THIS CONTRACT OF SINO-FOREIGN CONTRACTUAL JOINT VENTURE made this 3rd day of
February, 1994

BETWEEN:

          CHINA NON-METAL MINE ENTERPRISE GROUP 701 MINE, an
          enterprise incorporated under the laws of People's
          Republic of China with its legal office located in
          Mengyin  County,  Shandong  Province,  People's
          Republic  of  China

          (hereinafter referred to as "Party A"

                                           OF THE FIRST PART

AND

          VVS1  LIMITED,  a  company  incorporated under the
          laws  of  Hong Kong with its legal address located
          at  2203  Cameron  Commercial  Centre,  458-460
          Hennessy  Road,  Hong  Kong

          (hereinafter referred to as "Party B")

                                          OF THE SECOND PART

WHEREAS

A.   Party  A  and  Party  B  wish to form a limited liability company that will
          explore  for  and  mine diamonds in an area of approximately 1,157,000
          square  meters  property  located  in  Mengyin County, Ping Yi County,
          Shandong  Province,  and  process  and  sell  such  diamonds  on  the
          international  market;  and

B.   Party  A  and  Party  B  wish  to record their agreements relating to their
          rights  and  obligations  in  respect of such company and between each
          other  as  shareholders  thereof.


C.   Party  A  and  Party B agree that their overriding purpose in entering into
          and  performing  this  Contract is to enable each party to enjoy, in a
          spirit  of  friendship and mutual benefit, the maximum possible profit
          from  their  respective  investments.

NOW THEREFORE in consideration of the mutual covenants herein, Party A and Party
B  hereby  agree  as  follows:

                         ARTICLE 1 - GENERAL PROVISIONS

1.1  Definitions.  The  parties  agree that where used in this Contract, unless
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     the  context  otherwise  requires,  the  following  terms  shall  have the
     meanings  set  forth  below:

     1.1.1     Approval  Authority"  means  agencies  of  foreign trade of state
               council  and/or  agencies  authorized by the state council and/or
               local  government;

     1.1.2.     "Board"  means  the  board  of  directors  of  the  Company;


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     1.1.3     "Business  Day"  means  Monday  through  Friday,  both inclusive,
               except  for  statutory  holidays  recognized  in  China;

     1.1.4     "Business  license"  means  a  business license issued by SAIC to
               create the Company, which license shall be valid for the Duration
               of  the  Joint  Venture  and permit the Company to engage in each
               item  of  business  set  out  in  section  4.1;

     1.1.5     "Contractual  Joint  Venture  Law"  means the Law of the People's
               Republic  of  China  on  Sino-Foreign  Contractual Joint Venture;

     1.1.6     "Company" means the limited liability company to be formed by the
               Shareholders  pursuant to Article 3 hereof and in accordance with
               the  Contractual  Joint  Venture  Law,

               "Duration  of  the  Joint  Venture" means a period of thirty (30)
               years  commencing  on  the  date  the Business License is issued;

     1.1.8     "Marketing  and Sales Agreement" means the agreement to be signed
               by  the  Company and Party B in the form attached as Schedule "C"
               hereto;

     1.1.9     Existing  Assets"  means all of the diamond mining and processing
               equipment,  buildings,  plant, vehicles, use of land, exploration
               rights,  rights  of way, surface rights, electricity power source
               and facilities and improvements located at Mine 701 together with
               all  diamond  inventory  relating thereto, as of the date hereof,
               all  as  more  fully  described  in  Schedule  "A"  hereto;

     1.1.10    "Feasibility  Study"  means the feasibility study prepared by the
               China  Planning & Design Institute of Construction Material dated
               December,  1993;

     1.1.11    "General  Manager"  means  the  person  engaged by the Company as
               its  general  manager  pursuant  to  section  9.2;

     1.1.12    "Independent  Valuator"  means  any  one of the International and
               Chinese  Joint  Venture  Accounting  Firms  licensed  to practice
               accounting in China and such Accounting Firm shall be selected by
               Party  B  in  writing.

     1.1.13    "Investment"  means  for  any Shareholder all of its right, title
               and  interest  in  and  to  the  Company  and  this  Contract;

     1.1.14    "Mengyin  County"  means  an  area  of  approximately 1600 square
               kilometers;

     1.1.15    "Mine  701"  means  the  1,157,000  square meters mining property
               located  in  Mengyin  County  and  Ping Yi County as out lined in
               Schedule  "D"  hereto;

     1.1.16    "Mining  Authority"  means  authority  approved  by  relevant
               government  agency for mining certain mine resources described in
               the  Contract;


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     1.1.17    "Mining  License"  means  a  license issued to the Company by the
               Mining  Authority which shall grant to the Company for the entire
               Duration  of  the  Joint  Venture  to  do  Mining;

     1.1.18    "Party  A"  means China Non-Metal Mine Enterprise Group 701 Mine,
               a  enterprise incorporated under the laws of China, and being the
               Party  of  the  First  Part  of  this  Contract;

     1.1.19    "Party  B"  means  VVS1 Limited, a company incorporated under the
               laws  of Hong Kong and being the Party of the Second Part of this
               Contract;

     1.1.20    "Prime  Rate"  means  the prime rate of interest as determined by
               the  main  branch of the Bank of Nova Scotia in Vancouver, Canada
               as  the  base rate for commercial loans to its most credit-worthy
               customers,  provided  that the Prime Rate prevailing on January 1
               of  any  year  shall be deemed to be the Prime Rate for the first
               six  (6)  months  of  that year, and the Prime Rate prevailing on
               July  1  of any year shall be deemed to be the Prime Rate for the
               second  six  (6)  months  of  that  year;

     1.1.21    "SAIC"  means  the State Administration of Industry and Commerce;
               and

     1.1.22    "Shareholders"  means  Party  A  and  Party  B  collectively, and
               "Shareholder"  means  either  one  of  them.

     1.1.23    "Parties"  means  Party  A  and  Party  B  collectively.

1.2  Interpretation.  For  purposes of this Contract except as otherwise
     --------------
     expressly  provided:

     1.2.1     "Contract"  means  this  Contract  as it may from time to time be
               supplemented,  amended  or  restated  from  time  to  time.

     1.2.2     All  references  to  designated  articles,  sections  and  other
               subdivisions  are  to the designated articles, sections and other
               subdivisions  hereof.

     1.2.3     The headings preceding the text, articles and sections hereof are
               for  convenience  only,  do  not  form  a part hereof and are not
               intended  to  interpret,  define  or  limit  the scope, extent or
               intent  hereof  or  of  any  provision  hereof.

     1.2.4     Any  reference  to an entity shall include and shall be deemed to
               include reference to an entity that is a successor or assignee of
               such  entity.

     1.2.5     The schedules attached to this Contract shall form integral parts
               of this  Contract:

               Schedule  "A"  -  List  of  Existing  Assets
               Schedule  "B"  -  Mining  Program
               Schedule  "C"  -  Marketing  and  Sales  Agreement
               Schedule  "D"  -  Location  of  Mine  701


<PAGE>
                        ARTICLE 2 - CONTRACTING PARTIES

2.1  Parties   The  parties  to  this  Contract  are  as  follows
     -------

     2.1.1     China  Non-Metal  Mine  Enterprise  Group  701 Mine, a enterprise
               incorporated  in  the  People's  Republic of China with its legal
               address  at  Changma  Village, Mengyin County, Shandong Province,
               People's  Republic  of  China.

