THIS JOINT VENTURE CONTRACT is entered into on this 29th day of July, 1999
BETWEEN
EXPLORATION AND DEVELOPMENT INSTITUTE OF LAND AND RESOURCES OF INNER
MONGOLIA (hereinafter called " EDILRIM"), an enterprise with legal
capacity established in accordance with the relevant law and
regulations of the People's Republic of China
Registration Place: 12 Daxue Rd., Hohhot, Inner Mongolia, China
Legal Representative: Xxxxxx Xxx
Position: Manager
Nationality: Chinese
AND
MINCO MINING & METALS CORPORATION (hereinafter called "MINCO"), an
enterprise with legal capacity established in accordance with the
relevant law and regulations of British Columbia, Canada
Registration Place: 1807 - 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx
Address: Suite 1200, 000 Xxxxxxxxx Xxxxxx,
Xxxxx Xxxxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx
Legal Representative: Xxx Xxx
Position: President and Chief Executive Officer
Nationality: Canadian
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WHEREAS:
1. EDILRIM has Mineral Rights in Inner Mongolia Autonomous Region, the
People's Republic of China;
2. EDILRIM and MINCO wish to enter into a Joint Venture Contract and to
establish a Sino-Foreign Joint Venture to conduct mineral exploration
activities in the said area and if such exploration results in the
discovery of an economic mineral deposit, the Joint Venture will apply and
obtain a Mining License to develop or use one or more deposits;
3. By entering into this Contract, each of EDILRIM and MINCO desires to
confirm and record their respective rights and obligations in the proposed
Joint Venture; and
4. This Contract is entered into in accordance with the Law of the PRC
regarding Sino-Foreign Co-operative Enterprises and other Chinese laws and
regulations and subject to the approval of the Chinese government.
NOW THEREFORE THIS CONTRACT WITNESSES THE PARTIES AGREEMENT AS FOLLOWS:
1.0 DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Contract, unless the context otherwise requires, the following
expressions shall bear the following meanings:
(a) "Beneficial Interest"means, subject to Article 10, the right a Party
under this contract has to hold a specified percentage of the capital
of the Joint Venture and includes without limitation the obligation to
contribute to the Joint Venture and the right to share in the profits
of the Joint Venture in accordance with such percentage interest;
(b) "Board of Directors" means the management organisation comprised of
directors appointed by MINCO and EDILRIM respectively pursuant to
Article 6 hereof;
(c) "Business License" means the business license issued to the Joint
Venture by the Government department in charge of the administration
for industry and commerce or any other authorised Government agency;
(d) "Certificate of Approval" means the certificate of approval issued to
the Parties in respect of this Contract by the Committee of Foreign
Economic Relations and Trade or any other Government Agency authorised
to issue certificates of approval;
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(e) "Chairman" means the Chairman of the Board of Directors appointed in
accordance with section 6.5.
(f) "Commencement Date" has the meaning ascribed to it in section 2.4.2.
(g) "Commencement of Commercial Production" means the normal operation
after the completion of the construction of the production and
processing facilities in the manner contemplated in the Feasibility
Study.
(h) "Contract" means this Joint Venture Contract and shall include the
Recitals set out above and all Schedules attached to this Contract;
(i) "Development Period" means the period from the completion of
Exploration of each deposit of Minerals through the conduct of
development design and capital construction until the completion of
mining production system by the Joint Venture.
(j) "Directors" means collectively the Chairman, the Vice Chairman and
each of the other Directors appointed by MINCO and EDILRIM
respectively to the Board of Directors which term also includes any
alternate Director duly acting as such pursuant to paragraph 6.3.7;
(k) "Election to Cap Contribution"has the meaning ascribed to it in
section 14.1.
(l) "Exploration" means all work before the commencement of the
Feasibility Study with the goal of discovering and delineating a
mineral deposit on the Property to a stage where enough data is
available to determine if detailed engineering studies are warrants.
Exploration work may include, but not limited to, compilation of
existing data, regional and detailed geologic mapping and associated
studies, geochemical surveys, assaying, geophysical surveys, surface
trenching, drilling, underground drifting for the purpose of providing
drill stations for cost effective underground drilling, environmental
studies and preliminary metallurgical testing. Exploration does not
include detailed engineering studies, bulk sampling, underground
drifting for purpose other than providing cost effective drill sites,
or structures, equipment or machinery for the purpose of mining. All
the expenditures of the exploration shall be treated as Project
Expenditures.
(m) "Exploration Period" means the period before the commencement of a
Feasibility Study on a mineral deposit;
(n) "Exploration Permit" means the permit pursuant to which the Joint
Venture has the exclusive right to conduct mineral exploration
activities in the exploration areas which the Joint Venture has
obtained, or may obtain from time to time through agreement of both
sides, as more particularly described in Schedule A and Schedule B;
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(o) "Feasibility Study" means a study which includes the confirmation of
mineable ore reserves by conducting delineation drilling, hydrological
and geo-technical programs and environmental studies, which may
require the construction of underground workings including shafts or
inclines, or other works associated with mine development. In the
process of conducting the Feasibility Study different mining and
processing alternatives will be considered. The Feasibility Study
shall describe the proposed mining methods, and will contain estimates
of both capital and operating costs (with an accuracy of +/-10% to
+/-30%) and will analyse how to proceed to economically and
commercially extract Minerals and produce Products and will also
include relevant marketing and financial data referenced in the
Feasibility Study;
(p) "General Manager" means the General Manager of the Joint Venture
appointed pursuant to paragraph 7.1.1;
(q) "Government" means the Government of the People's Republic of China,
at Central, Provincial and local levels which term shall be deemed to
include all Government departments and their authorised agencies;
(r) "Initial Investment" has the meaning ascribed to it in section 4.2.1;
(s) "Initial Investment Period" means the period which commences on the
Commencement Date and ends on the date which is the earlier of the
date on which MINCO completes its Initial Investment and the date on
which MINCO delivers a notice pursuant to section 14.3 that it wishes
to cap its contribution;
(t) "Joint Assets" means, from time to time, the Mineral Rights, and any
interests into which such Mineral Rights may be converted or
exchanged, and shall also include all equipment, buildings, machinery,
data, analyses and other like items acquired, as used in, or in
respect of, the Mineral Rights, and the Joint Venture formed under
this Contract;
(u) "Joint Venture" means the joint venture which pursuant to Article 2
the Parties are to establish as a separate legal person in accordance
with the Law of the PRC on Sino-Foreign Co-operative Joint Venture
Enterprises;
(v) "Minerals" means all minerals extracted from the Property and includes
without limitation, copper, lead, zinc, silver and gold and all other
minerals commonly and necessarily found in association with zinc,
silver or gold in whatever form or state. However, the term "Minerals"
does not include minerals of which exploitation by Sino-foreign Joint
Ventures is prohibited by the Government;
(w) "Mineral Resources Law" means the Law of the PRC on Mineral Resources
and the Implementation Regulations thereunder and all relevant
supplementary provisions and interpretations as may be amended from
time to time;
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(x) "Mineral Rights" means either or both of Exploration Permit and Mining
Licences held by the Joint Venture in relation to a Property or
Properties subject to this Contract from time to time;
(y) "Mining License" means a license granted by the Government agency in
charge of mineral resources or its provincial bureau to an entity
pursuant to which such entity is authorised to exclusively develop a
mine and to conduct Mining Operations in connection with the Property
as specified in such Mining License;
(z) "Mining Operations" means every kind of work in connection with the
mining, beneficiation and sale of Minerals, without limiting the
generality of the foregoing, the engineering, developing, mining,
treating, refining, transporting, handling and marketing of Minerals
from the Property;
(aa) "month" means a Gregorian calendar month and "monthly" shall bear a
similar meaning;
(bb) "Operations" means the activities of the initial start-up, development
and operation of a fully integrated mine, mill and processing complex
and industrial endeavour and includes all activities which have for
their purpose the discovery and location, delineation and trial mining
of commercial deposits of Minerals within the area covered by Mineral
Rights, the testing of such deposits including drilling and other
underground reconnaissance, bulk sampling, Pre-Feasibility and
Feasibility Studies, the acquisition, maintenance and administration
of Exploration Permit, and specifically includes all development work,
design and production engineering and all activities constituting
Mining Operations as well as the administration of field and the
management and administrative offices for the performance of any of
the functions specified above and all matters inherent in or
incidental to the business of the Joint Venture wheresoever conducted;
(cc) "Operator" means the party which is the largest shareholder of the
Joint Venture and appoints the Chairman of the Board of Directors of
the Joint Venture;
(dd) "Parties" means the parties to this Contract collectively when
expressed in the plural form, and "Party" shall mean any party to this
Contract individually when expressed in the singular form;
(ee) "Property" means the area over which EDILRIM has obtained Exploration
Permit in accordance with law, i.e., the area within which the Joint
Venture conducts Operations. At the time of signing this Contract, the
Property has been specified in Schedule A and Schedule B.
(ff) "PRC" means the People's Republic of China;
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(gg) "Pre-Feasibility Study" means a study to acceptable international
standards which assesses the viability of conducting Mining Operations
within the Property and upon which a decision to conduct a Feasibility
Study is based;
(hh) "Products" means any ore, metals, concentrates or Minerals produced or
processed at or from the Properties;
(ii) "Program and Budget" means a "Program" being a description in
reasonable detail of Operations to be conducted and objectives to be
achieved by the General Manager within the Property; and "Budget"
means, in relation to each Program, a detailed estimate of all Project
Expenditure required in order to conduct such Operations;
(jj) "Project Expenditure" means all costs and charges, whether of a
capital or operating nature, incurred, by or on behalf of the Joint
Venture, on or after the Commencement Date;
(kk) "Shareholders" means the persons or organisations owning a Beneficial
Interest in the Joint Venture;
(ll) "Voting Interest" means the percentage of the votes which a Party has
a right to vote (calculated on the percentage) as ascribed in section
4.2.2.
1.2 Headings
The division of this Contract into Articles and sections, and the provision
of headings relating thereto, is for convenience of reference only, and
shall not affect the construction or interpretation of this Contract.
Unless otherwise specified, a reference to an Article, section or Schedule
is a reference to an Article, section or Schedule to this Contract.
1.3 Contract Paramount
In the interpretation of this Contract, should any inconsistency exist
between an Article or Section of this Contract and any part of a Schedule
attached hereto and the Article of Association of the Joint Venture and any
agreement, records, and memorandum of understanding signed by the Parties
prior to the execution of this Contract, then the relevant Article or
Section in this Contract (as the case may be) shall prevail.
1.4 Extended Meanings
When the context so requires, the singular number shall be read as if the
plural were expressed and the provisions of this Contract shall be read
with all necessary grammatical changes depending upon the nature of the
Person, or of the word or phrase which has been specifically defined in
this Contract, to which reference is made.
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1.5 Calculation of Time
When calculating the period of time within which or following which any act
is to be done or step taken pursuant to this Contract, the date which is
the reference date in calculating such period shall be excluded. If the
last day of such period is not a Business Day, then the time period in
question shall end on the first Business Day following such non-Business
Day.
1.6 Currency
Unless otherwise provided for herein, all monetary amounts referred to
herein shall refer to Renminbi (i.e., RMB), the lawful money of China.
1.7 Severability
If any Article, Section, or any portion of any Section, of this Contract is
determined to be unenforceable or invalid for any reason whatsoever then
that unenforceability or invalidity shall not affect the enforceability or
validity of the remaining portions of this Contract and such unenforceable
or invalid Article, Section or portion thereof shall be severed from the
remainder of this Contract.
