August 2, 2002 MOD determined that the Insured had fully complied with its obligations

with respect to those duties. The mine has becn closed since, May 19, 2001. Fherefore
these provisions arc not applicable to the instant determination.

Conclusion

For the foregoing reasons, OP 1C conchides that the claim of the Investor is valid. The
amount of compensation to be paid for the lease coverage for the period July 1 through

September 30, 2003 is determined to be $1 14,432.75, including interest.

OVERSEAS PRIVATE INVESTMENT CORPORATION

By: ARS de cer

Peter §, Watson

President and Chief Executive Offiect

Date: ZZ OCT 2003


interest in the amount of $373.75 computed at the average daily federal funds rate for the
period as required by the Contract, for a total of $114,432.75.

(1). Adjustments (o Compensation

The adjustment to compensation set forth in Section 7.02.2 of the Contract, which
authorizes OPIC w “reduce its compensation by the amount of any compensation
received by the Insured from any other sources on account of the political violence,” docs
not apply, as the Insored has not received any other compensation.

The adjustment to compensation set forth in Section 7.02.3 of the Contract does not
apply, as the Instired has not leased any other asscts to the lessee.

(2). Limitations to Compensation

The limitations to compensation set forth in Sections 7.03{a) and (b) of the Contract do
not apply, as the proposed. compensation will not execed the covered amount and the
claira does not include any penalty interest of penalty fees. The active amount is
$725,513. The active amount will be reduced by the amount of compensation paid.

(3). Assignment of Leases

Section 8.02 of the Contract, as amended by Section 10.14 requires the Insured to cither
wansfer to OPIC, within ten days after OPIC notifies the Tnsured of the amount of
compensation it will pay, the lease agreement in respect of which compensation is to be
paid or, at OPIC’s option, to “transfer to OPIC a beneficial interest in such lease and
related rights.” Because of the continuing nature of the political violence, OPIC is not in
a position to remove the equipment, ‘Additionally, it is possible that the political violence
will cease and the Tnsured will be able to resume operations. If that were to occur, then.
OPIC would be relieved of making farther payments pursuant to the Contract, Therefore,
OPIC detennined, in the August 2, 2002 MOD, that, it would require an assignment of
rights, rather than an assignment of the leases, as & condition precedent to payment of
compensation, pursuant to Section 8.02 of the Contract. The Insured entered into that
assignment of rights.

b, The Insured’s Duties Pursuant to the Contract
Atticle IX of the Contract establishes the duties of the Insured.

OPIC determines that the Insured has fully complied with all of its obligations pursuant
to the provisions of ‘Article CX of the Contract. In particular, the Insured is in compliance
with regard to its eligibility. It gave prompt notice to OPIC of the events of political
violence that gave rise to the claim and has taken reasonable measures to preserve the
property. The {nsured has fully cooperated with OPIC by giving it complete access to its
pooks and records, which OPIC has determined to be adequate, and made available for
interviews executives and other employees with direct knowledge of the Project. Section
10.18 of Contract No, F074 amended Article (X of the Contract to add additional duties
including. among others, Eavironmental Compliance and Workers Rights. OPIC, in the



L

IL

Ti.

MEMORANDUM OF D ETERMINATIONS
Political Violence Claim of Sector Capital Corporation

Contract of Insurance No. F074

The Claim

By letter dated October 6, 2003, {Lxhibit A), Sector Capital Corporation (the “Fusured” or
“Investor”) tiled an application for compensation pursuant to Contract of Insurance No.
F074 for the period July 1 through September 30, 2003. The Insured alleges that an act of
political violence, as more fully described below, occurred on May 19, 2001, at the site of
the Las Animas precious minerals mine in the State of Tolima, Colombia (the "Project"
and is continuing. The Jusured has advised OPIC that, as a result of the political violence,
it has ceased all operations at the Project and has sustained covered losses.

OPIC has determined that the claim is valid and that compensation is now payable in the
amount of $144,432.75, including interest.

The Insurance Contract

The Contract of Insurance was entered into with the Insured in 1999.

Contract of Insurance F074, an OPIC Form 234 LP 7-86A PL (Rev. 9/89), (the “Contract”)
(Exhibit B) was issucd effective August 18, 1999, to cover the Insured’s $2 million lease
payments for equipment used at the Project. The maximum coverage under this policy is
$3,800,000, The active amount of coverage is currently $725,513.

Factual Background

A. The Project and the Insured.

The Project involves the acquisition and expansion of the Las Animas
underground quartz, gold and silver mine (“Las Animas”) in the State of Tolima,
Colombia. Sector Resources, Ltd. (“Sector Resources”), @ LS,-owned Cayman
Islands company, has made up to 4 $3.5 million equity investment into its
Colombian branch (“Sector Resources Colombia”), as well as a $2 million
equipment Icase to the Colombian branch through one of its US. affiliates, Sector
Capital Corporation (“Sector Capital").



Iv.

