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 CONVENTION de BASE





i





between








THE F EPUBLIC OF GUINEA











mid








GOLDEN SHAMROCK MINES LIMITED











and








CIIEVANING MINING COMPANY LTD


r .7








INDEX


Article Page





* Recitals * 1





1. Interpretation 2


2. Restructuring of AuG 5


3. Objective 7


4. Implementation 7


5. Approval and Effective Date 8


6. Duration of Agreement 8


7. Rights in the Company and \ssignment ' 9


8. Rights and Titles 11


9. Company Organisation and Management 12


10. Exploration and Services 13


11. Feasibility Studies and Deci*ion to Mine 16


12. Development and Operation* 18


13. * Taxes and Fiscal Matters * 22


14. Facilitation of Enterprise and Promotion of National Interest 27


15. Reports and Data 30


16. Force-Majeure 32


17. General 33


First .Schedule - Description of Project Area & Concession


Second Schedule - Rules for Computation of Income Tax


Appendix 1 - Key Points of Co-Operation Agreement


Appendix 2 - Rules for Direction and Management of AuG


Appendix 3 - Description of Services


Appendix 4 - Mining List & Computation of Certain Prices





A.


r











convention de base





THIS AGREEMENT is made the 11th day of November 1993


BETWEEN





THE REPUBLIC OF GUINEA ("RoG") represented by the Minister of


t Natural Resources, Energy anti the Environment, His Excellency Dr. Toumany


Dakoun Sakho ("the Minister") and the Minister for Planning and Finance, His


Excellency Mr. Soriba Kaba





AND


GOLDEN SHAMROCK MINES LIMITED ("GSM"), a company


incorporated in the State of Victoria, Commonwealth of Australia, represented


by its Managing Director James Edward Askew, who has authority to sign this


Agreement


AND


CIIEVANING MINING COMPANY LTD (“CMC"), a company incorporated


in the United Kingdom, represented by James Edward Askew as aforesaid.


PRELIMINARY STATEMENTS ("Recitals"):





A. In accordance with the Convention de Base dated 19 October 1985, between


RoG and CMC ("existing Convention de^ Base"), a Guinean joint venture


^company known as Aurifere de Guin£e S.A. ("AuG”) was incorporated and was


granted a certain concession to explore for and mine gold, silver, diamonds and


associated minerals in the Project Area as hereafter defined.


Prior to the end of 1992, AuG completed certain alluvial gold mining


operations in part of the concession granted to it.


At the date of this Agreement, the shareholdings in AuG are: RoG 49% and





CMC 51%.


AuG is indebted to CMC and to IFC (as defined below) for funds previously


advanced to AuG in respect of those alluvial gold mining operations.


B. By an option agreement dated 23 December 1992 ("Option Agreement") GSM


obtained the option to acquire the entire issued share capital of CMC from the


beneficial owners of CMC, namely NV Union Minifere S.A. ("UM") and


Pancontinental Mining Limited, as well as the benefit of all loans made by both


of these owners to CMC. GSM exercised the option on the date of this


Agreement.


 - 2 -


C. By a Heads of Agreement dated 9 September. 1993 between RoG and GSM


("Heads of Agreement"), RoG and GSM agreed to replace the existing


Convention de Base with a new agreement (being this Agreement) providing for


restructuring of the sharehold ngs, management and indebtedness of AuG and


varying the legal, commercial and fiscal conditions governing its operations so


as to enable AuG to undertake fresh exploration, evaluation, development and


mining activities in the area of the concession referred to in Recital A,


principally of any primary gold deposits which may be located in that area.


I). At the request of GSM, 1FC s considering p propositi for the restructuring of


AUG’s shareholding and its financial obligations substantially as set out or


referred to in Appendix 1.


OPERATIVE PROVISIONS


Article 1: Interpretation


1.1 In this Agreement and the Ricitals and Schedules hereto, unless the context


otherwise requires, or it is oth;rwise expressly stated, the following expressions


have the following meanings:


"Affiliate" means any person that directly or indirectly through one or more


intermediaries (either subsidiary or parent companies), controls or is controlled


by a Party. Without limiting the generality of the above, such control is


presumed to exist if one persoi holds, directly or indirectly, more than 50% of


the issued voting shares of another person; "Affiliated" has a corresponding


meaning;


"Applicable Laws" mean the laws and regulations of the Republic of Guinea


and the decrees, directions, oders, executive instruments and requirements of


RoG having or purporting to 1 ave the force of law and concerning or affecting


the Company, the Titles, Pioject Activities or Services (including without


limitation the Mining Code);


"Board" means the board of directors of AuG and any committee thereof


established in accordance wi h the regulations of AuG or pursuant to this


Agreement;


"Concession" means the exploration and mining concession described in the


First Schedule;


"Consent" means any existing or future consent, approval, agreement, decree,


registration, certification, authorisation, licence, permit, assurance, waiver,


release, exemption, quota, v.sa or other privilege, benefit or right given,


entered into, granted, issued or extended by RoG or any third party which is


necessary for or incidental to the purposes of this Agreement or the carrying


out of Project Activities or performance of Services, but excludes any Titles;








*


r











- 3 -


"Co-Operation Agreement" means an agreement to be entered into between


RoG, GSM, UM, CMC and IFC for the purpose of facilitating the restructuring


of the capital, regulations, management and financial affairs of AuG as


provided in Article 2, which agreement shall contain provisions implementing


or giving substantive effect to the arrangements set out in Appendix 1 or


otherwise acceptable to the Parties;


"Decision to Mine" means a decision by the Board (taken after consideration of


a feasibility study and after being satisfied that finance required for


development of the proposed mining enterprise is available on reasonable terms)


to commercially develop and operate a mine or mines in any part of the Project


Area together with associated ore treatment and/or mineral processing plant and


related works, facilities, services and rights;





"Encumbrance" means: (i) any mortgage, charge or other security or trust


interest over or in respect of any of the Titles or the other property of the


Company; or (ii) any third party rights over or in respect of any part of the


Project Area which are inconsistent with or have priority over the rights or


interests of the Company and have not been expressly agreed to by the


Company;


"Fiscal Year" means a calendar year;





"RoG" includes the Government of the Republic of Guinea and its Councils,


Ministers, Instrumentalities, Departments, Agencies and Regional or Prefectural


Authorities however styled or organised (including without limitation the


Ministry responsible for mining and the Central Bank of Guinea);


"IFC" means International Finance Corporation, an international organisation


established by articles of agreement among its member countries including the


Republic of Guinea;


V


“Investor" means CMC and any person, other than RoG, which becomes a


shareholder of the Company in accordance with the provisions of this


Agreement either in substitution for or in addition to CMC;





"minerals" include gold, silver and diamonds and associated minerals and any


other minerals (dther than strategic minerals as defined in Clause 8.7), which


the Company is or becomes authorised to explore for or mine pursuant to this


Agreement;


"Mining Area" means: (i) the existing Concession area; and (ii) any part of the


Project Area as described in the First Schedule which the Board designates for


development as a separate mining enterprise in accordance with this Agreement;





"Mining List" means the list of Goods (as defined in Clause 13.4) described in


Part A of Appendix 4;


r c


V











- 4 -





"month" means calendar month;


"Party" means each of RoG, GSM and CMC and any other person who is or


becomes a party to this Agreement, and ."Parties" has a corresponding meaning;





"Programme" means a programme and budget prepared by GSM or the


management of AuG and approved by the Board for exploration, evaluation


and/or feasibility study work in respect of any part of the Project Area;


"Project Activities" means any and all activities and operations carried on by or


for the Company which have as their purpose the discovery, delineation and


evaluation of commercial deposits of minerals in the Project Area, the conduct


of feasibility studies, the development, constmction, operation and maintenance


in a Mining Area of any enterprise for the mining and treatment of minerals


*- and/or the refining and marketing of minerals derived from a Mining Area;


"Project Area” means the area or areas described in the First Schedule (as'the





same may be enlarged or reduced or otherwise varied from time to time as the


result, of action taken by the Company or agreement of the Parties in


accordance with this Agreement or by operation of Applicable Laws) and any


Mining Area;


"Services" means the services described in Appendix 3;





"Taxes" means all present and future taxes, duties, levies and other RoG


imposts of every nature and description (including without limitation income


tax, rents,, royalties, sales tax, value added tax, stamp duties, transfer tax,


training levies, infrastructure use charges, prefectural or local development


taxes or levies, withholding tax, excise tax, import or export tax);


"Titles" means: (i) the Concession; and (ii) each and every other mining lease,


exploration licence and other mineral exploration, mining or mining purposes


concession or right (howsoever styled) now or hereafter held, applied for,


granted to or acquired by the Company‘over the Project Area or any part


thereof and any extension or renewal of that lease, licence, concession or right;





"Work Plans" means work plan and budget for the development (including


design, construction and commissioning) or operation and maintenance


(including exploration, production, marketing and rehabilitation) of a mining


enterprise in any part of the Project Area.





1.2 In the interpretation of this Agreement, unless the context otherwise requires:


(a) the singular includes the plural and vice versa, the masculine gender


includes each other gender and vice versa and a reference to persons


includes corporations and other legal entities and vice versa;





(b) a reference to an "Article", "Clause", "Recital", "Appendix" or


c








- 5 -


"Schedule" is a reference to an Article, Clause, Recital, Appendix or


. Schedule of this Agreement;


(c) the Schedules form an integral part of this Agreement;


(d) "US$" means United States dollars and "PC" means Guinean Francs or


other official currency of the Republic of Guinea;


(e) the expression "this Agreement" means this Agreement as the same may


be varied or amended from time to lime in accordance with its terms;


(0 "%" means per centum;





(g) a reference to "associated minerals" in relation to gold, silver or


diamonds is a reference to minerals found in association with gold,


silver or diamonds which must necessarily or may conveniently be


v mined in conjunction with or incidentally to the mining of gold, silver or


diamonds, as the case may be;


(h) a reference to "regulations of AuG" or "regulations of the Company"


includes a reference to the articles of association or by-laws or rules of


' governance or statutes of AuG or that Company (as the case requires


under Applicable Laws);


(i) a reference to a "person" includes a company or other legal entity;





0) a reference to "the -Company" or "Company" is a reference to AuG and


to any other Guinean limited liability company established pursuant to


this Agreement for the express purpose of carrying out of Project


Activities in respect of any part of the Project Area as designated by the


Board.


1.3 The Article headings are for the purposes of convenience only and shall not


form part of this Agreement or affect the construction of it.


Article 2: Restructuring of AuG


A


2.1 Immediately following ratification of this Agreement as provided in Article 5,


the Parties shall restructure the capital and financial rights and obligations of


AuG and the management of AuG so that the following steps take place


simultaneously:


(a) the existing shareholdings are altered to:





RoG: 15%


CMC: . 85%;


'(b) all AuG’s existing debts are converted to shares in AuG or otherwise


cancelled with the exception of: (i) US$3.1 million of the original


exploration loan made by CMC, which loan shall constitute an


unsecured shareholder’s loan free of interest and any other charges, and


which shall not be reimbursed unless the Parties otherwise agree; (ii)


AuG’s existing indebtedness to IFC of US$7.2 million which shall be


dealt with in accordance with the Co-Operation Agreement; it being


agreed that any resulting royalty payable to IFC by AuG shall not be


deductible by AuG for corporate income tax purposes;


(c) RoG is released from its existing loan guarantee obligations toward


CMC and funds previously set aside in trust to secure such obligations


are released to RoG.


(d) GSM provides or arranges for the provision of Services to AuG in


accordance with this Agreement or a separate management services


agreement; and


(e) control and direction of the business and affairs of AuG is conducted in


v accordance with this Agreement.


Each Party agrees to promptly:


(a) execute and deliver all such agreements (including without limitation the


Co-Operation Agreement and any separate agreement for provision of


Services) and other documents;


(b) cause AuG to pass such resolutions, make such changes to its regulations


and issue the shares to RoG and to CMC;


(c) apply for and use its best endeavours to obtain any Consents from third


parties;


(d) provide any Consent;


(e) do all such further acts and things


as may be necessary or convenient to achieve the restructuring described in


Clause 2.1 in a legally binding way.


All transfers, transactions and documents involved in the restructuring of AuG


pursuant to Clause 2.1 shall be free of Taxes.


Without in any way limiting or affecting CMC’s rights and obligations, GSM


reserves the right to change CMC’s corporate name to one which, more


appropriately reflects the result of the restructuring of AuG.


<











- 7 -





Article 3: Objective


V


3.1 This Agreement aims to define the technical, legal, economic, financial, fiscal


and social terms and conditions under which the Company will carry out


Project Activities after the restructuring of AuG as provided in Article 2.


3.2 It is hereby expressly agreed that upon ratification in accordance with Article 5


this Agreement shall have the full force of law and shall govern the rights and


obligations of AuG and of the Parties.


Article 4: Implementation





4.1 The terms and conditions of this Agreement apply to all Project Activities


undertaken directly or indirectly by AuG and each other Company established


for such purposes.


4.2 It is envisaged that: (i) initially AuG, with Services provided or arranged by





GSM, will undertake mineral exploration, evaluation and feasibility work


targeted to determine the presence of commercial deposits of gold and


associated minerals in the Project Area and to furnish the Board with sufficient


information to enable a Decision to Mine to be made; and (ii) at a subsequent


stage or stages and, subject to grant or confirmation of the requisite Titles,


AuG or another Company will undertake the commercial development and


operation of a mine or mines and associated facilities in one or more Mining


Areas for the mining, treatment and sale of minerals and that GSM will provide


or arrange Services to the extent required by AuG or that other Company (as


the case requires).


4.3 If, as a result of exploration, evaluation and feasibility study work undertaken





by AuG, more than one Decision to Mine is made and more than one Mining


Area is established and one or more Companies is or are established in addition


to AuG to conduct separate mining enterprises, the following applicable


provisions of this Agreement shall, inutatis mutandis, apply to each such other


Company as if it had been named therein separately from AuG.


4.4 Each Company shall conduct Project Activities in accordance with good and


acceptable international exploration, engineering and mining standards and


practices and modem and accepted scientific and technical principles using


appropriate and effective methods and materials and so as to avoid unnecessary


waste or loss of natural resources and unnecessary harm to the environment.


4.5 The Company shall conduct Project Activities without interruption during the


term of this Agreement, subject always to force majeure as defined in Article


16 or to RoG expressly agreeing to a suspension of Project Activities for a


stipulated period or periods.


•c











- 8 -





Article 5: Approval and Effective Date


5.1 RoG shall within 90 days after the date of signing of this Agreement by the





Parties (or within such greater number of days as they may agree), obtain the


‘formal ratification of this Agreement in accordance with Applicable Laws.


RoG shall immediately upon obtaining such ratification notify GSM of that fact


and shall furnish GSM with documentary evidence of such ratification.





5.2 Upon the ratification of this Agreement as referred to in Clause 5.1: (i) this


Agreement shall be deemed to have entered into full force and effect


retrospectively from the date of execution hereof by RoG; (ii) the Parties shall


ratify and confirm anything done by a Party or AuG pursuant to the Heads of


Agreement prior to the date of ratification as referred to in Clause 5.1.


Without limitation to the. foregoing provisions of this Clause any monies


expended on Project Activities by GSM or an Affiliate on behalf of AuG


pursuant to the Heads of Agreement shall (subject to audit) constitute


exploration expenditures for the purposes of this Agreement.


5.3 On and from the dale of ratification of this Agreement as referred to in Clause


5.1, the existing Convention de Base shall cease to be of any further force and


effect and shall cease to govern the relationship of RoG and CMC in respect of


AuG and the existing Concession, but such cessation shall not operate to


prejudice or affect: (i) the validity or continuance in force of the existing


vConcession and any other rights granted to or anything done by AuG or a Party


pursuant to the existing Convention de Base or the Heads of Agreement prior to


the date of ratification of this Agreement; (ii) the legal standing of AuG; or (hi)


anything done pursuant to Article 2 or the Co-Operation Agreement.





Article 6: Duration of Agreement


6.1 Subject to the provisions herein contained, this Agreement shall continue in





force until the expiration of 25 years from the date of this Agreement.


6.2 Notwithstanding Clause 6.1, should commercial mining operations be


continuing in any Mining Area at the expiration of 23 years from the date


referred to in Clause 6.1 and the Company can demonstrate to the reasonable


satisfaction of RoG on the basis of mining reserves and prevailing economic


conditions that those mining operations will continue beyond the expiration date


of this Agreement set out in Clause 6.1: (i) the terms of this Agreement (other


than Article 13) shall continue in force in respect of that Mining Area for a


further period sufficient to enable the completion of the relevant mining


operations in accordance with good mining practice and the rehabilitation of


Jhose parts of the Mining Area affected by those operations; (ii) the Parties


shall in good faith renegotiate the Taxes and other fiscal provisions applying to


those extended mining operations.


6.3 Notwithstanding Clause 6.1 or 6.2, this Agreement is subject to early


termination in the following cases:


 -9 -


(a) the Parties formally and expressly agree to terminate this Agreement


from a specified date;


(b) the last of the Titles held by AuG or any other Company expires or is


relinquished or not renewed in accordance with Applicable Laws;


(c) all Project Activities are voluntarily suspended for a continuous period





«. of 8 months or are permanently abandoned by AuG and any other


Company operating in a Mining Area;





(d) AuG goes into voluntary liquidation (otherwise than for the purposes of


reconstruction or amalgamation) or a court of competent jurisdiction


places AuG in liquidation.





Article 7: Rights in the Company and Assignment


7.1 The revised shareholdings in AuG are as set out in Clause 2.1.





7.2 The initial shareholdings in each Company other than AuG shall be:





RoG ' 15%


CMC 85%.


7.3 In every case, the revised or initial 15% shareholding of RoG shall: (i) not be


subject to payment of any cash consideration (RoG having confirmed or agreed


to grant Titles to the Company as provided in this Agreement); (ii) be a carried


or non-contributory interest which shall be niaintained and assured to be always


fcqual to 15% of the total rights and obligations of the Company throughout the


term of this Agreement, subject to Clause 7.11 ("carried 15% shareholding").


In the case of AuG, the carried 15% shareholding shall continue to comprise


‘A’ class shares so as to distinguish that holding from the shareholding of CMC


which shall continue to comprise ‘B’ class shares.


7.4 RoG’s carried 15% shareholding in the Company shall not entail any financial


obligations whatsoever to contribute to the cost of any Project Activities


(whether by way of equity., loans or guarantees of the Company’s financial


liabilities). Nothing contained in this Clause shall limit or affect RoG’s


entitlement to receive dividends from the Company pro rata to its carried 15%


shareholding in the Company.





7.5 CMC may, as of right, assign or transfer all or part of its shareholding in the


Company and its rights under this Agreement to an Affiliate of GSM, or assign


or transfer up to a 15% shareholding in the Company and corresponding rights


under this Agreement to IFC. Any proposed assignment or transfer by CMC to


a person other than IFC who is not an Affiliate of GSM, shall require RoG’s


firior Consent provided RoG shall not unreasonably withhold its Consent where


CMC is able to demonstrate that its proposed assignee or transferee has the


technical and/or financial resources necessary to fully and properly fulfil its


obligations nnrtf*r thic


 - 10 -





7.6 An Investor, other than CMC, may assign, or transfer all or part of its


shareholding in the Company and its rights under this Agreement with the prior


Consent of RoG. RoG shall not unreasonably withhold its consent when that


Investor can demonstrate that the proposed assignee or transferee has the


technical and/or financial resources necessary to fully and properly fulfil its


obligations under the. Agreem;nt.