1.8 Schedules
The following schedules are attached hereto, and incorporated by reference
herein, and deemed to be a part hereof:
Schedule A Map of Property Boundary
Schedule B Particulars, Terms, Conditions of Exploration Permit
2 ESTABLISHMENT OF JOINT VENTURE
2.1 Legal Basis of Joint Venture
Subject to section 2.4, the Parties agree to form a Co-operative Joint
Venture constituted as a separate legal person in accordance with the Law
of the PRC on Sino-Foreign Co-operative Joint Venture Enterprises and other
relevant Chinese laws and regulations. The Joint Venture shall be
incorporated as a legal person with limited liability. The liability of
each Party shall be limited to contributing its share of the Joint
Venture's Registered Capital. No Party shall be liable for the debts and
obligations of the Joint Venture or any other Party. The creditors of the
Joint Venture shall have recourse only to the assets of the Joint Venture
and shall have no right to claim compensation or seek other remedies from
any of the Parties.
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2.2 Status of MINCO
MINCO is a corporation incorporated under the laws of British Columbia,
Canada and is authorised to carry out its duties and enjoy the benefits
under this Contract.
2.3 Status of EDILRIM
EDILRIM is an enterprise established in accordance with the laws of the
People's Republic of China and is authorised to carry out its duties and
enjoy the benefits under this Contract.
2.4 Effective and Implementation of the Joint Venture Contract
2.4.1This Contract shall become effective upon it being approved by the
Ministry of Foreign Economic Relations and Trade or its authorised
Government agency. The implementation of this Contract shall be conditional
on the Parties being granted a Business Licence and Exploration Permit to
the Joint Venture in terms satisfactory to both MINCO and EDILRIM by no
later than the date ninety (90) days after the date on which this Contract
has been fully executed.
2.4.2Subject to sub-section 2.4.1, the Commencement Date of the Joint Venture
shall be the date upon which the Business License is issued.
2.5 Effect of Contract
This Contract is to govern each Party's respective rights and obligations
in the Joint Venture.
2.6 Beneficial Interests
Each Party's Beneficial Interest shall be calculated in accordance with
Article 10.
2.7 Liability of the Parties
No Party shall have any greater legal interest or claim in the property,
rights and entitlements of the Joint Venture than the Beneficial Interests
which such Party holds at any time and bears in proportion to each other
Party's Beneficial Interest in relation to such property, rights and
entitlements, which shall be adjusted in accordance with Section 10.4.
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2.8 Articles of Association
2.8.1The Parties shall prepare articles of association consistent with the
terms of this Contract to comply with the Law of the PRC on Sino-Foreign
Co-operative Joint Venture Enterprises and the accompanying Regulations to
that Law.
2.8.2Any articles of association prepared by the Parties shall be submitted for
approval to the relevant Government authority and shall bind the Parties in
accordance with the terms thereof from the date of approval by the said
Government authority.
2.9 Name of the Joint Venture
The Chinese name of the Joint Venture shall be "______________". The
English name of the Joint Venture shall be "Inner Mongolia Damo Mining Co.,
Ltd."
2.10 Registered Office
The registered place of the Joint Venture shall be Huhhot City, China. The
Joint Venture may set up representative offices in Beijing or other places
as required.
2.11 Fiscal Year
The fiscal year of the Joint Venture shall be determined by the Board of
Directors at their first meeting.
2.12 Registered Capital
The registered capital of the joint venture is 16.8 million RMB
(equivalent to US$2.02 million at current exchange rate of US$1 equal
to 8.33 RMB) (the "Register Capital"). Both Parties will contribute and
register their respective share of that registered capital in
accordance with the terms and conditions of this Contract. EDILRIM
shall contribute 4.2 million RMB, representing 25% of the Registered
Capital. MINCO shall contribute 12.6 million RMB, representing 75% of
the Registered Capital.
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3 PURPOSES AND SCOPE OF JOINT VENTURE
3.1 Purpose and Scope
The purpose and scope of business for the Joint Venture shall be to
undertake mineral exploration, development, production, processing and
marketing of mineral Products using an integrated mining company model.
Initially the object will be to delineate one or more ore deposits
containing precious metals or other base metals, such as, but not limited
to, copper, lead, and zinc, or both amenable to commercial development by
the Joint Venture, thereafter the Joint Venture will undertake further
exploration drilling and sampling to confirm the size and extent of the
potential ore deposits and undertake development and mining and
metallurgical testwork to analyze alternative mining and milling methods,
recovery rates, grades and products related to commercial exploitation of
the ore deposits delineated and thereafter to construct and operate mines,
xxxxx and other processing facilities as necessary to produce Products from
the Properties subject to this Contract and to market the precious metal
and base metals Products thereby produced.
3.2 Use of International Mining Industry Standards
The Joint Venture will undertake all Operations having due regard to sound
internationally accepted exploration, development, production and
processing standards and practices. For greater certainty, the Parties
agree that the Board of Directors shall have the sole power to make
decisions regarding the norms and standards of Operations, taking into
account the realities of doing business in China.
4 COMPOSITION OF BENEFICIAL INTERESTS
4.1 Mutual Obligations of the Parties
Each of the Parties covenants, undertakes to, and agrees with the other
Party that it will:
(a) observe and perform its obligations and commitments in respect of the
Properties pursuant to this Contract;
(b) not engage (whether alone or in association with others) in any
activity, apply for, or grant any Exploration Permit or Mining License
in respect of Minerals within the Properties or the Mineral Rights
except as provided or authorised by this Contract, or as agreed in
writing by the Parties;
(c) not do, or cause, or permit to be done, any act, matter or thing which
might cause an Mineral Rights or any part thereof to be revised,
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cancelled, forfeited, not issued, not renewed or not extended, or
which in any way may jeopardise the continued enjoyment of an Mineral
Rights;
(d) subject to section 4.2 and Article 10, contribute, according to the
ratio of Beneficial Interests, to the capital of the Joint Venture or
the Project Expenditures for the purposes of conducting the
Operations;
(e) be fair and faithful in all of its dealings with each other Party.
4.2 Initial Investment
4.2.1 Total Initial Investment of the Joint Venture
The total initial investment of the Joint Venture is to be 24 million RMB
(approximately US $2.9 million at current exchange rate). EDILRIM will
contribute the Exploration Permit held by it as more fully described in
Schedule A-B hereto and the geologic data and research results relating
thereto including without limitation all data, drillcore samples and maps
with an estimated value of about 4.89 million RMB evaluated by Beijing
Jingwei Property Evaluation Firm but the Parties agree to a market value of
6 million RMB (approximately USD0.73 million) representing 25% beneficial
interest of the Joint Venture. EDILRIM shall guarantee the Exploration
Permit to be without claim by any third party and shall be solely
responsible for dispensing with any such claims. MINCO shall, subject to
section 14.1, within four (4) years subject to extension due to Force
Majeure, from the Commencement Date, expend on a Program by Program basis
up to 18 million RMB(approximately US$2.17 million) on Project Expenditures
(hereinafter called "Initial Investment") to the Joint Venture,
representing 75% beneficial interest of the Joint Venture.
4.2.2 Voting Rights
During the Initial Investment Period, MINCO contributes towards the Project
Expenditures required for each stage in accordance with each Program and
Budget in a timely fashion. With the above prerequisite, the Parties agree
that MINCO exercises 75% of the Voting Rights and EDILRIM exercises 25% of
the Voting Rights in the Joint Venture.
4.3 Changing Beneficial Interests
At all times during this Contract, both Parties' Beneficial Interest shall
be calculated in accordance with the formula set out in Article 10. For
greater certainty, it is acknowledged by the Parties that: (i) upon
completion of the Initial Investment by MINCO, MINCO shall have a 75%
Beneficial Interest and EDILRIM shall have a 25% Beneficial Interest; (ii)
thereafter, both Parties' Beneficial Interest shall be calculated in
accordance with the contribution made by the parties and the formula set
out in Article 10.
4.4 Contribution by EDILRIM and Warranty
4.4.1 Assignment of Exploration Permit and Related Information
As its contribution to the Joint Venture, EDILRIM shall, on the
Commencement Date, transfer and assign, or cause to have transferred and
assigned, to the Joint Venture all of those Mineral Rights referred to in
section 8.1.1 and, in relation to those Mineral Rights, all of the drilling
cores and other samples and assays, and all maps, geological, geophysical
and geochemical data and interpretations thereof.
4.4.2 Warranty of Title
During the term of this Contract, EDILRIM warrants to MINCO that, as at the
Commencement Date, it will have full title at Chinese Law to all of the
Exploration Permit which are to be transferred at a date within 30 days
after the Commencement Date to the Joint Venture and that it will obtain
approval from all relevant Government authorities and landholders to allow
the Joint Venture to enter into and work upon land which is the subject of
such Exploration Permit for purposes of the Operations.
4.4.3 Continuing Obligation of EDILRIM
EDILRIM shall provide all necessary assistance and support to the Joint
Venture requiring government or local support required to conduct the
Operations of the Joint Venture currently and in the future. The assistance
and support referenced shall include without limitation the following:
(a) to provide all necessary assistance and support to the Joint Venture
to obtain all necessary business, exploration, mining, environmental
permits, licences, rights or permissions, including Exploration Permit
and Mining Licences in respect of any of the Property and Joint
Assets, required to conduct Mining Operations of the Joint Venture
currently and in the future;
(b) to assist the Joint Venture with the supply of all necessary services,
including water, electricity and transportation;
(c) to assist the Joint Venture in recruiting Chinese management
personnel, technical personnel, workers and other personnel as needed;
(d) to assist foreign staff and visitors in applying for entry visas, work
permits and in processing and effecting their travel arrangements;
(e) keep confidential the technical and commercial information of both
Parties;
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(f) to handle other matters entrusted to it by the Joint Venture; and
(g) to import and export equipment EDILRIM shall provide the Joint Venture
with all assistance which it may require from time to time in relation
to the importation or exportation of any equipment including, without
limitation, any drilling or geophysical equipment obtained for the
purposes of the Operations.
(h) Public Relations and Monitoring of Legislation and Regulation As the
Board of Directors requires from time to time, EDILRIM shall also
advance the interests of the Joint Venture by exercising a public
relations role in relation to relevant Government authorities.
Particularly, EDILRIM shall be responsible for monitoring any changes
in Government policy towards mineral resource projects and EDILRIM
shall assist the Joint Venture to obtain assurance from the Government
in respect of certain regulatory objectives which the Joint Venture
desires.
4.5 Guarantee of Contribution by MINCO
4.5.1 Guarantee of Contribution
MINCO guarantees completion of contribution as provided for in section
4.2.1.
4.5.2 Continuing Obligation of MINCO
(a) to provide the Joint Venture with all required appropriate advanced
exploration method, measures, equipment as well as reasonable
quotation for the equipment.
(b) to assist the Joint Venture in hiring foreign management personnel,
technical personnel and other required personnel;
(c) to assist the Joint Venture in arranging for visiting, personnel
training, and purchasing, etc., outside China;
(d) to keep technology and commercial materials of the Parties
confidential; and
(e) to deal with other matters entrusted by the Joint Venture.
4.6 Contribution by Each Party to Project Expenditure
Following completion of MINCO's Initial Investment, each Party may, subject
to Article 10, contribute to Project Expenditure in proportion to their
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respective Beneficial Interests. All such contributions to Project
Expenditure shall be made in accordance with Article 10, and any subsequent
adjustments to the Beneficial Interests held by any Party by virtue of a
decision to support to a greater or lesser degree, any Program and Budget
for the Operations shall be made in accordance with the formula contained
in Article 10.
5 DURATION, TERMINATION AND DISSOLUTION OF THE JOINT VENTURE
5.1 Duration
Subject to as is provided in Article 15, and elsewhere in this Contract,
the duration of the Joint Venture will be thirty (30) years from the
Commencement Date.