               Legal Representative:   Name:        Zhang Yu Ling
                                       Position:    Mine Director
                                       Nationality      Chinese

     2.1.2     VVS1  Limited, a company incorporated in Hong Kong with its legal
               address at 2203 Cameron Commercial Centre, 4S8-460 Hennessy Road,
               Hong  Kong.

               Legal Representative:   Name:      Po Sun Liu
                                       Position:  Chairman and Chief
                                                  Executive  Officer
                                       Nationality: Canadian

2.2  Representations  of  Party  B.  Party  B  represents  and  warrants  to
     -----------------------------
     Party  A  as  follows:

     2.2.1     Party  B  is  a duly organized company validly existing under the
               laws  of  Hong  Kong;

     2.2.2     Party  B has full corporate capacity, power and authority and all
               necessary governmental approvals (other than those referred to in
               section  7.2.1) to enter into and perform each of its obligations
               hereunder;

     2.2.3     the  execution  and  delivery of this Contract and the observance
               and performance hereof have been duly authorized by all necessary
               corporate  action  on  the  part  of  Party  B;

     2.2.4     this Contract has been duly executed and delivered by Party B and
               constitutes  legal,  valid  and  binding  obligations enforceable
               against  it  in  accordance  with  its  terms;

     2.2.5     the  execution,  delivery  and  performance  by  Party  B of this
               Contract  does  not  and  will not constitute a default under any
               material  agreement  to  which  it  is  a party, any governmental
               regulation,  approval  or  order  to  which it is subject, or any
               provision  of  its  incorporation  documents;  and

     2.2.6     no  governmental  approvals  of  any  kind are required from any
               governmental  authority  in Hong Kong in respect of this Contract
               or  the  operations  of  the  Company  as contemplated hereunder.

2.3  Representations  of  Party  A.  Party  A  represents  and  warrants  to
     ------------------------------
     Party  B  as  follows:


<PAGE>
     2.3.1     Party A is a duly organized enterprise validly existing under the
               laws  of  People's  Republic  of  China;

     2.3.2     Party  A has full corporate capacity, power and authority and all
               necessary governmental approvals (other than those referred to in
               section  7.2.1) to enter into and perform each of its obligations
               hereunder  (including  Party  A's  obligations to arrange for the
               Company  to  be  granted  the  Mining  License);

     2.3.3     the  execution  and  delivery of this Contract and the observance
               and performance hereof have been duly authorized by all necessary
               corporate  action  on  the  part  of  Party  A;

     2.3.4     this Contract has been duly executed and delivered by Party A and
               constitutes  legal,  valid  and  binding  obligations enforceable
               against  it;

     2.3.5     the  execution,  delivery  and  performance  by  Party  A of this
               Contract  does  not  and  will not constitute a default under any
               material  agreement  to  which  it  is  a party, any governmental
               regulation,  approval  or  order  to  which it is subject, or any
               provision  of  its  incorporation  documents;

     2.3.6     only  government  approvals from government authorities stated in
               article  7.2.1  are  required  in respect of this contract or the
               operation  of  the  Company  as  contemplated  hereunder;

     2.3.7     the Company shall be required to pay no taxes, duties, royalties,
               license  fees or other payments of any kind except only for those
               described  in  section  12.1;

     2.3.8     Party  A  shall  deliver  to  Party  B all information concerning
               diamonds  in  respect of Mine 701 that is in Party A's possession
               or  control,  and  such  information  is  accurate  and complete;

     2.3.9     neither  Party  A  nor  any  other person that has engaged in the
               exploration  for  or  the  mining  of  diamonds  at  Mine 701 has
               violated  or  is violating any environmental law or regulation to
               which  such  property is subject, and Party A is not aware of any
               adverse  environmental  condition on or affecting Mine 701, or of
               the  past  or present activities of any person in respect thereof
               which  has  caused  or  is  likely  to cause or contribute to any
               adverse  environmental  condition  at  Mine  701;  and

     2.3.10    Party  A is the owner of all the Existing Assets, free and clear
               of  all  liens,  mortgages  or  other  encumbrances  of any kind.

     2.3.11    As  consideration  in  signing  this  contract,  Party  A  has
               acknowledged  receipt of U.S. $5,000 from Party B. This $5,000 is
               payment  for  50%  of  the  cost  of  the  Feasibility  Study.


<PAGE>
2.4  Indemnity.  If  any representation  or  warranty  given  herein  by  any
     ---------
     party is untrue or inaccurate, such party shall indemnify and hold harmless
     the  other  party  for  any  loss  or  damage  caused  to such other party.


     ARTICLE 3 - ESTABLISHMENT OF THE JOINT VENTURE COMPANY

3.1  Contractual  Joint Venture. In accordance with the Sino-Foreign Contractual
     --------------------------
     Joint  Venture Law and other relevant Chinese laws and regulations, Party A
     and  Party  B  agree that the Company shall be established as a contractual
     joint  venture.

3.2  Name   The  name  of  the  Company  shall  be:
     ----
     3.2.1     in  Chinese: [GRAPHIC OMITTED];  and
                            -----------------
     3.2.2     in  English:  VVS1  Diamond  Corporation  Ltd.

3.3  Legal  Address.  The  legal  address  of  the  Company  shall  be
     --------------
     Mengyin  County,  Shandong  Province,  China.

3.4  Laws  of  China.  All  activities  of  the Company shall be governed by the
     ---------------
     published  and  publicly  available laws, decrees, rules and regulations of
     China.

3.5  Limited  Liability.  The Company shall be a limited liability company. Each
     ------------------
     Shareholder  shall be liable to the Company only for the registered capital
     and  shareholder's  loans  such  Shareholder  has  agreed  to contribute in
     accordance  with  and  subject  to  the  provisions of Article 5 hereof. No
     Shareholder  shall be liable for any of the debts, losses or liabilities of
     the  Company  or  of  the  other  Shareholder.

3.6  Legal  Person.  The  Company  shall  be  a  legal  person  existing  as  a
     -------------
     separate  entity  from  the  Shareholders.

3.7  No  Partnership.  The  parties  expressly  disclaim  any intent to create a
     ---------------
     partnership  with  respect  to the administration or assets of the Company.

3.8  No  Agency.  Neither  party shall have any authority, actual or implied, to
     ----------
     act  as  agent for or to bind the other party or the Company, and is hereby
     prohibited  from  so  doing.


                     ARTICLE 4 - BUSINESS SCOPE AND PROJECT

4.1  Business  Scope.  The  parties agree that the business scope of the Company
     ---------------
     shall  include  the  following:

     4.1.1     the  exclusive  right  to  explore for, mine and extract diamonds
               throughout  Mine  701;

     4.1.2     the  exclusive  right  to  process  and  refine diamonds mined or
               extracted  by  the  Company;

     4.1.3     the  right  to  sell or market diamonds and other precious stones
               and  related  products  on  the domestic and international market
               with  a  Marketing  and  Sales  Agreement;  and


<PAGE>
     4.1.4     all  such  complementary  activities  as  may  be  necessary  or
               desirable  for  the  Company  to  fully  engage in all activities
               permitted  by  the  Business  license  or  the  Mining  License.


                ARTICLE 5 - TOTAL INVESTMENT REGISTERED CAPITAL

5.1  Investment  Amount  and  Initial  Registered  Capital. The total investment
     -----------------------------------------------------
     amount  of  the  Company is set at U.S. $7,000,000 consisting of registered
     capital  of  the  Company of U.S. $6,000,000 and U.S. $1,000,000 in working
     capital  provided  by  banks.  The  U.S. $6,000,000 can be in United States
     Dollars  or  in  kind or the equivalent amount in Renminbi in whole or part
     and  shall  be  contributed to the Company by the Shareholders at the times
     and in the forms set out in articles 5.2 and 5.3 below. Party A and Party B
     shall  contribute  the  U.S.  $3,000,000  respectively.

