vo.

Conclusion
Por the foregoing reasons, OPIC concludes that the claim of the Investor is valid. The

aniount of compensation to be paid for the Jcuse coverage for the period October 1
through December 31, 2003, is determined to be $114,348.53, including interest.

OVERSEAS PRIVATE INVESTMENT CORPORATION

By: 2b S wd QE

Peter $. Walson

- President and Chief Executive Officer

Dae: 2.) 2004



(1). Adiustments to Compensation

‘The udjustnent to compensation sct forth in Section 7.02.2 of the Contract, which
authorizes OPIC to “reduce ils compensation by the amount of any compensation
reccived by the Insured from any other sourecs on account of the political yiolence,” does
not apply, as the Insured hws not reveived any other compensalion.

‘The adjustment to compensation sel forth in Section 7.02.3 of the Contract docs not
apply, as the Insurccl has not leased any other assets-to the Iessev.

(2). Limilasons 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 nof exceed the covered amount and the
claim does not incjude any penalty interest or penalty fees, The active amount is
$725,513. The active amount will be reduced by the amount of compensation paid.

(3). Assignment of Lcases

Section 8.02 of the Contracl, us amended by Section 10. £4 requires the Insured to either
transfer to OPIC, within ten days after OPIC notifies the Insured of the amount of
compensation it will pay, the Icase agreement in respect of which compensation is to be
paid or, al OPIC’s option, to “transfer to OPIC a beneficial inturest m such lease and
related rights.” Because of the continuing nature of the political violence, OPIC is nol in
a position (o remove the equipment. Additionally, it is possible that the political violence
will cease and the Insured will be able to resume operations. If that were to occur, then
OPIC would be relieved of making further payments pursuant lo the Contract. Therefore,
OPIC determined, in the August 2, 2002 MOD, that, it would require an assignment of
tights, rather Lhan an assignment of the leases, as a condition precedent to puyment of :
compensation, pursuant to Section 8.02 of the Contract. ‘he Insured entered into that
assignment of rights.

b, The [nsured’s Duties Pursuant to the Contract
Article 1X of the Contract establishes the duties of the Insured.

OPIC determines that the Insured has fully complied with afl of its obligations pursuant
to the provisions of Article IX of the Contract. In particular, the Insured is in compliance
with regard Co its eligibility. It gave prompt notice ta OPIC of the events of political
violence that gave rise to the claim and has taken reasonable measures to preserve the
property. The Insured has fully operated with OPIC by giving it complete access to its
hooks and records, which OPIC has determined to be adequate, and made available for
interviews exccutives and other employees with direct knowledge of the Project. Section
10.18 of Contract No, F074 amended Article IX of the Contract to add additional! duties
including, among others, Environmental Compliance and Workers Rights. OPIC. in the
August 2, 2002 MON determined that the Insured had fully complied with its obligations
with respect to those duties. The mine has been closed since, May 19, 2001. Therefore
these provisions uc not applicable to the instant determination.



Il.

In.

MEMORANDUM OF DEFERMINATIONS
Political Violence Claim of Sector Capital Corporation

Contract of Insurance No. T074

The Claim

By letter dated January 5, 2004, (Exhibit A), Scctor Capita) Corporation (the “Insured” or
“Tavestor”) filed an application for compensation pursuant to Contract of Insurance No.
FQ74 for the period October i through December 31, 2003. The Insured alleges that an
act of political violenec, us more fully deseribed below, occurred on May 19, 2001, at the
sile of the Las Animas precious minerals mine in the State of Tolima, Colombia (the
"Project”) and is continuing. The Insurcd has advised OPIC that, as a result of the
political violence, it has ceased all operations at the Project und has sustained covered
losses.

OPIC has determined that the claim is valid and that compensation is now payable in the
amount of $114,348.53, including intcrest.

‘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 issued effective August 18, 1999, to cover the Insured’s $2 million lease
payments for cquipment used at the Project. The maximum coverage under this policy is
$3,500,000, The active amount of coverage is currently $591,471.