5.2 Extension
The Parties agree to extend and offer whatever assistance is required to
extend the duration of the Joint Venture until the last date of Mining
Operations on any of the Property and Joint Assets subject to this
Contract. Applications for such extensions of the duration of the Joint
Venture shall be submitted to the original examination and approval
authority, or to any other Government authorities at that time responsible
for administering foreign investment. EDILRIM will use its best efforts to
assist in obtaining such an extension.
5.3 Expiration of Joint Venture
Unless the Joint Venture obtains approval for an extension in accordance
with section 5.3 of this Contract, the Joint Venture shall be terminated
upon expiration of the duration of the Joint Venture.
5.4 Termination before Expiration of Joint Venture
Each of the Parties may instruct its Director of the Joint Venture to
request the Chairman to convene a meeting of Board of Directors to decide
the termination of the co-operation before expiration of the Joint Venture
in the event of any of the following occurrences:
(a) Where either of the Parties experiences Force Majeure or its
consequences as described in Article 19, or the Joint Venture
experiences the similar situations, the Parties or the Board of
Directors of the Joint Venture has failed to come to an agreement or
resolution as how to resolve the matters.
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(b) The Joint Venture suffers from major loss during Commercial Production
Period (the total loss up to 60% of total investment) and can not
continue operation.
(c) The Joint Venture has failed to achieve the objective of exploration
and development as expected and has failed to see any corporate
development prospects.
5.5 Election of Termination of Joint Venture
The Joint Venture will automatically be terminated when MINCO has elected
to cap the contribution in accordance with section 14.1 and EDILRIM has
elected to terminate the Joint Venture.
5.6 Dissolution of Joint Venture
The Joint Venture may be dissolved before the expiration of the Joint
Venture in the following events:
(a) Where either of the Parties becomes unable to pay debts or bankrupt,
or subject of lawsuits for liquidation and dissolution.
(b) Where one party (the "Breaching Party") has seriously breached the
Contract and has not made any remedies within 15 days (or the longer
period agreed by the other Party in its written notice) after
receiving notice from the other Party (the "Non-Breaching Party"), the
Non-Breaching Party is entitled to give notice to terminate this
Contract and dissolute the Joint Venture after the Non-Breaching Party
make claims for damage against the Breaching Party.
5.7 Liquidation
In the case of the expiration of the Joint Venture, or the termination
before expiration of the Joint Venture, or election of termination of the
Joint Venture, or dissolution of the Joint Venture as contemplated in
Sections 5.3, 5.4, 5.5, and 5.6 respectively, the assets of the Joint
Venture shall be liquidated pursuant to The Company Act of the People's
Republic of China, The Law of the PRC on Sino-Foreign Co-operation Joint
Venture Enterprise and The Liquidation Methods of the Foreign Investment
Enterprises of the People's Republic of China.
The Joint Venture shall establish a liquidation committee which shall
consist of representatives from the Shareholders to liquidate the assists
of the Joint Venture. The liquidation expenses shall be paid in first
priority from the liquidation assets and shall include: (1) all the
expenses related to managing, selling and distributing the liquidation
assets; (2) the expenses of proclamation, lawsuits, and arbitration; and
(3) other expenses incurred during the liquidation process.
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The remaining assets after the liquidation expenses have been paid shall be
distributed in the following order:
(1) Salary and benefits owed to the employees of the Joint Venture;
(2) Tax and fees payable to the Government;
(3) Debts, loans, liabilities or other obligations payable to the third
parties;
(4) Debts, loans, other liabilities or obligations payable to the
Shareholders.
Thereafter, any remaining cash and all other assets of the Joint
Venture shall be distributed to the Shareholders in accordance to
their respective Beneficial Interests in the Joint Venture unless
otherwise agreed by the Shareholders.
During the liquidation of the assets of the Joint Venture and transfer
of the "Mineral Rights", the Shareholders shall have the right of
first refusal to buy the liquidation assets and to transfer the
"Mineral Rights", which shall be sold and transferred to the
Shareholder who provides the highest bid. After the liquidation, all
the accounting records, books, and reports of the Joint Venture shall
be kept by EDILRIM and other Shareholders shall have rights to make
copies of the above documents for their own records.
6 BOARD OF DIRECTORS
6.1 Commencement
The Board of Directors shall function with effect from the Commencement
Date.
6.2 Composition
Before MINCO's completion of its Initial Investment, the Board of Directors
shall be comprised of seven (7) directors of whom four (4) shall be
appointed by MINCO and three (3) shall be appointed by EDILRIM. During the
term of this Contract, the parties agree that the Board of Directors
remains constituted as set out in the previous sentence. The Board of
Directors shall have one Chairman, whom shall be nominated by MINCO and one
Vice Chairman, whom shall be nominated by EDILRIM. The term of the office
for Chairman, Vice Chairman and director is three (3) years and any person
serving as Director, Chairman or Vice Chairman shall be eligible for
reappointment to the Board for one or more further terms of office.
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6.3 Principles and Scope of Authority of Board
6.3.1 Board of Directors as Supreme Power Authority and Powers
The Board of Directors is the supreme authority of the Joint Venture,
decides all major matters of the Joint Venture, and exercises, but not
limited to, the following powers:
(a) establish policies which will achieve the aims and objectives of the
Joint Venture;
(b) approve and amend Programs and Budgets submitted for the Operations by
the General Manager;
(c) review performance reports submitted by the General Manager;
(d) examine and make a decision, if appropriate, to implement a
Feasibility Study;
(e) establish any necessary amendments to establish and amend from time to
time various operating procedures including any necessary amendments
to the accounting procedure as appropriate; and
(f) make a decision as to the re-establishment, merger, termination,
extension or other operations of the Joint Venture;
(g) determine the establishment of organisations under the Board of
Directors and the employment of the officers; and
(h) consider all other matters appropriate for deliberation by the Board.
6.3.2 Matters to be Considered by Board
(a) The following resolutions adopted by the Board of Directors shall be
passed by unanimous decision of the directors attending the meeting:
i. formation of another enterprise, or open another operation, or
merger, or to form a new enterprise with a third party;
ii. termination or dissolution of Joint Venture (except for section
14.3);
iii. increase or reduction or assignment of the registered capital of
the Joint Venture;
iv. approval of borrowing by the Joint Venture;
v. guarantee on behalf of the Joint Venture for other economic
organisations;
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vi. any sale, assignment, mortgage or lien that has a value over 10%
of the total assets of the Joint Venture;
vii. any decision on the establishment of organisations under the
Board of Directors;
viii.any decision required by the Chinese law from time to time to be
passed unanimously by the Board of Directors.
(c) other resolutions with exception for those described in Section
6.3.2(a) shall be passed by the majority (over 1/2) of the Directors.
The Parties enjoy the voting percentages in the Board of Directors as
stipulated in Voting Rights.
(d) If an equality of votes on a particular resolution occurs, the
Chairman and Vice Chairman shall discuss the issue and recall the
board meeting for voting. If an equality of votes occurs again on the
resolution, the Chairman has power to make decision.
6.3.3 Convening and Place of Meeting
The Board of Directors shall meet at least once within any calendar year.
Meetings shall take place in the registered place of the Joint Venture, in
such other place, as shall be agreed upon from time to time by the Chairman
and Vice Chairman after consultation. The meeting shall be called and
presided over by the Chairman. The Chairman may call an extraordinary
meeting from time to time at the motion of over one third directors. 6.3.4
Powers of Attorney
Any Director may, by any duly executed power of attorney, appoint an
attorney to vote on his behalf and such power of attorney or proof thereof
to the satisfaction of the Board of Directors shall be produced for
inspection at the Registered Office of the Joint Venture or at such other
location as the Board may from time to time direct together with such
evidence of the due execution thereof as the Board may require before the
attorney shall be entitled to act thereunder. Any person (including another
Director) may be appointed as the attorney of one or more Directors for
these purposes.
6.3.5 Minutes of Meetings of the Board of Directors
Detailed written minutes shall be made in Chinese and English at each
meeting of the Board. The written minutes shall be signed by all the
directors at the meeting. If attended by attorneys, the attorneys shall
sign the written minutes. The written minutes shall be filed by the Joint
Venture.
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6.3.6 Notice Periods
The Chairman or, in the absence of the Chairman, the Vice Chairman or other
directors authorised to act by the Chairman shall give notice to all the
directors about the meeting or temporary meeting thirty days (30) before
the meeting through fax (the notice shall carry time, place, agenda and
motions).
6.4 Quorum and Rules of Meeting
6.4.1 Quorum of Meetings of the Board of Directors
The quorum for meetings of the Board of Directors shall be five (5). If a
quorum is not present, then, the meeting shall be adjourned to a date at
least two weeks thereafter at the same time and place and notice of the
adjourned meeting shall be given to all Directors; at such adjourned
meeting, the representatives present shall be deemed to be a quorum and
shall be automatically authorised and empowered to conduct business thereat
in the normal manner.
6.4.2 Casual Vacancies on Board
Where there is a casual vacancy within the Board of Directors, the Party
having appointed the person shall be entitled to appoint the replacement
director to hold office for the remainder of the term of office. However,
the new appointment shall be filed with original approval authority.
6.4.3 Written Resolutions
Except for special resolutions which require unanimous approval from the
Board of Directors, a resolution in writing under the hands of more than
50% of the Directors shall be as valid and effectual as a resolution duly
passed at a meeting of the Board of Directors duly called and held and may
consist of several documents in like form each signed by one or more of the
Directors or may be in telexed form, or other written form of
communication, indicating that the signature of the director concerned has
been duly affixed to the original provided that confirmation that such
signature has been affixed is forwarded to the legal address of the Joint
Venture within fourteen (14) days from the date upon which the original was
signed.
6.4.4 Filing of Written Resolutions
The resolution in writing passed without a meeting of the Board, having
been signed by Chairman or Vice Chairman or other directors duly authorised
by the Chairman, shall be written into the minutes of the Board of
Directors of the Joint Venture and kept in the registered office of the
Joint Venture.
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6.4.5 Resolutions of Board of Directors
All lawful decisions of the Board of Directors shall be binding on the
Parties. Both Parties are responsible to comply with and implement each
board decision or resolution.
6.5 Chairman of the Board of Directors
6.5.1 Chairman as legal Representative of Joint Venture
The Chairman shall be the legal representative of Joint Venture and shall
represent the Joint Venture to supervise and control the Operations. The
executive power of the Chairman, under the strict control and authorization
of the Board of Directors, is binding on the Joint Venture. When the
Chairman is unable to do his duty, the vice Chairman can be empowered to
exercise the Chairman's duty.
6.5.2 Consultation System Between Chairman and Vice-Chairman
The Chairman and Vice Chairman shall be respectively nominated by each of
the Parties to represent the respective Party's beneficial interest. The
Chairman and the Vice Chairman shall confer to each other from time to time
before the Board of Directors exercises its powers.
6.5.3 The Powers of Chairman of Board of Directors
The Chairman alone shall have the following rights and powers to enable him
to conduct his obligations for the benefit of the Joint Venture:
(a) the power to negotiate and reach agreement on matters relevant to the
Mineral Rights, the Property and Joint Assets or to the Operations
with competent Government authorities;
(b) subject to provisions of Article 12, the power to select, engage and
dismiss workers, agents and independent contractors necessary for the
efficient conduct of the Operations;
(c) the right to take such action as may in his judgement be necessary for
the protection of life, or reasonably necessary for the protection of
property, and all such costs reasonably incurred shall be deemed
Project Expenditure;
(d) the right as empowered by the Article of the Association of the Joint
Venture to decide the matters over which there is a dispute among the
Directors;
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(e) The right to make all expenditures and commitments for Operations in
accordance with Budgets for Project Expenditure approved pursuant to
section 9.4 (for the purposes of this sub-section 7.9. called
"Approved Budgets"). The Chairman shall take all reasonable care to
avoid such expenditures or commitments in excess of any Approved
Budget without first seeking approval of the Board of Directors
PROVIDED that the Chairman shall be entitled to expend in any
budgetary period up to twenty percent (20%) in excess of any Approved
Budget without requiring any further approval, and all such
expenditure shall be deemed to be Project Expenditure. The Chairman
shall not be entitled to recover from any Party any excess over and
above such permitted overrun and such excess shall not be included as
any Party's contribution to Project Expenditure for the purpose of
this Contract unless the Board shall approve or ratify such excess
expenditure.
