the
mineral ore produced from the Concession Area will be more if
exported or sold in treated/processed form than exports of
same in untreated/unprocessed form, then the Parties agree to
apply for and obtain Concession for Treatment Plants and to
set up Treatment Plant for that purpose.
11.2 Similarly if it is agreed or determined that it will be more
profitable to have a Transportation Concession, the Parties
agree to apply for and obtain a Concession for Transportation.
11.3 In order to agree or determine whether the obtaining of a
Concession for Treatment Plant and/or Transportation and the
setting up of such facilities will have more ultimate
profitability, the Parties shall within one year of
establishing of first exports of mineral ore, initiate
feasibility studies in relation to such facilities. Such
studies shall conform to the terms of reference laid down in
Annex "B" and shall be completed within twenty-four months
of first export.
11.4 The Parties shall each inform the other of the names and
qualifications of the engineers and other experts each has
instructed to carry out such studies on its behalf so that
each Party may take recommendations to the other Party as to
any further or alternate experts which it may consider
desirable to instruct. The Parties shall each request their
engineers and other experts fully to cooperate with the other
Party's engineers and experts during the course of such
studies with the intent that there shall be produced by all
engineers and experts engaged agreed results of such studies,
or where they do not agree, fully reasoned
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dissenting reports. The Parties shall each bear all costs and
charges of engineers and other experts respectively instructed
or employed by them.
11.5 With respect to the Treatment Plant end Transportation
Facilities envisaged the criteria used by the engineers and
other experts to determine the profitability of projects under
consideration shall be those criteria normally and
conventionally used in the Mining Industry in comparable
situations.
11.6 If the agreed results of any such study shall be to the
effect that :-
(a) either of the projects referred to in the foregoing
paragraph will show on equal or higher profitability
than profitability derived from sales of the raw ore
at export taking into account the then prevailing
prices for such raw ore or the use of alternative
transport, as applicable, and
(b) such projects are within the limits of financial
commitment of Parties adding thereto conventional
loan capital,
then the Parties undertake to carry out such projects.
11.7 If the agreed or determined results of such feasibility study
are to the effect that the criteria necessary for these
projects are not present, then the projects, which are the
subject of such feasibility study, shall be delayed until such
time within the period of this Contract as the Parties may
agree based on further feasibility studies, which feasibility
studies shall be made at intervals of not more than two (2)
years after the conclusion of the previous feasibility study.
11.8 If the engineers end other experts respectively instructed or
employed by the Parties for the purpose of any such
feasibility study shall express dissenting views on the
subject to be covered by the relevant feasibility study and
either one of such views is to the effect that the criteria
referred heretofore in this Article would be satisfied, then
the subject or subjects on which such
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dissenting views are expressed shall be submitted for the
decision of such expert third party or parties as the Parties
shall agree, or failing such agreement, such expert third
party shall be nominated by the President of the Board of
Concession Appeals provided for in Article 50 of the Mining
Code. If the decision of such third party or parties on the
matters which are the subject of such dissent is to the effect
that the criteria set out above would be satisfied, then the
Parties undertake to carry out such project or projects and
undertake with each other to make available, when called upon,
their relevant shares of investment.
11.9 For the purpose of financing such Treatment Plants and
Transportation Facilities as described in this Contract, the
necessary capitalization provided for in Annex "B" shall be
made available by the Parties in proportion with their
respective interests in the Concession.
ARTICLE 12 - PLANT CONSTRUCTION:
12.1 In the event the Parties agree or it is determined as set
forth in Article 11 hereof to set up a Treatment Plant and or
Transportation Facilities, and a Concession for same is
granted by the Government, Second Party shall be responsible
for making necessary arrangements for the design, engineering
purchasing of material and equipment and construction of the
Treatment Plant and or Transportation Facilities and its
commencement of operation.
12.2 In discharging the duties undertaken by it under Article
12.1 above, Second Party shall be responsible, amongst other
things, for the compilation of all data, specifications
drawings, conditions of contract end other documents and
information necessary or desirable for obtaining tenders on an
international basis for the design, engineering, purchasing of
materials and equipment and construction of the Treatment
Plant and or Transportation Facilities. No such data,
specifications, drawings, conditions of contract, documents or
information shall be published or distributed unless the same
shall have been approved by PETROMIN provided that this
requirement shall not apply if PETROMIN does not hold an
interest in the Concession.
