Document:

exv10wm

Table of Contents

30 December 2004

GNiFi

(as Owner)

GORO NICKEL S.A.

(as Project Manager)

CONSTRUCTION AGREEMENT

(Contrat de promotion immobilière)

 

Table of Contents

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	CLAUSE	 	PAGE
	1

	 	PURPOSE
	 	 	4	 
	2

	 	SPECIFICATION OF THE ASSETS
	 	 	5	 
	3

	 	CHANGES TO THE ASSETS
	 	 	5	 
	4

	 	DUTIES OF THE PROJECT MANAGER
	 	 	6	 
	5

	 	PERFORMANCE BY THE PROJECT MANAGER OF ITS DUTIES	 	 	7	 
	6

	 	PERFORMANCE OF THE WORKS – LIABILITY
	 	 	9	 
	7

	 	ACCESS TO THE SITE – CUSTODY – RISKS
	 	 	10	 
	8

	 	FORCE MAJEURE
	 	 	10	 
	9

	 	INSURANCE
	 	 	11	 
	10

	 	TOTAL AND PARTIAL LOSS
	 	 	15	 
	11

	 	TIME LIMITS FOR COMPLETION OF THE ASSETS
	 	 	15	 
	12

	 	COMPLETION OF THE ASSETS – DELIVERY – CERTIFICATES	 	 	16	 
	13

	 	DOCUMENTS TO BE DELIVERED TO THE LESSEE AND TO BE PUT AT THE OWNER’S DISPOSAL
	 	 	19	 
	14

	 	COMPLIANCE CERTIFICATE
	 	 	20	 
	15

	 	TERM
	 	 	20	 
	16

	 	CONSTRUCTION COSTS
	 	 	20	 
	17

	 	TERMS AND CONDITIONS OF PAYMENT
	 	 	21	 
	18

	 	REPRESENTATIONS
	 	 	22	 
	19

	 	TERMINATION EVENTS
	 	 	25	 

 

Table of Contents

	 	 	 	 	 	 	 
	CLAUSE	 	PAGE
	20

	 	TERMINATION
	 	 	29	 
	21

	 	LEGAL PROCEEDINGS
	 	 	31	 
	22

	 	WAIVER OF RECOURSE
	 	 	32	 
	23

	 	TRANSFER OF THE AGREEMENT
	 	 	33	 
	24

	 	CHOICE OF LAW — JURISDICTION CLAUSE
	 	 	33	 
	25

	 	INDEMNIFICATION
	 	 	33	 
	26

	 	COSTS AND EXPENSES
	 	 	37	 
	27

	 	AMENDMENTS
	 	 	37	 
	28

	 	NO WAIVER
	 	 	38	 
	29

	 	PARTIAL INVALIDITY
	 	 	38	 
	30

	 	CONFIDENTIALITY
	 	 	38	 
	31

	 	CONDITIONS PRECEDENT
	 	 	39	 
	32

	 	NOTICES
	 	 	39	 
	33

	 	LIST OF APPENDICES
	 	 	40	 

 

Table of Contents

THIS CONSTRUCTION AGREEMENT, DATED 30 DECEMBER 2004, IS ENTERED INTO BY AND BETWEEN:

	(1)  	GNiFi, a groupement d’intérêt économique having its registered office at 37, avenue Henri
Lafleur, BP K3, 98849 Nouméa Cedex, and enrolled at the Register of Commerce and Companies of
Nouméa under number 204 C 749002, and represented by Khalid Ammari, duly authorised for the
purposes of this Agreement (hereinafter referred to as the “Owner”); and
	 
	(2)  	GORO NICKEL S.A., a company incorporated under the laws of France, having its registered
office at 38, rue du Colisée, 75008 Paris, France, and enrolled at the Register of Commerce
and Companies of Paris under number 313 954 570, acting herein through and on behalf of its
branch (succursale) whose registered office is at 7 bis, rue Suffren, BP218, 98845, Nouméa
Cedex, New Caledonia, and represented by Yves Roussel, duly authorised for the purposes of
this Agreement (hereinafter referred to as the “Project Manager”),

each a “Party” and together the “Parties”.

WHEREAS:

	(A)  	The Owner has been organised for the purpose of constructing, financing and leasing the
Assets which constitute a portion of the Plant. The Project shall be developed and operated by
the Project Manager. The transactions contemplated by this Agreement and the other
Transaction Documents are based on the special tax support available for Dom-Tom investments.
	 
	(B)  	In accordance with the Girardin Law, the Request for DGI Final Approval was filed with the
DGI. A preliminary approval of the Transaction was granted by the DGI by a letter dated May 4,
2001 and the DGI Final Approval is to be issued. The retrocession rate as calculated in
appendix 8 of the Lease at the date of this Agreement is higher than 80%.
	 
	(C)  	In order to finance the construction of the Assets, the Owner shall:

	 	(i)  	receive the Tax Advances from the Tax Investors pursuant to the Tax
Loan Agreement; and
	 
	 	(ii)  	enter into the Loan Agreement.

	(D)  	The involvement of the Owner being only financial, the Project Manager as project manager
under this Agreement and as Lessee has selected the site, procured the preliminary technical
studies, drawn up certain plans and various descriptions and estimates for the construction of
the Assets and has decided on the design and characteristics thereof.
	 
	(E)  	The Substantial Completion Date and the delivery of the Assets to the Lessee is expected to
occur on or prior to December 31, 2008 (as such date may be extended to a date no later than
December 31, 2009 (subject to the satisfaction of the conditions in Clause 11.1(b))).
Substantial Completion shall be evidenced by the signature by the Project Manager and the
Lessee, on its behalf and on behalf of the Owner, of the Definitive Acceptance Certificate in
accordance with the terms of this Agreement.

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NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

	0  	DEFINITIONS
	 
	0.1  	For the purpose of this Agreement, capitalised terms and expressions (whether in singular or
in plural form) shall have the respective meanings given to them in this Agreement (including
Appendix 1) or if not defined in this Agreement shall have the meaning given to them in the
Lease.
	 
	0.2  	In this Agreement:
	 
	(a)  	headings of Clauses and Appendices are for ease of reference only and are not intended to
influence the interpretation of this Agreement; and
	 
	(b)  	references to any agreement or any other document shall be construed as a reference to that
agreement as it may from time to time be amended, varied, supplemented, restated or novated
(but excluding any amendment, variation, supplement, restatement, variation or novation
contrary to any Transaction Document).

	1  	PURPOSE
	 
	1.1  	The Owner and the Project Manager hereby agree that the Project Manager will, on the Owner’s
behalf, carry out the Works by way of any contracts including (without limitation) contracting
agreements, sub-contracting agreements, purchase agreements and the Services Agreement
pursuant to the terms and conditions of this Agreement, as well as to carry out or cause to be
carried out any related legal, administrative or financial transactions related to the Works.
	 
	   	Unless otherwise specified in this Agreement, this Agreement is governed by Articles 1831-1
to 1831-5 of the French Civil Code enforced in New Caledonia pursuant to order n°98-728
dated August 20, 1998.
	 
	1.2  	The authorisations granted, the contracts executed and the Works undertaken or initiated by
or on behalf of the Project Manager prior to the date hereof in connection with the Works (the
“Preliminary Works”) are hereby ratified and the Preliminary Works shall be subject to the
terms of this Agreement as if they had been undertaken after the date of this Agreement.
	 
	1.3  	This Agreement is entered into in the common interest of the Parties. However, the Owner
undertakes not to interfere, directly or indirectly, with the duties conferred on the Project
Manager.
	 
	1.4  	The Project Manager represents:

	 	(i)  	that it has selected the site, procured preliminary technical
studies, plans, descriptions and estimates for the construction of the Assets and
has decided on their design and specifications;

	 	(ii)  	that it has not been provided with any information or study in
respect of the Land or the Assets by the Owner and that the specification of the
Assets and of the Works was drawn up by the Project Manager or its agents,
contractors or subcontractors;

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	 	(iii)  	that, considering the expected modifications of the works
authorised by the Building Permit, it applied on or about 2 December, 2004 for a
new building permit in respect of the Plant; and

	 	(iv)  	that it will obtain a new Operating Permit in respect of the Plant
at least 3 months before the Substantial Completion Date.

	2  	SPECIFICATION OF THE ASSETS
	 
	(a)  	The Works shall be completed and the Assets shall be delivered and commissioned in accordance
with this Agreement, the Administrative Authorisations, the Request for DGI Final Approval
(which the Project Manager is fully aware of), the DGI Final Approval (which the Project
Manager is fully aware of) and good engineering practices (“les règles de l’art”).
	 
	(b)  	In the case of any contradiction between the terms of this Agreement and the DGI Final
Approval, the DGI Final Approval shall prevail.
	 
	(c)  	For the avoidance of doubt, any reference in this Agreement to commissioning the Assets is a
reference only to those commissioning works (in accordance with the commissioning and testing
procedures developed by the Project Manager) required to achieve Substantial Completion.

	3  	CHANGES TO THE ASSETS
	 
	3.1  	Conditions for changes to the Assets
	 
	(a)  	It is hereby agreed that the Project Manager may, at its sole expense and risk, vary the
technical characteristics of the Assets or any component or aspect thereof, provided that any
such Variation or any other variation:

	 	(i)  	will not increase the Construction Costs (unless, for the avoidance of doubt,
the costs of such Variation or variation are permitted under Clause 16.2);
	 
	 	(ii)  	will not extend the time limits set out in Clause 11;
	 
	 	(iii)  	will automatically be deemed to be approved by the Project Manager, as Lessee
under the Lease;
	 
	 	(iv)  	will not affect the DGI Final Approval; and
	 
	 	(v)  	with respect to a Variation only, has been previously notified to the Owner for
information purposes only in accordance with Clause 3.2(b).

	(b)  	Notwithstanding the foregoing, in no event shall any Variation or variation adversely affect
the ability of the Lessee to operate the Assets in accordance with the Authorised Activities.
	 
	3.2  	Authorisation of Variations
	 
	(a)  	In the event of any Variation, the Project Manager shall obtain, on its own behalf and in its
name, all required building permits and other administrative authorisations and

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	   	shall be liable for all claims filed and for all expenses incurred in connection with
obtaining such permits and authorisations.
	 
	(b)  	The Project Manager shall inform the Owner of any Variation, no later than
15 Business Days prior to the date planned for the
filing of the Administrative Authorisations required
for such Variation.

	4  	DUTIES OF THE PROJECT MANAGER
	 
	4.1  	Generally
	 
	(a)  	The Project Manager’s duties relating to the Works are set out in this Clause 4. Such
descriptions and lists are indicative and not exhaustive.
	 
	(b)  	The Project Manager shall be responsible for ensuring that the Works are completed and the
Assets are delivered in working order in accordance with this Agreement and that all
administrative and legal requirements, contractual easements, authorisations granted by third
parties, Applicable Laws in New Caledonia, and good engineering practices (“les règles de
l’art”) have been complied with.
	 
	4.2  	Definitions of the duties

The Project Manager’s duties relating to the Works are:

	(a)  	General description of the programme

	 	(i)  	definition of the Works’ programme;
	 
	 	(ii)  	drawing up a provisional Works’ budget; and
	 
	 	(iii)  	distribution of tasks to the Contractors and coordination of the Contractors;

	(b)  	Legal and administrative duties

	 	(i)  	all activities in relation to, when necessary, obtaining irrevocably, renewing,
maintaining or defending all the regulatory approvals, permits, administrative and
other authorisations and zoning agreements that are required under Applicable Law in
New Caledonia for the construction and the operation of the Assets and, in particular,
execution of documents relating to obtaining any Administrative Authorisation, as well
as any related renewals or amendments, verification of their issuance or any required
postage (“affichage”).
	 
	 	   	The Owner shall cooperate with the Project Manager with respect to obtaining any
administrative authorisations in the event that its intervention or assistance is
requested by the Project Manager and is required in order to obtain any
administrative authorisation.
	 
	 	   	The Project Manager shall take all steps necessary, if any, to protect the Owner
from incurring liability in respect of this Clause 4.2(b)(i).

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	 	(ii)  	coordination of the preparation of all agreements required for the purposes of
carrying out the Works and, in particular, the preparation of agreements with third
parties;
	 
	 	(iii)  	obtaining and maintaining the Insurance Policies in accordance with the terms
of this Agreement; and
	 
	 	(iv)  	dealings with public authorities, ministerial officers and court officials in
relation to the Works;

	(c)  	Financial management

	 	(i)  	providing the Owner with reasonable information or documentation required for
the Owner’s book-keeping relating to the Works; and
	 
	 	(ii)  	providing the Owner with any reasonable information or documents required by
the Owner for tax reasons and relating to the Works;

	   	it being understood that compliance with this Clause 4.2(c) will not be onerous for the
Project Manager and will not require the Project Manager to produce documentation which it
would not, other than for this Clause 4.2(c), be required to produce;

	(d)  	Technical management

	 	(i)  	preparation, drafting and signature of contracts with the Contractors it being
specified, for the avoidance of doubt, that the Project Manager may cause such
contracts to be signed by any third party acting on its behalf and for its account;
	 
	 	(ii)  	analysis of bids and selection of the Contractors;
	 
	 	(iii)  	supervision of the Contractors;
	 
	 	(iv)  	handover (“réceptions”) of the works, services or Equipment provided by the
Contractors if required under Applicable Law in New Caledonia;
	 
	 	(v)  	managing relationships with the Contractors and supervision of the remedying of
defects identified at the time the Works are handed over, delivered or operated;
	 
	 	(vi)  	commissioning of the Assets; and
	 
	 	(vii)  	delivery of the Assets to the Lessee.

	5  	PERFORMANCE BY THE PROJECT MANAGER OF ITS DUTIES
	 
	5.1  	Project Manager’s duties

The Project Manager:

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	(a)  	shall determine and prescribe the manner in which the Works will be performed within the
Construction Costs and in compliance with the time limits set out in Clause 11;
	 
	(b)  	shall be solely responsible for selecting the Contractors required to carry out the Works and
to commission the Assets;
	 
	(c)  	in the event of the enforcement of Act of December 31, 1975 relating to sub-contracting as
applicable in New Caledonia in the context of this Agreement, shall ensure that the Owner is
in no circumstances liable under this Act;
	 
	(d)  	shall be responsible for paying the Contractors;
	 
	(e)  	shall comply with the safety regulations enforceable in New Caledonia or which arise out of
good engineering practices (“les règles de l’art”) and shall procure that each Contractor
commits to comply with the Project Manager’s safety procedures;
	 
	(f)  	shall procure that supplies and equipment are covered by the usual warranties in accordance
with good commercial practices;
	 
	(g)  	must generally ensure compliance with Applicable Law in New Caledonia so that the Owner shall
not, in any way or for any reason, be liable in relation to such Applicable Law in New
Caledonia;
	 
	(h)  	shall obtain the compliance certificate(s) (“certificate(s) de conformité”) referred to in
Clause 14;
	 
	(i)  	shall enforce, if and when appropriate, the Contractors’ warranties; and
	 
	(j)  	shall construct the Assets in compliance with all applicable Environmental Laws.
	 
	5.2  	Management of the Works

The Project Manager shall procure, under any agreement entered into with a Contractor, that such
Contractor carries out any work or duty in relation to the Works in a manner which is not
inconsistent with this Agreement and which is in compliance with Applicable Law in New Caledonia as
provided under this Agreement.

	5.3  	Progress report (“reddition de compte”)

The Project Manager shall draw up on a semi-annual basis from the date of this Agreement, and as
specified in Clauses 13.3 and 13.4, a progress report (in no particular or specified format)
stating the following details as at the date of the relevant progress report:

	(a)  	the general progress of the Works on site including an indication of the expected Substantial
Completion Date;
	 
	(b)  	a comparison between any Works expected to have been carried out and the Works actually
carried out;
	 
	(c)  	any significant events in relation to the performance of the Works which have occurred
(either positive or negative);

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	(d)  	a comparison between the overall expenditure expected to have been made and the overall
expenditure actually made in relation to the Works; and
	 
	(e)  	any information relating to the application for and the issue of any Administrative
Authorisation.
	 
	5.4  	Except to the extent that such information has already been provided to the Owner pursuant to
Clause 5.3, the Project Manager will provide to the Owner a copy of each report required to be
provided to the DGI in accordance with the DGI Final Approval.

	6  	PERFORMANCE OF THE WORKS – LIABILITY
	 
	6.1  	The Project Manager undertakes to comply with any contractual documents relating to the
Works, the Assets and the Land and any third party rights under such documents. As between the
Project Manager and the Owner, the Project Manager shall be deemed responsible for any harm
suffered in relation thereto.
	 
	6.2  	The Project Manager is solely liable for the supervision of the Works.
	 
	6.3  	If one or more of the Contractors breach their obligations under any such contracts, the
Project Manager may terminate, at its own expense, risk and peril, the contracts entered into
and may enter into new agreements in order to avoid any delay in the completion of the Works
and the Project Manager shall be individually liable for such expenses, risks and perils. It
may also call on any relevant bank guarantees.
	 
	6.4  	The Project Manager shall remain liable for the performance of the Works by any Contractor.
The Project Manager shall be liable for the obligations and guarantees arising out of articles
1792, 1792-1, 1792-2, 1792-3 and 2270 of the French Civil Code if such provisions are
applicable to the Assets and shall remain liable as against the Owner for the conception and
the performance of the Works.
	 
	6.5  	The Project Manager has a performance obligation (“obligation de résultat”) to the Owner:
	 
	(a)  	to deliver the Assets on the Substantial Completion Date in accordance with Clause 12 and for
a price not exceeding the Construction Costs (subject to Clause 16.2);
	 
	(b)  	to bear all risks (“garde et risques”) relating to the Works and the Assets until the
Substantial Completion Date;
	 
	(c)  	to be individually liable to the Owner for any Loss which may be caused during the Works to
any individual (“personne physique”) or company (“personne morale”) as a result of the Works
or because of the existence of the Assets, or which is related to the construction process
throughout the duration of the Works;
	 
	(d)  	to deliver the Assets free from any lien (“droit concurrent”) and free from any
non-compliance (“non-conformité”) or defect it being specified that the Assets may be subject
to any Permitted Lien, provided however that the beneficiaries from such Permitted Lien have
no right or interest to enforce them on the Substantial Completion Date; and

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	(e)  	to cause the Assets to comply with the Production Test by no later than the Long-Stop Date.
	 
	6.6  	The Project Manager is responsible for all prejudicial consequences which may result from any
defects on or in the Land, and from negative, apparent or latent easements, whether existing
or discontinued, which may encumber the Assets or the Land, as well as the commissioning and
the operation of the Assets.
	 
	6.7  	The Project Manager in its own capacity and as Lessee represents and agrees that it shall
not, in any case, seek to make the Owner liable for any error, oversight, fault, defect,
inadequacy or any such event affecting the conception or the carrying out of the Works or the
Assets or the operation of the Equipment.
	 
	   	It is agreed that this Clause 6.7 shall not prevent the Project Manager from filing any
claims against the Contractors.
	 
	6.8  	If requested by the Owner, following the execution of any agreement with the Contractors, the
Project Manager shall provide the Owner with a copy of such agreement together with a copy of
any of the Contractor’s insurance certificates within 30 Business Days.

	7  	ACCESS TO THE SITE – CUSTODY – RISKS
	 
	7.1  	If any event adversely affects the Works or the performance of the Assets during the
Construction Period, the Owner shall be authorised, at the Project Manager’s expense, to
inspect the site and any document pertaining thereto. Any such inspections shall only be made
on a reasonable number of occasions, upon giving reasonable prior notice and up to a
reasonable amount of cost to the Project Manager. The Owner may seek, at the cost of the
Project Manager, the assistance of a technical advisor with which the Project Manager will
cooperate and which the Project Manager will provide with any information that the Owner
considers necessary. The Project Manager undertakes to facilitate the exercise of the duties
of the technical advisor and to allow it access to the site. The Owner must procure that any
Person given access under this Clause 7.1 complies with the Project Manager’s site rules and
must procure that such access does not hinder the Works or the Project.
	 
	7.2  	Provided that the Owner and the technical advisor comply with the Project Manager’s site
rules, access by the Owner and the technical advisor to the site does not confer any liability
on the Owner.
	 
	7.3  	Under Article 553 of the French Civil Code, the Owner, as holder of a right in rem (“droit
réel”) over the Land and the Assets pursuant to the Lease Assignment, shall acquire title as
owner to all of the work, buildings and Equipment as and when they are completed or delivered.
Regardless of such acquisition of such title, the risks relating to, and the custody of, the
Assets shall remain the responsibility of the Project Manager until the Substantial Completion
Date.

	8  	    FORCE MAJEURE

Upon the occurrence of any fortuitous or force majeure event which does not constitute an
Abandonment for the purposes of Clause 19.1(e), this Agreement shall not be terminated.

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The Project Manager shall remain responsible for its assignment under the Agreement whatever the
length of time of the event.

	9  	INSURANCE
	 
	9.1  	Insurance
	 
	(a)  	The Project Manager shall obtain and maintain the following insurance cover from appropriate
solvent insurers with ratings by Standard & Poor’s Ratings Group of no less than A-, for the
Construction Period (except otherwise specified herein), on a basis consistent with Inco’s
policies and best practice, providing such cover (including deductions and exclusions) and in
such form and amounts as are customarily obtained for this type of construction project and in
accordance with good business practices:

	 	(i)  	“All Risks” Marine Cargo insurance, insuring the material, equipment,
machinery, supplies and all other property used for or in connection with the Assets
(except Contractors’ Equipment) from the time the insured becomes at risk or assumes
interest and during transit and/or in storage, wherever located and until delivered to
final destination being the Project laydown site, including risks of loading and
unloading — anywhere worldwide, against physical loss or damage as per Institute Cargo
Clauses ‘A’ CL 252 (1/1/82), including Institute War Clauses (Cargo) CL 255 (1/1/82),
Institute Strike Clauses (Cargo) CL 256 (1/1/82, Institute War Clauses (Air Cargo) CL
258 (1/1/82, Institute Strike Clauses (Air Cargo) CL 260 (1/1/82), Institute
Radioactive Contamination Clause CL 356 (1/10/90) and Institute Replacement Clause CL
161 (1/1/34);
	 
	 	(ii)  	“Construction All Risks” (“CAR”) insurance covering POED against “all risks” of
direct physical loss or damage. This CAR insurance shall be effective and shall insure
POED while such POED is being transported to the site, excluding ocean marine cargo,
and thereafter until the Substantial Completion Date;
	 
	 	(iii)  	“Third Party Liability Insurance”, on an occurrence basis form, insuring
liabilities arising from bodily injury, death and property damage arising out of the
ownership, construction, erection, installation and maintenance of the Assets. Cover
shall include, but shall not be limited to, blanket contractual legal liability, broad
form property damage (excluding damage to the Assets), occurrence property damage,
personal injury, sudden and accidental pollution, and with respect to completed
operations, cover for a period of twenty four (24) months from the Substantial
Completion Date;
	 
	 	(iv)  	any other insurance which may be required by local law, it being understood
that a determination of what is required by local law will be based on a cooperative
analysis by the Project Manager and the Owner and their respective insurance and legal
advisers; and
	 
	 	(v)  	terrorism insurance.

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	(b)  	Notwithstanding the foregoing, it is understood and agreed that under no circumstance shall
the Project Manager be obliged to maintain or be caused to maintain a delay in start-up
insurance.
	 
	9.2  	The Project Manager shall cause each Insurance Policy to:
	 
	(a)  	name the Owner, each Member, each Tax Investor, the Security Agent and the Lessor
Administrators as named insured as their interest may appear and as relates solely to the
Assets, but neither the Owner nor any Tax Investor or any Member or the Security Agent or the
Lessor Administrators shall be liable for the payment of such insurance premiums;
	 
	(b)  	designate the Security Agent as the loss payee on behalf of each named insured in Clause
9.2(a) as their collective interests may appear (but only as such interests relate to the
Assets) except that it is understood and agreed that the Security Agent, the Owner or any Tax
Investor will not be designated as loss payee as regards Insurance Policies covering
liabilities to third parties or insuring the interests of third parties; and
	 
	(c)  	provide a waiver of all rights of recourse against the Owner, each Tax Investor, each Member,
the Security Agent and the Lessor Administrators and their insurers with respect to their
interests in the Assets and the Owner, each Tax Investor, each Member, the Security Agent and
the Lessor Administrators shall cause their respective insurers to waive any rights of
recourse against the Project Manager and each of its insurers.
	 
	   	Each of the parties shall provide the others with documentation evidencing the waivers by
their respective insurers.
	 
	9.3  	Implementation

In respect of the Insurance Policies:

	(a)  	Notwithstanding Clause 9.2(b):

	 	(i)  	if the insurance proceeds resulting from any claim under the Insurance Policies
for damage to the Assets (other than damages amounting to a Total Loss) are less than
US$50,000,000 such proceeds will be paid directly to the Project Manager;
	 
	 	(ii)  	if the insurance proceeds resulting from any claim under the Insurance Policies
for damage to the Assets (other than damages amounting to a Total Loss) are more than
US$50,000,000, such proceeds will be paid directly to the Project Manager, provided
that the Project Manager provides the Owner as soon as practicable following such
damage to the Assets with a plan which sets out the Project Manager’s proposal to
reinstate the Assets back to their pre-loss condition, or (subject to the Owner’s
written consent (such consent not to be unreasonably withheld)) to an equivalent
condition provided that the fitness for purpose of the Assets is maintained;
	 
	 	(iii)  	if a Total Loss occurs and the Project Manager has determined within twelve
months of the date of the event giving rise to such Total Loss that the Assets

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	 	   	will be replaced or re-built, then any insurance proceeds resulting from the
resultant insurance claim will be paid directly to the Project Manager, provided
that the Project Manager provides the Owner as soon as practicable following the
Total Loss with a plan which sets out the Project Manager’s proposal to reinstate
the Assets back to their pre-loss condition, or (subject to the Owner’s written
consent (such consent not to be unreasonably withheld)) to an equivalent condition
provided that the fitness for purpose of the Assets is maintained;
	 
	 	(iv)  	if a Total Loss occurs and the Project Manager has determined within twelve
months of the date of the event giving rise to such Total Loss that the Assets will not
be replaced or re-built, then the Project Manager shall provide the Owner with a letter
of credit issued in favour of the Security Agent by a credit institution with ratings
by Standard & Poor’s Ratings Group of no less than A- equal in amount to the Tax Loan
Reference TV within five Business Days of the date of such determination, it being
agreed and understood that any insurance proceeds resulting from the resultant
insurance claim will be paid directly to the Project Manager;
	 
	 	(v)  	if a Total Loss occurs and the Project Manager has determined that the Assets
will be not be replaced or re-built, and the Project Manager fails to provide the Owner
with a letter of credit on the terms required under paragraph (iv) above, then any
insurance proceeds resulting from the resultant insurance claim to an amount up to the
Tax Loan Reference TV will be paid directly to the Security Agent (acting on behalf of
the Owner and the Tax Investors pursuant to the terms of the Intercreditor Agreement)
as the interests of the Owner and Tax Investors may appear and only as such proceeds
relate to the Assets; and
	 
	 	(vi)  	if a Total Loss occurs and insurance proceeds are paid prior to the date on
which the Project Manager has notified the Owner whether it intends to replace or
rebuild the Assets or, if earlier, prior to the date falling twelve months after the
date of the event giving rise to such Total Loss, then unless the Project Manager has
provided to the Owner a letter of credit on the terms required under Clause 9.3(a) (iv)
above, the insurance proceeds up to an amount up to the Tax Loan Reference TV will be
paid directly to the Security Agent (acting on behalf of the Owner and the Tax
Investors pursuant to the terms of the Intercreditor Agreement) as the interests of the
Owner and Tax Investors may appear and only as such proceeds relate to the Assets.

	(b)  	In the event of failure by the Project Manager to pay the relevant insurance premiums under
the Insurance Policies, the Owner shall have the right to pay such premiums on behalf of the
Project Manager.
	 
	(c)  	On or before the date hereof and thereafter as soon as practicable following any request by
the Owner thereafter, the Project Manager agrees to furnish to the Owner a report that
includes in respect of each Insurance Policy:

	 	(i)  	the certificates of insurances signed by the insurers or their authorised
representatives indicating the amount of the cover and the risks covered, confirming
that the provisions set out in Clause 9.3(f) are being complied with and declaring
that all insurance premiums have been paid; and

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	 	(ii)  	a certificate signed by a responsible officer of the Project Manager
stating that such insurance is in accordance with this Clause 9.

	(d)  	During the occurrence of a Construction Agreement Termination Event (other than an Owner
Construction Agreement Termination Event referred to in Clause 19.1(d) (Total Loss) or a
Project Manager Construction Agreement Termination Event referred to in Clause 19.2(b) (Owner
breach) or Clause 19.2(c) (DGI Final Approval)) which remains unremedied or unwaived), all
transactions and other agreements to be entered into between the Project Manager and any
insurers relating to the determination of the amount of any damage and any other methods of
indemnification for losses under the Insurance Policies which exceed US$ 7,500,000 are subject
to the prior agreement of the Owner.
	 
	(e)  	To the extent that such provisions are valid and available on commercially reasonable terms,
the Insurance Policies shall provide that:

	 	(i)  	the respective interests of each of the Owner, any Member and any Tax Investor
shall not be invalidated by any act or omission by the Project Manager; and
	 
	 	(ii)  	the cover afforded by such Insurance Policies shall not be affected by the
performance of any work on the Assets or by any modification thereto.

	(f)  	Subject to availability on commercially reasonable terms, the Insurance Policies shall
contain obligations on the part of the insurer as follows:

	 	(i)  	without prejudice to Applicable Law, to advise the Owner of any delay in the
payment of premiums and not to suspend the agreed cover until one (1) month following
receipt by the Owner of such notice;
	 
	 	(ii)  	without prejudice to Applicable Law, to provide the Owner with one (1) month’s
prior notice of any termination, taking of effect of cancellation or material reduction
of cover which occurs at the initiative of such insurer;
	 
	 	(iii)  	not to exercise any rights against the Owner, any Member, any Tax Investor or
the Security Agent and/or the Lessor Administrators relating to any omission,
incomplete information or misrepresentation of the Project Manager or any Contractor
and, consequently, not to raise in defence against the Owner, any Member or any Tax
Investor nullity, average or lapse in the event of a breach of its obligations
committed by the insured subsequent to the loss; and
	 
	 	(iv)  	not to avail itself of any clause limiting insurance proceeds to the cost of
the Assets in case of the Assets being constructed on the land of others.

	(g)  	Notwithstanding the preceding provisions of this Clause 9, the Owner may at any time take out
of its own initiative and at its own cost any other insurance that it may desire.
	 
	(h)  	The Project Manager shall obtain and maintain the Insurance Policies and ensure compliance
with Applicable Law through participation by insurers licensed in New Caledonia. Reinsurance
of Insurance Policies will be arranged by the Project Manager and may include reinsurance with
insurers operating outside of New Caledonia.

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	(i)  	The Project Manager shall declare to the insurer, as the primary named insured, on behalf of
all named insured, including the Project Manager and Owner, all accidents or events likely to
give rise to a claim under the Insurance Policies, in the manner provided for in the Insurance
Policies.
	 
	9.4  	Modification
	 
	   	The Project Manager shall not seek to cancel the Insurance Policies or to introduce any
amendment materially reducing the cover thereunder without the prior consent of the Owner
which consent shall not be unreasonably withheld.

	10  	TOTAL AND PARTIAL LOSS
	 
	10.1  	Total Loss
	 
	(a)  	If, at any time on or before the Substantial Completion Date, an event occurs which could
reasonably be expected to constitute a Total Loss, the Project Manager shall notify the Owner
as soon as practicable.
	 
	(b)  	Within twelve months of the date of the occurrence of an event which gives rise to a Total
Loss, the Project Manager shall notify the Owner as to whether or not the Assets will be
replaced or rebuilt.
	 
	(c)  	Any other event, damage or loss, which is not a Total Loss must be repaired or reconstructed
pursuant to Clause 10.2.
	 
	10.2  	Partial Loss and Repair
	 
	(a)  	If the Assets or any part thereof suffers damage that does not constitute a Total Loss (a
“Partial Loss”), the Project Manager shall be required to repair, at its own expense, the
damage caused to the Assets and to restore the Assets back to their pre-loss condition, or
(subject to the Owner’s written consent (such consent not to be unreasonably withheld)) to an
equivalent condition provided that the fitness for purpose of the Assets is maintained.
	 
	(b)  	The Project Manager shall be responsible for all administrative authorisations and all
expenses necessary for such reconstruction.
	 
	(c)  	The repair, reconstruction or reinstatement work shall be performed under the Project
Manager’s full responsibility.
	 
	(d)  	Subject to Clause 9.3(a) above and in accordance with the Insurance Policies, the insurance
proceeds shall be paid out to the Project Manager, which shall use such proceeds to pay for
the restoration or reconstruction work, which shall be performed under the supervision of the
Project Manager. It is agreed that the Project Manager alone shall be responsible for all
costs (including all Taxes) in connection with the repair or reconstruction work in excess of
the amount of such insurance proceeds.

	11  	TIME LIMITS FOR COMPLETION OF THE ASSETS
	 
	11.1  	Substantial Completion Date

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	(a)  	Subject to Clause 11.1(b), the Project Manager shall cause the Substantial Completion Date to
take place in accordance with Clause 12.3 and by no later than December 31, 2008.
	 
	(b)  	The Project Manager may postpone the Substantial Completion Date until December 31, 2009 at
the latest, provided however that:

	 	(i)  	it has informed the Owner of the anticipated delay by November 1, 2008 at the
latest; and
	 
	 	(ii)  	the DGI has accepted in writing such postponement on or before December 1,
2008.

	11.2  	Final Completion Date

The Project Manager shall cause the Final Completion Date to take place in accordance with Clause
12.4 and by no later than the date which is the earlier of (i) 24 months after the Substantial
Completion Date and (ii) December 31st, 2010 (the “Long-Stop Date”).

	11.3  	Force majeure

Subject to the occurrence of an Abandonment, the time limits provided in Clauses 11.1 and 11.2
shall not be suspended or extended even in the event of an act of God (fortuitous event, or cas
fortuit) or a case of force majeure, including bad weather (“intempéries”).

If, as a result of an act of God or of a case of force majeure, the Project Manager expects not to
meet the time limits provided in Clauses 11.1 or 11.2, the Owner and the Project Manager will,
together with the Tax Investors, meet with a view to:

	(a)  	discussing how the Project Manager plans to resume the Works; and
	 
	(b)  	formulating a plan, if possible in the Owner’s reasonable opinion, to be implemented by the
Project Manager, to enable the Project Manager to resume the Works and attempt to avoid the
termination of this Agreement and withdrawal of the DGI Final Approval.

	12  	COMPLETION OF THE ASSETS – DELIVERY – CERTIFICATES
	 
	12.1  	The Project Manager in its own capacity and as Lessee and the Owner in its own capacity and
as Lessor, agree that the Lessee will operate the Assets under the Lease on and from the
Substantial Completion Date. The Project Manager shall however remain under a duty to perform
its duties under this Agreement and to procure that Final Completion takes place on or before
the Long-Stop Date.
	 
	12.2  	Completions
	 
	(a)  	Substantial Completion shall occur when the Works are completed in accordance with this
Agreement and when:

	 	(i)  	the Assets have been built substantially in accordance with the Project Design
Criteria;

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	 	(ii)  	each piece or item of equipment constituting part of the Assets has been
installed and tested in accordance with commissioning and testing procedures developed
by the Project Manager;
	 
	 	(iii)  	each system, subsystem or operating unit constituting part of the Assets has
been tested and commissioned in accordance with, and as contemplated by, the procedures
developed by the Project Manager using appropriate inert media, or where it is not
practical to use inert media, other appropriate media to confirm that the applicable
system, subsystem or operating unit has been properly tested in accordance with such
commissioning and testing procedures as developed by the Project Manager; and
	 
	 	(iv)  	the first autoclave of the Project is ready to accept initial feed for
processing in accordance with the Project Design Criteria.

	(b)  	Final Completion shall occur after achievement of the Substantial Completion Date and when
the Production Test has been satisfied.
	 
	12.3  	Substantial Completion
	 
	(a)  	When the Project Manager considers that Substantial Completion has been achieved, the Project
Manager, in its own capacity as Lessee, shall notify the Owner and shall represent and warrant
that:

	 	(i)  	the Works and the Assets are operational for the purposes contemplated in the
Lease and the DGI Final Approval;
	 
	 	(ii)  	all the necessary Administrative Authorisations have been obtained and are
valid, definitive and enforceable;
	 
	 	(iii)  	the declaration of completion of works (“declaration d’achèvement des
travaux”) has been notified to the administrative authorities (a copy of such
declaration in accordance with article 33 of order (“deliberation”) n°19 dated June 8,
1973, as amended, and a copy of its acknowledgment of receipt by the relevant
administrative authority shall be attached thereto);
	 
	 	(iv)  	the Insurance Policies required to be current under this Agreement are current
and the insurance policies required under clause 9 of the Lease are enforceable;
	 
	 	(v)  	the Lessee shall bear the risks relating to, and the custody of the Assets in
accordance with the Lease;
	 
	 	(vi)  	to the best of the Project Manager’s knowledge, there is no material
reservation or default other than those listed in an attachment to the notice;
	 
	 	(vii)  	the Lessee agrees to take possession of the Assets, accepts them, ratifies any
of the variation orders filed by the Project Manager and recognizes that the warranties
and operating manuals received are sufficient to start the operation of the Assets; and
	 
	 	(viii)  	Substantial Completion has occurred.

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	(b)  	The date of receipt by the Owner of the notice provided under Clause 12.3(a) shall constitute
the “Substantial Completion Date”, and such notice shall constitute the “Definitive Acceptance
Certificate”. Substantial Completion shall be deemed to have been agreed respectively between
the Project Manager and the Owner and between the Lessor and the Lessee on the Substantial
Completion Date. For the purpose of securing such agreements, the Project Manager shall act on
behalf of the Owner and in its own capacity and that of Lessee.
	 
	(c)  	On the Substantial Completion Date the Assets shall be deemed to have been delivered to the
Lessee under the Lease.
	 
	12.4  	Final Completion
	 
	(a)  	When the Project Manager considers that Final Completion has been achieved, the Project
Manager, in its own capacity and as Lessee, shall notify the Owner representing and warranting
that:

	 	(i)  	the Works and the Assets are operational for the purposes contemplated in the
Lease and the DGI Final Approval;
	 
	 	(ii)  	all the necessary Administrative Authorisations have been obtained and are
valid, definitive and enforceable;
	 
	 	(iii)  	the Insurance Policies required to be current under this Agreement are current
and the insurance policies required under clause 9 of the Lease are enforceable;
	 
	 	(iv)  	to the Project Manager’s best knowledge, there is no material reservation or
default other than those listed in an attachment to the notice;
	 
	 	(v)  	the Lessee ratifies any of the variation orders filed by the Project Manager;
and
	 
	 	(vi)  	the Production Test has been satisfied.

	(b)  	The date of receipt by the Owner of the notice provided under Clause 12.4(a) shall constitute
the “Final Completion Date”, and such notice shall constitute the “Final Completion
Certificate”. Final Completion shall be deemed to have been agreed respectively between the
Project Manager and the Owner and between the Lessor and the Lessee on the Final Completion
Date. For the purpose of securing such agreement, the Project Manager shall act on behalf of
the Owner and in its own capacity and that of Lessee.
	 
	12.5  	Defects and defaults

The Lessee, for and on behalf of the Owner, shall be authorised from the Substantial Completion
Date and until 12 months after the Final Completion Date, to notify the Project Manager (with a
copy to the Owner) of any defects or defaults that the Project Manager shall rectify as soon as
possible and in any case within 12 months of receipt of such notice.

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	13  	DOCUMENTS TO BE DELIVERED TO THE LESSEE AND TO BE PUT AT THE OWNER’S DISPOSAL
	 
	13.1  	On the Substantial Completion Date, delivery by the Project Manager to the Owner of the
Definitive Acceptance Certificate shall be deemed to constitute delivery of the signed
Definitive Acceptance Certificate by the Lessee to the Lessor under the Lease.
	 
	13.2  	On the Substantial Completion Date or as soon as possible thereafter, the Lessee shall be
provided with any warranties for the Equipment as well as any operating manuals, the original
and any electronic versions of which shall be put at the Owner’s disposal by the Project
Manager in the premises of the latter.
	 
	13.3  	Within six weeks of the Substantial Completion Date, the Lessee shall have access to the
following documents, the original and any electronic versions of which shall be put at the
Owner’s disposal by the Project Manager in the premises of the latter:
	 
	(a)  	any handover certificates (“procès-verbaux de reception”) required under Applicable Law in
New Caledonia together with any reservations;
	 
	(b)  	the Definitive Acceptance Certificate together with any reservations;
	 
	(c)  	the Administrative Authorisations and their application forms;
	 
	(d)  	the certificates for each Insurance Policy and evidence of the due payment of the premiums
under each Insurance Policy;
	 
	(e)  	the progress report specified in Clause 5.3 and evidence that each payment due and payable to
each Contractor has been made; and
	 
	(f)  	the inspection plans (“plans de recollement”) of the Assets.
	 
	13.4  	Within 6 weeks as of the Final Completion Date, the Lessee shall have access to the following
documents, the original and any electronic versions of which shall be made available to the
Owner by the Project Manager at the premises of the latter:
	 
	(a)  	any additional handover certificates (“procès-verbaux de reception”) required under
Applicable Law in New Caledonia and declared after the Substantial Completion Date together
with any reservations attached thereto;
	 
	(b)  	the Final Completion Certificate together with any reservations;
	 
	(c)  	an exhaustive list of the contact details of each Contractor together with the names of their
insurers (if insured);
	 
	(d)  	the agreements entered into between the Project Manager and the Contractors relating to the
Assets together with any guarantees of such Contractors;
	 
	(e)  	the progress report specified in Clause 5.3 which shall also contain any necessary
information as to the achievement of the Production Test, and evidence that each payment due
and payable to each Contractor has been made;

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	(f)  	each Administrative Authorisation issued subsequent to the Substantial Completion Date up to
the Final Completion Date and its application form; and
	 
	(g)  	the Insurance Policies and evidence of full payment of the premiums by the Project Manager.

	14  	COMPLIANCE CERTIFICATE
	 
	14.1  	The Project Manager shall obtain the compliance certificate(s) (“certificat(s) de
conformité”) provided for in articles 33 and 34 of order (“déliberation”) n°19 dated June 8,
1973 as amended, within twelve months as of receipt by the administrative authorities of the
declaration(s) of completion of the Works.
	 
	14.2  	The Project Manager undertakes to perform at its own cost and risk all works and duties
necessary to obtain the compliance certificate(s) as soon as possible.
	 
	14.3  	The Project Manager shall provide the Owner with the original version(s) of the compliance
certificate(s) within 5 Business Days of its (their) receipt.
	 
	14.4  	If any administrative authority refuses to issue compliance certificate(s) or if the
compliance certificate(s) is (are) not issued within the time limit provided in Clause 14.1,
the obligation of the Project Manager to obtain the compliance certificate(s) shall continue
in accordance with Clause 15.2(c). In this event, the Owner and the Project Manager
will, together with the Tax Investors, meet with a view to: (a) discussing how the Project
Manager plans to obtain the compliance certificate(s) ; and (b) formulating a plan,
if possible in the Owner’s reasonable opinion, to be implemented by the Project Manager, to
enable the Project Manager to obtain the compliance certificate(s).

	15  	TERM
	 
	15.1  	Subject to Clause 15.2, this Agreement shall commence on the date hereof and shall end,
except as otherwise provided herein, on the Final Completion Date.
	 
	15.2  	After the Final Completion Date, the Project Manager shall continue:
	 
	(a)  	to remedy all the defects (if any) identified by the Project Manager in its own capacity and
as Lessee at the time of the handover by the Contractors, following the Substantial Completion
Date or the Final Completion Date;
	 
	(b)  	to pay the Contractors;
	 
	(c)  	to obtain any compliance certificate(s); and
	 
	(d)  	to represent the Owner in any proceedings commenced pursuant to the powers granted to it
under Clause 21.

	16  	CONSTRUCTION COSTS
	 
	16.1  	The Owner agrees to pay the Project Manager in connection with its assignment under this
Agreement the Construction Costs.

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	16.2  	Cost overruns
	 
	(a)  	If the cost price of the Works (including, for the avoidance of doubt, the cost of labour or
equipment, the costs of any change or increase required by the authorities and any other cost
which comprises and/or is covered by the Construction Costs) exceeds the Construction Costs,
the Construction Costs may, at the Project Manager’s election, be increased by an amount
including any taxes not exceeding 20% of the Construction Costs (the “Cost Overruns”),
provided, however, that:

	 	(i)  	the Project Manager notifies the Owner of any Cost Overruns at least 30 days
before the expected Substantial Completion Date;
	 
	 	(ii)  	any Cost Overruns shall be funded pursuant to Loan Agreement; and
	 
	 	(iii)  	the Cost Overruns shall be fixed as at the Substantial Completion Date and
paid on or before the date falling 30 days after the Substantial Completion Date.

	(b)  	If the overruns are anticipated to exceed 20% of the Construction Costs, the Parties shall
meet in order to decide if the excess could be funded by the Lender. If the Parties agree that
such excess could be funded by the Lender, the Project Manager will be entitled to elect that
the Cost Overruns be increased up to the amount so agreed and Clauses 16.2(a)(ii) and (iii)
will apply.

	17  	TERMS AND CONDITIONS OF PAYMENT
	 
	17.1  	Payment of the Construction Costs
	 
	(a)  	The Construction Costs shall be paid by the Owner to the Project Manager by electronic
transfer of immediately available funds to an account that is specified by the Project Manager
no later than 48 hours prior to each scheduled payment date.
	 
	(b)  	Any payment by the Owner under this Agreement shall be made by the Owner before 11:00 a.m.
(New York time) on the scheduled payment date.
	 
	17.2  	Terms and conditions of payment
	 
	(a)  	The Construction Costs shall be paid in Euro (as calculated pursuant to the Applicable
Exchange Rate by the Owner) in four installments on the scheduled payment dates as follows:

	 	(i)  	on the Closing Date: US$ 137,970,000 (“Installment 1”);
	 
	 	(ii)  	on 18 December 2005: US$ 168,630,000 (“Installment 2”);
	 
	 	(iii)  	on 18 December 2006: US$ 204,400,000 (“Installment 3”); and
	 
	 	(iv)  	between the Substantial Completion Date and the date falling 30 days after the
Substantial Completion Date (both dates included), all amounts (if any) required in
respect of Cost Overruns elected by the Project Manager in accordance with Clause 16.2
(“Installment 4”).

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	(b)  	The Construction Costs will be paid by the Owner and by the Lender on behalf of the Owner as
follows:

	 	(i)  	Payments by the Owner:
	 
	 	   	The amounts payable by the Owner in respect of each of the four installments set out
in Clause 17.2(a) will be:

	 	-  	in respect of Installment 1: 24.17% x 27% x US$ 511,000,000
denominated in Euro at the Applicable Exchange Rate for 2004;
	 
	 	-  	in respect of Installment 2: 26.75% x 33% x US$ 511,000,000
denominated in Euro at the Applicable Exchange Rate for year 2005, multiplied
by the sum of the percentages underwritten by the Tax Investors according to
appendix 6 of the Tax Loan Agreement for that year;
	 
	 	-  	in respect of Installment 3: 26.75% x 40% x US$ 511,000,000
denominated in Euro at the Applicable Exchange Rate for year 2006, multiplied
by the sum of the percentages underwritten by the Tax Investors according to
appendix 6 of the Tax Loan Agreement for that year; and
	 
	 	-  	in respect of Installment 4: 0.

	(ii)  	Payment by the Lender on behalf of the Owner:
	 
	   	The difference between (i) each amount mentioned in Clause 17.2(b)(i) as currently
expressed in USD (and which shall be exchanged and paid in Euro) and (ii) each
corresponding installment expressed in USD in Clause 17.2(a), shall be paid in USD
directly by the Lender to the Project Manager, on the Owner’s behalf, on the
relevant due date.
	 
	   	The Parties agree that such payments made in USD by the Lender to the Project
Manager on the Owner’s behalf shall be deemed to meet the obligations of the Owner
to pay the Construction Costs in Euro.
	 
	   	The Project Manager shall confirm in writing to the Owner, using the notification
form attached as Appendix 3, that it received full payment of each installment due
from the Lender in accordance with this Clause 17.2(b)(ii) within 2 Business Days as
of the time limits set forth in Clause 17.2(a).
	 