(f) In the relevant budgetary period, as an additional permitted overrun
but only in the case of accident or any other emergency relating to
the Operations, the Chairman shall be entitled (without the need to
obtain approval pursuant to section 9.4) to take such action as in his
judgement may be necessary for the protection of life or property and
to incur all reasonable costs up to an amount no greater than thirty
percent (30%) of an Approved Budget. The said emergency expenditure
shall be treated as Project Expenditure and be outlayed on behalf of
the Parties in proportion to their respective Beneficial Interests.
The Chairman shall notify the Parties of any such emergency
expenditure as soon as practicable and in any event within seven (7)
days after it has been incurred.
(g) During the cooperation period, the Chairman has the power to make
final decisions on the operation and management and the distribution
of the Project Expenditures of the Joint Venture.
(h) The Chairman, under the special supervision and control of the Board
of Directors, may from time to time make adjustments to the manner of
conducting Operations as provided in the Feasibility Study based on
his judgement and on sound capital construction, construction, and
mining practice.
7 OPERATION AND MANAGEMENT ORGANIZATION
7.1 Operation and Management Organisation
7.1.1 Management Organisation and Working Principles
The Joint Venture shall establish an operation and management organisation
and other organisations in accordance with the relevant provisions of
China. The operation and management organisation shall implement the
resolutions of the Board of Directors and shall be responsible to daily
operations of the Joint Venture. The operation and
management organisation shall have one General Manager and a number of
Deputy General Managers. The General Manager and Deputy General Manager
shall be hired by the Board of Directors for three years which can be
renewed upon being approved by the Board of Directors. The duties of the
General Manager are to implement all resolutions of the meeting of the
Board of Directors, organise and lead the daily operations of the Joint
Venture.
7.1.2 General Financial Supervisor
The Joint Venture shall have one General Financial Supervisor, whom shall
be nominated and hired by the Board of Directors. The General Financial
Supervisor shall be responsible to supervise the management and control of
the financial affairs of the Joint Venture. The General Financial
Supervisor has the right to request the General Manager and other
organisations to provide and examine operations, statements, and financial
data. The General Manager and other departments have the obligation to
co-operate with the General Financial Supervisor. Detailed operations shall
be decided by the Board of Directors, to which the General Financial
Supervisor shall be responsible.
7.1.3 Principles of Management Organisation and Establishment
The Joint Venture shall have senior management positions and a number of
management organisations based on the principle of administration
simplicity and high efficiency. The General Manager shall make suggestions
as to the establishment, personnel system and division of responsibility to
the Board of Directors for approval. The senior management personnel other
than General Manager, General Financial Supervisor, Deputy General Manager
shall be nominated by the General Manager and hired by the Board of
Directors and shall share responsibilities with various branch managers to
the work of various organisations under the Joint Venture and perform the
duties delegated to them by the General Manager and Deputy General Manager.
Deputy General Manager and branch managers shall be responsible to the
General Manager.
7.1.4 General Manager and Deputy General Manager
General Manager and Deputy General Manager may be removed at any time at
the meeting of the Board of Directors in the event of engaging in
malpractices for selfish ends, or gross negligence or incompetence.
7.1.5 The Responsibilities and Power of General Manager
The General Manager of the Joint Venture shall provide to the Board of
Directors of the Joint Venture within required time periods the following
materials of the Joint Venture:
(a) draft and submit in a timely manner Programs and Budget and implement
them after approval by the Board of Directors;
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(b) submit within ten days at the end of the month information regarding
Operations, management reports and financial statements;
(c) submit within ten days at the end of the quarter information regarding
Operations, management reports and financial statements;
(d) submit within first two months at the end of each fiscal year
financial report of Joint Venture audited by an accountant, summary
report regarding technology of the Operations, report regarding the
status of the Operations and report regarding operation and
management;
(e) at the request of the Board of Directors, conduct Pre-Feasibility
Study and Feasibility Study;
(f) other materials required by the Parties;
(h) any other reports and programs required by the Board of Directors.
7.1.6Concurrent Posts of General Manager and Deputy General Manager
The Chairman, Vice Chairman, and directors of the Board of Directors may
hold titles at the same time as General Manager and Deputy Manager of the
Joint Venture as well as other senior administrative management positions
of the Joint Venture.
7.1.7 Restrictions on Senior Employees of Joint Venture
General Manager, General Financial Supervisor, Deputy General Manager as
well as other senior management personnel and branch managers shall not
engage in any activities or work that is considered by the Board of
Directors as harmful to the interest of the Joint Venture, or conflicting
with the interest of the Joint Venture.
7.1.8 Resignation of General Manager and Deputy General Manager
General Manager, General Financial Supervisor, or Deputy General Manager
who intends to resign shall submit to the Board of Directors its
resignation request in writing within the time periods provided for in
their respective employment contracts.
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8 GUARANTEE OF MINERAL RIGHTS AND OPERATION
8.1 Mineral Rights
8.1.1 Mineral Rights
With effect on and from the Commencement Date, EDILRIM shall pursuant to
sub-section 4.4.2 either, procure the transfer, or transfer to the Joint
Venture, the Mineral Rights, and the Joint Venture shall be entitled to the
legally registered holder of the Mineral Rights 8.1.2 Schedule A
The Mineral Rights referred to in section 8.1.1 are delineated within the
map attached as Schedule A.
8.1.3 Schedule B
Detailed particulars, terms and conditions attaching to each of the Mineral
Rights are set forth in Schedule B.
8.2 Guarantee of Exclusive Mineral Rights
8.2.1 EDILRIM's Promise to Assist with Obtaining Additional Exploration Permit
The Joint Venture may apply to the relevant Government authorities for
additional Mineral Rights in addition to those referred to in sub-section
8.1.2 so as to explore for further mineralization, and EDILRIM shall bring
all reasonable effort to bear so as to assist the Joint Venture in making
such applications and under certain circumstances to facilitate the grant
of such additional Mineral Rights.
8.2.2EDILRIM's Promise to Assist with Obtaining Land Access and dealing with
Local Landholders
EDILRIM shall assist the Joint Venture to make all applications for the
additional Exploration Permits referred to in sub-section 8.2.1 and to
obtain all necessary land access agreements to all Property and Joint
Assets. Further, EDILRIM shall assist the Joint Venture with liaising with
the government department in charge of geology and mineral resources and
all other relevant Government authorities and with local landholders to
ensure that good relations are maintained between the Joint Venture and
other persons during the conduct of Operations.
8.2.3 EDILRIM's Obligation to deal with Adverse Title Defects and Claims
EDILRIM shall be responsible to deal with any claims or interest of third
parties in and to the Mineral Rights (as referred in Schedules A and B and
later transferred mineral rights) and bear all the costs incurred. If any
such interest in the Mineral Rights arises or is claimed by any third
party, EDILRIM shall, on behalf of the Joint Venture, and at its sole
expense, proceed to defend any such claim and expunge any such interest.
For greater certainty, it is acknowledged and agreed by EDILRIM that if, in
order to satisfy its obligations under this section 8.2.3, any such third
party successfully claims an interest in and to the Mineral Rights and
requests or has right to receive compensation in whatever forms (cash or
Beneficial Interest in the Joint Venture or other forms), then such a
compensation shall be paid solely by EDILRIM, not borne by the Joint
Venture or MINCO.
8.2.4 Reimbursement of EDILRIM's Reasonable Costs
The Joint Venture shall reimburse all costs reasonable incurred by EDILRIM
in its provision of the services pursuant to sub-sections 8.2.1, 8.2.2 and
4.4.3 and in exploration in the Property agreed on by the Parties.
8.3 Amendment to the Attached Schedules
The attached schedules may be timely amended so as to reflect the status
quo of "Property"and "Exploration Permit"(including the additions and
deletions of Exploration Permits).
8.4 Property Extensions
Neither party, either alone or in association with others, shall proceed
for its own account, but only for the account of the Joint Venture to
obtain Mineral Rights to any natural extension of an orebody on the
Property and Joint Assets of the Joint Venture onto new ground beyond the
boundary of a Property and Joint Assets. Any interest obtained in
contravention of this section 8.4 by either Party shall be held for the
account of the Joint Venture.
8.5 "Priority Right of Investment"
Under similar conditions, EDILRIM will grant MINCO priority right to invest
in its other properties covered by its "Exploration Xxxxxx".
00
0 PROGRAMS AND BUDGETS
9.1 Setting of Programs and Budgets
9.1.1 Periodic Setting of Programs and Budgets
As soon as reasonably practicable before the scheduled end of current
Program and Budget, or by such other date which the Board of Directors may
determine, the General Manager shall prepare, for approval by the Board, a
Program for Operations proposed for the next period, as appropriate
together with a Budget showing in detail the estimated Project Expenditure
and proposed scheduling of activities.
9.1.2 Periods for Exploration based on Program Parameters
Unless the Board of Directors specifies otherwise, the Programs and Budgets
shall be prepared to cover the next logical step in the Property and Joint
Assets. Each step and proposed Program prior to the completion of a
Feasibility Study may or may not correspond to a calendar year.
9.1.3 Periods for Mine Development and Mining
During the mine construction and mining stages, the Program and Budget
shall correspond to a calendar year and the starting date of a budgetary
year is January 1.
9.2 Supplementary or Revised Programs and Budgets
The General Manager may from time to time prepare supplementary or revised
Programs and Budgets which shall be submitted as aforesaid to the Board of
Directors at least one (1) month prior to the meeting of the Board convened
for their approval.
9.3 Approval by Board of Directors
The Board of Directors shall consider and vote for approval (with or
without modification) upon Programs and Budgets as close as practicable to
but no later than thirty (30) days prior to the proposed commencement date
of such Program.
9.4 Budgetary Approval
The Board of Directors will not refuse approval for, or confirmation of,
such portion of a Budget as is required to maintain Exploration Permit
and/or to fulfil commitments under existing contracts.
9.5 Providing Information
The General Manager shall promptly furnish to each Party:
(a) up to the time of the delivery of a Feasibility Study, on a program by
program basis within ninety (90) days of the end of each such Program,
and thereafter yearly, a detailed summary of Operations including the
expenses thereof, the progress and available results of all
geological, geophysical, geochemical, drilling, construction, mining,
milling and other Operations and such other information as the Board
of Directors may reasonably be expected to require;
(b) during period of Exploration, quarterly progress reports of Operations
including the expenses incurred during the quarter and estimates of
cash flow needs for the succeeding two quarters as well as significant
results;
(c) during construction, a quarterly report setting out expenditures to
date by cost categories identified in the Feasibility Study and to
date in the aggregate, for that quarter and against budget for the
quarter and in the aggregate;
(d) during Mining Operations, summary quarterly reports detailing mining,
milling and production throughput, grades and recovery rates and such
other information as may be prescribed by the Board of Directors from
time to time; and
(e) copies of all reports, studies, analyses and other documents relating
to the Exploration Permit and the Property and Joint Assets.