5.2  Party  B's  Initial Capital Contribution. Party B may make its contribution
     ----------------------------------------
     under  this  article  5  in  the  form  of  cash, or in kind, equipment and
     machinery  as  recommended  by  Party  A's  and Party B's Mining Engineers.


     As  its capital contribution, Party B shall contribute U.S. $500,000 as its
     initial capital contribution within ninety (90) days of the issuance of the
     Business  License.  Another  U.S. 1,000,000 shall be contributed within one
     (1)  year  of  the  issuance  of  the  Business  License.


     Within  the second year, an additional capital contribution U.S. $1,000,000
     shall be contributed. In the third year the final capital contribution U.S.
     $500,000  shall  be  contributed.  The  Shareholders  agree  that Party B's
     obligation to contribute its initial capital contribution is subject to the
     fulfillment  of  each  of  the  following  conditions  precedent  to  the
     satisfaction  of  Party B (each of which is for the sole benefit of and may
     be  waived  by  Party  B):


     5.2.1     the  Feasibility  Study,  this  Contract  and  the  Charter  of
               Association  of  VVS1  Diamond  Corporation  limited  have  been
               approved  in  writing  by  the  Approval  Authority;

     5.2.2     the  Business License has been issued by the SAIC to the Company;

     5.2.3     the Mining License has been issued by the Mining Authority to the
               Company;

     5.2.4     the Existing Assets has been transferred to the Company, free and
               clear  of  all  liens,  mortgages  and  encumbrances of any kind;

     5.2.5     Party  B  has  received  a written legal opinion of a Chinese law
               firm  acceptable  to  Party  B  confirming  (a)  the issuance and
               sufficiency  of  the  foregoing  approvals  and licenses, (b) the
               legality,  validity  and  bindingness  of  this  Contract and the
               Marketing and Sales Agreement, (c) the completion of the transfer
               of  the  ownership of the Existing Assets to the Company free and
               clear  of  all


<PAGE>
               liens,  mortgages  and  encumbrances  of any kind by Party A, and
               (d)the  accuracy  of  the  tax  description  in  the  contract;

     5.2.6     audited  financial  statements of Mine 701 for the past three (3)
               years  has  been  given  to  Party  B;

     5.2.7     the  Company  has  signed  and  delivered the Marketing and Sales
               Agreement  to  Party  B;  and

     5.2.8     the representations and warranties made by Party A in section 2.3
               are true and correct as confirmed by a certificate to that effect
               signed  and  delivered  to Party B by the legal representative of
               Party  A.

5.3  Party  A's Initial Capital Contribution Party A may make contribution under
     ---------------------------------------
     this  article  S  in the form of cash, or in kind, the Existing Assets (701
     Mine)  which  includes  all  existing  inventory,  equipment,  vehicles,
     buildings,  labour supply, land, exploration rights, rights-of-way, surface
     rights,  water  rights,  electricity  power source and any other rights and
     assets  required  to  allow the Company to explore and mine for diamonds as
     listed  in  Schedule  A.

     As  Party A's U.S. $1,500,000 capital contribution; Party A shall, no later
     than  ninety (90) Business Days after the day the Business License has been
     transferred  to  the  Company, cause ownership of the Existing Assets to be
     transferred  to  the  Company  free  and  clear of all liens, mortgages and
     encumbrances  of  any  kind  provided  that:


     5.3.1.    Party A shall be solely responsible for and cannot charge to the
               Company  any  costs  or  payments  to:

                    any  person,  company,  entity  or governmental authority in
                    respect  of  the  transfer  of  the  Mining  License,

                    any  person,  company,  entity  or governmental authority in
                    respect of releasing their claims on any diamond bearing ore
                    body;

                    any  person,  company,  entity  or governmental authority in
                    respect  of the relocation of any individuals, businesses or
                    government  entities;

                    any  person,  company,  entity  or governmental authority in
                    respect  of  existing  pension  fund payments or termination
                    costs of individuals currently employed who are dismissed or
                    retired  because  of  the  signing  of  the  Contract or the
                    transferring  of  the  Existing  Assets.

                    any  person,  company,  entity  or governmental authority in
                    respect of any other outstanding liability, tax or any debts
                    whatsoever  owing  by Party  A.

     5.3.2     upon  the  transfer of the Mining License and the transfer of the
               Existing  Assets  to  the  Company and the payment of all amounts
               contemplated  by  article  5.3.1, Party A shall be deemed to have
               made  a


<PAGE>
               contribution  to  the  Company's  registered  capital  of  U.S.
               $1,500,000.

     5.3.3     upon  payment  of any part of the remaining registered capital
               contribution  of  U.S.  $1,500,000  in  the  form  allowed or the
               equivalent  amount  in Renminbi in whole or part by Party B under
               article  5.2, Party A shall be deemed to have made a contribution
               to  the  Company's registered capital equal to the same amount of
               that  payment.

     Bank  Loans. If the Company requires funds in addition to Party B's initial
     -----------
     capital  contribution  under  article S.2, the parties shall use their best
     efforts to obtain all such funds from Chinese or foreign banks. The Company
     shall  grant  such  security  over  its  assets  as the lender may require.

     Additional Shareholder  Contributions.  If  the Company requires funds in
     -------------------------------------
     addition  to  the  bank  loans obtained under article 5.4, the Shareholders
     shall  contribute  such  funds  to  the  Company  subject  to the following
     conditions:

     5.5.1     neither  Shareholder  shall  be  required  to make any additional
               contribution  under  this  article  S.5  unless  both parties are
               satisfied  with  the  results  of  the  Reverification and Mining
               program and such contributions shall be used only to pay for such
               exploration  and mining expenditures as may be recommended by the
               General  Manager, and or Management Committee and approved by the
               Board  by  a  duly  passed  resolution;

     5.5.2     neither  Shareholder  shall  be  required  to make any additional
               contribution  hereunder  in  excess  of  the expenditure schedule
               unless  approved  by  the  Board  by a duly passed resolution and
               further  consented  to  in  writing  by  both  parties;

     5.5.3     to  the  greatest  extent  permitted  under  Chinese  law,  such
               contributions shall be made in the form of shareholders loan. and
               shall  be  made  in  the  form  of registered capital only to the
               extent  required  to comply with debt-to-equity ratios imposed by
               Chinese  law  that  may  apply  to  the  Company,  if  any;

     5.5.4     if the Shareholders are required to make additional contributions
               under this article 5.5. whether in the form of shareholders loans
               or registered capital, each Shareholder shall provide one-half of
               such  contribution;

               ARTICLE 6 - ASSIGNMENT. ENCUMBRANCES AND TRANSFERS

6.1  Assignment.  The  assets  and/or  shares  in  whole  or  in  part  of  each
     ----------
     Shareholder  in  this Contract hereunder can at any time be assigned by any
     Shareholder  to  a subsidiary upon written notice to the other Shareholder.

6.2  Encumbrances  In  Favour  of Lenders. If the Company agrees to borrow funds
     ------------------------------------
     from  a  lender,  any  Shareholder giving a guarantee to the lender may, if
     required  by  the  lender, mortgage or otherwise encumber its Investment or
     any  part  thereof  in  favour  of  such


<PAGE>
lender as security for the loan but only if such lender enters into an agreement
with  both  Shareholders  (satisfactory  in  form and substance to both of them)
agreeing  to  be  bound  by  the  provisions  of  this  Contract.