	(c)  	Installment 2 will be paid by the Owner subject to the Project Manager providing the Owner
with a copy of the New Building Permit on or before 1st December 2005.

	18  	REPRESENTATIONS
	 
	18.1  	The Owner hereby makes the following representations to the Project Manager as at the date of
this Agreement:
	 
	(a)  	Status: the Owner is a groupement d’intérêt économique duly organised and validly existing
under the laws of France and the laws applicable in New Caledonia, and it

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	(b)  	possesses the capacity to sue and be sued in its own name and has the power and authority to
carry on its business and to own its assets and has no immunity from jurisdiction;
	 
	(c)  	Capacity and authority: the Owner has full legal capacity to execute, deliver and perform its
obligations under this Agreement and each of the other Transaction Documents to which it is a
party and to carry out the transactions contemplated by such documents and all necessary
corporate and other action has been taken to authorise the execution, delivery and performance
hereof and thereof by the Owner; and
	 
	(d)  	Validity, non-conflict: this Agreement and each other Transaction Document to which the Owner
is a party:

	 	(i)  	has been duly executed and validly delivered by the Owner and constitutes a
valid, legal and binding obligation of the Owner enforceable against the Owner in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganisation, moratorium and similar laws of general application relating to or
affecting creditors’ rights; and
	 
	 	(ii)  	does not violate any provisions of any law or regulation or any judgment, order
or decree of any governmental authority, agency or court having jurisdiction over it.

	18.2  	The Project Manager hereby makes the following representations to the Owner as at the date of
this Agreement:
	 
	(a)  	Status: the Project Manager is a société anonyme, or a société par actions simplifiée (as the
case may be), duly organised and validly existing under the laws of France, acting through its
New Caledonian branch in respect of its operations in New Caledonia (and its New Caledonian
branch is duly organised and validly existing under the laws applicable in New Caledonia) and
it possesses the capacity to sue and be sued in its own name and has the power and authority
to carry on its business and to own its assets and has no immunity from jurisdiction;
	 
	(b)  	Powers and authority: the Project Manager has full legal capacity to execute, deliver and
perform its obligations under this Agreement and each other Transaction Document to which it
is a party and to carry out the transactions contemplated by such documents and all necessary
corporate, shareholder and other action has been taken to authorise the execution, delivery
and performance hereof and thereof by the Project Manager;
	 
	(c)  	Binding obligations: the obligations of the Project Manager under this Agreement and each
other Transaction Document to which the Project Manager is a party constitute its valid,
legal, binding and enforceable obligations, subject to bankruptcy, insolvency, fraudulent
transfer, reorganisation, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights;
	 
	(d)  	Contraventions: the execution, delivery and performance by the Project Manager of this
Agreement and each Transaction Document to which it is a party does not:

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	 	(i)  	contravene any applicable law or regulation or any judgment, order or decree of
any governmental authority, agency or court having jurisdiction over it;
	 
	 	(ii)  	result in any breach of any of the provisions of, or constitute a default
under, any agreement or other instrument to which the Project Manager is a party or any
licence or other authorisation to which it is subject or by which it is bound; or
	 
	 	(iii)  	contravene or conflict with the provisions of its constitutional documents
(statuts),

	   	in each case, save where such contravention is being contested in good faith, by an
appropriate proceeding;
	 
	(e)  	Insolvency: the Project Manager has taken no action nor, to its knowledge, have any steps
been taken or legal proceedings been started or threatened against it for winding-up,
dissolution, re-organisation, or bankruptcy;
	 
	(f)  	No default: so far as it is aware the Project Manager is not in default under any obligation
under any agreement to which it is a party or which is binding on it in a manner or to an
extent which could reasonably be expected to have a material adverse effect on the Project
Manager’s operations or on the Owner’s or Tax Investors’ rights and obligations except where
such default or alleged default is being contested in good faith;
	 
	(g)  	Litigation: there are no actions, suits or proceedings pending or, to the Project Manager’s
knowledge, threatened against or affecting the Project Manager which would reasonably be
expected to have a material adverse effect on the ability of the Project Manager to perform
its obligations under the Transaction Documents to which it is a party;
	 
	(h)  	Authorisations: all governmental authorisations, licences, consents, filings and
registrations required:

	 	(i)  	for the conduct of business trade and ordinary activities of the Project
Manager, in particular the Operating Permit;
	 
	 	(ii)  	for the performance and discharge of the obligations of the Project Manager
under the Transaction Documents to which it is a party; and
	 
	 	(iii)  	in connection with the execution, delivery, validity and enforceability of the
Transaction Documents to which it is a party,

	   	have been, or, as the case may be, obtained or made, except to the extent that they are not
immediately necessary or failure to receive, benefit from or make the same would not have a
material adverse effect on the operations of the Project Manager;
	 
	(i)  	Taxes: except as disclosed in writing to the Owner prior to the date of this Agreement: (a)
there are no material disputes pending or, to the Project Manager’s knowledge, threatened with
governmental authorities in respect of the Project Manager’s non-payment of Taxes; (b) the
Project Manager has filed or caused to be filed all Tax returns required; and (c) the Project
Manager has paid all Taxes due and

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	   	payable on the returns contemplated by this Clause 18.2(i) except in each case (a) to (c)
where (A) the obligation to file or pay is being contested in good faith and by appropriate
proceedings, or (B) the failure to file or pay would not have a material adverse effect on
the Project Manager’s operations or its ability to perform its obligations under the
Transaction Documents;
	 
	(j)  	Environment: The Project Manager conducts its operations and assets in New Caledonia and will
construct and commission the Assets in compliance with all applicable Environmental Laws
except where appropriate remedial action acceptable to appropriate regulatory bodies is being
taken; and
	 
	(k)  	Accounts: the audited financial statements of the Project Manager as of and for the period
ended December 31, 2003 fairly present in all material respects the financial condition of the
Project Manager as of the date of such financial statements in accordance with French
generally accepted accounting principles, and as of the date of this Agreement, except as
disclosed in writing to the Owner (including, without limitation, pursuant to the Disclosure
Letter) or as publicly disclosed prior to the date of this Agreement, since the date of such
financial statements there has been no material adverse change in the financial condition of
the Project Manager.

The Project Manager shall be deemed to repeat the representations in Article 18.2 (other than (e)
(Insolvency), (f) (No default), (g) (Litigation), (i) (Taxes), (j) (Environment) and (k)
(Accounts)) on each day of the Construction Period.

	19  	TERMINATION EVENTS
	 
	19.1  	Owner Construction Agreement Termination Events

During the entire Construction Period, each of the following events shall be an “Owner Construction
Agreement Termination Event”:

	(a)  	Non-payment: the Project Manager does not pay on the due date any amount payable by it under
this Agreement unless the non-payment is remedied within 10 Business Days of written notice by
the Owner;
	 
	(b)  	Misrepresentation: a representation or warranty made or repeated by the Project Manager in a
Transaction Document is incorrect in any material respect when made or repeated and would
adversely affect the rights of the Owner under this Agreement;
	 
	(c)  	Girardin Law’s benefits: any event which results in the withdrawal or deprivation of the DGI
Final Approval;
	 
	(d)  	Total Loss: a Total Loss occurs or on before the Substantial Completion Date;
	 
	(e)  	Abandonment: an Abandonment occurs;
	 
	(f)  	Unlawfulness: it becomes unlawful for the Project Manager to perform or comply with any of
its obligations under this Agreement or any other Transaction Document;
	 
	(g)  	Insolvency proceedings or winding-up: the Project Manager:

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	 	(i)  	is in a state of suspension of payment (cessation des paiements), has stopped
making payments, has given up, by way of payment, a large part of its assets to its
creditors or has entered into a voluntary agreement (accord amiable) with some of its
creditors which relates to the refinancing of a large part of its indebtedness;
	 
	 	(ii)  	becomes subject to a voluntary arrangement procedure (procédure de règlement
amiable) or a judicial recovery proceeding (procédure de redressement judiciaire) (and
the administrator (administrateur judiciaire) nominated in relation with this
proceeding refuses (or is deemed to have refused) the continuation of any one of the
Transaction Documents to which the Project Manager is a party); or
	 
	 	(iii)  	becomes subject to a voluntary or mandatory winding-up;

	(h)  	Insurance: either:

	 	(i)  	the Project Manager fails to obtain and maintain, or cause to be obtained and
maintained, the Insurance Policies in accordance with Clause 9; or
	 
	 	(ii)  	any insurer cancels either of the Insurance Policies described in Clauses
9.1(a)(i), 9.1(a)(ii) and 9.1(a)(iii),

	   	provided that such failure shall not constitute an Owner Construction Agreement Termination
Event if it continues for a period of not more than fifteen (15) Business Days (such period
being extended to twenty (20) Business Days to the extent that the Project Manager is in
good faith seeking to replace or reinstate any Insurance Policy);
	 
	(i)  	Environmental proceedings:

	 	(i)  	a judicial proceeding is taken against the Owner and/or the Project Manager in
relation to the Assets with respect to environmental damages in an amount exceeding EUR
50,000,000 which is not contested in good faith by either the Owner and/or the Project
Manager as relevant (it being understood that the Project Manager may intervene if not
named in the proceeding to ensure that the proceeding is being contested), or, if it is
contested in good faith, where such contestation is still pending after :

	 	(A)  	in the case of a proceeding against the Project Manager, five
years from its initiation; or
	 
	 	(B)  	in the case of a proceeding against the Owner, two years from
its initiation,

	 	   	except where an expert of international standing appointed jointly by the Parties
has delivered an opinion that such judicial proceeding has no realistic prospect of
success;
	 
	 	(ii)  	a judicial proceeding is taken against the Project Manager in relation to any
of its other material assets being part of the Plant with respect to environmental
damages in an amount exceeding EUR 150,000,000 and which:

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	 	(A)  	is not contested in good faith by the Project Manager (unless
such contestation is still pending after five years from its initiation); and
	 
	 	(B)  	would affect the capacity of the Project Manager to perform its
obligations under this Agreement;

	(j)  	Expropriation and requisition: any of the following occurs:

	 	(i)  	expropriation by any governmental authority or any local public body
acting under governmental authority of all or a substantial part of the Assets; or
	 
	 	(ii)  	requisition or occupation of all or a substantial part of the Assets
during the Construction Period by any duly-empowered authority or agency for a
period exceeding two years;

	(k)  	Transaction Documents unenforceable or terminated: this Agreement or any other Transaction
Document is declared in a final judgment to be unenforceable against any party to the
Transaction Documents other than the Owner;
	 
	(l)  	Cross-default: any of the following occurs:

	 	(i)  	a Lease Termination Event;
	 
	 	(ii)  	an acceleration of the Loan Agreement or the Tax Loan Agreement;
	 
	 	(iii)  	any continuing event of default under any Transaction Document
other than the First Demand Guarantee (as such term is expressly defined under
the relevant Transaction Document); or
	 
	 	(iv)  	an acceleration under, or early termination of, any Transaction
Document (other than the First Demand Guarantee);

	(m)  	Put option: the exercise by the Members of the Put Option pursuant to clause 2.3(b) of the
Put Option Agreement on the Early Option Date;
	 
	(n)  	Cancellation, expiration or withdrawal of operating and building permits: the Operating
Permit or the Building Permit:

	 	(i)  	is finally and conclusively cancelled, expired or withdrawn; or
	 
	 	(ii)  	is suspended for more than 6 months,

	   	and such cancellation, expiration, withdrawal or suspension has the effect of stopping the
construction or the operation of the Plant (provided that such final cancellation,
expiration, withdrawal or suspension is not contested in good faith and that if such
contestation is initiated, it is still pending two years from its initiation);
	 
	(o)  	Non-compliance with environmental undertakings: the Project Manager does not comply on a
continuing basis with its obligations under Clause 5.1(l) except:

	 	(i)  	where appropriate, remedial action acceptable to appropriate regulatory bodies
is being taken; or

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	 	(ii)  	where compliance requirements are being contested in good faith by appropriate
proceedings, provided that the Owner may mandate an expert to determine whether the
condition in this exception (ii) is satisfied;

	(p)  	Guarantor Event of Default: the occurrence of a Guarantor Event of Default;
	 
	(q)  	Non-compliance with the Production Test: the Production Test is not satisfied on or before
the Long-Stop Date;
	 
	(r)  	Delay: the Substantial Completion Date does not occur by the final date required under, and
as may be extended in accordance with, Clause 11.1;
	 
	(s)  	New Building Permit: the Project Manager does not provide the Owner with a copy of the New
Building Permit on or before 1st December 2005;
	 
	(t)  	New Operating Permit: the Project Manager does not provide the Owner with a copy of a new
Operating Permit in respect of the Plant at least 3 months before the Substantial Completion
Date; and
	 
	(u)  	Non-compliance with DGI Final Approval: the Project Manager or Inco as the case may be fails
to comply in any material respect with its obligations under the DGI Final Approval which are
under its sole control.
	 
	19.2  	Project Manager Construction Agreement Termination Events

During the entire Construction Period, each of the following events shall be a “Project Manager
Construction Agreement Termination Event”:

	(a)  	Increased Costs, Taxes: the Project Manager determines that the consequences to it of its
liabilities in respect of any Increased Cost are excessive;
	 
	(b)  	Owner breach: a material breach of the Owner’s covenants under this Agreement excluding the
non-payment of the Construction Costs due to the failure of the Tax Investors or of the Lender
to make any advance, when due, under, respectively, the Tax Loan Agreement and the Loan
Agreement;
	 
	(c)  	DGI Final Approval: the Owner is in breach of any material requirement imposed on it by the
DGI Final Approval which is under its sole and direct control;
	 
	(d)  	Variation of Assumptions: the consequences to the Project Manager of its liabilities in
respect of any change of calculation following a variation in the Assumptions have become more
onerous than on the Closing Date;
	 
	(e)  	Tax Indemnity: the obligations of the Project Manager under the Tax Indemnity have become
materially more onerous than on the Closing Date; and
	 
	(f)  	Unlawfulness: the Lessor receives a notice in accordance with clause 6.1(a) of the Tax Loan
Agreement.

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	20  	TERMINATION
	 
	20.1  	This Agreement may be terminated prior to its scheduled expiry date as set out in this Clause
20.1.
	 
	(a)  	Upon the occurrence of a Project Manager Construction Agreement Termination Event (other than
a Project Manager Construction Agreement Termination Event referred to in Clause 19.2(f)), the
Project Manager shall have the right to terminate this Agreement 45 days after the receipt by
the Owner (with a copy to the Tax Investors) of a written notification sent by the Project
Manager stating that such event has occurred (subject to the relevant Project Manager
Construction Agreement Termination Event continuing unremedied by the Owner (in the case of
Clause 19.2(b) or 19.2(c)) or unwaived by the Project Manager).
	 
	(b)  	Upon the occurrence of a Project Manager Construction Agreement Termination Event referred to
in Clause 19.2(f), the Owner must immediately notify the Project Manager and must keep the
Project Manager informed of the progress of all discussions held in accordance with clause
6.1(b) and/or (c) of the Tax Loan Agreement. If following those discussions, the Owner is
required to make payment of a Take-Out Amount under the Tax Loan Agreement, then the Owner
must immediately notify the Project Manager and this Agreement shall terminate automatically 5
days after the receipt by the Project Manager of such written notification sent by the Owner
stating that the Take-Out Amount is required to be paid (subject to the relevant Project
Manager Construction Agreement continuing unremedied by the Owner or the Project Manager
having exercised its rights under Clause 20.3).
	 
	(c)  	Upon the occurrence of an Owner Construction Agreement Termination event (other than an Owner
Construction Agreement Termination event referred to in Clause 19.1(d) (Total Loss), Clause
19.1(m) (Put Option) or Clause 19.1(u) (Non-compliance with DGI Final Approval)), the Owner
shall have the right to terminate this Agreement 45 days after the receipt by the Project
Manager (with a copy to the Guarantors) of a written notification sent by the Owner stating
that such event has occurred (subject to the relevant Owner Construction Agreement Termination
Event continuing unremedied by the Project Manager or unwaived by the Owner).
	 
	(d)  	Upon the occurrence of a Total Loss the Owner shall have the right to terminate this
Agreement six months after the receipt by the Project Manager (with a copy to the Guarantors)
of a written notification sent by the Owner stating that such event has occurred unless:

	 	(i)  	the Owner has received an undertaking from the Project Manager to
reinstate the Assets, together with a plan which sets out the intended
replacement and reconstruction of the Assets;
	 
	 	(ii)  	the Owner has received written confirmation from the DGI that it
will not withdraw the DGI Final Approval, such confirmation to have been given
subject to the express conditions that:

	 	(A)  	the Project Manager reinstates the Assets; and

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	 	(B)  	the parties to the Transaction Documents are required to
continue their participation in the transactions described therein (and in
particular, that the Tax Loan Agreement is required to continue in accordance
with its terms); and

	 	(iii)  	the Project Manager has paid to the Tax Investors a fee calculated
in accordance with paragraph (5) of appendix 4 of the Lease on the basis of the
number of the days between the date of the occurrence of the Total Loss and the
date of completion of reinstatement of the Assets in accordance with the terms of
this Agreement.

	(e)  	Upon the occurrence of the Owner Construction Agreement Termination Event referred to in
Clause 19.1(m) (Put Option), the Owner shall have the right to terminate this Agreement 15
days after the receipt by the Project Manager (with a copy to the Guarantors) of a written
notification sent by the Owner stating that such event has occurred (subject to the relevant
Owner Construction Agreement Termination Event continuing unremedied by the Project Manager or
unwaived by the Owner).
	 
	(f)  	Following the occurrence of the Owner Construction Agreement Termination Event referred to in
Clause 19.1(u) (Non-compliance with DGI Final Approval), the Owner shall, on giving notice to
the Project Manager, be entitled to terminate this Agreement 6 months after the occurrence of
such Owner Construction Agreement Termination Event provided that neither of the following has
occurred within that 6 month period:

	 	(i)  	the Project Manager or Inco (as the case may be) remedies the
non-compliance of the DGI Final Approval which caused the Owner Construction
Agreement Termination Event pursuant to Clause 19.1(u) (Non-compliance with DGI
Final Approval) to occur; nor
	 
	 	(ii)  	the DGI has not indicated its intention to withdraw the DGI Final
Approval (it being acknowledged that on the occurrence of the Owner Construction
Agreement Termination Event pursuant to Clause 19.1(u) (Non-compliance with DGI
Final Approval), the Project Manager will be obliged to notify the DGI as soon as
practicable (with a copy to the Owner).

	20.2  	If Clauses 20.1(a) or 20.1(c) applies, then during the 45-day grace period during which the
default may be remedied, the Owner and the Project Manager will meet with a view to
maintaining the Transaction and avoiding recapture of the Tax advantages under the DGI Final
Approval. If the Project Manager and the Owner agree on a plan to maintain the Transaction and
avoid recapture of the Tax advantages under the DGI Final Approval, the grace period of 45
days referred to in Clauses 20.1(a) and 20.1(c) as the case may be will be extended in order
to allow the implementation of such plan.
	 
	20.3  	Upon the occurrence of a Project Manager Construction Agreement Termination Event set out
under Clause 19.2(f) in relation to an individual Tax Investor, the Project Manager will have
the option to require the Owner to expel the Tax Investor affected by the illegality (if a
solution to that Project Manager Construction Agreement Termination Event is not found in
accordance with clause 6.1(c) of the Tax Loan Agreement) by terminating the Tax Loan Agreement
as far as that Tax Investor is concerned in accordance with clause 6.1(c) of the Tax Loan
Agreement. If

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	   	the Project Manager chooses to exercise this option it shall notify the Owner not later than
30 days after receipt of the first notification from the Owner referred to in Clause
20.1(b). In such case, the Owner shall promptly notify the Project Manager of the Take-out
Amount.
	 
	   	Subject to the Project Manager having paid to the Owner the Take-Out Amount within 5
Business Days from the notification of the Take-out Amount by the Owner to the Project
Manager, the Project Manager Construction Agreement Termination Event will be deemed to have
been cured and the Tax Investors not affected by such illegality will continue to perform
their obligations under the Transaction Documents.
	 
	20.4  	In the event of any termination in accordance with Clauses 20.1 and 20.2:
	 
	(a)  	until the Substantial Completion Date, clauses 22, 23 and 24 of the Lease will apply mutatis
mutandis and references in such clauses to the “Lease Term” shall be construed as referrers to
the period from the Closing Date to the Substantial Completion Date;
	 
	(b)  	Clauses 22 and 24 shall survive; and
	 
	(c)  	the Owner shall transfer the Assets to the Project Manager subject to a retention of title
(“vente avec clause de reserve de propriété”) and the title of the Assets shall be transferred
to the Project Manager upon payment by the latter of the Termination Compensation (including
insofar as it relates to the Add-Back Indemnity by way of the posting of any Lessee Collateral
as may be required under clause 22.3 of the Lease) as full consideration for such sale. The
retention of title (vente avec clause de réserve de propriété) shall be released on full and
final payment of the Termination Compensation, it being understood that the posting of Lessee
Collateral does not constitute full and final payment of the Termination Compensation. The
Owner undertakes to execute any documentation and take any steps required to effect such
transfer of title to the Assets.
	 
	   	The Owner, acting in its capacity as the seller, shall transfer title to the Assets under
the ordinary de facto and legal terms and conditions without any warranty to be offered by
the Owner, in accordance the contents and in the “as is” condition of the Assets as at the
date of such transfer.
	 
	   	The Project Manager shall bear all the costs, duties, levies and taxes in respect of any
such termination and transfer of the Assets.
	 
	20.5  	If the Project Manager fails to comply with its obligations under Clause 20.4 when due for
performance, the Owner shall have available to it all remedies available under this Agreement
and at law.

	21  	LEGAL PROCEEDINGS
	 
	21.1  	To the extent possible under Applicable Law in New Caledonia, the Project Manager shall
bring, in its own name and at its own costs and risks, but on the Owner’s behalf, any legal
proceedings with respect to the Assets against any third parties, whether as plaintiff or
defendant and shall have full power to start or carry on such proceedings.

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	   	As of the Substantial Completion Date, and subject to the provisions of the Lease, the Owner
shall automatically exercise the rights and obligations exercised up to such time by the
Project Manager in accordance with its appointment, with the exception of any legal
proceedings commenced by the Project Manager during the course of its appointment on behalf
of the Owner, which shall be concluded by the Project Manager acting in the interests of the
Owner who shall be informed at all times of any developments in or evolution of such
proceedings.
	 
	21.2  	The assignment specified in Clause 21.1 shall be automatically terminated (“résilié de plein
droit”) upon written notice being served by the Owner on the Project Manager.
	 
	21.3  	The Project Manager shall bear the costs, expenses and consequences of the proceedings
specified in Clause 21.1.

	22  	WAIVER OF RECOURSE
	 
	22.1  	Subject to the Exceptions, the Project Manager hereby expressly waives any recourse for any
sum, against the Members, in the event of default by the Owner in the performance of its
obligations under this Agreement.
	 
	22.2  	The Project Manager hereby undertakes to limit any recourse for any sum, against the Owner to
the Assets and any rights and claims the Owner may have with respect to the Assets, in the
event of default by the Owner in the performance of its obligations under this Agreement.
	 
	22.3  	The Project Manager acknowledges and agrees that the undertakings contained in this Clause 22
constitute an express, irrevocable waiver of the provisions of article L.251-6 of the French
Commercial Code. In consequence thereof, the Project Manager hereby undertakes, subject to
the Exceptions, to refrain from invoking against any or all of the Members, the capacity of
Members with liability on their own assets for the debt of a groupement d’intérêt économique,
before any jurisdiction with respect to the obligations of the Owner under this Agreement.
	 
	22.4  	The Project Manager hereby undertakes to refrain from taking any action (including the filing
of any claim, petition or motion) with a view to the opening of any of the following
proceedings against the Owner or any or all of the Members:

	 	(i)  	designation as a debtor unable to pay its debts as and when they become due
(cessation de paiements);
	 
	 	(ii)  	judicial reorganisation (redressement judiciaire) or judicial liquidation
(liquidation judiciaire) pursuant to articles L. 620-1 and subsequent of the French
Commercial Code; or
	 
	 	(iii)  	any other action with respect of the insolvency, winding-up, dissolution,
administration, liquidation, rehabilitation, composition, or any equivalent or
analogous proceedings in France or any other jurisdiction or for an arrangement,
adjustment, composition, protection or relief from creditors’ action.

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	23  	TRANSFER OF THE AGREEMENT

Without prejudice to the Project Manager’s rights to contract and sub-contract the performance of
the Works pursuant to this Agreement, neither Party may sell, assign or transfer (collectively,
“Transfer”) in any form its rights and obligations under this Agreement without the prior written
agreement of the other Party provided that this shall not apply to any Transfer permitted under any
Transaction Document.

	24  	CHOICE OF LAW — JURISDICTION CLAUSE
	 
	24.1  	This Agreement is governed by French law. However, Article 1799-1 of the French Civil Code
shall not apply.
	 
	24.2  	Subject to any specific provisions of this Agreement, and to any mandatory legal provisions
that may apply, the Parties agree to submit to the jurisdiction of the relevant courts located
within the geographical jurisdiction of the Cour d’Appel (Court of Appeal) of Paris, in
connection with any and all proceedings and procedures (other than actions in rem).
	 
	24.3  	In addition, the Courts of Paris shall have exclusive jurisdiction, even in the event of an
impleader (appel en garantie), plurality of defendants or motion on a point of law (demande
incidente).

	25  	INDEMNIFICATION

	25.1  	General Indemnity

	(a)  	Subject to Clause 25.1(b), (c), (d) and (e), the Project Manager hereby agrees at all times
to indemnify and hold harmless the Owner for any Loss (including any environmental claim and
any amounts which the Owner is required to pay to any Tax Investor under clause 12 of the Tax
Loan Agreement) other than in respect of Taxes, which the Owner or any Member at any time
suffers or incurs, in its capacity as owner of the Assets or Member (respectively), as a
result of any third party claim (including but not limited to any claim by subcontractors) and
as confirmed by an executory judgment despite appeal (jugement exécutoire malgré l’appel) or a
final judgment (jugement ayant acquis l’autorité de la chose jugée) it being understood that
the Project Manager shall be consulted as to any decision to file or not any appeal and should
take the final decision whether or not to file such appeal (each such Loss covered by the
indemnity under this Clause 25.1 being an “Operational Loss”), including, but not limited to:

	 	(i)  	arising directly or indirectly out of or in any way connected with
the purchase, manufacture, ownership, possession, transportation, construction,
management, import, export, storage, insurance, sale, control, use or operation,
design, condition, testing, delivery, leasing, subleasing, maintenance, repair,
service, modification, overhaul, replacement, removal or redelivery of the Assets
or any part thereof by the Project Manager, the Owner or any other Person,
whether or not such Loss may be attributable to any defect in the Assets or any
part thereof or to the design, testing or use thereof or to any maintenance,
service, repair, overhaul, or to any other reason (whether similar to any of the
foregoing or not), and regardless of when the

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	 	   	same shall arise (whether prior to, during, or after termination of, this
Agreement); or
	 
	 	(ii)  	arising as a result of any design, article or material in the
Assets or any part thereof or the operation or use thereof constituting or being
alleged to constitute an infringement of any patent, copyright, design or other
proprietary right; or
	 
	 	(iii)  	in relation to preventing or attempting to prevent the arrest,
confiscation, seizure, taking in execution, impounding, forfeiture or detention
of the Assets, or in securing the release of the Assets.

	(b)  	The indemnification amount (the “Indemnification Amount”) in respect of an Operational Loss
incurred or sustained by the Owner shall be equal to:

	 	(i)  	the amount of such Operational Loss; less
	 
	 	(ii)  	the net amount (after deducting the reasonable costs or expenses to
the Owner in collecting such amount and any Taxes ) paid to the Owner by any
insurer or third party in respect of such Loss; less
	 
	 	(iii)  	the amount of any actual reduction in Taxes, or other costs or
expenses of the Owner resulting from such Loss; plus
	 
	 	(iv)  	in the event of any cost resulting from Taxes imposed by New
Caledonia, France, the State of Delaware, Canada or any other country in which
the Lender (or successor or assign) or a New Participant is incorporated and
actually borne or incurred by the Owner by reason of the receipt or accrual of
indemnity payments under this Agreement, by such additional amount as shall be
necessary to ensure that the Owner actually receives an amount equal to the
amount it would have received had no such costs been imposed.

	(c)  	If, after an Indemnification Amount is paid to the Owner:

	 	(i)  	the Owner receives from an insurer or a third party any amount in
respect of such Operational Loss; or
	 
	 	(ii)  	the Owner realises any benefit resulting from such Operational Loss
that, in each case, would have reduced the Indemnification Amount paid in respect
of such Operational Loss pursuant to Clauses 25.1(b)(ii) or 25.1(b)(iii); or
	 
	 	(iii)  	the executory judgment despite appeal (jugement éxecutoire malgré
appel) on the basis of which the Owner has received indemnification, is partially
or totally invalidated or the appeal decision confirming such judgment, if any,
is invalidated and the Owner receives any amount in this regard,

	   	then the Owner shall without delay repay to the Project Manager, as applicable, the net
amount so received or the benefit so realised.
	 
	   	If, as a result of an executory judgment despite appeal (jugement éxecutoire malgré appel),
the Owner has made payments to the third party by means of funds made available to it by the
Project Manager and such payments could be refundable by such

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	   	third party as a result of a final judgment, the Owner shall immediately transfer and assign
to the Project Manager its claim on the third party resulting from such final judgment.
	 
	(d)  	The Project Manager shall pay any Indemnification Amount to the Owner upon receipt of
documentation supporting that Indemnification Amount.
	 
	(e)  	The provisions of this Clause 25.1 shall not apply to, and the Indemnification Amount shall
exclude amounts relating to, any loss incurred or sustained by the Owner, which is directly
caused by (and only to the extend that such loss is directly caused by):

	 	(i)  	the gross negligence (faute intentionnelle) or wilful misconduct
(dol) of any Tax Investor or any Member;
	 
	 	(ii)  	any failure of a Tax Investor to make or abandon its Tax Advances
in accordance with the Tax Loan Agreement;
	 
	 	(iii)  	any breach by a Tax Investor or a Member of any requirement
imposed on it by the DGI Final Approval that is under its sole control;
	 
	 	(iv)  	any material breach by the Owner of its covenants under this
Agreement; or
	 
	 	(v)  	an imposition on the net income of the Owner,

	   	it being understood that the exclusions under Clauses 25.1(e)(i) to (iv) will apply only to
that Tax Investor or that Member which has defaulted as provided under Clauses 25.1(e)(i) to
(iv) and not to the other Tax Investors or the Members.
	 
	25.2  	Tax Indemnity
	 
	(a)  	The Project Manager hereby agrees at all times to indemnify and hold harmless the Owner for:

	 	(i)  	specified losses resulting from payment of a new Tax of any kind or
nature, an increase in the rate of an existing Tax other than the rate of French
Corporate Income Tax, or total or partial deprivation of a Tax advantage or
exemption provided for under the DSF Ruling, in each case imposed by New
Caledonia, France, Canada and any other country, or the State of Delaware, in
which the Lender (or successor or assign) or a New Participant is incorporated
where such event is the result of a Change in Law; and
	 
	 	(ii)  	any Tax imposed by New Caledonia which arises from the
non-availability (including as a result of any incorrect or incomplete
assessment) of:

	 	(A)  	the tax treatment set out in the DSF Ruling; or
	 
	 	(B)  	the Tax Agreement,

	   	in each case in respect of this Agreement, any of the other Transaction Documents or the
Assets or any part or interest therein or in respect of any transaction contemplated by this
Agreement or any of the other Transaction Documents, including (without limitation) the
purchase, ownership, delivery, leasing, use, possession and operation,

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	   	import to or export from any country, return, storage, maintenance, protection, sale,
attempted sale or other disposition of the Assets, or any part or interest therein.
	 
	(b)  	The Parties shall cooperate to find a position to mitigate the Tax consequences of any
incorrect or incomplete New Caledonian tax assessment.
	 
	(c)  	The Project Manager shall pay and discharge or cause to be paid or discharged, as soon as the
same become payable, all such Taxes and, if requested by the Owner, produce to the Owner
evidence of the payment and discharge thereof. The Owner agrees to provide any documentation
required to effect the payment or discharge on or prior to the due date.
	 
	(d)  	The provisions of this Clause 25.2 shall not apply to, and the amount of any indemnity shall
exclude any loss incurred or sustained by the Owner, which is directly caused by (and only to
the extent that such loss is directly caused by):

	 	(i)  	the gross negligence (faute intentionnelle) or wilful misconduct
(dol) of any Tax Investor or any Member;
	 
	 	(ii)  	any failure of a Tax Investor to make or abandon its Tax Advances
in accordance with the Tax Loan Agreement;
	 
	 	(iii)  	any breach by a Tax Investor or a Member of any requirement
imposed on it by the DGI Final Approval that is under its sole control;
	 
	 	(iv)  	any material breach by the Owner of its covenants under this
Agreement; or
	 
	 	(v)  	an imposition on the net income of the Owner,

	 	   	it being understood that the exclusions under Clauses 25.2(d)(i) to (iv) will apply only
to that Tax Investor or that Member of the Owner who will have defaulted as provided
under Clauses 25.2(d)(i) to (iv) and not to the other Tax Investors or the Members.

	(e)  	If, after indemnification in respect of Tax has been paid in accordance herewith to the
Owner, the Owner receives a Tax credit or refund in respect of such Tax or realises any
benefit resulting from the indemnification of such Tax, then the Owner shall without delay
repay to The Project Manager the net amount of such credit or refund.
	 
	25.3  	Conduct of claims

The Project Manager and/or Inco shall have full rights, at its election and at its own cost, to
control the conduct of any proceedings with respect to any claims under the indemnities in this
Clause 25 with the Owner having to provide full cooperation with such proceedings and claims,
provided that the Project Manager and/or Inco as the case may be shall keep the Owner fully
informed of the conduct of such proceedings and shall, where reasonably practicable, consult with
the Owner regarding the conduct of such proceedings.

	25.4  	Mitigation

The Project Manager and the Owner shall use their reasonable endeavours to avoid and mitigate all
Operational Losses, Tax Losses and Add-Back Losses, including the Project

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Manager making expenditure of funds and taking action which results in incurring costs. The Owner
is not obliged to take any steps under this Clause 25.4 if, in the opinion of the Owner (acting
reasonably), to do so might require it, or any Member, to expend funds.

	25.5  	Consequences of syndication

Notwithstanding any provision of this Agreement to the contrary, it is agreed that the Project
Manager shall not be affected by, or required to contribute to, any Loss deriving solely and
directly from the syndication mechanism, as described in the letter from Capstar Partners dated 15
October 2004, as approved by the DGI on 19 October 2004.

	25.6  	Specification

	   	For the avoidance of doubt, it is specified that when a claim is made and paid under any provision
of Clause 25, the same claim will not give rise to another payment pursuant to clause 25 of the
Lease. Further, notwithstanding any other provision of this Clause 25, this Clause 25 (other than
this Clause 25.7) shall only be in effect before and including the Substantial Completion Date.

	26  	COSTS AND EXPENSES
	 
	26.1  	All the costs, expenses, duties and fees of this Agreement arising after the Closing Date,
and all those that may arise in connection with, or as a consequence of, this Agreement and
incurred after the Closing Date, shall, to the extent that they are not Implementation Costs,
be borne by the Project Manager, which hereby agrees to pay them.
	 
	26.2  	The Project Manager shall pay within 3 Business Days of demand by the Owner, any amount which
the Owner is required to pay:
	 
	(a)  	to the Tax Investors:

	 	(i)  	under clause 6.2 (Increased Costs) of the Tax Loan Agreement;
	 
	 	(ii)  	under clause 12 of the Tax Loan Agreement; or
	 
	 	(iii)  	under clause 21 of the Tax Loan Agreement;

	(b)  	to the Lender:

	 	(i)  	in respect of Increased Costs; or
	 
	 	(ii)  	under clause 19 of the Loan Agreement,

provided the Project Manager shall not be required to pay such amounts which the Owner is required
to pay if such amounts are Implementation Costs or would not be recovered by the Owner under this
Agreement.

	27  	AMENDMENTS

This Agreement may only be amended with the written agreement of each Party.

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	28  	NO WAIVER

It is hereby formally agreed and understood that the fact that any act of forbearance or waiver
that may be made by a Party with regard to the enforcement of this Agreement, whatever the
frequency and/or the duration thereof, shall, unless expressly provided otherwise in writing, in no
event:

	(a)  	be deemed to constitute any novation or any amendment or any deletion of the provisions of
this Agreement, or

	(b)  	operate to confer any rights,

and in each case, except as expressly provided in writing, that Party shall be entitled to put an
end to such act of forbearance or waiver, without any prior notice being required.

	29  	PARTIAL INVALIDITY

In the event that one of the provisions of this Agreement is invalid or becomes impossible to
perform, such event will not affect the validity or performance of any other provision of this
Agreement.

	30  	CONFIDENTIALITY

The Parties shall treat the terms of this Agreement and all information provided under or in
connection with the Transaction, this Agreement and each other Transaction Document (“Confidential
Information”) as confidential and shall not disclose Confidential Information without the prior
written consent of the other Party, save that consent shall not be required for disclosure:

	(a)  	to directors, employees or affiliates of a Party, provided that they in turn are required by
that Party to treat the Confidential Information as confidential in favour of the other Party
on terms substantially the same as those set out in this Clause 30;
	 
	(b)  	to persons professionally engaged by a Party to the extent required in relation to such
engagement, provided that they in turn are required by that Party to treat the Confidential
Information as confidential in favour of the other Party on terms substantially the same as
those set out in this Clause 30;
	 
	(c)  	to the extent required by any competent authority having jurisdiction over a Party;
	 
	(d)  	to any bank, insurance company, other financial institution or rating agency to the extent
required in relation to the financing or insuring of the business activities of a Party,
provided that the bank, insurance company, or other financial institution or rating agency, as
the case may be, is required by that Party to treat the Confidential Information as
confidential in favour of any of the other Party on terms substantially the same as those set
out in this Clause 30;
	 
	(e)  	to the extent required by any Applicable Law, judicial process or the rules and regulations
of any recognised stock exchange, or to any expert or arbitrator to the extent necessary for
the resolution of any dispute arising under this Agreement;

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	(f)  	to any intending assignee of the rights and interests of a Party under this Agreement or to a
person intending to acquire an interest in a Party or that Party’s affiliate provided that the
intending assignee or acquirer in turn is required by that Party to treat the Confidential
Information as confidential in favour of any of the other Party on terms substantially the
same as those set out in this Clause 30; and
	 
	(g)  	to the extent that the Confidential Information is in or lawfully comes into the public
domain other than by breach of this Clause 30.

	31  	CONDITIONS PRECEDENT

This Agreement is subject to the fulfillment of the conditions precedent set forth in clause 28 of
the Lease.

	32  	NOTICES
	 
	(a)  	Any notice or other communication under, or in connection with, this Agreement shall be in
writing and signed by or on behalf of the Party giving it and shall be deemed to have been
properly served if delivered personally, or by post or facsimile transmission to the following
address or facsimile number:
	 
	   	Owner:

	 	   	GNiFi

BNP Paribas Nouvelle Calédonie

37 avenue Henri Lafleur

BP K3, 98800 Nouméa cedex, Nouvelle Calédonie

Fax:+687.25.84.59

Attention:Bernard Monteilh
	 
	 	   	And copied to
	 
	 	   	BNP Paribas-Capstar Partners

37 place du Marché Saint Honoré

75031 Paris Cedex 01, France

Facsimile number: +33 1 42 98 12 03

Attention: Khalid Ammari

	   	Project Manager:

	 	   	Goro Nickel

7 bis, rue Suffren, BP218

98845 Nouméa Cedex, New Caledonia

Fax number: +687 273 710

Attention: Président Directeur Général
	 
	 	   	And copied to
	 
	 	   	Goro Nickel

38, rue du Colisée

75008 Paris, France

Attention: Directeur Général Délégué

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	 	   	Facsimile number: +33 1 45 63 29 97
	 
	 	   	And copied to:
	 
	 	   	Inco Limited

145 King Street West

Toronto, ON, M5H 4B7, Canada

Fax number: +1 416 361 7788

Attention: Office of the Secretary

	  	or to such other address or facsimile number as the recipient may have notified to the other
Parties in writing.
	 
	(b)  	Proof of posting or despatch of any notice or other communication shall be deemed to be proof
of receipt:

	 	(i)  	in the case of a letter sent by post, at 10.00 a.m. on the tenth
(10th) Business Day after posting;
	 
	 	(ii)  	in the case of a facsimile transmission, at 10.00 a.m. on the
Business Day immediately following the date of despatch; and
	 
	 	(iii)  	in the case of a letter delivered by hand, immediately upon
delivery.

	(c)  	References in Clause 32(i) and (ii) to time are to local time in the country of the
addressee.
	 
	(d)  	A Party may notify the other Parties of a change to its name, relevant addressee, address or
facsimile number for the purposes of this Clause 32, provided that such notice shall only be
effective on the date specified in the notice as the date on which the change is to take
place; or if no date is specified or the date specified is fewer than five Business Days after
the date on which notice is given, the date which is five Business Days after the date on
which notice of change is given.

	33  	LIST OF APPENDICES

	 	 	 
	Appendix 1:

	 	Definitions;
	Appendix 2:

	 	Assets; and
	Appendix 3:

	 	Notification form.

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Made and executed in Paris,

In two (2) originals

On December 30, 2004.

	 	 	 
	/s/ Yves Roussel

	 	/s/ Khalid Ammari
	 

	 	 
	Goro Nickel S.A.

	 	GNiFi
	Name: Yves Roussel

	 	Name: Khalid Ammari

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APPENDIX 1

DEFINITIONS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Abandonment

	 	 	 	 	 	means:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(a)	 	at any time prior to the Substantial Completion Date:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(i)	 	the Project Manager voluntarily ceases to perform all
or substantially all construction activities of the Assets
without interruption for a period of 180 days;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(ii)	 	the Project Manager issues at the end of such period a
notice addressed to the Owner:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 	 	(A)
	 	informing the Owner of such cessation;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 	 	(B)
	 	indicating its intention to either abandon or resume all
or substantially all construction activities of the Assets
(the “Cessation Notice”),
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	(it being understood that the Project Manager
undertakes to issue such Cessation Notice at the end of such
period referred to in part (a)(i) of this definition); and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(iii)	 	in the case where the Project Manager has indicated
its intention to resume all or substantially all construction
activities of the Assets, the Project Manager has not resumed
all or substantially all construction activities of the Assets
within a period of 180 days of the date of the Cessation
Notice. For the purposes of this definition, the Project
Manager shall be deemed not to have voluntarily ceased to
perform construction activities of the Assets if such
cessation is caused by the Project Manager Force Majeure; or
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b)	 	as a result of Project Manager Force Majeure:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(i)	 	the Project Manager ceases to perform all or
substantially all construction activities of the Assets
without interruption for a period of 360 days;

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	 	 	 	 	 	 	 	 	 	 	(ii)	 	the Project Manager issues at the end of such period a
notice addressed to the Owner:
	

	 	 	 	 	 	 	 	 	 	 	 	(A)
	 	informing the Owner of such cessation; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 	 	(B)
	 	indicating its intention to either abandon or resume all
or substantially all construction activities of the Assets
(the FM Cessation Notice),
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	(it being understood that the Project Manager
undertakes to issue such FM Cessation Notice at the end of
such period referred to in part (b)(i) of this definition);
and
	 
	 	 	 	 	 	 	 	 	 	 	(iii)	 	in the case where the Project Manager has indicated
its intention to resume all or substantially all construction
activities of the Assets, the Project Manager has not taken
demonstrable steps to resume all or substantially all
construction activities of the Assets within a period of 180
days of the date of the FM Cessation Notice.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Administrative

Authorisations	 	 	 	 	 	means the Building Permit and the Operating Permit.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Agreement	 	 	 	 	 	means this construction agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Appendix	 	 	 	 	 	means an appendix to this Agreement.

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Applicable

Exchange

Rate	 	 	 	 	 	means the spot rate of exchange quoted by the European Central
Bank for the purchase of Euros with US Dollars (US$) as
displayed on the page “euro foreign exchange reference rates”
at or about 12h30 (Paris time) on 15 December of the relevant year or if such day is not a Business Day, the following
Business Day.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Applicable Law	 	 	 	 	 	means, with respect to any Person or any property or asset,
all laws, ordinances, codes, rules, regulations, orders,
writs, injunctions, decrees or rulings of any governmental
authority and all governmental authorisations applicable to or
binding on such Person (or its properties or assets) or to
such property or asset from time to time.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	 	 	 	means the assets listed in Appendix 2 and any equipment or
assets which are comprised in the assets listed in Appendix 2.

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	Building Permit	 	 	 	 	 	means the building permit n°98817 2001 0185 issued on 20 March
2002 by the President of the South Province of New Caledonia
for the construction of the Plant and any amendment thereof or
any new building permit or permits replacing in whole or in
part the current building permit, all of them having become
definitive, together with their application files.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Business Day	 	 	 	 	 	means a day, other than a Saturday or Sunday, on which banks
are open for general business in Paris, Nouméa, Toronto and
New York, and (on any day on which it is necessary to
calculate EONIA) Brussels and (on any day on which it is
necessary to calculate LIBOR) London.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Call Option

Agreement	 	 	 	 	 	means the agreement so named between each Member, Inco and the Owner dated on or about the date of this Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Cautionnement	 	 	 	 	 	means the cautionnement solidaire dated on or about the date
of this Agreement between Inco and the Security Agent (on
behalf of the Owner) and each other cautionnement solidaire
entered into pursuant to that cautionnement.
	 
	CEG Joint Venture	 	 	 	 	 	means the joint venture of the affiliated companies of SNC
Lavalin Inc. and Foster Wheeler Energy Limited.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CGI	 	 	 	 	 	means the Code Général des Impôts.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Change in Law	 	 	 	 	 	means any change in, deletion from, amendment or addition to
or introduction of, any Applicable Law or regulation or
official directive or any change in the interpretation or
administration of any thereof by any court, tribunal or other
binding competent authority in each case from that existing as
at the date of this Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Clause	 	 	 	 	 	means a clause of this Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Construction

Agreement

Termination Event	 	 	 	 	 	means each Owner Construction Agreement Termination Event and each Project Manager Construction Agreement Termination Event.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Construction Costs	 	 	 	 	 	means a fixed amount (“forfaitaire”) being the Euro equivalent
of US$511,000,000 which covers:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(a)	 	the fees of the Contractors;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b)	 	the Project Manager’s fees, costs and expenses (including
the fee of the Project Manager amounting to US$10,000,000);
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c)	 	the design, construction and completion of all of the

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	 	 	 	 	 	 	 	 	Assets in accordance with the description and the technical
and performance criteria set forth in this Agreement; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(d)	 	all administrative, insurance, legal, regulatory, tax and
other costs (including the contingency and escalation) in
connection with this Agreement and the design, construction or
completion of the Assets, and which amount shall not be subject to adjustment other than
in accordance with Clause 16.2.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Construction Period	 	 	 	 	 	means the period starting on the Closing Date and ending on
the Final Completion Date.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contractors	 	 	 	 	 	means any Person including (but not limited to) project
managers, sub-contractors, engineers, researchers,
constructors, suppliers, providers of equipment, providers of
services, technical surveyors and inspection agencies which
have entered into an agreement with the Project Manager as to
the completion of the Works and/or the delivery and the
commissioning of the Assets.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contractors’
Equipment	 	 	 	 	 	means all fixed and mobile equipment and tools used for the
purpose of carrying out the Works, owned, leased or rented for
or by any Contractor or for which any Contractor is legally
responsible.
	 
	Definitive

Acceptance

Certificate
	 	 	 	 	 	has the meaning given to it in Clause 12.3.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Delegations	 	 	 	 	 	 means each of the Rentals Delegation and the Termination Value
Delegation.
	 
