e Sector has not fulfilled its duty set forth in Section 9.01.15(g) of the Contract, which
requires Sector to submit to OPIC an annual monitoring report which documents
Sector’s compliance with environmental requirements for the project as outlined in
the Plan de Manejo Ambiental para la Explotacion de la Mina de Oro Filoniano
“Las Animas” and the Development Plan. Such report was required to be submitted
(a) on or before May 30, 2007 with respect to the period April 1, 2006 — April 30,
2007, (b) on or before June 30, 2008 with respect to the period May 1, 2007 — May
31, 2008 and (c) thereafter, on or before June 30 of each year during the term of the
insurance contract for with respect to the corresponding twelve-month period. Sector
has not provided such annual report for 2007 - 2011.

Section 9.02 of the Contract provides that a “material breach or misrepresentation by the Investor
shall constitute default, and OPIC may (a) refuse to make payments to the Investor; (b) recover
payments made; and (c) terminate [the] Contract effective as of the date of the breach by giving
notice to the Investor.” Section 9.03 of the Contract provides that “[nJeither OPIC’s failure to
invoke its rights, nor its acceptance of premiums, shall constitute waiver of any of its rights, even
though OPIC knows of the Investor’s breach.”

VI. Conclusion

For the foregoing reasons, OPIC concludes that Sector has not demonstrated its right to
compensation and therefore the Claim is not payable.

OVERSEAS PRIVATE INVESTMENT CORPORATION
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By: is War 6
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Don S. De Amicis ;

Vice President and General Counsel
August 23, 2012


February 22, 2011, Sector states that with such letter it was providing a “letter issued by the
Colombian Army indicating an event of political violence”, but the noted letter from the
Colombian Army does not indicate an event of political violence. Such letter, a written record of
Brigadier General Rodriguez, states only that there were “six gunmen reportedly members of
armed groups outside the law” (translated from Spanish), which does not necessarily mean
insurgents; further, the description appears to be based on the Sector employees’
characterizations rather than on independent conclusions reached by the military. The claims of
insurgent activity are further weakened by the information in the Case Report that an individual
received a phone call warning that a common criminal gang was planning to rob the mine. In
light of the lack of evidence supporting a claim of political violence and receipt of an official
report that treat the crime as committed by a common criminal gang, OPIC cannot determine that
the robbery was committed by an insurgent group and constituted an act of political violence
under the Contract.

In granting past political violence claims by Sector, OPIC has relied on independent
evidence that the acts were committed by insurgent groups. For instance, in Sector’s 2007 claim
of political violence arising out of two separate hijackings of Sector’s trucks, certifications by the
Colombian Army that the acts were committed by members of the FARC and ELN were deemed
sufficient independent evidence that the acts had been committed by insurgent groups. In the
Claim, Sector has not provided any such certifications or other independent evidence. In the
absence of other evidence, OPIC deferred its determination on the Claim pending receipt of the
Case Report. The Case Report, which is the only independent report available in this case,
concludes that the crime was most likely committed by members of a common criminal gang,
not insurgents.

Because the only independent evidence available suggests the robbery was committed by
a common criminal gang, Sector has not demonstrated that the February 7, 2011 armed robbery
was undertaken with the primary intent of achieving a political objective. Therefore, Sector has
not established that the robbery constitutes an act of political violence.

In light of the above, OPIC determines that political violence was not the direct and
immediate cause of the loss, and therefore that the acts complained of are not within the scope of
coverage. We will not analyze in detail the above noted second or third factors for the
determination because the first requirement has not been met. However, we do note the
following:

¢ Sector’s security arrangements for the mine at the time of the robbery were weaker
than what OPIC understood Sector had in place. Sector has informed OPIC that it has
a contract with the National Army to provide security, but Army personnel were
located 1.8 kilometers from the mine, with no Army personnel onsite. OPIC also has
learned that Sector does not permit its security guards onsite to carry weapons. In
addition, Sector’s closed circuit surveillance system was down for maintenance at the
time of the robbery and OPIC has no information as to how long the surveillance
system had been out of work or how well known this security weakness was among
Sector employees or other persons in the area.