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12.3 Upon such approval having been given, Second Party shall
invite tenders for the design, engineering, purchasing of
materials and equipment and construction of the
Plant/Transportation Facilities from such persons and in such
countries as the Parties to this Contract agree in advance.
12.4. Second Party shall not conclude by themselves any contract for
design, engineering, purchasing of materials and equipment and
construction of Plant/Transportation Facilities or any part
thereof. Instead, Second Party shall forward to PETROMIN
all tenders received together with the appraisals and
recommendations of Second Party with regard to those tenders
and the contracts will be placed thereafter with the mutual
agreement of the Parties.
12.5 During the period of construction of the Treatment Plant,
Second Party shall:-
(a) prepare any further designs and drawings necessary
for the information of the contractors to enable them
to carry out such construction.
(b) inspect and teat during construction the mechanical
and electrical materials, machinery and equipment
supplied by the contractors and arrange and witness
acceptance tests.
(c) issue proper instructions to contractors in
accordance with the terms of contracts between the
Joint-Venture and such contractors.
(d) issue such certificates as the conditions of
contracts between the Parties and a contractor
provide shall be issued prior to the contractor
becoming entitled to the whole or any part of his
contract price.
(e) arrange with prior written concurrence of PETROMIN
for such competent and qualified engineers,
technicians and/or consultants, as shall be
reasonably necessary for the efficient planning and
designing of the Treatment Plant and facilities; and
for a competent and qualified resident staff.
(f) assist, when appropriate, in settling disputes and
differences which may arise between the Parties and
contractors.
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Provided always that Second Party shall in no way be
responsible to the Joint-Venture and/or PETROMIN for the
wrongful or negligent acts or omissions of the contractors
where such acts or omissions do not result from the failure of
Second Party to discharge its own responsibilities as set
forth in this Article.
12.6 Second Party shall not charge any fees to the Joint-Venture
for the exercise of its functions under this Article. However,
it is agreed that the Joint-Venture shall pay (a) expenses
incurred for jobs carried out through third parties with the
prior approval of PETROMIN and (b) salaries and remunerations
of staff employed for supervision of designing, planning and
construction of the Plant/Transportation Facilities.
ARTICLE 13 - PLANT OPERATION:
13.1 Second Party shall, for the duration of the Contract, be
responsible to Joint-Venture and PETROMIN for efficient
technical management of the Treatment Plant and/or
Transportation Facilities (in the event same are set up) and
its offsites, according to first-class generally accepted
engineering standards. In the discharge of this responsibility
Second Party shall :-
(a) provide and/or secure with the prior
approval of PETROMIN, if PETROMIN is
holder of an interest, in the Concession,
such technical staff and employees of the
Joint-Venture as may be reasonably
necessary on suitable terms of employment.
(b) ensure proper extraction of minerals ore and
proper scheduling of production in the
Treatment Plant when it is set up.
(c) ensure that the Treatment Plant and its
offsites are properly maintained and
repaired.
(d) ensure that the production of the Treatment
Plant is properly stored and loaded on to
Transportation.
(e) from time to time transfer such of its
responsibility to such Saudi Arabian
employees of the Joint-Venture as the
Parties mutually agree are sufficiently
experienced.
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(f) provide all such information, patents and
processes and consultation services to the
Joint-Venture as may be reasonably within
its power and which shall be needed to
perform its obligations hereunder to the
efficient degree and to ensure that the
production by the Treatment Plant is
technically uptodate.
(g) provide for, as long as necessary, continued
instruction and training to an appropriate
number of Saudi Arabian employees of the
Joint-Venture with a view to ensuring that
the management and staff employed in the
operation, maintenance and repair of the
equipment and machinery of the
Joint-Venture and in marketing the ore
and/or products of the Treatment Plant shall
become progressively more Saudi Arabian in
content. The instruction and training of
such Saudi Arabian employees shall take
place at the Plants and offices of Second
Party or its affiliates as may be
appropriate. The Joint-Venture shall be
responsible for the travelling expenses,
living expenses and salaries of such Saudi
Arabian employees during the period of such
instruction and training but Second Party
shall not make any charge for such
instruction and training.
13.2 The provision of this Article shall apply with equal force in
case any Transportation Facilities are set up.