     Transfers.  It  is  not  a  breach  of  this  Contract when any Shareholder
     ---------
     transfers  all  or  part  of  its Investment at any time to a subsidiary if
     notice  is  given  to  the  other  Shareholder.

                ARTICLE 7 - RESPONSIBILITIES OF EACH SHAREHOLDER

     Responsibilities  of  Party  B. Party B shall be responsible for and hereby
     ------------------------------
     agrees  to  perform  each  of  the  following  matters  in a timely manner:

     7.1.1     assist  the  Company in engaging any foreign consultants, experts
               or  agents  the  Company  may  wish  to  hire to evaluate all the
               historical  geological,  exploration and mining data delivered to
               it  by  Party  A;

     7.1.2     provide registered capital and shareholder's loans to the Company
               subject  to  and  in accordance with. the terms and conditions of
               articles  5.2  and  5.5  above;

     7.1.3     entrusted  to  purchase  on behalf of the Company, any equipment,
               vehicles,  and  machinery  the  Company may need to purchase from
               outside  China;

     7.1.4     entrusted  to  sell  on the Company's behalf on the international
               market,  all  of the Company's diamonds and relevant products and
               other  precious  gems;  and

     7.1.5     handling  any  other  matter  entrusted  by  the  Company.

7.2  Responsibilities  of  Party A  Party A shall be responsible for and hereby
     -----------------------------
     agrees  to  perform  each of the following matters at its own cost and in a
     timely  manner:

     7.2.1     obtaining  all  approvals,  licenses.  permits,  export  rights.
               registrations and renewals necessary for establishing the Company
               and enabling the Company to engage in the activities contemplated
               hereunder, including but not limited to (i) the Business License.
               (ii)  the  Mining  License  and  (iii)  all  access  permits,
               rights-of-way,  easements, occupation permits, surface rights and
               other  such  rights  in  respect of places in Mine 701 in Mengyin
               County  as  the  Company may reasonably request and provided that
               such  licenses:

               (a)  shall  be  renewed  on  application  by  the  Company (which
                    application shall be submitted at least 3 months and no more
                    than  6  months  prior to its expiration date) for a further
                    period  of  thirty (30) years so long only as the Company is
                    engaged  in exploration and/or mining operations in Mine 701
                    in  Mengyin  County  during  such  period;  and

               (b)  shall not be cancelable except only if the Company fails for
                    a  period  of  two  (2)  consecutive  years  to  carry  out
                    exploration  and/or  mining  of  diamonds


<PAGE>
                    or other precious gems in Mine 701 in Mengyin County for any
                    reason  other  than (i) force majeure (as defined in article
                    18) or (ii) because it has proven uneconomic for the Company
                    to  carry  on mining during such period, and the Company has
                    failed to recommence mining operations within six (6) months
                    after  receiving  notice to do so from the Mining Authority;

     7.2.2     granting  to  the  Company  for  the entire Duration of the Joint
               Venture, the following rights, in each case free and clear of any
               and  all liens, charges, encumbrances, reservations and royalties
               of  any  kind:

               (a)  the  exclusive  right  to  explore  for,  mine  and  extract
                    diamonds  and  other  precious  gems  in  the  Mine  701;

               (b)  the exclusive right to process and refine diamonds and other
                    precious  gems  mined  or  extracted  by  the  Company;

               (c)  the  right  to  market  and  sell  such  diamonds  and other
                    precious  gems  on  the international market through Party B
                    under  the  Marketing  and  Sales  Agreement;  and

               (d)  all  access,  occupation,  surface,  water,  power and other
                    complementary rights necessary or' desirable for the Company
                    to  enjoy  all  of  the foregoing rights;

               provided that such  rights:

               (e)  shall  be renewed automatically by Party A on the same basis
                    as  the  approved  licenses  per  article  7.2.1.

     7.2.3     immediately  deliver  to  Party  B upon request true and complete
               copies  of  all  of the past three (3) years of audited financial
               statements  of  Mine  701.  production  records,  inventory  of
               diamonds.  geological  data  including  maps,  reports.  surveys,
               exploration  data,  other  historical  data  and  any  other data
               relating  to  the  finding and mining and processing of diamonds,
               kimberlite,  precious gems and ores bearing precious gems located
               in  Mine  701;

     7.2.4     make  available  for  consultation to Party B and its consultants
               all  technical  experts  in geology, mining and the processing of
               diamonds  and  other  precious gems, who have worked on obtaining
               the  data  referred  to  in  article  7.2.3  above;

     7.2.5     ensure  that  the  Company  may  obtain at prices not higher than
               prices  normally  paid by Chinese Joint Venture enterprises, each
               of  the  following:

               (a)  all  necessary  utilities,  including  the necessary consent
                    from the Power Supply Administration, as may be required for
                    the  Company's  operations;  and


<PAGE>
               (b)  office  space  at  Mine  701,  Mengyin  County to enable the
                    Company  to  carry  out  its  work  and  business;  and

               (c)  all  necessary  labour  and  personnel  as  may  be  deemed
                    necessary  by  the  Company;

     7.2.6     assist the Company to deal with all local, county, provincial and
               central  government  authorities, and any other parties as may be
               necessary  to ensure that the Company shall be able to operate in
               the  manner  contemplated herein, and to ensure that all of Party
               B's  rights  hereunder  are  also  protected;  and

     7.2.7     handle  such  other  matters  as  may  be  entrusted to it by the
               Company.

                       ARTICLE 8 - THE BOARD OF DIRECTORS

8.1  Date  of  Establishment.  The  Board  shall  be established on the date the
     ------------------------
     Business  License  is  issued.

8.2  Representation.  The  Board  shall  comprise  seven (7) directors. of which
     ---------------
     three  (3) shall be appointed by Party A and four (4) shall be appointed by
     Party  B.  Any director may be removed and replaced at any time and for any
     reason  by  the  Shareholder  that  appointed  such  director.

8.3  Chairman  and  Vice-Chairman.  The  Company  shall have one Chairman of the
     -----------------------------
     Board  and  one  (1)  Vice-Chairman.  The  Chairman  of  the Board shall be
     selected  by  Party  B from amongst the Board members appointed by Party B,
     and  the  Vice-Chairman  shall  be one of the directors selected by Party A
     from  amongst  the  Board  members  appointed  by  Party  A.

8.4  Term  of  Office.  The  directors,  Chairman and Vice-Chairman of the Board
     -----------------
     shall  hold  office  for terms of three (3) years, and such terms of office
     may  be  renewed by the continuous appointment of the relevant Shareholder.

8.5  Legal  Representative.  The  Chairman  of  the  Board  shall  be  the legal
     ----------------------
     representative  of  the  Company. If the Chairman is unable to exercise his
     responsibilities  for  any  reason,  he  may  temporarily  delegate  such
     responsibilities  to  the  Vice-Chairman or any other director by a written
     authorization  sent  to  such  person  and  copied  to the Company and each
     Shareholder.