9.6 International Standards for Record Keeping and Information Disclosure
The financial affairs of the Joint Venture shall be subject to the
supervision of the General Financial Supervisor and shall comply the
accounting policies of the Joint Venture. The books of account shall be
kept in accordance with international accounting standards for mining joint
ventures. The financial affairs shall be managed to ensure that the Board
of Directors has the accounting information, data and analyses necessary to
comply with their respective disclosure requirements. The accounting
procedure of the Joint Venture shall be established by the Board of
Directors according to the Accounting Policies of Foreign Investment
Enterprises of the People's Republic of China and Accounting Administration
Rules of Foreign Investment Enterprise of the Republic of China.
9.7 Initial Filing of Accounting Management System
The accounting procedure should be filed with the appropriate department of
the Government.
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9.8 Revision of Accounting Management System
Accounting management system may be revised from time to time at the
suggestion of the Board of Directors and any such revision should be sent
to the appropriate department of the government for records.
10 CONTRIBUTIONS TO PROJECT EXPENDITURE AND CHANGES IN BENEFICIAL INTERESTS
10.1 Liability for Project Expenditure
10.1.1 According to Beneficial Interests
Subject to the following provisions of this Article 10, each Party shall be
liable to the Joint Venture to contribute to Project Expenditure to the
extent of its Beneficial Interest.
10.1.2 Project Overrun Contributions
Where Project Expenditure is, pursuant to a Program and Budget, approved by
the Board of Directors, subject to sub-section 10.2.1, the liability of the
Party who is not nominating the Chairman shall not extend to Project
Expenditures which exceed the approved Budget by more than twenty percent
(20%) unless:
(a) the excess shall have been approved by the Board of Directors; or
(b) the expenditure shall have been incurred in circumstances referred to
in sub-section 6.5.3; or
(d) such excess shall have occurred in circumstances not directly
controllable by the Chairman.
10.2 Contribution by each Party
10.2.1 No Further Contribution by EDILRIM
Until MINCO shall have fully discharged its obligations pursuant to section
4.2, EDILRIM shall make no further contribution to Project Expenditures
beyond its initial contribution of the Property to the Joint Venture.
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10.2.2 Funding Expectations of the Parties
After MINCO has accomplished their Initial Investment, thereafter all
ongoing Project Expenditures will be contributed by the Parties according
to their respective Beneficial Interest.
10.2.3 Contributions as Shareholder Loans
Shareholders agree that all cash and assets, other than the Registered
Capital, contributed by MINCO and EDILRIM to the Joint Venture shall be
accrued as a non-interest bearing Shareholder loan to the Joint Venture,
with no fixed terms of repayment. The dividends or other distributions of
profit shall be made to the Shareholders (MINCO and EDILRIM) of the Joint
Venture in accordance with section 15.6 of this Contract.
10.3 Election to Contribute
10.3.1 Permitted Election Not to Contribute
At any meeting of the Board of Directors convened to consider a Program and
Budget for the next budgetary period towards which, pursuant to sub-section
10.2.2, after the completion of the Initial Investment, the Parties are
invited to contribute, either Party, subject to Article 14, may elect not
to provide funds for a Program and Budget for such next budgetary period.
The election not to contribute will be effective on the first day of the
next budgetary period. The Parties electing not to contribute to Project
Expenditure (the "Non-contributing Parties") shall serve the other Parties
(the "Contributing Parties") with a notice formally recording such decision
within three (3) Business Days following the relevant meeting of the Board.
10.3.2 Required Notice upon Election Not to Contribute
A notice given by a Non-contributing Party pursuant to sub-section 10.3.1
shall state that the Non-contributing Party does not wish to contribute to
the Program and Budget submitted by the General Manager for the next
budgetary period.
10.3.3 Election of Contributing Party
Within a reasonable time after receipt of the notice from a
Non-contributing Party pursuant to sub-section 10.3.1 (not to exceed six
(6) months), the Contributing Party may elect among the following options:
(a) to contribute all of the Non-contributing Parties' share of Project
Expenditures and proceed with the Program and Budget as approved;
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(b) to contribute only its share in accordance with its then current
Beneficial Interest to the approved Program and Budget;
(c) to contribute its share in accordance with its then current Beneficial
Interest and to redesign and adopt an amended Program and Budget
matching this contribution level;
(d) to contribute its share in accordance with its then current Beneficial
Interest and some but not all of the Non-contributing Parties' share
of Project Expenditures and to redesign and adopt an amended Program
and Budget matching this contribution level; or
(e) not to contribute.
10.4 Calculation of Beneficial Interest
After receipt of appropriate Government agency approval and prior to the
initiation of each Program and Budget and based on the contributions
committed by each Party to that Program and Budget, the level of Beneficial
Interests of each of the Parties shall be immediately adjusted and
calculated in accordance with the following formulae:
I = R/S x 100%
"I" is the Beneficial Interest of the Party
"R" is the actual amount of contribution made by a Party
"S" is the actual total amount contribution made by all the Parties
The actual contribution amount of EDILRIM includes intangible asset of 6
million RMB and the actual contribution amount of MINCO includes but not
limited to the Project Expenditures made by MINCO during the terms of this
Contract and before the establishment of the Joint Venture.
After MINCO completes the Initial Investment of 18 million RMB, the
expenditure required by the Joint Venture shall be funded 20% by EDILRIM,
holding 25% of Beneficial Interest, and 80% by MINCO, holding 75% of
Beneficial Interest. For greater certainty, 5% shall be added to the amount
of Beneficial Interest calculated for EDILRIM with the above formulae and
5% be subtracted from the amount of Beneficial Interest calculated for
MINCO with the formulae.
A Party's Beneficial Interest shall be subject to dilution. However, the
minimum Beneficial Interest of each Party shall not be diluted to less than
five percent (5%) which will then be considered as reserved Beneficial
Interest. After the Parties having recovered their total investment , the
Party holding reserved Beneficial Interest shall be entitled to obtain five
percent (5%) of the net profit and to check the financial records and other
data of the Joint Venture.
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10.5 Chairman to Calculate Beneficial Interests
If an election is made under sections 10.3 or 10.4, the Chairman shall,
from time to time, and at least at the initiation of each Program and
Budget or annually, whichever is more frequent, calculate, and the Board of
Directors shall approve the Parties' respective Beneficial Interests and,
when submitting each Program and Budget pursuant to section 9.1.1, the
Chairman, upon the approval of the Board of Directors, shall advise the
Parties of their respective Beneficial Interests as at the first day of
each such Program and Budget calculated pursuant to section 10.4 and on the
assumption that all contributions to Project Expenditure which any Party is
obliged to make will be made as and when they fall due according to this
Contract.
10.6 Payments following Completion of MINCO's Initial Investment
10.6.1 Call for Contributions
Each Party shall pay to the Joint Venture at call (payable at such
frequency as provided for in Accounting Management System" or as the Board
of Directors may from time to time amend) as the Board so requests, its
Contribution. Such request shall be made on or before the last day of the
end of the month and shall be accompanied by a statement showing
expenditures now payable and expenditures to be incurred and payable in the
immediately following month. Contributions may be called sixty (60) days in
advance.
10.6.2 Due Date for Contributions
Contributions so requested shall be received by the Joint Venture on or
before the 20th day following the date of the cash call (or such other date
as the Board of Directors may amend from time to time). The amount of any
such Contribution payable in advance shall be calculated by the Chairman
having regard to the amount of previous Contributions and the anticipated
level of Project Expenditure in the relevant following months.
10.7 Periodic Statements
The General Manager shall render to each of the Parties a cost statement
(summarising Project Expenditure paid and/or accrued by classifications)
for such periods as may be determined by the Board of Directors from time
to time and each Party's share of such Project Expenditure, each Party's
Contribution during such period, and the amounts with which the Party was
credited at the beginning and at the end of such period.
10.8 Challenge to Correctness
Payment by a Party of any Contribution requested by the Board of Directors
shall not prejudice such Party's right to challenge the correctness of any
32
statement or request for Contribution PROVIDED HOWEVER that all statements
rendered to a Party during any calendar year shall be presumed to be
conclusively true and correct after two (2) years following the end of that
said year unless challenged in writing by a Party within such period.
10.9 Interest Payable on Overdue Payments
Interest shall run on all payments to be paid to the Joint Venture not paid
on or before their due dates at a rate of interest equal to the prime rate
of the People's Bank of China plus five percent (5%).
10.10 Procedures for Making Adjustments in Beneficial Interests
The Parties shall sign and do all such transfers, deeds, documents, matters
and things (including the obtaining of the approval of the governments) as
may be necessary to transfer or vest sufficient of the Non-contributing
Party's Beneficial Interest in the Joint Venture in the other Party so as
to reflect the adjustments required by section 10.4, and for such purposes
each of the Parties hereby irrevocably appoints the other Party and its
officers who have signing authority jointly and severally to be its
attorney in its name and on its behalf to sign and do all assurances,
deeds, instruments, acts and things whatsoever which such Party ought to
sign and do.
11 MINE DEVELOPMENT AND PRODUCTION
It is agreed and acknowledged by the Parties that if a commercially viable
deposit is delineated on the Properties, the Joint Venture has the right to
proceed expeditiously to develop a mine or mines on the Property or
Properties in accordance with the relevant law and regulations of the PRC.
11.1 Board of Directors to Rule on Development
The Board of Directors is entitled to decide as to whether investment in
any Mining Operations is to occur and, if so, as to the parameters,
objectives, detailed plans, and the initiation and scale of such Mining
Operations.
11.2 Obligation to Contribution
In according to paragraph 10.2.2, in the event that the Board of Directors
of the Joint Venture has determined to develop the Property, the Parties
shall provide to the Joint Venture the required funds in proportion to each
Party's respective Beneficial Interest in the Joint Venture as at the date
of such decision.
11.3 Sole Risk Development
If the Board of Directors does not approve of the implementation of Mining
Operations, then either Party which is willing to undertake Mining
Operations shall be permitted to do so and the Non-contributing Party shall
be subject to dilution in accordance with the terms of Article 10.
11.4 Required Authorisations and Parameters for Mining Operation
11.4.1 Parameters of Mining Operations
The Joint Venture shall ensure that any proposed Program for the
implementation of Mining Operations would, depending upon the size and
style of the indicated Mineral resource and proposed scope of Mining
Operations, address the following topics:
(a) the obtaining of licenses necessary for the influx of all foreign
capital required. As circumstances dictate, such licenses may address:
(i) the basis upon which MINCO as the sole foreign party is to invest
capital; or
(ii) it may give approval to the formation of a Sino-Foreign
consortium to undertake a large-scale development;
(b) the approval of other reputable and financially sound parties
recommended by the Parties to invest in the Joint Venture at the
appropriate time. In this latter regard, suitable consortium parties
could be drawn from the mineral resource industry, smelting and/or
minerals marketing spheres, or from within the financial sector;
(c) subject to the provisions in section 11.5, obtaining of sales licenses
including export licenses as are permitted under Chinese law which the
Joint Venture may require for Products derived by the Mining
Operations;
(d) the incorporation of a fully expounded policy relating to staff and
manpower requirements, salaries, wages and employee benefits (the
"Employment Policy"), a dispute resolution process specifically to
govern employment disputes and those disputes concerning employment
matters between the Joint Venture and Government authorities, and a
mechanism to govern review of the Employment Policy in the event of
fundamentally altered economic circumstances affecting the viability
of the Joint Venture;
(e) incorporation of the most favourable Government policies available for
Sino-Foreign Co-operative Joint Ventures, including without limitation
the right of the Joint Venture to carry forward losses incurred by it
with respect to all Operations so as to reduce the taxable income of
the Joint Venture;
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(g) as the Joint Venture's business requires the choice of banks and
establishment of accounts both within and, in special circumstances,
beyond China appropriate to that business after the approval by the
foreign currency control authority of the People's Republic of China.