MEMORANDUM OF DETERMINATION

Political Violence Claim of Sector Resources, Ltd.
Contract of Insurance No. F030

I. The Claim

By letter dated February 22, 2011 (Annex A), Sector Resources, Ltd., a U.S.-owned
Cayman Islands company (“Sector”) filed an application for compensation pursuant to Contract
of Insurance No. F030. Sector notified OPIC that on February 7, 2011, an armed robbery
occurred at the site of the Las Animas precious minerals mine in the State of Tolima, Colombia
(the “Project”), resulting in the loss of two gold dore bars. Sector alleges that the robbery was
committed by insurgents and constitutes an act of political violence; consequently, Sector has
filed a claim (the “Claim”) with OPIC for $112,846, the estimated value of the stolen gold dore
bars.

For the reasons stated below, OPIC has determined that Sector has not demonstrated its
right to compensation and therefore the Claim is not payable.

IL. The Insurance Contract

Contract of Insurance No. F030, an OPIC Form 234 KGT 12-85 (Second Revised) NS
(the “Contract”) (Annex B) was issued effective August 18, 1999, to cover Sector’s $3,500,000
equity investment in the Project. The current maximum coverage under the Contract (reflecting
reductions for payment of previous claims) is $7,522,062. The active amount of coverage on the
date of loss (February 7, 2011) was $3,150,000. Article VI (Political Violence — Scope of
Coverage) and Article VII (Political Violence — Amount of Compensation) of the Contract have
been deleted in their entirety and replaced in Sections 10.04 and 10.05, respectively, of Article X
(Amendments). All references in this memorandum are to the amended Contract.

Il. Factual Background

A. The Project

The Project involves the acquisition and expansion of the Las Animas underground
quartz, gold and silver mine in the State of Tolima, Colombia. Sector has made an investment of
up to $3,500,000 into its Colombian branch, Sector Resources Colombia.

B. Project History

From its inception, political violence has been a significant concern for the Project. The
Las Animas mine is located near the town of Santa Isabel, in the State of Tolima. Tolima has not
been one of the most active areas for political violence, but sporadic insurgent activity has
occurred there. Sector has had to suspend operations in the past in response to political violence.


Between 2002 and 2007, OPIC paid compensation in the aggregate amount of
approximately $3,225,516 with respect to ten claims made by Sector and an affiliated company,
Sector Capital. These claims arose from acts of political violence by the Revolutionary Armed
Forces of Colombia (FARC) and, in one instance, the National Liberation Army (ELN) that
resulted in loss of business income and physical damage to the Project, as well as defaults under
equipment leases (which were covered under a separate insurance contract that is no longer in
effect). The mine had to be closed for several years due to the threat of direct attacks by the
FARC, until the Colombian armed forces reasserted control over the area in 2004.

In anticipation of reopening the mine in 2004, Sector entered into an arrangement with
the Colombian military consistent with Colombian legislation relating to protection of the mining
sector, and it also retained private security consultants to take measures to reduce the tisk of loss
due to political violence. These measures included establishing communications with the local
military that would permit a quick response to incidents, improving the physical security of the
mine, instituting security-conscious personnel practices and operating procedures, and obtaining
equipment such as GPS devices for vehicles. Sector has represented that it has sought to
diminish the risk of political violence by operating in a manner that would build ties with the
local community and obtain its endorsement for development of the mine.

IV. Facts Regarding the Incident

At approximately 2:00 am on February 7, 2011, a group of about six men wearing face
masks and carrying hand guns entered Sector’s Las Animas mine. The perpetrators subdued the
mine employees on duty at the time, and allegedly asked for the plant mechanic, Cesar Diaz, by
name. The armed men compelled Mr. Diaz and another employee to cut through a safe box
containing gold dore. The perpetrators took two bars of gold dore, which together were worth
$112,846, and eventually left the premises. The mine employees had been moved into a plant
maintenance container during the robbery, and they remained there until shortly after 3:00 am,
when they were sure the perpetrators had left.