8.6  Board  Decisions.  The  Board  shall manage the business and affairs of the
     -----------------
     Company.  Board issues shall be decided by the approval by vote of any four
     (4)  directors  present  at  a duly constituted meeting of the Board except
     that  the approval by vote of all seven (7) the directors present at a duly
     constituted  meeting  of the Board shall be required for each of the issues
     set  out  below:


     8.6.1     any  amendment  to  the  Company's  Articles  of  Association;

     8.6.2     any increase. in the registered capital of the Company other than
               an  increase  in  the  registered  capital  resulting  from  a
               requirement  to  contribute  monies


<PAGE>
               pursuant  to  article  5.5. Such increases are hereby approved in
               advance  by  the Shareholders, and the Shareholders each agree to
               cause  the  Board  to  vote  in  favour  thereof;

     8.6.3     any  merger  of the Company with any other economic organization,
               or  the  creation  of  another joint venture entity together with
               some  other  economic  organization;  and

     8.6.4     dissolution  of the Company for any reason prior to the expiry of
               the  Duration of the Joint Venture provided always, however, that
               if  unanimous  approval  of  all the directors is not achieved in
               this  regard at any Board meeting duly convened for such purpose,
               a  resolution  for  such dissolution may be effectively passed at
               the next Board meeting duly convened for such purpose if approved
               by  the  votes of at least four (4) of the seven (7) directors at
               such  later  meeting.

8.7  Meetings.  Board meetings shall be held at least once per year and whenever
     ---------
     any  two  (2) of the seven (7) directors may request. Directors may appoint
     alternate  directors  to  represent  and vote for them, or by written proxy
     authorize  another  director to vote on his behalf. Board meetings may also
     be  held  by  conference telephone call whereby each participant is able to
     hear  and  speak  to  each  other participant. The Chairman or other person
     convening a meeting of the Board shall give each director at least ten (10)
     days' written notice of the time, place and proposed agenda of the meeting.

8.8  Quorum.  A  quorum  shall  be  formed  by  any five (S) directors. For such
     -------
     purpose,  a  director  shall  be  deemed present at a meeting or conference
     telephone call either if he participates in person or by the representation
     of  a  duly  appointed  alternate  director.

8.9  Dewed Quorum. If a quorum is for any reason not present within one (1) hour
     -------------
     after  the  time  set for a Board meeting, such meeting shall automatically
     stand  adjourned  to  the fifth (5th) business day immediately following at
     the  same  time  and  place, and the directors present or deemed present at
     such  meeting  shall  be  deemed  to  constitute  a quorum and able to pass
     effective  resolutions.

                          ARTICLE 9 - GENERAL MANAGER

9.1  General  Manager. The Board shall delegate the day-to-day management of the
     -----------------
     Company  to the General Manager. The General Manager shall be nominated and
     hired  by  the  Board.

9.2  Duties of the General Manager. The General Manager shall be responsible for
     ------------------------------
     the  overall management of the Company. The General Manager shall report to
     the  Board,  and  his  duties  shall  include  the  following:

     9.2.1     preparation  of  annual  operating  and capital budgets, business
               plans  and  financial  projections  for  Board  approval;

     9.2.2     implementing  budgets  and  plans  approved  by  the  Board;


<PAGE>
     9.2.3     maintaining  an  accounting system and a system of financial,
               budgetary  and  internal  controls  designed  by  any  one of the
               International and Chinese Joint Venture Accounting firms licensed
               to practice accounting in China and such Accounting Firm shall be
               approved  by  the  Board;

     9.2.4     maintaining  accounting  ledgers, books and records in accordance
               with internationally accepted accounting principles and standards
               and  regulations;

     9.2.5     payroll  administration;

     9.2.6     labour  relations  and  personnel  administration;

     9.2.7     supervising and administering all exploration, mining, processing
               and  marketing  operations;

     9.2.8     implementing  a  system  of  security  designed by experts in the
               security  field  in  respect  of the Company's diamonds, precious
               gems  and  other  assets  that  is  in  accordance  with  good
               international  standards  and  that is satisfactory to the Board;

     9.2.9     doing  all other things necessary or advisable to ensure that the
               business  of  the  Company  and is carried out in accordance with
               this  Contract.

9.3  The  Vice-General  Managers  shall  be nominated by the General Manager and
     must  be  approved  by  the  Board.

     9.3.1     The  Vice-General  Managers  shall  assist the General Manager in
               carrying  out  his  duties.

                      ARTICLE 10 - PURCHASES AND CONTRACTS

10.1  Purchases Outside China.  If the Company needs to purchase any materials,
      ------------------------
     equipment. vehicles. machinery or other items necessary from outside China,
     Party  B  shall  be  entrusted  to  do  so  on  behalf  of  the  Company.

                        ARTICLE 11 - EMPLOYMENT MATTERS

11.1 Employment Contracts. All existing employees and retired employees of Party
     ---------------------
     A  are  the responsibility of Party A. All employees required to be engaged
     by  the Company, including but not limited to the General Manager, shall be
     hired  pursuant  to  employment  contracts  approved  by  the  Board.  Such
     contracts  will set out, amongst' other things, the title and duties of the
     employee,  the  remuneration payable and the terms on which such engagement
     may  be  terminated  by  the  Company.  Such employees, the Company and the
     parties  hereto shall be required to keep confidential all the terms of the
     engagement  of  such  employees.

11.2 Labor  Market.  The  Company  shall  be entitled to hire employees from the
     --------------
     labor  market  by  placing advertisements or using other direct methods for
     recruiting  employees.  either  from China or from abroad. as it deems fit.
     Salaries  and  benefits  payable  to


<PAGE>
     any  management  level  employee  from  China  shall  be based on standards
     prevailing  in  the  Chinese  labor  market  for such kind of employee. and
     salaries  and  benefits payable to any employee from outside of China shall
     be  based on standards prevailing in the international market for such kind
     of  employee.  Such  employees, the Company and the parties hereto shall be
     required  to  keep  confidential  all  the  terms of the engagement of such
     employees.

11.3 Autonomous  Handling  of  Employment  Matters. The Company shall handle all
     ----------------------------------------------
     matters relating to employment, including the hiring, payment and firing of
     all  employees as the Company sees fit in the best interests of the Company
     and  without  interference  from  any  Shareholder.

                      ARTICLE 12 - TAXES, FINANCE AND AUDIT

12.1  Company Taxes.  The  Company  shall  pay  taxes  in  accordance  with  the
      --------------
     stipulations  of  published  and  publicly  available  Chinese  laws  and
     regulations  using  the  maximum  deductions  and  allowable deductions and
     preferential  treatments  allowed in these some laws and regulations of the
     Income  Tax  Law  for Foreign Investment Enterprises and Foreign Companies.
     The  Company  shall  apply for the maximum allowable deductions and maximum
     allowable  credits and maximum allowable preferential treatments allowed in
     these  same  laws  and  regulations  covering  and  taxes.

12.2  Personal Taxes.  Employees  of the Company shall pay individual income tax
      ---------------
     according  to  the  Individual  Income Tax Law of the People's Republic of
     China.

12.3  Three Funds. The Company shall make annual allocations for a reserve fund,
      ------------
     an  expansion  fund and a welfare and bonus fund for its employees from its
     after-tax  profits  as  the  Board  may  deem  fit.