ARTICLE 14 - MARKETING ARRANGEMENTS:
14.1 Second Party, severally and jointly, shell be responsible for
a period of eight (8) years from the commencement of
production in the Concession Area or by the Treatment Plant,
in consideration of the remuneration hereinafter laid down, to
arrange the marketing and sales of relevant proportion of
PETROMIN's share, if any, of all the mineral ore produced
and/or products of the Treatment Plant, that are available for
export from Saudi Arabia and in the discharge of such
responsibility Second Party shall either itself purchase or at
its option procure purchasers for such ore or products of
PETROMIN's share that are available for export. Sales in
Saudi Arabia shall be handled by PETROMIN itself or through
any other agency appointed by PETROMIN.
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14.2 The relevant proportion of PETROMIN's share, referred to in
Article 14.1 hereinabove, shall be :-
(a) During the 1st year from the date of commencement
of production in the Concession Area or by the
Treatment Plant...............................100%
(b) During the 2nd year...........................87 1/2%
(c) During the 3rd year...........................75%
(d) During the 4th year...........................62 1/2%
(e) During the 5th year...........................50%
(f) During the 6th year...........................37 1/2%
(g) During the 7th year...........................25%
(h) During the 8th year...........................12%
(i) During the 9th year...........................NIL
The excess of ore and or Plant production over the relevant
proportion will be sold by PETROMIN itself or through any
other agency appointed by it. PETROMIN will be entitled to a
commission of two percent (2%) on the total of such sales and
sales in Saudi Arabia.
14.3 The prices to be paid by the purchasers for mineral ore and
Plant products F.O.B. Jeddah or any other port of loading in
Saudi Arabia shall be the prices fixed under paragraph 8 and
of this Article 14, except in the case of sales into Saudi
Arabia where sales shall be at the best prices obtainable
having due regard to local conditions and prevailing world
prices at the time of such sales. In case of sales to Second
Party or purchasers of products for export directly procured
by Second Party it shall be entitled to a gross sales
commission equal to two percent (2%) of the sale price
received.
14.4 The volume of sales into Saudi Arabia shall be determined by
the Parties for each period of three (3) months ending 31st
March, on 30th June, on 30th September and 31st December.
Sales into Saudi Arabia shall have priority over sales for
export.
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14.5 50 far as may be reasonable the Parties will cooperate with
each other in agreeing prices on a long term basis.
14.6 If Second Party shall fail to market any portion of the ore or
the products of the Plant in accordance with its
responsibilities as per paragraphs 1 and 2 of this Article 14
then without prejudice to remedies of PETROMIN against Second
Party, PETROMIN shall be entitled to procure export buyers
for such portion. In such event PETROMIN shall be entitled to
receive from the Joint-Venture the sales commission of two
percent (2%) which would have been paid to Second Party had it
marketed such portion and PETROMIN shall in addition be
entitled to receive from Second Party compensation at the rate
of two percent (2%) of the purchase price received by the
Joint-Venture for the portion so sold.
14.7 (a) The mineral ore or the Treatment Plant products for export
shall be sold only under the following terms end conditions:-
(i) On payment of agreed F.O.B. price against
delivery of shipping documents,
(ii) On payment agreed F.O.B. price within
thirty (30) days from the date of the
relevant ▇▇▇▇ of loading such payment to be
guaranteed in advance by a bank acceptable
to PETROMIN, if PETROMIN at the time
has an interest in the Concession,
(iii) Risk and title shall pass to Second Party or
buyer, as the case may be, at delivery point
F.O.B. Jeddah or any other Saudi port as
progressively loaded.
(iv) Arrangements for payment shall be agreed to
the satisfaction of PETROMIN any shipment
can be taken in hand.
Where Second Party estimate that the best
economic interest of the Joint-Venture
requires variations in the above, they shall
secure the prior approval of PETROMIN for
making such variations.
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(b) Payments for the account of the Joint-Venture by
Second Party or a purchaser for all its purchases
from the Joint-Venture shall be made in U.S.
Dollars or any other currency acceptable to the
Joint-Venture and freely convertible into U.S.
Dollars but sales into Saudi Arabia shall be made
in Saudi Arabian currency. Such sales shall be made
in cash or on thirty (30) days credit against
acceptable bank guarantee.