The 16" Infantry Battalion of the Colombian Armed Forces was dispatched to the mine
sometime before 3:00 am, but the military unit was unable to intercept any of the perpetrators as
they fled the scene. Several Sector officers, including Coordinator of Operations Mr. William
Torres, arrived at the mine shortly after 3:00 am and began assessing the situation.

Investigators from the Basic Criminal Investigations Unit of the Judicial and
Investigative Police Section (SIJIN) arrived at the mine around 8:40 am and commenced an
investigation into the robbery. Mr. Torres filed a complaint with the Office of the Prosecutor
General in Lérida, alleging that the men who committed the robbery were insurgents. Mr. Torres
stated that he suspected that the perpetrators were members of the Libano Bolshevik Bloc of the
ELN because the mine operators had recently received some “threatening pamphlets” from that
group expressing anger at the presence of Sector, a multinational company, in the region.
Sector’s Head of Security, Mr. Fernando Pinilla, also expressed a belief that insurgents had
committed the robbery, basing this belief on witness reports that the perpetrators carried a


backpack with a Che Guevara emblem and claimed to be members of the Aguilas Negras,
another insurgent group in the region.

The investigation into the robbery is still in progress, but investigators at the Office of the
Prosecutor General have determined that the crime was most likely committed by members of a
“common criminal gang.” That office’s Executive Criminal Case Report, dated January 30,
2012 (the “Case Report”), notes that an individual reportedly received a telephone call from a
woman who warned her that a common criminal gang was planning to rob the mine. The Case
Report also reviews recent progress toward apprehending various suspects in the case, one of
whom has been identified by several mine employees. The Case Report takes note of Sector’s
allegations that insurgents committed the robbery, but concludes that the Office of the Prosecutor
General believes the crime was committed by a common criminal gang, possibly with the help of
mine personnel.

Vv. Determination Under the Contract

A determination under an OPIC insurance contract addresses three factors: (1) whether
the acts complained of satisfy all the elements 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.

Was political violence the direct and immediate cause of the permanent loss of tangible property
of the foreign enterprise used for the Project?

Section 6.01(a) of the Contract provides that “compensation is payable ... if political
violence is the direct and immediate cause of the permanent loss ... of tangible property of the
foreign enterprise used for the project”. Section 6.01 of the Contract defines “political violence”
as “a violent act undertaken with the primary intent of achieving a political objective, such as
declared war or undeclared war, hostile action by national or international armed forces, civil
war, revolution, insurrection, civil strife, terrorism or sabotage.” Section 8.01 of the Contract
provides that the “application for compensation shall demonstrate the Investor’s right to
compensation in the amount claimed”.

In the Claim, Sector alleges that the armed robbery was committed by an insurgent group,
and that therefore the robbery was an act of violence with a political objective, satisfying the
definition of political violence. OPIC paid a previous claim in 2007 for the hijacking of two
shipments of gold concentrate, treating as political violence ordinary criminal acts that were
committed by an insurgent group as a means of financing its activities or undermining the
authority of the government. In that case, the Colombian military ascribed the hijackings to the
FARC and the ELN, and OPIC had no evidence to the contrary. However, the Claim lacks
similar independent evidence that the robbery was committed by an insurgent group rather than a
common criminal gang. Sector’s documentation refers generally to the perpetrators as
“insurgents,” but it does not include supporting evidence to substantiate that characterization.
Representatives of Sector have speculated about the involvement of different insurgent groups,
such as the Libano Bolshevik Bloc of the National Liberation Army (ELN) or Aguilas Negras,
but with no consistency or evidence to support such speculation. Ina letter to OPIC, dated