7.7 Any assignment or transfer pursuant to Clause 7.5 or 7.6 shall be free of Taxes


but shall be conditional upon the proposed assignee or transferee entering into a


binding agreement with RoG (in form and containing provisions to RoG’s


'reasonable satisfaction) whereby the proposed assignee or transferee undertakes


to be bound by the terms and conditions of this Agreement and to assume all


obligations and responsibilities of CMC or other Investor which are the subject


of the proposed assignment or transfer.


7.8 RoG shall have the right to purchase from the Investor at any time a further


15% shareholding in the Ccmpany ("additional equity"). The price for the


additional equity shall be: (i) a fair market value as determined by independent


expert valuation at the time of exercise of the right; (ii) payable in cash in US$


within 60 days of exercise.cf the right; (iii) paid free of any Taxes or other


deductions or set-offs to the Iivestor’s nominated bank account.


7.9 For the purposes of Clause "\8: (i) the independent expert shall be appointed,


conduct his proceedings and make his determination in accordance with Clause


7.10; (ii) if there is more that one Investor at the time of exercise by RoG of


its right, the Investors shal contribute the additional equity and share the


purchase price between thim in the proportions which their respective


shareholdings in “the Company bear to one another inter se at the time of


exercise of such right, prov ded that if IFC is an Investor at that time, any


.reduction in IFC’s sharehold ng will be subject to approval of IFC’s board of


directors.


7.10 The independent expert shal : (i) be internationally recognised in the mining


industry and experienced ir valuing mining companies; (ii) be chosen by


agreement between the Parties or, in default of such agreement within 60 days


of the date of RoG notifies its intention to purchase additional equity,


appointed, at the request of he Parties or RoG, by the President for the time


being of the International Chamber of Commerce or by his nominee; (iii)


determine on technical and economic grounds customarily used in the mining


industry the fair market value of the proposed additional equity.


An independent expert appointed pursuant to this Clause shall:








(a) be instructed to make his determination as soon as practicable and, in


any event, within 90 days of his appointment;





(b) within 30 days after his appointment, provide each' Party with the


opportunity, through written submission, to present him with such


-........ - ■ • - • -___■ ■ ■ ■__!____■ ■ ■ 1!■ ’ ''* ■ • •' ■ ■ ■ • - - ■ - -


 -11 -





should be aware and consider with respect to his determination;


(c) have the right to open and complete access to all relevant information in


the possession or control of a Party or the Company as he shall


reasonably request, which access shall’be provided not later than 30


days after being requested by him;


(d) give such regard as he deems appropriate to the information furnished or


made available to him with respect to the Company, Project Activities


and the Project Area; and


(e) act as an expert and not as an arbitrator.


The independent expert’s determination shall'be final and binding on the Parties


and the costs of his appointment and proceedings (including all fees and


expenses) shall be borne equally by RoG and CMC.


7.11 The additional equity shall be a contributing (ordinary) shareholding, having the


• same rights and obligations attached to it as the Investor’s shareholding in the


Company. In the case of AuG, any additional equity shall comprise *B’ class


shares, equal in all respects to CMC’s shareholding in AuG.


7.12 Where the Company has established a mining enterprise in a Mining Area and


can demonstrate to RoG’s reasonable satisfaction that a reduction in the level of


RoG’s carried 15% shareholding is an indispensable condition precedent to


either: (i) implementation by the Company of a significant planned increase in


the production capacity of that mining enterprise; or (ii) the attraction of further


investment capital for development of another proposed mining enterprise in a


Mining Area. RoG, in the context of a review of its overall mining policy, will


give sympathetic consideration to reducing its carried 15% shareholding in the


Company to not less than 10%.


Article 8: Rights and Titles


8.1 RoG will, as and when requested by the Company, grant, give, confirm, issue


or extend to the Company all Titles and Consents which are necessary or


appropriate for carrying out Project Activities.


8.2 Without limitation to Clause 8.1, RoG hereby confirms that at the date of


ratification of this Agreement the Concession is valid and in full force and


effect according to its terms.


The Concession shall continue in full force and effect according to the


provisions of this Agreement, in particular the First Schedule.


8.3 All Titles granted to the Company shall confer exclusive exploration or mining


rights and shall be free from all Encumbrances. Titles issued in replacement or


substitution for the Concession shall unless the Parties otherwise agree, be


mining concessions issued in accordance with and subject to the Mining Code.


 - 12 -


I


8.4 Without limitation to Clause 8.3 but subject to Clauses 6.3 and 8.7, RoG shall


not without the prior approval of the Company grant any exploration or mining


rights to any third parties over any lands which at the relevant time form part


of the Project Area.


8.5 Notwithstanding .anything .to the contrary contained or implied in Applicable


Laws, RoG warrants and agrees that the Concession shall not be subject to the


progressive area reduction or retrocession requirements of Applicable laws for a


period of J years after the date of this Agreement. With effect from that third


anniversary, AuG (and any other Company which may be granted a Title) shall


comply with the provisions of the First Schedule covering of reduction of the


Project Area to a maximum of 1500 square kilometres.


8.6 Subject to Clause 8.7, if the Company discovers a commercial mineral deposit





other than gold, silver or diamonds, the Company shall have the pre-emptive


right to develop and mine that deposit as a’separate mining enterprise subject to


a new agreement to be negotiated with RoG.


Such pre-emptive right must be exercised within 90 days of the date the





Company notifies RoG of such discovery in accordance with this Agreement.


The new agreement shall, with the exception of the level of export tax on


mineral production, contain terms and conditions which overall are no less


favourable to the Company than the terms and conditions of this Agreement.


8.7 Clause 8.6 has no application to commercial deposits of radioactive minerals or


hydrocarbon compounds ("strategic minerals"). The Company shall not be


entitled to mine or exploit strategic minerals in its own right. The Company


shall nevertheless retain its discoverer’s right under Applicable Laws to receive


fair compensation for any discovery of strategic minerals it may make in the


Project Area.


Article 9: Company Organisation and Management


9.1 The business of AuG shall be directed and managed by the Board which shall





*be empowered to make all binding decisions affecting the business of AuG


which are not expressly reserved to the shareholders of AuG in general meeting


under the regulations of AuG.


9.2 The appointment of directors to the Board, voting of directors at Board





meetings (including the supporting votes required to validly pass resolutions


relating to certain matters), the proceedings of the Board and the management


of the day to day affairs of AuG shall be governed and conducted in accordance


with the rules set out in Appendix 2.


9.3 Without limitation to the scope and application of Appendix 2 but subject to





Clause 9.4, the Parties shall cause the regulations of AuG to be amended to the


extent necessary to give effect to the foregoing provisions of this Article and


Appendix 2.


9.4 Notwithstanding the foregoing provisions of this Article, the Parties acree and





 - 13 -





shall ensure that the shareholders of AuG agree that they will not without


RoG's prior approval:


(a) amend the regulations of AuG otherwise than as necessary to give effect


to the foregoing provisions of this Article and Appendix 2;


(b) change the basic nature of the business of AuG;


(c) voluntarily liquidate or wind up AuG;‘ or


(d) merge AuG with any other company.


9.5 The Parties agree and shall ensure that the shareholders of AuG agree that


neither the Board nor the shareholders of AuG in general meeting will resolve


or authorise the management of AuG to:


(a) substantially reduce the permanent workforce of AuG;


(b) otherwise than due to force majeure as defined in Article 16, curtail or


suspend operations of a mining enterprise or close that mining


enterprise;


(c) embark on any course of action which may have a material adverse


effect on the socio-economic stability in the region of the Project Area


or on the physical environment of that region; or


(d) establish any reserves or provisions in the financial accounts of AuG or


adopt any other financial management measures which could have a


material adverse effect on the likely level or timing of receipt of Taxes


by RoG from AuG having regard to the terms of this Agreement


without the matter first being discussed with RoG.


Any discussions required pursuant to this Clause shall be carried out in a spirit


of co-operation with due regard to the interest and objectives of the respective


Parties including the shared desire of the Parties to realise the commercial


success of AuG and each mining enterprise operated by AuG in a manner


which benefits the growth and development of the economic and social structure


of Guinea.


Article 10: Exploration and Services


10.1 GSM, either directly or through CMC, shall progressively fund AuG for


carrying out exploration, evaluation and feasibility study work in or in respect


of the Project Area in accordance with annual Programmes prepared by or


under the supervision of GSM and approved by the Board. It is intended that


AuG will be responsible for all exploration, evaluation and feasibility study


work in any part of the Project Area prior to that part being' designated by the


Board as a separate Mining Area.


 - 14 -





10.2 The scope and content of each Programme .shall be determined by GSM so long


' as, through CMC, it holds at least 10% of the issued share capital of AuG.


Thereafter the scope and content of each Programme shall be determined by the


Board. Each Programme shall contain sufficient detail of the activities to be


undertaken and the budgeted costs thereof to enable the Board to effectively


evaluate the same.


10.3 Expenditure or exploration made pursuant to the Heads of Agreement prior to





the date of ratification of the Agreement shall be deemed to form part of the


first approved Programme hereunder.





10.4 GSM undertakes that over the 3 years commencing on the date of this


Agreement:


(a) Programmes will provide for an aggregate expenditure of at least


US$4.5 million; and


(b) an aggregate amount of US$4.5 million is actually expended by or on





behalf of AuG or made available for expenditure by AuG on


Programmes (of which not less than US$1.0 million is expended in the


«. first 12 months of that 3 year period).


10.5 GSM's undertakings in Clause 10.4 are subject to GSM’s right (exercisable on


60 days’ notice to RoG) to withdraw from further funding of Programmes at


any time after not less than US$1.0 million has been expended on Programmes,


where GSM is of the opinion that the results of exploration to the date of


withdrawal do not warrant further expenditure on Project Activities.


10.6 For the purposes of Clauses 10.4 and 10.5:


(a) GSM will satisfy it's undertakings in Clause 10.4 if it makes a total of





US$4.5 million available for expenditure on Programmes within the


abovementioned 3 year period, notwithstanding that by reason of force


majeure (as defined in Article 16) AuG or its consultants and contractors


are prevented from completing the Programmes and from fully


expending US$4.5 million within that 3 year period;


(b) if GSM withdraws from further funding of Project Activities pursuant to


Clause 10.5 or fails to satisfy its undertakings in Clause 10.4, GSM's


v rights title;, and interest under this Agreement and its then current


*4 shareholding in CMC shall be dealt with in accordance with the Co-


Operation Agreement;





(c) subject to paragraph (d) of this Clause, failure by GSM to satisfy its


undertakings in Clause 10.4 shall not create or give rise to any right or


claim in favour of RoG to receive or have awarded monetary


compensation, damages or penalty payments from GSM;





(d) if GSM fails to cause US$1.0 million to be expended on Programmes,


GSM shall be liable to pay to RoG by way of liquidated damages the


difference between USS1.0 million and the amount actually expended on


Programmes under this Article.


*


10.7 After GSM has funded not less than US$6.0 million of expenditure on


Programmes and Work Plans, further expenditure on Programmes and Work


Plans shall (unless otherwise provided in the Co-operation Agreement or


otherwise agreed between the Investors) be funded by the shareholders pro rata


to their then existing shareholdings (excluding the carried 15% shareholding of


RoG but including any additional equity purchased by RoG under Article 7) and


unless otherwise agreed between the shareholders shall take the form of


unsecured, interest free shareholder loans.


10.8 Funds in excess of US$6.0 million made available by GSM or by shareholders


under this Article to meet expenditures on Programmes shall constitute and be


treated as unsecured, interest free, shareholder loans to AuG, some or all of


which shall, in the event the Board makes a Decision to Mine, be converted to


equity (shares) in AuG (or if the Board so decides, in the capital of new


Company other than AuG). Nothing in this Clause shall affect RoG’s carried


15% shareholding and RoG shall without obligation on its part be issued with


such further shares as are necessary to maintain its carried shareholding at


15%.


10.9 ‘ GSM undertakes to provide or arrange for provision of applicable Services, so


that Programmes are carried out in a proper and efficient manner. As needs be


GSM and CMC shall enter into a separate management services agreement with


AuG to give full effect to this undertaking.


10.10 In providing or arranging Services for Programmes, GSM shall either directly


or through consultants and contractors:


(a) act as agent for AuG, and any contract or transaction entered into in


connection with Project Activities wi(l be in the name of AuG or a


disclosed agent for AuG;


(b) have access to the Project Area and use of the fixed and moveable


property of AuG (wherever located);


(c) open and operate (either directly or through CMC) one or more bank


accounts in the name of AuG for the purpose of efficiently managing


and separately recording expenditures on Project Activities;


'(d) second to AuG (either on a full or part time basis) the services of expert


expatriate personnel as deemed appropriate by GSM, provided in each


case such personnel shall remain subject to the direction of GSM or


CMC;


(e) invoice AuG (either directly or through CMC) at monthly intervals for


all costs and expenses properly incurred in provision of Services subject


to the following: (i) no fee or other remuneration in the nature of a


profit to GSM or to CMC will be claimed nr


-





- 16 -





(ii) in order to recover in reasonable measure general overhead and


administrative costs of GSM associated with Services prior to a Decision


to Mine, each invoice may include a charge (separately shown) not


exceeding 8% of the total of other costs and expenses properly included


in that invoice;





(0 maintain and cause AuG to maintain full and accurate records and


separate accounts in respect of Services, conforming to internationally





X accepted accounting practice consistently applied as will enable AuG to


Satisfy its obligations under Applicable Laws and the reporting,


verification and auditing requirements of this Agreement.





10.11 Where any Services are performed by an Affiliate of GSM which customarily





offers such services to the public, GSM shall ensure that the charges made by


X that Affiliate are at competitive commercial rates and the Services are





performed according to good’ internationally accepted standards.


10.12 For the purposes of satisfying GSM's undertakings in Clause 10.4 the following


shall constitute quajifying expenditures:








(a) costs and expenses properly invoiced to AuG by GSM or CMC in


accordance with Clause 10.10; and





(b) the following costs incurred by AuG and either paid on AuG’s behalf by


v GSM or CMC or paid by AuG reimbursed by either of them: (i) costs of


leasing and running an office in Conakry (as required); (ii) costs of


conducting Board meetings (including travel, accommodation and


associated costs of directors in attending those meetings); (iii) costs of


operating and maintaining plant, vehicles, equipment, amenities and


facilities for or in connection with Project Activities; and (iv) salaries,


wages and allowances of AuG employees (other than those of seconded


expatriate personnel who are not placed on the payroll of AuG, which


shall form part of the cost of Services).





Article 11: Feasibility Studies and Decision to Mine





11.1 If as a result of exploration and evaluation work in the Exploration Area a gold


or other mineral deposit showing potential for commercial development is


discovered in the Project Area, GSM or the Board (as the case may be) may


determine to carry out a feasibility study in respect of that deposit as part of a


Programme.








11.2 Bach feasibility study shall have as its purpose a study of the feasibility of


establishing a separate mining enterprise within part of the Project Area and


shall be sufficiently comprehensive and detailed that it may be submitted to a


reputable lending institution for the purpose of financing the development and


operation of that mining enterprise, including without limitation: •





(a) the location of the deposit and the area of the proposed mining


 - 17 -





enterprise;


(b) the nature, shape, size, grade and metallurgical characteristics of the


deposit;


(c) the proposed, development (including description of the design,


construction and comn issioning activities and timetable, major items of


plant, vehjeles and equipment required, rates of production and


processing of ore, nature and extent of treatment to be undertaken and


types and quantities of marketable gold or other mineral products to be


produced and infrastructure services and facilities to be provided or


used);


(d) the likely employment and supply requirements of the proposed mining


enterprise;





(e) the likely physical impict of development and operation of the proposed


mining enterprise on the environment; .


(0 a Work Plan for development (including initial capital and working


capital costs);


(g) financial studies settin; out anticipated cashflows, revenues, operating


costs, profitability and return on investment (based on projected prices


for gold or other minerals); and


(h) likely sources, types and terms of financing for the mining enterprise.


*


11.3 Each Party and each sharehoder of AuG shall be promptly furnished with a


copy of every feasibility study together with evidence and terms of available


finance relating thereto and shill be entitled to elaboration or verification of any


material item which that Party or shareholder reasonably considers inadequately


addressed or inaccurate. GSM undertakes to use its best endeavours to ensure


that the requested elaboration or verification is provided within a reasonable


time.


11.4 A Decision to Mine shall be made as soon as practicable (and in any event


within 90 days) after the relevant feasibility study and any information required


under Clause 11.3 has been provided to the Parties and the shareholders.


11.5 In the case of the first Decision to Mine, development and operation of the


relevant mining enterprise will be carried out by AuG. In the case of a second


or subsequent Decision to Mine, development and operation of the relevant


mining enterprise will also be carried out by AuG unless the Board forms the


opinion that timely financing and development of the second or subsequent


mining enterprise will be facilitated by establishing another company separate


from AuG to own the relevant mining enterprise.


11.6 The Parties agree that in orde’ to obtain appropriate financing for development


of a mining enterprise it may be necessary for shareholders of AuG to do all or


any of the following: (i) con/ert existing shareholders’ loans (whether secured


or unsecured) to equity; (ii) make further subordinated shareholder loans; and


(iii) subscribe for further shares (either ordinary shares or preference shares).


Subject to Clauses 7.3 and 7.4, each Party agrees that to the extent necessary to


obtain financing as referred to in this Clause, the shareholders in AuG shall be


obliged to make the debt to equity conversions, make the further subordinated


loans and/or subscribe for tie further shares as is necessary to ensure that


appropriate finance can be obtained to enable timely implementation of the


Decision to Mine.


11.7 HJpon the first Decision to Mine, furthe’r subordinated loans and further


subscriptions for shares in AuG required for development of the relevant


mining enterprise, shall be nade by shareholders pro rata according to their


respective percentage shareho dings in AuG at the date of the Decision to Mine


provided that RoG’s carried 15% shareholding shall not be subject to this


Clause or counted in determining pro rata shareholder contributions of loans


and subscriptions for shares.


11.8 Without limitation to the provisions of Article 4, where the Board decides to


establish a new Company tc own a second or subsequent mining enterprise


separate from AuG:


(a) the initial shareholdings in that Company shall be the same as those in


AuG (in terms of the shareholders, their respective percentage


shareholdings and Lie rights and obligations attaching to their


shareholdings, includirg in the case of RoG a carried 15% shareholding


as described in Clauses 7.3 and 7.4);


(b) the regulations of that Company shall be the same or substantially the


* same as those of AiG as amended to give effect to Article 9 and


Appendix 2; and


(c) provisions to the effect of Article 9 and Appendix 2, shall govern the


organisation and management of that Company as if reference in Article


9 and Appendix 2 to Project Activities were references to corresponding


activities in or in respect of the relevant Mining Area.