11.4.2 Obtaining all the Authorisations Required
The conduct of Mining Operations shall be subject to and conditional upon
the Parties (and any third parties which may later be involved) obtaining
necessary consents and approvals from all relevant government authorities.
EDILRIM shall do its best to assist the Joint Venture, its expenses shall
be reimbursed as Project Expenditures, in obtaining such permits,
licensees, and approvals as may be required to conduct Mining Operations.
It shall be clarified that EDILRIM is to assist the Joint Venture in
obtaining all necessary approvals, permits, consents, etc. in respect of
all minerals, metals or other products which may be producible from the
Exploration Permit or the Mining and such permits, approvals and consents
will be for the processing, marketing and export of such products so that
the Joint Venture will be able to receive reasonable returns from the
effort of conducting the Mining Operations.
11.4.3 Guarantee of Working Conditions in Property.
EDILRIM shall assist to guarantee the following rights of Joint Venture in
Property:
(a) the work of the earth's surface in Property;
(b) access to Property to conduct Operations and Mining Operations;
(c) use of water and electricity and railway in Property at market price;
(d) use of roads and facilities of transportation in Property; and
(e) construction of supplementary facilities in Property but same should
not affect the working of other facilities of EDILRIM.
In summary, EDILRIM shall assist to guarantee the basic conditions of
Operations and Mining Operations of the Joint Venture in Property so that
the Joint Venture can work smoothly.
11.5 Marketing of Minerals from the Joint Venture
11.5.1 Marketing Policy
The Parties agree that marketing policy of products shall be based in
principle on the best interests of the Join Venture. It is agreed and
acknowledged by the Parties that, especially in respect of marketing
decisions, the best interests of the Joint Venture means the best interest
of the Joint Venture as an entity as opposed to the interests of either of
the Parties individually. The Board of Directors shall be empowered to
determine how and where to market the Products of the Joint Venture, within
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the limits of the regulations of the Chinese national government, from time
to time.
11.5.2 Exporting Rights
The Parties recognise that it is of fundamental importance to the viability
of any Mining Operations that the Joint Venture shall have the right to
sell all Products derived from the Properties to any market, international
or Chinese. With this objective in mind, EDILRIM shall continue assisting
the Joint Venture to lobby relevant Government authorities so that the
Joint Venture may be granted such export rights.
11.6 Importation of Technology and Equipment
11.6.1 Quotation
MINCO has the obligation to recommend suitable and advanced technology and
equipment and their reasonable quotations for the Joint Venture.
11.6.2 Purchasing Plan of Technology and Equipment
On the basis of a thorough investigation on both international market and
domestic market, the general manager shall prepare the purchasing plan for
technology and equipment in accordance with the progress of the Operations.
11.6.3 Approval of Purchasing Plan
The general manager should submit the purchasing plan of technology and
equipment to the Board of Directors for approval at least one month (30
days) before the Board meeting or other date as required by the Board of
Directors.
11.6.4 Implementation of Purchasing Plan
(a) The important technology and equipment required by the Joint Venture
shall be purchased in principle through a fair bidding procedure;
(b) When similar technology and equipment are available in the domestic
market, purchase shall be conducted in China.
11.6.5 Appraisal of the Imported Technology and Equipment
All the imported technology and equipment purchased through fair bidding
shall be appraised by China Commodity Inspection Agency.
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12 LABOUR, TRAINING AND TECHNOLOGY TRANSFERS
12.1 Labour Policy of the Joint Venture
12.1.1 Flexible Labour Requirements
The Labour requirements of the Joint Venture will fluctuate considerably
depending upon the requirements of particular Programs and Budgets proposed
for the Operations. Each Program and Budget prepared by the General Manager
and subsequently approved by the Board of Directors shall pay specific
attention to the Labour requirements and training component of each
Program.
12.1.2 Priority to Efficiency of the Operations
The Joint Venture, shall give priority to the efficiency of the Operations
when devising and implementing its Labour policies but full weight will
also be given to the requirements of the Regulations of the PRC on Labour
Management in Joint Ventures using Chinese and Foreign Investment (for the
purposes of this Article 12, the "Labour Regulations").
12.2 Selection of Employees and Contractors
The Chairman shall select the Joint Venture's employees and contractors and
determine the number thereof and the terms and conditions of their
engagement depending upon the requirements of Programs and Budgets
scheduled for any year. The Joint Venture is determined by the Parties to
be operated as an efficient and flexible unit without a large number of
employees. It is preferred to engage workers as contractors or consultants
rather than as employees. In selecting employees and contractors the
Chairman shall, consistent with the Labour Regulations, and principally for
the efficient management of the Joint Venture and its Operations, and
subject to a fair bidding procedure open to such numbers of participants as
is in the best interest of the Joint Venture in the sole opinion of the
Chairman, give EDILRIM preferred consideration, provided that services are
of similar quality and at competitive prices, for hire as employees or
contractors and shall endeavour to employ qualified and experienced Chinese
employees of EDILRIM. However the Joint Venture shall be free to introduce
expatriate personnel into China as is deemed to be necessary for the
efficient performance of the Operations. For greater certainty, the primary
principle shall be the acquisition of the best services and labour to
conduct the Operation of the Joint Venture for the most reasonable cost and
that a fair bidding process be used to find those services and labour. The
Joint Venture shall sign labour agreements with individual employees or a
group of employees and such labour agreements shall be filed to the
Government labour administration agency.
12.3 Contributions to Statutory Labour Funds
The Joint Venture shall comply with all requirements of the Labour
Regulations concerning contributions to the awards, welfare and social
insurance funds of its employees while they are in the employment of the
Joint Venture.
12.4 Training of Joint Venture Personnel and Transfer of Technology
12.4.1 Guidelines for Training Program
The general manager, in accordance with the guidelines provided by the
Board of Directors, shall develop and establish a comprehensive program for
training Joint Venture employees and contractors engaged to undertake their
various functions within the operative Joint Venture.
12.4.2 Introduction of Appropriate Advanced Technology
(a) Each of the Parties shall wherever possible introduce to the Joint
Venture appropriate advanced equipment, technology and managerial
experience necessary for efficient and productive conduct of the
Operations. The general manager shall ensure that Joint Venture
employees and contractors engaged by the Joint Venture receive
training to ensure their comprehension and efficient deployment of
such technology and management practice in the context of Operations
to be undertaken.
(b) The technology transfer envisaged by paragraph 12.4.2 (a) above shall
not require either Party capable of transferring technology to
disclose or introduce restricted proprietary know-how, patents or
other commercially confidential information to the Joint Venture.
However, wherever possible a Party which intends to transfer
technology shall endeavour to have the Joint Venture licensed to use
technology appropriate to the Operations, subject always to the prior
approval of the proprietor of such technology. Costs and expenses
incurred by the Joint Venture in the course of its personnel training
program under sub-sections 12.5.1 and 12.5.2 shall be charged to
Project Expenditure.
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13 ASSIGNMENT AND SUCCESSION
13.1 Assignment
Subject to sections 13.2 and 13.3, either Party may sell, transfer,
mortgage, lease or in any manner dispose of in any other way the whole or
any part of its Beneficial Interest.
The above sale, transfer, mortgage, lease or in any manner dispose of
Beneficial Interest of a Party, shall be subject to the consent of the
other Party and the approval of the original approving Government agency.
However, should one Party sell, transfer, mortgage, lease or in any manner
dispose of in any other way the whole or any part of its Beneficial
Interest to its associated companies or subsidiaries, the restriction of
this section shall not apply but the other Party should be notified in
advance.
13.2 Assumption Agreement
Any new entity who receives an interest in a Party's Beneficial Interest as
contemplated in section 13.1 shall only be entitled to the benefits of such
interest following the execution and delivery of an assumption agreement
relating to that interest and the terms and conditions of this Contract
attaching thereto in form and substance satisfactory to the other Party to
this Contract and shall be subject to the approval of the original
Government approval agency.
13.3 Restrictions
Notwithstanding any of the preceding provisions of this Article 13, each of
the Parties covenants and undertakes that except as unanimously resolved by
the Board of Directors it shall not sell, mortgage, lease or in any manner
dispose of in any other way any of its rights under this Contract or the
whole or any part of its Beneficial Interest in a manner which would result
in either Party being prevented in practice from continuing, or prejudicing
their (or its) ability to continue the Operations.
14 ELECTION TO CAP CONTRIBUTIONS
14.1 Election Notice by MINCO
While it is the intention of MINCO to proceed to spend the Initial
Investment and develop the Property as quickly as is reasonable on a
technical basis to develop the Property assuming positive results of each
Program and Budget completed. If the Board of Directors of the Joint
Venture concludes that there is no further exploration and development
potential on the Property, MINCO by notice in writing to EDILRIM may, at
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any time, give an election-to-cap-further-contribution notice to EDILRIM
which shall take effect at the end of any Program and Budget which has been
approved by the Board of Directors.
14.2 Effective Date of Cap
Upon the effective date of a notice to cap contributions pursuant to
section 14.1 the Beneficial Interest of MINCO shall be frozen at the level
calculated at the completion of that last Program and Budget to which MINCO
has just completed its contribution and MINCO shall cease to have any right
to contribute to any Program and Budget beyond that frozen level of
Beneficial Interest under this Contract.
14.3 Withdrawal from Property
At any time after the effective date of a MINCO election-to-cap-expenditure
notice, MINCO shall have the option to completely withdraw from any Mineral
Rights and terminate its right, title and interest in any Mineral Right
held by the Joint Venture by giving 15 days written notice of its intention
to do so to EDILRIM, and the Joint Venture may assign its entire right,
title and interest in said Mineral Right to EDILRIM without compensation
therefor. The Joint Venture will bear the transfer fees, taxes or similar
levies. After any such termination and assignment, the assigning party
shall have no further obligation with respect to the Mineral Right in
question. Any such Mineral Right may be explored, developed, mined or sold
for the sole account of the party to which it has been assigned.
14.4 Implementation of Cap Contributions
If MINCO has sent the election notice pursuant to section 14.1, it shall,
on the date upon which its election to cap becomes effective:
(a) have the voting rights attaching to its actual Beneficial Interest;
(b) have liability, in accordance with its Beneficial Interest from time
to time, to contribute to approved Programs and Budgets or suffer
dilution in accordance with the provisions of Article 10;
(c) continue to be bound by Article 18;
(d) be and remain liable for payment of any amount due and owing by it at
the date of its election notice and for its proportion of Project
Expenditure, but only pursuant to an approved Program and Budget in
respect of which it was Contributing Party as at the effective date of
the election notice, where such amount due and owing had not been
invoiced by the General Manager at the date of such election notice.
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14.5 Willing Third Party Investor
If the Parties hereto are interested in selling the whole project and a
willing third party is found then dilution to the Beneficial Interests of
MINCO and EDILRIM shall occur in accordance with their respective
Beneficial Interests held at the time, as the third party earns in.
14.6 EDILRIM'S Right to Spend Further
If EDILRIM or a third party wishes to spend further after receipt of an
election to cap notice pursuant to section 14.1 has been sent by MINCO,
EDILRIM has right to spend further and MINCO will suffer dilution in
accordance with the terms and provisions of Article 10.
15 ACCOUNTING, REPORTING, AUDITING AND BANK ACCOUNTS
15.1 Foreign Exchange Reporting
15.1.1 Treatment of Foreign Currency Exchange Rates
If any expenditures or receipts are made in a currency other than American
Dollars, with the exception of expenditures in RMB, such expenditures and
receipts shall be converted to American Dollars at the mean of the average
daily buying and selling rate for US Dollars established by the Bank of
China at the time of such expenditure or receipt. Conversions of RMB of the
PRC into American Dollars shall be made at rates of exchange quoted to the
Chairman by the Bank of China at the time of conversion or as otherwise
prescribed by relevant Chinese laws and regulations.