14.8 The representative/representatives of each Party shall meet
together in Saudi Arabia or such other place as may be agreed
on March 31, June 30, September 30 and December 31, or as near
as possible to such dates, in each year during the period of
the Contract for the purpose of agreeing upon prices at the
date of such meeting for the ore and plant products,
considering the provision of paragraph 14.9 hereof. If within
a period of fourteen (14) days from the date of such
representatives so meeting together, they shall not have
agreed on prices, then the matter shall be referred to the
Government Prices Committee set up for this purpose. An appeal
against the decision of this Committee may be made by any
party to the Board of Concession Appeals provided for in
Article 50 of the Mining Code, the award of the Board shall be
final and binding.
14.9 The geographic world markets the prices of which shall be
taken into consideration are :
(1) NEW YORK (2) LONDON
(3) TOKYO (4) ZURICH
(5) OTHERS. The list of such markets may be
amended from time to time by mutual agreement of Parties.
14.10 If at any time during the said period of eight (8) years
Second Party are in breach of its duty imposed by paragraph 1
of this Article 14 to purchase or procure purchasers of the
relevant proportion of PETROMIN's share of the ore
produced or the Treatment Plant products, then they shall be
liable to pay to PETROMIN as liquidated damages in respect
of such default so long is it continues, such profit as
PETROMIN would have realized on the sale of such relevant
proportion not so purchased at prices which shall reflect the
prices actually obtained during the period of default based
on the program or actual production from the Concession Area
whichever is more at the time of commencement of such
default less such profit as PETROMIN shall actually
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realize on such sales as it shall be able to make of such
relevant proportion of ore produced or the Plant products not
purchased but after adding all costs incurred by PETROMIN,
as the same shall not have been taken into account in arriving
at such profit in keeping mining operations in the Concession
Area and/or the Plant in operational readiness during the
period of such default.
14.11 Without prejudice to the provisions of this Contract and in
case at any time during the period of this Contract any party
is in breach of its obligations under this Contract that party
shall pay to the other party or parties damages as shall be
determined by adjudication as set forth in Article 29 hereof.
14.12 Second Party shall be free to market the ore or the Treatment
Plant products in any country of the world provided that at no
time shall Second Party market the ore or Treatment Plant
products to any hostile country or sell the same to Parties
under a commercial ban by the Government of the Kingdom of
Saudi Arabia.
ARTICLE 15 - MATERIAL AND SERVICES:
15.1 Second Party shall give preference to goods and materials that
are available in Saudi Arabia. They shall not knowingly
purchase directly or indirectly goods or materials from any
foreign source hostile or unfriendly to the Saudi Government.
Each year from the beginning of the commercial production,
at least twenty five percent (25%) of the cash reserves
retained by Second Party in Saudi Arabia shall be deposited as
current account in Saudi bank or banks and that fifty percent
(50%) of the value of the Second Party's letters of credit
related to purchases made during the period of the Concession
shall be opened through such bank or banks.
15.2 Second Party shall also accord priority to Saudi Arabian
contractors for the execution of the Second Party's works and
installations, provided that the rates and terms and the
quality of work are generally the same as those that may be
obtained from contractors in other countries.
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15.3 Should the need arise during the periods of the License and
the Concession, for the services of drilling rigs other than
those owned by Second Party, first preference shall be given
to rigs owned by the Saudi Government, any of its
organizations and/or Saudi Arabian nationals, provided that
the rates and terms and quality of work are generally the same
as those for similar rigs of other contractors.
ARTICLE 16 - PERSONNEL:
16.1 Second Party and the Company shall employ Saudi Arabian
personnel in the administration and management of their
operations and activities. Once the Concession is granted, the
following proportions must be observed in all brackets:-
16.2 Inside Saudi Arabia a minimum of eighty five percent (85%) of
the employees of the Second Party and the Company shall be
Saudis, of whom at least fifty percent (50%) must be in major
posts.
16.3 Outside Saudi Arabia a minimum of thirty-five percent (35%)
shall be Saudis, if and when they are available.
16.4 Whenever it is not possible to meet these requirements, due
to a shortage of skilled Saudi personnel, Second Party, the
Company and such other companies or ventures formed under this
Contract shall employ personnel in the following order :
citizens of the Arab States who are members of the Arab
League, citizens of other Arab countries and citizens of other
friendly states.
16.5 Saudi and non-Saudi employees having substantially similar
capabilities or having substantially similar duties and
responsibilities must receive the same remuneration and the
same reasonable foreign allowance if an when circumstances
require it.