12.4  Dividend Policy. Unless the Board unanimously resolves otherwise at a duly
      ---------------
     convened  meeting. the following dividend policy shall apply throughout the
     Duration  of  the  Joint  Venture and regardless of the amount of dividends
     that  may  have  been  or  will  be  paid  to  any  Shareholder:

     12.4.1    after  the loan repayments contemplated in article 5.5 have been
               paid  to  the  lender  the Company shall at least once each year,
               distribute  to  the  Shareholders  all  of  the after-tax profits
               remaining  by  declaring  and  paying  dividends to them in equal
               proportions;

     12.4.2    the  Company  shall  use  United  States  Dollars or Renminbi as
               decided  by  the  Board  to  distribute  dividends;

     12.4.3    if the United States Dollars available from the Company's normal
               operations  (excluding foreign currency exchange transactions) is
               sufficient.  the  Company  shall  pay  the  dividends  of  both
               Shareholders  with  such  United  States  Dollars;

     12.4.4    if the United States Dollars available from the Company's normal
               operations  (excluding foreign currency exchange transactions) is
               insufficient to pay the dividends of both Shareholders in foreign
               exchange.  the


<PAGE>
               Company  shall  use the United States Dollars which it does have,
               if  any,  to  pay  Party  B's  dividend  on  a  priority  basis;

12.5  Fiscal Year. The Company's fiscal year shall commence on January 1 and end
      ------------
      on  December  31 of each year, except for the first fiscal year which will
      commence  on the day the Business License is issued and end on December 31
      of  the  same  year.

12.6  Books of  Account. The Company shall keep its books of accounts in English
      ------------------
      and  Chinese,  and  in  accordance  with  generally accepted international
      accounting  principles.

12.7  Accounting Currency.  The  Company  shall use Chinese Renminbi and/or U.S.
      --------------------
      dollar  as  the  base  accounting  currency.

12.8  Reporting to  Directors.  The General Manager and the management committee
      ------------------------
      shall  prepare  and  deliver  the following statements and reports to each
      member  of  the  Board:

     12.8.1    quarterly  unaudited  financial statements within four (4) weeks
               of  the  end  of  each  fiscal  quarter;

     12.8.2    annual  unaudited  financial  statements  by  no  later than the
               forty-fifth (45th) day after the end of the previous fiscal year;

     12.8.3    annual  audited  financial  statements  and the auditor's report
               thereon by no later than the sixtieth (60th) day after the end of
               the  previous  fiscal  year;  and

     12.8.4    daily  production  records  by  shift  including  inventory  of
               diamonds  held  for  sale  at  the  end  of  each  day.

12.9   Rights to Inspect. Each director shall have the right to inspect and copy
       ------------------
       the  books  of  account  of  the  Company  at  any  time.

12.10  Auditors.  The  Company's  books  shall  be  audited  by  any  one of the
       ---------
       International  and  Chinese  Joint  Venture  Accounting Firms licensed to
       practice  accounting  in China and such Accounting Firm shall be selected
       by  Party  B  in  writing.

12.11  Bank  Accounts.  The  Company  shall  open  such  bank accounts as deemed
       ---------------
       necessary  by  the  Board.


                             ARTICLE 13 - INSURANCE

13.1   Standards of Insurance. The Company shall, purchase insurance of such
       -----------------------
       kind  and  of  such  value and duration as the Board considers necessary,
       having  due  reference to international insurance practices in respect of
       similar  projects.

13.2   Choice of Insurer.  The  Company  shall  purchase  such  insurance  from
       ------------------
       the  insurance  provider  which  the  Board  considers  to  be  the  most
       competitive in terms of coverage, dependability and cost. If the People's
       Insurance  Company  of China satisfies the Board that its policies are at
       least as favourable to the Company as those of its competitors in respect
       of  all  factors  the  Board


<PAGE>
       considers  material,  the  Company shall purchase its insurance from that
       insurer.

                   ARTICLE 14 - DURATION OF THE JOINT VENTURE

14.1   Initial Duration.  The Project shall have an initial duration (the
       -----------------
       "Duration  of  the  Joint  Venture")  of  thirty (30) years commencing on
       the  day  the  Business  License  is  issued.

14.2   Extended Duration.  The Company and  the  Shareholders  shall  make  an
       ------------------
       application  to  the  Approval Authority at least six (6) months prior to
       the  expiry  date  of  the  Duration  of the Joint Venture for same to be
       extended  as  follows:

     14.2.1    if  the  Company  has  been  profitable,  for a further period of
               thirty  (30)  years;  or

     14.2.2    if  any  loan owed to Party B either by the Company or by Party A
               or  vice versa is not completely repaid, for such further period,
               if  any,  as  Party  B may consider necessary to ensure that such
               loan  is  completely  repaid.

14.3   Continuation of Contract and Licenses. If the Duration of the Joint
       --------------------------------------
       Venture  is extended for any reason. notwithstanding any provision to the
       contrary  herein,  this Contract shall continue in full force and effect,
       as  amended  by such extension. Party A shall obtain such renewals of the
       Business License, Mining License and other rights and permits referred to
       in  article  7.2.1  as  may  be  necessary  or  desirable.

          ARTICLE 15 - DISPOSAL OF COMPANY ASSETS ON EXPIRY OF DURATION

15.1   Liquidation of  Assets. If the Duration of the Joint Venture expires or
       -----------------------
       is terminated pursuant to this Contract for any reason, the assets of the
       Company  shall  be liquidated and the debts of the Company (including any
       amounts  owed  to any Shareholder hereunder) shall be paid. The remaining
       cash  of  the Company, if any, shall be distributed by the Company to the
       Shareholders  equally  in  accordance  with  the  principles set forth in
       article  12.4:  Thereafter,  the  Company  shall:

     15.1.1    make  a  full  report  of  the  liquidation  to  each  of  the
               Shareholders;  and

     15.1.2    cause  the  Business  License  to  be  cancelled.

15.2   Sale of  Assets. The liquidation committee shall use its best efforts to
       ----------------
       sell  the non-cash assets of the Company (including the Mining Rights and
       Marketing  and  Sales  Rights)  for  the  highest  available  price.  Any
       Shareholder  may purchase all or part of those assets at a purchase price
       equal  to  their  fair  market  value,  as  determined  by the parties by
       agreement  (or  by  the  Independent Valuator, if no written agreement is
       reached  within  thirty  (30)  days).  Such  price  may be paid by way of
       set-off  against  any  amount  that  may  be  owed  by the Company to the
       purchasing  Shareholder.  Such  Mining  Right shall get approval from the
       appropriate  Government Agency.


<PAGE>
15.3   Survival of  Term.  The provisions of  this Article 15 shall survive the
       ------------------
       expiry  or early termination of the Duration of the Joint Venture for any
       reason.


             ARTICLE 16 - AMENDMENT AND TERMINATION OF THE CONTRACT

16.1   Amendment. This Contract and its two (2) schedules may only be amended by
       ----------
       a  written  amendment  agreement  signed by both Party A and Party B, and
       shall come into effect on the day such amendment agreement is approved by
       the  Approval  Authority.

16.2   Term of  Contract. This Contract and its two (2) schedules shall come
       ------------------
       into  effect  upon  approval  by  the  Approval Authority and, subject to
       article  16.3,  shall  remain  in force until the procedures set forth in
       Article  15  above  have  been  completed  following  the expiry or early
       termination  of  the  Duration  of  the  Joint  Venture  pursuant.

16.3   Rescission of  Contract. If for  any reason the conditions precedent set
       ------------------------
       forth  in article 5.2 and 5.3 have not all been fulfilled by any Party on
       or prior to the 90th day after the Business License has been issued, this
       Contract  shall  be  deemed terminated and of no force and effect and the
       Company shall be dissolved. The Party that has suffered damages resulting
       for  the  breach of the contract can claim such damages against the other
       Party.