	DGI	 	 	 	 	 	means the French Direction Générale des Impôts.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DGI Final Approval	 	 	 	 	 	means the final approval to be issued by the DGI and the
French Ministry of Economy and Finance.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DSF Ruling	 	 	 	 	 	has the meaning given to it in the Lease.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Early Option Date	 	 	 	 	 	has the meaning given to it in the Put Option Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Environmental Law	 	 	 	 	 	means any Applicable Law in New Caledonia regarding:
	 	 	 	 	 	 	(a)	 	protection of the environment;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b)	 	human health or safety as it relates to exposure to
Hazardous Materials; or
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c)	 	the use, handling, release or disposal of Hazardous

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	 	 	 	 	 	 	 	 	Materials.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Exception
	 	 	 	 	 	has the meaning given to it in the Intercreditor Agreement.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Euro	 	 	 	 	 	means the lawful currency of the member states of the European
Union that have adopted or that adopt the single currency in
accordance with the treaty establishing the European
Community, as amended by the Treaty on European Union.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Final Completion	 	 	 	 	 	has the meaning given to it in Clause 12.2(b).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Final Completion

Certificate	 	 	 	 	 	has the meaning given to it in Clause 12.4(b).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Final Completion

Date	 	 	 	 	 	has the meaning given to it in Clause 12.4(b).

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	First Demand

Guarantee
	 	 	 	 	 	means the first demand guarantee dated on or about the date of
this Agreement between the Security Agent (on behalf of the Tax Investors) and Inco and each other first demand guarantee
entered into pursuant to that first demand guarantee.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Guarantor	 	 	 	 	 	means Inco and each New Participant.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Guarantor Event of
Default	 	 	 	 	 	has the meaning given to it in the First Demand Guarantee.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Hazardous Material	 	 	 	 	 	means any substance listed, defined, designated or classified
as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type,
concentration or by quantity, including petroleum, petroleum
product, asbestos, lead, polychlorinated biphenyls and smoke.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Implementation

Costs	 	 	 	 	 	has the meaning given to it in the Tax Loan Agreement.

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 Inco	 	 	 	 	 	means Inco Limited, a Canadian corporation having its
registered office at 145 King Street West, Toronto, ON, M5H
4B7, Canada.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Increased Cost	 	 	 	 	 	has the meaning given to it in the Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Insurance Policies	 	 	 	 	 	means the insurance policies specified in Clause 9.1(a).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Intercreditor

Agreement	 	 	 	 	 	means the agreement so named dated on or about the date of
his Agreement between, among others, the Owner, the Project
Manager, each Tax Investor, each Member, the Lender, each
Guarantor and the Security Agent.

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	Land	 	 	 	 	 	means the real property in New Caledonia on which the Assets
are to be located.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lease	 	 	 	 	 	means the French financial lease (crédit-bail) dated on or
about the date of this Agreement between the Project Manager, as lessee and the Owner, as lessor.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lease Assignment	 	 	 	 	 	means the assignment, dated on or about the date of this
Lease, between the Project Manager and the Owner, of the
rights and obligations over the Land as vested in the Lessee
under the Long-term Lease
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lender	 	 	 	 	 	means Goro Funding, LLC, a limited liability company formed
under the laws of the State of Delaware.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lessee	 	 	 	 	 	means the Project Manager in its capacity as lessee under the
Lease.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lessor

	 	 	 	 	 	means the Owner in its capacity as lessor under the Lease.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loan Agreement	 	 	 	 	 	
means the agreement so named dated on or about the date of
this Agreement between the Lender, as lender, and the Owner,
as borrower.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-Stop Date	 	 	 	 	 	has the meaning given to it in Clause 11.2.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term Lease	 	 	 	 	 	means the “bail emphytéotique” dated 7 December 2004 between
the Project Manager, as lessee, and New Caledonia, as lessor.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss	 	 	 	 	 	means any loss, liability, claim, damage, cost or expense.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Materials	 	 	 	 	 	means, for the purposes of the definition of POED only, all
materials, equipment, supplies and other items, intended to
form part of, and/or required for the operation or maintenance
of, the Permanent Works, to be supplied by the Contractors.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Member	 	 	 	 	 	means each member of the Owner (or any successor or assign of
such member).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	New Building Permit	 	 	 	 	 	means the building permit for the construction of the Plant to
be issued by the administrative authorities further to the
application form filed by the Project Manager on or about 2
December 2004.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	New Participant	 	 	 	 	 	means a Person who is a “New Participant” as defined under the
First Demand Guarantee and the Cautionnement.

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	Operating Permit	 	 	 	 	 	means the operating permit (“autorisation d’exploiter une
installation classée pour la protection de l’environnement”)
n° 1769-2004/PS issued on October 15, 2004 by the President of
South Province of New Caledonia for the operation of the Plant
and any amendment thereof or any new operating permit or
permits replacing in whole or in part the current operating
permit, all of them having become definitive, together with
their application file.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Owner
	 	 	 	 	 	has the meaning given to it in the Preamble.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Owner Construction 

Agreement

Termination Events	 	 	 	 	 	has the meaning given to it in Clause 19.1.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Partial Loss	 	 	 	 	 	has the meaning given to it in Clause 10.2.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Permanent Works	 	 	 	 	 	means, for the purposes of the definition of POED only, the
permanent structures, installations and other works to be
designed, constructed and completed as part of the Project.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Permitted Liens	 	 	 	 	 	means:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(a)	 	the respective rights and interests of the Parties and to
all contracts referred to in this Agreement;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b)	 	liens of the Public Treasury that are being contested in
good faith and by appropriate proceedings duly conducted, so
long as such proceedings do not: (i) involve any danger of
foreclosure, forfeiture or loss of the Assets, or any part
thereof or interest therein or any substantial danger of the
sale of the Assets or any parts thereof or interest therein;
or (ii) interfere with the enjoyment, possession or
development of the Assets or any part thereof or rights
therein; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c)	 	the liens of architects, contractors, masons and all other
workmen employed for the construction of the Assets or for any
Work or modifications or arising in the ordinary course of
business for amounts that are not more than 30 days past due
or which are being contested in good faith by appropriate
proceedings.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Person	 	 	 	 	 	means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated
organisation, governmental entity (whether or not having
separate legal personality).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Plant	 	 	 	 	 	means the nickel-cobalt processing plant comprising a

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	 	 	 	 	 	 	portion of the Project.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	POED	 	 	 	 	 	means property of every description (except Contractors’
Equipment) including the Assets, the Permanent Works and the
Temporary Works associated with and/or materials incorporated
in Assets that are required for or in connection with the
construction of the Project.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Preamble	 	 	 	 	 	means the preamble of this Agreement which forms an integral
part of this Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Preliminary Works	 	 	 	 	 	has the meaning given to it in Clause 1.2.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Production Test	 	 	 	 	 	means the production by the Project, over a continuous period
of 30 days occurring prior to the Long-Stop Date, of a total
of a least 2,600 tonnes of contained nickel in oxide form and
220 tonnes of contained cobalt in carbonate form (such amounts
representing 60% of the Asset’s expected capacity and the
amount of 220 tonnes of cobalt being adjusted to reflect any
difference between the grade of cobalt in the ore actually
mined and the grade assumed by Inco).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Project	 	 	 	 	 	means the nickel-cobalt mine, Plant, and supporting
infrastructure being constructed, and to be operated by the
Project Manager in the South Province of New Caledonia.

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Project Design

Criteria	 	 	 	 	 	means the written
project design criteria developed by the Project Manager for the Assets as may be amended and updated
from time to time by the Project Manager.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Project Manager

Force Majeure	 	 	 	 	 	means:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(a)	 	the concept of force majeure such as defined under French
law and construed under French jurisprudence, being an
unforeseeable (“imprévisible”), external (“extèrieur”) event
or circumstance that is beyond the control of the Project
Manager which it could not have avoided or overcome
(irrésistible) and which makes it impossible for the Project
Manager to construct and/or operate all or substantially all
of the Assets and including, without limitation, events such
as for example climatic events, civil war, revolution, acts of
war or terrorism;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b)	 	the events set out in the DGI Final Approval including
unforeseeable major technological and technical difficulties
beyond the control of the Project Manager and Inco provided
that such difficulties are confirmed by an independent expert;

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	 	 	 	 	 	 	 	 	or
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c)	 	strikes.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Project Manager

Construction

Agreement

Termination Events	 	 	 	 	 	has the meaning given to it in Clause 19.2.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Put Option	 	 	 	 	 	has the meaning given to it in the Put Option Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Put Option
Agreement	 	 	 	 	 	means the agreement of that name between each Member, Inco,
and the Lessee dated on or about the date of this Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rentals Delegation	 	 	 	 	 	means the delegation of claims (acte de délégation imparfaite)
dated on or about the date of this Agreement and entered into
between the Owner, as grantor (délégant), the Project Manager,
as delegated debtor (débiteur délégué), and the Lender as
beneficiary (délégataire) pursuant to which the Owner
delegates the Project Manager to the Lender with respect to
the Owner’s rights and claims relating to the Rent.

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Request for DGI

Final Approval	 	 	 	 	 	means the request for
approval of the Transaction filed with the DGI and pursuant to which the DGI Final Approval is to be
issued.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Security Agent	 	 	 	 	 	means the security agent appointed by the Tax Investors, the
Owner and the Lender under the Intercreditor Agreement and
acting for them and on their behalf.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Services Agreement	 	 	 	 	 	means each of the agreements between the Project Manager and
CEG Joint Venture in relation to the provision of services
(including the Works) to the Project Manager for the Project.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Substantial
Completion	 	 	 	 	 	has the meaning given to it in Clause 12.2(a).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Substantial
Completion Date	 	 	 	 	 	has the meaning given to it in Clause 12.3(b).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Take-out Amount	 	 	 	 	 	has the meaning given to it in the Tax Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax or Taxes	 	 	 	 	 	means all forms of taxation whether direct or indirect and
whether levied by reference to income, profits, gains, net
wealth, asset values, turnover, added value or other reference
and statutory, national or supranational, governmental, state,
provincial, local governmental or municipal impositions,
duties, contributions, rates and levies (including without
limitation customs duties, social security contributions and

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	 	 	 	 	 	 	any payroll taxes), whenever and wherever imposed (whether
imposed by way of a withholding or deduction for or on account
of tax or otherwise) and in respect of any person and all
penalties, charges, costs and interest relating thereto.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax Advance	 	 	 	 	 	has the meaning given to it in the Tax Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax Loan Agreement	 	 	 	 	 	means the agreement so named dated on or about the date of
this Agreement between the Owner, the Tax Investors and the
Tax Investors Agent.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax Investors	 	 	 	 	 	has the meaning given to it in the Tax Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax Investors Agent	 	 	 	 	 	has the meaning given to it in the Tax Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Taxable Base	 	 	 	 	 	means for a Person (other than an individual) with a
registered place of business in metropolitan France, the
amount of such Person’s taxable corporate income as determined
in accordance with article 209(I) of the CGI (or any successor
provision thereof) for purposes of calculation of the amount
of Taxes such Person’s corporate income tax liability under
article 219(I) of the CGI (or any successor provision
thereof).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Temporary Works	 	 	 	 	 	means, for the purposes of the definition of POED only, all
temporary works or facilities of every kind required for or in
connection with the execution of the Project.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Termination

Compensation	 	 	 	 	 	has the meaning given to it in the Lease.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Termination Value

Delegation	 	 	 	 	 	means the delegation of claims (acte de délégation imparfaite)
dated on or about the date of this Agreement and entered into
between the Owner, as grantor (délégant), the Project Manager,
as delegated debtor (débiteur délégué), and the Tax Investors
and the Lender, as beneficiaries (délégataires), pursuant to
which the Owner delegates the Project Manager to the Tax
Investors and the Lender with respect to the Owner’s rights
and claims relating to the Termination Value and the purchase
price under clause 26 of the Lease.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Loss	 	 	 	 	 	means:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(i)	 	the Assets are completely physically destroyed; or
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(ii)	 	the Assets are destroyed to an extent that it is deemed
more economic to replace rather than repair the

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	 	 	 	 	 	 	Assets;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	and in each case as certified by an expert jointly appointed
by the Owner and the Project Manager.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Transaction	 	 	 	 	 	means the transaction comprising:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(d)	 	the assignment pursuant to the Lease Assignment;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(e)	 	the construction and commissioning of the Assets by the
Project Manager, acting as project manager under this
Agreement, and the incremental acquisition by the Owner of
title to the Assets as they are constructed, pursuant to this
Agreement; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(f)	 	the Lease.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Transaction

Documents	 	 	 	 	 	means the Lease, this Agreement, the Loan Agreement, the Tax
Loan Agreement, the First Demand Guarantee, the Cautionnement,
the Delegations, the Put Option Agreement, the Call Option
Agreement, the Long-term Lease, the Lease Assignment, the
Intercreditor Agreement and the letter from Inco to the
Security Agent (on behalf of the Owner) dated on or about the
Closing Date regarding the obligations of the Lender under the
Loan Agreement.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	US$, USD and US
Dollars	 	 	 	 	 	means the lawful currency for the time being of the United
States of America.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Variation	 	 	 	 	 	means any additional or supplemental work which shall require
the filing of an Administrative Authorisations as required by
all Applicable Laws in New Caledonia.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Works	 	 	 	 	 	means any works or services to be carried out or provided with
a view to completing and commissioning the Assets.

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APPENDIX 2

ASSETS

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APPENDIX 2 A

LIST OF THE ASSETS

	 	 	 
	The Assets will comprise the following units of the Plant:
	 
	 	 
	 
	 	 
	-

	 	Unit 215;
	 
	 	 
	-

	 	Unit 220;
	 
	 	 
	-

	 	Unit 240;
	 
	 	 
	-

	 	Unit 245;
	 
	 	 
	-

	 	Unit 250; and
	 
	 	 
	-

	 	Unit 285.

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APPENDIX 2 B

MAP OF THE ASSETS [NOTE: MAP NOT INCLUDED IN THIS VERSION]

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APPENDIX 2 C

SCOPE BOOK

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Area 215: Feed Thickening

Area 220: Pressure Leaching

Areas 215 and 220 are addressed together because the slurry enters Area 220 from 210 for
preheating, then proceeds to Area 215 for thickening, and finally returns to Area 220 for
further heating, pressure acid leaching and pressure letdown.

Purpose

Areas 215 and 220 are designed to:

	•  	heat the feed slurry to about 93°C prior to thickening;
	 
	•  	thicken the slurry exiting the low temperature heaters;
	 
	•  	store hot, thickened slurry at 90°C;
	 
	•  	further heat the slurry to about 259°C prior to pressure acid leaching:
	 
	•  	leach the heated slurry at 270°C with the appropriate addition of sulphuric acid
(H2SO4) in mechanically agitated autoclaves to extract nickel and
cobalt; and
	 
	•  	depressurise the leached slurry in flash vessels, while recovering steam for direct
heating of the incoming slurry as described in the first and fourth points above.

Description

Refer to PFDs CEG01-215-8110-20-0120 to 0122 for Area 215, and CEG01-220-8110-20-0130 to
0140 for Area 220.

The ore slurry is delivered to Area 220 from Area 210 via the pipeline and is preheated in
the direct heater section of three low temperature (LT) heater/flash vessels (210-PRV-
111/211/311, 5,504mm heater PD x 21,400mm tan/tan), arranged in parallel, using flashed
low pressure steam from the integrated low pressure flash vessels (5220mm PD). At base
case conditions, approximately 166t/h of slurry enters each vessel at a temperature of 63°C
and is heated to approximately 93°C by contact with the low-pressure flashed steam.
Preheating the ore slurry facilitates thickening and permits slurry feed of a higher
density to be sent to the pressure leach circuit. The preheated slurry is thickened in
five 20m dia x 19.8m high deep bed thickeners (215-THK-005 to 009) operating in parallel.
The thickener underflow, at 37% solids by weight, is pumped to the
four 20.6m dia x 21.1m
high agitated autoclave feed storage tanks (215-TNK-001 to 004), each with a surge capacity
of 6,000m3. The thickener overflow solution is pumped back for use as process
water in the FPP (Area 210) via two-stage pumps (210-PPP-001 to 004, duty/standby) and a
10km long carbon steel pipeline for use as process water. One LT heater is associated with
each leach train.

There are three identical
leach trains in the pressure acid leach area; the description
that follows refers to the first train but also applies in principle to each of the other
trains. Where the trains differ in principle, additional description is provided for
clarification.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

The preheated and thickened ore slurry is pumped by a single stage centrifugal pump
(215- PPS-009/010, duty/stand by) from the autoclave feed tanks to the heater section of
the intermediate temperature (IT) heater/flash vessel
(220-PRV-112, 4,020mm
heater PD x 16,550mm tan/tan). Steam from the integrated intermediate pressure flash
vessel (3600mm PD) heats the slurry. Slurry discharges the IT heater at 151°C and is
transferred by three stage centrifugal pumps (220-PPS-115 to 120, duty/standby sets) to
the heater section of the high temperature (HT) heater/flash vessel (220-PRV-113, 4,160mm
heater PD x 17,430mm tan/tan), where it is heated by steam from the integrated
high-pressure flash vessel (3654 PD). The heated slurry at 200°C is then pumped into the
autoclave via a live steam trim direct heater (220-PRV-114, 2,500mm
PD x 5,400mm tan/tan).
Two high-pressure positive displacement pumps (220-PPD-101/102) operating in parallel are
used to transfer the slurry from the HT heater discharge through the trim heater to the
autoclave. The trim heater raises the slurry temperature to 259°C. The autoclave feed
density is reduced by contact with condensing steam to 27.6% solids by weight.

The slurry is leached with H2SO4 at an approximate ratio of 122kg
acid for each tonne of ore, in a six-compartment autoclave (220-ALV-100, 4,300mm PD x
25,845mm tan/tan) at high pressure (5,900kPa) and high temperature (270°C). Sulphuric acid
is delivered to each of the first three autoclave compartments using one positive
displacement high-pressure acid pump (220-PPD-003/004/005) for each compartment. Sulphuric
acid is fed directly to the pump suctions from the sulphuric acid storage area (Area 330).
The nominal H2SO4 deliveries to the first, second, and third
compartments of the vessel are 25m3/h, 7.2m3/h and
3.6m3/h, respectively.

The slurry/acid mixture cascades through the six agitated compartments of the autoclave.
Dual impellers driven by 75kW motors agitate each of the first three
compartments; 37kW
motors drive the agitators in each of the final three compartments. Complete dissolution is
required to maximise liberation of nickel and cobalt as sulphates. Slurry residence time
in the autoclave is 30 minutes. Nickel and cobalt extractions from the ore into solution
are approximately 94.5% and 93.5% respectively. The leached slurry discharges the final
autoclave compartment at 270°C and 22% solids by weight.

Each agitator shaft is equipped with a cartridge type, dual-pressurised mechanical seal. A
circulating barrier fluid of demineralised water lubricates and cools the seals. The return
seal water from the six agitators is cooled in a seal water cooler (220-HXS-423) which is
shared by the three trains. Seal water for the autoclave agitator seals and HT heater feed
pump mechanical seals in all three trains is supplied from a common 165m3
autoclave seal water tank (220-TNK-404). Each set of autoclave agitator seals has a
duty/standby positive displacement seal water pump set (220-PPP-101/102, 201/202,
301/302). A single duty/standby pump set (220-PPP-407/408) provides high-pressure seal
water for the HT heater feed pumps of all three trains.

The leached slurry flows from the final autoclave compartment into a flashing circuit. The
pressure and temperature of the slurry are progressively reduced as it passes in order
through the flash sections of the HT, IT, and LT heater/flash vessels (220-PRV-113, 220-
PRV-112 and 220-PRV-111). In each pressure let-down stage, the flashed steam rises from the
flash section of the vessel into the heater section to pre-heat incoming slurry, thus
recovering heat from the slurry depressurization process. In the LT vessel the slurry
flashes to near boiling point at ambient pressure.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

The vent gases from the three-heater/flash vessels and the autoclave are handled as
follows:

	•  	LT heater/flash vessel vent gas is sent directly to the vent gas
scrubber (220-SBW-102) for gas cleaning and discharge to atmosphere;

	•  	IT heater/flash vessel vent gas and autoclave vent gas are collected in a ceramic-lined
continuous vent vessel (220-SPC-111) for pressure let-down prior to being sent to the vent
gas scrubber; and

	•  	HT heater/flash vessel vent gas passes through a knockdown tank (220-VEP-111) to
separate condensate prior to being sent to the power plant (Area 350) for waste heat
recovery. The condensate from the knockdown tank is combined with the scrubber
condensate and returned to the thickener overflow surge tank (215-TNK-008) in Area
215.

The slurry from the final flash vessel is discharged to a leach discharge pump box
(220-PBX- 401) common to the three trains. Trains 1 and 2 require pumps to transfer the
slurry from the final flash vessel to the pump box; slurry in Train 3 flows by gravity.
From the pump box, the slurry is pumped to the counter-current decantation washing
thickeners (220-PPS-403/404) for separation of the barren solids from the pregnant leach
solution. This slurry is at approximately 101°C and 28% solids by weight. The pregnant
leach solution contains approximately 7g/l of nickel and 0.8g/l of cobalt.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Area 240: Partial Neutralisation

Purpose

The partial neutralisation (PN) circuit is designed to:

	•  	neutralise the excess acid in the CCD thickener overflow PLS with lime and limestone;

	•  	precipitate the majority of impurities such as iron, aluminium, chromium and silica;

	•  	separate the neutralised and partially purified solution from the precipitated
impurities;
	 
	.  	filter and wash the resulting precipitate before treatment in the ETP; and

	•  	collect and clean the CO2 off-gas resulting from the neutralisation process
and compress/liquefy part of this CO2 off-gas for use in the solvent-extraction
area.

Description

Refer to PFDs CEG01-240-8110-20-0160 to 0163.

The thickener overflow from the CCD circuit is treated with limestone and lime using a two-
stage neutralisation circuit to neutralise excess acid. Impurities such as iron, aluminium,
chromium, and silica are also removed. (The limestone and lime are prepared as slurries in
separate limestone and lime plants). Iron and chromium in particular would be detrimental to
downstream unit operations if not removed in partial neutralisation.

Limestone slurry is used for the first stage and slaked lime for the second stage.

PLS is pumped from the first CCD thickener overflow tank at a base case flow of
1358m3/h
to a distribution box (240-TNK-010) above two 625m3
mechanically agitated tanks (240-TNK- 002/031) operating in parallel. If required PLS is
heated to 65°C using a direct steam eductor. Sulphur dioxide (SO2)
gas is injected via a static mixer into this overflow stream before it enters the first
distributor tank immediately after the pumps. SO2 reduces any chromium from the
hexavalent (Cr6+) state to the stable trivalent (Cr3+) state allowing
it to precipitate as a hydroxide. An SO2 / air blend may be added to the reactor
tanks to improve the oxidation rate.

Limestone slurry is dosed at a rate of 125t/h solids to both of these tanks and
neutralisation of the majority of the free H2SO4 in the PLS takes place.
Reaction of the limestone with acid evolves carbon dioxide (CO2) gas and
precipitates gypsum solids. Some of the CO2 is recovered for subsequent
compression for use as a blanketing gas in the solvent extraction circuit. A small
(8m3/h) flow of regenerated solution from the Area 245 Cu IX circuit is added to
this reactor. Further neutralisation of acid continues in the third and fourth tanks by
dosing more limestone slurry. Tanks 240-TNK-003 and 004 have live capacities of
1655m3
and 1700m3 respectively and each has a residence time of 60
minutes. Low-pressure air from Area 280 is injected to these two tanks at a rate of
7,364m3/h to oxidise ferrous iron (Fe2+) to ferric iron
(Fe3+) forming a hydroxide precipitate.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Slurry from the 240-TNK-004 flows by gravity at a base case flow rate of
1,699m3/h into the feed box (240-TNK-047) of the 40m dia. first-stage thickener
(240-THK-001). The gypsum and iron solids contained in this slurry settle and are
compressed to a higher density slurry in the 45m dia. x 3.5m high thickener. Flocculant
solution is added to the diluted feed slurry stream to facilitate slurry settling. Slurry
at a density of 30% solids is withdrawn from the thickener as underflow slurry and is
pumped at a base case rate of 497m3/h to the 840m3 capacity belt
filter feed surge tank (240-TNK-011). A portion of the underflow slurry
(146m3/h) is recycled as seed to the distribution tank. The solution component of
the feed slurry overflows the thickener at a base case rate of 1,571m3/h and
flows by gravity into an overflow tank (240-TNK-025).

First stage thickener flocculant is supplied from the Area 230 flocculant storage tank by
duty/standby flocculant pumps (230-PPD-003/004).

Carbon dioxide evolved in the first two neutralisation tanks is scrubbed prior to removal of
water in a knockout pot (240-VAR-017). CO2 flows to Area
245 - Copper Removal,
or is compressed by CO2 compressors for downstream use in Area 250 Solvent Extraction. The
Co2 package provides for storage and vaporisation of liquid CO2.

Slurry in the belt filter
feed tank is pumped to four
120m2 horizontal belt filters
(240-FLB-001 to 004) that operate in parallel Three stages of counter current washing are
used to maximise recovery of soluble nickel and cobalt. Four vacuum pumps (240-PPU-001 to
004) apply vacuum to the filters, which remove entrained solution as filtrate and results
in a cake forming on top of the filter cloth. First stage filtrate solution containing nickel and cobalt is recycled to the
first stage PN thickener. Second and third stage filtrate solution is used as wash water on
the filter. Process water is used as the third stage of wash solution. Washed and dewatered
filter cake from each filter is transferred by screw conveyor (240-CVS-001 to 004) at a
combined rate of 220t/h solids to two mechanically agitated repulping tanks (240-
TNK-029/030). Process water from the process water dam is used to repulp the filter cake to
a density of 35-40% solids. Repulped filter cake slurry is pumped to the effluent treatment
circuit (Area 280) by centrifugal pumps (240-PPS-007/008). An automatic sampler extracts a
sample from this material for metallurgical accounting procedures.

Thickener overflow from the first-stage PN thickener overflow tank is pumped to the first of
three second-stage PN reactor tanks (240-TNK-007 to 009) connected in series, each of
1,215m3 capacity and a residence time of 45 minutes. Slurry from the Area 245 PN
clarifier is pumped to this first tank at a rate of 15m3/h. A recycle seed
stream of underflow slurry from the second stage PN thickener (240-THK-002) is also pumped
to this tank.

Slurry from the first of the PN neutralisation tank overflows to the second tank, which in
turn overflows to the third reactor tank. Injection of air (1342m3/h) from Area
280 low-pressure blowers and the addition of slaked lime slurry (2t/h solids) into these
tanks results in precipitation of the remaining iron and aluminium, and a significant
portion of the dissolved copper. An SO2 / air blend may be added to the reactor
tanks to improve the oxidation rate.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Slurry from the last PN reactor tank overflows by gravity to the 31m dia.
second-stage partial neutralisation thickener (240-THK-002) at a base case flow rate of
1,616m3/h. Solids contained in this slurry settle and are compressed to a higher
density slurry in the thickener. Slurry settling is facilitated by the use of flocculant
solution which is added to the diluted feed slurry stream. Slurry (18m3/h at a
density of 30% solids) is removed from bottom of the thickener and is pumped to the first
CCD thickener in Area 230 for recovery of nickel and cobalt precipitated during the
addition of slaked lime.

Flocculant solution is made up in batches in a vendor supplied package comprising a dry
flocculant storage bin, powder wetting and mixing tank before transfer to a 14m3
storage tank (240-TNK-044). Flocculant to PN thickener No.2 is delivered by flocculant
distribution pumps (240-PPD-003/004).

Thickener overflow from the second stage partial neutralisation thickener flows by gravity
to the PN clarifier in Area 245 at a base case flow rate of 1,582m3/h.

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	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Area 245: Copper Removal

Purpose

The copper removal operation
is designed to:

	•  	clarify the neutralised solution from Area 240;
	 
	•  	inject hot water into the clarified solution to minimise gypsum precipitation;
	 
	•  	remove copper impurities through Ion Exchange columns;
	 
	•  	de-aerate the copper free solution;
	 
	•  	carbonate the resulting solution; and
	 
	•  	provide surge and steady flow to SX1.

Description

Refer to PFDs CEG01-245-8110-20-0201 and 0202.

	•  	Calcium Management
	 
	   	Neutralised PLS from Area 240 overflows the second-stage PN
thickener (at base case flow of 1,582m3/h) via launder to the feedwell of the 35m dia. PN clarifier
(245-THK- 001). The liquor is dosed with flocculant from the Area 240 flocculant
package by flocculant distribution pumps (240-PPD-003/004. The underflow slurry is
returned to Area 240 to the first stage of partial neutralisation. The clarifier
overflow travels by launder to the copper ion exchange feed tank (245-TNK-002) that
provides 625m3 of surge capacity between Areas 240 and 245.
	 
	   	Following reaction with lime and limestone in Area 240 the calcium concentration in the
neutralised PLS is above the solubility limit of gypsum. Heat is lost through pipes
and tank walls, so the temperature and gypsum solubility of the PLS falls. The
downstream process equipment is therefore prone to scale deposition on wetted
surfaces.
	 
	   	The PLS is diluted by water heated by steam injection (245-EJS-001) in the copper
removal feed tank. Water lowers the calcium sulphate concentration below the
solubility limit. If the PLS temperature is above the design operating temperature of
SX1 extraction, cooler filtered water can be injected into the copper ion exchange.
The steam and water may dissolve solids in the PLS to allow lower back washing
frequency in the copper ion exchange columns
	 
	   	Spent scrub solution is returned from Area 250 to the copper ion exchange (Cu IX) feed
tank to decrease the calcium concentration of PLS prior to feeding to the ion exchange
columns. PLS is pumped to the PLS ion exchange trains by centrifugal pumps
(245-PU-030/031).

Page 64 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

	•  	Copper Ion Exchange
	 
	   	Copper is removed from PLS to prevent poisoning of the solvent in SX1. The ion
exchange resin selectively loads copper above nickel. The copper ion-exchange columns
are loaded in series to ensure that copper breakthrough is prevented. Seven trains of
columns are operated in parallel to achieve design throughput without excessive
pressure drop across the resin beds. Each train consists of three columns.

	 	•  	245-IEX-101 to 103;
	 
	 	•  	245-IEX-2D1 to 203;
	 
	 	•  	245-IEX-301 to 303;
	 
	 	•  	245-IEX-401 to 403;
	 
	 	•  	245-IEX-501 to 503;
	 
	 	•  	245-IEX-601 to 603; and
	 
	 	•  	245-IEX-701 to 703,

	   	Each ion-exchange train continually receives PLS. When the copper concentration on the
resin in the lead column of each train reaches its absorption limit the loaded lead
column is taken offline for copper removal. The other columns in the train remain in
service. Copper free solution discharging each train is manifolded to the 3.6m dia x
6.8m high PLS degas vessels (245-PRV-001/002). Solution that is outside the dissolved
copper specification is sent to the recycle solutions tank (245-TNK-009) for transfer
to Area 240 for retreatment.
	 
	   	The sequence of treating loaded columns includes:

	 	•  	back wash with water to recover the nickel-rich solution within the resin bed and
column freeboard. Spent backwash solution pumped to Areas 240 or 280 via the
recycle (245-TNK-009) or discharge tank (245-TNK-010) respectively;
	 
	 	•  	elution with dilute H2SO4 to remove the copper and
residual nickel from the resin. Spent eluate flows to the discharge solutions
tank and is pumped to Area 280 as effluent for treatment; and
	 
	 	•  	regeneration with copper free PLS to restore the nickel concentration on resin
prior to copper loading. The PLS is recycled from the SX1 feed pumps (245-PPP-
007 to 009). Spent solution from regeneration of the resin is pumped to the
recycle solutions tank and returned to Area 240.

	   	The regenerated column is returned to service as the trailing column in the respective
train. The first flush of PLS through the reinstated column is directed to the recycle
solution tank for return to Area 240 to ensure that no copper passes to SX1 while the
resin bed settles into service.

Page 65 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

	•  	Gas Treatment of Liquor
	 
	   	The gas dissolved in solution received from Area 240 varies depending on the
instantaneous process conditions. The PLS becomes progressively richer in dissolved
air as it passes through tanks in Areas 240 and 245 as a result of
its CO2
content being depleted by air sparging in Area 240. The O2 content is
depleted from PLS to decrease solvent degradation that arises by its reaction with
extractant in the circulating solvent in Area 250. The CO2 in the SX feed
minimises the consumption of expensive, high purity CO2 cover gas in Area
250. De-aeration is performed in two parallel PLS degas vessels (245-PRV-001/002) in
which the PLS is distributed across the vessel void under vacuum. The vacuum
maintains a low O2 partial pressure within the vessel to promote
O2 removal from the PLS. The dissolved gases in the PLS are released into
the vacuum stream and are exhausted to atmosphere via the vacuum pumps. The degassed
PLS is then pumped through eductors (245-EJS-002/003) which contact CO2
(from Area 240) with the PLS, and then through inline static mixers
(245-MXS-003/004). The retention and mixing facilitate CO2 absorption in
the PLS before discharging into the SX feed tank (2450TNK-003). Constant PLS
throughput during upstream flow restrictions is achieved by recycling PLS from the SX
feed tank as required to maintain a steady gas to liquid ratio and maintain adequate
CO2 contact with the PLS.
	 
	   	The 100m3 SX feed tank provides surge capacity between Areas 245 and 250.
Excess CO2 from the PLS is released to blanket the tank freeboard space.
	 
	   	The copper free and O2 depleted PLS is supplied to the solvent extraction
columns in Area 250 by variable speed pumps (245-PPP-007 to 009) via a pipe header.
The liquor is delivered at constant pressure to ensure regulation of flow rate to
individual columns. A side stream of SX feed can be diverted to Cu IX for resin
regeneration as required.

Page 66 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Area 250: Primary Solvent Extraction SX 1

Purpose

The purpose of the primary solvent-extraction circuit is to selectively recover the nickel
and cobalt contained in the copper-free pregnant leach solution and concentrate them in a
hydrochloric acid (HCI) solution.

Description

Refer to PFDs CEG01-250-8110-20-0210 to 0215.

PLS from Area 245 is treated to recover the metal values through a primary solvent
extraction circuit (SX1) including extraction, scrubbing and stripping. Nickel, cobalt and
zinc are efficiently concentrated and transferred from sulphate based PLS to hydrochloric
acid based strip solution; separation and purification is performed in downstream
processing. Trace impurity metals including iron and manganese are co-extracted with the
nickel, cobalt and zinc. Copper and chrome are removed from the PLS in upstream processes
in Areas 245 and 240 respectively.

The three SX1 sections all utilise pulsed columns to contact the solvent and aqueous inputs
in counter current flow. Each pulsed column system comprises:

	•  	a tall central column section containing disc-and-doughnut internals;
	 
	•  	a top settler where the organic overflows into a discharge weir;
	 
	•  	a bottom settler where the aqueous phase is
discharged;
	 
	•  	a pulse leg, where pressurised air creates a pulsating action on the liquid in the
column;
	 
	•  	an air receiver, where pressurised air is accumulated prior to discharge to the column;
	 
	•  	an air manifold, where the air pulses are generated; and
	 
	•  	a water-cooled refluxing vent condenser to condense and recover organic vapours in the
off-gas.

The first section involves
the extraction of metals into the organic phase. This extraction is selective against alkali metals such as calcium and magnesium, which remain in the aqueous
phase, or raffinale. Seven parallel columns (250-PCO-001 to 007) are installed. Extraction
columns are 27m high, and have central column dimensions of 4m dia. x 16m high.

In the second section the loaded solvent is scrubbed with dilute
H2SO4 to remove any remaining iron and manganese that have been
co-extracted with nickel and cobalt into the organic phase. The spent scrub acid aqueous
solution is recycled either to the SX1 feed or to Area 240. Four parallel columns
(250-PCO-020 to 023) are installed. Scrub columns are 16m high and have central column
dimensions of 4m dia. x 6m high.

Page 67 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

The scrubbed solvent is stripped of metals into an aqueous stream of regenerated HCI
from Area 270; the stripped solvent is returned to extraction. Eight parallel (250-PCO-008
to 015) columns are installed with an allowance for four future columns. Strip columns are
37m high and have central column dimensions of 4m dia. x 26m high.

Dissolved metals are extracted by di-thio phosphinic acid (DTPA) which is supplied as the
proprietary reagent Cyanex 301. This extractant is dissolved in the
kerosene diluent Isopar M.

	•  	Extraction
	 
	   	The copper-free PLS from Area 245 is supplied as SX feed from the primary SX feed
pumps (245-PPP-007/008/009). Surge capacity is provided in the 1000m3 surge
tank (245-TNK-003) to smooth short-term process fluctuations. The solution has been
depleted of
O2 and
saturated with
CO2 in Area 245 to reduce the
potential for solvent degradation.
	 
	   	The PLS from Area 245 is supplied to a header at a base case flow of
1,627m3/h from where it is distributed into each of the operating pulse
columns. The stream is pumped at controlled pressure to ensure stable flow control to
individual columns. A side stream of PLS is directed to regeneration of the copper ion
exchange resin as required.
	 
	   	Stripped solvent is pumped to the bottom of the extraction columns at a base case flow
of 145Cm3/h and dispersed by the pulsing action. The organic phase rises
against the flow of PLS before exiting via a circumferential weir to the loaded
organic header. The loaded solvent for each column is collected in the header and
piped to the scrub columns.
	 
	   	The metal depleted aqueous solution or (raffinate) flows at 1,629m3/h to
parallel multimedia filters (250-MLF-001 to 004) for recovery of entrained organic
prior to transfer (250-PPP-012 to 014) to Area 280 for treatment.

	•  	Scrubbing
	 
	   	Solvent scrubbing aims to dislodge iron and manganese from DTPA without excessive
removal of nickel and cobalt. Scrub solution is pumped at a base case rate of 2
m3/h from the 15m3 scrub solution feed tank (25Q-TNK-063). The
acid make-up to the tank is controlled by dilution of concentrated
H2SO2
with filtered water in a static mixer (250- MXS-002). The scrub solution acid strength
can be varied to optimise the removal of metals from the solvent. The scrub solution
is supplied at controlled pressure (250- PPP-130/131) to a header from where it is
distributed into each of the operating pulsed columns.
	 
	   	The organic/aqueous flow ratio through individual scrub columns can be varied by
pumping the scrub solution from each bottom decanter to join the fresh scrub solution
at the top of the same active column. The four scrub columns (250-PCO-020 to 023) each
have a single aqueous recycle pump (250-PPP-090 to 093). This solution recycle flow
(334m3/h) is larger than the advance scrub flow to provide efficient phase
mixing. The recycle stream in each of the four columns is heated by direct steam
injection (250-MXS-005 to 008) to maintain the process temperature and raise the
temperature of the scrubbed solvent to that required for stripping.

Page 68 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Loaded solvent flows via a common header to the bottom of the scrub columns and is
dispersed by the pulsing action. The loaded solvent rises against the flow of scrub
solution before exiting via a circumferential weir to the scrubbed organic header. The
scrubbed solvent for each column is collected in the header and pumped (250-PPP-040 to
043) to the strip columns.

The impurity bearing solution
(spent scrub) is pumped (250-PPP-088/089) at a base case
rate of 2m3/h to two parallel multimedia filters (250-MFL-008/009) for recovery
of entrained organic. The cleaned spent scrub is piped to its destinations in Area 245 for
dilution of the PLS and recovery of nickel and cobalt, or Area 240 to bleed the impurities
from SX1. The scrub liquor also assists with calcium (Ca) dilution of the PLS prior to Cu
IX.

	•  	Stripping
	 
	   	Scrubbed solvent is pumped to a pipe header and then into the bottom of the eight
strip columns (250-PCO-008 to 015) via valves and dispersed by the pulsing action.
The organic phase rises against the flow of strip solution before exiting each
column via a circumferential weir to a discharge header.
	 
	   	The stripped solvent for each column is collected in the header and piped to the
900m3 capacity stripped organic surge tank (250-TNk-058). Aqueous
entrainment is drained from this surge tank and pumped via air drive positive
displacement pump 250-PPP- 122 as required to the strip solution feed header.
	 
	   	The strip solution is regenerated HCI from Area 270 that has been scrubbed in carbon
columns (250-CCL-001 to 003) and premixed with make-up concentrated HCI in a static
mixer (250-MXS-003). The strip solution is pumped (250-PPP-060/061) from its feed
tank (250-TNK-010) to a header pipe at constant pressure, then through control valves
into each of the operating pulse columns. The strip flow rate ratio is monitored and
controlled from the solvent flow rate with adjustment for the nickel plus cobalt
grade on scrubbed solvent.
	 
	   	The loaded strip solution flows at a base case rate of
68m3/h to parallel
multimedia filters (250-MLF-005/006) for recovery of entrained organic, before it is
piped to the Ni/Co/Zn solution tank (250-TNK-012). The loaded strip solution is
pumped (250-PPP- 038/039) to Area 255 for zinc removal.
	 
	   	DTPA is oxidised by O2 that enters the organic phase, the major source
being the feed PLS. Any O2  that does not react in the solvent may reach
the freeboard of columns or tanks and can be purged by high purity CO2
from the Area 240
CO2 compression/storage package. Oxidation of DTPA degrades the
solvent performance both reversibly and irreversibly. The regeneration section
provides treatment for reversible degradation. Make-up with fresh Cyanex 301 from the
air-driven positive displacement SX1 extractant pump 250-PPP-071 allows for
irreversible degradation of DTPA.

Page 69 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

	   	Pulsing air is delivered from a common battery of blowers (250-FAB-001 to 005)
that supply SX1 and SX2. Each column has its own receiver, valving and pressure
regulation arrangement to control pulsing amplitude and frequency. The pulse air is
exhausted to atmosphere through the same valves. The pulse air supply is cooled with
cooling water to the process operating temperature through a heat exchanger
associated with each blower (250-HXS-001 to 005).
	 
	•  	Organic Recovery and Regeneration
	 
	   	Each of the aqueous streams that exit Area 250 pass through multimedia filters to
recover entrained solvent. The filter beds are backwashed of residual entrainment
regularly. The major portion of the organic phase from the filters is purged as
required to a 20m3 conical bottom recovered organic separation tank
(250-TNK-016). The solvent is separated from the aqueous content of the streams by
settling in this tank and pumped to the regeneration facility (250-PPP-075). The
carry over of aqueous phase is drained from the tank and pumped (250-PPP-076) to
effluent.
	 
	   	The dirty backwash streams that contain sulphates from the raffinate and spent scrub
filters are collected in the
175m3 SX1 extraction dirty backwash tank
(250-TNK-037). The accumulated sulphate backwash is pumped (250-PPP-100/101) to a
secondary multimedia filter (250-MFL-007) for further cleaning.
	 
	   	The dirty backwash stream that contains chlorides from the loaded strip filters is
collected in the 15m3 SX1 chloride-settling tank (250-TNK-015). The pooled
organic phase is decanted over an internal weir and pumped to the organic separation
tank (250-TNK-016). The recovered solvent streams are combined in this tank before
transfer to the regeneration facility. The aqueous phase is drained from the settling
tank and pumped to join the fresh strip solution for recycle to the strip columns.
Pumps in this section are air-driven positive displacement type.
	 
	   	Loaded solvent is bled as required from the extraction columns and flows to the
regeneration facility. An impure organic stream can also be received from the
recovered organic separation tank. The organic stream is contacted with water in a
wash tower (250-CMW-001) and overflows to the agitated conical tank-reactor (250-TNK-027). The wash water is drained to the regeneration effluent tank (250-TNK-026)
and pumped back to the SX1 recovered organic separation tank (250-PPP-026).
	 
	   	The regeneration reaction rate is maintained by circulating (250-PPS-007) reactor
contents through a heat exchanger (250-HXS-025). A charge of nickel powder is
transferred from a tote bin (250-BIN-001) to the reactor by a screw feeder (250-FEM-001). After each batch the reactor contents is settled and the residual nickel powder
falls to the tank floor while the regenerated solvent is decanted. The nickel powder
is re-suspended in subsequent regeneration batches and re-used.

Page 70 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

The regenerated solvent is separated from any nickel powder carryover by filtration.
After a selected number of batches the reactor is completely drained of all nickel powder,
which is also filtered. The reactor discharge is pumped through the filter (250-FLP-002)
into the SX1 regeneration product tank (250-TNK-028). The cleaned regenerated solvent is in
turn pumped (250-PPP-082) to the SX1 stripped organic surge tank to join the main
circulating stream. Filtered powder can be washed with water to assist organic recovery.
The residual nickel powder is discharged as a cake by opening the filter plates and transferred via
screw conveyor to drums. This solid waste is sent for disposal.

Page 71 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 

Area 285: Effluent Treatment

Refer to PFDs CEG01-285-8110-20-0281 to 0283.

Waste streams from the following Areas report to a distribution box (285-TNK-002) and flow
by gravity to the first of three acidic liquor neutralisation reactors:

	•  	Area 250 SX1 raffinate; and
	 
	•  	Area 350 CFPP and OFSPP effluent.

Effluent treatment in Area 285 is a multi-stage process involving neutralisation of the SX1
raffinate sulphate stream from Area 250 with limestone slurry in two mechanically agitated
reactors (285-TNK-010, 011) followed by neutralisation with slaked lime slurry in the
agitated third reactor (285-TNK-012). Each reactor has a capacity of
1,125m3
and a nominal retention time of 30 minutes. Limestone slurry is drawn from the plant ring
main and is used to neutralise the majority of the H2SO4 in the
effluent streams. Lime slurry drawn from the plant ring main is used to neutralise any
remaining H2SO4 in the effluent stream and precipitate most of the
remaining soluble metal sulphates.

Spent chemicals from the water treatment plant are also neutralised. Decant water from the
tailings dam can report to the third neutralisation reactor.

Air from low-pressure blowers
(280-FAB-O01, 002, 003) located in Area 280 is sparged into these neutralisation reactor tanks to oxidise any soluble divalent iron (Fe2+)
to its trivalent (Fe3+) form and enable its precipitation as a hydroxide.
Ferrous sulphate solution from the Area 280 storage tank (280-TNK-006) can be dosed to the
third neutralisation reactor to reduce any hexavalent chromium to trivalent chromium that
may be contained in the decant water. Chromium (3) hydroxide is precipitated. At the
increased pH in the lime reactor, manganese and magnesium hydroxide precipitate as solids.

The neutralised stream from
the third neutralisation reactor flows to a 57 m dia. x 4.5m high effluent treatment thickener. Thickener overflow solution containing <100mg/L of
manganese flows by gravity to the 295m3 chloride tank (285-TNK-017) where it
combines with chloride containing streams. Retention time is 30 minutes Zinc is
precipitated by addition of slaked lime slurry from the ring main.

A number of other streams shown below contain chlorides:

	•  	Area 245 copper IX solution discharge;
	 
	•  	Area 250 SX1 chloride effluent;
	 
	•  	Area 260 Zinc IX and SX2 aqueous waste (usual destination);
	 
	•  	Area 270 pyrohydrolysis scrubber effluent; and
	 
	•  	Area 350 CFPP and OFSPP effluent

A significant portion of the
thickener overflow (neutralised effluent) is pumped (285-PPP-017/018) to the process water pond. Most of this stream is used as wash solution in the
Area 230 CCD circuit. Decant water is usually sent directly to the process water dam.

Page 72 of 74

 

Table of Contents

	 	 	 	 	 
	

	 	Goro Nickel Project
	 	
	

	 	Phase 2B Report	 	 
	

	 	Appendix A: Scope Book	 	 
	 
	 

Part of the underflow from the effluent treatment thickener is pumped
(285-PPP-031/032) to Area 280 where it is combined with other solids streams to tailings. A
portion of the effluent thickener underflow stream is recycled to the first neutralisation
reactor in Area 285 as seed.

Neutralised effluent from the agitated chloride tank flows to the two parallel effluent
treatment lamella clarifiers (285-TNK-008, 009) to remove
residual solids, which are pumped to Area 280 for
disposal in the tailings dam. Final effluent overflows from the clarifiers to the effluent
head tank (285-TNK-016). Outfall discharge pumps (285-PPP-015, 016) deliver the effluent
via an overland pipeline to the ocean outfall at the Canal De La Havannah where a diffuser
disperses the clear and neutralised effluent at the sea bed. Seawater recovered from the
port is pumped into the head tank to reduce scale formation in the pipeline.

Page 73 of 74

 

Table of Contents

APPENDIX 3

NOTIFICATION FORM

	 	 	 
	To:

	 	GniFi
	

	 	BNP Paribas Nouvelle Calédonie
	

	 	37 avenue Henri Lafleur
	

	 	BP K3, 98800 Nouméa cedex, Nouvelle Calédonie
	

	 	Fax:+687.25.84.59
	

	 	Attention:Bernard Monteilh
	 
	 	 
	

	 	BNP Paribas-Capstar Partners
	

	 	37 place du Marché Saint Honoré
	

	 	75031 Paris Cedex 01, France
	

	 	Facsimile number: +33 1 42 98 12 03
	

	 	Attention: Khalid Ammari
	 
	 	 
	From:

	 	Goro Nickel

Date: [•]

Goro Nickel Construction
Agreement dated 30 December 2004 (the “Construction Agreement ”)

Dear Sir,

We refer to Clause 17.2(b)(ii) of the Construction Agreement.