15.1.2 Treatment of Foreign Currency Exchange Gains or Losses
At the end of each accounting period, any gains or losses in the Joint
Venture's financial books of account attributable to variations in foreign
exchange, shall to the extent permissible under relevant Chinese laws and
regulations be accounted for in accordance with internationally recognized
accounting principles generally accepted in the mining industry.
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15.2 Financial aspects of Operations and Annual Reports
15.2.1 Submission of Financial Summary of Prior Budgetary Period
At each meeting of the Board of Directors at which the General Manager is
to submit, in accordance with Article 9, a proposed Program and Budget, the
General Manager shall also submit a summary of financial aspects of the
Operations for the prior budgetary period.
15.2.2 Submission of Annual Report using the International Accounting Standards
The General Manager shall prepare and deliver to the Board of Directors for
consideration and approval within sixty (60) days following the end of each
fiscal year an annual report containing financial statements including a
balance sheet and profit and loss statement which shall consolidate the
information contained in the quarterly statements of Project Expenditure
furnished in respect of such year by the General Manager to the Board
pursuant to sub-section 15.2.1 and any variations made thereto. Such annual
report shall be accompanied by a verification report prepared by a Chinese
certified accountant chosen by the Board of Directors. The financial
statements included in the annual report shall be prepared in accordance
with the Chinese and international accounting principles generally accepted
in the mining industry. Upon consideration and approval of such financial
statements by the Board, the General Manager shall thereafter deliver
within ninety (90) days of the end of each fiscal year copies of the
approved annual report to all appropriate Government authorities.
15.3 Audits
An audit of the Joint Venture's financial books, reports and records shall
be conducted annually by an internationally recognized firm of auditors
registered to undertake business in China.
15.4 Bank Accounts
15.4.1 The Joint Venture shall hold all Contributions in a separate interest
bearing bank account to be used solely for the payment of Project
Expenditure.
15.4.2 Under the direction of the Board and the supervision of the General
Financial Supervisor, the General Manager may open, maintain and operate
such other bank accounts as are necessary or convenient in connection with
the performance of the responsibilities of the General Manager under this
Contract.
15.4.3 Any foreign currency account of the Joint Venture shall be subject to the
relevant regulations of the Government.
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15.4.4 If required to conduct the business of the Joint Venture, the Joint
Venture may open accounts by providing its Business Licence to the banks
authorised by the appropriate foreign exchange administrations in China.
In special circumstances, the Joint Venture may, with approval of the
Board of Directors pursuant to the relevant Chinese laws and
regulations, select banks and open accounts outside of China.
15.5 Accounting
15.5.1 Statements and Xxxxxxxx
The Joint Venture as agent for the Parties shall xxxx each of the Parties
on or before the last day of each calendar month for its proportionate
share of Project Expenditures and expenses for the preceding calendar
month. Such bills will be accompanied by statements reflecting all charges
and credits to the Joint Account, summarized by appropriate classifications
indicative of the nature thereof. Expenditures for tangible assets and
unusual charges will be detailed, including copies of invoices where
appropriate.
15.5.2 Adjustments
Payment of any such bills shall not prejudice the rights of the Parties to
protest or question the correctness thereof provided, however, all bills
and statements rendered to the Parties by the Joint Venture during any
calendar year shall conclusively be presumed to be true and correct after
twenty-four (24) months following the end of such calendar year, unless
within the said twenty-four (24) month period the Parties take written
exception thereto and makes a claim on the Joint Venture for adjustment. No
adjustment favourable to the Joint Venture shall be made unless it is made
within the same prescribed period. The provisions of this Article shall not
prevent adjustments resulting from a physical inventory of the material
purchased for Joint Operations.
15.6 Distributions
15.6.1 Recovery of Project Expenditures Contributed in the Exploration Period
Each of the Parties shall be entitled to pro rata recovery in full from the
net profits of their contributions to Project Expenditures contributed
during the Exploration Period prior to any other distributions to the
Parties in accordance with their Beneficial Interest. EDILRIM's
contribution includes the contribution in the form of intangible assets
such as Mineral Rights, etc.
15.6.2 Distributions of Net Profits in Accordance with Beneficial Interests
Subject to Section 15.6.1, the net profit of the Joint Venture, after the
recovery of each Party's contribution to Project Expenditures, will be
distributed to the Parties in accordance with their respective Beneficial
Interests.
16 INSURANCE
16.1 General Manager to Devise Insurance Program
The General Manager shall devise an insurance Program for the Operations
and submit it to the Board of Directors for review and approval prior to
the commencement of any Operations and, in any event, no later than one
hundred and twenty (120) days after the Commencement Date. The General
Manager shall obtain insurance required in accordance with such Program as
approved by the Board before commencement of the Operations; it being
expected that a reputable insurer will be contracted with to insure MINCO
and EDILRIM and the Joint Venture, their respective authorised agents,
representatives and contractors against claims that arise from the conduct
of the Programs on the Exploration Permit and the Minerals Rights during
Operations.
16.2 Insurance Coverage
The insurance Programs shall include, but not be limited to, the following
insurance covering:
(a) damage incurred in relation to all aspects of Operations;
(b) damage to data packages, computer software or hardware utilized by the
Joint Venture for the Operations;
(c) liability to third parties arising by reason of the Operations;
(d) liability for injury or death to third parties or damage to property
of third parties pertaining to the use of any motor vehicle in the
service of, or the property of, the Joint Venture;
(e) expenses incurred during the transportation and storage in transit of
goods shipped to or from the Joint Venture; and
44
(f) such other insurance as is usual and customary in the mining industry
to cover the risks of Operations and as may be specifically mandated
by the Board of Directors from time to time.
16.3 Party's Personal Accident Insurance
In the course of the Operations, each Party shall cover separately personal
accidental death and injury insurance with respect to personnel assigned or
seconded by them to the Joint Venture respectively. The premiums in respect
thereof shall be dealt with in the following way: the premiums for
accidental death and injury insurance with respect to personnel whose costs
are charged to Project Expenditure pursuant to the provisions of the
Contract shall be charged to the Joint Venture, and those with respect to
other personnel shall be borne respectively by the Parties by which they
are assigned.
16.4 Premiums as Project Expenditure
Any premium required for the insurance of the agreed insurance Program
shall be charged to Project Expenditure, and any recovery made from
insurers unless the beneficiary of insurance is a third party (i.e. an
employee or consultant) shall be credited to the Joint Venture's benefit.
17 CONFIDENTIALITY
17.1 Definition of Confidential Information
Unless otherwise agreed by each of the Parties, this Contract, the Articles
of Association of the Joint Venture Company, any offer documents or drafts
of this Contract, all agreements, all documents and all information that is
not in the public domain (other than that which has been improperly
disclosed) relating to the Mining Rights, the Properties, the Operations,
and any data or analysis of or relating to the Joint Venture shall be
confidential to the Joint Venture and to the Parties.
17.2 Prohibition on Disclosure of Confidential Information
17.2.1 General Prohibition and Specified Exceptions
No information that is confidential under the terms of section 17.1 shall
be disclosed by a Party without the prior approval of the other Party
otherwise than:
(a) to the other Party or the Chairman;
45
(b) to officers and employees of either of the Parties or to their
affiliates, but only to those employees and officers with a "need to
know" and only after each such person has executed a confidentiality
acknowledgement reciting the specific terms of this Article 17;
(c) (subject to section 17.3) if and to the extent required pursuant to
any necessarily applicable legislation or pursuant to the rules or
regulations of a recognized stock exchange applicable to a Party or to
an affiliate thereof;
(d) to a financial institution and its technical and professional advisers
in connection with any loan or other financial accommodation sought to
be arranged by the disclosing Party for purposes directly related to
the provision of financing for the Joint Venture or the Parties and to
bona fide potential assignees of all or part of the Beneficial
Interest of that Party (but such disclosure shall only be made for the
purposes of and shall be limited to the information necessary for
satisfying such institution or potential assignee as to the value of
the Beneficial Interest and the value and commercial viability of the
Operations or contemplated Mining Operations);
(e) independent consultants, contractors and technical and professional
advisers of the Parties or the Chairman whose duties in relation to
the Joint Venture reasonably require such disclosure;
(f) to relevant government departments having direct responsibility for
and oversight of the business and objectives of the Joint Venture and,
additionally, to other government departments having statutory
authority to gather information from mineral explorers and miners
PROVIDED HOWEVER that any disclosure pursuant to sub-sections 17.2(d)
and 17.2(e) shall only be made subject to the institution and/or
person to whom disclosure is made covenanting and agreeing with the
disclosing Party in a form enforceable by any other Party to the Joint
Venture that such information shall not be disclosed to any other
person for any purpose whatsoever or used for its or his own benefit
and provided further that a Party shall ensure that any such
information disclosed to an affiliate of it shall not be disclosed by
that affiliate except as would be permitted by this section 17.2; and
(g) to securities commissions and stock exchanges and any other government
departments or agencies to whom the Parties owe disclosure obligations
in respect of the happening of a material event or fact, where
material is in relation to the Party doing the disclosing.
17.2.2 Application of Chinese Law when removing Confidential Information from
China
All relevant statutory procedures of the Chinese Government shall be
complied with when any Party wishes to remove confidential information from
China.
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17.3 Public Announcements
The Parties shall use their reasonable endeavours to agree in advance to
the text of all public announcements to be made in relation to the Joint
Venture, including those described in sub-section 17.2.1; however, given
the legal disclosure obligations of the Parties, notwithstanding anything
to the contrary contained in this Contract, a Party shall be entitled to
release a public announcement. Neither Party shall attribute any such
public announcement to the other Party or to the Joint Venture without the
prior consent of that other Party.
18 PROTECTION OF THE ENVIRONMENT
The Joint Venture is concerned and will be cognizant of the environment
within the Property and Joint Assets described in the Exploration Permit
when conducting Operations. The Joint Venture will have an environmental
policy determined by the Board of Directors which will be specifically
developed to address the needs of the Joint Venture. In particular, the
Joint Venture shall observe standards which are no less stringent than
those set out in laws of the Chinese Government pertaining to environmental
management and control.
The Parties covenant that EDILRIM shall have the obligation for the
environment protection within the Property before the establishment of the
Joint Venture; and the Joint Venture shall be responsible for the
environment protection within the Property after the establishment of the
Joint Venture.
19 FORCE MAJEURE
19.1 Consequence of Force Majeure
Any failure on the part of either Party, or of the Joint Venture, to fulfil
any obligation proposed under this Contract including any Program and
Budget shall be excused if and to the extent that such failure arises from
Force Majeure and, if through Force Majeure the fulfillment by such Party
or the Joint Venture of any of the obligations under this Contract be
delayed, the period of such delay, together with such period as may be
necessary for the restoration of any damage done during such delays and for
the resumption of Operations, shall be added to the time given in this
Contract for the performance of such obligation and for the performance of
any obligation dependent thereon and to the term of this Contract.
19.2 Definition of Force Majeure
"Force Majeure", within the meaning of Clause 19.1 shall mean any order,
regulation or direction of any government or state whether promulgated in
the form of law or otherwise, or any act of the public enemy, perils of
navigation, fires, floods, storms, typhoons, earthquakes, epidemics,
accidents, hostilities, war (declared or undeclared), blockades and
unpredicted embargoes or other enemy action, strikes and other labour
disturbances, insurrections, riots, or any other cause not due to the fault
or negligence of the Party claiming Force Majeure, whether or not similar
to the foregoing provided that any such cause is beyond the control of such
Party.