Article 12: Development and Operations


12.1 Forthwith after the first Decision to Mine, the-Parties shall cause AuG to take


all steps necessary to:


(a) secure finance appropriate for development of the mining enterprise - for


which purposes the Parties shall cause AuG to grant or provide such


Encumbrances as may reasonably be necessary;


(b) establish the boundaries of the Mining Area - which unless the Parties


otherwise agree shall not contain a greater land area than is necessary to


encompass all minerJ deposits which on the basis of the relevant


feasibility study may properly be mined as a single mining enterprise


together with all associated treatment plants, works, facilities and


amenities;


(c) apply for and obtain uiy necessary or appropriate Titles and Consents


for the financing, development and operation of the mining enterprise;


and


(d) have detailed engineer ng studies, environmental impact studies and (if


needs be) marketing investigations carried out as part of the Services in


respect of the mining enterprise and the Mining Area.


12.2 v\uG or other applicable Company shall commence physical construction or


enter into binding contracts for physical construction of the mining enterprise


within 12 months of the date :>f the relevant Decision to Mine (subject to forc.e


majeure as defined in Article .6).


12.3 GSM undertakes to provide )r arrange for provision to AuG and any other


Company of applicable Services so that Work Plans for development and


operation of each mining ente prise can be carried out in a proper and efficient


manner and the provisions ol Clauses 10.10 and 10.11 shall apply as though


references to the Project Area were to the Mining Area, references to Project


Activities were to development, construction, operation and maintenance


activities in the Mining Area and the reference in paragraph 10.10(e)(ii) to a


maximum 8% charge for recovery of GSM’s general overhead and


administrative costs associated with Services was to a 5% charge.


12.4 Where in the case of a second or subsequent Decision to Mine, the Board


decides to establish another Company to own the relevant mining enterprise,


then with effect from the time that other Company is established (or as soon


thereafter as practicable) the Parties shall in accordance with Applicable Laws:





fa) cause AuG to transfer o that other Company all Titles and Consents and


all other property of auG exclusively referable to the relevant Mining


Area (including without limitation all relevant exploration data,


evaluation results, feasibility studies and primary or supporting


information);


(b) execute such agreemerts and other documents, provide such Consents


and take all other actio i as may be necessary or convenient to place that


other Company in a position where it can develop and operate the


relevant mining enterprise in the subject Mining Area in accordance with


the relevant provision* of this Agreement and the terms of financing


secured by the Board; and


(c) cause that other Com>any, as part of the development costs of the


relevant mining enterprise, to reimburse to AuG the costs and expenses


incurred by AuG pursuant to Article 10 in evaluation, and feasibility


study work exclusively referable to the relevant Mining Area.


 *








- 20 -





12.5 Upon the transfer or grant (as the case may be) of all necessary or appropriate


Titles and Consents to another Company pursuant to Clause 12.4, the relevant


Mining Area shall for the purposes of this Agreement cease to form part of the


Project Area. AuG shall apply the proceeds, of reimbursement under Clause


12.4 towards further Programmes in respect of the balance of the Project Area


outside the relevant Mining Area.


12.6 Development and operation of each mining enterprise shall be carried out in


accordance with:


(a) the applicable provisions of this Agreement, any management services


agreement and any shareholders agreement;


'(b) the terms and conditions of the relevant Titles and Consents;


(c) the terms and conditions of the relevant financing agreements;


(d) -Work Plans based on the parameters of the relevant feasibility study;


(e) rehabilitation plans based on the recommendations of the relevant


environment impact study; and


(0 to the extent consistent with the above paragraphs. Applicable Laws.


12.7 Without derogating from the requirements of Applicable Laws, each


environmental impact study shall be prepared by independent expert consultants


having due regard to World Rank guidelines and the Guinean "Code dc


l’Environnement" current at the time of preparation and in addition to analysing


the potential impact of the proposed mining enterprise on land, air, biological


resources and human settlements, such study shall outline measures which


should be adopted to mitigate adverse impacts.


12.8 'Based on the environmental impact study abd consistent with Applicable Laws


the Company shall adopt and progressively implement a plan for effective


rehabilitation of those parts of each Mining Area disturbed or affected by


operations.


12.9 Each Work Plan ^hall include:


(a) an itemised budget with capital and operating costs separately grouped


and showing separately FG and foreign currency components;


(b) an itemised estimate of cash requirements and expenditures, showing


separately FG and foreign currency components;


(c) details of Project Activities to be carried out;


(d) an itemised estimate of production,


 *








- 21 -





for or during the period covered by that Work Plan.


12.10 In respect of each mining enterprise any mining, processing or treatment of ore


prior to sale or export by the Company shall be conducted in accordance with


such generally accepted international standards as are economically feasible,


and in accordance with -such standards the Parties shall ensure that the


Company undertakes to use all reasonable efforts to optimise the recovery of


minerals from proven reserves and of minerals from the ore provided it is


economically feasible to do so.


12.11 Each mining enterprise shall be operated so as to produce marketable products


which in the case of gold or silver means a gold or silver dore suitable for


refining into gold or silver bullion and in the case of base metals means a


marketable concentrate.


12.12‘The Company shall have the right to export from Guinea all gold and other


products obtained from each mining enterprise and for these purposes to enter


into refining, marketing and sales contracts with refiners, agents and consumers


in accordance with generally accepted international business practices, at the


best prices and on the best terms compatible with world market conditions


obtainable in the circumstances then prevailing.


12.13 Any sales commitments to an Affiliate of a Party shall be made only at prices


based on or equivalent to arms length sales and in accordance with such terms


and conditions as would apply if the parties had not been Affiliated.


12.14 No Party or shareholder of the Company and no Affiliate of that Party or


shareholder-shall Jbe entitled to purchase gold produced by the Company at a


discount from prevailing world market prices or to receive any commission


from the Company in connection with sale of the Company’s gold production.


In the event the Company produces products other than gold dore, no sales


shall be made to an Affiliate of a Party or of a shareholder at a discount where


the products other than gold are intended for consumption by that Affiliate;


‘however where that Affiliate is acting as a'sales agent, it shall be entitled to a


selling commission at but no greater than the prevailing market rate so that the


net proceeds of sale received by the Company are not less than those receivable


where the sales agent had not been Affiliated with a Party or shareholder.


12.15 The Company shall not enter into any contract for sale or refining of its


products for a term in excess of 3 years without prior approval of RoG, which


approval shall not be unreasonably withheld or delayed.


12.16 If after the date of this Agreement, a commercial gold or other mineral refinery


or smelter is established in Guinea for processing gold dore or mineral


concentrates to gold bullion or to marketable metal stage, the. Company shall,


consistent with its rights and obligations elsewhere in this Agreement, give bona


fide consideration to processing its gold dore or other mineral products through


such refinery or smelter provided the charges, metal recoveries and services


therefor are economic and competitive.


Article 13: Taxes and Fiscal Matters


13.1 Subject to the terms and corditions of this Agreement, the Company shall pay


to RoG and fulfil its Tax liabilities as provided in this Article.


13.2 The Company shall not he subject to any Taxes other than as specifically


provided in this Article. Without limitation to the foregoing and for avoidance


of doubt no stamp duties, registration fees, transfer tax or similar imposts shall


be payable -on or in respect of any: (i) issue of shares in the Company; (ii)


transfer of shares or property in the Company between Affiliates or as part of


the restructuring of AuG; (iii) transfer or reimbursement referred to in Clause


12.4 from AuG lo an Affiliate; (iv) loan agreements entered into by the


Company; (v) any mortgage charge or other security interest given by the


Company for financing purposes; and (vi) any other document required for the


purposes of this Agreement.





13.3 The Company shall pay an :xport tax calculated on the value of all products


derived from a Mining Area ind exported from Guinea as follows:


(a) in the case of gold: ft) the value of each ounce of gold in each export


shipment used in computation shall be the 15.00 hours US$ gold fixing


as agreed by members of the London Gold Bullion Market on the 3rd


day following the da> of the export shipment as quoted for that day in


the Metal Bulletin; (ii) the export tax per ounce of gold in each export


shipment shall be computed as a percentage of the per ounce value


determined in accordance with paragraph (i) above as follows:





Per Ounce Value of Gold Export Tax Percentage





• less than US$475, 3%


• more than US$475, 5%; and





(iii) the value ranges in paragraph (ii) above shall be subject to


adjustment with effect from each and every anniversary after the date of


this Agreement to tale account of general inflation in the United States


of America (as reflected in the consumer price index) over the 12


months preceding eacl anniversary date;





(b) in the case of diamonds and minerals other than gold: the export tax


shall be fixed by RoG having regard to the levels of royalty or export


tax fixed by other countries in West Africa in which diamond and


corresponding mineral production is being commercially undertaken, but


in no case shall exceec 9% of market value at time of shipment;


(c) export taxes shall be paid: (i) in US$s or such other currency as may be


agreed between RoG end the Company; (ii) on or before the last day of


 -23 -





v the month following each calendar quarter, in respect of export


shipments made in that calendar quarter; and


(d) each payment shall be accompanied by a statement in reasonable detail


showing the basis of computation of export taxes due in respect of


export shipments made in the preceding calendar quarter.


13.4 In the following provisions of this Agreement, the expression "Goods" includes


all plant, machinery, equipment, vehicles, tools, apparatus, components,


computer and telecommunications equipment and accessories, spare parts,


consumables, materials and substances directly required for Project Activities or


related infrastructure and accommodation in accordance with approved


Programmes or approved Work Plans but expressly excludes vehicles for


private domestic use, personal effects of expatriate personnel, foodstuffs and


petroleum products.


13.5 Goods imported into Guinea by the Company or by consultants, contractors or


sub-contractors during the period and for the purposes of: (i) exploration; (ii)


construction and commissioning of a mining enterprise of the Company; (iii) the


first 2 years of commercial production of a ruining enterprise of the Company;


and (iv) the expansion of a mining enterprise of the Company, shall enjoy the


following exemptions:


(a) those Goods imported for a limited period and due to be re-exported


once exploration, construction or production is completed will enjoy


duty free status under RoG’s temporary admission customs regime;


(b) other imported Goods will be exempt from all import taxes and duties


and like imposts, including RTL.


(c) Goods referred to in paragraph (a) above will, upon re-export, be


exempt from all export taxes and duties and like imposts including RTL.


13.6 For the purposes of Clause 13.5 the Parties agree that items included in the


Mining List qualify for exemption from import taxes and duties and like imposts


including RTL. The Mining List will be subject to periodic review and revision


by RoG to ensure the customs exemption regime in respect of the mining


industry in Guinea is operating fairly.


13.7 G'oods imported into Guinea which do not qualify for exemption under Clause


13.5 shall be subject to customs duties as follows:


(a) 5.6% of value on importation during the first 10 years of commercial


operation of the relevant mining enterprise;


(b) 10% of value on importation after the end of the 10th year of


commercial operation of the relevant mining enterprise. *


13.8 Expatriate personnel of or seconded to the Company and of consultants,


 . J-





- 24 -


contractors and sub-contractors to the Company shall enjoy exemption from


Taxes on the import of personal effects (including furniture and appliances)


during the first 6 months following commencement of employment in Guinea


and on the re-export of those personal effects following completion of their


employment in Guinea.


13.9 Petroleum products required by the Company and its consultants, contractors


and sub-contractors for Project Activities shall be dealt with as follows:


(a) heavy fuel oil used for power generation shall be free of all Taxes for


the duration of this Agreement, unless RoG is able to provide electricity


for such purposes from the public electric grid on competitive terms;


(b) diesel fuel, which RoG shall ensure is-available in adequate quantities


for the duration of this Agreement, shall be calculated and paid for as at


the price ruling in the mining sector in Guinea and the factors used in


such calculation are set out in Part B of Appendix 4 as they may be


adjusted from time to time;


(c) lubricants and other petroleum products readily available in Guinea shall


be sold at preferential prices as set forth in Part C of Appendix 4 as


they may be adjusted from titmc to time.





13.10 All items other than Goods imported into Guinea by or on behalf of the


Company, its employees, consultants, contractors or sub-contractors and not


expressly dealt with in the preceding clauses of this Article, shall be subject to


customs duty or import tax in accordance with Applicable Laws.


13.11 The Company shall pay corporate income tax throughout the term of this


Agreement at the rate of 30% on all taxable income received or accrued by the


Company, whether originating from within or without Guinea.


13.12 In the case the Company is operating more than one mining enterprise, for


income tax purposes, the operating period shall be deemed to commence on the


date of commencement of commercial operation of the first mining enterprise.


13.13 For purposes of calculation of taxable income the rules for computation of


corporate tax ("BIC") set out in the Second Schedule shall apply with the


express exception that the Company shall not be entitled to claim an income tax


deduction for any gold royalties paid to IFC as a consequence of the


restructuring of AuG pursuant to Article 2. Without limitation to the Second


Schedule:


(a) taxable income shall be calculated by making allowance for accelerated


depreciation on depreciable assets in accordance with the declining


balance method over 5 years from the date of acquisition or completion


of construction;


 -25 -





(b) losses may be brought forward for a period of up to 5 years; and


(c) an investment allowance of 5% will apply for investments in depreciable


assets made during the year.


13.14* The Parties shall ensure that the Company only pays dividends on shares: (i)


out of after tax income; (ii) consistent with any debt repayment obligations


under financing secured for development of a mining enterprise or for


expansion of that mining enterprise; and (iii) after taking into account


expenditure commitments under approved Programmes and approved Work


Plans.


13.15 The Company shall withhold and remit to RoG withholding taxes fixed at the


rate of 10% on services provided to the Company as part of or in connection


with Project Activities by .persons who do not have a permanent establishment


in Guinea for income tax purposes, (including services involving use of rights


or property) provided that no withholding tax shall apply in respect of Services


directly provided by GSM or CMC in accordance with this Agreement or a


separate management and technical services agreement as contemplated in this


agreement by reason of those Services being provided at cost.


13.16 The Company shall withhold and remit income taxes on salaries and wages of


its Guinean employees according to Applicable Laws. In addition, the


Company will in each year set aside and apply towards training of Guinean


« employees an amount at least equal to 1.5% of the aggregate of all salaries and


wages of Guinean employees paid in the preceding year. To the extent that this


minimum amount is not fully expended on training in the year of application,


the unexpended balance shall be paid as a training levy or tax. If in any year


the Company expends more than the applicable minimum amount on training,


the excess expenditure shall be deductible for income tax purposes as provided


in the Second Schedule.


13.17 Expatriate individuals who are employed by the Company or seconder! to the


Company as part of Services or employed by its consultants or contractors to


work in Guinea, shall be subject to an income tax equal to 10% of total salaries


paid for work performed in Guinea. Non cash allowances and benefits, pension


or superannuation payments, social security and health care payments shall be


disregarded for these purposes and exempt from tax.


13.18 The policy enunciated in Applicable Laws for provision for reconstitution of the


mining deposit ("PRG") shall be applied in accordance with the Second


Schedule.


13.19* The Company shall be subject to a prcfectural or local development tax equal to


0.4% of gross sales revenues each year. Such tax shall be paid in the same


manner and time as the export tax under Clause 13.3.


13.20 RoG undertakes that the Company shall be entitled to establish and maintain an


• i j-


 - 26 -





external account or accounts and receive into such account or accounts the


following monies:


(a) any equity or capital contribution in foreign exchange made at any time


by the shareholders of the Company;


(b) all credits or loans in foreign currency that may be granted to the


Company from time to time, provided that the Company shall give


* notice to the Central Bank of Guinea of any credit or loan it intends to


obtain for the purpose of Project Activities and indicating the terms of


such credit or loan arrangement;


(c) 75% or such other percentage of the gross proceeds of all sales in


foreign currency of gold, and other minerals produced by the Company


as may be approved by RoG having due regard to the debt financing or


capital investment requirements of a particular mining enterprise of the


Company;


(d) the foreign exchange proceeds from investment of any monies in the


external account or accounts.


The remaining 25% or other agreed percentage of gross proceeds of sales not


payable into the external account or accounts, shall be paid into or maintained


by the Company in a bank account in Guinea (either with the Central Bank of


Guinea or by a bank approved by it) in FG or other lawful currency in Guinea


and applied towards costs, expenses and charges: (i) of or in respect of


Company employees (other than expatriate personnel); and (ii) for or in


connection with goods and services supplied by contractors, consultants and


business enterprises resident in Guinea.


13.21 The Parties acknowledge and agree that the external account or accounts shall


be used exclusively for the payment by the Company of the following:


(a) payment of principal, interest and other costs and fees in respect of any


borrowing in foreign currency by the Company for a mining enterprise;


(b) remuneration of expatriate personnel of the Company and any costs,


expenses and charges' paid or to be paid in foreign exchange for or in


connection 'with Services or to suppliers, consultants or contractors


whose goods or services are reasonably required for the purpose of


Project Activities;


(c) the costs of recovery, export and sale of gold or other minerals (if any)


pursuant to the implementation of a mining enterprise;


(d) payment of any dividend to the shareholders of the Company.


13.22 RoG hereby confirms and warrants to the Company and to its shareholders that


 - 27 -





the Company shall not be required to deduct or withhold any Taxes from any


payment from the external account or accounts of:


(a) any interest or other costs paid in respect of any borrowing by or on


behalf of the .Company in foreign currency;


(b) subject to 13.15, any payments for or in connection with Services or to


consultants and contractors for supply of goods or services, where such


payments are made in foreign currency; or


t(c) any dividends paid to the shareholders of the Company.


13.23 The types and rates of Taxes payable by the Company in accordance with this


Article shall remain fixed fot the duration of this Agreement unless the Parties


otherwise agree. No new or additional Taxes shall be imposed on the Company


in res|>ect of any mining eiterprise established by it in a Mining Area in


accordance with this Agreement.


Article 14: Facilitation of Enterprise and Promotion of National Interest


14.1 In addition to the provisions of Titles and Consents as provided in Article 8,


RoG undertakes with the other Parties and with the Company that:


(a) no part of the right cr interest of the Company in or in respect of the


Project Area or a M ning Area shall be expropriated by RoG without


prompt payment of fiir and reasonable compensation therefor in such


amount or awards as shall be determined by agreement or by award by


arbitration as providec in this Agreement;


(b) except as provided for in Article 7 in respect of RoG's right to purchase


v additional equity, the shareholders of the Company shall not be


compelled by Applicable Laws to cede any right or interest they may


have in or in respect of the capital of the Company and any mining


enterprise of the Conpany to any other person whether wholly or in


.part;


(c) in order to secure the repayment of the Company’s obligations to any


external financier, the Company may mortgage or charge to such


external financier any and all of the Company’s rights and interests in


the Titles and its assets and undertaking;


(d) the Company and it; agents, consultants and contractors shall have


access to and use of all geological and other information held by RoG


and relating to the Piojcct Area, including past exploration and mining


reports and results;


(e) the Company and its agents, consultants and contractors shall have the


right: (r) subject to Applicable Laws and generally applicable


international treaties ind conventions, to fly over the territory of the


 - 28 -





Republic of Guinea and to fly in and out of Guinean territory using


chartered or privately owned aircraft and to use any recognised airstrip


in Guinea and to lard aircraft anywhere in the Project Area; (ii) in case


of emergency, to -fly personnel out of Guinea without interference or


delay;


(0 to the extent necessary for Project Activities or Services the Company,


its agents, consultants and contractors may construct, install or obtain,


or gain access and may operate or use within any part of the Project


Area: (i) commun.cations systems in accordance with applicable


regulations (including without limitation, VHP, CB radios, satellite


communications networks and other telecommunications equipment); (ii)


adequate supplies or sources of power, water and construction materials


* such as sand, gravel and stone;'(iii) pipelines, power lines, roads,


airstrips and other infrastructure facilities; and (iv) housing and


accommodation and lealth, education and social amenities.