For the purpose of this letter, capitalised terms and expressions (whether in singular or in plural
form) shall have the respective meanings given to them in the Construction Agreement.

We hereby confirm that we received from the Lender on [•] the amount of US$[•] which, together with
the part of Installment [1/2/3] paid by the Owner pursuant to Clause 17.2(b)(i), represents the
full payment of Installment [1/2/3/4].

Yours faithfully

Page 74 of 74exv10wn

 

P.T. INTERNATIONAL NICKEL INDONESIA

Agreement on Modification and Extension of

1968 Contract of Work Dated January 15, 1996

Contract of Work Dated as of July 27, 1968

Memorandum of Understanding Dated January 15, 1996

Relating to Agreement on Modification and Extension of

1968 Contract of Work Dated January 15, 1996

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Agreement on Modification and Extension of 1968 Contract of Work Dated January 15, 1996
	 	 	[1]	 
	Contract of Work Dated as of July 27, 1968
	 	 	[54]	 
	Memorandum of Understanding Dated January 15, 1996 Relating to Agreement on
Modification and Extension of 1968 Contract of Work Dated January 15, 1996
	 	 	[85]	 

 

 

CONTRACT OF WORK

(Agreement on Modification and Extension of 1968 Contract of Work)

BETWEEN

THE GOVERNMENT OF THE REPUBLIC OF INDONESIA

AND

P.T. INTERNATIONAL NICKEL INDONESIA

 

 

	 	 	 	 	 	 	 	 	 
	ARTICLE 1	 	DEFINITIONS
	 	 	2	 
	ARTICLE 2	 	CONTINUATION OF THE COMPANY AS SOLE CONTRACTOR OF THE GOVERNMENT IN THE CONTRACT AREA
	 	 	5	 
	ARTICLE 3	 	UNDERTAKINGS BY THE COMPANY
	 	 	7	 
	ARTICLE 4	 	CONDUCT OF OPERATIONS
	 	 	11	 
	ARTICLE 5	 	REPORTING REQUIREMENTS
	 	 	11	 
	ARTICLE 6	 	OPERATING CONTROL AND SUBSEQUENT EXPANSIONS
	 	 	13	 
	ARTICLE 7	 	MARKETING
	 	 	13	 
	ARTICLE 8	 	IMPORT AND RE-EXPORT FACILITIES
	 	 	15	 
	ARTICLE 9	 	TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY
	 	 	17	 
	ARTICLE 10	 	RECORDS, INSPECTION AND WORK PROGRAM
	 	 	26	 
	ARTICLE 11	 	CURRENCY EXCHANGE
	 	 	28	 
	ARTICLE 12	 	SPECIAL RIGHTS OF THE GOVERNMENT
	 	 	30	 
	ARTICLE 13	 	EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS
	 	 	31	 
	ARTICLE 14	 	ENABLING PROVISIONS
	 	 	33	 
	ARTICLE 15	 	FORCE MAJEURE
	 	 	36	 
	ARTICLE 16	 	DEFAULT
	 	 	37	 
	ARTICLE 17	 	SETTLEMENT OF DISPUTES
	 	 	39	 
	ARTICLE 18	 	TERMINATION
	 	 	40	 
	ARTICLE 19	 	COOPERATION OF THE PARTIES
	 	 	42	 
	ARTICLE 20	 	PROMOTION OF NATIONAL INTEREST
	 	 	42	 
	ARTICLE 21	 	REGIONAL COOPERATION IN REGARD TO ADDITIONAL INFRASTRUCTURE
	 	 	43	 
	ARTICLE 22	 	ENVIRONMENTAL MANAGEMENT AND PROTECTION
	 	 	45	 
	ARTICLE 23	 	LOCAL BUSINESS DEVELOPMENT
	 	 	46	 
	ARTICLE 24	 	ASSIGNMENT
	 	 	47	 
	ARTICLE 25	 	FINANCING
	 	 	47	 
	ARTICLE 26	 	TERM
	 	 	48	 
	ARTICLE 27	 	GOVERNING LAW
	 	 	50	 
	ARTICLE 28	 	MISCELLANEOUS PROVISIONS
	 	 	50	 
	 	 	 	 	ANNEX “A” CONTRACT AREA
	 	 	53	 
	 	 	 	 	ANNEX “B” MAP OF CONTRACT AREA
	 	 	54	 
	 	 	 	 	ANNEX “C” DEADRENT FOR VARIOUS STAGES OF PRODUCTION
	 	 	55	 
	 	 	 	 	ANNEX “D” ROYALTY ON MINERAL PRODUCTION
	 	 	56	 
	 	 	 	 	ANNEX “E” THE METHODS OF ROYALTY CALCULATION
	 	 	60	 
	 	 	 	 	ANNEX “F” RULES FOR THE COMPUTATION OF INCOME TAX
	 	 	62	 

 

 

[CONFORMED COPY]

THIS AGREEMENT ON MODIFICATION AND EXTENSION OF THE CONTRACT OF WORK 1968 dated January 15th, 1996
(the “Agreement”) by and between the GOVERNMENT OF THE REPUBLIC OF INDONESIA, as represented by the
Minister of Mines and Energy (the “Government”), and P.T. INTERNATIONAL NICKEL INDONESIA (the
“Company”)

WITNESSETH THAT:

     The Company has agreed to undertake a staged expansion program as more fully set forth in
Article 3 of this Agreement; and

     Inco Limited, the owner of 58.19% of the shares of the Common Stock of the Company, supports
such staged expansion program by the Company; and

     The Government, through the continuation and expansion of the operations of the Company, is
desirous of creating growth centers for regional development, creating more employment
opportunities, encouraging and developing local business and ensuring that skills, know-how and
technology are transferred to Indonesian nationals; and

     The Government, through the operations of the Company, desires to maintain the position of
Indonesia as a leading producer of nickel in order to fulfill domestic demand, increase exports of
nickel and value-add to Indonesia by means of the Mineral deposits of Indonesia; and

     The Government and the Company recognize that the Contract Area is located in a remote area
for the purposes of Income Tax Law 1994;

     The magnitude and timing of the Company’s planned additional investment require that the term
of the Contract of Work of the Company dated as of July 27, 1968 be extended beyond its termination
date of March 31, 2008 for the maximum period permitted by the laws of Indonesia; and

     In consideration of the planned additional investment by the Company, the Government has
agreed with effect from and after the Effective Date, to extend the existing Contract of Work of
the Company such that, except as otherwise set forth in this Agreement and in the Memorandum of
Understanding, its existing terms will remain in full force and effect until March 31, 2008 and
that from and after April 1, 2008, the existing terms of the Contract of Work will be superseded by
the terms of this Agreement, except as provided in the Memorandum of Understanding, all in
accordance with Article 26 hereof;

     NOW THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter
set out to be performed and kept by the parties hereto, and intending to be legally bound hereby,
it is stipulated and agreed among the parties hereto as follows:

1

 

ARTICLE 1

DEFINITIONS

     Except as otherwise specifically set forth herein, the terms set forth below shall have the
meanings therein set forth wherever the same shall appear in this Agreement.

	1.	 	“l968 COW” means the Contract of Work dated as of July 27, 1968 between the
Government and the Company.
	 
	2.	 	“Affiliate” of any Person means any other Person that directly or indirectly
through one or more intermediaries Controls or is Controlled by, or is under common
Control with, such Person.
	 
	3.	 	“Associated Minerals” with respect to a particular Mineral means Minerals which
geologically occur together with, and are inseparable by Mining from, such Mineral.
	 
	4.	 	“Beneficial Use” means any use of the Environment or any clement or segment of
the Environment that is conducive to the public benefit, welfare, safety or health and
which requires protection from the effects of Waste discharges, emissions and deposits.
	 
	5.	 	“Contract Area” shall have the meaning set forth in Annex “A” hereto, as such
Contract Area may be reduced further by relinquishments voluntarily undertaken by the
Company, it being recognized that the Company achieved the stage of commercial
production under the 1968 COW on April 1, 1978.
	 
	6.	 	“Contract Properties”, with respect to any Mining Area, means, for the purpose
of Article 18, the property of the Company in Indonesia which is located in such Mining
Area or any Project Area related to such Mining Area.
	 
	7.	 	“Control” (including the terms ‘Controlled by’ and ‘under common Control with’
and ‘Controls’) means the direct or indirect ownership of more than 50% of the issued
and outstanding voting shares of a corporation or, in the case of a partnership, joint
venture or other unincorporated association, of more than 50% of the voting securities
of such entity.
	 
	8.	 	“Department”, unless the context otherwise indicates, means that Government
agency charged with the administration of the Indonesian Mining laws and regulations.
	 
	9.	 	“Effective Date” means December 29, 1995.
	 
	10.	 	“Enterprise” means the Company and all of those rights it currently has, and
will have, to engage in any and all activities of the Company, including the expansions
contemplated in Article 3 of this Agreement, including all Exploration, evaluation,
development, construction, Mining, operating, Processing, selling and marketing
activities with respect to the Contract Area and any Project Area related thereto, and
Products therefrom.

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	11.	 	“Environment” means physical factors of the surroundings of human beings,
including land, water, atmosphere, climate, sound, odors, and tastes and biological
factors of animals and plants and the social factors of aesthetics.
	 
	12.	 	“Expatriate Individuals” or “Expatriates” means individuals who are
non-Indonesian nationals.
	 
	13.	 	“Exploration” means the search for Minerals using geological, geophysical and
geochemical methods, including the use of air reconnaissance, boreholes, test pits,
trenches, surface or underground headings, drifts or tunnels in order to locate the
presence of economic Mineral deposits and to determine their nature, shape and grade,
and “Explore” has a corresponding meaning.
	 
	14.	 	“Generally Accepted Accounting Principles” means generally accepted accounting
principles accepted in Indonesia, which, in the Company’s case, conform in all material
respects with accounting principles generally accepted in the United States of America.
	 
	15.	 	“Government” means the government of the Republic of Indonesia, its Ministers,
Ministries, Departments, Agencies, and Instrumentalities and all Regional, Provincial
and District authorities thereof.
	 
	16.	 	“Hydro Decree” shall mean the Agreement effective as of February 27, 1975
between the Company and the Government entitled “Lampiran Surat Keputusan Menteri
Pekerjaan Umum don Tenaga Listrik No. 48/KPTS/1975” pursuant to which the Government
granted the Company the priority right to construct and further develop hydroelectric
facilities on the Larona River.
	 
	17.	 	“Memorandum of Understanding” means the Memorandum of Understanding dated
January 15th, 1996 between the Government and the Company which sets forth their mutual
understanding concerning certain technical and transitional tax matters concerning this
Agreement and the 1968 COW.
	 
	18.	 	“Minerals” means all inorganic natural deposits and natural accumulations
containing chemical elements of all kinds, either in elemental form or in association
or chemical combination with other metallic or non-metallic elements.
	 
	19.	 	“Mining” means recovery activities aimed at the economic exploitation of one or
more identified deposits of Minerals, and “Mine” has a corresponding meaning.
	 
	20.	 	“Mining Area” means that portion or portions of the Contract Area as to which
Mining operations are undertaken by the Company in order to supply the Company’s
Processing facilities at Soroako and any other locations in the Provinces of South
Sulawesi, Central Sulawesi and South East Sulawesi.
	 
	21.	 	“Minister”, unless the context otherwise indicates, means that person who is
acting at any given time as the Minister of the Department of Mines and Energy.

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	22.	 	“Original Shareholders” shall mean each of the following shareholders of the
Company, each of whom is a founding shareholder of the Company, including their
successors and assigns, if and so long as the applicable shareholder is a non-resident
of Indonesia and does not maintain a permanent establishment therein: Inco Limited;
Sumitomo Metal Mining Co., Ltd.; Shimura Kako Company, Ltd.; Tokyo Nickel Company,
Ltd.; Mitsui & Co. Ltd.; Nissho-Iwai Co., Ltd.; and Sumitomo Corporation.
	 
	23.	 	“Person” means any individual, partnership, or corporation, wherever organized
or incorporated, and all other judicially distinct entities and associations, whether
or not incorporated.
	 
	24.	 	“Pollution” means any direct or indirect alteration of the Environment by the
discharge, emission or deposit of Wastes so as to materially and adversely affect any
Beneficial Use or to cause a condition which is, in any significant degree, hazardous
or potentially hazardous to public health, safety or welfare, or to animals, birds,
wildlife, fish, plants or aquatic life, and “Pollute” has a corresponding meaning,
pursuant to Article 1 Law No. 4 1982, regarding the Regulation of Environmental
Management.
	 
	25.	 	“Processing” means the treatment, including, but not limited to, the drying and
smelting, or, if applicable, refining of Minerals after they have been Mined to produce
a marketable Product, and “Process” has a corresponding meaning.
	 
	26.	 	“Products” means all ores, Minerals, concentrates, precipitates and metals,
including, if applicable, refined products, obtained as a result of Mining or
Processing, after deducting any quantities thereof which are lost, discarded, destroyed
or used in research, testing, Mining, Processing or transportation.
	 
	27.	 	“Project Area” means, with respect to any Mining Area, an area outside the
Contract Area and heretofore designated as a Project Area or any such area hereafter
designated as a Project Area and delineated in a feasibility study report for Mining
development by the Company as necessary or desirable for Processing facilities or other
infrastructure facilities related to such Mining development.
	 
	28.	 	“Proprietary Information” shall mean the exclusive know-how, trade secrets,
proprietary technology, proprietary financial data and sales and marketing data and
other confidential data and reports disclosure of which, in the opinion of the Company,
its contractors or Affiliates, would have an adverse economic impact on any of their
respective activities or which could cause such exclusive knowhow, trade secrets,
proprietary technology, proprietary financial data and sales and marketing data and
other confidential data and reports to become part of the public domain.
	 
	29.	 	“Rupiah” or “Rp.” means the legal currency of the Republic of Indonesia.
	 
	30.	 	“US”, “$” or “United States Dollars” means the legal currency of the United
States of America.

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	31.	 	“Waste” includes any matter, whether liquid, solid or gaseous, including
radioactive material, and which is discharged, emitted or deposited in the Environment
in such volume, consistency or manner as to cause a material and adverse alteration of
the Environment.

ARTICLE 2

CONTINUATION OF THE COMPANY AS SOLE CONTRACTOR

OF THE GOVERNMENT IN THE CONTRACT AREA

	1.	 	Continuation of Appointment.

     The appointment of the Company as the sole contractor of the Government in the Contract Area
and any related Project Area pursuant to the 1968 COW is hereby continued and extended for the term
ending thirty years from the Effective Date, as such term may be further extended pursuant to the
terms of Article 26 of this Agreement.

     a) Appointment.

     Under such appointment the Company shall continue to be the sole contractor to the
Government to conduct all the operations hereinafter described for the term hereof in and in
relation to the Contract Area, including the search for and discovery of nickel and
Associated Minerals by all appropriate means, and the Exploration, evaluation, development,
Mining, Processing, storage and transportation thereof by all means in and outside of
Indonesia, and the marketing of such Minerals in and outside Indonesia, and to perform all
related activities appropriate to further such operations, and all other operations and
activities specified in this Agreement or appropriate for the discharge of the Company’s
obligations hereunder; provided, however, that the Company shall not deal with hydrocarbons
or radioactive Minerals in any way without first consulting the Minister.

	 	b)	 	Responsibility.

     The Company accepts the rights and obligations to conduct operations in accordance with
the terms of this Agreement and to conduct all such operations in a good technical manner in
accordance with good international mining engineering standards. The Company will have
control and management of all of its activities under this Agreement and will have full
responsibility therefor and assume all risks thereof in accordance with the terms and
conditions of this Agreement. Without in any way detracting from the Company’s
responsibilities and obligations hereunder, the Company may engage registered
sub-contractors, whether or not Affiliates of the Company, for the execution of such phases
of its operations as the Company deems appropriate.

	 	c)	 	Cooperation.

     The Government and all its agencies will cooperate fully with the Company and will
grant it all necessary rights and will take such other action as may be desirable to achieve
the mutual objectives of this Agreement. Subject to the provisions of this

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Agreement, the Government hereby assigns to the Company all rights, powers,
authorizations and privileges which are necessary or convenient in order to enable the
Company to carry out its operations hereunder, which rights, powers, authorizations and
privileges are more fully described in Article 2(1)(d) of this Agreement.

	 	d)	 	Specific Rights.

     Without limiting the generality of Article 2(1)(c) of this Agreement, the Company shall
have the exclusive rights

     (i) To Mine, Process, store, transport and sell all nickel and nickelcontaining
Mineralization in any form and all Associated Minerals located in, on and beneath
the surface of the Contract Area, except for hydrocarbons and radioactive Minerals
which shall remain subject to applicable laws and regulations in effect from time to
time.

     (ii) To apply on a priority basis for the right to Mine, Process, store,
transport and sell any and all other Mineralization which the Company may encounter
in the Contract Area in the course of its work under this Agreement, on terms to be
agreed upon with the Government.

     (iii) To enter the Contract Area for the purposes of this Agreement, to make
all drill holes, test pits and other excavations, and to take and remove, without
royalty or other charge, samples for assays and for metallurgical, pilot plant and
laboratory research purposes, including bulk samples; provided that any such bulk
samples which shall be exported and which shall have economic value shall be subject
to applicable royalties.

	 	e)	 	Relinquishments

     Except as set forth in Article 16 of this Agreement, nothing in this Agreement or the
1968 COW shall require the Company further to relinquish any part of the Contract Area.

	 	f)	 	Licenses.

     The Company is hereby granted all necessary licenses and permits to construct and
operate the Enterprise, including the expansions and other operations contemplated in
Article 3 of this Agreement, in accordance with such reasonable safety regulations relating
to design, construction and operation as may be in force and of general applicability in
Indonesia as from time to time in effect.

	2.	 	Extension of Rights Under Hydro Decree; Priority Development of Larona River.

     Upon the Effective Date, all of the rights and obligations of the Company under the Hydro
Decree shall be extended pursuant to their terms to, and including, the Termination Date and the
Hydro Decree, as so extended, shall be deemed to be amended and applicable to, and to authorize the
Company to undertake and construct the hydroelectric facilities contemplated by,

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all subsequent expansions of the Company’s production capacity, including but not limited to
those contemplated by Article 3 of this Agreement. Nothing in this Agreement or the 1968 COW shall
limit or restrict the priority accorded to the Company in Article 1(3) of the Hydro Decree to
develop hydroelectric power generation and transmission facilities on the Larona River for the
Enterprise. The Government, as stipulated in the letter of the Director General for Electricity and
Energy Development No. 9156/40/600.3/94 dated September 12, 1994, has stated its agreement in
principle to the Company’s plan to increase the existing capacity of its hydroelectric power
generation and transmission facilities on the Larona River pursuant to the Company’s undertakings
as generally set forth in Article 3 of this Agreement upon completion by the Company of necessary
documentation and permits.

ARTICLE 3

UNDERTAKINGS BY THE COMPANY

	1.	 	Expansion in Indonesia.

     The Company undertakes that, commencing on the Effective Date, it will put in place a program
designed to increase its annual production capacity of nickel in matte from the Company’s current
capacity of 100 million pounds per annum to between 220 and 230 million pounds per annum. Such
program will be carried on in stages as follows:

	 	a)	 	First Stage.

     The first stage of such program shall consist of the construction of a fourth line for
the production of nickel in matte at Soroako or its vicinity together with the
“optimization” of the Company’s existing operating facilities at Soroako and the
construction of one or more additional power facilities on the Larona River. The capital
cost of the first stage is currently estimated to be in the order of US $500 million. The
Company estimates that this expansion would increase its production capacity for nickel in
matte by about 50 million pounds per annum. The Company’s current schedule calls for
completion of the first stage expansion not later than the end of the year 2000 and the
Company has commissioned initial engineering for such expansion. Upon the completion of such
engineering, the Company undertakes to submit to the Department for its review a report on
such first stage expansion setting forth, among other matters deemed relevant by the
Company, detailed capital cost estimates for the expansion, anticipated increased production
capacity resulting from the expansion and the estimated expansion completion date. In
furtherance of the Government’s undertaking in Article 28(6), the Department may object to
such report within three months of the date of its receipt thereof and not thereafter. In
the event of an objection to such report by the Department, the Department shall notify the
Company of such objection and the Department and the Company shall consult in a good faith
attempt to remove the cause for such objection. If, after a period of three months from the
notification of such objection, there has been no resolution of the matter, then either
party may proceed to resolve the matter in accordance with the arbitration provisions of
Paragraph (1) of Article 17 of this Agreement.

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	 	b)	 	Second Stage.

     The second stage shall consist of the construction of two additional production plants
in the coastal areas of the Company’s Contract Area: one at
Pomalaa and the other at
Bahudopi. Each such plant would have a production capacity of about 35 to 40 million pounds
annually and each would require an investment in the order of US $500 million.

     Based on current projections, the first plant would be in operation by about 2005 and
the second plant by about 2010. Completion of either such expansion will be dependent upon
the Company’s determination that such expansion is technically and economically feasible and
the Government and the Company agree that further extensions or renewals of this Agreement
may be necessary if such expansions are to be technically and economically feasible. The
Company undertakes, upon the completion of engineering relating to each such expansion, to
submit to the Department for its review a report on any expansion with which the Company
plans to proceed setting forth, among other matters deemed relevant by the Company, detailed
capital cost estimates for such expansion, anticipated increased production capacity
resulting from such expansion and the estimated expansion completion date; In furtherance of
the Government’s undertaking in Article 28(6) of this Agreement, the Department may object
to such report within three months of the date of its receipt thereof and not thereafter. In
the event of an objection to such report by the Department, the Department shall notify the
Company of such objection and the Department and the Company shall consult in a good faith
attempt to remove the cause for such objection. If, after a period of three months from the
notification of such objection, there has been no resolution of the matter, then either
party may proceed to resolve the matter in accordance with the arbitration provisions of
Paragraph (1) of Article 17 of this Agreement.

	 	c)	 	Completion of Expansion Set Forth in Article 3(1)(a).

     The
Company shall use its best efforts, subject to the provisions of Article 15 of this
Agreement, to complete the expansion referred to in Article 3(1)(a) of this Agreement. If,
in the Company’s opinion, it shall require additional time to complete such expansion,
whether because of technical or engineering requirements, nickel market conditions, the
availability of financing or otherwise, the Company may request the Department to extend the
relevant time period for completion of such expansion and the Department shall give
sympathetic consideration to such request. In furtherance of the Government’s undertaking in
Article 28(6), the Department may object to such request within three months of the date of
its receipt thereof and not thereafter. In the event of an objection to such request by the
Department, the Department shall notify the Company of such objection and the Department and
the Company shall consult in a good faith attempt to remove the cause for such objection.
If, after a period of three months from the notification of such objection, there has been
no resolution of the matter, then either party may proceed to resolve the matter in
accordance with the arbitration provisions of Paragraph (1) of Article 17 of this Agreement,
it being understood and agreed that such arbitration shall take into account the factors set
forth above upon which the Company’s request was based.

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	 	d)	 	Completion of Expansions Set Forth in Article 3(1)(b).

     The Company shall use its best efforts, subject to the provisions of Article 15 of this
Agreement, and to the extent technically and economically feasible, to complete the
expansions referred to in Article 3(1)(b) of this Agreement. If, in the Company’s opinion,
it shall require additional time to complete either expansion, whether because of technical
or engineering requirements, nickel market conditions, the availability of financing or
otherwise, the Company may request the Department to extend the relevant time period for
completion of the expansion concerned or to discontinue any such expansion and the
Department shall give sympathetic consideration to such request. In furtherance of the
Government’s undertaking in Article 28(6) of this Agreement, the Department may object to
such request within three months of the date of its receipt thereof and not thereafter. In
the event of an objection to such request by the Department, the Department shall notify the
Company of such objection and the Department and the Company shall consult in a good faith
attempt to remove the cause for such objection. If, after a period of three months from the
notification of such objection, there has been no resolution of the matter, then either
party may proceed to resolve the matter in accordance with Paragraph (1) of Article 17 of
this Agreement, it being understood and agreed that such arbitration shall take into account
the factors set forth above upon which the Company’s request was based.

	2.	 	Additional Value-Adding in Indonesia.

     In accordance with the request of the Government, the Company has reviewed the possibilities
for the further refining of Indonesian source nickel within the Contract Area in connection with
its undertakings in Article 3(1)(b) of this Agreement and has outlined to the Government the
advantages afforded to Indonesia and the Company from the Company’s current production and sale of
nickel in matte. The Company undertakes that, as it considers such expansions and the installation
of such facilities as contemplated by its undertakings in Article 3(1)(b) of this Agreement, it
will also consider, subject to technical and economic feasibility, and will periodically report to
the Government on, the possibilities for production by the Company, from such expansions and such
facility installations, of more refined nickel or other higher-value nickel Products, such as ferro
nickel, over the term of this Agreement. In carrying out such periodic reviews, and in determining
the technical and financial feasibility of any of such possibilities, the Company may take into
account:

     (i) the Company’s then-existing and contemplated financial, mineral, technical and
other resources and constraints;

     (ii) then-existing refining capacity, both with regard to its Affiliates and
nonAffiliates;

     (iii) the prospects for access to various markets for the Company’s Products; and

     (iv) the demand for more refined nickel Products or other higher-value nickel Products
within Indonesia, all with a view to further value-adding in Indonesia over the term of this
Agreement.

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	3.	 	Joint Ventures.

     With regard to the further development of Indonesian source nickel within the Contract Area in
connection with its undertakings in Article 3(1)(b) of this Agreement, the Company undertakes to
consider opportunities which may become available to it to enter into joint ventures with the
Government and/or others for such development; provided that:

     (i) such joint venture must be technically and economically feasible and otherwise
acceptable to the Government and the Company;

     (ii) worldwide nickel market and other relevant conditions must, in the Company’s view,
warrant any such venture;

     (iii) nothing in this Agreement shall be construed so as to deprive the Company of the
right to Control any such venture;

     (iv) the availability of any such opportunity shall not deprive the Company of the
ability to develop such opportunity on its own; and

     (v) each potential joint venture partner must be reasonably acceptable in all respects
(including but not limited to its financial strength and technical expertise) to the
Government and the Company.

	4.	 	Regional Development Programs.

     After the Effective Date, the Company shall undertake staged regional development programs in
the Provinces of Southeast Sulawesi and Central Sulawesi as follows:

	 	a)	 	Southeast Sulawesi.

     In
anticipation of the future development of the Pomalaa deposits, the Company will
undertake a pre-feasibility study to define and quantify the hydroelectric potential of
local rivers in the Province of Southeast Sulawesi. The Company will also seek to develop
local project roads (which shall be available for use by the public) and site services,
including community support programs in the areas of health, education and agriculture in
local communities as an adjunct to such development. The Company currently estimates that
the overall cost of the staged regional development programs as outlined herein in Southeast
Sulawesi could approximate US $3 million.

	 	b)	 	Central Sulawesi.

     In anticipation of the
future development of the Bahudopi deposits, the Company will
seek to construct on 80 km gravel road in the Province of Central Sulawesi connecting
Soroako and Bahudopi. Such road will be available for use by the public. The Company also
expects to establish a regional office in Bahudopi. The Company will also seek to develop
infrastructure necessary to support this regional development, including community support
programs in the areas of health, education and agriculture. The

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Company currently estimates that the overall cost of the staged regional development
programs as outlined herein in Central Sulawesi could approximate US $3 million.

	 	c)	 	South Sulawesi

     With regard to the mining project in the Soroako area and its surroundings, the Company
will continue and increase its on-going contribution programs to the community and the
Regional Government of South Sulawesi.

ARTICLE 4

CONDUCT OF OPERATIONS

     The Company accepts the rights and obligations to conduct its operations and activities in
accordance with the terms of this Agreement. The Company shall conduct all such operations and
activities in accordance with such international Mining and engineering standards and practices as
are economically and technically feasible, and in accordance with modern and accepted scientific
and technical principles. In accordance with such standards, the Company undertakes to use
appropriate modern and effective techniques, materials and methods designed to achieve minimum
wastage and maximum safety as provided in the applicable laws and regulations of Indonesia from
time to time in effect.

ARTICLE 5

REPORTING REQUIREMENTS

	1.	 	Monthly Reports.

     The Company shall furnish to the Government a monthly report which shall describe the location
of its operations during each month and a brief description of the work in progress at the end of
each such month and of the work contemplated during the following month.

	2.	 	Quarterly Reports.

     The Company shall furnish to the Government a quarterly report with respect to the Contract
Area and each Project Area with regard to the progress of its operations therein, which report
shall describe in reasonable detail the Mining activities carried on therein, including the number
of workmen employed therein as of the end of the applicable quarter and a description of the work
in progress at the end of such quarter and of the work contemplated during the ensuing quarter.

	3.	 	Annual Reports.

     The Company shall furnish to the Government an annual report with respect to the Contract Area
and each Project Area which shall:

     a) describe in reasonable detail the Mining activities carried on therein during the
year;

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     b) include for the applicable year the total volume of ores, kind-by-kind, broken down
between volumes Mined, volumes transported from the Mines and their corresponding
destination, volumes stockpiled at the Mines or elsewhere in Indonesia, volumes sold or
committed for export, volumes actually shipped from Indonesia (with information as to
purchaser, destination and terms of sale) and, if known to the Company after diligent
enquiry, volumes Processed within Indonesia; and

     c) include work accomplished and work in progress at the end of the year in question
with respect to all of the installations and facilities related thereto, together with a
full description of all work planned for the ensuing year with respect to such installations
and facilities, including a detailed report of all material investments actually made or
committed during the year in question and all investment committed for the ensuing year or
years.

	4.	 	Due Date of Reports; Number of Copies.

     Monthly reports shall be submitted
in eightfold within two weeks after the end of the month in
question. Quarterly reports shall be submitted in eightfold within thirty days after the end of the
quarter in question. Annual reports shall be submitted in eightfold
within ninety (90) days after the
end of the year in question. The Company shall also submit to the Department all financial and
periodic reports which it is required as a public company to file with BAPEPAM at the same time
such reports are filed with BAPEPAM. Copies of such reports shall also be submitted to each
Provincial and Regional Government concerned.

	5.	 	Confidentiality.

     The Government shall treat
as proprietary and confidential and shall protect and withhold from
public disclosure all Proprietary Information; provided, however, that data belonging to the public
domain (because of having been published by a Person other than the Government in generally
accessible literature or because of their mainly scientific rather than commercial value, such as
geological and geophysical data) and data which has been published pursuant to laws and regulations
of Indonesia shall not be subject to the foregoing restrictions; provided further that the term
“data” as used in this Paragraph shall include (without limitation) any and all documents, maps,
plans, worksheets and other technical data and information, as well as data and information
concerning financial and commercial matters .

     In furtherance of the above, Proprietary Information submitted by the Company, its contractors
or Affiliates as contained in data or reports submitted by the Company to the Department or the
Government pursuant to the provisions of this Agreement shall only be used by the Government in
relation to the administration of this Agreement and shall not be disclosed by the Government to
third parties without the prior written consent of the Company. Such Proprietary Information shall
remain the sole property of the Company, its contractors or Affiliates, as the case may be.

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ARTICLE 6

OPERATING CONTROL AND SUBSEQUENT EXPANSIONS

     The Company shall have full and effective control and management of all matters relating to
the operation of the Enterprise and the production and marketing and sale of its Products, and the
Company is hereby granted in respect thereof all necessary licenses and permits to construct and
operate in accordance with such reasonable safety regulations relating to design, construction, and
operation as may be in force and of general applicability in Indonesia from time to time in effect,
including, but not limited to, all matters pertaining to the expansions, modifications,
improvements and replacements referred to below. After notification to the Department and without
prejudice to the Government’s rights under Article 12 of this Agreement, the Company may make such
expansions, modifications, improvements and replacements of the Enterprise’s facilities, and may
add new facilities, as the Company shall consider necessary for the operation of the Enterprise or
to provide any services or to carry on activities ancillary or incidental to the Enterprise. All
such expansions, modifications, improvements, replacements and additions shall be considered part
of the Enterprise.

ARTICLE 7

MARKETING

	1.	 	Exports.

     The Company has the unqualified right and license to export such of its Products as it, in its
sole discretion, shall elect to produce and export, and which are obtained from its operations
under this Agreement. Without in any way prejudicing the Company’s basic right and license to
export its Products, such export will be subject to the export laws and regulations of Indonesia
from time to time in effect. The Company shall use its reasonable best efforts, without prejudice
to its obligations under its existing long-term and other sales contracts, to fulfill the
requirements of the domestic market for its Products in parallel with the Company’s committed
export sales agreements with regard to sales of its Products. Nothing in this Paragraph shall
require the Company, without its prior agreement, to construct additional facilities in Indonesia
or to change the nature or method of production of its Products.

	2.	 	Export Duties and Taxes.

     The Company has the right to export and sell all Products obtained from its operations under
this Agreement subject to such duties, levies and taxes as may be imposed by the laws and
regulations of the Republic of Indonesia, at such rates as shall be in effect on the Effective Date
and for the duration of this Agreement, without any restrictions or limitation and its customers
have the right to take such Products out of the country, except that the Company may not export ore
without the consent of the Government.

	3.	 	Terms of Sales.

     The Company shall sell its Products in accordance with generally accepted international
business practices, at the best prices and on the best terms that the Company is able to obtain in

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the circumstances prevailing, but without prejudice to the terms of its existing sales
agreements, and subject to world nickel market conditions and prices and such other conditions as
it shall deem necessary or appropriate.

	4.	 	Long-Term Sales Contracts.

     To the extent deemed necessary by the Company to enhance its geographic or Product markets or
to secure financing, or otherwise, for the Enterprise or to comply with its obligations to lenders,
the Company shall have the right to enter into long-term contracts for the sale of its Products
hereunder subject to its reasonable best efforts undertaking to endeavor to fulfill domestic
requirements for its Products as set forth in Paragraph (1) of this Article.

	5.	 	Sales to Affiliates.

     The Company shall have the right to enter into sales contracts for its Products with its
Affiliates. The Company shall submit to the Government any proposed contract of sale to an
Affiliate for approval. If it does so, and the Government approves the contract or fails to respond
within three months of such submission, the contract shall be deemed eligible for purposes hereof.
The contract shall be made only at prices based on or equivalent to arm’s length sales and
substantially in accordance with such terms and conditions under which such commitments would have
been made had the parties not been Affiliates with due allowance for normal selling discount and
commissions. If requested by the Department, the Company shall submit to the Department evidence of
the correctness of the figures used by the Company in computing the prices, determining the metals
content and analyzing materials shipped under such contracts, as well as copies of the applicable
sales contracts themselves.

	6.	 	Settlement of Disputes as to Affiliate Pricing.

     In
the event the Government believes any figures related to sales to Affiliates and used by
the Company in computing its revenues are substantially not in accordance with the provisions of
Paragraphs (3) and (5) of this Article, the Government may within twelve months after the calendar
quarter in which such Products are sold, but not thereafter, so advise the Company in writing. The
Company shall submit evidence of the correctness of such figures within forty-five days after
receipt of such advice. Within forty-five days after receipt of such evidence, the Government may
give notice to the Company in writing if it is still not satisfied with the correctness of such
figures and, within ten days after receipt of such notice by the Company, a Committee, consisting
of one representative of or appointed by the Government and one representative of or appointed by
the Company, shall be constituted to review the issue. The Committee shall meet as soon as
convenient at a mutually agreeable place in Indonesia and if the members of the Committee do not
reach agreement within twenty days after their appointment or such longer period as the Government
and the Company may mutually agree, the representatives shall appoint a third member of the
Committee, who shall be a person of international standing in jurisprudence and shall be familiar
with the international Mineral industry. The Committee, after reviewing all the evidence, shall
determine whether the figures used by the Company or any other figures are in accordance with
Paragraphs (3) and (5) of this Article. The decision of two members of the Committee shall be
binding upon the parties. Failure of two representatives to appoint a third member of the Committee
shall require the issue to be submitted to arbitration or

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conciliation pursuant to Paragraph (1) of Article 17 of this Agreement. Within ninety days
after the issue has been finally decided pursuant to this Paragraph, an appropriate retroactive
adjustment shall be made in conformity with the Committee’s decision. The Company and the
Government each shall pay the expenses of its own member on the Committee and one half of all other
expenses of the Committee’s proceedings, including the fees and expenses of the third member.

ARTICLE 8

IMPORT AND RE-EXPORT FACILITIES

	1.	 	General.

     The Company and its registered subcontractors may import into Indonesia capital goods,
including equipment, machinery (including spare parts), vehicles (except for sedan cars and station
wagons), aircraft, vessels, other means of transport; non-capital goods; and raw materials,
including consumables (including safety equipment, chemicals, fuel oil and explosives), in each
case being items needed for use in the Exploration, Mining, Processing, construction, production
and supporting activities of the Company, including but not limited to the Company’s undertakings
set forth in Article 3 of this Agreement;

	2.	 	Import Duties.

     Subject to Paragraph (4) of this Article, imports by the Company of the following shall be
exempt from all customs and import duties and/or levies, except for value added tax and sales tax
on luxury goods (collectively, “Import Duties”) to the extent set forth below:

     a) Imports of capital and non-capital goods referred to in Paragraph (1) of this
Article shall be exempt from all Import Duties until December 31, 2015;

     b) Imports of raw materials, including but not limited to sulphur, coke, carbon, and
electro-paste, to the extent such raw materials shall be used directly in the manufacture or
processing of Products for export, shall be exempt from all Import Duties for the duration
of this Agreement.

     c)
It is understood and agreed that if, at any time during the term of this Agreement,
the Government shall implement any law, regulation or policy which shall impose lower Import
Duties than those in effect on the Effective Date or which shall extend the duration of
applicable import exemptions or expand the classes of imports which shall be eligible for
such exemptions, the Company shall automatically be entitled to the benefit of such law,
regulation or policy without the need for application to, or further confirmation by, the
Government.

	3.	 	Sub-Contractors.

     The provisions of this Article shall also be applicable to Persons engaged as registered
sub-contractors of the Company to carry on work or perform services with respect to the

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Company and to any equipment directly used to support the operations of the Company or any
such sub-contractor, such as laboratory or computer equipment.

	4.	 	Goods Manufactured In Indonesia.

     The exemption from Import Duties as referred to in Paragraph (2) of this Article shall apply
only to the extent that such imported goods are not produced or manufactured in Indonesia or that
locally produced and manufactured products are not available on a competitive time, cost (including
credit terms), quantity or quality basis; provided that, for the purpose of comparing the costs of
imports and the cost of goods manufactured or produced in Indonesia, Import Duties as provided for
in this Agreement shall be applied to the cost of such imports. No Import Duties referred to in
this Article shall be levied or collected without prior consultation and agreement between the
Government and the Company as to the basis for any such levy or collection.

	5.	 	Equipment Intended For Re-Export.

     Any equipment (which must be clearly identified) and unconsumed material imported by the
Company or registered sub-contractors of the Company for the exclusive purpose of providing
services to the Company and intended to be re-exported will be exempt from Import Duties. If such
equipment and material shall not have been re-exported by the time for re-export (as established at
the time of import), the Company or the sub-contractors of the Company, as the case may be, shall,
unless such re-export time has been extended or exempted for reasons acceptable to the Government,
pay Import Duties not paid upon entry. The Company shall be responsible for proper implementation
of its subcontractors’ obligations under this Article.

	6.	 	Re-Sales of Imported Goods.

     Any item
imported by the Company or its registered sub-contractors pursuant to this Article and
no longer needed for the operating activities of the Company may be sold outside Indonesia and
re-exported free from export taxes and other customs duties (excluding capital gains tax) and from
VAT after compliance with the laws and regulations which are in effect from time to time and of
general application in Indonesia. No imported item shall be sold domestically or used otherwise
than in connection with the Company except in compliance with the laws and regulations of general
application in Indonesia which are from time to time in effect. The Company shall be responsible
for the proper implementation of its sub-contractors’ obligations under this Article 8.

	7.	 	Government Support In Remote Areas.

     In view of the fact that goods and services will have to be imported from abroad and that
various parts of the Contract Area are remote, for all practical purposes from presently existing
sea ports and other ports of entry (other than the Company’s seaport at Malili) for customs
purposes, the Government will consider establishing other sea ports or ports of entry and the
requisite customs offices thereat as the Company shall reasonably request from time to time; in
consideration thereof, each such customs office so established of the request of the Company shall
be furnished and maintained by the Company at its expense and according to the laws and regulations
of Indonesia from time to time in effect.

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	8.	 	List of Equipment and Material To Be Imported.

     The Company shall submit to the Government, not later than November 15 of each year, a list of
equipment and material to be imported by the Company and by its sub-contractors as referred to in
Paragraph (3) of this Article 8 during the next calendar year to enable the Government to review
the various items to be imported for the Company. Notwithstanding the foregoing, the Company may
request (stating the cause) the Government to amend the list of equipment and material as required
during the year.

	9.	 	General Import Restrictions.

     Except as otherwise specifically provided in this Article or in Article 9, the Company shall
duly observe the import restrictions and prohibitions and rules and procedures of general
application in the Republic of Indonesia from time to time in effect.

	10.	 	Continued Effectiveness of 1968 COW.

     Nothing in this Article shall be construed to alter or amend the provisions of Article 14 of
the 1968 COW, which provisions shall remain in full force and effect to and including March 31,
2008.

ARTICLE 9

TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY

     The parties hereto understand and agree that, from and after the Effective Date, to and
including the Year ending March 31, 2008, the Company shall continue to pay taxes and fulfill its
other tax liabilities to the Government as provided in the 1968 COW, except as otherwise
specifically set forth in this Agreement and in the Memorandum of Understanding. Commencing on and
after the Year commencing April 1, 2008, and for the then-remaining duration of this Agreement, the
Company shall pay taxes and fulfill its other tax liabilities to the Government as provided in this
Agreement and in the Memorandum of Understanding. The taxes to be paid and the obligations to be
fulfilled by the Company pursuant to this Agreement are as follows:

	 	(i)	 	Deadrent in respect of the Contract Area;
	 
	 	(ii)	 	Royalties in respect of the Company’s production of Minerals;
	 
	 	(iii)	 	Income taxes in respect of income received or accrued by the Company;
	 
	 	(iv)	 	Personal income tax (PPh. Article 21 of Income Tax Law 1994);
	 
	 	(v)	 	Tax withheld by the Company in respect of the payment of
dividends, interest (including payments in respect of loan guarantees), rents,
royalties, insurance premiums paid directly or indirectly to insurance
companies who are not residents of Indonesia, and other payments related to the
utilization of property, remuneration for technical and management services, as
well as on any other services;

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	 	(vi)	 	Value Added Tax (PPN) on taxable goods and services and Sales
Tax on Luxury Goods (Ppn BM) on luxury goods;
	 
	 	(vii)	 	Stamp duty on documents;
	 
	 	(viii)	 	Import duty on goods imported into Indonesia;
	 
	 	(ix)	 	Land and Building Tax (PBB) in respect of:

a) the Contract Area; and

b) the utilization of land and buildings in the area where the Company
constructs facilities for its Mining operations;

	 	(x)	 	Levies, taxes, charges end duties imposed by any Government in
Indonesia which have been approved by the central Government;
	 
	 	(xi)	 	General administrative fees and charges for facilities or
services rendered and special rights granted by the Government to the extent
that such fees and charges have been approved by the central Government; and
	 
	 	(xii)	 	Tax on the transfer of ownership of motorized vehicles and
ships in Indonesia.

     The Company shall
not be subject to any other taxes, duties, levies, contributions, charges or
fees now or hereafter levied or imposed or approved by the Government
other than those provided for
in this Article and elsewhere in this Agreement.

	1.	 	Deadrent in respect of the Contract Area.

     From and
after April 1, 2008, the Company shall pay, in Rupiah or in such other currencies as
may be mutually agreed, an annual amount of money as deadrent to be measured by the number of
hectares included in the Contract Area, calculated on January 1st and July 1st of each Year, such
payments to be made in advance and in two installments each payable within thirty (30) days after
the said dates, during the term of this Agreement and payable at the rate stipulated in Annex “C”
attached hereto.

	2.	 	Royalties in respect of the Company’s Production of Minerals.

     a) From and after April 1, 2008, the Company shall pay royalties in respect of the Mineral
content of Products (as defined in Annex “D” and detailed in Annex “E”) derived from the Contract
Area, to the extent that any Mineral in such Products shall be a Mineral for which value, according
to general practice, is paid to the Company by a buyer.

     Royalties shall be paid in Rupiah or in such other currency as may be mutually agreed and
shall be paid on or before the last day of the calendar month following the end of the immediately
preceding calendar quarter. Each payment shall be accompanied by a statement in

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reasonable detail showing the basis of computation of royalties due in respect of shipments or
sales made during the immediately preceding calendar quarter.

     Royalties will be computed from the rates specified in Annex “D” as follows:

     (i) the tonnage or quantity by weight used in the computation shall be that quantity
delivered for export shipment or for domestic sale. The quantity by weight of each Mineral
subject to royalty shall be properly determined by internationally accepted assay methods.

     (ii) The Government shall, upon written request by the Company, specify the royalty
tariff in column 6 of Annex “D” for those Minerals for which no tariff reference is given.

     b)
From and after April 1, 2008, royalties shall be payable annually with regard to any
industrial Minerals derived from the Enterprise and used for the Company’s construction purposes
such as, but not limited to, roads, bridges, railways, port facilities, airports, community
buildings, housing or any other infrastructure used in relation to the Enterprise, at rates no
higher than the rates established for such Minerals as in effect on the Effective Date. Industrial
Minerals used by the Company for environmental management, reclamation or regional development
shall be exempt from any such royalty.

     c) Royalties shall be calculated and paid pursuant to Article 11 (c) of the 1968 COW for all
Products shipped by the Company prior to April l, 2008. Royalties shall be calculated and paid
pursuant to this Article 9(2) and Annex “D” of this Agreement for all Products shipped by the
Company on or after April 1, 2008.

     d) The Company undertakes that any Mining, Processing or treatment of ore prior to domestic
sale or export shipment by the Company shall be conducted in accordance with such then-prevailing
generally accepted international standards as are then economically and technically feasible, and,
in accordance with such standards, the Company undertakes to use all reasonable efforts to optimize
the Mining recovery of ore from proven reserves and metallurgical recovery from such ore, provided
it is then economically and technically feasible to do so. Nothing in this Agreement, however,
shall require the Company to construct additional infrastructure or to change the manner in which
its Products are produced without the consent of the Company.

     e) If, in the reasonable opinion of the Government, the Company is failing without good cause
to recover Minerals at the recovery rate commensurate with then-prevailing international Mining
standards, the Government may give notice in writing to the Company. Within three (3) months of the
receipt of such notice, the Company shall in its discretion either:

     (i) Commence work to improve its Mining method, treatment and/or Processing facilities
to the reasonable satisfaction of the Government, provided that the Company shall in no
event be obliged to conduct mining, processing or treatment activities otherwise than as
provided in Paragraph (2)(d) of this Article; or

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     (ii) Submit to the Government evidence in support of its performance in accordance with
Paragraph (2)(d) of this Article. In the event that the Government remains unsatisfied with
the Company’s performance in Mining ore from its proven reserves and recovering Minerals
from the ore, the Government shall have the right to commission independent technical
studies to determine a fair average recovery rate therefor, taking into account the nature
of the Company’s proven reserves, the ore concerned and the economic and technical
feasibility of achieving increased recovery by the Company, in accordance with Paragraph
(2)(d) of this Article. Such studies shall be carried out by at least three (3)
internationally recognized consultants appointed by the Company and agreed to by the
Government. The Government and the Company shall have the right to prepare submissions to
such consultants. If a majority of such consultants finds that, based upon internationally
accepted Mining standards, the performance of the Company’s operations is not satisfactory
in any material respect, then the cost of the consultants’ studies shall be borne by the
Company. If it is found that the performance of the Company’s obligations is satisfactory in
all material respects based upon internationally accepted Mining standards, then the cost of
the consultants’ studies shall be borne by the Government. If following the completion of
such studies, the Company fails within a reasonable period to achieve the recovery rate
indicated by a majority of such studies, the Government shall have the right, if the Company
is not then observing its undertaking in Paragraph (2)(d) of this Article, to increase the
royalty applicable to the Minerals covered by such studies and delivered for export shipment
or domestic sale in proportion to the extent that the recovery of such Minerals by the
Company falls short of the fair average rate indicated by such studies; provided that,
should such average recovery rate again rise to that indicated by such studies, then the
Company shall have the right promptly to receive from the Government a corresponding
reduction in the royalty applicable to such Minerals. At no time shall the payment of such
increased royalty free the Company from the obligation to observe its undertaking in
Paragraph (2)(d) of this Article.