A complete discussion of the factual background of the Project, the events
triggering the political violence, the remedial steps taken by the Insured and the
Tngured’s compliance with the Contract arc contained in the August 2, 2002
Memorandum of Determinations (the MOD"). The MOD considered and
approved the initial claim hy the Insured for the petiod May 19, 2001 through
May 18, 2002. The MOD found the claim to be valid and, at page 10, concluded
that, if the political violence continued, the Insured would be entitled to receive
additional compensation pursuant to the Contract for claims for defaults on lease
payments, which claims were [0 be submitted quarterly. OPIC tetained the
accounting firm of Deloitte & Touche (“Deloitte”) to assist it im analyzing the
Insured’s initial claim. Deloitte prepared a report to OPIC. That report included an
analysis and mode! of the lease claims throughout the term of all thirtcen leases
with payment schedules on an actual and accrued basis.

Determinations Under the Contract

‘A determination under an OPIC insurance conttact addresses three categories of issues:
(1) whether the acts complained of satisfy all the clements required to bring them within
the scope of coverage; (2) the amount of compensation payable, and (3) whether the
insured fulfilled its duties under the insurance contracts.

As stated above, the August 2, 2002 MOD concluded that the Joss was due to
political violence. Accordingly, as the instant applicati alleges a consecutive
default arising from a continuation of the political violence, Section 8.01{c} of
the Contract provides that OPIC shall be liable for subsequent consecutive
defaults unless it determines that the latter defaults were not caused by political
violence. OPIC also paid subsequent claims for defaulted lease payments for the
periods May 19 through September 30, 2002, October 1 through December 31,
2002, January 1 through March 31, 2003 and April 1 through June 30, 2003,
pursuant to separate Memoranda of Determinations. The Insured submitted a
statement thal the political violence is continuing and further states that since the
Colombian Government bas established a military presence in a neatby town, it
has begun maintenance work at the mine and to assess and repait damage caused
by previous gucrilla visits. The Tusured states that “[w]hen all maintenance and
repairs of damages are complete, we will forward a listing of work performed.
Once we feel that security conditions are acceptable to bring our employees back,
Sector will consider reactiviation of the mine”. The United States Embassy in
Bogota has confirmed that political violence is continuing in the area where the
Project is located and that the Tnsuyed has heen jn contact with the Embassy
seeking assistance to arrange meetings with Colombian Government officials.
Accordingly, OPIC has no basis for determining that the continuing closure of the
Project and losses covered under the Contract were not the result of political
violence. As will be discussed, mote fully, below, it is further determined that the
Insured fulfilled its duties under the Contract, and compensation should now be
paid in the total amount of $1 14,432.75.



L Section 6.01 of the Contract — That the loss was due 10 political violence.

(a) The evidence submited by the Insured regarding the activities of the
FARC clearly satisfies all of the elements required to bring them within the scope
‘of the definition of “political violence” set forth in Section 6.01 of the Contract.

2. Section 6.01 of the Contract - that political violence has been the direct and
immediate causc of defaults on scheduled lease payments.

(a) The requirement of coverage pursuant to the provisions of Section 6.01
of the Contract “is the direct and immediate cause of a de! fault on a scheduled
payment and such default continues for one month.” Accordingly, the scope of
coverage condition has clearly been met,

3. Section 6.02 of the Contract — That pone of the Exclusions applies.

(a) The Contract bas, as a single exclusion, provocation on the part of the
Tnsured. The evidence submitted by the Insured cl early demonstrates that it
engaged in no activity thal would bring it within the Exclusions provisions of
Section 6.02 of the Contract.

Basis of Compensation Under the Contract

Section 7.01 of the Contract provides that, assuming the requirements of Article VI are
satisfied, OPIC shal! pay compensation in the amount of the insured portion of the
scheduled payment in default “plus interest accruing from the later of (i) the date of the
scheduled payment or (ii) the date occurring one month prior to the date of receipt by
OPIC of the completed application for political violence compensation, through the date
of payment of: compensation by OPIC, at the average daily federal funds rate in effect for
such period.”

Recause there are thirtcen scparate lease contracts with different commencement and
payment dates, OPIC, for its administrative convenience, and with the consent of the
Insured, concluded that it would consider applications for compensation on a quatterly,
accrued basis. This procedure avoids the Insured having to submit, and OPIC to consider,
a multiplicity of small claims. While this procedure is not consistent with the language of
Scotion 7.01 of the Contract, it reaches the same result with fewer burdens on both the
Insured and OPIC.

Analysis of the Compen sation Claimed
a. Application of the Contract to the Claim

The Insured is entitled to compensation, pursuant (0 Section 7.01, in the amount of
$126,732, the insured portion of lease payments for the petiod in default. Attached hereto
as Exhibit C is a schedule of lease payments prepared on an accrual basis through the
term of each of the thirteen leascs. From that amount OPIC will deduct $12,673, which
yepresents the 10% self-insurance requirement of the Contract. To that will be added