14.2 RoG shall do everything within its power to ensure that the Company has access


to and use of relevant public infrastructure facilities and services on no less


favourable terms than those generally applicable in the mining sector. Where


the Company has access and use of public infrastructure facilities (such as the


Siguiri airport), it may to tie extent that it deems necessary or appropriate, at


its own cost and as part of approved Programmes or Work Plans upgrade,


repair and maintain such families and expenditure so incurred shall be treated


as expenditure on Project Activities.


14.3 Infrastructure facilities consructed or installed in any part of the Project Area


by or on behalf of the Company: (i) will be constructed to the capacity and


standards which meet but do not exceed the needs of the Company unless


otherwise agreed with Raj; (ii) will be repaired and maintained by the


Company as part of Project Activities; (iii) subject to the Company and its


agents, consultants and contractors having priority, will in the case of roads


4 outside restrictive areas, be available for public use free of charge.


14.4 RoG agrees that the Compar.y and its consultants and contractors will be free to


recruit and employ or use the services of expatriate personnel in Guinea to


carryout Project Activities as they deem reasonably necessary. In respect of


such expatriate personnel and their families and personal effects, RoG


undertakes to facilitate their entry, residence and working in and passage from


Guinea through the issue of necessary visas and work permits, customs and


taxation clearances and the like as required under this Agreement or Applicable


Laws.


RoG confirms that it will no adopt any policy measures which could reasonably


be construed as discriminatory towards such expatriate personnel.


14.5 GSM and CMC shall use their best endeavours to ensure that" (i) the Company


does not recruit or employ expatriate personnel who are citizens of a country


hostile to the Republic of Guinea; and (ii) expatriate personnel employed by the


 -29-





Company do not engage in ary activities which could undermine the national


security or the public peace of Guinea.


14.6 The Parties shall ensure that the Company adopts and implements the following


policies in relation to employment of Guinean nationals in Project Activities and


in procurement of goods and services for the purposes of Project Activities:


(a) the Company shall employ Guinean nationals to the maximum extent


practicable consistent with efficient operations;


(b) the Company shall not be restricted in its assignment or discharge of


personnel; provided thal subject to the foregoing requirements the terms


and conditions of suci assignment and discharge or disciplining of


Guinean personnel shall be carried out in compliance with Applicable


Laws;


(c) the Company shall see< to provide direct Guinean participation in the


• management of the Company after the* exploration phase and to this end


CMC undertakes to use its best endeavours to have the Company recruit


and employ a suitably qualified Guinean national as its director or


manager of mining within 5 years of commencement of commercial


operations of the Compiny’s first mining enterprise;


(d) the Company shall imroduce and conduct a comprehensive training


program for Guinean personnel in Guinea in order to meet the


requirement for various classifications of full time employment for its


mining enterprise within the shortest practicable period of commencing


development of that mining enterprise and shall also conduct a


programme to acquaint all expatriate employees and contractors with the


relevant laws and customs of Guinea;


(e) the Company shall at all times provide equal treatment, facilities and


opportunities among employees in the same job classification with


respect to salaries, facQities and opportunities within the mining sector


regardless of nationality;


(0 if the Company establishes a mining enterprise it shall furnish such free


medical care and attention to all its employees as is reasonable and shall


establish, staff and maintain a dispensary or clinic which shall be


reasonably adequate under the circumstances;


(g) the Company shall make maximum use of Guinean sub-contractors


where goods or service? available from them are competitive as regards


price, continuity of supply, timing and quality of workmanship with


those obtainable elsewhere;


(h) the Company shall not be obliged to engage the services of local sub¬


contractors unless the sub-contractors are technically or appropriately


skilled or otherwise capable of carrying out the work in a satisfactory


manner;


 - 30-





(i) after the first Decision to Mine, the Company shall appoint for such


period as is reasonably necessary, a number of its staff to: (i) identify


goods or services required for Project Activities which can be provided


by Guinean nationals or local businesses; and (ii) advise Guinean


nationals desirous of providing those goods or services or establishing


such businesses of those opportunities and the requirements of the


Company; and


(j) the Company shall, to the extent the same does not interfere with the


proper and timely per ormance of Project Activities, provide advice to


groups of local miner; in the Project Area in basic small scale, non¬


mechanical gold minirg techniques, specifically shallow, alluvial gold


mining operations.


14.7 RoG shall assist the Company in arrangements for any necessary resettlement of


local inhabitants whose resettlement from any part of the Project Area or a


Mining Area is necessary and the Company shall pay for the resettlement and


give reasonable compensation for any dwelling, privately owned lands


(including such landownership based on any Guinean customs or customary


Sviws, generally or locally applicable) or other improvements (such as crops or


plantations) in existence on ary such parts which are taken or damaged by the


Company in connection with Project Activities.


Article 15: Reports and Data


15.1 In addition to the matters referred to in Clause 9.15 the Investor agrees with


RoG that the Company shall:


(a) in respect of exploratbn in the Project Area, furnish the Minister not


later than 60 days after 30 June and 31- December in each Fiscal Year


with a report of th; exploration activities undertaken during the


preceding 6 months ending 30 June or 31 December (as the case


requires) and the results obtained, accompanied by: (i) copies of any


geological or geophysical maps of any part of the Project Area prepared


by the Company or on its behalf by consultants or contractors as part of


services; (ii) copies o ' maps indicating all places in the Project Area


where drilling or trenching has occurred or exploratory pits sunk in the


relevant 6 months period; (iii) copies of logs of all drill holes, pits and


. trenches and of assay results of any analytical mineral samples recovered


from them;


(b) forthwith notify the M nister of: (i) any significant discovery of gold or


other mineralisation h the Project Area which shows potential for


economic development; (ii) any other significant event or occurrence


directly or indirectly affecting the conduct of Project Activities;


(c) prior to commencement of development of a mining, enterprise: (i)


furnish the Minister with a copy of the feasibility study and


environmental impact study and details the financing arrangements on


 - 31 -





which ihe relevant Decision to Mine is based; (ii) and provide the


Minister with a proposed construction schedule in respect of that mining


enterprise; and (iii) keep the Minister informed of the progress of


construction;


(d) during commercial operation of a mining enterprise furnish the Minister


within 30 days after each calendar quarter with operating reports


containing: (i) a description of Project Activities carried out in the


quarter and operating itatistics for the quarter; (ii) a summary of gold


and other mineral products exported and sold during the quarter; and


(iii) profit and loss and net cash How statements for the quarter;


(e) furnish RoG as and when required with such other reports and other


information required ui.der the conditions of any Titles or any applicable


Consents or Applicable Laws.


15.2 Except as otherwise provided in Clause 15.3, RoG shall have title to all data


and reports submitted by the Company to the Minister or RoG pursuant to the


provisions of Clause 15.1. Such data and reports will be treated as strictly


confidential by RoG to the ex ent that the Company shall so request, provided,


that data belonging to the public domain (because of having been published in


generally accessible literature or of therr mainly scientific rather than


commercial value, such as gtneral geological and geophysical data) and data


which have been published pursuant to Applicable Laws or laws of a foreign


country in which a shareholder may be domiciled (such as the annual report of


public companies) shall not be subject to the foregoing restrictions. The term


"data" as used in this Clause shall include (without limitations) any and all


documents, maps, plans, worksheets and other technical data and information,


as well as data and informatior concerning financial and commercial matters.


In respect of data relating sole y to areas relinquished by the Company from the


Project Area pursuant to Article 8, the foregoing restrictions shall cease to


apply as from the date of relirquishment of such areas. In addition, where this


Agreement has been terminate 1 pursuant to Article 6, the foregoing restrictions


shall cease to apply.


15.3 Notwithstanding Clause 15.2, exclusive know-how of the Company, its


consultants, contractors or Affiliates contained in data or reports submitted by


the Company to the Minister ar RoG pursuant to the provisions of Clause 9.2


or 15.1 and which shall have been identified as such by the Company, shall


only be used by RoG in rela ion to the administration of this Agreement and


shall not be disclosed by RoG to third parties, without the prior consent of the


Company. Such exclusive knc w-how as long as it remains exclusive know-how


of the Company, its consultants, contractors or Affiliates (as the case may be)


remains the sole property o: the Company, its consultants, contractors or


Affiliates (as the case may be).


15.4 RoG shall at its own cost have the right at all reasonable times to have access to


and to audit or verify the con ext of the Company's commercial, technical and


 - 32 -





financial records, either by Ro3 officials or independent auditors or advisers.


Article 16: Force Majoure


16.1 »*-'or the purposes o( this Agreement "force majeure" means any event or


circumstance beyond the reasonable control of a Party or the Company and


occurring or arising without ts fault or negligence which prevents or delays


performance by that Party Dr the Company of its obligations hereunder,


including without restriction (i) war, sabotage, riot, insurrection, civil


commotion, national emergency (whether in fact or law), martial law, fire,


flood, cyclone, earthquake, landslide, explosion, strike, lockout, boycott or


other labour difficulties, ep demic or quarantine; (ii) inability to obtain,


breakdown of or damage to ;ssential plant, facilities, equipment or supplies;


(iii) loss, breakdown or shortage of necessary transport; (iv) restriction,


restraint, prohibition, expropriation or embargo by legislation, regulation,


decree or other legally enforceable order of any government or governmental or


other competent authority; (v) refusal, non-grant, revocation, cancellation or


suspension of any necessary Consent or the non-execution, non-entry into force


or termination of any necessary agreement; or (vi) delay or failure to act on the


part of any person (other thar the Party affected) involved in the restructuring


of AuG.


16.2 Any failure by a Party or by the Company to carry out any of its obligations


ynder this Agreement shall nDl be deemed-a breach of contract or default if


such failure is caused by foicc majeure, that Party or the Company having


taken all appropriate precaution, due care and reasonable alternative measures


with the objectives of avoiding such failure and of carrying out its obligations


under this Agreement. If ary activity is delayed, curtailed or prevented by


force majeure, then anything ii this Agreement to the contrary notwithstanding,


the time for carrying out the activity thereby affected and the term of this


Agreement specified in Article 6 shall each be extended for a period equal to


the total of the periods during which such causes or their effects were operative,


and for such further periods, if any, as shall be necessary to make good the


time lost as a result of such fo'ce majeure.


16.3 Where a Party or the Compary is affected by force majeure in performance of


its obligations, it shall as soor. as practicable notify each Party which is not so


affected and if applicable the Company thereof, stating the cause and the Parties


shall endeavour to do all reisonable acts and things within their power to


remove such cause, provided, that a Party shall not be obligated to resolve or


terminate any disagreement with third Parties, including labour disputes, except


under conditions acceptable o it or pursuant to the final decision of any


arbitral, judicial or statutory agencies having jurisdiction to finally resolve the


disagreement. As to labour disputes, the Company may request RoG to co¬


operate in a joint endeavour to alleviate any conflict which may arise.


 - 33 -





Article 17: General


17.1 This Agreement is govemec by and shall be construed in accordance with the


laws of the Republic of Guir ea. RoG declares that this Agreement is authorised


under and conforms to Applicable Laws in force at the date hereof.


4 It is expressly agreed that Mis Agreement shall govern the relationships of the


Parties in respect of the subject matter hereof for the duration of this Agreement


and in the event of any incc nsistency between the terms of this Agreement iind


Applicable Laws, the terms of this Agreement shall favour to the extent of that


inconsistency.


17.2 Any dispute or .difference between the Parties concerning the construction or


operation of this Agreemen or the rights or obligation of a Party hereunder


shall, except where a procedure for resolution of such dispute or difference is


expressly provided elsewhere in this Agreement, or the Parties otherwise agree


in respect of a particular dispute or difference, be submitted to the jurisdiction


of the International Centre tor Settlement of Investment Disputes for settlement


by conciliation or arbitration


17.3 Any arbitral award made in respect of a dispute or difference submitted to


arbitration pursuant to Clause 17.2 shall be final and binding upon the Parties


and judgement thereon may be entered in any court of competent jurisdiction or


application made to such court for judicial acceptance and an order for


enforcement of that award.


*


17.4 If a dispute or difference is submitted to arbitration pursuant to Clause 17.2, the


Parties shall, during the period of such arbitral proceedings and pending the


making of the arbitral award, continue to perform their respective obligations


under this Agreement so far as circumstances will allow without prejudice to a


final adjustment in accordant e with that arbitral award.


17.5 Any notice, advice, report, request, confirmation, approval, offer, acceptance,


direction. Consent required or permitted or authorised under this Agreement


("notice") shall be in writing and:


(a) must be legible and addressed as set out below:


(i) if to RoG: The Minister for Natural Resources, Energy and


the Environment


Address: BP 295 Conakry


Republic of Guinea





Attention: The Minister


Telex: (0995) 22350 MINGEO GE


 - 34 -





(ii) if to GSM


or to CMC: C/- Golden Shamrock Mines Limited





Address: 4th Floor, 15 Queen Street


Melbourne 3000


Victoria, Australia


Attention: Legal & Commercial Department


Facsimile: 61 3 629 7274


Telex: A A 154899 GSMLTD





or to any other add -ess specified by a Party to the sender by written


notice;





(b) must be signed by a lirector, manager or secretary of the sender;


(c) in the case of a telex, must be stated or purport to be sent under the


signature of a director, manager or secretary of the sender;





(d) is deemed to be duly given by the sender and received by or served on


the addressee:


(i) if by delivery in person, when delivered to the addressee;


(ii) if by post, when received by the addressee;


(iii) if by telex, oi receipt by the sender of the answerback code of


the addressee; or


*


(iv) if by facsimile transmission, when received by the addressee,


but if the delivery oi receipt is on a day which is not a business day at


• the place of the adcressee or is after 4.00pm (addressee’s time) it is


deemed to be duly given on the next business day at the place of the


addressee; and


(e) can be relied on by the recipient and the recipient will not be liable to


any other person for any consequences of that reliance if the recipient


believes it to be genuine, correct and duly authorised by the sender.


17.6 Waiver of any breach or provision of, or any default under, this Agreement


must be in writing and signed by the Party granting the waiver. A breach of,


or default under, this Agreement is not waived by any failure or delay in


exercising any provision of this Agreement. A failure or delay in exercising or


the partial exercise of any provision of this Agreement is not a waiver of that


provision.


17.7 ' A variation of any term of this Agreement must be in writing and signed by the


Parties. It is explicitly agreed that the Schedules and Appendices hereto mav be


 - 35 -





amended from lime to time by the written agreement of the Parties without


requiring formal ratification n accordance with Applicable Laws.


17.8 This Agreement supersedes all previous agreements, negotiations and


understandings with, respect to its subject matter including, without limitation,


the Heads of Agreement and the existing Convention.


17.9 Each Party shall pay its own costs and expenses (including legal expenses) in





respect of or in connection with the preparation and execution of this


Agreement and the documents executed under this Agreement (including any


document resulting from the restructuring of AuG).


17.10 In entering into this Agreement the Parties recognise that it is impracticable to


make provision for every contingency which may arise in the course' of


operation of this Agreement and if unfairness to either Party is disclosed or


reasonably anticipated due to some event or change in circumstances beyond the


reasonable control of that I arty, the Parties shall, upon request of either of


them, forthwith consult in good faith with a view to removing the cause or


ameliorating the effects of such unfairness provided that failure of the Parties to


agree to remove the cause or ameliorate the effects of such unfairness shall not


constitute a dispute or difference for the purposes of Clause 17.2.


17.11 Each Party shall do any thing and execute all documents reasonably required by


the other Party to give effect to the transactions contemplated by this


Agreement.


17.12 This Agreement may be executed in several counterparts, each of which shall be


deemed an original, but all of which together shall constitute one and the same


agreement.


17.13 »This Agreement is drafted and signed in'both French and English language


versions. Each notice under this Agreement shall be in both French and


English.


In the .event of any inconsis ency between the French and English versions of





this Agreement or any notice, the French version shall prevail to the extent of


V * 1 11 that inconsistency.



































 - 36 -








IN WITNESS WHEREOF the Paries have entered into this Agreement on the day


and year first herein before written.




















DULY SIGNED for THE REPUBLIC


OF GUINEA by the Minister for Planning


and Finance His Excellency, Mr Sorfba Kaba;


and the Minister for National Resouries,


Energy and the Environment, His Excellency,





Dr Toumany Dakoun Sakho ) Signature

















DULY SIGNED for and on behalf of


GOLDEN SHAMROCK MINES LIMITED


by its duly authorised representative in













































































j


 FIRST SCHEDULE





Description of Project Area





Project Area means an area of 8384 km2 referred to in the letter of the Minister to AuG


dated 11th November 1992 and the AuG title description of 21 June 1988 as modified


(copies of which comprise Annex "A" hereto) being the area described by the Coordinates


set out in annexes to that letter.


Description of Concession


1. By this Agreement the Concession means the concession described in Article 12 of


the existing Convention de Base other than Clauses (0 and (g) thereof (a copy of


which Article comprises Annex "B" hereto) which confers exclusive and irrevocable


rights on AuG to explore for and exploit deposits of gold, silver, diamonds and other


v associated minerals in an area which in this Agreement is defined as the Project


Area, subject to 2 and 3 below.


2. The area subject to the Concession (i.e. the Project Area) at the date of this


Agreement is a single area of 8384 km2. Over the period of 3 years from the date of


this Agreement, AuG has the exclusive rights to explore for and mine gold, silver,


diamonds and other associated minerals in that Project Area of 8384 km2. By the


end of that 3 year period AuG must select and delineate not more than 5 separate


sub-areas or blocks within that Project Area. Each block must be of a minimum size


of not less than 250 km2. The aggregate area covered by the blocks must not exceed


1500 km2. It is permissible to select and delineate any number of blocks between 1


and 5 provided the aggregate area does not exceed 1500 km2. The block or blocks


so selected and delineated shall, at the expiration of the above 3 year period, become


the Project Area in respect of which AuG has exclusive exploration and mining


rights for the duration of this Agreement and any extension of this Agreement in


accordance with Article 6. These parts of the 8384 km2 Project Area as it exists at


the date of this Agreement which are not selected and delineated as a block or blocks


for inclusion in the 1500 km2 Project Area, shall revert to the public domain.


i 4


3. «. Once the selection and delineation of the blocks has been effected in accordance with


2 above, no further or subsequent reduction of the Project Area (i.e. retrocession)


shall be required under the Mining Code, so unless AuG otherwise requests -the grant


of substitute or replacement Titles the Concession shall operate with full force and


effect, in respect of those blocks in accordance with the provisions of this Agreement.