	3.	 	Income taxes in respect of income received or accrued by the Company.

	 	a)	 	Pursuant to Article 33A of Income Tax law 1994,

     (i) Prior to the Year commencing April 1, 2008, the rate of income tax applicable to
the Company shall be as stipulated in Article 11 of the 1968 COW, except as otherwise set
forth in the Memorandum of Understanding.

     (ii) For the Year commencing April 1, 2008 and for the then-remaining term of this
Agreement, the rate of income tax applicable to the Company shall be 30% or such lower rates
as may come into effect from time to time during such period under Article 17 of Income Tax
Law 1994 or any amendments thereto.

     b) For the purposes of the calculation of Net Taxable Income under this Agreement, the rules
for computation of corporate income tax as provided for in Annex “F” attached to and made part of
this Agreement shall apply.

20

 

     It is understood and agreed that the calculation of the tax payments to be made, if any, by
the Company in any Year shall be made in United States Dollars based upon the Net Taxable Income of
the Company as expressed in United States Dollars. Except as otherwise stipulated in this
Agreement, the rules as provided in Income Tax Law 1994 shall apply.

     c) Monthly installments of income tax payable by the Company shall be calculated based upon
the Net Taxable Income of the Company during the preceding Year after taking into account carried
forward tax losses and other prepaid and withholding taxes, all in accordance with Article 25 of
Income Tax Law 1994.

	4.	 	Personal income tax (Pph. Article 21 of Income Tax Law 1994).

     From and after January 1, 1996, the Company shall withhold and remit income tax in accordance
with Article 21 of Income Tax Law 1994 in respect of:

     a) Payments for salaries and wages, and taxable employee benefits, including severance
pay and pension benefits provided, to employees or former employees of the Company according
to Article 21 of Income Tax Law 1994.

     b) Expatriate Individuals who are employed or engaged by the Company and who are
present in Indonesia for less than 183 days in any twelve month period through deduction
(withholding tax) by the Company, based on Article 26 of Income Tax Law 1994, at a rate of
20% of personal income derived by them arising out of services rendered to the Company in
Indonesia.

     c) Expatriate Individuals who are employed or engaged by the Company and who are
present in Indonesia for more than 183 days in any twelve month period, through deduction
(withholding tax) by the Company based on Article 21 of Income Tax law 1994, subject to
applicable regulations relating to employee remuneration in effect on the Effective Date.

     d) Benefits in kind provided by the Company to employees and registered contractors of
the Company and their subcontractors working in the Contract Area or any Project Area as set
forth in Paragraph 3(c) of Annex “F” shall not be subject to personal income or withholding
tax and shall be deductible by the Company in determining its Net Taxable Income.

     e) Nothing in this Paragraph (4) shall alter or amend the Company’s obligations prior
to January 1, 1996 to withhold personal income tax in accordance with the terms of the 1968
COW.

5.        Withholding taxes on dividends, interest, rents, royalties, insurance premiums paid directly or
indirectly to insurance companies who are not residents of Indonesia, and other payments related to
the utilization of property and compensation paid for services, including technical and management
services, performed for the benefit of the Company.

     From and offer January 1, 1996, except as otherwise specifically set forth herein, and in
accordance with Income Tax Law 1994, the Company shall withhold and remit to the

21

 

Government income taxes at rates not to exceed those specified in this Article, or at such
lower rates as may be applicable as a result of any applicable double taxation treaty, on the
following:

     a) Dividends, except that the payments of dividends by the Company in respect of shares of
P.T. Inco owned by the Original Shareholders shall be subject to withholding tax as follows:

     (i) Payments to the Original Shareholders of dividends declared on or after the
Effective Date to and including March 31, 2008 shall be exempt from withholding tax;

     (ii) Payments to the Original Shareholders of dividends declared between April 1, 2008
to and including April 1, 2010 (being a period of twenty-four months) in an aggregate amount
not to exceed the amount of the Company’s retained earnings as reported on the Company’s
balance sheet as at March 31, 2008 shall be exempt from withholding tax (it being understood
and agreed that the amount of dividends to be so exempt from withholding tax shall be deemed
to be paid on a “first in — first out basis”, i.e.,
each dividend declared on and after
April 1, 2008 and before April 1, 2010 shall be deemed to have been paid out of the
Company’s retained earnings as of March 31, 2008 until such time as the aggregate amount of
such dividends shall equal the amount of such retained earnings); and

     (iii) Payments to the Original Shareholders of dividends (x) during the period set
forth in subparagraph (ii) above in excess of the aggregate amount of retained earnings
referred to therein and (y) declared on and after April 1, 2008 shall be subject to
withholding tax at the rate of 7.5%.

     b) Interest, including payments in respect of loan guarantees, in whatever form, to
non-resident taxpayers, except as set forth in the Memorandum of Understanding.

     c) Rents and royalties related to the utilization of property.

     d) Compensation paid for services, including technical and management services performed for
the benefit of the Company.

     e) Insurance premiums paid directly or indirectly by the Company to insurance companies who
are not residents of Indonesia, except to the extent that such payments are exempt from withholding
tax pursuant to any applicable double taxation treaty.

     f) The rates of withholding shall be:

     (i) Fifteen percent (15%) in the case of payments of interest, payments in respect of
loan guarantees, rents and other income related to the use of property and royalties, to
resident taxpayers in accordance with Article 23 of Income Tax Law 1994;

     (ii) Fifteen percent (15%) in the case of payments of dividends to resident taxpayers
except as otherwise exempt as provided in Article 4(3)(f) of Income Tax Law 1994;

22

 

     (iii) Except as set forth in sub-paragraph 5(a) of this Article and in the Memorandum
of Understanding, twenty percent (20%), or such other lower rate as may be applicable as a
result of any applicable double taxation treaty, in the case of payments of dividends,
interest, payments in respect of loan guarantees, rents and other income related to the use
of property and royalties, to non-resident taxpayers who do not have a permanent
establishment in Indonesia;

     (iv) The rates set forth in Article 23 of Income Tax Law 1994 in the case of payments
to resident taxpayers or permanent establishments in Indonesia, for services, including
technical, management and other services referred to in Article 23, performed by them for
the benefit of the Company;

     (v) In the case of all services, including technical, management and other services,
performed for the benefit of the Company by non-residents of Indonesia:

     (A) if such non-resident resides in a jurisdiction which does not have in
effect a double taxation treaty with the Republic of Indonesia, the rate of
withholding tax shall be 20%; or

     (B) if such non-resident resides in a jurisdiction which has in effect a double
taxation treaty with the Republic of Indonesia and such nonresident does not have a
permanent establishment in Indonesia, such treaty shall govern the appropriate tax
treatment; and

     (vi) The rates set forth in the applicable regulations under Income Tax Law 1994 in
respect of insurance premiums paid directly or indirectly by the Company to insurance
companies who are not residents of Indonesia and who are not exempt from withholding tax
pursuant to an applicable double taxation treaty.

6.        Value
Added Tax and Tax on Sales of Luxury Goods in accordance with Value Added Tax Law 1994.

     The Company shall:

a) From and after January 1, 1996

     (i) continue the registration of its business as a Taxable Entrepreneur;

     (ii) as a Taxable Entrepreneur, collect and remit Value Added Tax (“VAT”) for the sale
of Products inside Indonesia (“Output Tax”) as a taxable firm with a rate of 10% or such
other lower rate as may be applicable pursuant to Value Added Tax law 1994;

     (iii) continue to collect and remit VAT and/or sales tax on luxury goods at the rate of
10% (or such lower rate as may be in effect pursuant to Value Added Tax law 1994) in respect
of purchases of taxable goods and services (including services performed by subcontractors
of the Company) inside Indonesia;

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     (iv)
collect and remit VAT at the rate of 10% (or such lower rate as may be in effect
pursuant to Value Added Tax Law 1994) in respect of purchases of taxable services (including
services performed by subcontractors of the Company) outside Indonesia; and

     (v) collect and remit VAT in respect of the sale of Products outside Indonesia at the
applicable rate as set forth in the Value Added Tax Law 1994. Such rate is, and for the
duration of this Agreement shall be, zero percent (0%).

     b) From and after April 1, 2008

     (i)
continue to collect and remit VAT in respect of the sale of Products outside
Indonesia at the applicable rate as set forth in the Value Added Tax Law 1994. Such rate is,
and for the duration of this Agreement shall be, zero percent (0%); and

     (ii) collect and remit VAT and/or sales tax on luxury goods at the rate of 10% (or such
lower rate as may be in effect pursuant to Value Added Tax Law 1994) in respect of purchases
of taxable goods outside Indonesia.

     VAT paid on taxable goods or taxable services (“Input Tax”) may be credited against Output Tax
in accordance with the provisions of the Value Added Tax Law 1994. In the event that the Input Tax
is greater than the Output Tax for any tax period, any payment of Input Tax otherwise required may
be offset and reduced by the amount of the required Output Tax for the following tax period or a
refund in the amount of such excess may be requested by the Company. Any such refund shall be paid
within one month, at the latest, from the date of the authorization for refund of the overpaid
amount of VAT. Refunds delayed beyond such date shall bear interest at rates applicable from time
to time.

	7.	 	Stamp duty on legal documents.

     From and after January 1, 1996, the Company will be subject to Stamp Duty in accordance with
the provisions stated in Law No. 13, 1985 regarding Stamp Duty as in effect on the Effective Date.

	8.	 	Import duty on goods imported into Indonesia.

     The Company’s obligations to pay duty on goods imported into Indonesia shall be as set forth
in Article 8 of this Agreement.

	9.	 	Land and Building Tax (PBB) in accordance with PBB Law 1994.

     From and after April 1, 2008, the Company shall pay in semi-annual installments Land and
Building Tax (PBB), in Rupiah or in such other currencies as may be mutually agreed, as follows,
except that for the taxable Year beginning April 1, 2008, the amount of land and building tax to be
paid shall be equal to 75% of the amount of land and building tax that would otherwise have been
payable for calendar year 2008.

24

 

     a) The Land and Building Tax to be paid in each Year shall be composed of (i) a land tax; (ii)
a buildings tax; and (iii) a mining tax.

     b) The land tax to be paid in each Year shall be equal to the rate of the deadrent referred to
in Paragraph (1) of this Article 9 multiplied by the number of hectares included in the Contract
Area less the sum of the number of hectares occupied by (i) Taxable Buildings; (ii) land/water
areas and floor space and types of buildings used by the Company which are open to the public and
for which PBB shall be levied from the relevant parties and not from the Company; and (iii) tax
objects exempt from taxation pursuant to Article 3 of PBB Law 1994. The term “Taxable Buildings”
shall be limited to buildings, including residential housing, owned by the Company and the land
underlying such buildings.

     c) The buildings tax to be paid in each Year shall be calculated as follows: 0.5% x 30% x the
Fair Value of Taxable Buildings. The “Fair Value” of Taxable Buildings in any Year shall consist of
the sum of (i) the replacement cost of Taxable Buildings in and continuing in service, and the
value of the underlying land, for all of such Year as determined on the basis of appraisals
conducted at least every three Years by, in the Company’s discretion, an independent appraiser
selected and paid for by the Company or by the Department of Taxation and, in each case, reported
to, and subject to review by, the Department of Taxation; and (ii) the replacement test of any
Taxable Buildings placed in service subsequent to the Company’s payment of buildings tax for the
most recent prior Year, as determined by the Company’s capital expenditures in respect of the
construction thereof. The tax object of the buildings tax component of Land and Buildings Tax is
defined in Article 2 of PBB Law 1994.

     d) The mining tax to be paid in each Year shall be calculated as follows: 0.5% x 30% x the
Company’s gross proceeds referred to in Paragraph 11 (a) of Annex “F” of this Agreement in the
prior Year from sales of its Products.

10.        From and after April 1, 2008, the Company shall pay levies, taxes, charges and duties which
have been imposed by any local Government in Indonesia having jurisdiction over the Company and
which have been approved by the central Government and which are at rates no higher than the
levies, taxes, charges and duties prevailing on the Effective Date; and which are calculated in a
manner no more onerous to the Company than that prevailing on the Effective Date. In imposing such
taxes, the Government agrees that such taxes, if imposed, shall be imposed upon all other Mining
companies within its jurisdiction upon the same terms and conditions without discrimination against
or differentiation among any one or more of such Mining companies.

11.        From and after April 1, 2008, except as otherwise provided in this Agreement, the Company shall
pay general administrative fees and charges for facilities or services rendered and special rights
granted by any Government to the extent that such fees and charges have been approved by the
central Government; are at rates no higher than the fees and charges prevailing on the Effective
Date; and are calculated in a manner no more onerous to the Company than that prevailing on the
Effective Date. In imposing such fees and charges, the Government agrees that such fees and
charges, if imposed, shall be imposed upon all other Mining companies within its jurisdiction upon
the same terms and conditions without discrimination against or differentiation among any one or
more of such Mining companies.

25

 

	12.	 	Tax on the transfer of ownership rights.

     From and after April 1, 2008, the Company shall pay tax on the transfer of ownership rights
for:

     a) Wheeled, motorized vehicles travelling on public roads (such tax to be levied by the
Government with which such vehicles are registered) at rates set forth in the relevant Government
regulations in effect on the Effective Date. Motor vehicles for use off public roads shall not be
subject to such taxes and duties.

     b) Ships or other marine transportation vessels working in Indonesia, at rates levied on the
Effective Date by the Directorate General of Sea Communication, Ministry of Communication where
such ships or vessels are registered.

	13.	 	Tax Compliance.

     Tax compliance by the Company in connection with its tax obligations, such as filing tax
returns, making tax payments and filing tax reports, and the Company’s rights regarding taxation,
including but not limited to, filing objections to amounts of tax, obtaining refunds and tax
credits, are set forth in the provisions of Law No. 6 of 1983, as amended by Law No. 9, 1994,
concerning General Tax Provisions and Procedures; the Income Tax Law 1994; the Value Added Tax Law
1994; PBB Law 1994; Law No. 13, 1985 on Stamp Duty and all of their implementing regulations as in
effect on the Effective Date. The Company shall compute and pay all payments of income tax in
United States Dollars and shall maintain its records and books of account in English.

ARTICLE 10

RECORDS, INSPECTION AND WORK PROGRAM

	1.	 	Maintenance of Books and Records.

     The Company shall maintain in Indonesia technical, financial and tax records relating to its
operations hereunder which are comparable in detail and type to those being maintained on the
Effective Date with respect to its current operations in Indonesia. The Company is authorized to
keep and maintain its books and records in English and in United States Dollars.

	2.	 	Audit; Retention of Records.

     The Government and its authorized representatives shall have the right to review and audit
such financial statements and tax returns within ten years after the end of the latest period
covered thereby. The failure by the Government to make a claim for additional payment on account of
deadrent, royalties, tax or any other payments to the Government within such ten year period shall
preclude any such claim by the Government thereafter. The Company shall be obliged to retain books
and records relating to its operations for a period of ten years.

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	3.	 	Government Right of Inspection.

     Upon reasonable prior written notice to the Company, the Government and its authorized
representatives may enter the Contract Area and any other place of business of the Company to
inspect the Company’s operations during regular business hours. The Company shall render any
reasonably necessary assistance, without unreasonable cost to itself, to enable such
representatives to inspect technical, financial and tax records relating to the Company’s
operations and, subject to the provisions of Article 5(5), shall make available to such
representatives such information as such representatives may reasonably request. The
representatives shall conduct such inspections at their own risk and shall avoid interference with
normal operations of the Company.

	4.	 	Submission of Plans.

     The Company shall submit to the Department no later than 6 (six) weeks prior to the commencing
of its financial year its work program, budget plan, sales contracts and marketing/sales plan for
the following year in sufficient detail to permit the Department to review such physical, financial
and marketing/sales program and determine whether they are in accordance with the Company’s
obligations under this Agreement.

	5.	 	Submission of Reports.

     The Company shall also furnish to the Department the reports celled for by Article 5 of this
Agreement and shall, subject to the provisions of Article 5(5) of this Agreement, make available to
the Government such other information of whatever kind relative to the Enterprise and not otherwise
being delivered to the Government or the Department as the Government may reasonably and in writing
from the Department request, which is, or with the exercise of reasonable efforts by the Company
would be, within the control of the Company in order that the Government may be fully apprised of
the Company’s Exploration and exploitation activities.

	6.	 	Use of English and United States Dollars; Confidentiality.

     All information mentioned in Paragraph (5) of this Article furnished to the Department may be
in English and all financial data shall be recorded and stated in United States Dollars. All such
information shall (except with the written consent of the Company) be treated by all Persons in the
service of the Government as confidential in accordance with Article 5(5) of this Agreement, but
the Government shall nevertheless be entitled at any time to make use of any information received
from the Company at any time for the purpose of preparing and publishing aggregated returns and
general reports on the extent of ore prospecting or ore Mining operations in Indonesia and for the
purpose of any arbitration or litigation between the Government and the Company.

	7.	 	Records To Be Maintained In Indonesia.

     The Company shall maintain original records and reports relating to its activities and
operations under this Agreement, including documents relating to financial and commercial
transactions with independent parties and Affiliates of the Company, in Indonesia.

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	8.	 	Records of Subcontractors.

     The Company shall require its registered sub-contractors, to the extent that such
sub-contractors are acting for or on the Company’s behalf with respect to the Company’s
obligations, activities and operations under this Agreement, to keep all financial statements,
records, data and information necessary to enable the Company to observe the provisions of this
Article.

ARTICLE 11

CURRENCY EXCHANGE

	1.	 	General.

     Foreign exchange generated or obtained by the Company from sales or otherwise which is in
excess of amounts remitted on a current basis for Rupiah expenditures in Indonesia may be received
and held abroad by the Company in United States Dollars or in other freely convertible currencies.
Foreign exchange so generated may be used by the Company at any time to meet foreign currency
requirements of the Company, including repayment of capital investments, both debt and equity; to
pay interest and dividends; to pay contractors; to pay management costs and fees, including
reasonable overhead expenses; to pay salaries, wages and other expenses of foreign and domestic
personnel of the Company, of its Affiliates and of its contractors; to make loans to its Affiliates
or to other Persons selected by it; to meet any other foreign currency requirements it may from
time to time have; or otherwise to be placed on deposit to the account of the Company.

	2.	 	PMA Accounts.

     All investment remittances into Indonesia for the purpose of any expenditures to be made in
Indonesia (including but not limited to equity capital and loan capital) shall be deposited into a
foreign investment account (a “PMA Account”) established at one or more foreign exchange banks in
Indonesia. All such investment remittances shall be used in accordance with the investment
regulations in effect on the Effective Date applicable to foreign investment law companies
established under the Foreign Investment Law, Law No. l of 1967, as amended by Law No. 11 of 1970.
The conversion or sale of foreign exchange originating from PMA Accounts shall be done with foreign
exchange banks.

	3.	 	No Exchange Controls.

     The Company has the right to transfer and hold abroad, in any freely convertible currencies,
funds in any FMA Account or received by the Company in Rupiah in respect of the following items,
provided that such transfers are effected in accordance with the laws and regulations in effect on
the Effective Date and at prevailing market rates of exchange generally applicable to commercial
transactions, including but not limited to:

     a) Retained earnings of the Company;

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     b) Repayment of loan principal and interest thereon, including fees, commissions and
other expenses, insofar as such loan is a part of the Company’s capital investment which has
been approved by the Government;

     c) Allowance for depreciation of capital assets generally applicable to foreign
investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as
amended by Law No. 11 of 1970;

     d) Proceeds from any sales of Company shares or Company assets undertaken by the
Company or its shareholders;

     e) Expenses, including salaries, for Expatriates employed by the Company and their
families and for the training of Indonesian personnel abroad;

     f) Debts of the Company denominated in foreign currency, including debts owed to
contractors and sellers of equipment and raw materials, commissions, and obligations of the
Company in respect of equipment and other lease obligations;

     g) Technical and management assistance fees for services rendered outside of Indonesia;

     h) License fees;

     i) Agency commissions payable to third parties abroad;

     j) Payments to foreign suppliers of the Company to the extent that the Company’s
purchases of foreign goods and services, including management and related services, are, in
the view of the Company, reasonably necessary for the operation of the Company or the
Enterprise;

     k) Repatriation of capital on the liquidation of the Company;

     l) Judgments payable by the Company outside of Indonesia or in a currency other than
Rupiah;

     m) Repatriation of any compensation payable to the Company pursuant to Article 18; and

     n) Any other foreign exchange facilities provided from time to time to foreign
investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as
amended by Law No. 11 of 1970 or provided by any other regulations adopted pursuant thereto
or by any other laws and regulations.

	4.	 	Proceeds of Sales of Products.

     The proceeds of sales of Products may be used as the Company sees fit. Without prejudice to
the foregoing rights of the Company, the Company agrees that, with regard to the

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proceeds of the Company’s export sales, it shall comply with the laws and regulations from
time to time in effect in Indonesia.

	5.	 	Payments Abroad.

     The Company in the exercise and performance of its rights and obligations set forth in this
Agreement shall be authorized to pay abroad, in any currency it may desire, without conversion into
Rupiah, for the goods and services it may require and to defray abroad, in any freely convertible
currencies it may desire, or for any other expenses incurred for its operations under this
Agreement.

	6.	 	Rights of Expatriates.

     All Expatriates of the Company or of any of its Affiliates in any capacity shall have the
right to freely retain or dispose of any of their funds or assets outside Indonesia and shall be
entitled to transfer into Indonesia such foreign currencies as may be required for their needs.

	7.	 	Equal Treatment With Other Mining Companies.

     In respect of other matters of foreign currency arising in any way out of or in connection
with this Agreement, the Company shall receive treatment no less favorable to the Company than that
accorded to any other Mining company carrying on operations in Indonesia.

	8.	 	Compliance With Law.

     Subject to the foregoing Paragraphs of this Article, the Company shall comply with all
financial reporting and approval requirements applicable to foreign investment law companies
established under the Foreign Investment Law, Law No. 1 of 1967, as amended by Law No. 11 of 1970
or other prevailing law and regulations from time to time in effect in Indonesia.

ARTICLE 12

SPECIAL RIGHTS OF THE GOVERNMENT

1.        Required Government Approvals; Recognition of Company’s Status As A Public Company

     The Company agrees that it will not without the Government’s prior approval:

     a) amend the Articles of Association of the Company in any material respect;

     b) change the basic nature of the business of the Company;

     c) voluntarily liquidate or wind up the Company;

     d) merge or consolidate the Company with any other company; or

     e) pledge or otherwise use as security the Minerals in the Contract Area, except as set
forth in Article 25 of this Agreement.

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     Notwithstanding the foregoing in this Paragraph (1), the Government recognizes and understands
that the Company is a public company regulated by BAPEPAM and the Indonesian stock exchanges and
accordingly undertakes to exercise its special rights hereunder in such a manner as not to conflict
with regulations promulgated by such agencies or with the rights of shareholders of the Company
granted by virtue thereof.

	2.	 	Government Right With Regard To Company Plans and Designs.

     Subject to the provisions of Article 3, the Government reserves the right to disapprove plans
and designs relating to construction, operation, expansion, modification and replacement of
facilities of the Enterprise in the Contract Area which may disproportionately and unreasonably
damage the surrounding Environment or, without prejudice to the Company’s rights under Paragraph
(1) of Article 2 of this Agreement, limit its further development potential or significantly
disrupt the socio-political stability of the area or be materially adverse to the interests of
national security. Such approval shall not be unreasonably withheld or delayed, it being understood
and agreed that the Government may object to such plans and designs within three months after the
submission thereof and not thereafter. In the event of an objection to such plans and reports by
the Department, the Department shall notify the Company of such objection and the Department and
the Company shall consult in a good faith attempt to remove the cause for such objection. If, after
a period of three months from the notification of such objection, there has been no resolution of
the matter, then either party may proceed to resolve the matter in accordance with the arbitration
provisions of Article 17 Paragraph (1) of this Agreement.

	3.	 	Government Rights to Enter Contract Area.

     The Government shall have the right of access to the Contract Area as provided in Article 10
Paragraph (3) of this Agreement.

ARTICLE 13

EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS

	1.	 	Employment of Indonesians.

     The
Company shall continue to employ Indonesian personnel, giving preference to local
residents, to the maximum extent practicable consistent with efficient management and operating
practices, subject to the laws and regulations of Indonesia from time to time in effect. Nothing in
this Article shall limit the discretion of the Company, based upon its own judgment of its own
management and operational needs, to hire or discharge employees or otherwise to act in respect of
its own employment needs and policies.

	2.	 	Company Rights Of Discharge and Discipline.

     The Company shall not be restricted in its assignment or discharge of personnel; provided,
however, that subject to the foregoing requirements the terms and conditions of such assignment and
discharge or disciplining of personnel shall be carried out in compliance with the laws and
regulations of the Republic of Indonesia which are from time to time in effect.

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	3.	 	Indonesians In Management.

     The
Company shall continue to seek to provide direct Indonesian participation in the
Enterprise through the inclusion of Indonesian nationals in the management of the Company. The
Company will also train Indonesian nationals to occupy other responsible positions.

	4.	 	Training Program For Indonesians.

     The Company shall continue to conduct a comprehensive training program for Indonesian
personnel in Indonesia and in other countries and shall carry out such program for training and
education in order to meet the requirement for various classifications of full time employment for
its operations in Indonesia. The Company will also assist in educational development in line with
the Government’s program in the form of scholarships and other financial or other forms of
assistance directly to educational institutions in Indonesia.

	5.	 	Company Right To Use Expatriates.

     The Company and its registered sub-contractors may bring into Indonesia such Expatriate
individuals as in the Company’s judgment are necessary or appropriate to carry out efficiently the
operations of the Company hereunder; provided however, that the Department may make known to the
Company, and the Company shall duly observe, objections based on grounds of national security or
foreign policy of the Government. At the Company’s request (which shall be accompanied by
information concerning the education, experience and other qualifications of the individuals
concerned) and in compliance with the laws and regulations of Indonesia from time to time in
effect, the Government will facilitate the issuance of all necessary permits, visas and such other
permits as may be required. In this connection, the Company shall periodically submit its manpower
requirement plans, manpower reports, training programs and training reports with regard to the
Indonesianization process to the Government. From time to time Indonesian executives and managers
may be replaced in the Company’s discretion with new Expatriates for various purposes, including
further technology transfer, further organizational development, or otherwise. The Company shall
also conduct a program to acquaint all Expatriate employees and registered subcontractors with the
laws and customs of Indonesia.

	6.	 	Equal Opportunity; Preference to Indonesians.

     The Company agrees that there shall at all times be equal treatment, facilities and
opportunities among employees in the some job classification with respect to salaries, facilities
and opportunities within the Mining industry regardless of nationality and the Company shall duly
observe the manpower laws and regulations from time to time in effect in the Republic of Indonesia.
Notwithstanding the foregoing, it shall not be a violation of the foregoing provision to give
preference as to opportunity to Indonesians in light of the policy of the Government to increase
the employment of Indonesians to the maximum extent possible, nor to continue to pay Expatriates
brought into Indonesia pursuant to Paragraph (5) of this Article at a higher rate than local
employees in situations where, with respect to a given job classification, there is a need to
employ such Expatriates.

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	7.	 	Medical Care.

     To the extent that medical care shall not already be otherwise available, and without
prejudice to the ability of the Company to operate on an economically feasible basis as determined
by the Company, the Company shall furnish such medical care and attention to all its employees
working in any Mining Area or in any Project Area related to such Mining Area as is reasonable and
shall maintain or have available adequate medical services at least commensurate with such services
provided in similar circumstances in Indonesia. With respect to a Company-established permanent
settlement with respect to a Mining Area, the Company shall furnish such medical care and attention
to all its employees and all Government officials requested by the Company to work in such Mining
Area or in any Project Area related to such Mining Area as is reasonable and shall maintain a staff
and a dispensary, clinic or hospital which shall be reasonably adequate under the circumstances
according to the laws and regulations of the Republic of Indonesia from time to time in effect.

	8.	 	Education Facilities.

     With respect to any Mining Area as to which the Company has established a permanent settlement
for families of employees associated with the Enterprise, the Company shall, in the event no other
education facilities are available, provide primary and secondary education facilities for the
children of employees living in any Project Area related to such Mining Area and to other children
living in such Project Area. The rules, regulations and standards of general application for
comparable education facilities in Indonesia established by the Department of Education and Culture
from time to time in effect shall be followed. The Government undertakes that, as soon as
practicable under the then prevailing circumstances, it shall assume responsibility for the
operation and financing of all education facilities provided by the Company.

	9.	 	Trade Unions.

     The Company acknowledges that pursuant to Law No. 14 of 1969, employees of the Company have
the right to form a trade union for purposes of collective bargaining with the Company. Certain of
the Company’s employees are members of a trade union which has been recognized by the Company as
well as by the Government, and a collective labor agreement with such union is in effect as of the
Effective Date. The Company acknowledges that it may be required from time to time to enter into
collective bargaining with such trade union.

ARTICLE 14

ENABLING PROVISIONS

	1.	 	Additional Rights.

     The Government will grant the Company any and all necessary rights and will take such other
action as may be desirable in the view of the Government and the Company to achieve the mutual
objectives of this Agreement.

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	2.	 	Rights To Construct Facilities and Acquire Land Title.

     In carrying out its activities under this Agreement, the Company, subject to the laws and
regulations from time to time in effect in the Republic of Indonesia, shall have the right to
construct facilities and to acquire land titles as it deems necessary; provided that;

     a) in connection with the use of land by the Company for the construction of facilities
as provided in this Agreement, the Company shall pay reasonable surveying and registration
fees charged by the Land Registration Office. In acquiring titles to land outside the
Contract Area, the Company shall comply with the laws and regulations of general application
from time to time in effect; and

     b) in connection with the activities of the Company, but subject to the provisions of
Article 9, the Company shall pay generally applicable fees and charges for services
performed, facilities provided and special rights granted by the Government; provided that
such services, facilities and rights shall have been requested by the Company.

	3.	 	Additional Plans; Resettlements.

     Subject to the laws and regulations from time to time in effect in Indonesia, and subject also
to the provisions of Paragraph (2) of Article 12 and Paragraph (2) of Article 21, the Company may
at any time file with the Department a plan or plans, and may thereafter file additional or amended
plans, covering;

     a) any new Mining Area or new Project Area in which the Company proposes to construct
facilities related to production from the Contract Area;

     b) all other areas within the Contract Area in which the Company proposes to construct
any other facilities necessary for the Enterprise, and the location of all such rights in
and over land, including easements, rights of way and rights to lay or pass on, over and
under land, roads, railways, pipes, pipelines, sewers, dams, hydroelectric power stations,
generators, drains, wires, lines or similar facilities as may be necessary for the
Enterprise; and

     c) all other areas in which the Company shall have the right to construct such
additional facilities as the Company deems necessary or convenient for the Enterprise.

     Upon any such filing by the Company, the Government shall make arrangements for the Company to
utilize and remain within all such areas and such land covered by such plans (or such comparable
areas as may be agreed between the Government and the Company) and to exercise the other rights
specified above with respect to each such area. The use and occupancy of any areas covered by such
plans shall not be subject to payment by the Company of any charges or fees of any kind other than
those specified elsewhere in this Agreement. The plans filed pursuant to this Paragraph shall, to
the extent practicable, provide descriptions in sufficient detail to permit precise identification
of the designated areas. The Government shall assist the Company in arrangements for any necessary
resettlement of bona fide local inhabitants whose resettlement from
any part of the Contract Area
or any Project Area is necessary and the Company shall pay for such resettlement and provide
reasonable compensation for any dwelling,

34

 

privately owned lands (including such landownership based on any Indonesian customs or
customary laws, generally or locally applicable) or other improvements in existence on any such
parts which are taken or damaged by the Company in connection with its activities under this
Agreement.

	4.	 	Company Right To Use Natural Resources In Contract Area.

     Subject to the generally applicable laws and regulations of Indonesia from time to time in
effect, and to the payments provided for in Article 9 of this Agreement but to no other payments to
the Government, and with due recognition of the rights of private parties created prior to the
Effective Date, and subject to payments of such reasonable compensation to any such private party
with rights thereto created prior to the execution of this Agreement as may be customary in the
Contract Area, the Company may take and use from the Contract Area or any Project Area such timber
for construction purposes, soil, stone, sand, gravel, lime, water and other products and materials
as are necessary for or are to be used by the Enterprise.

	5.	 	Clearance of Obstructions.

     The Company shall also have the right, in compliance with the laws and regulations from time
to time in effect in Indonesia, to clear away and remove such timber, overburden and other
obstructions as may be necessary or desirable for the Mining, construction of facilities and any
other operations of the Company under this Agreement, provided that the Company shall take into
account other rights granted by the Government such as grazing, timber cutting and cultivation
rights, and rights of way, by conducting its operations under this Agreement so as to interfere as
little as possible with such rights.

	6.	 	Company Right To Use Natural Resources Outside The Contract Area.

     The Company may, at its own expense, take and use any of such products and materials from
other areas outside the Contract Area or any Project Area, including but not limited to products
and materials necessary or appropriate in its view to the further development of the hydroelectric
potential of the Larona River, subject to the rights of other parties, to the approval of the
Government, and to the payment of such compensation as may be agreed between the Company and such
other parties or the Government and in accordance with the laws and regulations of Indonesia from
time to time in effect.

	7.	 	Conflicting Rights.

     The Government recognizes that the Company shall have the prior and paramount right to develop
any and all portions of the Contract Area or any Project Area as to which the Company shall have
made the filings called for by Paragraph (3) of this Article. At the request of the Company, the
Government shall cooperate in a joint endeavor to alleviate any interference which may arise from
others operating under conflicting rights. The Government agrees promptly to consult with the
Company in the event it shall contemplate legislation which has or could have consequences adverse
to the Company’s continued use and enjoyment of any of the areas referred to in this Paragraph.

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	8.	 	Operations in Remote Areas.

     The Company and the Government recognize that certain of the existing and proposed operations
of the Company hereunder are to be carried out in remote areas with difficult terrain and access
and that, accordingly, the Company has been and may be required to develop special facilities and
to carry out special functions in order to fulfill its obligations in such areas under this
Agreement. In recognition of the added burdens and expenses to be borne by the Company, and of the
additional services to be performed by it, as a result thereof, the Government acknowledges that
appropriate arrangements shall be required in order to minimize the adverse economic and
operational tests resulting from the administration of laws and regulations of the Government
having effect in respect of such areas and the Company’s compliance obligations thereunder.

ARTICLE 15

FORCE MAJEURE

	1.	 	Effect of Force Majeure.

     Any failure by the Government or by the Company to carry out any of its obligations under this
Agreement shall not be deemed a breach of contract or default if such failure is caused by force
majeure, that party having taken all appropriate precaution, due care and reasonable alternative
measures with the objectives of avoiding such failure and of carrying out its obligations under
this Agreement. If any activity is delayed, curtailed or prevented by force majeure, then anything
in this Agreement to the contrary notwithstanding, the time for carrying out the activity thereby
affected and the term of this Agreement specified in Article 26 shall each be extended for a period
equal to the total of the periods during which such causes or their effects were operative, and for
such further periods, if any, as shall be necessary to make good the time lost as a result of such
force majeure. For the purposes of this Agreement, force majeure shall include among other things:
war, insurrection, civil disturbance, blockade, sabotage, embargo, strike and other labor conflict,
riot, epidemic, earthquake, storm, flood, or other adverse weather conditions, explosion, fire,
lightning, adverse order or direction of any Government de jure or de facto or any instrumentality
or subdivision thereof, act of God, the public enemy, breakdown of machinery having a major effect
on the operation of the Enterprise and any cause (whether or not of the kind hereinbefore
described) over which the affected party has no reasonable control and which is of such a nature as
to delay, curtail or prevent timely action by the party affected.

	2.	 	Notice of Force Majeure.

     The party whose ability to perform its obligations is affected by force majeure shall notify
as soon as practicable the other party thereof in writing, stating the cause of such force majeure,
and the parties shall endeavor to do all reasonable acts and things within their power to remove
such cause; provided, however, that neither party shall be obligated to resolve or terminate any
disagreement with third parties, including labor disputes, except under conditions acceptable to it
or pursuant to the final decision of any arbitral, judicial or statutory agencies having
jurisdiction to finally resolve such disagreement. As to labor disputes, the Company may

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request the Government to cooperate in a joint endeavor to alleviate any conflict which may
arise.

ARTICLE 16

DEFAULT

	1.	 	Notice and Cure of Default.

     Subject to the provisions of Article 15 of this Agreement, and except as otherwise set forth
in Paragraph (4) of this Article, in the event that the Company is found to be in default in the
performance of any provision of this Agreement, the Government, as its default remedy under this
Agreement, shall give the Company written notice thereof (which notice must state that it is
pursuant to this Article and must include the details giving rise to such notice) and the Company
shall have a maximum of one hundred eighty (180) days after receipt of such notice to cure such
default. The actual time within which to cure such default shall be stipulated in the said written
notice in each individual case as may be reasonable under the circumstances considering the nature
of the default. In the event the Company cures such default within such period, this Agreement
shall remain in full force and effect without prejudice to any future right of the Government in
respect of any future default. In the event the Company does not cure such default within the time
stipulated in the notice, the Government shall have the right to terminate this Agreement in
accordance with the provisions of Article 18 of this Agreement. Any failure by the Company to
comply with any provisions of this Agreement relating to one or more Mining Areas, and not to all
Mining Areas or to the Enterprise as a whole, shall not be considered to be a default under this
Article. In the event of such failure, and in the event that, after prior consultation with and
notice to the Company in accordance with this Paragraph, such failure has not ceased to exist or
has not been cured, the Government shall have the right to close such Mining Areas or any part
thereof and to require the Company to relinquish such Mining Areas or such parts.

	2.	 	Monetary Default; Cure.

     Notwithstanding the cure period provided for in Paragraph (1) of this Article, in the event
that, after the provision of notice to the Company as set forth in Paragraph (1), the Company shall
be found to be in default in the making of any payment of money to the Government which the Company
is required to make pursuant to Article 8 and Article 9 of this Agreement, the period within which
the Company must cure such default shall be thirty (30) days after the receipt of such notice. The
penalty for late payment shall be an interest charge on the amount in default from the date the
payment was due to the date of such payment at the rate of the New York prime interest rate in
effect on the date of default plus four percent (4%). This or other penalties provided for in this
Article may not be taken as deductions in the calculation of taxable income.

	3.	 	No Default Pending Settlement.

     The Company shall not be deemed to be in default in the performance of any provision of this
Agreement concerning which there is any dispute between the parties until such time as all

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disputes concerning such provision, including any contention that the Company is in default in
the performance thereof or any dispute as to whether the Company was provided a reasonable
opportunity to cure a default, have been settled as provided in Article 17 of this Agreement.

	4.	 	Default Remedies With Regard To Undertakings.

     Notwithstanding the general default remedy set forth in Paragraphs (1), (2) and (3) above, the
sole remedies of the Government with regard to a default by the Company in respect of its
undertakings in Article 3 of this Agreement shall be as follows:

a) In the case the Company fails to fulfill Article 3(1)(a).

     If, subject to the provisions of Article 15 of this Agreement, the procedures set forth
in Article 3(1)(c) of this Agreement and the notice procedures set forth in Article 16(1) of
this Agreement, the Company is determined to be in default with respect to Article 3(1)(a)
of this Agreement, the Company shall have a period of one hundred eighty (180) days after
receipt of such notice to cure such default. In the event the Company cures such default
within such period, this Agreement shall remain in full force and effect without prejudice
to any future right of the Government in respect of any future default. In the event the
Company does not cure such default within such time, the Government, after prior
consultation with the Company pursuant to Article 19(4) of this Agreement, as its sole
remedy may elect to determine that, solely with respect to that portion of the Contract Area
referred in Article 3(1)(a) of this Agreement, and subject to the provisions of Article
18(2) of this Agreement, the Termination Date shall be March 31, 2008, in which event the
provisions of the 1968 COW shall remain in full force and effect until such time, without
prejudice to the Company’s right to request a further extension thereof under Article 22
thereof. In such event, the Company shall also submit to the Government, within 180 days
after such determination, its development plans for Pomalaa and Bahudopi. If, after
consultation with the Company pursuant to Article 19(4) of this Agreement, the Government
shall disapprove such plans, the Government shall have the further right, subject to Article
18(2) of this Agreement, to close either or both of the Mining Areas
related to the Pomalaa
and Bahudopi deposits and to require the Company to relinquish such Mining Areas and, upon
the Government’s exercise of such right, the Company shall relinquish such Mining Areas.

b) In the case the Company fails to fulfill Article 3(1)(b).

     If, subject to the provisions of Article 15 of this Agreement, the procedures set forth
in Article 3(1)(d) of this Agreement and the notice procedures set forth in Article 16(1) of
this Agreement, the Company is determined to be in default with respect to either of the
expansions set forth in Article 3(1)(b) of this Agreement, the Company shall have a period
of one hundred eighty (180) days after receipt of such notice to cure such default. In the
event the Company cures such default within such period, this Agreement shall remain in full
force and effect without prejudice to any future right of the Government in respect of any
future default. In the event the Company does not cure such default within such time, the
Government, after prior consultation with the Company pursuant to Article 19(4) of this
Agreement, shall have as its sole default

38

 

remedy, subject to Article 18(2) of this Agreement, the right to close the Mining Areas
related to the expansion concerned and to require the Company to relinquish such Mining
Areas. No such default shall, however, either (i) affect any other part of the Contract
Area; (ii) prejudice the Company’s right to undertake any other expansion contemplated by
Article 3(1)(b) of this Agreement; or (iii) preclude the Company from seeking further
extensions of this Agreement pursuant to Article 26 of this Agreement.

c) In the case the Company fails to fulfill Article 3(4).

     To the extent that the amounts referred to in Article 3(4) of this Agreement for
expenditure in the Province of Southeast Sulawesi or in the Province of Central Sulawesi
shall not have been expended by the Company by the time of completion of the Company’s
undertaking applicable to the Province concerned, the Company shall be obligated to pay, as
a default payment and as the sole remedy of the Government, that portion of such amount
which shall not have been expended by such time to the Province concerned; provided that, in
no event shall the total amount of payments made to either such Province under Article 3(4)
of this Agreement and this Article 16(4)(c) exceed $3 million.

	5.	 	Substitution of Undertakings.

     If the Company shall elect to substitute an undertaking of comparable scope, expenditure and
beneficial impact upon Indonesia for one or more of the expansion undertakings set forth in Article
3(1)(a) or 3(1)(b) of this Agreement, upon receipt of the approval of the Government therefor,
which approval shall not be unreasonably withheld, such undertaking shall be substituted for such
prior undertaking or undertakings and the failure of the Company to complete such prior undertaking
shall not constitute an event of default.

ARTICLE 17

SETTLEMENT OF DISPUTES

	1.	 	Conciliation and Arbitration.

     The Government and the Company hereby consent to submit all disputes between the parties
hereto arising before or after termination hereof, out of this Agreement or the application hereof
or the operations hereunder, including contentions that a party is in default in the performance of
its obligations hereunder, for final settlement, either by conciliation, if the parties wish to
seek an amicable settlement by conciliation, or by arbitration. Where the parties seek an amicable
settlement of a dispute by conciliation, such conciliation shall take place in accordance with the
UNCITRAL Conciliation Rules contained in resolution 35/52 adopted by the United Nations General
Assembly on 4 December, 1980 and entitled “Conciliation Rules of the United Nations Commission on
International Trade Law”. Where the parties arbitrate, such dispute shall be settled by arbitration
in accordance with the UNCITRAL Arbitration Rules contained in resolution 31/98 adopted by the
United Nations General Assembly on 15 December, 1976 and entitled “Arbitration Rules of the United
Nations Commission on International Trade Law.” The foregoing provisions of this Paragraph do not
apply to tax matters which are subject to the

39

 

jurisdiction of Majelis Pertimbangan Pajak (The Tax Appeals Board), or its successor. The
language to be used in conciliation and arbitration proceedings shall be the English language,
unless the parties otherwise agree.

	2.	 	Remedies Prior to Arbitration.

     Before the Government or the Company institutes an arbitration proceeding under the UNCITRAL
Arbitration Rules, they will use their best endeavors to resolve the dispute through consultation
and use of administrative remedies; provided that the Company shall not be obligated to pursue any
such remedies for more than ninety days after it has notified the Government of an impending
dispute if such remedies involve a request or application to the Government.

	3.	 	Place of Conciliation or Arbitration and Nature of Decisions.

     Conciliation or arbitration proceedings conducted pursuant to this Article shall, if
appropriate arrangements can be made, be held in Jakarta, Indonesia, unless the parties agree upon
another location or unless the aforesaid rules or the procedures thereunder otherwise require. The
provisions of this Article shall continue in force notwithstanding the termination of this
Agreement. An award pursuant to any such arbitration proceedings shall be enforceable against and
binding upon the parties hereto, and shall be specifically enforceable in Indonesia, whether or not
the proceedings have been held in Indonesia.

ARTICLE 18

TERMINATION

	1.	 	Termination By Company.

     At any time during the term of this Agreement, after having used all reasonable diligence in
its endeavor to conduct its activities under this Agreement, if in the Company’s opinion the
Enterprise is not workable, the Company shall consult with the Department and may thereafter submit
a written notice to terminate this Agreement and to be relieved of its obligations hereunder. At
the time of the submission of such notice, the Company shall make available to the Department, to
the extent requested by the Department, all relevant data and information related to the Company’s
activities under this Agreement which have not theretofore been delivered to the Department. Such
data and information shall include, but not be limited to, documents, maps, plans, work sheets and
other technical data and information. Upon confirmation of termination by the Department or within
a period of six months from the date of the giving of such written notice by the Company, whichever
shall first occur, this Agreement shall automatically terminate and the Company shall be relieved
of its obligations under this Agreement except as hereinafter specifically provided in this
Article. In the event, however, that such data and information, to the extent requested by the
Department, have not been provided by the Company, the Department will so notify the Company and
such termination shall not come into effect until such time as such data and information have been
provided.

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	2.	 	Sale of Contract Properties Upon Termination.

     Upon termination of this Agreement pursuant to this Article or termination of this Agreement
by reason of the expiration of the term of this Agreement, all Contract Properties, movable and
immovable, of the Company within the Project and Mining Areas shall
be offered for sale to the
Government, at cost or market value, whichever is the lower, but in no event lower than their then
depreciated book value determined in accordance with Generally Accepted Accounting Principles. The
Government shall have an option, valid for thirty days from the date of such offer, to buy, within
ninety days after acceptance by the Government of such offer, all such property at the agreed value
payable in United States Dollars and through a bank outside of Indonesia to be agreed upon by both
parties. If the Government does not accept such offer within the said thirty day period, the
Company may sell, remove or otherwise dispose of any or all of such property during a period of
twelve months after the expiration of such offer. The Government will use its best efforts to
facilitate the disposition by the Company of any of such Contract Properties that the Company
desires to dispose of.

     Any of such Contract Properties not so sold, removed or otherwise disposed of shall become the
property of the Government without any compensation to the Company.

	3.	 	Certain Property to Become Government Property.

     It is agreed, however, that any Contract Properties, movable and immovable, which shall at
time of any such termination be in use for a public purpose, such as roads, schools and hospitals,
with the equipment therein, within Indonesia shall immediately become the property of the
Government without any compensation to the Company; and the Company shall recognize the items
referred to in (c) of sub-Paragraph 1 of Article 24 of Law No. 11 of 1967 relating to safety, and
Paragraphs 3, 4 and 5 of Article 46 of Government Regulation No. 32 of 1969.

	4.	 	Valuation.

     All sales, removals or disposal of the Company’s property pursuant to any such termination
shall be effected according to laws and regulations in effect on the Effective Date and any gain or
loss from sale or disposal as related to the written down book value shall be determined in
accordance with Article 9 of this Agreement. All values shall be based on Generally Accepted
Accounting Principles.

	5.	 	Prior Rights and Obligations.

     Rights and obligations which have come into effect prior to any such termination and rights
and obligations relating to transfer of currencies and properties which have not yet been completed
at the time of such termination shall continue in effect for the time necessary or appropriate
fully to exercise such rights and discharge such obligations. Additionally, the Company shall be
granted the right to transfer abroad all or any proceeds of sale received under this Article,
subject to the requirements of Article 11 of this Agreement.