16.4   Early Termination. Either Shareholder may by written notice to the
       ------------------
       Chairman  and Vice-Chairmen of the Company, request the Board to consider
       and  approve  a  resolution  pursuant  to  article  8.6  to terminate the
       Duration  of  the  Joint Venture prior to its expiry date only for any of
       the  following  reasons:

     16.4.1    the  other  Shareholder has caused an Event of Default to occur,
               and  has  failed to cure such Event of Default within thirty (30)
               days of written notice by the first Shareholder, or if such Event
               of  Default  cannot  be  cured within thirty (30) days, the other
               Shareholder  has  failed  to  use  its  best efforts to cure such
               default;  or

     16.4.2    there  has  been  a  material  change  in  the  applicable laws,
               regulations or policies of the pertinent governmental authorities
               that  adversely  affect  the  interests  of  such  Shareholder.

16.5   Government Approval  If any  Shareholder  gives a notice requesting early
       -------------------
       termination  under  article  16.4  and  the  Board  resolves according to
       article  8.6.4  to dissolve the Company, the Shareholders shall cause the
       Company  and  the  Board  to  make  such  applications  to  the  Approval
       Authority,  and  to  take  all  such  other  steps as may be necessary to
       complete  the  dissolution  of  the  Company  in  accordance  herewith.

16.6   Survival of  Certain Provisions and Obligations. The provisions of
       ------------------------------------------------
       Article  15  and  this.  article  16.6  and  all other provisions of this
       Contract  necessary  to  give full force and effect thereto shall survive
       the expiration. or early termination of the Duration of the Joint Venture
       for  any  reason.  Notwithstanding  the  termination of this Contract, no
       Shareholder


<PAGE>
       shall  by  reason  of  such  termination be relieved of any obligation or
       liability accrued hereunder prior to such termination, all of which shall
       remain  enforceable  until  fully  satisfied.

                        ARTICLE 17 - BREACH OF CONTRACT

17.1   Events of Default. Each of the following events shall be deemed to be an
       ------------------
       Event  of  Default  hereunder:

     17.1.1    if  any  Shareholder  shall  be in breach of any of its material
               obligations hereunder and such breach shall continue for a period
               of  thirty  (30)  days  from  the  receipt of a written notice of
               breach  from  the  other Shareholder, or if such breach cannot be
               cured within thirty (30) days, such Shareholder has failed to use
               its  best  efforts  to  cure  such  breach;

     17.1.2    if  any  Shareholder  passes a resolution that it be wound up or
               liquidated  or  a  meeting is convened for the purpose of passing
               any  such  resolution,  or an order is made for the winding-up or
               liquidation  of  such  Shareholder;

     17.1.3    if a receiver or receiver-manager is appointed in respect to the
               whole  or  a  substantial  part  of  the affairs or assets of any
               Shareholder;  and

     17.1.4    if  a  Shareholder  is adjudged bankrupt or insolvent or files a
               proposal  in  bankruptcy.

17.2   Remedies. If an  Event  of Default occurs, the Non-Defaulting Shareholder
       --------
       shall  be  entitled  to exercise against the Defaulting Party any and all
       rights,  remedies. and recourses permitted hereunder or at law, including
       without  limitation,  the  right  to obtain an injunction or order from a
       court of competent jurisdiction setting aside the act giving rise to such
       Event  of  Default.  All  such  rights.  remedies  and recourses shall be
       cumulative  and the exercise of one shall not prevent the exercise of any
       other  or  others.

17.3   Interest.  Unless otherwise provided  herein,  any  sum at any time owing
       --------
       hereunder  by  any  Shareholder  to  the Company or by the Company or any
       Shareholder  to  another  Shareholder  which  is not paid when due shall,
       without  derogation  from  any  other  right  or recourse of the creditor
       hereunder  or  at  law,  bear interest from its due date until payment in
       full  at  an  interest  rate  equal  to  the  Prime  Rate.

                           ARTICLE 18 - FORCE MAJEURE

18.1   Event of Force  Maieure.  An Event  of  Force Majeure includes any fire.
       -------------------------
       explosion.  accident, earthquake, tidal wave. strike, picketing, lockout,
       labour  dispute,  flood,  drought,  embargo,  war.  riot or insurrection,
       uprising,  rebellion, or any other event whether similar or dissimilar to
       the  foregoing  which  shall  be  beyond  the  reasonable  control of the
       Shareholder  affected thereby and which shall delay, interrupt or prevent
       the  performance  in


<PAGE>
       whole  or in part by such Shareholder of any of its obligations hereunder
       other  than  an  obligation  to  pay  money.


18.2   Notice of  Force  Majeure.  A Shareholder affected  by an Event of Force
       --------------------------
       Majeure  shall  promptly give notice thereof to the other Shareholder and
       shall  indicate  in such notice, as accurately as possible, the effect of
       such  Event  of  Force Majeure on its capacity to perform its obligations
       hereunder.

18.3   Effect of an  Event  of  Force  Maieure.  Subject to the giving of notice
       -----------------------------------------
       provided  for  in  the  immediately  preceding  article:

     18.3.1    the  non-fulfillment  of  any  obligation  of  any  Shareholder
               hereunder  by  reason  of  an  Event  of  Force Majeure shall not
               constitute  a  breach  or an Event of Default, and shall not give
               rise  to  damages  or  to  any  other  recourse;  and

     18.3.2    any  time  period provided for the performance of any obligation
               of  any  Shareholder hereunder shall be postponed or extended for
               and  by  a duration equal to the period during which the Event of
               Force  Majeure  shall  continue  to  exist.


18.4   No Termination.  An  Event of  Force Majeure shall not be a cause for the
       ---------------
       early  termination.  of  this  Contract  or  of the Duration of the Joint
       Venture  unless  the  Event  of  Force  Majeure continues for a period in
       excess  of 12 months, in which case the Shareholder not directly affected
       by  such  Event of Force Majeure may request the early termination of the
       Project  pursuant  to  the  provisions  of  article  16.4.

                          ARTICLE 19 - APPLICABLE Law

19.1   Published Laws of China. The formation, validity and interpretation of
       ------------------------
       this  Contract  shall be governed by the published and publicly available
       laws  of  the  People's  Republic  of  China.

19.2   Effect of Future Laws.  The  Shareholders  agree that if f any law or
       ----------------------
       regulation  of  China  that  is  amended  or  changed or a new law has an
       adverse effect on any Shareholder then, if such Shareholder requests, the
       parties  shall  forthwith amend this Contract so that such adverse effect
       is  eliminated  or  adjusted  to  the  greatest extent possible, and each
       Shareholder  shall and shall cause the Company to use its best efforts to
       cause  such  amendment  to  be  approved  by  the  Approval  Authority.


                      ARTICLE 20 - SETTLEMENT OF DISPUTES

20.1   Overriding Principle  Any dispute  arising  out  of  or  relating to this
       --------------------
       Contract  shall be resolved exclusively by the procedures set out in this
       Article  20.  First,  there  shall  be  friendly  discussions between the
       Shareholders based on the overriding principle that the Shareholders have
       agreed  to establish the Company in order to generate maximum profits for
       each  of  the  Shareholders.


<PAGE>
20.2   Binding  Arbitration.  If  the  dispute  is  not  resolved  by  friendly
       ---------------------
       discussions  under  the immediately preceding article any Shareholder may
       give  to  the  other  Shareholder  written notice under this article 20.2
       requesting  the  dispute  to  be resolved. If the dispute is not resolved
       within  forty  (40)  days  after such notice, either Shareholder shall be
       entitled  to  refer  the dispute for arbitration by three (3) arbitrators
       pursuant  to  the  rules  of  and under the auspices of the International
       Arbitration  Institute  of  the  Stockholm  Chamber of Commerce. In their
       determination,  such  arbitrators  shall have due regard to international
       practice.  The  award of such arbitrators shall be binding on the parties
       and  may  be  entered  in  any  court  of  competent  jurisdiction.