ARTICLE 17 - TRAINING:
Once the Concession is granted by the Government, the Parties
shall, at the expense of the Joint-Venture, prepare a
specialized theoretical and practical training program for
Saudi Arabian employees relating to the various aspects of the
mining industry and including supervisory and management
training.
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ARTICLE 18 - EDUCATION, MEDICAL AND OTHER SERVICES:
Once the Concession is granted, the Parties shall contribute
to the welfare of the people of Saudi Arabia by providing
various facilities pertaining to educational, medical,
hygenical and other services including but not limited to
setting up of schools, hospitals and water facilities to be
agreed upon with the Government.
ARTICLE 19 - OTHER INTERESTS:
19.1 Except with the prior written approval of PETROMIN, neither
Second Party nor any of its affiliates or associated companies
shall either directly or indirectly in any capacity be
concerned or interested in any corporation, firm, business or
enterprise in Saudi Arabia which shall compete with or be
likely to compete with the business, activities and program of
the Joint-Ventvre.
19.2 PETROMIN notwithstanding anything to the contrary herein
contained shall be at liberty without any restriction
whatsoever to mine, produce or sell or be associated with or
interested in any corporation, firm, business or enterprise
mining, making or selling any minerals or products whatsoever
whether or not the same shall be competitive with the
business, activities and program of the Joint-Venture.
ARTICLE 20 - TRANSFER OF INTEREST IN CONCESSION:
20.1 PETROMIN may transfer its total or partial interest
and holdings in the Concession and/or the Joint-Venture to
any Saudi Arabian company, firm or person, provided PETROMIN
shall always hold itself responsible to Second Party for
performance by such transferee of this Contract.
20.2 Second Party may transfer its total or partial interest and
holdings in the Concession and/or the Joint-Venture to its
parent company or a subsidiary or an affiliate, provided
Second Party shall always hold itself responsible to
PETROMIN for performance, by such transferee of this
Contract
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A subsidiary shall mean a corporation or company which the
Second Party owns more than half of its capital and which is
under the direct or indirect control of the Second Party. An
affiliate shall mean a corporation or company which more than
half of its capital is owned by, and which is under the
direct or indirect control of, a corporation or company which
the Second Party owns more than half of its capital and which
is under his direct or indirect control.
20.3 Any transfer by any Party at variance with the afore stated
provisions of this Article shall require the approval in
writing of the other Party.
ARTICLE 21 - VOLUNTARY SURRENDER OF CONCESSION
21.1 Should any Party at any time desire to surrender or abandon
its entire interest under the Concession and this Contract,
and any other Party or Parties do not so desire, such Party
shall, subject to Government approval, execute and deliver an
instrument transferring its interest, pro rata, to the
Parties desiring not to surrender or abandon, provided
however, that if either PETROMIN or NATIONAL wishes to abandon
its participation interest as aforesaid, the other of them
shall have the first option to take all of the interest so
abandoned.
21.2 From and after the making of the transfer referred to in the
preceding paragraph, the transferring Party shall have no
further interest under the Concession and this Contract and
shall be relieved from the relevant obligations thereafter
accruing under the Concession and this Contract but shall be
bound to meet and clear all its share obligations and
liabilities up to and including such date of transfer and the
substitute Party shall assume all obligations and be entitled
to all benefits thereafter arising so far as applicable to the
interest transferred.
21.3 At the making of the transfer under this Article the
transferee shall be entitled to purchase the transferor's
interest in all facilities, materials and equipment at its
value determined by agreement, or, failing such agreement, by
an award of the Board of Concession Appeals.
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21.4 If however the Transferor should wish to participate once
again under the particular Concession and this Contract it may
do so upon terms mutually acceptable to PETROMIN.
ARTICLE 22 - WAIVER:
The failure of any Party hereto to insist upon strict
performance of any terms, conditions and provisions of
the Contract shall not be deemed a waiver of future compliance
therewith by the Party by which the same is required to be
performed hereunder and shall in no way prejudice the
remaining provisions of this Contract.
ARTICLE 23 - INDEMNITY:
Second Party hereby agrees to indemnify and keep PETROMIN
harmless and indemnified against all claims, demands or
losses, including but not limited to personal losses and
third party claims from whatever source arising, for the
duration hereof, which PETROMIN may have to meet during the
currency of the Contract or after its termination, if such
claims, demands, or losses are the result of any neglect,
delay or default by Second Party of any of the obligations or
liabilities assumed by Second Party under this Contract, the
License, the Concession, or the provisions of the Mining Code.