4. For good order it is acknowledged that AuG was granted a mining permit in respect


of a 335 km2 block within the Project Area for a 10-year period commencing 24


September 1986 (a copy of this mining permit comprises Annex "C" hereto). By the


end of the 3 years after the date of this Agreement AuG shall decide whether or not


to count the area of this mining permit as a block for the purposes of 2 above. If


AuG does decide to retain the mining permit as a block, the mining permit itself


shall be treated as part of the Concession and its duration shall be extended to a


period or periods ecual to then unexpired balance of the term of this Agreement or


any extension of that Agreement in accordance with Article 6 and any references in


that mining permit to the existing Convention de Base shall be treated as references


to this Agreement.


 I











Annex "A"


REPUBLIGUE DE GUlMEr





miavam. ,uS*'CC :CLC*ni'r








‘MENTSTEIRE DES HESSOUBCES Conakry. •« | | NOV, |gg2 '


NATDTIELLE3, DES E.VERGEES


ET DE L'ENTIROtfNEMENT








rjfif Mm.F'Tia /CM/92 JU




A MONSIEUR LE DIRECTEUR GENERAL


vome/RgP DE LA SOCIETE AURIFERE DE CUINEE


OQJLT (A u G)














Monsieur le Directeur General,


J'ai accuse reception de vo :re lettre n,221/DG/AuC/SlG/92 en date du 24 juw 1992





relative aux limites des cor cessions mimeres entre la SOCIETE AURIFERE DE


CUINEE (AuG) et la SOCIETE MINIERE DE DINCUIRAYE (SMD). Je vous en


remercie.


En reponse. /'at Vhonneur de vous informer que le chevauchement des deux permis


resulte d"uhe delimitation a I'epoque des superficies optionnelles de recherche sur la


base des frontieres admimsiratives des Regions de Siguin et Dinguiraye devenues


Prefectures.


Compte tenu de ('Importance des mvestissements deja realises par la SMD aans les





travaux de recherches sur U site de LERCJ, nos avons juge equitable de mamtemr


cette tone dans la concession de cette Societe (SMD).














Aunleie Gurnee


lO-n-Ri


Cow-A,"'f ----


Soul *« “


En consequence, les limites de 'Otre concession sont definies desormais par les


coardonnees geographiques cirannexees, sott une .super ficie cotale de 8.384 Km“.


. . . . 2


Cede superficie sera reduite per le systeme de la retrocession, a 1.500 Km


conformement aux dispositions nsees a I'artt'cie 12 alinea (P de votre Convention.


En vous sou/iattant bonne reception, recevex, Monsieur le Dlrecteur General,


mes salutations distinguees.-









































COPIE : Directeur General Adjoint


Co or do nr, e ■» 3 leo aommecs iu .'roly gone d^llmlcan: Iz tor rtsaLon -








FOHITS LAT ITU DE MORO LONGITUDE OU





11*


A . . 20' 00" 9* 09* 46"


B . ll* 20’ 00" 9' 30' 00"





c. L1 * 21 ' 00" 9* 30' 00"


0. ll* 21’ 00" 9 ‘ 40 1 00"


E. 11* 22* 00" 9 ’ 40' 00"





F . ll* 22' 00" 9* 50* 00"


G. LL* 23* 00" 9* 50’ 00"


H. • ll* 2-3' 00" 9* 58' 45"





[ . li * 30' 00" 10* 00 ' 00"


J. U* no • 00" 10* 03' 00"


K. 11* no * 00" 10* 00' 00"





L. 11* 4 9' 30" LO* 00 ' 00"


11* *


M. 49' o 9* 57* 00"


r->


M . ll* 45' 00" 9* 57' 00"





0. ll* .45' 00’ 9* 50' 00"


P . ll* 51' 00" 9* 50' 00”


Q. ll* 51 ’ 00" 9* 40 ' 00"





R. 11* 52' 9* 40 ' 00"


S. 12* 00 ' 00" 9 * 30* 00"


T. 12* 00 ' 00" 9* 20' 00"





U. 12* 04' 00" 9’ 20’ 00"


V. 12* 04 ' 00" 8* 54' 30" .


 IRIFERE DE CUINEE











LIMITES DE LA CONCESSION D'EXPLORATION POUR





OP. DE .LA SOCIETE AURIFERE DE QUINES








1) Preambule :


Le territoire dont la definition suit constitue une seule entiti


et est entierement inscrit dans les limites administrat ives do ;


prefecture de Siguiri.


Pour rappel, la superficie de cette derniAre, mAsurAe sur les


cartes au 1/200 .OOOe (feuilles Bamako Ouest, Faraba, Sirakoro,


Siguiri, Kankan et Dinguiraye) est de 17.779' kilometres carre;.





2) Limites :


A partir du point, frontiAre entre Gurnee et Mali situe sur l'a.


routier Siguiri-Bamako A KouremalA, la iimite suit-cette mene


frontiere en direction. Sud d'abord, Est ensuite ]usqu'A un cc:


situA A 1 km de la berge rive droite du fleuve Niger.





De lA, en direction Sud-Ouest d'abord, Ouest ensuite et Sud en-


A fin selon la courbe situAe constamme.nt A lkm de la berge rive


droite du fleuve Niger, jusqu'A sa rencontre avec la latitude


de 11 # 201 Nord.


De la, en direction Ouest suivant la latitude de 11° 2 0 ’


f) -9 & Norc


jusqu'a sa rencontre avec la longitude de 9°30' Ouest.


De la, vers le Nord suivant la longitude de 9°30' Ouest


&-+C sa rencontre avec la latitude de ll°21‘ Nord. A ]USCU'a





c De 1A, vers l'Ouest suivant la latitude de 11 •21' Nord jusqu'a


sa. rencontre avec la longitude de 9°40' Ouest.


De 1A, vers le Nord suivant la longitude de 9°40'


b -*>£ Ouest jusqu’i


sa rencontre avec la latitude de 1 1 0 2 2 ' Nord.


De 1A, vers l’Ouest suivant la latitude de 11°22*


£ -*>? sa rencontre avec.la longitude de 9°50‘ Ouest." Nord juscu'A





f -*G De la, vers le Nord suivant la longitude de 9°50‘ Ouest 2use -' a


sa rencontre avec la latitude de 11°23' Nord.


De


c* *>hl la, vers l'Ouest suivant la latitude de 1 1 0 2 3 * Nord jusau‘*


sa 4* P--





De 1A, vers le Nord-Ouest rt i,mr„ „, , ,


H -- I 38---I«:!■-. t --r- ] I | a ", n ■ ,,


po.n-t d*. renCon+rc e~1 't. /a /-V//w4- , / •> j“S A


!0'00\ . 4* U 20 KJor4 Vfc V-.


De t*f \/Crs /< KJor/- OutSt ^juSjuou r>o.n-i M r t*co a 1 rc /«


S - 3 tU h*4g‘ sh*d rt/c U lo*£,t-ud*. /0 " 0Z "(pue -y


--SOCIETE AURIFERE DE ClflNEE ---_J*' / _





»«*t cs#C.*.--- s- 5W-T» V:m '*V. t - ' COna

 T- Pc U' \/t r. 1 - ‘ / ' V * r* + 'a 4 4 // c 4i


a --- o / c*\ ca r-\ 4- r -- o*c c t" t O , y-, i-ctc. d< /O


'V‘


K - be t~\ U hJo'ei- r./ i/as> t 1 A ,C~\ •, 4 L

L a So- Z£r'\U!r'4 ' ,w C c /<5

V"


De la, vers i'Est suivartt la latitude de //'-^ .30 Nord ]usqu'4


sa rencontre avec la longitude de 9°57' Ouest.


De 14, vers le Sud suivant la longitude de 9*57' Ouest ;jusqu'4


M • K/ sa rencontre avec la latitude de 1 1 0 45 * Word.





A/ De 14, vers I'Est suivant la latitude de 11*45' Nord jusqu'4





sa rencontre avec la longitude de 9*50' Ouest.


O - De 14, vers le Nord suivant la longitude de 9°50' Ouest jusqu'4


P sa rencontre avec la latitude de ll°5i' Nord.


P- Q De 14, vers L'Est suivant la latitude de 11*51' Nord jusqu'4


sa rencontre avec la longitude de 9*40' Ouest.


Q • K De 14, vers le Nord suivant la longitude de 9*40’ Ouest gusqu'4


sa rencontre avec la latitude de 11*52' Nord.


<( 5 De 14, vers '14 Nord-Est jusqu'au point de rencontre entre la


latitude de 12*00' Nord de la longitude de 9*30' Ouest.


> T De la, vers I'Est .suivant La latitude de 12*00* Nord jusqu'4 sa


rencontre, avec La loncitude de 9*20' Ouest.


H De la, vers le Nord suivant la longitude de 9*20' Ouest jusqu'4


r sa rencontre avec La latitude de 12*04' Nord.





-w De la, vers I'Est suivant la latitude de 12*04' Nord jusqu'4 sa


U rencontre avec la frortiere Guinee-Mali.





De la, vers le Sud-Est suivant la fronti4re Guin6e-Mali jusqu'av


*point frontiere sur l'axe routier Siguiri-Bamako 4 Kouremale.





3) Superficie concernee :


La superficie du territoire ainsi d6fini, mesur6e sur les cartes


au 1/200.OOOe (feuilles Bamako-Ouest, Faraba, Sirakoro, Siguiri


et Dinguirayel, s'61eve 4 8.890 kilometres carres soit 50% du


territoire de la concession originelle.














Koron, le 21 Juin 1988























V.


 FIRST




innex U"








j 11. CONCESSION ET PURLS MINIERS





Conceiiion Article 12


tJ Dans lej trente 130) fours qui wirront Peniree en vigueur de |«





presente Convention, U Repuilique de Gurnee oetrbiers a 1* Soaete une


concession miniere exclusive et irrevocable pour les gisements (foe,


(furgent, d* diamant et tutres mineraux luoces enrttnt sur le


temtoire de It Prefecture de Siguiri definie et deLimitee par mi


coordonnees geogrtphique* reported nx une ctrte t Techeile de


1/200,000 selon tnnexe & de It presente Convention. Cene designation


lormert une parti e Integrtie du 'document de titre et de permu


e rferploitttion" emii enTtveur

b) A Pinterieur de certe concession, It Societe turt le droit


exdusLf de proceder t Pextraction, tu drainage, tu trimport, * it


trtniformition, i It vente _ de Tor, de Ptrgent, du diimint et de*


miner tux anodes. La Societe tun tun! le droit tftoquerir ou de


comtruire toutes mines, Installations, materiel et mtcfunei y ayant


trait, de lei exploiter et de prendre route* mesures a cet egard ou


tutrement qi/elle |ugera necessaire en vue dune bonne exploitation de It


concession.


c) Cette Concession turt une duree pour le moirn egaie a U duree


de cene preseme convenGon, miu en tucun cu inferietr a la duree de


vie dea mines en exploitation.





/ d) Cene concession est accordee Libre de routes red evinces et


charges sans exception.


c * e) SI das biern mii en vaieur, tell que terrains, immeubles, bo is ou


autre* mater it ux, vole* tfeaux du autre* lAlrtstructurea sont si rue* dans


le perimetre Sexploitation, la Soaete derrt indemruser les propriettirei


coni or moment tux textes et reglements en viguevr en mttiere de droit


CiviL Le Gouvemement left tout en ion pouvoir pour que it Societe n‘tit


pas a payer plus que la valeur marcftandc de* equipements ou Immeubles


en question.


0 Une foil dtfinl les ) blocs rfexploration totaiisant 1300 lcm2, le


reste du perimetre fait retoix au domain* public gumeen avec les


donnees corrcspondantes recueiilies. Le* 1300 km2 seront deiimites


selon la legislation miniere en viguetr en la m a tie re. Le Gouvemement


accorde touteiols tux Part entires un droit de preemption pour ugner us


nouveau protocole rfaccord de prospection nr tout ou partie de cene


tone.





g) A Pinterieur de cene concession, le Gouvemement deiivrera_a_


It Societe, au fur et a mesure del besoiru de celle-ci. les tib-es miners


et permis Sexploitation pour lui permettre de mener a ,^idn arv?


exploitation auui profitable que possible del gisements dor, d'aPgenC^


diamant et autrei mmerau* asiociei. 1 c ' (





\ ••


 ?:?r








a-r.ex •'?• *• 5705 _ 5CC.XR>ti


REPUBLICS os cuinee








;t:msTSPS dbs resources .*a?’jr£llls


SNERCIS FT ENVIRON* EX ENT





I,


a


)i








A R * £ V S














Vu la dtfclaration de p'tae effective du pouvvir par l'Ar**e en a*te :'


3 Avrll 198U ;


Vu la proclamation de la Jeuxtiae R«publlquc ; 4





Vu rordonnanee n* 009,f’RC/8‘i du 18 Avrll, prorogeanc la vaiidlte -* *


loia ec Piglesenta en vtg^eur au 3 Avrll 198** .


Vu i’Ordonnance n* J21^RC/85 du 22* D«ceaore portant riorganl tat. or. --


Couverneaent de la Deuxl<»e R*puBUque .


Vu TOrdonnance n‘ C07/PRC/96 du 19 tare 1986 pcrear.c r* organ aat to n --


"lniactre dea Reeaourcea Naturallea. E-ergie et Ervi.-crneaent .


Vu la Convention de Base du 29 *aro 1985 entre la R*;uOllq-e de .. -rfe


ec Chevaru r* *imr« Coanany Llalteo. .atlflie par jrdorrjr.ee n 1 ' a**





du *29 Juln 1985 ec aur retosaandatlon de la Direction DC.nBraae dea Hlr*9








- A R RE








\cc Un vriTBi# a exploit**: in 4‘une r\.pcrflCAC 2c 3;* 13 1 :ouvr*“t !e*


de DID! ec ROROH eat accord* i la Soctece ante ’S.-A.:.' S0C1E7E •


DE CUI NEE,





tlele 2 Ce penal# coratltue le prealer Sloe d’oiploicacion ds .a lancealitr


Mlni4re d’une auperflcle de 1.509 Ra‘ sreroyie a la S.A..,. . rS'.rzfzt





4 aa Convention de baee.


biele > Le plan du peraia corvtern* eat jolrc en i-neit aur ure wxrte 1 1 itr.elle


l : 200.000 done lea lialtea aont dtflruea par lea coordonniea geograpn:;.:s


suitantea :





*. . WORD QUEST


1. 11*31’ 9*19'


2. 11*13* 9‘ 19’


3. 11*37’ 9*25“


». 11*3” 9*38’


5. 11*31’ 9*38-





pjcle A : U Socitt* palera lei plrolta d1 enregiatreaent et de timbre confcr=

a la Kglelaclcn en vjgjieur.


hjcje 5


La Socittt Mixte S.A.C. a’engage a exploiter la tore aelon lea reglee


Ce l’art ec cortfonnea* nt 1 la legislation airae re en vigueur.





... / ..i


Lc persla d ■ exp lol cat lo r sera ca-o -n regioire special le


la Direction Ctntrale Cea mi re a, te~. * >-: e.r.e:


Le preaent per-ala eat accord* pour une durfte de dix tlOi a'-a ec ree'-e


eoujola aux dlopoaitlona de la Convention le 3ase le S.A.C. ai--.ni du a„x


ceitea i'application y aff*rant qul pourraient *tr« *laoor*a ultirlecre-


=«nt. d' jne part et de L' autre du code mlnler. pour autant due ces


diapoaltlona ne aolent paa contralre 1 la convention le oase.


Le preaent Arret* prerxl effet a compter ce la date Ue sa signature


La Direction G*niral"e dee Mines eat caa_-g*e de 1 application du present


Arrite qut sera enreglatr* et publl* au .’ournal Cfflciel de la a*puOllque
































Anpllatlon





S.G.C................ 12


■M.R.E.D............. 10


1 .M.G./Tar*an........ 2


D.P .M.G./Glguin..... 3


D.G.M................ *


S.A.G................ 5


J .0.................. »/«0.


 SECOND SCHEDULE





Rules for Compulation of Income Tax


Pursuant to Article 13





1. "Year" means (A) the calendar year or part thereof during which the Company shall


first become liable for income taxes herein provided, (B) each subsequent full


calendar year from January l to December 31, inclusive during the term of this


Agreement and (C) the calendar year or par( thereof in which this Agreement shall


terminate.


2. "Products* means all ores, minerals, concentrates, precipitates and metals mined and


produced and other material derived therefrom after deducting any quantities thereof


which are lost, discarded, destroyed or used in research, mining, processing or


transportation.


3. "Operating Expenses" in any year means the amount deductible from income of all


expenses attributable to the Project Activities in such year. Operating expenses shall


v include, inter alia, the following types of expenses:


(a) Expenses in respect of material, supplies, equipment and utilities.


(b) Expenses for contracted services on behalf of the Project Activities.


(c) Expenses for premiums for insurance (foreign and domestic) on physical


assets, inventories and for premiums against business and operational


interruptions, to the extent that such premiums are paid to un-Affiliated


Parties.


(d) Expenses in respect of damage or losses not compensated for by insurance or


otherwise.


(e) Expenses for royalties, interest and other payments including those to


Affiliates for patents, designs, technical information and services within


reasonable limit.


(0 Expenses in respect to losses resulting from obsolescence, theft or destruction


v of inventory.


, j.


(g) Expenses for rentals such as, for example, those charged for equipment,


plant, land and buildings.


(h) Expenses for all Taxes (including without limitation, lump sum and


withholding payments with respect to employees’ remuneration paid by the


Company and any other levies paid pursuant to this Agreement, except


income tax (B1C).


(i) Expenses for treating, smelting and other processing expenses.


(j) Expenses for handling, loading, storing, transporting and shipping.


(k) Expenses for repairs and maintenance.


(l) Expenses for commissions and discounts.


(m) Expenses fof deductions permitted by paragraph 4 through 12 below and


other expenses related to the Project Activities.


"Depreciation" in any year means the deduction from income of an amount in


respect of depreciable assets on a declining balance basis computed over a 5 year


period (that is 40% in year 1; 24% in year 2; 14% in year 3; 11% in year 4 and


11% in year 5).





‘Depreciable assets include, by way of example, buildings, plant, machinery,


equipment, dredges, vehicles used in connection with Project Activities, roads,


bridges, power lines, pipelires, employee housing and employee health, education


and welfare facilities and th:ir respective equipment, construction in progress and


other tangible assets depreciate under generally accepted accounting principles, plus


any things made available by the Company for public purposes, such as, among


others, roads, schools and clinics and their respective equipment.


"Investment Allowance" in any year means 5% of its total investment by the


Company in depreciable assets in that year.


"Amortisation" in any year means the deduction from income of an amount in


respect of amortisable assets computed on a declining balance basis over a 5 year


period as per paragraph 4 above in respect of depreciations.


Amortisable assets include, b/ way of example, (A) patents, franchises, concessions,


licences, leasehold interest and other intangible assets amortisable under generally


accepted accounting principles and (B) all expenses incurred and capitalised prior to


commencement of any phase of Project Activities in question, including exploration,


‘development, construction, employee training and education and all other tax


deductions allowed under this Agreement or permitted under Applicable Laws.


"Preproduction expenses" previously expended and capitalised and directly related to


Project Activities may be consolidated into the account of the Company as a tax


deductible item by way of amortisation. These preproduction expenses must be


audited and approved by RoG.