                           ARTICLE 21 - MISCELLANEOUS

21.1   Notices. Any and all notices or other communications required or
       --------
       permitted  pursuant  to  this  Contract shall be in writing and shall be:

     21.1.1    personally  delivered by courier (accompanied by a fax or telex)
               thereof  to the addressees at the addresses referred to below, in
               which case such notice or other communication shall conclusively
               be deemed to have been given to the addressee thereof at the time
               of  such  delivery  or on the next business day if delivered on a
               day  that  is  not  a  business  day;  or

     21.1.2    telexed  or  telecopied to the addressee at the numbers referred
               to  below,  confirmed  by delivery by courier, in which case such
               notice  or  other  communication  shall conclusively be deemed to
               have been given to the addressee thereof on the day upon which it
               was  received if received prior to 3:00 p.m. (local time) on such
               day  or  on  the  next  business  day if received after 3:00 p.m.
               (local  time)  on  a  business day or on the next business day if
               received  on  a  day  that  is  not  a  business  day:

                    For Party A:
                    ------------

                    China Non-Metal Mine Enterprise Group 701 Mine Mengyin
                    County
                    Shandong Province People's Republic of China

                    Attention: Zhang Yu Ling
                    Telephone: 86-0-5491-71513
                    Telephone: 86-0-S491-71240

                    For Party B:
                    ------------

                    VVS1 Limited
                    2203 Cameron Commercial Centre
                    458-460 Hennessy Road
                    Hong Kong

                    Attention:  Po Sun Liu
                    Telecopier: 852-854-2128


<PAGE>
                    Each  Shareholder  may  change  its  address  for service by
                    written  notice,  given in the manner provided above, to the
                    other  Shareholder  and  such change shall be effective upon
                    the  date  the  notice  shall  be  deemed  to  be  received.

21.2  Entire Agreement.  This  Contract and its two (2) schedules constitute the
      -----------------
     entire agreement between the parties hereto. There are no, and shall not be
     any,  verbal  or  written  statements,  representations,  warranties,
     undertakings  or  agreements  between the parties pertaining to the subject
     matter  hereof  other  than as expressly provided for herein. This Contract
     supersedes the Agreement between the parties dated December 1, 1993. If any
     provision  hereof  conflicts  with  any  provision  of  the  Articles  of
     Association  of  the Company or with anything in the Feasibility Study, the
     provision  of  this  Contract  shall  prevail.

21.3  Business Day.  Where  the  time  limit for the doing of anything hereunder
      -------------
     expires  or falls upon a day that is not a business day the time so limited
     extends  to  and the thing may be done on the day first following that is a
     Business  Day.

21.4 Time of Essence. Time and each of the terms and conditions of this Contract
     ----------------
     shall  be  of the essence of this Contract and no waiver by any Shareholder
     of  any  default by the Shareholder of any provision herein shall be deemed
     to  be  a  waiver  of  any other provision herein nor to release such other
     Shareholder  from  any  such  provision.

21.5  Further Assurances:  Cooperation.  Each of the parties hereto shall do all
      -------------------
     things  and  execute all documents necessary or desirable in order to carry
     out  the  intents  of  this  Contract, and shall fully co-operate with each
     other  and  the  Company  in  all  respect in good faith to ensure that the
     Company operates in the manner contemplated herein and achieves the purpose
     set  out  in  article  "C".

21.6  Corrective Actions.  If  at  any  time  during  the  Duration of the Joint
      -------------------
     Venture,  any  governmental  authority  of  China  enacts  or law or policy
     (collectively  "Unilateral  Action"), and if such Unilateral Action has the
     effect  (a "Negative Effect") of preventing or constraining the exercise of
     any  right  or  of  materially  increasing the burden of performance of any
     obligation  (including any increase in an obligation to pay a sum of money)
     of  Party  B  or  the Company hereunder the Company shall, at the Company's
     cost,  take  such  measures  ("Corrective  Action")  as  may be required to
     restore  Party  B  or  the  Company (as the case may be) to the position it
     would  have  retained  had  such  Unilateral  Action  not  been taken. Such
     Corrective  Action  may  take  any  or  all  of  the  following  forms:

     21.6.1    obtaining  from  the  relevant  authority, an exemption from the
               application  of the law or policy, that is the direct or indirect
               subject  to the Unilateral Action or the direct or indirect cause
               of  the  Negative  Effect;

     21.6.2    causing  the  enactment  of  specific  legislations  (including
               subsidiary  legislation)  eliminating  the  Negative  Effect;  or

     21.6.3    any  other  action  acceptable  to  Party  B


<PAGE>
21.7  Language. This  Contract  has  been  written in Chinese and in English and
      ---------
dully  executed  in Chinese and in English. The Parties agree that both versions
are  equal,  and  legally  binding  on both Parties. In case of discrepancy, the
meaning  and  spirit  of  the  English  version  shall  be used to interpret the
Contract.

      Enurement. This Contract shall enure to the benefit of and be binding upon
      ---------
      the  parties hereto and their respective successors and permitted assigns.

IN WITNESS WHEREOF duly authorized officers of each of the parties have executed
this Contract in Beijing on this 2nd day of February, 1994.

CHINA NON-METAL MINE                        VVS1 LIMITED
ENTERPRISE GROUP 701 MINE


Per: /s/ Zhang Yu Ling                      Per:  /s/ Po Sun Liu
    --------------------------                  ---------------------------
    Name:   Zhang Yu Ling                       Name:  Po Sun Liu
    Title:  Mine Director                       Title: Chairman and Chief
                                                       Executive Officer


Witness:                                     Witness:

  /s/  Jason Lee
----------------------------                 ------------------------------
Name: Jason Lee, I.L.B. LL.M                 Name:


<PAGE>
[GRAPHIC OMITTED]                                   Tel: (01)4932306 (01)4991319
DRAGON LAW OFFICE                                   Fax: 4932307

                              Attorny's Attestation

                                                               Feburary 2nd 1994

China  Non-metal  Mine  Enterprise  Group  701  Mine  (Party A) and WS 1 Limited
Liability  Company(Party B) after friendly consultation, on February 2nd,1994 in
Hilton  Hotel,Beijing  signed  this  contract  of  cooperation  in  which  they
unanimously  decided  to  establish  a  limited liability company,in Mengyin and
Pingyi  county, Shandong, China, to mine and process diamonds and other precious
stones  as  well  as to sell above-mentioned products on international and local
markets.The  contract  also  clarifies the shareholders' position for both sides
and  their  powers  and  duties.

Party  A's  Mine  Director  Mr.  Zhang  Yu Ling, Party B's president and general
manager  Mr.  James  Poe  represent  each  party  in  signing  the  contract.

Dragon  Law Office's attorneys,Li Jinn Sheng,esq.Zhai Cun Zhu esq., participated
in  the  project's  negotiations,  corrected and revised the contract.They state
that the contract is in accordance with the relevant laws and regulations of the
People's  Republic  of  China, it expresses the intent of both parties and is in
accordance  with  all  the  relevant  laws  and  regulations.


Attested by The Dragon Law Office,Beijing,China.


                                                          /s/ Li Jing Sheng
                                                          ----------------------
                                                          Li Jing Sheng,Attorney


                                                          /s/ Zhai Cun Zhu
                                                          ----------------------
                                                          Zhai Cun Zhu,Attorney



                            [GRAPHIC OMITTED] 100101
                Suite 1001, Bldg. B, International Huiyuan Apt.
                      Yayuncun, Beijing 100101, P.R. China


<PAGE>