19.3 Notice Requirements
The Party claiming Force Majeure shall give notice thereof to the other
Party without delay, stating the cause and the date of its commencement and
adducing evidence in support, and both Parties shall thereafter take all
reasonable steps within their power to remove or mitigate the effects of
such cause. If the cause is not removed within one (1) year and the
Operations within that period have been severely curtailed the Parties
shall enter into negotiations to discuss in good faith the continuance of
this Contract. Upon an event of Force Majeure ceasing, the Party claiming
Force Majeure shall notify the other Party without delay.
20 APPLICABLE LAWS
20.1 Chinese Law
The Law applicable to this Contract is the law and regulations of the
People's Republic of China. All the lawful Operations and Joint Assets of
the Joint Venture shall be protected by the law and regulations of the
People's Republic of China and the international treaties or conventions as
described in clause 20.2 of this Contract.
20.2 Treaties to Prevail
Where international treaties or conventions to which China is a signatory
are in conflict with a pertinent Chinese law and regulations, such treaties
or conventions shall prevail with the exception of any reserved provisions
made by the Chinese Government at the time of signing such treaties or
conventions.
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20.3 Common Practice in Operations
Where there is no provision of relevance to the Joint Venture existing
either in Chinese law and regulations or in any relevant international
conventions or treaties in existence to which China has acceded then the
common practices of the mining industry internationally shall apply to this
Contract.
20.4 Changes in Law
Any changes in law and regulations shall be dealt with in accordance with
the provisions of Article 22.
21 SETTLEMENT OF DISPUTES
21.1 Consultation
The Parties shall meet periodically to discuss the conduct of the
Operations covered by this Contract and shall make every effort to settle,
amicably and in good faith, disputes of any kind whatsoever arising out of
or related to the performance of this Contract.
21.2 Expert Conciliation
21.2.1 Notice of Intent to Submit to Expert Conciliation
If the Parties are unable to resolve amicably through consultation any
dispute within one hundred and twenty (120) days of one Party receiving the
other Party's notice of dispute, then on or before the thirtieth day
following the expiration of such one hundred and twenty (120) day period
(or such other time as the Parties may mutually agree) either Party may
give the other Party notice of its intent to submit the matter in dispute
to an independent expert (the "Expert") for conciliation pursuant to this
Clause 21.2.
21.2.2 Appointment of Expert
The Parties shall mutually agree upon the appointment of the Expert, who
shall be a person suited by reason of his qualifications, experience and
expertise for the determination of the matter in dispute. The Expert's fees
shall be shared equally by the Parties. If the Parties fail to agree upon
the appointment of the Expert within thirty (30) days of the notice to
submit the dispute to the Expert, then the dispute shall be referred to
settlement by arbitration in accordance with Clause 21.3.
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21.2.3 Convening a Hearing
No later than thirty (30) days after the Expert is appointed, the Expert
shall convene a hearing at which the Parties shall have the full
opportunity to explain their respective positions and present supporting
documentation. The hearing shall not last more than seven (7) days. The
Parties may also mutually agree to not convene a hearing and may make a
request to the Expert in writing that the Expert makes a decision on the
basis of written submissions by the Parties.
21.2.4 Rendering of Written Decision
No later than thirty (30) days following the conclusion of the hearing, or
the date on which the Parties together request that no hearing for the
matter should be convened, the Expert shall render a decision in writing
concerning the matter in dispute.
21.2.5 When Decision Becomes Final and Binding
If the Expert has provided his decision concerning the matter in dispute
and no Party provides notice of its intent to submit the matter to
arbitration in accordance with Clause 21.3 then on the thirtieth day after
the Expert issues his decision in accordance with sub-clause 21.2.4. the
decision of the Expert shall become final and binding on the Parties.
21.3 Arbitration
21.3.1 Use of Arbitration
Any dispute in respect of which:
(a) amicable settlement amicable settlement has not been reached within
one hundred and twenty days of written notice of the dispute,
(b) neither Party requests resolution of the dispute by the Expert within
the thirty (30) day period set forth in sub-clause 21.2.1, or a
decision by the Expert pursuant to Clause 21.2. has not become final
and binding pursuant to sub-clause 21.2.5, or
(c) pursuant to sub-clause 21.2.2 the Parties fail to agree upon the
appointment of an Expert,
shall be finally settled by arbitration in Singapore under the Statutes of
Singapore.
21.3.2 Language of Proceedings
The language of the arbitral proceedings shall be Chinese and English. All
materials utilized in the hearing, statements of claims or defence, and
awards and the reasons supporting them shall be in Chinese and English.
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21.3.3 Relevant Matters to Consider
In rendering its decision, the arbitrator shall comply with and pay full
regard to the terms of this Contract including principles contained in
Article 20, and this Clause 21.3 and shall consider the intention of the
Parties at the time of entering into this Contract insofar as it may be
ascertained from the Contract.
21.3.4 Powers of Arbitrator Regarding Expert Conciliation
The arbitrator shall have the full power to review and revise any decision,
recommendation or opinion of the Expert related to the dispute. No Party
shall be limited in the arbitral proceedings to evidence or arguments
submitted to the Expert pursuant to Clause 21.2, and nothing shall prevent
the Expert from being called as a witness to give evidence before the
arbitrators.
21.3.5 Decision is Final, Binding and Non-appealable
The award of the arbitral tribunal shall be final, binding and
non-appealable upon the Parties, and any Party may seek to enforce or
execute the award in any court of competent jurisdiction.
21.3.6 Power to Award Costs
The arbitrator shall have the authority to award costs to the winning party
and otherwise to settle matters relating to proceedings before the
arbitrator.
21.4 Failure to Comply with Binding Expert's Award
Notwithstanding any preconditions to arbitration set forth in Clause 21.3,
if a Party fails to comply with an Expert's decision that has become final
and binding pursuant to sub-clause 21.2.5, the other Party shall have the
right to immediately refer the matter to final arbitration in accordance
with Clause 21.3.
21.5 Validity During Arbitration
During arbitration, this Contract shall continue to be performed by the
Parties except for matters in dispute.
22 CHINESE LEGISLATION
22.1 References in this Contract
Any references in this Contract to any law, by-law, rule, regulation, order
or act of any Government, governmental body or other regulatory body shall
be construed as a reference thereto as amended or re-enacted from time to
time or as a reference to any successor thereto.
22.2 Changes to Legislation
If, after the signing of this Contract, there is any change in existing
laws, regulations, rules or policies (a "Change") or any new laws,
regulations, rules or policies are introduced (a "New Provision") in the
PRC which is applicable to the Joint Venture, or to the activities of any
Party in relation to matters dealt with herein, and the effect of the
Change or New Provision is either to provide for preferential treatment to
or, conversely, to have an adverse effect on the Joint Venture or any of
the Parties then:
(a) if the Change or the New Provision is more favourable to the Joint
Venture or one of the parties than the relevant laws, acts, rules or
regulations in effect on the date this Contract was signed (and the
other Parties are not materially and adversely affected thereby), the
Joint Venture and the Party concerned shall promptly apply to receive
the benefits of such Change or New Provision. All of the Parties shall
use their best efforts to cause such application to be approved by the
relevant Government authorities; and
(b) if, because of the Change or New Provision, the economic benefits to
any Party or the Joint Venture existing or to arise under this
Contract are materially and adversely affected, directly or
indirectly, then, in accordance with the provisions of Article 40 of
the Law of the People's Republic of China on Foreign Economic
Contracts, this Contract shall continue to be implemented in
accordance with its original terms. If, for any reason the provision
in the preceding sentence cannot be implemented, upon notice by the
affected Party to the other Parties, the Parties shall consult
promptly and make all such amendments to this Contract and any other
related documentation as are required to maintain or preserve the
economic benefits of the affected Party or the Joint Venture
hereunder, provided, however, that the Parties other than the affected
Party are not materially and adversely affected thereby.
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23 MISCELLANEOUS
23.1 Amendment of Contract
23.1.1The mutual written consent of the Parties shall be required to annul,
amend, modify or supplement the provisions of this Contract; and all
amendments, modifications or supplements to the Contract (hereinafter
collectively called the "Amendments"), if any, shall be expressed in
writing and signed by the Parties or their authorised representatives.
23.1.2 All proposed Amendments shall be subject to approval by the original
Government examination and approval authority or such other Government
department at that time responsible for administering foreign investment.
23.1.3 No Amendments shall be contrary to the terms of Chinese Law and
Regulations.
23.2 Inurement
Subject to the provisions of Article 14, this Contract shall be binding
upon, and inure to the benefit of, the Parties and their successors and
respective assignees.
23.3 Notices
23.3.1 Address for Delivery or Service
Any and all notices and other types of communication ("Notices") required
by or given pursuant to this Contract by either Party to the other shall be
written in Chinese and English, and shall be validly served when delivered
personally, or sent by recognized courier service, telex or facsimile
communication ("facsimile") to the following address:
Address of EDILRIM:
00 Xxxxx Xxxx, Xxxxxx Xxxx, Inner Mongolia, PRC
Attention: Manager Office
Telephone: (0000) 0000000
Facsimile: (0000) 0000000
Address of MINCO:
1200 - 000 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx Xxxxxx
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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23.3.2 Effective Date of Service
The effective date of service of a Notice shall be the date upon which it
is received at the address of the Party to which it is addressed as
evidenced, in the case of hand/courier delivery, by a signed receipt, and
in the case of telex or facsimile, by telex or facsimile acknowledgement.
23.3.3 Change of Address
Any Party hereto may change or add parties to whom Notices to it shall be
addressed by giving ten (10) days' written notice thereof to the other
Party. Change of address of any Party may be made by giving ten (10) days'
written notice to the other Party.
23.4 Language of Text
This Contract is written in duplicate in both Chinese and English, with
both texts being equally authentic.
23.5 Preferential Treatment
The Parties agree that at all times everything will be done to ensure most
favoured treatment from the Government to the Joint Venture and to the
Parties.
23.6 Additional Documents
The Parties shall sign such further and other documents, cause such
meetings to be held, resolutions passed and by-laws enacted, exercise their
vote and influence, do and perform and cause to be done and performed such
further and other acts and things as may be necessary or desirable in order
to give full effect to this Contract and every part thereof.
23.7 Time of the Essence
Time shall be of the essence of this Contract and of every part hereof and
no extension or variation of this Contract shall operate as a waiver of
this provision.
23.8 Waivers and Remedies
No delay or omission by any Party in exercising any right or remedy
hereunder shall operate as a waiver thereof, or of any other right or
remedy, and no single or partial exercise thereof shall preclude either the
further exercise thereof, or the exercise of any other right or remedy. All
rights and remedies granted or recognized herein by any Party are
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cumulative and may be exercised at any time and from time to time
independently or in combination.
23.9 Counterparts
This Contract may be executed in several counterparts, each of which so
executed shall be deemed to be an original and such counterparts together
shall be but one and the same instrument.
23.10 Transmission by Facsimile
The Parties agree that this Contract may be transmitted by facsimile or
such similar device and that the reproduction of signatures by facsimile or
such similar device will be treated as binding as if originals and each
Party undertakes to provide each and every other Party with a copy of the
Contract bearing original signatures forthwith upon demand.
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IN WITNESS WHEREOF the Parties have duly executed this Contract as evidenced by
the signatures set out below.
EXPLORATION AND DEVELOPMENT INSTITUTE OF MINCO MINING & METALS
LAND AND RESOURCES OF INNER MONGOLIA CORPORATION
Legal Representative: Legal Representative
-------------------------------------------- -----------------------------
Title: Manager Title: President & CEO