"Selling, general and admir istrative expenses" in any year are deductible from


income and include but are not limited to management expenses, compensation fees


for services rendered abroad executive salaries, communication expenses, dues and


subscriptions, selling expenses, public relations, office expenses, marketing expenses


(but not unrelated product research), legal and auditing expenses, general overhead


expenses, including reasonab e charges of Affiliates to be allocated to the Guinean


operations to the extent that hese charges represent actual cost, of services provided


in such year.


The following items shall also be included in selling, general and administrative


expenses of the Company:


(a) Wages, salaries and other compensation, including employee remuneration,


of personnel employed or engaged by the Company and any of the Affiliates


of the Company who are assigned to the Project Activities on a temporary,


part-time or permanent basis. Employee benefits paid by the Company


include payment in respect of sickness, disability, termination, pensions,


savings plans, incen ives, training and other education programmes provided


they are not categorised as a fringe benefit.


(b) All necessary facilities provided in the Project Area or in the neighbourhood


• thereof for employees including but not limited to facilities for housing,


sustenance, recreation and transport.


(c) Administrative overhead charges for product research, market development


and technical services of personnel employed or engaged by any of the


Affiliates of the Cortpany, who are not assigned to the Company but who


render such services for the benefit of the Project Activities.


(d) All- necessary travel expenses incurred in connection with Project Activities in


Guinea and to and from Guinea and other countries. In case such personnel


are assigned to the Project Activities, such travel expenses shall include


reasonable relocation expenses of them and their dependants to and from


Guinea and their country of residence.


(e) Charges for laboratory and technical services rendered to the Company by


any of its Affiliates and/or contractors. Such charges shall consist of the cost


of such services ard shall be limited to not more than the cost an un-


Affiliated Party won d charge for such services.


"Interest Expenses" paid 01 accrued in any year on loan capital provided that the


interest on loans does not exceed the generally applicable market rate at the time of


borrowing.


"Losses" in any year means the excess of all deductions over the gross income in


such year.


In the event a loss is incured in any year, such a loss can be carried forward and


may be deducted from taxable income accruing in the 5 years next succeeding the


year in which such a loss was incurred.


"Exploration Expenses" in any year means all amounts deductible from income in


respect of expenses incurrec in such year in connection with exploring or evaluating


mineral deposits, including but not limited to drilling, pumping, labour, clearing,


access roads, power and water connection, service charges for erecting transmission


lines, piping, communications facilities of die property and other similar expenses


incurred in preparing a M ning Area for development, mining and processing of


minerals.


 (iv)





11. "Other Expenses" in any year means amounts deductible from income in respect of


proper expenses incurred in the year in gaining or producing income or incurred for


die purpose of Project Activities in such year as provided in accordance with


Applicable Laws.


12. "Provision pour Reconstitution due Gisemcnt", or PRG, in any year is a provision


for future exploration,, establishing a reserve. If any part of the PRG reserve is not


used within 3 years of having been added to the reserve, such portion will be deemed


an addition to taxable income in the next year, and the reserve will be diminished by


that amount.


13. "Gross income" means all amounts paid to or accrued by the Company:


(a) In the case of products ;old or accrued by the Company, gross income means


the gross proceeds rece ved or accrued from the sale of the products free on


board transporting aircraft or vessel at point of export shipment in Guinea on


the basis described in A tide 13.


(b) Receipts of a capital niture shall be treated in accordance with Applicable


Laws.


(c«) Other income of the Company actually received or accrued and not


mentioned above.


14. "Taxable income" in any year means gross income in such a year after deducting


therefrom all amounts in respe:t of expenses, costs and allowances as permitted by


this Agreement and to the extent that there is no conflict therewith by the prevailing


laws and regulations.
































*


 APPENDIX I





Key Points of Cooperation Agreement





It is envisaged by GSM and CMC that the Cooperation Agreement (which may also be


known and referred to as the Second Restructuring Agreement) shall be entered into


between RoG, GSM, UM, CMC and IFC as soon as practicable after the date of this


Agreement and will make provision for or acknowledge the matters set out below. It is also


envisaged by GSM and CMC that the Cooperation Agreement will not become operative


until this Agreement is ratified in accordance with Article 5. The matters set out below are


under consideration by IFC at the date of this Agreement and this Appendix and Annex MB"


hereto do not constitute binding commitments on the part of IFC.





1. The following existing loans to AuG will be converted to shares in AuG or otherwise


cancelled in return for restructuring the existing shareholdings in AuG and for grant


' of certain gold royalty rights:


(i) First, existing loans from CMC (both secured and unsecured) and accrued


interest comprising the following: US$8.4 million tranche 'A' secured loan;


• US$6.0 million tranche ‘B’ secured loan; US$3.9 million unsecured


exploration loan; US$20.1 million unsecured advances and US$8.3 million


accrued interest, will all be converted to shares in AuG or otherwise


cancelled and the shareholdings in AuG being initially altered from: RoG


49%, CMC 51%, to: RoG 15% and CMC 85% and the additional shares to


be issued to achieve these new percentage holdings shall: (A) in the case of


RoG be issued free of consideration or payment; (B) in the case of CMC be


issued at par in consideration of the said loan conversion/cancellation; (C) be


calculated by reference to the proposed loan cancellation referred to in l(ii)


below.





(ii) Secondly, US$3.0 million of the secured loan from IFC totalling US$7.2


million, will be cancelled in consideration for transfer of a 15% shareholding


in AuG to IFC by CMC following l(i) above, so that the resultant percentage


shareholdings in AuG will become: RoG 15%, CMC 70% and IFC 15%.


«. Upon taking a transfer of the 15%'shareholding, IFC will agree to be bound


by the applicable provisions of this Agreement, in particular Article 9.





(iii) Thirdly, the US$4.2 million balance of the IFC secured loan together with


accrued interest (which will be capitalised) of US$0,564 million shall after


the share transfer referred to in 1 (ii) above, continue in force as an interest


free loan secured by a charge over the existing alluvial gold mining assets of


AuG unless and until converted to a gold production royalty as per 4 below.


(iv) Fourthly, all existing Financing and security agreements, instruments and


arrangements (other than the charge referred to in l(iii) above) relating to the


above loans will be terminated or otherwise released and discharged.


2. Simultaneously with the happening of 1 (i) above and as part of- l(iv) above:





(i) RoG shall be released from its existing guarantee obligations to CMC in


 (»)


account to secure those obligations shall be released to RoG;


and


(ii) the parties to the Cooperation Agreement shall procure the termination of the


various financing and security agreements listed in Annex "A" hereto which


are still extant, other than the "Convention de Cession" or Assignment


Agreement of 5 July 1991 in particular certain payment obligations of CMC


in the event of "Retour h Meilleure Fortune".


3. * Subject to 6 below, GSM/CMC shall solely contribute by way of unsecured interest


free shareholder loans the first US$6.0 million (without time limit in respect of the


last US$1.5 million of that amount) towards the costs of Programmes and Work


Plans without dilution of IFC’s 15% equity. Thereafter, providing a Decision to


Mine has been made, Clause 10.7 of this Agreement shall apply in respect of further


funding of Programmes and of Work Plans so that GSM/CMC will contribute


70/85th and 1FC 15/85th unless RoG purchases additional equity in AuG. GSM will


convert the above sum of US$6.0 million to equity in AuG at an appropriate time


being a time not later than the time of making the first Decision to Mine. If


GSM/CMC withdraws from funding Project Activities pursuant to Clause 10.5, it


will release AuG from all then outstanding shareholder loans made by it.


4. Conversion of the IFC secured loans to a gold production royalty shall only take


place after GSM/CMC has in accordance with Article 10 of this Agreement


(particularly Clauses 10.4 and 10.6) funded Programmes to at least US$4.5 million.


Conversion to equity in AuG of the US$6.0 million GSM/CMC shareholder loans


referred to in 3 above shall not affect either RoG’s 15% shareholding or the IFC’s


15% shareholding and both of those shareholders will be issued with additional


shares as needs be to maintain those percentage holdings.


IFC's gold production royalty will be calculated and payable by AuG and any other


applicable Company (as defined in this Agreement) which establishes a gold mining


enterprise in the Project Area pursuant to this Agreement in accordance with the


relevant provisions of Annex "B" hereto. AuG and any other applicable Company


shall not be entitled to any corporate income tax ("BIC") deductions in respect of


such royalty payments to IFC.


5. In the event of the Board making the first Decision to Mine:


(i) the various options as set out in Annex "B" hereto will become available to


GSM/CMC and IFC respectively; and


(ii) UM will become entitled to a gold production royalty from CMC in


accordance with clauses 6.9, 6.10 and 6.11 of the Option Agreement (as set


out in Annex "C" hereto) which clauses shall be construed and applied as


though references therein to ‘AuG’ included references to any Company (as


defined in this Agreement) which establishes a gold mining enterprise in the


Project Area pursuant to this Agreement.


V


6. If GSM withdraws from further funding of Programmes in accordance with Clause


10.5 of this Agreement or fails to satisfy its undertakings in Clause 10.4 of this


 (iii)


Agreement:


(i) GSM’s ownership right title and interest in CMC shall be dealt with in


accordance with clause 6.7 of the Option Agreement (as set out in Annex "C"


hereto); and


(ii) IFC’s secured loan as.per l(iii) above will remain in full force.


If UM docs not exercise its rights under clause 6.7 of the Option Agreement to


resume ownership of CMC, AuG will for the purposes of clause 6.3 of this


Agreement be deemed to have permanently abandoned all Project Activities.

































































V


 (iii)





Agreement:


(i) GSM’s ownership right title and interest in CMC shall be dealt with in


accordance with clause 6.7 of the Option Agreement (as set out in Annex "C"


hereto); and


(ii) IFC's secured loan as per l(iii) .above will remain in full force.





If UM does not exercise its rights under clause 6.7 of the Option Agreement to


resume ownership of CMC, AuG will for the purposes of clause 6.3 of this


Agreement be deemed to have permanently abandoned all Project Activities.






























































4





y


 innex -C








EXTRACT OF OPTION











If after the date of exercise of the Option, AuG commences or recommences gold


mining operatic* in the Ctncr.ir.on Area, GSM shall pay or cause CMC or AuG (as


the care requires; to pay UM a royalty in respect of gold produced by AuG from the


Concession Area (TUjyaiiy*) as follows:





(I) • the Royalty shall apply to ail gold, other than gold to which the Republic is


entitled, produced after the first year of commercial operaccn from each


individual mining project established or recommenced after the din: of


exercise of the Option (’qualifying gold*);


(ii) the aggregate amount of the Royalry shall be subject to 'he limitation :et out


in Clause 6.11;


(Iii) unless the Parries otherwise agree in writing, the Royalty shall not be affected





by any royalty or other impost on the production, sale or export of gold now


or hereafter Imposed by the Republic under any law having general application


throughout Guinea;





(lv) the Royalry payable in respect of qualifying gold produced in each Quarter


shall, subject to Clause 6.11, be the applicable * of the simple arithmetic


avenge of the U53 spot gold price over that Quarter as determined in


accordance with the fallowing table multiplied by the quantity of qualifying


gold produced in such Quarter.





Table •





USS Spot Gold Royalty


Prici per Ounce


• less than 350 nil


• 350 tp 400 2.5


•400.01 to 425 3 J


• 425.01 to 450 4.3


•450.01 to 475 6.0


• greater than 475 _ 7.5;








(v) the amount of Royalty determined to be payable in respect of qualifying gold


produced in a Quarter shail be paid to UM in USS within thiny (30) days after


the end of that Quarter to the credit of UM*! nominated barJc iccount.


For the purposes of Clause 6.9:


 (T) i reference to 'gold to which the Republic is entitled* Ls 1 rererer.ce to the


Republic's ervcticzr.cr.c to gold m specie or to the proceeds of the sale of gold


obaur.ed by Au j from the Concession Area whether that entitlement iccrece


■ to the Republic js a shareholder m AuG or under the Ccnvecucn;


(ii) a reference to * tach individual mining project* includes a reference tc:


m


• (a) each Prirrary Gold Resource which is mined as an independent mining


operation with iu own, exclusive are crushing and treatment plann


m (b) each Primary Gold Resource which is mined is par: of a mining


enterprise having two or more mines and a common ore crushing and


m treatment plant but which* Primary Gold Resource is located at least


three (3) kilometres from any ocher mine in the Concession Area;


(c) an alluvial gold mining operation in the Concession Area carried on as


m a single m_ning enterprise with a separate processing plane;


(IH) a reference to "tlx USS spot gold price* is a reference to the aflcmccn US


■ Dollar fixing price of (he London Gold Maricei as quoted in Metal Bulletin;


Civ) the USS spoc gold price ranges set out in the Tabic in Cause 6.3 shall be


■ subject to Indexation and adjusted yearly for inflation from the date


commercial production from the Concession Area is achieved or 1996,


whichever shall last occur, onwards according to changes In the simple


anthmeoc average of United States, Canadian and Australian national


■ consumer price inricea from those indices applying oa 1 January 1995, which


date shall be used as the base date for purposes of indexation;


■ (v) each Quarterly payment of Royalty shall be accompanied by a statement


setting out:


(a) the quantity of qualifying gold produced in ±e relevant Quarter





(b) the rirople arithmetic average of the USS spot price over the relevant


k Quarter,


(c) GSM’s or CMC’s calculation of the amount of Royalty for the relevant


Quarter; and


i (d) such supporting information as UM may reasonably require to verify


the basis of GSM’s or CMC's calculation;


(vi) UM’s employees aid agents shall at all times, at UM’s own cost and upon


giving reasonable prior nonce to GSM. have access to the gold production


records of AuG sub.ect a observance of the confidentiality provisions of this


Agreement.


 6.11 Royalties shall be subject to the following limitations:





(T) where the aggregate amount of Royalty paid to UM reaches USSjO.OCO.CCO,


each Royalty 5 per ounce of gold set out in the Table in Cause 6.9 shall be


reduced to one half of the rated % figure and such reduced % rates of


Royalty shall apply to all qualifying geld produced aricr the aforementinned


USS3G,OOOtOOC aggregate Royalty payment has been reached;





(li) where the aggregate amount of Royalty paid to UM reaches U53£0,OGO,COO,


the Royalty shad cease to b« payable and shall terminate absolutely.


•Primary Gold Resource" means any gold bearing in lict resource in the Concession


Area other than a gold bearing resource comprising alluvium depesued by existing or


former surface river rystems;






































*


 APPENDIX I





Ar.r.ex








Upon the occurrence of any cf the following events, upon the written request of UM.


GSM shall (a) transfer to UM for no consideration other than the terms of this


Agreement. GSM's then existug right, title and interest in the Project, including, without


limitation, GSM's current shareholding in CMC or in AuG (as the case may be) and the


benefit of all then outstanding loans owing by CMC or by AuG (as the case may be) to


GSM. exclusive of any loans or advances made by GSM to CMC or AuG since the


exercise of the Option by GSM and prior to the expenditure by GSM of USS4.500.000


in accordance with Clause 6.2 • the 'Exploration Loans"), which Exploration Loans shall


for all purposes be deemed to te of no force or effect from and after the date of transfer


by GSM to UM pursuant to this Clause 6.7, and (b) upon such transfer to UM, GSM


shall assume the obligations of CMC and AuG. if any. to pay all amounts due by CMC


and AuG to ■ any person in connection with loans or-advances made by such person to


CMC or AuG (as the case may be) since the date of exercise of the Option and prior to


(tie expenditure-by GSM of USS4.500.000 in accordance with-Clause 6.2





(i) GSM ceases further expenditure on exploration in the Concession Area with


UM's concurrence in accordance with Clause 6.4;


*• (ii) GSM ceases further expenditure on exploration in the Concession Area pursuant


to the Expert’s determnauon in accordance with Clause 6.6;


(iii) Subsequent to the expenditure by GSM of USS4,500,000 in accordance with


.Clause 6.2, GSM advises UM in writing that GSM has elected to decline to


authorise, through CMC or otherwise, any further funding of AuG’s operations


in the Concession Area or


(iv) Subsequent to the expenditure by GSM of USS4.500.000 in accordance with


Clause 6.2 GSM advises UM in writing that CMC or AuG (as the case may be)


have ceased to engige m any substantial exploration or mining activities in the


Concession Area for a period of eighteen (18) consecutive months.


Notwithstanding anything set forth above to the contrary, the rights granted to UM under


this Clause 6.7 shall automatically terminate and be of no further force or effect upon


the fust to occur of the following: (a) UM fails to request GSM to transfer the assets


described above within sixty (60) days after the occurrence of one of the events set forth


in Paragraphs (i). (ii), (iii) or (s /) above; (b) the obligations of CMC to the BIAO Banks


under the Assignment Agreement have been satisfied in full; (c) the obligation of UM


to guarantee the performance of CMC to th.e BIAO Banks under the Assignment


vAgreement is terminated or otherwise released; or (d) UM has received Royalty from


GSM, CMC or AuG (as the case may be) in accordance with Clause 6.9 equal to


USS3.500.000.


 (i)


APPENDIX 2


Rules for Direction and Management of AuG


1. The Board shall consist of not more than 7 directors. A shareholder shall be entitled


to appoint 1 director for each whole 15% of issued share capital held by that


shareholder, provided always that RoG shall be entitled to appoint 2 directors


irrespective of the percentage of its shareholding and IFC shall be entitled to appoint


1 director so long as its. shareholding is not less than 10% of total issued share


capital. Bach director shall be entitled to appoint an alternate or substitute director


to act for him in his absence either for a specified period or generally.


2. A quorum of the Board shall comprise not less than 2 directors representing 2 or


more shareholders, one of which must be CMC so long as it holds not less than 50%


of the total issued share capital and one of which must be RoG.


3. Each director shall be entitled to 1 vote for each 1% of share capital owned by his


appointer provided that where a shareholder is entitled to appoint more than 1


* director, all the directors appointed by that shareholder shall vote as a block with the


right to vote being exercised on behalf of that shareholder by its more or most senior


appointee present at the relevant meeting of the Board.


4. The .Chairman of the Board shall be one of the directors appointed by the


shareholder with the largest single shareholding, provided that shareholding is not


less than 50% of the total issued share capital. If no shareholder has 50% or more


of the total issued share capital, the Chairman shall be appointed by agreement


between the members of the Board. The Chairman shall not have a second or


casting vote on any matter to be decided by the Board.


5. Prior to the first Decision to Mine, all binding decisions of the Board (including


without limitation, the approval of Programmes and appointment of the chief


executive officer) shall require the supporting vote of directors representing a


shareholder holding alone or 2 or more shareholders holding in aggregate 70% or


more of the issued share capital provided that after the restructuring of AuG as


provided in Article 2 and prior to that Decision to Mine, the Board may only: (i)


issue further shares or vary the rights attaching to existing shares in the capital of


AuG; (ii) create any Encumbrance over AuG; or (iii) authorise AuG to incur new


v indebtedness other than loans in accordance with Clause 10.7 or 10.8, with the


approval of all directors for the time being.


6. The first Decision to Mine and the development Work Plan relating to it shall


require the supporting vote of directors representing a shareholder holding alone or 2


or more shareholders holding in aggregate 70% or more of the total issued share


capital.