41

 

ARTICLE 19

COOPERATION OF THE PARTIES

	1.	 	Parties to Use Best Efforts.

     The parties to this Agreement agree that they will at all times use their best efforts to
carry out the provisions of this Agreement to the end that the Enterprise may at all times be
conducted in accordance with internationally accepted Mining standards.

	2.	 	Indonesian National Interest.

     The Company agrees to plan and conduct all operations under this Agreement in accordance with
the standards and requirements imposed elsewhere in this Agreement for the sound and progressive
development of the Mining industry in Indonesia, to give at all times full consideration to the
aspirations and welfare of the people of the Republic of Indonesia and to the development of the
nation, and to co-operate with the Government in promoting the growth and development of Indonesian
economic and social structure, and subject to the provisions of this Agreement, at all times to
comply with the laws and regulations of Indonesia.

	3.	 	Action By Government.

     The Department on behalf of the Government agrees that during the term of this Agreement the
Government, consistent with Law No. 1 of 1967, as amended by Law No. 11 of 1970, on Foreign Capital
Investment, (i) it will take no action which is inconsistent with the provisions of this Agreement
so as to adversely affect the conduct of the Enterprise hereunder, including, without limitation,
any action of condemnation or nationalization of the Enterprise or any part thereof, and (ii) will
at all times co-operate with the Company in handling all administrative actions and determinations
relating to the Enterprise in the most expeditious manner consistent with orderly procedures.

	4.	 	Consultations.

     All consultations between the Company and the Government shall be carried out in a spirit of
cooperation with due regard to the intent and objectives of the Company and the Government. Each of
the Company and the Government desires to realize the success of the Enterprise for the benefit of
the people of the Republic of Indonesia, the development of the Nation, the growth and development
of its economic and social structure, the continued operation of the Company and the development of
the mineral resources of the Republic of Indonesia.

ARTICLE 20

PROMOTION OF NATIONAL INTEREST

	1.	 	Preference to Indonesians.

     In the conduct of its activities under the Agreement, the Company shall utilize Indonesian
manpower, services and raw materials produced from Indonesian sources and products

42

 

manufactured in Indonesia to the extent such services and products are available on a
competitive time, cost (including credit terms), quantity and quality basis.

	2.	 	Board of Commissioners.

     The Company shall continue to seek to include such number of Indonesian citizens as members of
its Board of Commissioners (Dewan Komisaris) as shall be proportionate to the percentage of the
Company’s equity owned by Indonesian citizens .

	3.	 	Indonesian Share Ownership.

     All shares in the capital stock of the Company may be freely sold, pledged or otherwise
transferred by the owners thereof except that, without the written consent of the Government, no
such transfer may be made of shares owned directly or indirectly by Inco Limited if such transfer
shall have the effect of removing Control of the Company from Inco Limited. The Company and the
Government recognize the significant investment made by Inco Limited to develop the Company’s
currently existing facilities in the Contract Area and the importance of the continued sponsorship
of Inco Limited to the operations of the Company. Based upon this recognition, the Government
hereby confirms that, over the term of the Company’s Contract of Work as extended hereby, Inco
Limited shall continue to exercise Control and that nothing in this Agreement or the 1968 COW shall
require the Company or Inco Limited to offer or to sell to Indonesians any shares in the Company in
addition to an aggregate of 49,681,694 shares sold to the public pursuant to BAPEPAM License No.
SI-097/SHM/MK.10/1990 dated April 6, 1990.

ARTICLE 21

REGIONAL COOPERATION IN REGARD TO ADDITIONAL INFRASTRUCTURE

	1.	 	Coordination Between The Government and The Company.

     The Company will at all times co-operate with the Government in utilizing its best efforts to
plan and coordinate its activities and proposed future projects in the Contract Area or the Project
Areas. Living accommodations and facilities and working conditions provided by the Company for its
operations shall be of a Government standard commensurate with those of good employers operating in
Indonesia.

	2.	 	Maximizing Regional Benefit.

     In relation to the region, the Company will endeavor to cooperate with each Government having
jurisdiction over it in maximizing the economic and social benefits generated by the Enterprise in
the Contract Area in respect to:

     a) coordinating such benefits with local and regional infrastructure studies
undertaken by the Government together with benefits generated by other interested local,
foreign and international public and private entities; and

43

 

     b) assisting and advising the Government, when requested, in its planning of the
infrastructure and regional development which the Company may deem useful to the Enterprise
and to existing and future industries and activities in the area of the Enterprise.

	3.	 	Public Use of Company Facilities.

     Subject to the Company’s ability to obtain insurance in respect thereof at reasonable cost,
the Company shall allow the public and the Government to use any wharf and harbor installations,
air strips or roads which have been constructed by the Company pursuant to this Agreement and which
are located outside the Company’s Mining Areas and the related Project Areas provided that:

     a) any such use shall be subject to such regulations and limitations as the Company
shall reasonably impose, and shall in no event adversely affect or interfere with the
Company’s operations hereunder; and

     b) the Company shall be entitled to impose such charges therefor as shall be
appropriate to reflect the cost of maintaining such facilities and, with respect to any
commercial use of such facilities, the capital cost thereof.

	4.	 	Company Maintenance of Roads.

     The Company shall maintain and be responsible for the maintenance of all roads of the
Enterprise in the Contract Area and in each Project Area.

	5.	 	Roads Available for Public Use.

     Subject to the Company’s absolute priority right to utilize such roads, all roads constructed
by the Company outside the Contract Area, to the extent used by the public, shall be public roads
for the purposes of the provisions of the traffic laws and regulations from time to time in effect
in Indonesia. To the extent that the plans and designs for the Enterprise as approved by the
Government so provide and thereafter from time to time, the Government shall make such special
regulations under the traffic laws as it considers necessary or desirable for the proper safety of
the users of the said roads.

	6.	 	Road Damage; User Charges.

     If the Company’s use of the existing public roads results in or is likely to result in
significant damage thereto or deterioration thereof, the Company shall pay to the Government or
other authority having control over the roads the cost (or an equitable proportion thereof having
regard to the use of such roads by others) of preventing or making good such damages or
deterioration or of upgrading to a standard necessary having regard to such increased traffic. In
addition, the Government or other authority having control over any such road may require the
Company to pay a maintenance user charge based upon what is fair and reasonable having regard to
the continuing cost (excluding any profit to the Government or such other authority) of operation
and maintenance of such road and the use of such road by others; provided that, in lieu of making
any such payments, the Company shall have the right to elect to maintain at its own expense any
such road needed by it for its operations hereunder.

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	7.	 	Telecommunications Facilities.

     In the event that the Government is unable to provide adequate telecommunications facilities
within the Contract Area or any Project Area, the Company may, in accordance with rules and
regulations from time to time in effect in Indonesia, install and operate such telecommunications
facilities as it may require; provided that it shall allow the Government and the public to use
such facilities on the following terms; (i) any such use shall be subject to such regulations and
limitations as the Company shall reasonably impose, and shall in no event adversely affect or
interfere with the Company’s operations hereunder and (ii) the Company shall be entitled to impose
such charges therefor as shall be appropriate to reflect the cost of maintaining and operating such
facilities and, with respect to any commercial use of such facilities, the capital cost thereof. In
the event that, prior to any such installation by the Company, adequate telecommunications
facilities of the type needed by the Enterprise can be provided by the Government, the Company
shall be obliged to use the Government’s network and pay reasonable standard charges for
telecommunications services.

	8.	 	Camps and Permanent Facilities.

     The Company may, at its own cost, in accordance with the laws and regulations from time to
time in effect in Indonesia, construct and establish and develop camps or permanent facilities
sufficient to service the needs of the Enterprise.

ARTICLE 22

ENVIRONMENTAL MANAGEMENT AND PROTECTION

	1.	 	Best Efforts to Minimize Environmental Harm.

     The Company shall, in accordance with prevailing laws and regulations of Indonesia governing
the Environment and natural preservation from time to time in effect, use its best efforts to
conduct its operations under this Agreement, consistent with economic and technical feasibility, so
as to minimize material harm to the Environment through the use of recognized modern Mining
industry practices to protect natural resources against unnecessary damage, to minimize Pollution
and harmful emissions into the Environment, to dispose of Waste in a manner consistent with good
Waste disposal practices, and in general to provide for the health and safety of its employees and
the local community. The Company shall not take any acts which may unnecessarily and unreasonably
block or limit the further development of the Mineral resources of the Mining Areas in which it
operates.

	2.	 	Safety Precautions.

     The Company shall install and utilize such internationally recognized modern safety devices
and shall observe such internationally recognized modern safety precautions as are provided and
observed under conditions and operations comparable to those undertaken by the Company under this
Agreement, including measures designed to prevent and control fires.

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	3.	 	Environmental Impact Studies.

     The Company shall include in any feasibility study for a new Mining Area or new Project Area
an environmental impact study which analyzes the potential impact of its operations on land, water,
air, biological resources and human settlements. The environmental study will also outline measures
which the Company intends to use to mitigate materially adverse impacts. Copies of such studies
shall be forwarded to each of the local Governments concerned.

ARTICLE 23

LOCAL BUSINESS DEVELOPMENT

	1.	 	Support To Indonesian Nationals.

     The Company shall, to the extent reasonably and economically practicable, having regard to the
nature of particular goods and services, promote, support, encourage and lend assistance to
Indonesian nationals desirous of establishing enterprises and businesses providing goods and
services for the Enterprise and for any permanent settlements constructed by the Company and the
residents thereof, and shall generally promote, support, encourage and assist the establishment and
operation of local enterprises outside its Mining Areas and any related Project Areas for the
benefit of the Enterprise.

	2.	 	Local Sub-contractors.

     The Company shall make maximum use of local registered sub-contractors where such
sub-contractors’ services are available at competitive prices and of comparable standards with
those obtainable from other third party suppliers, whether inside or outside Indonesia.

	3.	 	Preference to Local Landowners.

     Insofar as it is practicable, the Company shall give first preference in its assistance
hereunder to landowners in and other people originating from the area of the Enterprise.

	4.	 	Business and Community Development Program.

     The Company will, directly or indirectly so far as it is economically feasible in the
Company’s judgment for it to do so, continue to assist in the development of a Business (including
cooperatives) and Community Development Program designed to assist Indonesian nationals in the area
in which the Enterprise is located in lines of business which are related to the business carried
on by the Company. The Company and the Government shall cooperate closely in carrying out such
program.

	5.	 	Annual Review of Business and Community Development Program.

     Except as otherwise agreed by the Government, the Company’s Business and Community Development
program shall be reviewed annually by the Company, in consultation with the Government, and may be
altered by mutual consent between the Company and the Government

46

 

with a view to securing maximum benefit to Indonesian nationals and local enterprises from the
operations of the Company and the carrying out of the Enterprise.

	6.	 	Consultation With Government; Annual Report.

     Except as otherwise agreed by the Government, the Company shall consult from time to time with
representatives of the Government and furnish the Government annually with a report concerning the
following:

     (a) the implementation of the training and manpower aspects of the Business and
Community Development Program;

     (b) the implementation of provisions relating to local purchasing of supplies, and

     (c) the implementation of provisions relating to local business development.

ARTICLE 24

ASSIGNMENT

	(1)	 	Consent to Assignment.

     This Agreement may not be transferred or assigned (including for the purpose of financing) in
whole or in part, without the prior written approval of the Minister; provided, that, in the event
of any such transfer or assignment, the Company shall not be relieved from any of its obligations
hereunder except to the extent that the transferee or assignee shall assume such obligations.

	(2)	 	Transfer of Shares.

     The Shareholders of the Company shall not transfer shares of the Company without the prior
written consent of the Department which shall not be unreasonably withheld or delayed; provided,
however, that the consent of the Department shall not be required in the case of;

     (a) a transfer of shares of the Company listed on the Jakarta Stock Exchanges in
Indonesia;

     (b) a transfer by a shareholder of all or some of its shares of the Company to any
Affiliate of such shareholder.

ARTICLE 25

FINANCING

	1.	 	Company Responsibility; Debt/Equity Ratio.

     The Company shall have sole responsibility for financing the Enterprise and shall maintain
sufficient capital to carry out its obligations under this Agreement. The Company may

47

 

determine the extent to which the financing shall be accomplished through issuance of shares
of the Company or through long-term or short-term borrowings by the Company, including borrowings
from and loans to its Affiliates; provided that, the Company shall at all times maintain a ratio of
shareholders capital to indebtedness which is sufficient to reasonably assure its solvency for the
benefit of the Government and the Company’s creditors and shareholders.

	2.	 	Long Term Borrowings.

     Any long term borrowing by the Company pursuant to the terms of this Agreement shall be on
such repayment terms and at such effective rates of interest (including discounts, compensating
balances and other costs of obtaining such borrowings) as are reasonable and appropriate for Mining
companies in circumstances then prevailing in the international capital markets, after complying
with existing procedures for obtaining foreign loans.

	3.	 	Encumbrances.

     For the purpose of securing financing, the Company may mortgage, pledge or otherwise encumber
its assets, subject to Paragraph (1) of Article 24 of this Agreement.

ARTICLE 26

TERM

	1.	 	Transition.

     The
effective dates of the 1968 COW and this Agreement shall be as follows;

     a) Between the Effective Date and March 31, 2008.

     The 1968 COW shall continue to remain in full force and effect from and after the
Effective Date to and including March 31, 2008 except for Article 16 (“Default By Company”),
Article 17 (“Termination by the Company”), Article 18 (“Force Majeure”), Article 19
(“Settlement of Disputes”) and Article 22 (“Term”) thereof, which Articles, except as
otherwise specifically set forth herein, will be superseded and replaced on the Effective
Date by the corresponding provisions (i.e, Articles 15 (“Force Majeure”), 16 (“Default”), 17
(“Settlement of Disputes”), 18 (“Termination”), and 26 (“Term”), respectively) of this
Agreement, including the definitions related thereto as set forth in Article 1 of this
Agreement. In addition, Article 2 (“Continuation of the Company As Sole Contractor of the
Government in the Contract Area”); Article 3 (“Undertakings By the Company”), specifically
designated portions of Article 9 (“Taxes and Other Financial Obligations of the Company”)
and Annex “F” (“Rules for the Computation of Income Tax”); Article 19 (“Cooperation of the
Parties”); Article 27 (“Governing Law”) and Article 28 (“Miscellaneous Provisions”) of this
Agreement, and the definitions related thereto as set forth in Article 1 of this Agreement,
shall become effective on the Effective Date.

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     b) On and After April 1, 2008.

     Effective April 1, 2008 and subject to the Memorandum of Understanding, the entirety of
the 1968 COW shall be superseded and replaced by this Agreement.

     c)
Term

     This Agreement shall remain in effect from and after the Effective Date to and
including December 28, 2025 or such subsequent date to which this Agreement may be extended
or renewed pursuant to Article 26 (2) (the “Termination Date”).

	2.	 	Extension or Renewal of Agreement.

     This Agreement may be extended or renewed upon the following terms:

     a) Long-Term Planning and Additional Financing

     If at any time the Company shall (i) propose a substantial new investment in the
Enterprise or (ii) require an extension or renewal of this Agreement in order (x) to
facilitate additional financing, long term sales contracts, its obligations as a public
company, or otherwise or (y) to render economically feasible, in the Company’s opinion, any
expansion contemplated by Article 3(1)(b), and shall so request an extension or renewal of
this Agreement, the Government will give sympathetic consideration to any such request,
taking into account, among other factors deemed relevant by the Government, the progress the
Company shall have achieved at the time of such request, in respect of its undertakings set
forth in Article 3, to permit continuation of the Enterprise on the basis of longterm
planning and sound mining and operating practices and to assure continued employment of
those devoting their time and effort to the Enterprise for such extended or renewed term or
terms as the Company and the Government shall mutually agree.

     b) Demonstration of Benefits to Indonesia.

     If at any time the Company shall request an extension or renewal of this Agreement and
demonstrate to the Department that the Enterprise has provided positive benefit to the
economy of the Republic of Indonesia, including, but not limited to, the provision of
employment opportunities within the Company’s Contract Area or any related Project Area; the
generation of tax, export and other revenues to the Government; and the responsible
stewardship of the Environment, the Government will give sympathetic consideration to an
extension or renewal of this Agreement for such extended or renewed term or terms as the
Company and the Government shall mutually agree.

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ARTICLE 27

GOVERNING LAW

	1.	 	Governing Law.

     Except as otherwise expressly provided for herein, this Agreement, its implementation and
operation shall be governed and construed and interpreted in accordance with the laws of the
Republic of Indonesia. This Agreement has been drawn up in both the Indonesian and English
languages and both texts are valid. In the event of any divergence between the two texts, however,
the English text shall prevail and shall be considered the official text.

	2.	 	Agreement To Have Effect of Law.

     This Agreement shall have the force and effect of law. The Government and the Company have
also entered into the Memorandum of Understanding which sets forth their mutual understandings
concerning certain technical and transitional tax matters concerning this Agreement and the 1968
COW. By their approval of this Agreement, the Government and the Company acknowledge their
responsibility for this Agreement and the Memorandum of Understanding.

	3.	 	Variance With Other Laws.

     By reason of authorization contained in the Foreign Capital Investment Law (No. 1 of 1967), as
amended by Law No. 11 of 1970, this Agreement shall be enforceable in accordance with its terms,
including any cases where the provisions of this Agreement may be at variance from time to time
with foreign exchange, customs, taxation and other laws and regulations of the Republic of
Indonesia, in which event the provisions of this Agreement shall govern.

ARTICLE 28

MISCELLANEOUS PROVISIONS

	1.	 	Further Instruments.

     Each of the parties agrees to execute and deliver all such further instruments, and to do and
perform all such further acts and things, as shall be necessary or convenient to carry out the
provisions of this Agreement.

	2.	 	Notices.

     Any notice, request, waiver, consent, approval and other communication required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly given or made when
it shall be delivered by hand or by mail, telegram, cable, or facsimile, with postage or
transmission charges fully prepaid, to the party to which it is required or permitted to be given
or made at such party’s address hereinafter specified, or at such other addresses as such party
shall have designated by notice to the party giving such notice or making such request:

50

 

     If to the Government, addressed to:

     The Minister of Mines and Energy of the Republic of Indonesia

     c/o The Director General of Mines

     Jl. Jenderal Gatot Subroto Kav. 49

     Jakarta Selatan, Indonesia

     Facsimile Number; 62 21 525 5863 or 62 21 525 1494

     If to the Company, addressed to:

     President Director

     P.T. International Nickel Indonesia

     Wisma Antara, 18th Floor

     Jl. Medan Merdeka Selatan No. 17

     Jakarta 10110, Indonesia

     Facsimile Number; 62 21 381 0804

     With a copy addressed to:

     Inco Limited

     145 King Street West

     Suite 1500

     Toronto, Ontario, Canada M5H 4B7

     Facsimile Number; 416-361-7788

     Attention; Office of the General Counsel

3. Consent By Government

     The Minister or his designee may take any action or give any consent on behalf of the
Government which may be necessary or convenient under or in connection with this Agreement for its
better implementation and any action so taken or consent so given shall be binding upon the
Government and any instrumentality or sub-division thereof.

4. Singular and Plural Terms; Headings

     When required by the context of this Agreement, each number (singular or plural) shall include
all numbers and each gender shall include all genders. The headings appearing in this Agreement
are not to be construed as interpretations of the text or provisions hereof, but are intended only
for convenience of reference.

5. Entire Agreement

     The terms of this Agreement (including the Annexes hereto and the Memorandum of Understanding)
constitute the entire agreement between the parties hereto and, except as specifically set forth
herein with regard to the 1968 COW, and in such Memorandum of Understanding, no previous
communications, representations, or agreements, either oral or written, between the parties hereto
with respect to the subject matter hereof shall vary the terms of this Agreement.

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6. Consent Or Approval Not To Be Delayed

     Where an approval or consent or concurrence of a Ministry or the Government of Indonesia or
any subdivision or instrumentality thereof is required, and where an application is made by the
Company to the Government of Indonesia under this Agreement, such approval or consent will not be
unreasonably withheld or delayed.

     IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed on the
date appearing at the beginning of this Agreement.

	 	 	 	 	 
	 	FOR THE GOVERNMENT OF

THE REPUBLIC OF INDONESIA

 	 
	 	/s/ I.B. Sudjana
 	 
	 	I.B. Sudjana 	 
	 	Minister of Mines and Energy 	 
	 
	 	P.T. INTERNATIONAL NICKEL INDONESIA

 	 
	 	/s/ Scott M. Hand
 	 
	 	Scott M. Hand 	 
	 	President Commissioner 	 
	 
	 	 	 
	 	                                                    /s/ Rumengan Musu
 	 
	 	Rumengan Musu 	 
	 	President Director 	 

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ANNEX “A”

CONTRACT AREA

     The description of the Company’s contract area set forth below reflects all relinquishments
undertaken by the Company from the original contract area of the Company provided for in Article
2(h) of the 1968 COW. As used in this Agreement, the term “Contract Area” refers to such original
contract area as reduced by all such relinquishments.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Number of	 
	Block Name	 	Block Number*	 	 	Hectares	 
	Lakes Area
	 	 	1	 	 	 	108,377.25	 
	Bahudopi
	 	 	1B	 	 	 	32,123.01	 
	Matano
	 	 	1E	 	 	 	6,176.48	 
	Lingke
	 	 	1G	 	 	 	1,548.39	 
	Bulubalang
	 	 	1H	 	 	 	2,249.33	 
	Latao
	 	 	4	 	 	 	3,148.11	 
	Suasua
	 	 	5	 	 	 	10,372.68	 
	Paopao
	 	 	6	 	 	 	6,785.75	 
	Pomalaa
	 	 	8	 	 	 	20,286.19	 
	Torobulu
	 	 	10	 	 	 	13,817.05	 
	Malapulu
	 	 	12	 	 	 	3,329.66	 
	Kolonodale
	 	 	25	 	 	 	4,512.35	 
	Matarape
	 	 	29	 	 	 	1,679.87	 
	Lasolo
	 	 	29A	 	 	 	4,086.87	 
	TOTAL
	 	 	 	 	 	 	218,528.99	 

	*)	 	The longitude and latitude of each Block and a schematic layout of each such Block are set
forth on the following pages of this Annex “A”.

     The above coordinate numbers on each blocks were constituted with the theoretical calculation
method and will be surveyed in its field in accordance with the effective procedures.

[Longitude and latitude descriptions not included]

53

 

ANNEX “B”

MAP OF CONTRACT AREA

[Complete map included in originally-executed version]

54

 

ANNEX “C”

DEADRENT FOR VARIOUS STAGES OF PRODUCTION

(Deadrent is expressed in United States Dollars

Per Hectare Per Annum)

	 	 	 	 	 	 	 	 	 	 	 
	General	 	Exploration	 	Feasibility Study	 	Construction	 	Operating
	Survey Period	 	Period	 	Period	 	Period	 	Period
	No Longer
Applicable to
Company

	 	No Longer
Applicable to
Company
	 	No Longer
Applicable to
Company
	 	No Longer
Applicable to
Company
	 	$	1.50	 

55

 

ANNEX “D”

ROYALTY ON MINERAL PRODUCTION

(Mine and Energy Ministerial Decree No 1166.K/844/M.PE/1992 dated September 1992)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total	 	 	 	 	 	 
	 	 	 	 	 	 	Production per	 	 	 	Royalty/Tariff	 	 
	No.	 	Mineral	 	Calendar Year	 	Unit	 	(US$/Unit)	 	Explanation
	1	 	2	 	3	 	4	 	5	 	6
	 	1	 	 	Nikel ore

	 	£1250
	 	Tonne
	 	70.00/tonne
	 	Metal
	 	 	 	 	(Garnierite)

	 	>1250
	 	 	 	78.00/tonne
	 	 
	 	2	 	 	Nickel ore

	 	£750
	 	Tonne
	 	62.00/tonne
	 	Metal
	 	 	 	 	(Limonite)

	 	>750
	 	 	 	63.00/tonne
	 	 
	 	3	 	 	Cobalt

	 	£500
	 	Tonne
	 	140.00/tonne
	 	Metal
	 	 	 	 	

	 	>500
	 	 	 	156.00/tonne
	 	 
	 	4	 	 	Tin

	 	£50000
	 	Tonne
	 	59.00/tonne
	 	Metal
	 	 	 	 	

	 	>50000
	 	 	 	64.00/tonne
	 	 
	 	5	 	 	Copper

	 	£80000
	 	Tonne
	 	45.00/tonne
	 	Metal
	 	 	 	 	

	 	>80000
	 	 	 	55.00/tonne
	 	 
	 	6	 	 	Lead

	 	£6000
	 	Tonne
	 	17.50/tonne
	 	Metal
	 	 	 	 	

	 	>6000
	 	 	 	18.00/tonne
	 	 
	 	7	 	 	Zinc

	 	£4000
	 	Tonne
	 	12.00/tonne
	 	Metal
	 	 	 	 	

	 	>4000
	 	 	 	12.50/tonne
	 	 
	 	8	 	 	Iron

	 	£100000
	 	Tonne
	 	2.70/tonne
	 	Metal
	 	 	 	 	

	 	>100000
	 	 	 	2.90/tonne
	 	 
	 	9	 	 	Gold

	 	£2000
	 	Kg
	 	225.00/Kg
	 	Metal
	 	 	 	 	

	 	>2000
	 	 	 	235.00/Kg
	 	 
	 	10	 	 	Silver

	 	£25000
	 	Kg
	 	1.90/Kg
	 	Metal
	 	 	 	 	

	 	>25000
	 	 	 	2.00/Kg
	 	 
	 	11	 	 	Platinum

	 	£100
	 	Kg
	 	35.50/Kg
	 	Metal
	 	 	 	 	

	 	>100
	 	 	 	38.50/Kg
	 	 
	 	12	 	 	Mercury

	 	£500000
	 	Kg
	 	0.16/Kg
	 	Metal
	 	 	 	 	

	 	>500000
	 	 	 	0.17/Kg
	 	 
	 	13	 	 	Antimony

	 	£100000
	 	Kg
	 	0.55/Kg
	 	Metal
	 	 	 	 	

	 	>100000
	 	 	 	0.60/Kg
	 	 
	 	14	 	 	Bismuth

	 	£1000
	 	Kg
	 	45.00/Kg
	 	Metal
	 	 	 	 	

	 	>1000
	 	 	 	50.00/Kg
	 	 
	 	15	 	 	Wolframite

	 	£12.5
	 	Tonne
	 	0.30/Tonne
	 	Metal
	 	 	 	 	

	 	>12.5
	 	 	 	0.40/Tonne
	 	 
	 	16	 	 	Vanadium

	 	£12.5
	 	Tonne
	 	0.10/Tonne
	 	Metal
	 	 	 	 	

	 	>12.5
	 	 	 	0.15/Tonne
	 	 
	 	17	 	 	Molybdenum

	 	£500
	 	Tonne
	 	612.00/Tonne
	 	Metal
	 	 	 	 	

	 	>500
	 	 	 	624.00/Tonne
	 	 
	 	18	 	 	Titanium

	 	£20000
	 	Tonne
	 	41.00/Tonne
	 	Metal
	 	 	 	 	

	 	>20000
	 	 	 	42.00/Tonne
	 	 

56

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total	 	 	 	 	 	 
	 	 	 	 	 	 	Production per	 	 	 	Royalty/Tariff	 	 
	No.	 	Mineral	 	Calendar Year	 	Unit	 	(US$/Unit)	 	Explanation
	1	 	2	 	3	 	4	 	5	 	6
	 	19	 	 	Chromite

	 	£15000
	 	Tonne
	 	0.35/Tonne
	 	Concentrate
	 	 	 	 	

	 	>15000
	 	 	 	0.45/Tonne
	 	 
	 	20	 	 	Monazite

	 	£10000
	 	Tonne
	 	60.00/Tonne
	 	Concentrate
	 	 	 	 	

	 	>10000
	 	 	 	65.00/Tonne
	 	 
	 	21	 	 	Xenotim

	 	£100000
	 	Tonne
	 	80.00/Tonne
	 	Concentrate
	 	 	 	 	

	 	>100000
	 	 	 	85.00/Tonne
	 	 
	 	22	 	 	Ilmenite

	 	£12.5
	 	Tonne
	 	0.60/Tonne
	 	Concentrate
	 	 	 	 	

	 	>12.5
	 	 	 	0.90/Tonne
	 	 
	 	23	 	 	Zicron

	 	£12.5
	 	Tonne
	 	17.50/Tonne
	 	Concentrate
	 	 	 	 	

	 	>12.5
	 	 	 	18.50/Tonne
	 	 
	 	24	 	 	Rutile

	 	£12.5
	 	Tonne
	 	4.75/Tonne
	 	Concentrate
	 	 	 	 	

	 	>12.5
	 	 	 	5.50/Tonne
	 	 
	 	25	 	 	Iron Sand

	 	£100000
	 	Tonne
	 	0.60/Tonne
	 	Concentrate
	 	 	 	 	

	 	>100000
	 	 	 	0.70/Tonne
	 	 
	 	26	 	 	Sulfur

	 	£5000
	 	Tonne
	 	2.10/Tonne
	 	Concentrate
	 	 	 	 	

	 	>5000
	 	 	 	2.20/Tonne
	 	 
	 	27	 	 	Bauxite

	 	£200000
	 	Tonne
	 	0.40/Tonne
	 	Ore
	 	 	 	 	

	 	>200000
	 	 	 	0.50/Tonne
	 	 
	 	28	 	 	Manganese

	 	£10000
	 	Tonne
	 	0.25/Tonne
	 	Ore
	 	 	 	 	

	 	>10000
	 	 	 	0.35/Tonne
	 	 
	 	29	 	 	Natural/Rock

	 	£200000
	 	Tonne
	 	0.17/Tonne
	 	 
	 	 	 	 	Asphalt

	 	>200000
	 	 	 	0.20/Tonne
	 	 
	 	30	 	 	Barite

	 	£10000
	 	Tonne
	 	0.15/Tonne
	 	 
	 	 	 	 	

	 	>10000
	 	 	 	0.25/Tonne
	 	 
	 	31	 	 	Iodine

	 	£500
	 	Tonne
	 	83.00/Tonne
	 	 
	 	 	 	 	

	 	>500
	 	 	 	88.00/Tonne
	 	 
	 	32	 	 	Beach Sand

	 	£100000
	 	Tonne
	 	0.29/Tonne
	 	 
	 	 	 	 	

	 	>100000
	 	 	 	0.30/Tonne
	 	 
	 	33	 	 	Crystal

	 	£10000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	Quartz

	 	>10000
	 	 	 	0.75/Tonne
	 	 
	 	34	 	 	Pyrite

	 	£10000
	 	Tonne
	 	0.15/Tonne
	 	 
	 	 	 	 	

	 	>10000
	 	 	 	0.20/Tonne
	 	 
	 	35	 	 	Diamond

	 	£500
	 	Carat
	 	 	—	 	 	Carat
	 	 	 	 	

	 	>500
	 	 	 	 	—	 	 	 
	 	36	 	 	Nitrate

	 	£500000
	 	Tonne
	 	0.88/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.90/Tonne
	 	 
	 	37	 	 	Phosphates

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	38	 	 	Salite

	 	£500000
	 	Tonne
	 	0.88/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.90/Tonne
	 	 
	 	39	 	 	Asbestos

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 

57

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total	 	 	 	 	 	 
	 	 	 	 	 	 	Production per	 	 	 	Royalty/Tariff	 	 
	No.	 	Mineral	 	Calendar Year	 	Unit	 	(US$/Unit)	 	Explanation
	1	 	2	 	3	 	4	 	5	 	6
	 	40	 	 	Talc

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	41	 	 	Mica

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	42	 	 	Magnesite

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	43	 	 	Graphite

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	44	 	 	Yarosite

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	45	 	 	Alum

	 	£500000
	 	Tonne
	 	0.88/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.90/Tonne
	 	 
	 	46	 	 	Lensite

	 	£500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	1.08/Tonne
	 	 
	 	47	 	 	Ocher

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	48	 	 	Quartz

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	Sand

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	49	 	 	Kaolin

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	50	 	 	Feldspar

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	51	 	 	Gips

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	52	 	 	Bentonite

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	53	 	 	Pumice

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	54	 	 	Trass

	 	£500000
	 	Tonne
	 	0.14/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.16/Tonne
	 	 
	 	55	 	 	Obsidian

	 	£500000
	 	Tonne
	 	0.41/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.42/Tonne
	 	 
	 	56	 	 	Perlite

	 	£500000
	 	Tonne
	 	0.41/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.42/Tonne
	 	 
	 	57	 	 	Diatomite

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	Earth

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	58	 	 	Fuller’s Earth

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	59	 	 	Marbles

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.72/Tonne
	 	 
	 	60	 	 	Flint

	 	£500000
	 	Tonne
	 	0.14/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.16/Tonne
	 	 

58

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total	 	 	 	 	 	 
	 	 	 	 	 	 	Production per	 	 	 	Royalty/Tariff	 	 
	No.	 	Mineral	 	Calendar Year	 	Unit	 	(US$/Unit)	 	Explanation
	1	 	2	 	3	 	4	 	5	 	6
	 	61	 	 	Limestone

	 	£500000
	 	Tonne
	 	0.14/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.16/Tonne
	 	 
	 	62	 	 	Dolomite

	 	£500000
	 	Tonne
	 	0.26/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.28/Tonne
	 	 
	 	63	 	 	Calsite

	 	£500000
	 	Tonne
	 	0.26/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	 	 	0.28/Tonne
	 	 
	 	64	 	 	Granite:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	a. Break/

	 	£500000
	 	Tonne
	 	0.24/Tonne
	 	 
	 	 	 	 	Crush

	 	>500000
	 	Tonne
	 	0.26/Tonne
	 	 
	 	 	 	 	b. Block

	 	£500000
	 	Tonne
	 	1.03/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	Tonne
	 	1.05/Tonne
	 	 
	 	65	 	 	Granite,

Andesite,

Basalt,

Trachite

(Building

Material)

	 	£500000

>500000
	 	Tonne

Tonne
	 	0.26/Tonne

0.28/Tonne
	 	 
	 	66	 	 	Clay:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	a.
Fire

Clay/Ball
clay

	 	£500000

>500000
	 	Tonne

Tonne
	 	0.47/Tonne

0.48/Tonne
	 	 
	 	 	 	 	b.
Clay

Building
Material

	 	£500000

>500000
	 	Tonne

Tonne
	 	0.235/Tonne

0.240/Tonne
	 	 
	 	67	 	 	Sand

	 	£500000

>500000
	 	Tonne

Tonne
	 	0.14/Tonne

0.16/Tonne
	 	 
	 	68	 	 	Quartz,

	 	£500000
	 	Tonne
	 	0.25/Tonne
	 	 
	 	 	 	 	Gravel

	 	>500000
	 	Tonne
	 	0.30/Tonne
	 	 
	 	69	 	 	Zeolite

	 	£500000
	 	Tonne
	 	0.70/Tonne
	 	 
	 	 	 	 	

	 	>500000
	 	Tonne
	 	0.72/Tonne
	 	 
	 	70	 	 	Gemstone

	 	—
	 	—
	 	 	10	%	 	 
	 	71	 	 	Semi

Precious

Stone

	 	—
	 	—
	 	 	10	%	 	 

59

 

ANNEX “E”

THE METHODS OF ROYALTY CALCULATION

Based on Directorate General of Mines Decree

No. 514.K/844/DDJP/1992 Dated December 28, 1992

     In interpreting and implementing the Royalty of Mineral Production (Mines and Energy
Ministerial Decree No. 1166.K/844/M.PE/1992 dated September, 1992), the following explanations of
the column headings of ANNEX “D” hereof are provided:

Column 1: “No.”

The reference number for each of the various Minerals that may be subject to the payment of
royalties pursuant to the above-reference Decree on Royalty on Mineral Production.

Column 2: “Mineral”

The elemental constituent in the final mined and/or processed product to be sold by the
Company, whether in the form of ore, mill concentrate, smelter matte or refined metal.

Column 3: “Total Production Per Calendar Year”

The total amount of production in any one calendar year of the relevant Product sold by the
Company. There is excluded from such total production deleterious or poorly recoverable
by-products, as determined from the Company’s production, shipping and sales records, for
which value is not paid to the Company by a buyer.

Column 4: “Unit”

The unit of production for each Mineral subject to royalty for the purposes of the
calculation of such royalty. All units are in metric form (e.g., the term “Ton” in Column 4
refers to a metric ton or tonne.)

Column 5: “Royalty Tariff”

The rate, expressed in United States Dollars per unit of production, applicable to those
contained metals, concentrates or ores (as specified in Column 6) for which value is paid to
the Company by a buyer, but excluding deleterious or poorly recoverable by-products of
relatively low value, as determined from the Company’s production, shipping and sales
records.

Column 6: “Explanation”

This column explains whether the Royalty Tariff specified in column 5 is to be applied to
the metal content of the product or to the total concentrate or ore weight thereof.

60

 

     Reference is made to Article 9 of the Agreement for additional information regarding the
Company’s payment obligations in respect of royalties to be paid pursuant to the above-referenced
Decree.

61

 

ANNEX “F”

RULES FOR THE COMPUTATION OF INCOME TAX

     1.        “Year” means each full calendar year, whether commencing before or after the
Effective Date, except that (a) for the calendar year ended December 31, 2008, the term “Year”
shall mean (i) the period commencing January 1, 2008 and ending March 31, 2008 and (ii) the period
commencing April 1, 2008 and ending December 31, 2008; and (b) in the calendar year in which this
Agreement shall be terminated, the term “Year” shall mean the period from January 1 to the date of
termination.

     2.        “Products” has the meaning set forth in Article 1 of this Agreement.

     3.        “Operating Expenses” shall be deductible by the Company in determining its Net
Taxable Income in respect of any Year and shall mean all paid or accrued expenses attributable to
the Company in such Year. Operating Expenses shall include, among other things, the following
amounts:

     a)        Amounts in respect of materials, supplies, non-depreciable equipment and
utilities.

     b)        Wages, salaries and other compensation, including employee remuneration,
to the extent not otherwise classified as Operating Expenses, of personnel employed or
engaged by the Company or any of the Affiliates of the Company who are assigned to the
Company on a temporary, part-time or permanent basis.

     c)        Benefits in kind provided by the Company in the Contract Area or any
Project Area in the form of:

     (i)        Accommodations and housing, including those for families.

     (ii)        Compensation or remuneration in the form of food or drink at the job
location and supplies of foodstuffs in order to meet basic daily necessities,
including food, drink and supplies of foodstuffs for families.

     (iii)        Medical services inside Indonesia, including medical examinations to meet
the medical requirements of the job assignment and medical or hospital treatment.

     (iv)        Educational facilities with regard to a general Elementary, Junior High or
Senior High (or comparable level) School education for families.

     (v)        Sports facilities in the Contract Area or any Project Area, including such
facilities for families but excluding bowling, golf, hunting, horse racing, and
gliding facilities.

     (vi)        Vocation allowance or travel leave facilities for Company employees,
including their families and including Expatriate Individuals.

62

 

     (vii)        Transportation allowance facilities for Company employees and their
families, including Expatriate Individuals, at the time of the termination of
employment of such employees or Expatriate Individuals, from the Contract Area to
their points of hire.

     d)        Amounts for contracted services provided to the Company by third parties.

     e)        Amounts for premiums for insurance (foreign and domestic) on plant,
inventory, machinery, equipment, stores, supplies and for premiums for insurance against
business, operational, earthquake and other interruptions and for premiums for insurance
against public liability claims; provided that, where such premiums are paid directly or
indirectly to Affiliates, such premiums shall not exceed those which would be payable in an
arms-length transaction to a party not related to the Company.

     f)        Amounts for royalties, interest and related costs, and payments for
patents, design, technical and management information and services, including those to
Affiliates; provided that such amounts and payments to Affiliates shall not exceed those
which would be payable in an arms-length transaction to a party not related to the Company.

     g)        Amounts in respect of losses resulting from obsolescence, writedowns,
shortages, allowed damage claims, theft, or destruction of inventory to the extent not fully
compensated for by insurance or otherwise. The amount to be deducted shall be equal to the
decrease in the tax basis of such inventory brought about by such losses.

     h)        Amounts for rental payments in respect of tangible assets, such as amounts
charged for equipment, plant, and buildings.

     i)        Amounts for deadrent, land and building tax, royalties, uncredited value
added tax, sales tax on luxury goods, stamp duty, transfer of ownership tax, import duties,
if any, and any other taxes or levies paid pursuant to this Agreement, except corporate
income tax and withholding tax.

     j)        Amounts for treating, smelting, refining and other Processing expenses.

     k)        Amounts for handling, loading, storing, transporting and shipping, and
other delivery costs (including insurance).

     l)        Amounts for repairs and maintenance.

     m)        Amounts for commissions, discounts, price allowances and sales returns.

     n)        Mining expenses.

     o)        Environmental Management Costs.

     p)        Qualifying business entertainment expenses.

63

 

     q)        Commitment, agency, advisory and other financial management expenses
incurred by the Company in respect of financing undertaken by the Company.

     r)        All other ordinary and necessary trade or business expenses qualifying
under Income Tax Law 1994.

     4.        “Depreciation” in respect of Depreciable Assets shall be deductible by the
Company in determining its Net Taxable Income in respect of any Year and shall be calculated as
follows:

     a)        Depreciable Assets placed in service by the Company from and after the
Effective Date in connection with the Company’s expansion undertakings set forth in Article
3(1)(a) or 3(1)(b) of this Agreement shall be eligible to be depreciated in accordance with
the asset classifications and the rates set forth in Government Regulation 34 Year 1994, as
such Regulation shall be in effect on the Effective Date.

     b)        Depreciable Assets placed in service by the Company prior to April 1,
2008, other than those referred to in subparagraph 4(a), shall be eligible to be depreciated
in accordance with the terms of the 1968 COW until March 31, 2008. Depreciable Assets placed
in service on and after April 1, 2008, other than those referred to in subparagraph 4(a),
shall be eligible to be depreciated in accordance with the asset classifications and the
rates set forth in the Decree of the Minister of Finance Number 82/KMK.04/1995 Dated
February 7, 1995, as such Decree shall be in effect on the Effective Date.

     c)        In determining its Net Taxable Income in any Year prior to the Year
commencing April 1, 2008, the Company (i) shall be required to recognize gain or loss
resulting from any sale or other disposition by it of Depreciable Assets, other than real
property, placed in service by or in connection with the Company’s undertakings set forth in
Article 3(1)(a) and 3(1)(b) of this Agreement and (ii) shall not be required to recognize
gain or loss resulting from any sale or other disposition by it of any other Depreciable
Assets, other than real property. The amount of such gain or loss in respect of such other
assets shall instead be transferred to the Company’s accumulated reserve for depreciation.
The Company shall recognize gain or loss resulting from any sale or other disposition by it
of Depreciable Assets on or after the Year commencing April 1, 2008.

     “Depreciable Assets” means tangible assets owned and used by the Company, or owned to obtain,
claim, or maintain income, with a useful life of more than one year, including, without limitation,
aircraft, buildings, machinery, equipment, dredges, vessels, vehicles, railways, rolling stock,
bridges, piers, roads, docks, shipyards, construction in progress and other tangible assets
depreciable under Generally Accepted Accounting Principles, including qualifying facilities made
available by the Company for its employees and/or for public purposes, including roads, schools and
hospitals and their respective equipment, in each case within the Contract Area or any Project
Area. Depreciable Assets located outside the Contract Area or any Project Area shall be governed
by the provisions of Article 11, Paragraphs (1) — (11) of Income Tax Law 1994.

64

 

     5.        “Amortization” in respect of Amortizable Assets shall be deductible by the
Company in determining its Net Taxable Income in respect of any Year and shall be determined upon
the same basis as set forth in Paragraph 4 of this Annex “F” in respect of Depreciation.

     “Amortizable Assets” means intangible assets owned and used by the Company, including but not
limited to:

     (i)        patents, rights, franchises, concessions, licenses, leasehold interests and
other intangible assets amortizable under Generally Accepted Accounting Principles
and

     (ii)        all expenses incurred prior to commencement of any operations with respect
to any Mining Area, including costs of acquisition of Mining or prospecting rights
or Mining or prospecting information, Pre-Production Expenses, organizational
costs, employee training costs, education grants, and all other deductions allowed
under this Agreement or permitted under Income Tax Law 1994.

     6.        “Selling, General and Administrative Expenses” shall be deductible by the Company
in determining its Net Taxable Income in respect of any Year and shall include, but not be limited
to, management expenses, compensation fees for services rendered abroad, employee, management and
executive salaries, communication and shareholder relations expenses, dues and subscriptions,
advertising and other selling expenses, public relations expenses, office expenses, marketing
expenses (excluding unrelated product research), legal and auditing expenses and general overhead
expenses, including reasonable charges of Affiliates allocated to the Company’s operations in
Indonesia to the extent that these charges represent the fair value of costs of services provided
by such Affiliates in such Year.

     The following items shall also be included in Selling, General and Administrative Expenses of
the Company:

     a)        Wages, salaries, benefits and other compensation, of personnel employed or
engaged by the Company or any Affiliate of the Company who are assigned to the Company on a
temporary, part-time or permanent basis.

     b)        General administrative overhead expenses for product research, market
development and technical services of personnel employed or engaged by any Affiliate of the
Company who render such services for the benefit of the Company and charges for laboratory
and technical services rendered to the Company by any of its Affiliates or sub-contractors.
Such charges shall consist of the cost of such services and shall be limited to the amount
which a non-Affiliated party would charge for such services.

     c)        All necessary travel expenses incurred in connection with the Company’s
business in. Indonesia and to and from Indonesia and other countries. In the case
of personnel assigned to the Company, such travel expenses shall include their and their
dependents’ reasonable relocation expenses to and from Indonesia and their country of
residence.

65

 

     d)        “Environmental Management Costs” shall be deductible by the Company in
determining its Net Taxable Income in respect of any Year and shall mean any and all costs
incurred by the Company with regard to:

     (i)        compliance with the laws and regulations of the Republic of Indonesia
relating to the Environment, including but not limited to laws and regulations
governing emissions by the Company’s operations into the Environment and employee
health and safety;

     (ii)        the generation, storage, treatment, transportation or other management of
Waste;

     (iii)        groundwater or surface water monitoring and operational costs in respect
of surface impoundments, slurry walls and caps, lagoons and other facilities to
monitor, reduce, eliminate or contain Waste so as to minimize its impact upon the
Environment;

     (iv)        revegetation and reclamation; and

     (v)        the closure of mining, processing or other facilities of the Company
following the cessation of operations by the Company in respect thereof.

     e)        Amounts in respect of damage or Losses, to the extent not fully
compensated for by insurance or otherwise.

     7.        “Interest Expenses”, including payments in respect of loan guarantees, shall be
deductible by the Company in determining its Net Taxable Income in respect of any Year, provided
that the ratio of the Company’s loan capital to its total equity capital in any such Year does not
exceed 5:1 for capital expenditures up to $200,000,000 (two hundred million) or 8:1 for capital
expenditures of more than $200,000,000 (two hundred million), and shall mean all interest paid or
accrued in any Year on long-term or short-term loan capital, except that interest paid or incurred
(i) in respect of indebtedness related to the Company’s expansion undertakings set forth in Article
3 of this Agreement and (ii) prior to the completion of construction of each expansion project
referred to in such undertakings shall not be so deductible and shall instead be capitalized and
amortized over the remaining life of such indebtedness. The completion of construction of each such
project shall be deemed to occur upon the earlier of the date of completion of construction thereof
as certified by a third party or on the date such expansion project is placed in service by the
Company.

     8.        “Losses” shall mean the excess of all allowable deductions over Gross Income in
such Year and shall be deductible by the Company in determining its Net Taxable Income in respect
of any Year. In the event a Loss is incurred in any Year, such Loss may be carried forward and
deducted from Net Taxable Income accruing in the eight taxable Years next succeeding the Year in
which such Loss was incurred. Those Losses first occurring shall be deducted first from Net Taxable
Income earned in the next eight succeeding taxable Years.

66

 

     9.        “Development Expenses” shall be deductible by the Company in determining its Net
Taxable income in respect of any Year and shall mean all expenses incurred in accessing or opening
up new areas within the Contract Area for the purpose of advancing the commercial development of a
new operating facility, including expenses relating to the Company’s undertakings set forth in
Article 3 of this Agreement.

     10.        “Pre-Production Expenses” shall be treated as deferred expenditures and shall
be deductible in the form of amortization by the Company in determining its Net Taxable Income in
respect of any Year and shall mean all expenses incurred in respect of the preparation and the
bringing into production of new operating facilities or assets within the Contract Area, including
but not limited to expenses for access roads and site preparation.