ARTICLE 24 - FORCE MAJEURE:
Neither party to this Contract shall be liable to the other
party for any failure of or delay in performance of its
obligations hereunder due to any cause or circumstance which
is beyond its reasonable control and may not reasonably be
prevented, including but without limiting the generality of
the foregoing any such failure or delay as is caused by
strikes, lockouts, fires, explosions, shipwreck, ▇▇▇▇▇,
earthquake, flood, lightning, act of God, wars, riots,
interference by military authorities, regulation or direction
of the Government of Saudi Arabia, or any other government or
governmental authority, provided that the party so restricted
shall continue to use its best efforts to remove the cause
of the force majeure.
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ARTICLE 25 - CONTROLLING LAW:
The rights of Parties hereunder shall be exercised in a lawful
manner, subject to the laws of the Kingdom of Saudi Arabia,
and in the exercise thereof all respect shall be accorded to
the religion and customs of the people.
ARTICLE 26 - CONFIDENTIAL INFORMATION:
All information acquired by any Party hereto in respect of the
operations hereunder shall be considered as confidential and
shall not be divulged to any other entity except on mutual
agreement of the Parties. This restriction shall not apply in
case of information submitted to or required by the
Government.
ARTICLE 27 - NOTICES:
27.1 Second Party shall designate a fully authorized representative
who shall maintain an office in Saudi Arabia at which notices
to Second Party may be validly served. The address of such
office and any change of address shall be noticed in writing
to PETROMIN, and the address of PETROMIN shall be noticed by
it in writing to Second Party at the office of its said
representative. A party shall not be bound to take notice of
any change of address of the other party until it is so
notified. Second Party, unless otherwise advised, shall direct
his correspondence with PETROMIN to PETROMIN'S address in
Riyadh, Saudi Arabia.
27.2 Any notice to be given by a party to another party hereto
shall be deemed to be validly served if made:
27.2.1 by means of a registered letter, airmail post,
postage prepaid, with receipt requested sent to the
office of the party or authorized representative to
which it is addressed:
27.2.2 by means of a letter delivered by hand at the mail
reception department or desk of the party or
authorized representative to which it is sent, with
an acknowledgement of a receipt on a copy.
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27.3 Notice by registered mail shall be deemed to have been served
at the expiration of the tenth (10th) day after the same shall
have been posted in Saudi Arabia. In proving such service, it
shall be sufficient to prove that the envelope containing the
notice was properly addressed and posted with prepaid postage.
ARTICLE 28 - ABEYANCE OR ARTICLES:
All Articles of this Contract pertaining to imposition of a
financial burden or responsibility on PETROMIN or pertaining
to participation of PETROMIN in non-profit joint company shall
remain in abeyance and shall come into force only after
PETROMIN exercise its option to retain or resume the agreed
percentage of interest in the Concession in accordance with
provision of this Contract.
ARTICLE 29 - SETTLEMENT OF DISPUTES:
If any doubt, difference or disputes shall arise between the
Parties concerning the interpretation of performance of this
Contract, or anything herein contained or in connection
herewith, or the rights and liabilities of the Parties
hereunder, it shall, failing any agreement to settle it, be
referred to the Board of Concession Appeals provided for in
Article 50 of the Mining Code. The award of the said Board
shall be final and binding on the Parties and may be
enforceable in any Court of Law.
ARTICLE 30 - ORIGINALS AND LANGUAGE:
This Contract is executed in six (6) duplicates, three in
Arabic and three in English and each of the Parties
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shall retain one of each. All duplicates shall be regarded as
originals and both Arabic and English texts shall have equal
authority and weight.
ARTICLE 31 - EFFECTIVE DATE OF THE CONTRACT:
This Contract shall be effective on and from the date of
signing hereof.
GENERAL PETROLEUM AND MINERAL ORGANIZATION
By /s/ ▇▇▇▇▇ ▇▇▇▇ YAMANI
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NATIONAL MINING COMPANY
By /S/ [ILLEGIBLE]
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ARABIAN SHIELD DEVELOPMENT COMPANY
By /s/ HATEM EL KHALIDI
------------------------------------------