7. After the first Decision to Mine and the development Work Plan relating to it, all


binding decisions of the Board (including without limitation, the making of


subsequent Decisions to Mine) shall require the supporting vote of directors


representing at least 2 un-Affiliated shareholders holding in aggregate not less than


 (ii)





75% of the issued share capital other than decisions on the following matters which


shall require the supporting vote of directors representing a shareholder holding


alone or shareholders holding in aggregate 51% or more of the issued share capital:


(a) Programmes or Work Plans providing for expenditure of less than US$1.5


million over any 12 months period;


(b) any Project Activities necessary in the opinion of the chief executive officer


for the maintenance, renewal or extension of any Title or Consent or the


preservation or protec ion of any other property of AuG or of the health and


safely of employees or of the environment;


(c) acquisition or disposd of vehicles or equipment in any 12 months to an


aggregate value of less than US$1.0 million.


8. The day to day affairs of AuG shall be managed by the chief executive officer who


shall be appointed by and responsible to the Board provided that prior to the first


Decision to Mine the chie:' executive officer shall be an appointee of CMC,


seconded to AuG as part of the provision of Services. The chief executive officer


need not be a director, but shall reside in Guinea during his tenure of office.


9. Board meetings shall be held once every 6 months or at such other times as the


Chairman or, in his absence, the chief executive officer, deems necessary for the


efficient management of AuG. At least 21 days’ notice of meeting shall be given to


each director whether or not that director is in Guinea. Board meetings shall be held


in Guinea unless the Parties otherwise agree. Each director shall be entitled to


invite up to .2 advisers to atte id and assist that Director at Board meetings. Advisers


shall not be entitled to vote and shall not be entitled to speak at any meeting at


which he is present unless invited to do so by the Chairman.


10. The chief executive officer even if he is not a director) will attend each Board


meeting for the purposes of reporting on the progress of Project Activities,


explaining proposed Programmes and Work Plans and generally assisting the Board


«in making fully informed decisions. The chief executive officer may be


accompanied by members of senior AuG management where in his opinion it is


necessary to provide technical or financial details to the Board on any significant


matter.


11. A person shall be appointee to act as secretary of AuG and to attend and take


minutes of Board meetings and otherwise attend to AuG’s corporate administration


requirements under Applicable Laws.


12. A resolution in writing signei by all the directors for the time being shall be valid


and binding as if it had been duly passed at a validly convened meeting of the


Board.


13. Prior to the first Decision to Mine:


(a) directors’ expenses in attending Board meetings will be paid or reimbursed


by AuG and directors shall be entitled to modest directors’ fees, as set out by


 (iii)


the Board having regard to the fact that AuG will not have a positive cash


flow at that stage;


(b) AuG shall maintain a representative in Conakry for purposes of liaison with


RoG and handling its external affairs but AuG shall not be required to have a


permanent office in Conakry.


14. After the first Decision to Mire:


(a) directors, in addition o expenses incurred in attending Board meetings shall


be entitled to receive reasonable directors’ fees, as set from time to time by


the Board;


(b) AuG shall, if it has net already done so, establish and maintain a permanent


office in Conakry.


15. liach Party that is a shareholder in AuG agrees that it will exercise its respective


voting rights as a shareholder n AuG to procurd that AuG shall:


(a) carry , out Project Activities and conduct its business with due diligence and


efficiency and in acco'dance with sound engineering, financial and business


practises and approved Programmes and Work Plans and cause all


shareholder loans anc other financing obtained by AuG to be applied


exclusively to Project Activities and related business operations;


(b) keep its insurable ass its and business insured with financially sound and


v reputable insurers agaiist loss or damage in such manner and to such extent


as shall be no less thin that generally accepted as customary in regard to


assets and business of Eke character;


(c) maintain proper and effective cost control and management information


systems and maintain books of account and other records adequate to reflect


truly and fairly the financial condition of AuG and the results of Project


Activities and related business activities in conformity with Guinean and


internationally generally accepted accounting principles consistently applied;


(d) furnish each shareholdir within 60 days after the end of each half of each


Fiscal Year:


(i) a copy of AuG’ i complete financial statement for such half-year;


(ii) a report on any factors materially affecting or which might materially


affect Project Aitivities or AuG’s financial condition;


(iii) a report on the implementation and progress of the approved


Programmes ai d/or approved Work Plans including any factors


materially affecting, or which might materially af(ect, the carrying out


of Project Activ ties;


 (iv)





(e) furnish each shareholder within 120 days after the end of eacli Fiscal Year


with a copy of its complete financial statements for such Fiscal Year (which


are in agreement with its books o’f account and prepared in accordance with


Guinean and internationally generally accepted accounting principles


consistently applied), together with an audit report thereon;


(0 . appoint an'internationally recognised firm of accountants as auditors of AuG


(whose fees and expenses shall be for the account of AuG) and authorise such


auditors to communicate directly with RoG at any time regarding AuG’s


accounts and management;


(g) obtain, maintain in force or, where appropriate, promptly renew and perform


and observe all the conditions and ‘ restrictions contained in any Title or


necessary Consent.


16. The books of accounts of AuG and financial records relating to Project Activities


shall be maintained in FG’s and in US$ or such other currency as the Parties agree.


17. As between the Parties, the monies of account and payment shall be US$s unless


otherwise agreed in respect of a particular transaction or series of related


transactions.


■' .a*


18. Without limitation to anything contained in this Article so long as AuG remains an


Affiliate of GSM, the accounts and financial records of AuG shall be maintained and


all financial reports and statements of AuG shall be prepared in such form and detail


as will meet the Australian accounting, taxation and statutory requirements of GSM.


19. The accounts of AuG in respect of each Fiscal Year (including the balance sheet as


at the end of each Fiscal Year) shall be approved by the shareholders of AuG in


general meeting not later than 180 days after the end of that financial year.


20. The accounts, records and assets of AuG shall be audited at the end of each Fiscal


Year by the auditors in accordance with Applicable Laws and internationally


recognised auditing practice and procedures. Each of the shareholders shall be


entitled to a copy of each of the auditors’ reports.


21. Without limiting or affecting any right which RoG may have under this Agreement


or Applicable Laws, a duly authorised representative of a shareholder shall have the


right at any reasonable time and at his own expense and risk, to enter the Project


Area and observe Project Activities, but in so doing that representative shall be


subject to the safety and security policies .and procedures of AuG and the directions


of AuG senior staff.


22. No business shall be transacted at any general meeting of shareholders of AuG


unless a quorum is present at the time when the meeting proceeds to business.


The quorum required for any general meeting of shareholders of AuG shall be not


less than 2 shareholders un-Affiliated to each other present in.person or by proxy or


duly authorised representative and entitled to vote at that meeting, and being


shareholders holding in the aggregate not less than 75% of the total issued share


capital (irrespective of the class of those shares). If a quorum required for any


general meeting of shareholders is not present within 1 hour after the time appointed


for the meeting, the relevant provisions of Applicable Laws shall apply in respect of


adjournment of the meeting an j the quorum required for the adjourned meeting.


 • j APPENDIX 3





Description of Services








Services mean:


(a) management services, advice and assistance in respect of all aspects of Project


Activities;





(b) ' financial, insurance, accounting, taxation, legal, personnel and general


administration services in connection with or incidental to Project Activities;


(c) without limiting the generality of the foregoing paragraphs, undertaking or arranging


in connection with Project Activities, (either directly or through advisers,


consultants, contractors and similar personnel engaged by GSM or CMC on behalf


of the Company):


(i) recruitment or secondment to the staff of the Company of necessary


expatriate expert personnel and selection and training of other Company


personnel;


(ii) preparation of Programmes and Work Plans and budgets; economic, technical


and environmental studies; development proposals and mine plans;


management, operating and financial reports required under this Agreement


and all reports and returns required under Applicable Laws or the Titles or


applicable Consents;


(iii) definition and supervision of mineral exploration (using geological,


v geophysical and geotechnical methods), drilling, sampling, assaying,


metallurgical testing, site investigations for engineering and environmental


data;


(iv) provision of engineerng and design services, procurement and supply of all


necessary plant, machinery and equipment (including vehicles and mobile


machinery) and corsumables (including reagents and spare parts and


construction and operating supplies);


(v) management of construction and commissioning of mining enterprises;


(vi) management of min ng, treatment and rehabilitation operations and the


production, transportation, storage and delivery of gold and other mineral


products;


(vii) application for and acquisition, extension, renewal, maintenance and variation


of Titles and Consent;;


(viii) acquisition or provis on of mining infrastructure and related services and


facilities (including power, water,* transport, commhnications, employee


housing and welfare);


(ix) negotiation and implementation of agreements and arrangements for or in


relation to the refining, transportation and marketing of gold and other


minerals and monitoring and reporting on market conditions;


*(x) provision of agency services for the Company in Australia, Europe and the


United States of America (including without limitation personnel recruitment,


purchasing, marketing, insurance and banking services);


(xi) compliance with all Applicable Laws including without limitation, laws


relating to safety requirements, working conditions and compensation and


benefits to employees;


(xii) the making of applications for, and obtaining all relevant Consents and


extensions and variations of Consents or as and when required by AuG


obtaining Consents on behalf of AuG (including, for the avoidance of doubt,


in relation to the employment or working in Guinea of any expatriates


recruited on behalf of or seconded to AuG;


(xiii) proper disbursement of all funds provided by or on behalf of the Company to


carry out Services, including without limitation, payment of all sums payable


by GSM or CMC with respect to acquisition of all goods and services and all


property and rights necessary or appropriate in connection with Project


Activities; and


(xiv) payment on behalf of the Company of all Taxes and other charges payable in


connection with Project Activities or pursuant to the Titles, or otherwise; and


such other services as may be agreed from time to time between the Company and


GSM or CMC whether pursuant to this Agreement or a separate management and


technical services agreement.


*


APPENDIX 4





Part A


Mining List


As set out in Annex "A"











Part B


Calculation of Price of Diesel Fuel


As set out in Annex "B"








Part C


Calculation of Price for other Petroleum Products


As set out in Annex "B" other than for imported


lubricants wh ch shall be subject to customs


duty in accordance with Clause 13.7











. .1


 APPENDIX 4





PART A


NO. DESCRIPTION OF ITEM


SERIAL





001


ADHESIVES, aLL TYPES


002 AMALGAM BARRELS BUCKETS AND PANS


003 * AMMETERS - ELECTRIC


004 ANVILS


005 ARMATURES


006 ASBESTOS - CRUDE, WASHED, GROUND AND WASTE


067 AXES - FELLING, HAND, AND OTHER TYPES


008 AXLE BOXES - SPECIALLY DESIGNED FOR MINING PURPOSES


010 BAGS - ASS/YING, SAMPLING, DUST COLLECTION, AND





011 OTHER


BALANCES - ASSAYING, CHEMICAL AND WEIGHTS, AND OTHER


012 BALANCES - SPECIFIC GRAVITY


013 BALL BEARINGS, ROLLER BEARINGS AND NEEDLE ROLLER


014 BEARINGS


BARS - FIRE


015 BATTERIES - ALL KINDS, INCLUDING THOSE SPECIALLY


4 DESIGNED FOF MINING EQUIPMENT


016 BELT FASTENERS AND TIGHTENERS


017 BELTING - FCR CONVEYORS, CUT OR UNCUT


018 BELTING, LACES AND BANDS OF ALL TYPES FOR DRIVING


019 MACHINERY


BLACK LEAD


020 BLOWLAMPS


021 BOILER HOUSE PLANT INCLUDING ECONOMISERS,


SUPERHEATERS, CONDENSERS, SOOT REMOVERS, GAS


022 RECOVERERS AND RELATED ITEMS


BOLTS - CLUTCH, UNDERGROUND SAFETY ROOF AND OTHER


023 BOOTS - ANTIC, RUBBER, SAFETY AND OTHER


024 BOTTLES - GUTTA PERCHA, GLASS, PLASTIC, CERAMIC AND


 (ii)





OTHER


025 BRASS INGOTS AND RODS


026 BRONZE, ALL SHAPES


027 BRUSH - BURETTE, CYLINDER, TEST TUBE AND OTHER


028 BRUSHES - CAMEL HAIR, DYNAMO, FILTER CLEANING,


029 FOUNDRY AND OTHER


BUCKETS AND OISHES - AMALGAM


040 CARBON - FOR TREATMENT OF ORE (ACTIVATED CARBON)





041 CALCIUM CARBIDE


042 CARBON BRUSHES (ELECTRICAL)


043 CARPET STRII - DIAMOND MINING, FOR RECOVERY OF


044 DIAMONDS


CEMENT


045 CEMENT CLINKZR - FOR MINING CONSTRUCTION PURPOSES


046 CHAINS - STEEL FOR MACHINERY


047 CHARTS - WINDER


048 CHECKER PLATES


049 CHEMICAL ELEMENTS, INORGANIC AND ORGANIC CHEMICAL


COMPOUNDS, BEING CHEMICALS AND REAGENTS USED IN


050 ASSAYING AND PRODUCTION


CLOTH - ALL KINDS AS USED IN MILLING, MINING,


051 EXPLORATION OR OTHER MINERAL - RELATED ACTIVITIES


COKE


052 COMPUTERS - COMPUTERS AND RELATED EQUIPMENT


INCLUDING DISPLAY MONITORS, PRINTERS, DRAFTING


053 ACCESSORIES, MAGNETIC OR OTHER DATA STORAGE MEDIA


CONDENSERS - ELECTRICAL


054 CONVEYING EQUIPMENT, ALL KINDS AND SPARE PARTS


055 COPPER WIRE - INSULATED OR BARE


056 CORDUROY - GOLD MINING FOR RECOVERY OF GOLD


057 COTTER PINS


058 CRAYONS, WATERPROOF


059 CRUCIBLE MUFTLE TONS


060 CRUCIBLE - CC'VERS AND LINER FOR


 *





(iii)





061 CRUCIBLE - GOOCH, NICKEL, PLATINUM, PORCELAIN OR


OTHER


062 CUPELITE SAMPLE DIVIDERS


063 CYLINDERS


070 DESICCATORS


071 DESICCANTS, EG. SILICA GEL


072 •DREDGES AND SPARES


073 DRILLING EQUIPMENT, ALL KINDS AND SPARE PARTS


074 DUMPERS AND SPARES


075 DYNAMO METERS - ELECTRICAL


080 ELECTRICAL APPARATUS . FOR MAKING AND BREAKING


* ELECTRICAL CIRCUITS


081 ELECTRICAL MOTORS, CONVERTERS, TRANSFORMER,


RECTIFIERS, RECTIFYING APPARATUS AND PARTS


082 ELECTRICAL SIGNALLING EQUIPMENT


083 ELECTRICAL STARTING AND IGNITION EQUIPMENT


(INTERNAL COMBUSTION ENGINES) DYNAMOS, CUTOUTS,


ETC. (FOR MINING MACHINERY)


084 ELEMENTS ELECTRICAL


085 ENGINES - DUMPER, DIESEL, GASOLINE AND SPARES


086 EXCAVATING, LEVELING, SAMPLING, BORING AND


EXTRACTING MACHINERY AND PARTS


087 EXPLOSIVES - FOR MINING USE


090 FANS, ALL KINDS OF (EXCEPT DOMESTIC)


091 FERROSILICON


092 FILES, HAND


093 FILTERPRESS - CLOTH, PAPER, BAGS AND OTHER


094 FILTER WIRE


095 FLANGES


096 FORCEPS WEIGHT STEEL


097 FOUNDRITE


098 FOUNDRY MATERIALS, ALL KINDS


099





4








(iv)


FURNACES, BURNERS FOR LIQUID FUEL (ATOMISERS),


PULVERISED SOLID FUEL, OR FOR GAS; MECHANICAL


100 STOKERS, ETC. AND PARTS


GAS TESTING APPARATUS





101 GAUGE CHART


102 GAUGE GLASSES, POINTERS FOR


103 GAUGE - ELECTRIC


104 GAUGE - RINGS FOR


105 GAUGE - STEAM, VACUUM, WATER


106 GLASSES - CLOCK, GAUGE, MAGNIFYING, METER, WATCHES


107 OR OTHER


GLOVES, RUBBER, SAFETY, CLOTH; INSULATED OR OTHER


108 CORE COMPOUND, ALL KINDS


109 GOLD WIRE FOR ASSAY


110 GREASE LUBRICATING


112 GRINDING MACHINES AND TOOLS (INCLUDING GRINDING


WHEELS, EG: CARBORUNDUM WHEELS)


120 HACKSAW BLADES


121 HAMMER HEADS


122 HANDLES - FILE


123 HANDLES - BROOM, SHOVEL AND OTHER HAND DIGGING OR


124 CLEANING TOOLS


HATS - MINERS


125 HAULAGE VEHICLES, ALL SIZES FOR ORE AND ROCK


126 HAULAGE


HOSE AND HOSE FITTINGS


127 HOT PLATES AND SPARES


128 HYDRAULIC ENGINES, MOTORS, FLUIDS, HOSES AND PARTS


129 HYDROMETER .


130 HYFLO SUPER GEL





140


INDIA RUBBER TUBING AND VALVES


141 INDICATOR CARDS - ENGINE


 (V)





142 INGOT MOULDS


143 INSTRUMENTS FOR PHYSICAL OR CHEMICAL ANALYSIS


144 INSULATED CABLES


145 INSULATORS


146 INTERNAL COMBUSTION ENGINES AND PARTS





150 JACKETS, DONKEYS AND MINERS


151 JAWS FOR CRUSHERS


152 JIM CROWS


153 JOINT BOX COMPOUND


160 LABORATORY APPARATUS AND SPARES THEREOF - FOR





161 TESTING AND SAMPLING OF ORE OR MILL PRODUCTS


LAMPS - ELECTRIC, HANOVER ULTRA VIOLET RED, MINERS


162 AND SPARES INCLUDING BELTS (LAMP PARTS)


LEAD FOIL USED FOR ASSAYING GOLD


163 LEATHER BELT FOR DRIVING MACHINE


164 LENS, OBJECT


165 LIFTING, HANDLING, LOADING, UNLOADING MACHINERY,


EG. LIFTS, HOISTS, WINCHES, CRANES, TRANSPORTER


166 CRANE, PULLEY AND TACKLE, BELT CONVEYORS,


TELEFERICS, ETC. AND SPARES


LIME - METALLURGICAL


167 LIMESTONE


168 LINATEX, RUBBER LINING FOR PUMPS


169 LISSAPOL N.D.B.


170 LITMUS PAPER


171 LOCKERS - BATH HOUSE OR OTHER


172 LOCOMOTIVES DIESEL, ELECTRIC, OR OTHER - SPECIALLY





173 DESIGNED FOR MINING OPERATIONS


LOOP HEAD


174 LUBRICATING OIL


175 LOOP, ZEISS HAND





180


MABOR FOR MAKING CUPELS


 (Vi)





181 MACHINE TOOLS FOR WORKING METAL (E.G. BORING,


MILLING, PLANING, GRINDING, GEAR CUTTING MACHINERY)