     11.        “Gross Income” means all income, other than exempt income as defined under
Income Tax Law 1994, paid to or accrued by the Company, including:

     a)        the gross proceeds received or accrued by the Company from the sale of the
Products F.O.B. point of shipment in Indonesia on the basis described in Article 7 of this
Agreement;

     b)        income from the sale or transfer of capital assets, treated in accordance
with subparagraph 1(d) of Article 4 of Income Tax Law 1994; and

     c)        other income of the Company actually received or accrued and not referred
to above.

     12.        “Net Taxable Income” in any Year means Gross Income in such Year after deducting
therefrom all amounts in respect of expenses, costs and allowances (including the items defined in
Paragraphs 3 through 10 of this Annex “F”) as permitted by the laws and regulations of Income Tax
Law 1994.

     13.        “Income Tax Law 1994” shall mean Law No. 7 of 1983, as last amended by Law No.
10 of 1994, including the regulations promulgated thereunder, in each case as in effect on the
Effective Date.

     14.        “Value Added Tax Law 1994” shall mean Law No. 8 of 1983 as amended by Law No. 11
of 1994, including the regulations promulgated thereunder, in case as in effect on the Effective
Date.

     15.        “PBB Law 1994” shall mean Law No. 12 of 1985 as amended by Law No. 12 of 1994,
including the regulations promulgated thereunder, in each case as in effect on the Effective Date.

     16.        “LTCB Credit Agreement” means the Credit Agreement dated as of June 22, 1990
among the Company, the Banks named therein (including their successors and assigns), The Long-Term
Credit Bank of Japan, Limited, as Agent and LTCB Trust Company, as Collateral Agent, as such
agreement may be amended from time to time.

67

 

[Conformed Copy]

 

	 
	 

 

CONTRACT OF WORK

BETWEEN

REPUBLIC OF INDONESIA

AND

P.T. INTERNATIONAL NICKEL

INDONESIA

 

27 JULY 1968

	 
	 

 

DIREKTORAT PEMBINAAN PERUSAHAAN PERTAMBANGAN

DIREKTORAT JENDERAL PERTAMBANGAN

JAKARTA

1974

[54]

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	Contract
of Work
	 	1	 
	Article 1   Appointment And Responsibility of Contractor
	 	 	2	 
	Article 2   Definitions
	 	 	3	 
	Article 3   Advance Payments
	 	 	4	 
	Article 4   The Project
	 	 	4	 
	Article 5   Additional Infrastructure
	 	 	7	 
	Article 6   Marketing
	 	 	8	 
	Article 7   Promotion of National Interest
	 	 	9	 
	Article 8   Employment And Training of Indonesian Nationals
	 	 	9	 
	Article 9   Financing
	 	 	11	 
	Article 10 Indonesian Participation in Ownership
	 	 	11	 
	Article 11 Landrent, Royalties And Corporation Taxes
	 	 	12	 
	Article 12 Records and Audit
	 	 	15	 
	Article 13 Foreign Exchange
	 	 	16	 
	Article 14 Imports And Exports
	 	 	17	 
	Article 15 Suspension of Operations
	 	 	18	 
	Article 16 Default By Company
	 	 	19	 
	Article 17 Termination By The Company
	 	 	19	 
	Article 18 Force Majeure
	 	 	21	 
	Article 19 Settlement of Disputes
	 	 	21	 
	Article 20 Corporate Status
	 	 	23	 
	Article 21 Assignment
	 	 	23	 
	Article 22 Term
	 	 	23	 
	Article 23 Miscellaneous Provisions
	 	 	24	 
	Annex A Mining and Other Rights
	 	 	26	 
	Annex B Investigation
	 	 	29	 
	Annex C Rules For Computation of Corporation Tax
	 	 	30	 
	Annex D Corporate Powers
	 	 	36	 
	 

 
	Presidential
Notification
	 	38	 

 

 

CONTRACT OF WORK

     THIS AGREEMENT made and entered into in Djakarta, Indonesia as of the 27th day of July, 1968
by and between

     THE REPUBLIC OF INDONESIA represented by the Ministry of Mines of the Government of the
Republic of Indonesia,

     and

     P.T. INTERNATIONAL NICKEL INDONESIA (hereinafter referred to as “the Company”),

     WITNESSETH that:

     WHEREAS, all minerals found in the territory of the Republic of Indonesia in the form of
natural deposits are part of the national wealth of the Indonesian people and are controlled
through law by the Government for the maximum welfare of the people; and

     WHEREAS, the Republic of Indonesia is desirous of advancing the economic development of the
people of Indonesia and to that end desires to encourage and promote the further exploration and
development of the mineral resources of the Republic of Indonesia and, if ore deposits of
commercial grade and quality are proved, to take all appropriate measures consistent with the needs
of the people and the requirements of the Republic of Indonesia to facilitate the development of
such ore deposits and the operation of mining enterprises in connection therewith; and

     WHEREAS, the Government, in its desire to encourage the orderly development of the nickel
deposits in the island of Sulawesi issued invitations for bids in respect of such deposits on May
6, 1967; and

     WHEREAS, following the evaluation of the bids received, The International Nickel Company of
Canada, Limited was designated the successful bidder on the basis of its proposal dated October 20,
1967, and has in turn designated the Company to carry out this Contract of Work; and

     WHEREAS, the Company, through The International Nickel Company of Canada, Limited and other
affiliated companies, has or has access to extensive experience and proven technical and financial
capability in the mining and processing of nickel ores and in the marketing of nickel and related
minerals and contemplates a program of investigation, and, if feasible, development and operation
of the Sulawesi nickel deposits; and

     WHEREAS, the Government in its desire to facilitate orderly mineral resource development has
passed laws providing for private foreign investment in mining and the Company is acting in
reliance upon those and other applicable laws and also upon the Government’s expressed desire to
work, in the spirit of cooperation and mutual respect, with private enterprises for the greater
benefit of the Indonesian people; and

1

 

     WHEREAS, Article 16, Paragraph 2, of the Foreign Capital Investment Law (No. 1 of 1967)
provides that additional privileges may be granted by Government Regulation to any foreign capital
enterprise which is extremely important for economic development and the Government has among other
things determined that the Company is entitled to additional tax concessions on the basis of the
amount and size of the capital to be invested, the technological pioneering involved in the project
to be undertaken in Indonesia and the pioneering to be undertaken by the Company in regional
development in connection with the construction of infrastructure, all as hereinafter provided;

     NOW THEREFORE,

     In consideration of the mutual promises, covenants and conditions hereafter set out to be
performed and kept by the parties hereto, it is stipulated and agreed between the parties hereto as
follows:

ARTICLE 1
 

APPOINTMENT
AND RESPONSIBILITY OF CONTRACTOR

     (a) Appointment. The Company is hereby appointed sole contractor to the Government to conduct
all the operations hereinafter described for the term hereof in and in relation to the Contract
Area, including the search for and discovery of nickel and associated minerals by all appropriate
means, and the exploration, evaluation, development, mining, processing, storage and transportation
thereof by all means in and outside Indonesia, and the marketing of such minerals in and outside
Indonesia, and to perform all related activities appropriate to further such operations, and all
other operations and activities specified in this Agreement or appropriate for the discharge of the
Company’s obligations hereunder; provided, however, that the Company shall not deal with
radio-active minerals in any way without first consulting the Ministry.

     (b) Responsibility. The Company accepts the rights and obligations to conduct operations in
accordance with the terms of this Agreement and to conduct all such operations in a good technical
manner in accordance with good international mining engineering standards. The Company will have
control and management of all of its activities under this Agreement and will have full
responsibility therefor and assume all risks thereof in accordance with the terms and conditions of
this Agreement. Without in any way detracting from the Company’s responsibilities and obligations
hereunder the Company may engage sub-contractors, whether or not affiliates of the Company, for the
execution of such phases of its operations as the Company deems appropriate.

     (c) Cooperation. The Government and all its agencies will cooperate fully with the Company
and will grant it all necessary rights and will take such other action as may be desirable to
achieve the mutual objectives of this Agreement. Subject to the provisions of this Agreement, the
Government hereby assigns to the Company all rights, powers, authorizations and privileges which
are necessary or convenient in order to enable the Company to carry out its operations hereunder,
which rights, powers, authorizations and privileges are more fully described in Annex A attached to
and constituting an integral part of this Agreement.

2

 

ARTICLE 2

 

DEFINITIONS

     The entire program in all its phases is sometimes herein called the “Project.” Throughout this
Agreement the following additional terms shall have the indicated meanings:

	 	 	 	 	 
	(a) “Government”

	 	—
	 	The Government of the Republic of Indonesia.
	 
	(b) “Company”

	 	—
	 	P.T. International Nickel Indonesia, a company organized
under the laws of Indonesia and controlled by The
International Nickel Company of Canada, Limited.
	 
	(c) “Date of the
Invitation to Bid”

	 	—
	 	May 6, 1967.
	 
	(d) “Date of Contract
Approval”

	 	—
	 	the date set out at the beginning of this Agreement,
following consultation with the People’s Representatives
Assembly and compliance with all other necessary
procedures, as of which both the Company and the
Government have executed this Agreement.
	 
	(e) “Control”

	 	—
	 	direct or indirect ownership of more than 50% of all the
issued voting shares in the capital stock of a company.
	 
	(f) “Affiliate”

	 	—
	 	an affiliate of the Company shall mean any company
controlled by, controlling or under common control with
the Company.
	 
	(g) “Agreement”

	 	—
	 	this Contract of Work.
	 
	(h) “Contract Area”

	 	—
	 	that portion of the island of Sulawesi and its off-shore
islands bounded by 120° 45’ East Longitude, 30’ South
Latitude, 123° 30’ East Longitude, and 5°
30’ South Latitude, excluding the Pomalaa Area (defined
below), the off-shore island of Muna and the Peleng and
Banggai groups of islands (subject to reduction as
provided in Paragraph (c) of Article 4).
	 
	(i) “Pomalaa Area”
	 	—
	 	the area an the island of Sulawesi bounded on the south
by the Oko-Oko River from its mouth on the Gulf of Bone
up to a point 14.8 kilometers due east of such mouth;
thence by a line of 12 kilometers length with an
astronomical azimuth of north 20° 45’east; bounded on
the north by a line proceeding thence westwards on an
astronomical azimuth of north 265° 10’east for a distance
of 5.38 kilometers and bounded on the west by the
shoreline on the Gulf of Bone; plus the islands of
Maniang and Lemo.

	 
	(j) “Project
Facilities”

	 	—	 	the facilities provided for in Paragraph (e) of Article 4.

3

 

	 	 	 	 	 
	(k) “Commercial Plant”

	 	—
	 	a plant in Indonesia for the metallurgical transformation
on a commercial scale of ore into a nickel product or
products.
	 
	(l) “Rupiahs”

	 	—
	 	Indonesian rupiahs or such other basic unit of currency
as shall constitute legal tender in Djakarta for public
and private debts.
	 
	(m) “Ministry of Mines”

	 	—
	 	the “Departemen Pertambangan” or any Government agency
which is a successor in function thereto.

ARTICLE 3
 

ADVANCE
PAYMENTS

     Within 30 days following the Date of Contract Approval the Company will pay to the Government
a sum in Canadian dollars equivalent to U.S. $500,000 and within 30 days following the commencement
of initial production the Company will pay to the Government an additional sum in Canadian dollars
equivalent to U.S. $500,000. Such payments shall be made to the Ministry of Finance in Djakarta
and credited against the landrents, royalties and corporation taxes first due to the Government
from the Company, provided that the credit to be allowed in any one year shall not exceed 75% of
such amounts due the Government during such year.

ARTICLE 4
 

THE
PROJECT

     (a) Program. The Company contemplates a program to commence as soon as possible following the
Date of Contract Approval to consist of an investigation of the Contract Area, followed by
construction of facilities for the Project and by operation of the Project.

     (b) Investigation. The investigation shall include a general survey and exploration of the
Contract Area and evaluation, all as set forth in Annex B attached to
and constituting an integral
part of this Agreement. The Company shall be allowed a period of five years from the Date of
Contract Approval for investigation; in accordance with Government regulations, there shall be
allowed 12 months for general surveys, 36 months for exploration and 12 months for evaluation.
When the Company shall have incurred expenditures for equipping, operating and implementing the
field work in connection with the investigation program in an amount equivalent to U.S. $1,500,000,
exclusive of landrent and advance payments to the Government made in accordance with Article 3,
said five-year period shall be automatically extended an additional three years, to expire on the
eighth anniversary of the Date of Contract Approval unless further extended by reason of force
majeure as provided in Article 18.

     (c) Relinquishment. The Company may by written notice to the Government relinquish all or any
parts of the Contract Area at any time and from time to time during the term of this Agreement.
The Company shall, through relinquishments, reduce the Contract Area (i) prior to the first
anniversary of the Date of Contract Approval to not more than 75% of the initial Contract Area,
(ii) prior to the second anniversary of the Date of Contract Approval to not more than 50% of the
initial Contract Area, and (iii) prior to the fifth anniversary of the Date of

4

 

Contract Approval to not more than 25% of the initial Contract Area. To the extent that the
program of investigation is delayed by reason of force majeure as provided in Article 18, the
foregoing periods of time shall be extended accordingly. For all purposes of this Agreement, the
initial Contract Area shall be deemed to contain 6,600,000 hectares.

     (d) Development and Construction. Prior to the end of the period allowed for investigation
(as extended in accordance with paragraph (b) above and by reason of force majeure as provided in
Article 18) the Company shall give notice to the Government whether or not the Company desires to
proceed with development of nickel deposits within the Contract Area. In the event the Company
decides to proceed with such development, it shall have the time remaining within the period
allowed for investigation as provided in paragraph (b), plus 36 months following the conclusion of
said period, for planning, arranging of financing and construction of the facilities which it deems
necessary for such development (referred to in this Agreement as the “Project Facilities”). If the
Company should give notice to the Government that it does not wish to proceed with development,
this Agreement shall thereupon terminate in the same manner and with the same results as if the
Company had surrendered its rights pursuant to paragraph (b) of Article 17 and the Company shall
turn over to the Indonesian Geological Survey (i) maps indicating all places in the Contract Area
in which the Company shall have drilled holes or sunk pits, (ii) copies of logs of such drill holes
and pits and of assay results with respect to any analyzed samples recovered from them and (iii)
copies of any geological or geophysical maps of the Contract Area which shall have been prepared by
the Company.

     (e) Project Facilities. The ultimate objective of the Project will be the operation on a
continuing economic basis of a Commercial Plant in Indonesia for the metallurgical transformation
on a commercial scale of ore into a nickel product or products for sale. The exact nature of the
plant and of the product or products it will produce will depend on the results of the program of
investigation, and, in particular, on the types and grades of ore delineated, their quantity,
physical and chemical composition and location and the economics of their processing including the
relative costs of alternative energy sources and other local requirements. It is presently
anticipated that the Project Facilities will have the capacity to add between 11,500,000 and
23,000,000 kilograms per year to the world supply of nickel. Operations on this scale would,
depending upon the average grade of ore available, involve mining between 1,400,000 and 2,800,000
metric tons of ore annually. It is anticipated that an operation of this nature would involve
processing ores approaching an average (on a dry basis) of 1.5% nickel which could permit mining of
ore down to a cutoff grade of 0.85% nickel. The Project Facilities shall include the mines,
Commercial Plant, port facilities, aircraft landing facilities and transportation, communication,
water supply and other necessarily related facilities as set forth below, for which the Company is
hereby granted all necessary licenses and permits to construct and operate in accordance with such
reasonable safety regulations relating to design, construction and operation as may be in force and
of general applicability in Indonesia:

		 	     (i) development of the mines and other operating facilities; this development will
require opening of roads, bridges and storage areas, and may entail construction of aerial
tramways, conveyor belts, pipelines and other transportation facilities;

5

 

		 	     (ii) the port facilities; these facilities will require docks and storage areas and,
possibly, in addition piers, jetties, harbors, breakwaters; terminal facilities, loading and
unloading equipment and warehouses;
	 
		 	     (iii) additional roads; these will include roads to provide access to housing for
Company personnel and to port and aircraft landing facilities;
	 
		 	     (iv) a communications system; communications between points in the Contract Area may
include radio, telephone and telegraph systems;
	 
		 	     (v) water supply; provision for water; supply may require pumping stations,
purification systems and distribution lines;
	 
		 	     (vi) in addition, the Project may require other buildings, workshops, warehouses,
storage areas, sewage treatment Systems, Systems for tailings, plant waste and sewage
disposal, foundries, machine shops, repair shops and all such additional or other
facilities, plant and equipment as the Company shall consider necessary for its operations
or to provide services or to carry on activities ancillary or incidental to such operations.

     The cost of the Project Facilities and the facilities referred to in Article 5, estimated at
not less than the equivalent of U.S. $75,000,000 including all planning, engineering and design
costs, together with the costs of additions to and improvements, modifications and replacements of
such facilities which are paid for and owned by the Company, shall be subject to depreciation or
amortization by the Company. All Project Facilities shall be the property of the Company and may
be mortgaged, pledged or otherwise encumbered by it.

     (f) Stages. To bring the deposits most quickly into production, development may proceed in
stages and production may be initiated during the periods allowed for investigation and
construction. These production stages may in the Company’s discretion include exportation of ore
which has been subjected to beneficiation in Indonesia by drying, sorting, screening, crushing,
pelletizing or other means and intermediate production in Indonesia of nickel-containing materials
before achieving production from the Commercial Plant of the nickel product or products finally
decided upon. Earlier stages of production may continue concurrently with later stages of the
operations. It is recognized that the stage of production which might be most quickly achieved is
that of exporting ore as mined and the Company may in its discretion export ore in this form until,
but not except with the Government’s consent after, the end of the time period provided in
Paragraph (d) of Article 4 for the planning, arranging of financing and construction of the Project
Facilities.

     (g) Reports. The Company will keep the Government advised through the Ministry of Mines
concerning the Project through submission of quarterly progress reports of its activities in
connection with the Project. Within one year from the time of filing the notice provided for in
Paragraph (d) of this Article 4, the Company will also file with the Ministry of Mines a summary of
its geological and metallurgical investigations together with a sample representative of each
principal type of nickel bearing mineralization encountered in its investigations. It is
understood

6

 

that the Company will not be required to disclose any trade secrets or unpublished proprietary
process information.

     (h) Operations. The Company shall have full and effective control and management of all
matters relating to operation of the Project including the production and marketing of its products
in accordance with sound, long term policies. The Company may make expansions, modifications,
improvements and replacements of the Project Facilities, and may add new facilities, as the Company
shall consider necessary for the operation of the Project or to provide services or to carry on
activities ancillary or incidental to the Project. All such expansions, modifications,
improvements, replacements and additions shall be considered part of the Project Facilities.

     (i) Services and Supplies. The Government will cooperate with the Company to the end that the
Company may freely select the vessels and other transportation facilities, including stevedoring
services, to be used in connection with imports and exports of articles under this Agreement. In
addition, the Company shall have the right at all times to purchase from vendors of its choice all
equipment, materials and supplies necessary for the Project. In any case where the Republic of
Indonesia or any of its governmental instrumentalities or subdivisions is the sole economic source
of supply for any article or commodity necessary for the Project, adequate supplies of such article
or commodity shall be made available for sale to the Company at prices not greater than the fair
market value thereof.

     (j) Pomalaa Ore. In addition to processing ores mined from the Contract Area, the Company
will be prepared to include as supplemental to the regular feed to the Commercial Plant ore of
similar grade and type from the Pomalaa Area in amounts and on terms to be agreed between the
Company and the Government.

ARTICLE 5
 

ADDITIONAL
INFRASTRUCTURE

     (a) Cooperation. The Company and the Government will cooperate, together with others, in
planning, and obtaining financing for such facilities as may be useful to both the Project and to
existing and future industries and activities in the region. For example, up-to-date living
accommodations for the Company’s personnel will require provision for adequate housing, food
supplies, medical facilities, water, sewage facilities, pest and disease control and educational,
religious and recreation facilities. Similarly, the Project’s power needs will require
construction of a power plant or plants, by the Company or by others, which may be hydroelectric,
thermal or nuclear in design and may further entail pipelines, power lines, canals, dams, raceways
and pumping stations. To the extent part or all of such requisite living accommodations and power
facilities are not financed in whole or in part by others, it will be the Company’s responsibility
to ensure that such needs of the Project and its employees will be adequately met.

     (b) Hydroelectric Power. As part of its evaluation, the Company will undertake to secure and
finance, as part of the Project’s costs, a feasibility study of the hydroelectric power potential
of the Larona River in relation to the needs of the Project. Should such a facility prove

7

 

economically feasible, the Company will be prepared as a possible aid in its financing, to
enter into long term contracts on terms to be agreed with the Government, or other entity
designated by the Government, to take its electric power requirements from a hydroelectric power
facility on the Larona River.

     (c) Regional Benefits. To maximize the regional economic and social benefits which the
Project can generate, the Company will also:

		 	     (i) Endeavor to coordinate all of its studies of the Project’s infrastructure
requirements with local and regional infrastructure studies undertaken by the Government and
interested local, foreign and international public and private entities; and
	 
		 	     (ii) Endeavor to assist and advise the Government in its planning of the infrastructure
and regional development which the Company may deem useful to the Project and to existing
and future industries and activities in the region of the Project.

ARTICLE 6

 

MARKETING

     (a) Domestic and Export Sales. The Company will produce and sell its products in amounts, at
prices and upon terms compatible with world market conditions. The Company will endeavor at all
times to fulfill the requirements of Indonesian consumers for its products. Prices determined in
accordance with long or short term agreements entered into in good faith by the Company, and
notified to the Government as provided below, shall govern for all purposes of this Agreement,
subject to the provisions of this Paragraph (a). This Agreement shall constitute a license for the
Company freely to export its products and neither the Company nor the purchasers shall be required
to obtain any further license or other authorization in respect thereof. In advance of every
export the Company will file with an appropriate governmental agency, to be designated in writing
by the Government, the date of shipment, the weight, class or kind of product, unit and total
prices, terms of sale, discounts and commission, if any, destination, consignee and name of vessel.
This information will be entered on report forms to be prescribed by the Government but in no
event shall the filing of such reports be prerequisite to the right to export nor shall any
disagreement as to the accuracy of the information in any way delay exports by the Company. The
Company and the purchasers may freely determine whether and with whom and to what extent insurance
shall be obtained with respect to such products and the vessels (and their crews) transporting such
products. The Company may sell its products to affiliates at prices based on or equivalent to
arm’s-length sales of products most nearly comparable in quantity, grade and utility in any market
selected by the Company, with due allowances for normal marketing discounts or commissions and for
differences in processing, freight, analyses, packing and other appropriate items. Such discounts
and commissions must also be properly allocable to the sale and be no greater than the usual
prevailing rate in such market so that discounts and commissions allowed the affiliates will not
reduce the net proceeds of sale to the Company below those which it would have received if the
affiliate had not been introduced. No marketing discounts shall be allowed an affiliate in respect
of a sale for consumption by it and no commission shall be allowed any purchaser in respect of a
sale for consumption by such purchaser.

8

 

     (b) Committee. If the Government believes that any figure used in computing the price of the
Company’s product is not in accordance with the provisions of Paragraph (a) of this Article, the
Government may within 12 months after the calendar quarter in which such product was exported, so
advise the Company in writing. The Company may submit evidence of the correctness of the figure
within 45 days after receipt of such advice. Within 45 days after receipt of such evidence, the
Government may give notice to the Company in writing that it is still not satisfied with the
correctness of the figure, and within ten days after receipt of such notice by the Company a
Committee, consisting of one representative of and appointed by the Government and one
representative of and appointed by the Company, shall be constituted to review the issue. The
Committee shall meet as soon as convenient at a mutually agreeable place in Indonesia and if the
members of the Committee do not reach agreement within 20 days after their appointment or such
longer period as the Government and the Company may mutually agree, the representatives shall
appoint a third member of the Committee, who shall be a person of international standing in
jurisprudence and if possible shall be familiar with the international nickel industry. The
Committee, after reviewing all the evidence, shall determine whether the figure used by the
Company, or another figure, is in accordance with Paragraph (a) of this Article. The decision of
two members of the Committee shall be binding upon the parties. Failure of the two representatives
to appoint a third member of the Committee shall require the issue to be submitted to arbitration
pursuant to Article 19. Within 90 days after the issue is finally decided pursuant to this
Paragraph (b), appropriate retroactive adjustments shall be made in conformity with the Committee’s
decision. The Company and the Government shall each pay the expenses of its own member on the
Committee and one-half of all other expenses of the Committee’s proceedings.

ARTICLE 7
 

PROMOTION OF NATIONAL INTEREST

     In the conduct of its activities under this Agreement the Company and its sub-contractors
shall endeavor in good faith to utilize Indonesian services, raw materials produced from Indonesian
sources and products manufactured in Indonesia to the extent such services, materials and products
are available on a competitive time, cost, quantity and quality basis.

ARTICLE 8
 

EMPLOYMENT
AND TRAINING OF INDONESIAN NATIONALS

     (a) Management. The Company will seek to provide direct Indonesian participation in the
Project through the inclusion of Indonesian nationals in the management and among the members of
its board of directors. To this end at least one seat on the board of directors will be
continuously reserved for an Indonesian national prior to the operation of Article 10(c). The
Company will also train Indonesian nationals to occupy other responsible positions in the Company.

     (b) Training. The Company shall prepare a comprehensive program for training personnel, shall
review that program with the Government and shall carry out such program for training for the
various classifications of full time employment for its operations in Indonesia

9

 

within the shortest practicable period of time after having given notice to the Government in
accordance with Article 4 of its decision to proceed with development of the deposits. Training
shall be on the job, in educational or professional institutions in Indonesia or abroad, or in
operations in foreign countries.

     (c) Educational Grants. In the event the Company shall give notice to the Government of its
decision to proceed with development of the deposits, the Company will establish a program of
grants to educational institutions in Indonesia involving, when fully operative, a minimum
expenditure equivalent to U.S.$50,000 annually. The costs of training and educational programs
shall be an allowable expense of the Project.

     (d) Indonesian Manpower. The Company shall employ Indonesian personnel, if available with
qualifications and upon terms which are acceptable to the Company, in all classifications of full
time employment, for its operations in Indonesia so that 75% of all positions in each employment
classification are held by Indonesian nationals within five years of the completion of the
Commercial Plant. The classifications of employment for the purposes of this Article shall include
the following: managerial, technical, professional, administrative, clerical, skilled labor and
unskilled labor. The Company’s obligation to achieve said percentage is dependent upon the
availability of Indonesian nationals having qualifications acceptable to the Company, and the
Company’s judgment as to availability and qualifications shall be conclusive unless exercised
unreasonably. It is further understood that the Company shall not be restricted in its employment,
selection, assignment or discharge of personnel; provided, however, that subject to the foregoing
requirements the employment and the terms and conditions of such employment and the discharge or
disciplining of Indonesian personnel shall be carried out in compliance with laws and regulations
of Indonesia which at the time are of general application.

     (e) Other Personnel. Subject to the provisions of Paragraph (a) of this Article, the Company
and its subcontractors may bring into Indonesia such non-Indonesian personnel as in the Company’s
judgment are required to carry out the operations efficiently and successfully, and at the
Company’s request (which shall be accompanied by information concerning the education, experience,
and other qualifications of the personnel concerned), the Government shall cause all necessary
permits (including entry and exit permits, work permits, visas and such other permits as may be
required) to be issued without delay and without hampering the continuous and efficient performance
of the Company under this Agreement. In this connection the Company shall have the right
periodically to submit manpower requirement plans and the Government will thereupon issue the
necessary permits for all personnel covered by any such plan subject only to completion of the
required security checks.

     (f) Equal Treatment. There shall at all times be equal treatment, facilities and
opportunities for all employees in the some job classification regardless of nationality.

     (g) Income Tax. Non-Indonesian individuals employed or engaged by the Company or its
subcontractors (including those employed by corporations affiliated with the Company) will not be
subject to income tax by the Republic of Indonesia, or by any territory, province, municipality,
authority, instrumentality, agency or subdivision thereof, on remuneration earned for services
performed in the Republic of Indonesia provided that such individuals do not remain in Indonesia
for more than 90 days within any calendar year and also provided that such

10

 

individuals are subject to taxation in their home country. Furthermore, pursuant to Article
16, paragraph 2, of the Foreign Capital Investment Law (No. 1 of 1967), it is understood and agreed
that until the tenth anniversary of the commencement of production from the Commercial Plant the
aggregate of income taxes which may be levied by the Republic of Indonesia, or by any province,
municipality, authority, agency or instrumentality thereof, on remuneration earned for services
performed in the Republic of Indonesia by each non-Indonesian individual employed or engaged by the
Company shall not exceed the amount of income tax that such individual would have been required to
pay to the country in which he ordinarily resides or of which he is a citizen, had such
remuneration been earned by him in that country. It is understood that any such individual will at
the request of the Ministry of Finance furnish appropriate supporting documentation with respect to
such amount of income tax that would have been so payable to his country of ordinary residence.

ARTICLE 9

 

FINANCING

     The Company shall have sole responsibility for financing the Project and determining the terms
on which said financing shall be obtained, including the extent to which the financing shall be
accomplished through issuance of shares of the Company or through borrowing by the Company. It is
contemplated that the funds required by the Company to conduct the investigation program will be
obtained by it through the issuance of capital stock to its parent company or its affiliates or by
advances or loans from said company or its affiliates. To finance the development stages it is
recognized that it may be necessary or desirable, in addition to funds which may be obtained from
the parent company or its affiliates, to obtain financing or financing guaranties, or both, from
international and foreign national financing institutions, private financial institutions or other
enterprises. The Government undertakes to cooperate with the Company to facilitate the financing
of the Project particularly insofar as the terms of the financing arrangements require consent,
approval or other participation of the sovereign, or the central bank, of the host country. In the
event that guaranties should be sought from the United States Agency for International Development
by any investor in the Project, this Agreement shall constitute the Government’s approval required
for such guaranties under the provisions of the bilateral agreement dated January 7, 1967 between
the Government of Indonesia and the Government of the United States of America.

ARTICLE 10
 

INDONESIAN
PARTICIPATION IN OWNERSHIP

     (a) Offer of Shares. Indonesian participation in the ownership of the Project will be
provided by offering shares in the capital stock of the Company for sale to Indonesians in rupiahs
in each year following the end of the first full calendar year beginning after commencement of
production of the Commercial Plant, subject to the last sentence of Paragraph (c) of this Article.
The shares to be so offered will, at the election of the holders of a majority of the common shares
held by non-Indonesian shareholders of the Company, be made available from shares held by such
shareholders or by the issuance by the Company of new shares of capital stock. The initial
offering of shares in the Company shall be of that number of shares which is equal to 2% of the

11

 

total number of common shares outstanding at the end of the year preceding the year in which
the initial offer is made. In each subsequent year there shall be offered that number of shares
which shall be equal to 2% of the total number of common shares outstanding at the end of the
preceding year until the earliest date on which 20% of the total number of common shares of the
Company outstanding shall have been sold pursuant to such offers. Thereafter 20% of each new issue
of capital stock will be offered to Indonesians. The offer and sale of such shares may be made
upon terms and conditions reasonably intended to assure that such shares are not thereafter
transferred to non-Indonesian individuals or to companies or other entities controlled by
non-Indonesians.

     (b) Price. The price at which shares shall be offered for sale to Indonesians shall be the
higher of (i) the average cost to original shareholders of the Company of the shares held by them
or (ii) the proportionate part represented by each share in the fair value of the Company as a
going concern as determined by agreement between the Company and the Government or by independent
valuers, all as determined as at the end of the year preceding that in which the particular
offering is being made. Such independent valuers shall be appointed in the same manner as the
third member of the Committee provided for in Paragraph (b) of Article 6, except that they shall be
persons of standing in the private investment business and if possible familiar with the
non-ferrous metal industry. Rupiahs received in respect of sales hereunder shall be convertible
into U.S. dollars for repatriation.

     (c) Voting Rights. When 20% of the common shares of the Company outstanding have been
transferred to Indonesian purchasers as provided in this Article, the holders of these shares as a
group (so long as such holders shall be the Government, Indonesian individuals or companies or
other entities controlled by the Government or by Indonesians) shall have the right to nominate
one-fifth of the members of the board of directors of the Company and affiliates of the Company who
are shareholders will vote in favor of such nominees. So long as each holder of voting common
shares of the Company does not have the right, under the applicable
laws of Indonesia, to cast one
vote for each share held on all matters submitted to a vote of shareholders, the initial offer
under Paragraph (a) of this Article shall be postponed.

ARTICLE 11
 

LANDRENT,
ROYALTIES AND CORPORATION TAXES

     (a) General. The Company shall pay the Government as hereinafter provided:

	 		 	     (i) landrent in respect of the Contract Area,
	 
	 		 	     (ii) royalties in respect of the Company’s production of minerals mined by it in
Indonesia,
	 
	 		 	     (iii) corporation taxes in respect of the annual profits of the Company,
	 
	 		 	     (iv) sales taxes of general application on purchases and sales in Indonesia,
	 
	 		 	     (v) documentary stamp duty of general application in Indonesia, and

12

 

	 		 	     (vi) tax of general application upon transfer of ownership of motorized vehicles and
ships.

     The Company shall not be subject to any other landrents, royalties, corporation or income
taxes, contributions, fees, excise taxes, levies in kind, recordation, dockage or transfer fees, or
any other charge or imposition of any kind, other than customs duties and other charges to the
extent provided in Article 14, now or hereafter levied or imposed by the Republic of Indonesia, or
any territory, province, municipality, authority, instrumentality, agency, officer or official or
subdivision thereof and any levy made against the Company other than for the landrent, royalties
corporation taxes, sales taxes, stamp duty, and transfer tax as provided herein shall be deducted
from the landrent, royalties and corporation taxes, next due from the Company until recovered.
During the term of this Agreement the Company shall not be required to make any payments to the
Government on a basis less favorable to the Company than the payments required by this Article.
Except as provided in Paragraph (c) of Annex C, no stockholder or creditor of the Company, not
being a resident of or having a permanent establishment in the Republic of Indonesia, shall be
subject to any taxes levied or imposed by the Republic of Indonesia or any taxing authority thereof
or therein, by reason of being such stockholder or creditor; and the Company shall not be required
to make any withholding for taxes in respect thereof.

     (b) Landrent. The Company shall pay an annual amount as landrent to be measured by the number
of hectares included in the Contract Area such payment to be made within 30 days after the end of
each calendar month during the term of this Agreement, in accordance with the laws and regulations
in force on the Date of Contract Approval, under which landrents are payable as follows:

		 	     (i) Prior to the time that the Company shall be obligated to reduce the Contract Area
to not more than 75°% of the initial Contract Area, as provided in Paragraph (c) of Article
4, the landrent shall be $U.S. 0.005 per hectare per annum;
	 
		 	     (ii) Thereafter and until commencement of initial production, the landrent shall be
$U.S. 0.10 per hectare per annum; and
	 
		 	     (iii) Thereafter, the landrent shall be $U.S. 1.00 per hectare per annum.

The annual landrent payable for each twelve-month period referred to above shall be computed by
applying to the number of hectares included in the Contract Area, as the case may be, as of the
first day of each calendar month which commences within such period at a rate equal to one-twelfth
of the applicable rate per annum specified above.

     (c) Royalties. The Company shall pay quarterly production royalties in respect of the
Company’s production of nickel ore from the Contract Area. The rates of royalties to be paid shall
be those set forth in the laws and regulations in force on the Date of Contract Approval, under
which royalties are payable as follows:

		 	     (i) For ores with nickel content less than 2.5% the royalty shall be $U.S. 0.015 per
kilogram of nickel contained in the ore;

13

 

		 	     (ii) For ores with nickel content 2.5% and higher, the royalty shall be $U.S. 0.03 per
kilogram of nickel contained in the ore;
	 
		 	     (iii) To the extent cobalt shall constitute at any time an element for which value is
paid to the Company by a buyer, then the cobalt content of the ore shall be deemed to
constitute nickel in calculating the royalty payable at the above rates on the ore mined and
sold, or mined and processed into the product sold, to such buyer.
	 
		 	     (iv) The royalty rates specified in paragraphs (i) and (ii) above are based on a market
price of $U.S. 0.94 per pound for electrolytic nickel f.o.b. refinery at Port Colborne,
Ontario. The royalty rates used in any quarter yearly period shall be increased (or
decreased) from such specified rates in the same proportion that the weighted average market
price per pound in U.S. funds for electrolytic nickel cathodes in carload lots, f.o.b. Port
Colborne, Ontario, prevailing during such quarter yearly period, exclusive of any U.S.
import duties or taxes included therein, shall be different from such market price per pound
of $U.S. 0.94. In absence of evidence to the contrary the said prevailing market price
shall be considered the f.o.b. Port Colborne price published in the Engineering and Mining
Journal; less any U.S. import duty or taxes included therein.
	 
		 	     (v) The Company shall pay the above royalties to the Government on or before the last
days of April, July, October and January, beginning with the first of such dates on which
royalties are due in accordance with this paragraph. In the case of ore beneficiated or
processed in Indonesia, the royalty shall be paid on the monthly average grade (on a dry
basis) and on the quantity fed into the beneficiation or processing facility during the
three calendar months preceding the month in which such payment is made. In case of ore
which is shipped from Indonesia without beneficiation or processing, the royalty shall be
paid upon the monthly average grade (on a dry basis) and on the quantity placed on board an
ocean-going vessel during the three calendar months preceding the month in which such
payment is made. Each such payment shall be accompanied by a statement in reasonable detail
showing the basis on which the payment has been calculated.

     (d) Corporation Tax. Subject to the provisions of this Agreement, the Company shall pay
corporation taxes in accordance with the generally applicable principles of taxation pertaining in
Indonesia on the Date of Contract Approval, under which the rates of tax, before credits, to be
applied to the Net Taxable Income derived by the Company from its operations under this Agreement
shall be 45% of Net Taxable Income, provided that during the first ten Years after the start of
initial production such rate shall be 37 1/2% of Net Taxable income. For the purpose of
determining the taxes payable by the Company to the Government, the following special rules shall
apply:

		 	     (i) In addition to Depreciation to be allowed as provided in this Agreement as an
additional investment incentive there shall be allowed a tax credit equal to 8% of the
investment by the Company in any asset included in the Project in the Year in which the
asset is placed in service, provided that (A) such credit shall not exceed in any Year 50%
of income taxes payable before provision for such credit and (B) If the amount of the

14

 

	 	 	credit for any taxable Year exceeds such 50% limitation, then the excess shall be
carried forward to the amount allowable as a credit in succeeding Years until exhausted;
	 
		 	     (ii) In other respects, the corporation taxes payable by the Company shall be
determined and paid in accordance with the rules set out in Annex C attached to and
constituting an integral part of this Agreement.

     (e) Adjustments. The net rates of corporation tax, the landrent and the royalties applicable
to the Company shall each be no greater than the lowest such rate applicable at any time in the
future in the nickel mining industry in Indonesia; and the Depreciation and Amortization rates and
tax credits applicable to the Company shall be no less than the highest such rates or credit
applicable at any time in the future in the nickel mining industry in Indonesia.

ARTICLE 12
 

RECORDS
AND AUDIT

     (a) Records. The Company shall maintain in Indonesia books of account in accordance with
Generally Accepted Accounting Principles stated in United States dollars. All landrents,
royalties, corporation taxes and other payments to the Government shall be calculated in United
States dollars and paid in United States dollars or in such other currencies as may be mutually
acceptable to the Company and the Ministry of Finance or any Government agency which is a successor
in function thereto. The Company shall furnish to the Government annually financial statements
consisting of a balance sheet and statement of income prepared in accordance with Generally
Accepted Accounting Principles together with production statistics in reasonable detail.

     (b) Audits. The Government may, at its own expense, review the performance of the Company
under this Agreement. The Company shall render necessary assistance to enable the Government’s
representatives to conduct technical and financial inspections with respect to the operations under
this Agreement at any time during normal working hours, and said representatives shall conduct such
inspections at their own risk and shall avoid interference with normal operations of the Company.
As part of any such review, audits of financial statements may be made by the Government within
five years after submission by the Company of its financial statements. Any such audit shall be
conducted expeditiously and in any event shall be completed within one year after commencement.
The failure of the Government to make a claim for additional payments on account of landrent
royalties, corporation taxes or other payments to the Government within 90 days following
completion of any such audit shall preclude any such claim thereafter.

     (c) Disclosure. All documents and other technical data and information, as well as all data
and information concerning financial and commercial matters, which may be furnished to the
Government, shall be treated as strictly confidential by the Government and its officials,
employees and agents, and shall not be disclosed to other parties (or to officials or employees who
are not properly concerned therewith), without the express written consent of the Company.

15

 

ARTICLE 13
 

FOREIGN
EXCHANGE

     (a) General. It is contemplated that the foreign exchange requirements to establish and
operate the Project will require little or no need to transfer rupiahs into foreign currency and
that virtually all of the domestic costs of the Project will be met through conversion into rupiahs
of hard foreign currency obtained by the Company from sources outside of Indonesia. Foreign
exchange generated or obtained by the Company from sales or otherwise which is in excess of amounts
remitted on a current basis for rupiah expenditures in Indonesia, may be received and held abroad
by the Company in United States or Canadian dollars or in other hard currency accounts on a
reporting basis. Foreign exchange so generated may be used by the Company at anytime to meet
directly foreign currency requirements of the Company, including repayment of capital investments,
both debt and equity, payment of interest and dividend, payment of contractors and management costs
and fees, including reasonable overhead; payment of salaries, wages and other expenses of foreign
and domestic personnel of the Company, affiliated companies and contractors; and any other foreign
currency expenditures of the Company, or may be placed on deposit to the account of the Company.

     (b) Rupiahs. The Company shall remit to Indonesia Canadian dollars or other hard foreign
currency for conversion into rupiahs to cover rupiah expenditures arising from or related to
activities in Indonesia under this Agreement. In particular, by the end of each month the Company
shall remit such foreign currency to Indonesia (for deposit in a foreign currency account
maintained by the Company) in an amount not less than that calculated by the Company for payment of
its estimated corporation tax then due for the previous month as well as for its other estimated
expenses in Indonesia for the ensuing month. The Government through its designated foreign
exchange authority shall promptly make rupiahs available to the Company for its free use in its
activities when requested. Any rupiahs generated by the Company in its activities in Indonesia
under this Agreement shall also be available for its free use in Indonesia. Expenditures made with
rupiahs received in exchange for another currency may be treated by the Company as costs incurred
in the other currency so exchanged at the applicable rate of exchange on the date the expenditure
is accrued. Notwithstanding the provisions of this Paragraph (b), the Company shall be free to use
the Debt Investment Conversion Scheme to meet its rupiah requirements.

     (c) Reports. To keep the Government advised of the Company’s projected foreign currency
revenues and expenditures, the Company will submit to the foreign exchange authority designated by
the Government, before each November 15 during the term of this Agreement, an estimate of foreign
currency and rupiah revenues and expenditures for the coming calendar year. Before each April 30
following the year to which any such estimate applies, the Company shall submit a summary of its
foreign exchange transactions with respect to such year.

     (d) Exchange Rate. All payments and conversions by the Company of foreign currencies into
rupiahs pursuant to any provisions of this Agreement shall be at a realistic exchange rate
representing a fair approximation of equivalent purchasing power of the respective currencies
involved in such payments and conversions; provided, however, that if there is only one legally
recognized rate prevailing for exchange transactions at the time the payment or

16

 

conversion is made, the applicable rate of exchange shall be not less favorable to the Company
than such legally recognized rate; and if there should be more than one legally recognized rate of
exchange prevailing at such time, the applicable exchange rate shall be not less favorable than
that most favorable to the Company unless such most favorable exchange rate (i) is applicable only
to special, limited exchange transactions different from those in which the Company is engaged and
(ii) is not of general applicability to substantial exchange transactions or to investors in
Indonesia in positions similar to or competitive with the Company. The Company and the foreign
exchange authority designated by the Government shall consult at the request of either party in
order to consider the efficient implementation of this paragraph.

     (e) Payments to Personnel. The Company may pay salaries, wages and other expenses of any
personnel it may employ or engage in rupiahs or foreign currencies or in both, as the Company may
determine, and may pay the same by crediting the accounts of such personnel maintained in any
country. All non-Indonesian personnel employed or engaged by the Company in any capacity shall
have the right to freely retain or dispose of any of their funds or assets outside Indonesia and
shall be entitled to import into Indonesia such foreign currencies as may be required for their
needs.

     (f) Credit terms. The Company may export on such credit terms as it deems appropriate for
marketing its products, and neither the Company nor any of the purchasers of such products shall be
required to obtain letters of credit or other credit documents at any bank or other institution in
Indonesia or elsewhere in connection with marketing such products, or otherwise; provided however
that if such credit terms allow more than 90 days following the month of delivery to customer’s
place of business for payment, then the Company and the Government shall consult as to whether such
terms should in reality give rise to interest in a reasonable amount being deemed accrued to the
Company in respect of amounts unpaid for more than such 90 days unless the granting of such longer
term is based on meeting the competition for sales of similar products in the same market, in which
case no such interest will be deemed to accrue.

     (g) Termination. Upon termination of this Agreement, the Company shall have the right to
remit abroad and to pay to its shareholders Canadian dollars or other foreign currency in exchange
for all rupiahs which are in excess of the requirements hereunder after satisfying all of its
obligations under this Agreement. It is expressly understood and agreed that the foreign exchange
authority shall not have any binding commitment to make available such foreign currency but said
authority will give sympathetic consideration to the request by the Company for such currencies
taking into account the amount of foreign currency remitted by the Company into Indonesia.

ARTICLE 14
 

IMPORTS
AND EXPORTS

     (a) Imports. This Agreement shall constitute a license for the Company and its subcontractors
to import free from all import and other customs duties, charges, taxes, payments and levies, by
any route and any means of transport, into and use in Indonesia all equipment and materials, such
as machinery, supplies and equipment, needed for the operation of the Project.

17

 

Without limitation, the foregoing shall also include all machines, machine-units, tools or
appliances, and their parts, vehicles (except sedan cars), aircraft, vessels and other means of
transport, raw materials (for export production), ancillary supplies, office equipment, building
material for plants, office buildings, employee housing, schools and hospitals, and other
machinery, supplies and equipment needed for the operation of the Project. This license shall
extend on the same terms to personal effects (including household and living equipment and goods)
belonging to foreign personnel (and their dependents) employed in the Project and especially
provided from abroad, to the extent that such personal effects have been in use prior to
importation; it shall also extend to food stuffs, wearing apparel and other necessities which may
be imported (either individually or on a group basis) by the Company’s foreign personnel, for their
personal needs up to $U.S. 50.00 for each person and $U.S. 100.00 per family at f.o.b. prices per
month. Items, other than those covered by any of the foregoing exemptions, which the Company may
desire to import, including tobacco articles, sugar and alcoholic drinks, may be freely imported in
conformity with laws and regulations which shall at the time of import be in effect and of general
application throughout Indonesia.

     (b) Re-exports. Any items imported by the Company or its subcontractors for use in connection
with the Project and no longer needed for such use may be sold outside Indonesia and re-exported
free of all customs duties, charges, taxes, payments and levies. No imported items shall be sold
domestically except after compliance with customs and import laws and regulations which shall at
the time of such sale be in effect and of general application throughout Indonesia.

     (c) Exports. The Company shall have the right to export and sell free of customs duties all
products obtained from the operations under this Agreement without any restriction or limitation
and its customers may take such products out of the country.

     (d) Cooperation. All imports and exports of articles under this Agreement shall be handled
simply and expeditiously and the Government will, at the Company’s request, cooperate with the
Company in making appropriate arrangements between the Company and the customs authorities to this
end.

ARTICLE 15
 

SUSPENSION
OF OPERATIONS

     At any time and from time to time after the commencement of initial production, the Company
may notify the Government that the Company is suspending, in whole or in major part, its operations
because in the Company’s judgment economic or other conditions make it necessary to do so. The
Company may then suspend operations and may continue such total or partial suspension of operations
until, in the Company’s judgment, such conditions no longer exist, provided, however, if the
Company continues a total suspension of operations for longer than a period of twelve months, which
is not made necessary by world market conditions or force majeure, the Government may treat such
suspension as a default to be governed by the provisions of Article 16, below. In any event, the
Company will consult with the Government and keep it fully informed regarding any suspension of
operations under this Article.