Factual Background

A. - The Projcet and the Insured.

‘The Project involves the acquisition and expansion of the Las Animas
widerground quartz, gold and silver mine (“Las Animus”) in the State of Tolima,
Colombia, Sector Resources, Ltd. (“Sector Resources”), a U.S.-owned Cayman
Islands company, has made up to a $3.5 million equity investment into its
Colombian branch (“Sector Resources Colombia”), as well as a $2 million
equipment lease to the Colombian branclrthrough one of its U.S. affiliates, Sector
Capital Corporation (“Sector Capital"),



A conmplete discussion of the factual huckground of the Project, the events
triggering the political violence, the remedial steps taken by the Insured and the
Insured’s compliance with the Contract are contained in the August 2, 2002
Memorandum of Determinations (the “MOD”). The MOD considered and
approved the initial claim by the Insured for the period May 19, 2001 through
May 8, 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 to be submitted quarterly, OPIC retained the
accounting firm of Deloitte & Touche (“Deloittc’’) to assist it in analyzing the
Insured’s initial claim. Deloitte prepared a report to OPIC. That report included an
analysis and modcl of the lease claims throughout the term of all thirteen leases
with payment schedules on an actual and accrued basis.

Determinations Under the Contract

A determination under an OPIC imsurance contract addresses three categories of issues:
(1) whether the acts complained of satisfy all the clements required to bring Lhem 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, 20022 MOD conciuded that the loss was due to
political violenec. Accordingly, as the instant application alleges a consecutive
default arising from a continuation of the political violence, Section §.01(c) of
the Contract provides that OPEC shall be liable for subsequent consceutive
defaults unless it determines that the latter defaults were not caused by political
violenec. OPIC also paid subsequent claims, pursuant to separate Memoranda of
Determinations, for defaulted louse payments for the periods May 19 through
September 30, 2002, October 1 through Deeumbes 31, 2002, January 1 through
March 31, 2003, April i through June 30, 2003, and July 1 through September 30,
2003, The Insured submitted a statement that the political violence is continuing,
and further states that since the Colombian Government has established a military
presence in a nearby town, it has begun maintenance work at the mine and to
assess and repair damage caused by previous guerilla visits. The Insured states
that “| w |hen ali maintenance and repairs of dumages are complete. we will
forward a listing of work performed. Gnce we feel that sceurity conditions are
acceptable to bring our employees buck, Sector will consider reactivation of the
mine”, OPIC has no basis for deterinininy that the continuing closure of the
Project and losses covered under the Contract were not the result of political
violence. As will be discussed, more fully, below, it is further determined that the
ngured fulfilled its duties under the Contract, und compensation should now be
paid ia the total amount of $114,348.53,

1. Section 6.01 of the Contract That the loss was due to political violence.



VL

(a} The evidence submitted by the Insured regarding the activities of the
FARC clearly satisfies al] 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 default on a scheduled
payment and such default continues for one month.” Accordingly, the scope of
coverage condilion has clearly been met.

3. Section 6.02 of the Contract — That none of the Exchisions applies.

(a) The Contract has, as a single exclusion, provocation on the part of the
Tusured. The evidence submitted by the Insured clearly 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 shall pay compensation in the amount of the insured portion of the
scheduled payment in default “plus interest aceruing from the juter of (i) the date of the
scheduled payment or (3) the date occurring one month prior to the date of receipt by
OPIC of the completed application for politicul violence compensation, through the date
of payment of compensation by OPIC, at the average daily federal funds rate in effect for
such period.”

Because there are thirteen separate lease contracts with different commencement and
payment «Lites, OPIC, for its administrative convenience, and with the consent of the
Insured, concluded that it would consider applications for compensation on a quarterly,
accrued basis. This procedure avoids the Insured having to submil, and OPIC to consider,
amultiplicity of small claims. While this procedure is not consistent with the language of
Section 7.01 of thc Contract, it reaches the same resuli with fewer burdens on both the
Insured and OPIC.

Analysis of the Compensation Claimed

a. Appheation of the Contract to the Claim

The Insured is cntitled to compensation, pursuant to Section 7.01, in the amount of
$126,732, the insured portion of lease payments for the period in default. Attached hercto
as Exhibit C is a scheduic of lcasc payments prepared on an accrual basis through the
term of euch of the thitteen leases. From that amount OPIC will deduct $12,673, which
represents the 10% self-insurance rcquircment of the Contract. ‘To that will be added
interest in the amount of $290.53 computed at the average daily federal funds rate for the
period as required by the Contract, for a wial of $114,348.53,