AND SPARES


182 MACHINE TOOLS FOR WORKING WOOD (E.G. SAWING


183 MACHINES) AND SPARES


MACHINERY AND MECHANICAL APPLIANCES FOR MINING USE


184 MACHINERY ' PARTS NOT' CONTAINING ELECTRICAL


CONNECTORS, INSULATORS, COILS, ETC. - FOR MINING


USE


185 MACHINES FOR SORTING, SCREENING, SEPARATING,


WASHING, CRUSHING, GRINDING, LEACHING ORE, ETC. AND


SPARES


186 MAGNETS


187 MAGNETITE


188 MAGNIFIER - APLANATIC, COMPOUND OR OTHER


189 MATTING - FOR FILTER USE IN SOLUTION TANKS


190 MEASURING EQUIPMENT AND DEVICES, ELECTRONIC OR


MECHANICAL, FOR MINING AND MILLING USE, WITH SPARE


PARTS


191 METAL - MUNTZ


192 METERS - ELECTRICAL, VOLT OR OTHER


193 METHYLATED SPIRIT


194 MICROSCOPE


195 MOULDERS - CHAPLETS, SAND, SPRINGS, STUD OR OTHER


196 MUFFLES


210 OIL - TRANSFORMER (INSULATING)





211 OUTER COVERS FOR EARTH-MOVING


220 PACKING - ASBESTOS JOINTING (CORD), BANKETITE,





ENGINE, GRAPHITED - HYDRAULIC, GREASY, HEMP,


LANGITE, METALLIC ASBESTOS, RUBBER, TALLOW OR OTHER


221 PAD - DIAMOND SORTING


222 PANS - CLEAN UP, PROSPECTORS, LATRINE UNDERGROUND,


AND OTHER


 (Vii)





223 PAPER - bla:k glazed, or white stone for diamond


SORTING


224


PAPER FOR ALL USES


225 PIG IRON


226 PIPES


227 PLIERS


228 PLUMBAGO FOR FOUNDRY


229 PLUMBERS WIPING METAL


230 POINTERS FOR WATER GAUGE GLASSES


231 PROTECTIVE CLOTHING FOR MINERS AND MILL WORKERS


232 PHOTO EQUIPMENT


233 PHOTOSORB


234 PULSOMETERS





235 PUMP LEATHERS


236 PUMPS AND SPARES AIR AND LIQUID


237 PYROMETERS








240 RAILS, RAIL SWITCHES (NOT ELECTRICAL) AND OTHER


SPECIALISED MATERIALS FOR JOINING OR FIXING OF


RAILS


241 REFRACTORY BRICKS AND OTHER REFRACTORY CONSTRUCTION


MATERIALS


242 REFRACTORY PRODUCTS OTHER THAN REFRACTORY


CONSTRUCTION MATERIALS


243 RESISTANCES AND RESISTORS


244 ROAD ROLLERS AND SPARES


245 ROPES - MANILA, STEEL HAULING, WIRE, AND OTHER


246 RUBBER - OIL SKINS, PLATES, SEAT PROTECTORS,


STOPPERS, TUBING, VALVES AND OTHER








250 SAFETY VALVE


2 51 SAWS - NON MECHANICAL, AND BLADES FOR HAND OR


MACHINE SAWS INCLUDING TOOTHLESS SAW BLADES


252 SCREENING - PERFORATED STEEL PLATES, WIRE MESH


AGATE STEEL, WIRE MESH PHOSPHOR BRONZE, AND OTHER


 (viii)





MATERIALS


253 SCREENS FOR VIBRATORY CONVEYORS


254 SCREWS - ALL KINDS


255 SCREW DRIVERS


256 SHACKLES FOR WIRE ROPES


257 SHOVELS - MINING


258 SIGNALING EQUIPMENT - ELECTRICAL


259 SILICA FINELY GROUND


260 SILICON CARBIDE ABRASIVE GRAINS


261 SILVER WIRE (PURE) FOR ASSAYING


262 SOCKETS FOR WIRE ROPES





263 SOLUFIX CEMENT FOR LINATEX RUBBER


264 SOLVENTS, ALL KINDS





265 SPANNERS


266 SPIKES - DOG


267 STARCH - MAIZE (REAGENT)





268 STEAK AND OTHER VAPOUR POWER UNITS AND PARTS


269 STEEL - ANGLE IRON, BALLS (FOR MILLING), BARS (ALL


SHAPES), CHANNEL IRON, DRILLS, HIGH SPEED TOOL,





MILD, MILD BARS, MILD TOOL, RODS (FOR MILLING),


ROLLER JOISTS, SETS AND STEELWORKS FOR SHAFTS,


STUDS, SQUARE BARS, WIRE MESH


270 STEELWORKS, FABRICATED FOR ORE TRANSFER STRUCTURES


271 STEMMING BAGS FOR USE WITH EXPLOSIVES


272 STOCK AND DIES


273 STORAGE BATTERIES - ELECTRICAL PROTECTIVE CIRCUITS


AND PARTS


274


SUCTION HOSES


275 SULPHATE OF AMMONIA


276 SULPHUR AND SULPHUR CHEMICALS


277 SULPHURIC ACID RESISTING ENAMEL


278 SURVEYING INSTRUMENTS AND PARTS


279 SYSTOFLEX VARNISHED COTTON





290 TAMPING BAGS


V


291 TAPS, COCKS, VALVES AND SIMILAR APPLICANCES AND


292 PARTS


TAR SOLVENT


293 TIN-INGOTS OR OTHER SHAPES


294 TOGGLES


295 TOOL^ HAND, PNEUMATIC, ELECTRIC OR OTHER


296 TRANSMISSION SHAFTS, CRANKS, PLAIN SHAFTS,


BEARINGS, GEARS AND GEARING, FLYWHEEL, PULLEYS AND


297 PULLEY BLOCKS AND PARTS '


TUBE BENDERS, CUTTERS, EXPANDERS OR OTHER TOOLS


298 TUBES AND FERRULES - COMPRESSOR, STEAM AND OTHER,


299 IN ANY MATERIAL


TURBINES AND PARTS


300 TURNTABLES (RAILWAY AND TRAMWAY)


301 TWEEZERS, PICKERS


302 TWINE


303 TWIST DRILL





310 UNIVERSAL INDICATOR PAPERS AND SOLUTIONS


320 VANNER PARTS AND SUPPLIES





321 VARNISH INSULATING


322 VEHICLES - 2 OR 4-WHEEL DRIVE - EXPLORATION,


DRILLING, WATER, HAULAGE-, UTILITY OR OTHER AND


323 PARTS


VENTILATION DUCTING SHEET - FOR MINE VENTILATION


324 VISES AND OTHER EQUIPMENT - ENGINEERS


325 VOLTMETERS





330 WATER GAUGES, GLASSES, RINGS AND OTHER PARTS


331 WEDGES - STEEL


332 WEIGHTOMETERS FOR CONVEYORS


333 WELDING EQUIPMENT INCLUDING ELECTRODES


334 WHEELBARROW, SELF TIPPING FOR MINING


335- WHISTLES - ALARM


 (X)


336 WRENCHES - PIPE CHAIN, STILLSON AND OTHER, WITH


SPARE PARTS


340 X-RAY EQUIPMENT, SPARE PARTS AND FILM


341 XYLENE


350 ZINC INGOTS, SHAVINGS, DUST AND OTHER FORMS


360 ANY OTHER ITEM NOT HEREIN SPECIFIED APPROVED BY THE


COMMISSIONER OF CUSTOMS, EXCISE AND PREVENTIVE


SERVICE ON RECOMMENDATION OF THE MINISTRY


' RESPONSIBLE FOR MINING



































y


 APPENDIX 4





Annex B"


I *


STRUCTURE 06 PRiX Avr-93


MINI6R


CONAKRY •


, --- . jmt* 3 are me -Lignes oe ;Ref CSSCNCC GaZOLC pctrclC


1 noyenhe Plate s USS/TM


192.71 . 165.91 iso.;


2 FO0a CaF USS/TM 13.39 19,50 . 5.


J LA> - UbS/in 1 ‘c . J I 1.1 u 185.5- •VP..


. A


4 Perues Mantimes USS/TM it; * 3 2.11 * .26


5 Commission de Change uSS/TM 0.503 ■ 1.06 0.93 ■5 £


5 crais Financiers uss/tm • • •





~ CaF Structure USS/TM 3.j.5 - Jc 214.27 13 s.:-:- ' s' J





•3 Oensite • 0.758 0.963 C.52


0 litres/TM I3i9 1 :59 1 * *


iO Taux ae Change 952.71- 952.7 r 952.7’





i > Z±F Structure -*S/l '54,’I :*j - ’ • v y








! 2 Pr3isr:e Credoc 0.355 0.54 0=4


' 3 Crais ae PaC r'O/TM 1 sac 1.20 . 3n •


! 4 ventas 0.723 Ml • ■ • ■


15 Passage deoocs PG/L • • •


N.21 ' 0 ■ n »


16 TD5 . I4.34S 13-14. 5 2.02 ^ •.


i 7 Pertes-et COulages 2.41/1.8* 12 a '6 4. 10 • 3.0J > •


18 Taxe d'Encreoosage 13 ; 1 '1.55 ’ ' 1.55


19 Sortie Depots h" *G/L IJ- -s 3 ••76.46 7A "" -


•'73.53,


1


:o ope 5 63 11 3.67 9.6? A ■*:


21 doe. * * 1: ; 0.00 0.00 1 Vx


22 tca • • •


0.00 0.00 •


23 RTL \ 23 1 1 1 3,09 3.1 ••:•. :.!


24 TSPP PG/L • 0.00 coo • A.


25 RCE ‘ t C.2C3 20 a 24 0.02 0.0- • -• •


25 total croits « taxes PG/L 20- -25 M.78 1 1 79 1 >


«





27 Sortie O*00ts TTC PC/l •?-:e 183.25 • Z * « - • , - - •





29 Mjrge orute oe Oistr«o eG/L 50 50.00 s:.x " ’• \ *


29 Pere'oudtion PG/L '■ 00 lOO.OC 5 00.0c . t *


30 Margiou aecail PG/L • 2 1 21.00 • 21 *:•*: --- • 1


:• rc r.H. ;; rO/L 359 25 "CA ” '








:: ffr* . 357.00 ‘





 V





APPENDIX 1





Annex "A"








Title Date Parties


1. Credit Agreement (as amended) 22 April 1987 AuG, Republic, CMC, UM, BIAO


and Banks


2. Investment Agreement 17 June 1988 AuG and IFC





3. Trust Agreement (as amended) 17 June 1988 AuG, Republic, CMC, IFC, BIAO


and Banks





4. Assignment & Retention Agreement 17 June 1988 AuG, IFC, CMC, Republic, BIAO,


the Banks, the Trustee, Argor


Hereaus and Union de Banques


». * Suisses





5. Pledge (of Goodwill) Agreement 17 June 1988 AuG and Trustee (BIAO)


6. Share Retention Agreement 17 June 1988 CMC, UM, AuG, IFC


7. Assignment Agreement or AuG, CMC, UM, Pancon, BIAO,


5 July 1991


"Convention de Cession" GBNV and Banks


8. Agreement in Principle 26 September 1991 CMC and IFC


9. Restructuring & Amendatory 3 July 1993 • AuG and IFC


Agreement


10. Amendatory Share Retention 3 July 1993 AuG, CMC, UM and IFC


Agreement


11. Subordination Agreement 3 July 1993 AuG, CMC and IFC





12. Trust Agreement Amendment 3 July 1993 AuG, Republic. CMC, IFC and IFC


Agreement and BFO


13. CMC Credit Agreement 3 July 1993 AuG, Republic, UM and CMC








BIAO = Banque Internationale pour I’Afrique Occidental S.A.


BFO = Banque Frangaise de L’Orient - Successor Trustee to BIAO


Banks = the Banks and other financial institutions represented by BIAO or any


successor to BIAO


GBNV = Generale Bank S.A./N.V.


 APPENDIX 1





Annex "B"


GSM and CMC have proposed to IFC the following terms and conditions for dealing with


IFC’s existing first ranking secured loan to AuG. IFC is considering these terms and


conditions as part of the proposed Co-operation Agreement:


1. IFC’s existing first ranking secured loan to AuG, the principal portion of which is


US$7.2 million, will be divided into equity and loan/royalty components (in


aggregate "IFC Entitlement”) as follows:


n


(a) US$3.0 million of IFC Entitlement will be converted into a 15% ownership


interest in AuG ("IFC" Equity Interest"); and


(b) the balance of US$4.2 million of the IFC Entitlement will, subject as


provided in Clause 3 hereunder, remain a first ranking secured loan to AuG.


2. GSM shall ensure that the IFC Equity Interest is transferred to IFC by CMC or


otherwise beneficially vested in IFC as soon as possible after the exercise of the


Option.


3. IFC’s US$4.2 million loan referred to in paragraph 1(b) above, shall be


automatically converted into a royalty on Qualifying Gold, such royalty having a


total value of up to USS7.8 million, upon GSM having spent or caused AuG to


expend not less than US$4.5 million on Programmes ("IFC Royalty”).


4. Prior to the first Decision to Mine and to GSM having spent or caused AuG to


spend an aggregate of US$6.0 million on Programmes and Work Plans, IFC shall


not be obliged to make any pro rata contributions to the cost of Programmes and


Work Plans.


5. If the first Decision to Mine is made, the following options will become available to


GSM and IFC respectively:


(a) ' in the case of GSM - within 30 days after the first Decision to Mine (but not


thereafter) GSM may serve notice on IFC ("GSM Call Notice") that requires


IFC to sell the IFC Equity Interest to GSM or CMC for a cash price of


US$3.0 million payable to IFC within 12 months from the date of the GSM


Call Notice, interest to accrue from day to day on such price at LIBOR plus


2% calculated on and from the date of the GSM Call Notice to the date of


payment of the price, such accrued interest to be payable with the price;


(b) first, in the case of IFC - at any time after the first Decision to Mine


(provided GSM has not serviced a GSM Call Notice), IFC may serve notice


on GSM ("IFC Sale Notice") of IFC’s intention to sell all (but not part of)


the IFC Equity Interest for a specified cash consideration, to a named third


party on specified terms (collectively "Offer Terms"); where an IFC Sale


Notice is served on GSM or CMC may within 21 days thereafter (but not


otherwise) by notice to IFC accept ihe Offer Terms; if GSM or CMC does


not accept the Offer Terms within the 21 day period, IFC shall have the right


to sell the IFC Interest on the Offer Terms prior to (but not after) the


 expiration of 60 days after the end of the 21 day period;





(c) secondly, in the case of 1FC - within a 21 day period after the expiration of


the 30 day period referred to in paragraph (a) above (but not thereafter),


provided GSM has not served a GSM Call Notice and 1FC has not served an


1FC Sale Notice, 1FC may give notice to GSM ("IFC Dilution Notice") that


IFC elects not to participate in additional Equity Contributions required to


help meet ‘tire cost of Development and in such event the IFC Equity Interest


•shall thereafter be subject to proportional abatement in favour of CMC in


accordance with the formula:





El = 100 x £_


TC


where


"El" is the IFC Equity Interest as calculated from time to time;





"C" is US$1.5 million; and


"TC" is:








where GSM and/or CMC have spent US$6.0 million or more on


Programmes prior to the first Decision to Mine - US$10.0 million


v plus any additional equity contributions made by GSM and/or CMC


towards the cost of development after the first Decision to Mine; or


where GSM and/or CMC have not spent US$6.0 million on


Programmes prior to the first Decision to Mine - US$4.0 million, plus


the amount actually spent on Programmes by GSM and/or CMC prior


to a Decision to Mine, plus any additional equity contributions made


by GSM and/or CMC towards the cost of Work Plans after the first


Decision to Mine.


Where by operation of paragraph 5(c), the IFC Equity Interest is abated to less than


two-thirds of its original level, GSM and/or CMC shall ensure that such abated IFC


Equity Interest is converted into a senior loan of USS1.5 million to AuG, bearing


interest at LIBOR plus 3% (calculated at 12 monthly rests from the conversion date);


such loan to be repayable within 3 years after the date of commencement of new


commercial mining operations by AuG in the Concession pursuant to the first


Decision to Mine and interest of the loan to accrue from day to day and be payable


12 monthly in arrears. IFC shall ensure that upon such re-conversion, the abated


IFC Equity Interest is transferred to or otherwise re-vested in CMC.


IFC may serve an IFC Sale Notice notwithstanding that it has previously given an


IFC Dilution Notice (provided Clause 6 has not then taken effect), and in such case


the IFC Sale Notice shall relate to the IFC Equity Interest as abated in accordance


with Clause 5.





GSM shall ensure that where Clause 3 has application, the IFC Royalty shall be


payable to IFC by AuG and any other applicable Company as a royalty in respect of


 J





(iii)


Qualifying Gold divided intc two classes:


(a) the first US$4.2 million of the total royalty value shall be payable to IFC pan


passu and in the ratio of 1:2 with payment of the first US$8.4 million of the


UM royally entitlement, so that for each US$1 royalty payment to UM, IFC


shall receive a royalty payment of US50 cents;


(b) the remaining US$3.6 million of the total royalty value shall be payable to


IFC, after payment of the first US$4.2 million, pari passu and in the ratio of


1:5 with the UM royalty entitlement, so that for each US$1 royalty payment


to UM. IFC shall receive a royalty payment of US20 cents.


9. Notwithstanding the foregoing provisions of this Annex "B“, if AuG commences


new gold mining operations in the Concession pursuant to the first Decision to Mine


without GSM and/or CMC having made equity contributions totalling US$6.0


million, GSM shall pay or ciuse AuG and any other applicable Company to pay IFC


as an additional royally in r aspect of Qualifying Gold (calculated and payable under


the same terms as, but in addition to, the royalty payable in respect of Qualifying


Gold under paragraph 8(a), a US$ amount equal to 25% of the difference between


US$6.0 million and the actuil equity contributions of GSM and/or CMC made prior


to the commencement of mir ing operations.


10. Royalties in respect of Qual fying Gold payable to IFC pursuant to Clauses 8 and 9


shall be calculated and payable in the same circumstances and manner, on the same


terms and subject (pro rata) to the same limitations as the UM royalty entitlement is


payable to UM. No royalties or other monetary benefits whatsoever shall be


payable to IFC in respect.cf diamonds or in respect of minerals, other than gold,


obtained from the Concession.


11. For the purposes of this Annex "B":


(a) "equity contributions' include contributions by way of unsecured interest free


shareholder loans as well as by way of subscription for shares in AuG;


(b) "Qualifying Gold" means all gold, other than gold to which RoG is entitled


(either in specie or as to proceeds of sale pursuant to the Convention or by


*• virtue of RoG's shareholding in AuG or in any other Company as defined in


this Agreement), produced from each individual mining project (as defined in


the Option) established or restarted by AuG and by any other applicable


Company in the Concession after:


in the case of AuG - the first Decision to Mine; - in the case of any


other applicab e Company - the relevant Decision to Mine; and


in all cases - ;xpiration of the first 12 months of commercial mining


operations of that individual mining project;


(c) references to any other "applicable Company" are references to any


Company (as definec in this Agreement) which establishes a gold mining


enterprise in the Concession pursuant to this Agreement in addition to AuG;


 (iv)








(d) where pursuant to Clause 8 and/or Clause 9 there is an applicable Company


contributing royalty payments to IFC in addition to AuG, they shall do so pro





rata in the proportior s which their respective annual gold production rates


bear to one another.


























*






































































































































. -ji‘