18

 

ARTICLE 16
 

DEFAULT
BY COMPANY

     (a) General. In the event the Company should be in default in the performance of any
provision binding upon the Company, the Government, as its exclusive remedy under this Agreement,
may give the Company written notice thereof (which notice must state that it is pursuant to this
Article 16 and be delivered by hand to a legal representative of the Company) and the Company shall
then have a period of 180 days after receipt of such notice to cure such default, or such longer
period of time as may be reasonable under the circumstances considering the nature of the default,
the action required to cure such default and the action being taken by the Company to cure such
default. In the event the Company cures such default within such period, this Agreement shall
remain in full force and effect without prejudice to any future right of the Government in respect
of any future default. In the event the Company does not cure such default within such period, the
Government shall have the right to replace the Company as a party to this Agreement by acquiring
all the assets of the Company upon payment to the Company in United States dollars in New York an
amount equal to the book value of such assets (computed in accordance with Generally Accepted
Accounting Principles) less the amount of all money payments determined to be due and payable by
the Company to the Government pursuant to Article 3 or Article 11, or to obtain another party who
will make such payment to the Company to replace the Company under this Agreement.

     (b) Payments. Notwithstanding the provisions of Paragraph (a) of this Article, in the event
the Company shall be in default in the making of any payment of money to the Government which the
Company is required to make pursuant to Article 3 or Article 11, the period within which the
Company must cure such default shall be 30 days after the receipt of notice thereof.

     (c) Disputes. For all purposes of this Agreement, the Company shall not be deemed to be in
default in the performance of any provision of this Agreement concerning which there is any dispute
between the parties until such time as all disputes concerning such provision, including any
contention that the Company is in default in the performance thereof, have been settled as provided
in Article 19.

ARTICLE 17
 

TERMINATION
BY THE COMPANY

     (a) Notice. At any time after the Company has actually commenced exploration, or, after
having used all reasonable diligence in its endeavors to commence exploration, has nevertheless
been unable to do so, the Company may give to the Government notice of the Company’s election to
surrender its rights and to be relieved of its obligations under this Agreement. Upon giving such
notice, this Agreement shall automatically terminate at the end of six months without any further
action of the parties or upon confirmation of termination by the Minister, whichever is sooner, and
thereafter the Company and the Government shall have no further rights, obligations or liabilities
hereunder except as hereinafter specifically provided in this Article.

19

 

     (b) Investigation Period. If termination occurs during the period specified in Paragraph (b)
of Article 4, the Company shall have a period of six months within which to sell, remove or
otherwise dispose of drilling equipment, supplies and other property of the Company in Indonesia
and to furnish the Government the information to be turned over to it under the provisions of
Paragraph (d) of Article 4. Any property not so removed or otherwise disposed of shall become the
property of the Government without compensation to the Company.

     (c) Pre-Production Period. If termination occurs after the period specified in Paragraph (b)
of Article 4, but before commencement of production from the Commercial Plant, all facilities,
buildings, equipment, supplies, machinery, vehicles and other property of the Company, both movable
and immovable, located in the Project Area shall be offered for sale to the Government, which shall
have on option, valid for thirty days from the date of such offer, to buy all such property at a
price equal to the total original cost to the Company payable in United States dollars in New York
within ninety days after acceptance by the Government of such offer. If the Government shall not
accept such offer within said thirty-day period, the Company may sell, remove or otherwise dispose
of any or all of such property during a period of twelve months after the expiration of such offer
provided that all such sales by the Company in Indonesia shall incur the original duty payable to
the extent not paid upon entry. All property not so sold, removed or otherwise disposed of shall
become the property of the Government without compensation to the Company.

     (d) Operating Period. If termination occurs after the period referred to in Paragraph (c) of
this Article 17, or by reason of the expiration of the term of this Agreement, all facilities,
buildings, equipment and other property of the Company, both movable and immovable, which are then
employed by the Company in Indonesia shall in the first instance be offered for sale to the
Government at cost or market value, whichever is the lower. The Government shall then have an
option, valid for thirty days from the date of such offer, to buy the same at the agreed value
payable in United States dollars in New York within ninety days. All such property not acquired by
the Government may be sold or otherwise disposed of by the Company provided that all such sales by
the Company in Indonesia shall incur the original duty payable to the extent not paid upon entry.
Any property not so sold or otherwise disposed of within twelve months shall become the property of
the Government without any compensation to the Company. Any gain or loss from sale or disposition
or relating to the written down book value shall be included in the determination of Other Income
in accordance with Annex C. All values shall be based on Generally Accepted Accounting Principles.

     (e) Continuation. Rights and obligations which have come into effect prior to the termination
of this Agreement and rights and obligations relating to transfer of currencies and properties
which have not yet been completed at the time of such termination, shall continue in effect for the
time necessary or appropriate fully to exercise such rights and discharge such obligations.

20

 

ARTICLE 18
 

FORCE
MAJEURE

     (a) General. Any failure by the Government or any of its instrumentalities or subdivisions,
or by the Company, to carry out any of its obligations under this Agreement shall not be deemed a
breach of contract or default if such failure is caused by force majeure. If any activity is
delayed, curtailed or prevented by force majeure, then, anything in this Agreement to the contrary
notwithstanding, the time for carrying out the activity thereby affected and the term of this
Agreement specified in Article 22 shall each be extended for a period equal to the total of the
periods during which such causes or their effects were operative. For purposes of this Agreement,
force majeure shall include wars, insurrections, civil disturbances, blockades, embargoes, strikes
and other labor conflicts, riots, epidemics, earthquakes, storms, floods, or other adverse weather
conditions, explosions, fires, lightning, orders or directions of any government de jure or de
facto or instrumentality or subdivision thereof, acts of God or the public enemy, breakdown of
facilities or machinery, wherever occurring, and any cause (whether or not the kind hereinabove
described) over which the affected party has no reasonable control and which must be of such a
nature as to delay, curtail or prevent timely action by the party affected. It is understood that
in no event may the Government, or any of its instrumentalities or subdivisions, invoke as force
majeure any act (or failure to act) on its part.

     (b) Notice. The party whose ability to perform its obligations is affected by force majeure
shall notify the other party thereof in writing, stating the cause, and the parties shall endeavor
to do all reasonably within their power to remove such cause; provided, however, that neither party
shall be obligated to resolve or terminate any disagreement with third parties, including labor
disputes, except under conditions acceptable to it or pursuant to the final decision of any
arbitral, judicial or statutory agencies having jurisdiction to finally resolve the disagreement.
As to labor disputes, the Government and the Company will cooperate in a joint endeavor to
alleviate any conflict which may arise.

     (c) Disputes. Any differences regarding interpretation or application of this Article,
including differences concerning the period by which the term of this Agreement and of rights and
obligations thereunder should be extended, shall, if not otherwise amicably resolved, be determined
through arbitration pursuant to Article 19.

ARTICLE 19
 

SETTLEMENT
OF DISPUTES

     (a) Arbitration. Any dispute between the parties hereto arising before or after termination
concerning anything related to this Agreement or the operations hereunder, including contentions
that a party is in default in performance of its obligations, shall, unless settled by mutual
agreement or by conciliation, be referred for settlement by arbitration to The International Centre
for Settlement of Investment Disputes pursuant to the convention thereon which entered into force
on October 14, 1966. For the purposes of such convention, the parties to this Agreement hereby
agree that the Company shall be treated as a national of the United States of America. If the
services of the Centre are unavailable to the parties to this Agreement, then such

21

 

unsettled dispute shall be referred for settlement to a Board of Arbitration of three members,
consisting of two arbitrators and an umpire. Each of the parties hereto shall appoint one
arbitrator and the arbitrators so appointed shall appoint an umpire. If the arbitrators appointed
by the parties shall be unable to agree upon the umpire within thirty days after appointment of the
second arbitrator, the umpire shall, upon request of either party hereto, be designated by the
President of the International Court of Justice (or, if said President shall be a national of
either Indonesia, Canada or the United States or for any reason fails or is unable to act, by the
next most senior Judge of said International Court who is not a national of either Indonesia,
Canada or the United States and is willing and able to act). If for any reason an arbitrator or
umpire shall fail or be unable to act, his successor shall be appointed in the same manner as the
arbitrator or umpire whom he succeeds. The umpire shall not be closely connected with, or have
been in the public service of, or be a national of, either Indonesia, Canada or the United States,
and he shall be a person of recognized standing in international jurisprudence.

     (b) Sole Arbitrator. If within two months after institution of a Board of Arbitration
proceeding hereunder by either party, the other party shall fail to appoint an arbitrator by
written notice to the instituting party, such instituting party shall have the right to apply to
the judge of said International Court having the designating power as provided in Paragraph (a) of
this Article 19, for the appointment of a sole arbitrator having the same qualifications as those
required in the case of an umpire. The sole arbitrator shall constitute the Board of Arbitration
hereunder with respect to such proceeding.

     (c) Procedures. The Board of Arbitration shall determine its own rules of procedure and the
place of arbitration, and, in the case of a Board of Arbitration constituted pursuant to Paragraph
(a) of this Article 19, the decision of the Board shall be made by majority vote of the members.
The decision of the Board of Arbitration shall be final and binding on the parties hereto, and the
parties shall comply in good faith with the decision and award of the Board. The parties hereto
shall extend to the Board of Arbitration all facilities (including access to the Project) for
obtaining any information required for the Proper determination of the dispute. The absence or
default of any party to an arbitration proceeding hereunder shall not be permitted to prevent or
hinder the arbitration proceeding in any or all of its stages. Pending the making of a decision or
award, the operations or activities which have given rise to the arbitration proceeding need not be
discontinued. In case the decision or award recognizes that the complaint was justified, provision
may be made in such decision or award for such reparation as may appropriately be made in favor of
the complainant. Wherever appropriate, decisions and awards in arbitration proceedings hereunder
shall specify the time for compliance therewith. If the Board of Arbitration shall decide that any
party hereto is in default, such party shall have a reasonable period of time, to be specified by
the Board of Arbitration, in which to remedy the default. Each party hereto shall pay the expenses
of its own arbitrator and one-half of the other expenses of the arbitration proceeding. The
provisions of this Article shall continue in force notwithstanding the termination of this
Agreement.

22

 

ARTICLE 20
 

CORPORATE
STATUS

     The Company shall be domiciled in Djakarta and subject to the jurisdiction of courts in
Djakarta which normally have jurisdiction over corporations. The Company shall maintain in
Djakarta an office or agent for receipt of service of process, or notification or other official or
legal communication. The Company shall, if requested, file with the Minister of Justice
information indicating the location in Djakarta of the office or agent maintained for the above
purpose. During the period of this Agreement, the Company shall enjoy the powers listed in Annex D
attached to and constituting an integral part of this Agreement.

ARTICLE 21

 

ASSIGNMENT

     The terms, covenants and conditions of this Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors and assigns, provided that the
rights of the Company under this Agreement may not be transferred or assigned, in whole or in part,
without the prior written consent of the Government, except to a corporation of which more than 50%
of the issued shares having power to vote is owned, directly or indirectly, by The International
Nickel Company of Canada, Limited; provided, however, that any such transfer or assignment shall
not relieve the Company of any of its obligations hereunder except to the extent that the assignee
or transferee shall assume and in fact perform such obligations.

ARTICLE 22

 

TERM

     (a) Subject to the provisions herein contained, this Agreement shall continue in force until
the expiration of thirty years following the commencement of production from the Commercial Plant,
subject to renewal for such term or terms as shall be determined by mutual agreement of the
Government and the Company. It is understood and agreed that at any time the Company shall propose
a substantial new investment in the Project or shall require an extension of the term of this
Agreement in order to facilitate additional financing, long-term sales contracts or otherwise and
in any event at least fifteen years prior to such expiration date, the Government will give
sympathetic consideration to a request by the Company to extend the term of this Agreement to
permit continuation of the Project on the basis of long term planning and sound mining and
operating practices and to assure continuing employment of those devoting their time and efforts to
the success of the Project.

     (b) In addition to the provisions contained in (a), after the Commercial Plant has been
operating for ten years, if at any time or from time to time the Company undertakes to make or
makes additional investment connected with the Project, then the Company may apply to the Minister
for an extension of the term of this Agreement. In such case, the Government will grant an
extension of not less than ten years for each 10% of additional investment, providing that at no
time will the unexpired term of this Agreement exceed 30 years from the date of any such

23

 

extension. In order to qualify for the purposes of extension such an additional investment
must have been approved by the Government, which shall give sympathetic consideration to the
Company’s request for approval, and the amount of the investment must be at least equal to the
greater of (i) 10% of the original costs of the Company in depreciable and amortizable assets plus
development costs incurred to the date of such additional investment or (ii) the equivalent of US
$7,500,000.00.

ARTICLE 23
 

MISCELLANEOUS
PROVISIONS

     (a) By reason of authorization contained in the Foreign Capital Investment Law (No. 1 of 1967)
this Agreement shall be enforceable in accordance with its terms including any cases where the
provisions of this Agreement may be at variance from time to time with foreign exchange, customs,
taxation and other laws and regulations of the Republic of Indonesia.

     (b) Without in any way detracting from the Company’s responsibilities and obligations
hereunder, the Company may engage subcontractors for the execution of such phases of its operations
as the Company deems appropriate, consistent with good technical procedures and with good mining
and commercial practice.

     (c) All shares in the capital stock of the Company may be freely sold, pledged or otherwise
transferred by the owner thereof except that no such transfer may be made of shares owned directly
or indirectly by The International Nickel Company of Canada, Limited (“Inco”) when such transfer
shall have the effect of removing control of the Company from Inco without the written consent of
the Government.

     (d) Each of the parties agrees to execute and deliver all such further instruments, and to do
and perform all such further acts and things, as shall be necessary or convenient to carry out the
provisions of this Agreement.

     (e) Notices and other communications given pursuant to the provisions of this Agreement shall,
unless otherwise specifically provided be given by air mail, telegraph, cable, or messenger, with
postage or transmission charges fully prepaid, to the parties, or addressed to the parties,
respectively at the following addresses:

	 	 	 	 	 
	 

	 	To
	 	the Government in care of

The Ministry of Mines of the Republic of Indonesia

Djalan Menteng Raya 3

Djakarta, Indonesia
	 
	 	 	 	 
	

	 	To
	 	the Company at its principal office in Djakarta with

a copy in care of

The International Nickel Company of Canada, Limited

P.O. Box 44

Toronto-Dominion Centre

Toronto 1, Ontario, Canada

24

 

Either party may change its address for the purposes of this Article by giving written notice
thereof to the other party. Notices will be effective on date of receipt by the addressee. In
addition to sending notices and other communications to the Company of the addresses specified
above, the Government will, if so requested in writing by the Company, send copies of such notices
and other communications to such addresses (not exceeding two in number) in Indonesia or elsewhere
as may be specified by the Company in such request.

     (f) The Minister of Mines may take any action or give any consent on behalf of the Government
and any instrumentality or subdivision thereof which may be necessary or convenient under or in
connection with this Agreement for its better implementation and any action so taken or consent so
given shall be binding upon the Government.

     (g) The article and paragraph headings appearing in this Agreement are not to be construed as
interpretations of the text or provisions hereof, but are inserted only for convenience of
reference.

     (h) The terms of this Agreement constitute the entire agreement between the parties hereto,
and no previous communications, representations or agreements, either oral or written, between the
parties hereto with respect to the subject matter hereof shall vary the terms of this Agreement.

     In witness whereof, the parties hereto have caused this Agreement to be duly executed as of
the date appearing at the beginning of this Agreement.

	 	 	 	 	 
	 	THE REPUBLIC OF INDONESIA
 

	 
	 	By	/s/ Sumantri
 	 
	 	 	Minister of Mines 	 
	 	 	 
	 
	 	P.T. INTERNATIONAL NICKEL
INDONESIA

 	 
	 	By	/s/ Henry S. Wingate
 	 
	 	 	Managing Director 	 
	 	 	 
	 

25

 

ANNEX A
 

MINING
AND OTHER RIGHTS

     (a) Specific Rights. Without limiting the generality of Paragraph (c) of Article 1 of this
Agreement, the Company shall have exclusive rights

		 	     (i) To mine, process, store, transport and sell all nickel and nickel-containing
mineralization in any form and all associated metallic and non-metallic minerals located in,
on and beneath the surface of the Contract Area, except for hydrocarbons and radioactive
minerals which shall remain subject to applicable laws and regulations;
	 
		 	     (ii) To apply on a priority basis for the right to mine, process, store, transport and
sell any and all other mineralization which the Company may encounter in the Contract Area
in the course of its work under this Agreement, on terms to be agreed upon with the
Government, except to the extent that valid and subsisting rights to such other
mineralization, outstanding at the Date of the Invitation to Bid, are at the time held by
others;
	 
		 	     (iii) To enter the Contract Area for the purposes of this Agreement, to make drill
holes, test pits and other excavations, and to take and remove, without royalty or other
charge, samples for assays and for metallurgical, pilot plant and laboratory research
purposes, including the bulk samples referred to in Annex B; and
	 
		 	     (iv) To enter upon and take possession of and to occupy the areas (including portions
of the air space and shore line and off shore areas) covered by the plans provided for
below, with all rights and appurtenances thereunto belonging, and to conduct all operations
of exploration, development, construction, mining, processing, storage and transportation as
may be necessary or convenient to bring the Project into production and to continue
production therefrom.

     (b) Construction. In carrying out its activities under this Agreement, the Company shall have
the right to construct the Project Facilities described in Article 4 and such additional facilities
as it deems necessary.

     (c) Plans. At any time and from time to time after the giving of the notice provided for in
Paragraph (d) of Article 4, the Company may file with the Ministry of Mines a plan or plans, and
may thereafter file additional or amended plans, covering

		 	     (i) the area or areas in which the Company shall have the right to construct facilities
related to production, including the Commercial Plant;
	 
		 	     (ii) all other areas in which the Company shall have the right to construct any other
Project Facilities, and the location of all such rights in and over land (whether or not
covered by coastal or other waters), including easements, rights of way, and rights to lay
or pass on, over or under land any roads, railways, pipes, pipelines, sewers, drains, wires,
lines or similar facilities, as may be necessary for the Project; and

26

 

		 	     (iii) all areas in which the Company shall have the right to construct such additional
facilities as the Company deems necessary or convenient for the Project.

The Government shall thereupon promptly make arrangements, at the Government’s expense, for the
Company to take possession of and occupy all such areas and such land covered by such plans (or
such comparable areas as may be agreed between the Government and the Company) and to exercise the
other rights specified above with respect to each such area. The use and occupancy of any areas
covered by such plans shall not be subject to the payment by the Company of any landrentals or
royalties other than those specified elsewhere in this Agreement, and shall be otherwise free of
charge to the Company except as and to the extent hereinafter provided in this paragraph. The
plans filed pursuant to this paragraph shall, to the extent practicable without the incurring by
the Company of unreasonable expense, give descriptions in sufficient detail to permit precise
identification of the designated areas. The Government shall arrange for any necessary
resettlement of indigenous inhabitants whose resettlement from any part of the Contract Area is
necessary and the Company shall pay reasonable compensation for any dwellings, private owned lands
in cultivation or other permanent improvements in existence on any such part at the Date of
Contract Approval which are taken or damaged by the Company in connection with its activities under
this Agreement.

     (d) Materials and Use of Surface. The Company shall have the right to take and use from the
Contract Area, subject to the payments provided for in Paragraph (e) of this Annex A but otherwise
free from any royalty, tax or other charge, such timber, soil, stone, sand, gravel, lime, gypsum,
sulphur, water and other products and materials as are necessary or convenient for the Project.
The Company shall also have the right to clear away and remove such timber, overburden and other
obstructions as may be necessary or desirable for the mining, construction of facilities and any
other operations of the Project under this Agreement, provided only that the Company shall take
into account rights granted by the Government prior to the Date of the Invitation to Bid, such as
grazing, timber cutting and cultivation rights, and rights of way, by conducting its operations
under this Agreement so as to interfere as little as possible with such rights. The Company may,
at its own expense, also take and use any of such products and materials from other areas on the
island of Sulawesi, subject to the rights of private parties and to the payment of such
compensation as may be agreed between the Company and such private parties.

     (e) Royalties. To the extent the Company makes use of any of the materials from the Contract
Area referred to in Paragraph (d) of this Annex (excluding water) in its own operations under this
Agreement, or sells any of such materials to third parties, then the Company shall pay to the
Government production royalties at the following rates:

	 	 	 
	Sulphur
	 	$U.S. 0.002 per kg.
	gravel, limestone, dolomite, clays
	 	0.05 per metric ton
	asphalt stone, coal, serpentine, quartz, perlite, cooline
	 	0.10     "      "
	gypsum, flourspor
	 	0.20     "      "
	graphite, ceramic feldspar, phosphate
	 	0.25     "      "
	meranti timber
	 	1.50 per cubic meter   

27

 

     The royalty rate for other materials shall be comparable in proportion to their respective
sales value as the most similar material listed above. To the extent that the Company uses any of
such materials for housing or for facilities available to the public, such as roads, bridges,
community buildings, etc., then such use shall not be deemed to constitute a use in its own
operations under this Paragraph and no royalty or other charge shall be due from the Company on
account of such use.

     (f) Removal of Interference. The Government shall ensure that the Company will be free to
exercise the several rights referred to in Paragraph (c) of Article 1 and in Paragraphs (a) through
(e), above, of this Annex without interference from others operating under conflicting rights. To
this end, immediately upon notice from the Company of any such interference, the Government at its
expense will do all within its powers to remove such interference.

28

 

ANNEX B

 

INVESTIGATION

     (a) The investigation of the Contract Area will include (i) a general survey in the field for
the purpose of ascertaining the areas to be explored for nickel-bearing formations; (ii)
exploration in the field for the purpose of locating nickel-bearing formations or verifying the
location and the extent of known nickel-bearing formations; this work will include, among other
things, drilling and pitting, taking of samples and establishing the grades and tonnages of
nickel-bearing materials in such deposits; (iii) metallurgical and extractive research and
development to select effective means for the treatment of nickel-bearing materials found in such
deposits; (iv) field surveys and preliminary studies of locations and designs for operating
facilities; (v) gathering of data with respect to potential power sources and other infrastructure
planning, including fief surveys and discussions with private, public and international experts and
bodies concerned with economic development; and (vi) other studies and investigations which the
Company may require in order to determine its course for developing the deposits.

     (b) To implement the field work program the Company will establish a principal and secondary
bases of operation. It is contemplated that the principal base camp may be located in the vicinity
of Karebe or such other place as the Company may select and will require temporary living quarters,
offices, and laboratories, a medical clinic, mess facilities, maintenance and repair shops, storage
facilities for fuel and supplies, power generating equipment and an aircraft landing facility, as
determined by the Company. For the preparation of samples, beneficiation tests and sample
analysis, the base camp laboratories will be equipped with drying ovens, crushers, pulverizers,
trammels, shaker screens, an atomic absorption unit and ancillary equipment. Other field camps
with facilities to house personnel and to store, maintain and repair equipment may be established
in the vicinities of Soroako and Larona or elsewhere. Transportation between base camps and to the
working areas in the field will require opening or improvement of existing roads and bridges. To
coordinate activities in the field, transportation and communication facilities will be established
including radio communications and a docking facility to be located at Lampea or at such other
place as the Company may select.

     (c) In connection with the field work program, the Company shall have the right to remove and
export for noncommercial testing purposes one or more bulk samples of approximately 500 tons each
of the mineralized material which may be mined from such place or places within the Contract Area
as the Company may select.

     (d) The Company may lease or purchase existing structures, and shall be promptly granted all
permits, licenses and other authorizations necessary to implement the field work program.

29

 

ANNEX C
 

RULES
FOR COMPUTATION OF CORPORATION TAX

     (a) Definitions. Unless the context otherwise indicates, for the purpose of computation of
the corporation tax the following terms shall have the respective meanings specified below:

		 	     (i) “Year” means (A) the calendar year or part thereof after commencement of initial
production during which the Company shall first become liable for corporation taxes as
herein provided, (B) each subsequent full calendar year from January 1, to December 31,
inclusive, during the term of this Agreement, and (C) the calendar year or part thereof in
which this Agreement shall terminate.
	 
		 	     (ii) “Products” means all ores, minerals, concentrates, and other products mined and
produced for sale after deducting any quantities thereof which are lost, discarded,
destroyed or consumed in mining, processing or transportation.
	 
		 	     (iii) “Production Costs” means all costs which are incurred in producing Products up to
and including the cost of placing Products on a transportation facility at completion of
production. Production Costs shall include, but shall not be limited to, the following
items:

	 		 	     (1) salaries and wages, and all costs of employee benefits including reasonable
provision for termination benefits;
	 
	 		 	     (2) materials, equipment, supplies and utilities;
	 
	 		 	     (3) contract services on the basis of their cost to the Company;
	 
	 		 	     (4) premiums for insurance on plant, machinery, equipment, stores, and supplies
and all other investment and/or reasonable reserves for insurance to the extent that
the Company determines that it should be a self-insurer;
	 
	 		 	     (5) damages or losses not compensated for by insurance, self-insurance or
otherwise;
	 
	 		 	     (6) all reasonable payments by the Company paid to others, including affiliated
companies for royalties for patents and technical Information and other fees for
technical assistance;
	 
	 		 	     (7) losses resulting from obsolescence and from the writedown of inventory in
conformity with Generally Accepted Accounting Principles;
	 
	 		 	     (8) equipment and other rentals;
	 
	 		 	     (9) landrent and royalties paid pursuant to this Agreement.

30

 

		 	     (iv) “Cost of Products Sold” in any Year means the Production Costs properly applicable
to Products sold during such Year (determined in accordance with Generally Accepted
Accounting Principles.)
	 
		 	     (v) “Depreciation” in any Year means depreciation charges with respect to 100% of the
cost of plant, buildings, machinery and equipment and of all other depreciable capital costs
incurred by the Company computed in such a way that the aggregate of depreciation charges
per Year does not exceed a rate of 121⁄2% of the aggregate original cost. The Company
shall be free to select for each Year the rate to be applied for such Year. The total
accumulated depreciation shall not exceed 100% of the aggregate original cost.
	 
		 	     (vi) “Amortization” in any Year means amortization charges with respect to all costs
incurred prior to initial production including exploration, development, employee training
costs, education grants, financing costs and expenses in connection with the obtaining of
funds for the Project prior to commencement of initial production, items of cost of the kind
described in Paragraph (b) of this Annex and which are incurred after the Date of Contract
Approval and all other non-depreciable costs incurred prior to the commencement of initial
production. Costs subject to amortization also include development and other costs incurred
after the commencement of initial production which are of a capital nature and which are
properly subject to being amortized in conformity with Generally Accepted Accounting
Principles. Amortization shall be computed in such a way that the aggregate of amortization
charges per Year does not exceed a rate of 121⁄2% of the aggregate original cost. The Company
shall be free to select for each Year the rate to be applied for such Year. The total
accumulated amortization shall not exceed 100% of the aggregate original cost.
	 
		 	     (vii) “Loading Costs” in any Year means all transportation and related costs properly
applicable to Products sold during such Year, including but not limited to, those cost
elements which are itemized under Production Costs in Clause (iii) of this Paragraph and
which are incurred in handling, storing, loading and transporting Products after the
Products have been placed on a transportation facility at completion of production and until
they have been loaded an board oceangoing vessels.
	 
		 	     (viii) “Selling, General and Administrative Expenses” in any Year means all selling,
general and administrative expenses properly applicable to the Project during such Year
(including, but not limited to, Loading Costs, commissions allowed to sales agents, dealers,
brokers or affiliated companies, salaries, travel expenses, communication expenses, rents,
dues and subscriptions, insurance, advertising, public relations, office expenses, costs
incurred in connection with the keeping of records and the audits referred to in Article 12
and any other appropriate items of cost which have not been included in Clauses (iii)
through (vi) of this Paragraph or deducted in determining Net Sales). Such costs shall
include, subject to the limitations at the end of this Clause, interest paid or accrued on
borrowed capital (including interest on capital borrowed from corporations affiliated with
the Company), other financing costs, general overhead expenses, the cost of exploration
within the areas covered by this Agreement incurred after commencement of initial
production, and research and market development activities which are for the

31

 

	 	 	benefit of operations under this Agreement. Such costs shall also include those
described in Paragraph (b) of this Annex which are properly applicable to the Project during
such Year. The amount deductible in respect of loans from affiliated corporations shall not
exceed the highest interest rate paid in respect of loans from unaffiliated lenders, or if
there are none, such deduction shall not exceed the interest rate obtainable at the time of
borrowing by a corporation of similar financial assets on like terms from commercial banks
in Canada. The deduction for interest in any Year shall not exceed 70% of the weighted
average of interest times the sum of the indebtedness and equity capital of the Company as
of the end of such Year.
	 
		 	     (ix) “Net Sales” in any Year means Products sold in such Year after deducting from
gross sales the amount of return sales, damage and shortage claims allowed, discounts and
price allowances granted. There shall also be deducted the amount of any freight,
insurance, handling, storage or other costs incurred in delivering to customers Products
after they have been loaded on board oceangoing vessels, and all other costs of any nature
properly deductible from gross sales in determining net sales in accordance with Generally
Accepted Accounting Principles.
	 
		 	     (x) “Operating Costs” in any Year means the sum of the Cost of Products Sold,
Depreciation, Amortization, and Selling, General and Administrative Expenses in such Year.
	 
		 	     (xi) “Other Income” in any Year means revenue derived by the Company from other than
the regular activities of its operations (principally dividends and interest from minor
investments).
	 
		 	     (xii) “Net Taxable Income” in any Year means the excess of Net Sales over Operating
Costs plus Other Income in such Year less any deduction for Operating Losses in accordance
with the next paragraph.
	 
		 	     (xiii) “Operating Loss” in any Year means the excess of Operating Costs in such Year
over Net Sales plus Other Income in such Year. In the event an Operating Loss is incurred
in any Year commencing before the fifth anniversary of the commencement of initial
production such Operating Loss shall become an “Indefinite Operating Loss Carryforward” and
may be deducted from income accruing in any succeeding Year or Years. In the event an
Operating Loss is incurred in any Year commencing on or after the fifth anniversary of the
commencement of initial production such Operating Loss shall become a “Two Year Operating
Loss Carryforward” and may be deducted from income accruing in the two Years next succeeding
the Year in which such Operating Loss was incurred. In determining the Net Taxable Income
for any Year there shall first be deducted any Two Year Operating Loss Carryforwards which
arose in the two preceding years, the earliest such carryforward being the first deducted;
then, if there be any income remaining, there shall be deducted, to the extent of such
income, any Indefinite Operating Loss Carryforwards.

     (b) Additional Expenses. The following items shall also be included in Selling, General and
Administrative Expenses of the Company:

32

 

		 	     (i) Wages, salaries and other compensation, including employee benefits, of personnel
employed or engaged by any of the Affiliates of the Company who are assigned to the Project
on a temporary, part-time or permanent basis. “Employee benefits” include costs in respect
of holidays, vacations, sickness, disability, termination, life insurance, pensions, thrift
plans, incentive compensation and other employee benefits including reasonable provision for
employee termination benefits.
	 
		 	     (ii) Administrative overhead charges for selling, product research, market development
and technical and other advisory services of personnel employed or engaged by any of the
affiliates of the Company, who are not assigned to the Company but who render such services
for the benefit of the Project. Such charges shall consist of the cost of such services,
including wages, salaries and other compensation referred to above, and a reasonable amount
for making such services available.
	 
		 	     (iii) Travel expenses of the personnel referred to in the foregoing clauses (i) and
(ii), including travel expenses to and from Indonesia and other countries. In the case of
any of such personnel who are assigned to the Project, such travel expenses shall include
their reasonable moving expenses and the reasonable travel expenses of their dependents in
traveling to and from Indonesia and their country of residence.
	 
		 	     (iv) Charges for laboratory and technical services rendered to the Company by any of
its affiliated companies. Such charges shall consist of the cost of such services and a
reasonable amount for making such services available.
	 
		 	     (v) All costs to the Company for its education program provided for in Article 8 or
otherwise to the extent such costs do not exceed 3% of Net Taxable Income computed before
any deduction for such costs and before deduction of any Operating Loss Carryforwards. In
the event costs are incurred by the Company with respect to such educational programs in
excess of such 3%, such excess shall be available as a carryforward to succeeding Years when
it may be combined with educational costs of such later Years, and included in the Selling,
General and Administrative Expenses of such Years, subject to the 3% limitation set forth
above.
	 
		 	     (vi) Gifts, such as infrastructure facilities, made to the Republic of Indonesia or any
subdivision thereof.

     (c) Other Taxes. The corporation taxes payable by the Company pursuant to this Annex shall be
paid to the Ministry of Finance, or to any Government agency which is a successor in function
thereto, as agent for the Government of Indonesia and shall be in lieu of all other taxes of the
Republic of Indonesia, or any territory, province, municipality, authority, agency or
instrumentality or subdivision thereof, now or hereafter imposed and, except as provided in Article
11, the Company shall be exempt from all such taxes, including, without limitation, payroll charges
on the Company, import or export charges or duties except to the extent provided in Article 14,
recordation, levies in kind, dockage or transfer fees, or any other charge, surcharge, fee or other
imposition or exaction, now or hereafter levied or imposed by the Republic of Indonesia, or any
territory, province, municipality, authority, agency or instrumentality thereof, or any other
official or semi-official organization, whether national,

33

 

provincial, municipal or local in origin or nature, on the Project or on any facility or
activity thereof, at any time during the term of this Agreement, it being understood that such
exemption does not apply to (i) personal income taxes collected by the Company from employees; (ii)
corporation tax collected from payments for services rendered in Indonesia to the Company by its
subcontractors but only after the fifth anniversary of the commencement of initial production and
then at a maximum rate of 1% of any such payment or at such other rate as may be mutually agreed
between the Government and the Company; (iii) reasonable and generally applicable fees for services
performed by the Government such as recording and filing fees and (iv) withholding taxes of general
application on the payment of royalties to non-Indonesians for the use of patents in Indonesia.
(By way of explanation of the extent of the application of this Paragraph, the Company will not be
subject to any of the administrative provisions of any of the laws governing the imposition of such
other taxes, charges and levies referred to in this Paragraph which are now in effect or which may
hereafter be promulgated.)

     (d) Non-Residents. Persons, firms and corporations (including corporations affiliated with
the Company) not being a resident of or having any permanent establishment in the Republic of
Indonesia shall be exempt during the term of this Agreement from the corporation tax and all other
taxes now or hereafter imposed on, or levied with respect to, or measured by, or otherwise related
to, any amounts received by them from the Company, or otherwise derived by them from the Company,
as interest, dividends, fees or other payments or distributions, including, without limitation,
payments made in accordance with this Agreement; and the Company shall not be required to make any
withholding for taxes in respect of such amounts except as provided in Paragraph (c) of this Annex.
It is understood and agreed that the receipt from the Company of interest and dividends by
persons, firms and corporations (including corporations affiliated with the Company) will not
result in their being deemed to have a permanent establishment in the Republic of Indonesia. It is
further understood and agreed that corporations affiliated with the Company will not have or be
deemed to have a permanent establishment in the Republic of Indonesia solely by reason of
performing services (and receiving payment therefor) for the Company, providing that such services
are performed outside the Republic of Indonesia.

     (e) Payments. The corporation taxes payable by the Company pursuant to this Article shall be
paid in United States dollars or in such other currencies as may be mutually acceptable to the
Company and the Ministry of Finance or any Government agency which is a successor in function
thereto. Such corporation taxes with respect to any Year shall become due and payable monthly on
an estimated basis on the end of each calendar month for the preceding month of such Year. The
balance of tax due (after reflecting such estimated payments) with respect to such Year shall
become due and payable on March 31 on the next succeeding Year. Any excess estimated tax payments
over the final liability as reflected in the records of the Company for such Year may be credited
against subsequent monthly estimated tax payments in the order in which they become due and payable
or may be the subject of a claim for refund as provided in the last sentence of this Paragraph (e).
Tax payments made pursuant to this Paragraph (e) shall be paid in accordance with written
instructions of said Ministry; provided, however, that unless other instructions are received by
the Company at least 30 days prior to the due date of a tax payment, corporation tax payments then
due and payable shall be paid to said Ministry, or any Government agency which is a successor in
function thereto, at its principal office in Djakarta. The payment of the estimated tax for the
first month in each Year shall be

34

 

accompanied with a statement setting forth in reasonable detail the basis of the estimated
payment. The final payment of corporation taxes with respect to each Year shall be accompanied by
financial statements showing in reasonable detail the Company’s determination of the corporation
taxes due for such Year. Such financial statements and such determination of corporation taxes
shall be final and binding on the parties hereto after 5 years following the submission of such
statements (or, if the Ministry of Finance shall have made an audit of such financial statements
pursuant to Article 12, after 90 days following completion of such audit), unless and to the extent
that the Ministry of Finance shall have theretofore delivered to the Company a statement setting
forth written exception to such financial statements and such determinations of corporation taxes,
together with all claims by the Ministry of Finance in respect of such exceptions. The failure by
the Ministry of Finance to make such written exceptions and claims within the applicable period
specified above shall establish the correctness of such financial statements and such
determinations and shall preclude said Ministry from making any exceptions or claims in respect
thereof. In the event that the Ministry of Finance shall make any such exceptions and claims, the
parties hereto shall use their best efforts to settle any differences through negotiation. To the
extent that any such differences are not settled through negotiation, the parties hereto may, in
lieu of the procedures provided by Article 19, mutually agree to submit any accounting questions
involved therein to a mutually acceptable firm of independent accountants of recognized
international standing, on the understanding that, if so submitted, the determination by such firm
shall be final and binding on the parties hereto. Unless the parties hereto shall otherwise
mutually agree, the amount involved in any such claims shall become due and payable 90 days after
the Company shall have received such written exceptions and claims (or, if such claims shall be
submitted to a firm of independent accountants pursuant to the last preceding sentence or shall be
referred for settlement by arbitration pursuant to Article 19, 90 days after the determination
shall have been made by such firm or the decision shall have been made by the Centre or Board of
Arbitration, as the case may be). The Company shall likewise have the right to claim a refund for
corporation taxes paid with respect to a prior Year and shall have the right to pursue such claim
in the manner and to the extent set forth in this Paragraph (e) with respect to claims made by the
Ministry of Finance for additional corporation taxes due.

35

 

ANNEX D
 

CORPORATE
POWERS

     During the period of this Agreement, the powers of the Company shall include the power to do
any of the following:

     1.   transact its affairs and keep its records in the English language;

     2.   have branches both in Indonesia and elsewhere;

     3.   from time to time, declare as its corporate purpose, any purposes which, although primarily
the mining, production and marketing of nickel products, may extend to all other things which an
Indonesian individual or corporation may lawfully do;

     4.   denominate and value the shares of its equity capital in United States dollars;

     5.   issue registered shares or bearer shares or both;

     6.   issue fractional shares; and permit fractional votes;

     7.   issue preferred and common shares of various classes and kinds, to any person or entity
subject only to the other provisions of this Agreement;

     8.   issue bonds, notes or other obligations, secured or unsecured;

     9.   issue obligations convertible into shares and issue shares of one class or kind convertible
into shares of any other class or kind;

     10. receive and hold foreign currency in payment for shares;

     11. after establishment, have as few as one stockholder as provided in Paragraph 22, below;

     12. count partially paid-up shares as subscribed shares;

     13. keep and maintain books and records in United States dollars;

     14. declare and pay dividends to shareholders in Indonesia or abroad in Canadian or United
States dollars or other foreign currency;

     15. hold meetings of directors in Indonesia or abroad;

     16. elect, or appoint, as the case may be, non-Indonesians as Members of the Board of
Directors, of a Managing Board or other supervisory bodies, and of any committees thereof as well
as any of the principal officers of the Company;

     17. submit disputes to arbitration without approval of the shareholders;

     18. dispense with the necessity of creating reserves of any kind;

     19. provide indemnification to its directors for liabilities incurred by reason of their
office as directors of the Company; and

     20. without limiting the foregoing, enjoy all other powers and freedoms normally enjoyed by an
Indonesian corporation as the laws of Indonesia may from time to time permit.

     In addition:

     21. The Company will start on the day that its articles of incorporation are approved and
legalized by the Government following due observance of the terms determined by the Government for
the incorporation of a corporation. The Company is established for a period of 75 years with the
understanding that only for the period of 30 years will the Foreign Capital

36

 

Investment law (No. 1 of 1967) be applicable unless the term of this Agreement is renewed, as
provided in Article 22, in which case such law will continue to apply.

     22. The founders of the Company shall be The International Nickel Company of Canada, Limited
(“Inco”) or an affiliate thereof, and, for the purpose of complying with the requirement of the
Department of Justice that there be two founders, a non-Indonesian individual appointed by Inco who
shall assign his interest to Inco or such affiliate immediately after the formation of the Company
and the signing of this Agreement.

37

 

[Translation of Presidential Notification]

PRESIDENT OF THE REPUBLIC OF INDONESIA

Djakarta, 24th July 1968.

No. : B.91/PRES/7/1968.
 

Character:
Urgent
 

Enclosures:
 

	Matter:  	Agreement to the Draft Working Contract

between the Department of Mining and

P. T. International Nickel Indonesia

THE MINISTER FOR MINING,

Djakarta

_____________________

     With reference to the letter from the Minister for Mining No. 960/M.483/1968, dated 22nd July
1968, concerning the matter referred to above, we hereby inform you that we are able to endorse the
Draft Working Contract between the Department of Mining and P.T. International Nickel Indonesia in
the field of nickel mining, in the framework of executing the Foreign Investments Law.

     As to its further implementation, you are hereby instructed to act in the name of the
Government in the signing of that Draft Working Contract.

     This letter is for the information of those concerned and for use as required.

	 	 	 	 	 
	 	PRESIDENT OF THE REPUBLIC OF INDONESIA

 	 
	 	/s/ SOEHARTO
 	 
	 	General, Indonesian National Army 	 
	 	 	 
	 

COPIES SENT TO:
 

1.
Head of the Foreign Investments Technical Team.
 

2.
The archives.

_________________________

38

 

P.T. INTERNATIONAL NICKEL INDONESIA

Djakarta, Indonesia

July 27, 1968

Prof. Dr. Ir Sumantri Brodjonegoro

Minister of Mines

Ministry of Mines

Djalan Menteng Raya 3

Djakarta

 

Dear Mr. Minister:

     In connection with the Contract of Work between the Republic of Indonesia and this Company,
which has just been executed, we wish to confirm with you the following points:

     1. Wherever used in the Contract of Work, the phrase “Generally Accepted Accounting
Principles” shall mean those principles of accounting generally accepted in the United States,
especially as applied in the field of mining.

     2. In connection with the use of land by the Company for construction of facilities as
provided in the Contract of Work, the Company will pay the usual surveying and registration fees
charged by the land registration office.

     3. In acquiring titles to land outside the Contract Area, the Company will comply with
existing laws and regulations of general application.

     If the foregoing expresses your understanding, would you please sign the copy of this letter
provided for the purpose and return it to us, whereupon this shall constitute an agreement between
the Republic of Indonesia and the undersigned Company as of the date set out above.

	 	 	 	 	 
	 	Sincerely yours,

P.T. INTERNATIONAL NICKEL INDONESIA

 	 
	 	/s/ HENRY S. WINGATE
 	 
	 	Managing Director 	 
	 	 	 
	 

	 	 	 	 	 
	Confirmed:

THE REPUBLIC OF INDONESIA

 	 	 
	/s/  SUMANTRI
 	 
	Minister of Mines 	 
	 	 	 
	 

 

MEMORANDUM OF UNDERSTANDING

(Relating to the Agreement on Modification and Extension of 1968 Contract of Work)

BETWEEN

THE GOVERNMENT OF THE

REPUBLIC OF INDONESIA

AND

P.T. INTERNATIONAL NICKEL INDONESIA

85

 

MEMORANDUM OF UNDERSTANDING

     THIS MEMORANDUM OF UNDERSTANDING, dated January 15th, 1996, between the Government of the
Republic of Indonesia (the “Government”) and P.T. International Nickel Indonesia (“P.T. Inco” or
the “Company”).

WITNESSES THAT:

     The Government and the Company have entered into an Agreement on Modification and Extension of
the Contract of Work 1968 (the “Extension Agreement”) dated January 15, 1996 pursuant to which the
Contract of Work dated July 27, 1968 between the Company and the Government (the “1968 COW”) has
been extended.

     This Memorandum of Understanding has been entered into in order to address certain technical
and transitional tax matters relating to the Extension Agreement and the 1968 COW.

     NOW THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter
set out to be performed and kept by the parties hereto, and intending to be legally bound hereby,
it is stipulated and agreed among the parties hereto as follows:

	 	1.	 	Rates of Income Tax

     From and after the Effective Date and prior to the Year commencing April 1, 2008, and in
accordance with the terms of the 1968 COW, the Company shall pay income tax at the rates set forth
below:

		 	     (a) In any Year in which the Company shall elect to utilize investment tax credits
which shall then be available to it, at a rate of 45% reduced to a rate not lower than 22.5%
by the application of such investment tax credits.
	 
		 	     (b) In any Year in which the Company (i) shall elect not to utilize investment tax
credits which shall then be available to it or (ii) shall have utilized all the investment
tax credits available to it, at the rate of 30% or such lower rates as may be in effect from
time to time during such period pursuant to Article 17 of Income Tax Law 1994, any
amendments thereto, or under any legislation or regulation which may supersede or replace
Income Tax law 1994.

	 	2.	 	Withholding Tax on Interest Payments.

     With regard to Article 9(5)(b) of the Extension Agreement, payments of interest by the Company
under the LTCB Credit Agreement to creditors of the Company who are neither residents of, nor have
established permanent establishments in, Indonesia, will be treated as follows:

		 	     (a) Payments made from and after the Effective Date to and including March 31, 2008
under the LTCB Credit Agreement will continue to be exempt from withholding tax; and

 

		 	     (b) Payments made from and after the Effective Date to and including March 31, 2008
under any loan or credit agreement which succeeds, supersedes or refinances the LTCB Credit
Agreement will be exempt from withholding tax to the extent that they relate to an amount of
indebtedness under such subsequent loan or credit agreement equal to the principal amount of
the LTCB Credit Agreement outstanding as of the date on which such subsequent loan or credit
agreement becomes effective.

	 	3.	 	Investment Tax Credits.

     With regard to the interpretation of Article 9(3) of the Extension Agreement, investment tax
credits allowed in respect of investments made by the Company in assets placed in service prior to
the Effective Date pursuant to the 1968 COW will be creditable in respect of any taxable Year
commencing after the Effective Date to and including the Year ending March 31, 2008 up to 50% of
the amount of corporate income tax payable before provision for such credit. If the amount of such
credit in respect of any taxable Year exceeds such 50% limitation, then the excess may be carried
forward as a credit in succeeding Years until such amount shall have been exhausted or until the
Year ending March 31, 2008, whichever occurs first.

	 	4.	 	Tax Returns For The Year 2008.

     With regard to the implementation of the definition of “Year” in Paragraph 1 of Annex “F” of
the Extension Agreement, the Company will file two tax returns for calendar year 2008 as follows:
(i) a return for the taxable year consisting of the three months from January 1, 2008 to March 31,
2008 and (ii) a return for the taxable year consisting of the nine months from April 1, 2008 to
December 31, 2008. Each such return will be filed within ninety (90) days after the end of the
applicable Year.

	 	5.	 	Audits Of Company Tax Returns.

     Tax returns filed by the Company prior to April 1, 2008 shall be subject to the audit
provisions of Article 12(b) of the 1968 COW. Tax returns filed on or after that date shall be
subject to the audit provisions of Article 10(2) of the Extension Agreement.

	 	6.	 	Definitions.

     Capitalized terms used in this Memorandum of Understanding shall have the definitions set
forth in the Extension Agreement unless otherwise indicated in this Memorandum of Understanding.

 

     IN WITNESS WHEREOF the parties hereto have caused this Memorandum of Understanding to be duly
executed on the date appearing at the beginning hereof.

	 	 	 	 	 
	 	FOR THE GOVERNMENT OF THE

REPUBLIC OF INDONESIA

 	 
	 	/s/ I.B. SUDJANA
 	 
	 	I.B. Sudjana 	 
	 	Minister of Mines and Energy 	 
	 
	 	P.T. INTERNATIONAL NICKEL INDONESIA

 	 
	 	/s/ SCOTT M. HAND
 	 
	 	Scott M. Hand 	 
	 	President Commissioner 	 
	 
	 	 	 
	 	/s/ RUMENGAN MUSU
 	 
	 	Rumengan Musu	 
	 	President Director

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