Document:

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

BETWEEN:

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

          (hereinafter referred to as "Party A"

                                           OF THE FIRST PART

AND

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

          (hereinafter referred to as "Party B")

                                          OF THE SECOND PART

WHEREAS

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

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

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

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

                         ARTICLE 1 - GENERAL PROVISIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>
                        ARTICLE 2 - CONTRACTING PARTIES

2.1  Parties   The  parties  to  this  Contract  are  as  follows
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     2.1.1     China  Non-Metal  Mine  Enterprise  Group  701 Mine, a enterprise
               incorporated  in  the  People's  Republic of China with its legal
               address  at  Changma  Village, Mengyin County, Shandong Province,
               People's  Republic  of  China.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

             ARTICLE 3 - ESTABLISHMENT OF THE JOINT VENTURE COMPANY

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

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

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

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

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

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

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

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

                     ARTICLE 4 - BUSINESS SCOPE AND PROJECT

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

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

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

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

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

                ARTICLE 5 - TOTAL INVESTMENT REGISTERED CAPITAL

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

               ARTICLE 6 - ASSIGNMENT. ENCUMBRANCES AND TRANSFERS

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

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

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

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

                ARTICLE 7 - RESPONSIBILITIES OF EACH SHAREHOLDER

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

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

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

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

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

     7.1.5     handling  any  other  matter  entrusted  by  the  Company.

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

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

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

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

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

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

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

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

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

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

               provided that such  rights:

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

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

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

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

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

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

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

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

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

                       ARTICLE 8 - THE BOARD OF DIRECTORS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                          ARTICLE 9 - GENERAL MANAGER

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

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

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

     9.2.2     implementing  budgets  and  plans  approved  by  the  Board;

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

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

     9.2.5     payroll  administration;

     9.2.6     labour  relations  and  personnel  administration;

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

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

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

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

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

                      ARTICLE 10 - PURCHASES AND CONTRACTS

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

                        ARTICLE 11 - EMPLOYMENT MATTERS

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

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

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

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

                      ARTICLE 12 - TAXES, FINANCE AND AUDIT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                             ARTICLE 13 - INSURANCE

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

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

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

                   ARTICLE 14 - DURATION OF THE JOINT VENTURE

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

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

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

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

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

          ARTICLE 15 - DISPOSAL OF COMPANY ASSETS ON EXPIRY OF DURATION

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

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

     15.1.2    cause  the  Business  License  to  be  cancelled.

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

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

             ARTICLE 16 - AMENDMENT AND TERMINATION OF THE CONTRACT

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

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

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

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

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

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

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

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

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

                        ARTICLE 17 - BREACH OF CONTRACT

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

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

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

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

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

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

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

                           ARTICLE 18 - FORCE MAJEURE

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

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

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

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

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

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

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

                          ARTICLE 19 - APPLICABLE Law

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

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

                      ARTICLE 20 - SETTLEMENT OF DISPUTES

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

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

                           ARTICLE 21 - MISCELLANEOUS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     21.6.3    any  other  action  acceptable  to  Party  B

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

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

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

CHINA NON-METAL MINE                        VVS1 LIMITED
ENTERPRISE GROUP 701 MINE

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

Witness:                                     Witness:

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

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

                              Attorny's Attestation

                                                               Feburary 2nd 1994

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

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

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

Attested by The Dragon Law Office, Beijing, China.

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

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

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

<PAGE>THIS  CONTRACT  OF  SING-FOREIGN CONTRACTUAL JOINT VENTURE made this 31st day of
January,  1994

BETWEEN:

            MENG  MOUNTAIN  DIAMOND  DEVELOPMENT  CORPORATION,
            a  company incorporated under the laws of People's
            Republic  of  China with its legal  office located
            at 047 Xincheng Road, Mengyin County, Shandong
            Province,  People's  Republic  of  China

            (hereinafter  referred  to  as  "Party  A")

                                             OF THE FIRST PART

AND

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

            (hereinafter  referred  to  as  "Party  B")

                                            OF THE SECOND PART

WHEREAS:

A.   Party  A  and  Party  B  wish to form a limited liability company that will
          explore  for  and  mine  diamonds  and  other precious gems in Mengyin
          County,  Shandong  Province, and process and sell such diamonds on the
          international  market;  and

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

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

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

                         ARTICLE 1 - GENERAL PROVISIONS

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

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

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

<PAGE>
     1.1.3      "Business  Day"  means  Monday  through Saturday, both inclusive
                except  for  statutory  holidays  recognized  in  China;

     1.1.4      "Business  license"  means  a  license  issued by Industrial and
                Commercial  Administration department and which license shall be
                valid  to  engage  in  each  item  of  business;

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

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

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

     1.1.8      "Feasibility  Study'  means  the  verification  document  in
                connection with the aspects of geology, resource, technology and
                economics  of  diamond  mining  and  processing relevant to this
                co-operative  project  provided  by  Party  A  and  Party  B;

     1.1.9      "General Manager" means the person engaged by the Company as its
                general  manager  pursuant  to  article  9.1;

     1.1.10     "Independent  Valuator"  means  any  one of the five (5) largest
                Chinese registered accounting firms in the world, as selected by
                Party  B  in  writing;

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

     1.1.12     "Mengyin  County"  means  an  area of approximately. 1600 square
                kilometers  and  identified  on  schedule  B;

     1.1.13     "Mine  701"  means  China  Construction  Material  701  Mine;

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

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

     1.1.16     "Exploration  Rights"  means  that  rights  to explore, mine and
                extract  diamonds  in  Mengyin  County;

     1.1.17     "Party A" means Meng Mountain Diamond Development Corporation, a
                company  incorporated  under  the  laws  of China, and being the
                Party  of  -the  First  Part  of  this  Contract.

<PAGE>
     1.1.18     "Party  B"  means  China  Best  (Asia)  Limited,  a  company
                incorporated  under the laws of Hong Kong and being the Party of
                the  Second  Part  of  this  Contract;

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

     1.1.20     "Reverification  and  Exploration  Program"  means  the
                reverification  work  described  in  relevant  section  of  the
                Feasibility  Study;

     1.1.21     "S.A.I.C."  means  the  State  Administration  of  Industry  and
                Commerce;  and

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

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

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

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

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

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

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

     1.2.5      The  two  (2)  schedules  attached  to  this Contract shall form
                integral  parts  of  this  Contract:

                Schedule  "A"  -  Expenditure  Schedule;

                Schedule  "B"  -  Mengyin  County  Map.

                         ARTICLE 2 - CONTRACTING PARTIES

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

     2.1.1      Meng  Mountain  Diamond  Development  Corporation,  a  company
                incorporated  in  the  People's  Republic  of  China

<PAGE>
                with  its  legal  address at 047 Xin Cheng Road, Mengyin County,
                Shandong  Province,  People's  Republic  of  China.

                Legal  Representative:    Name:         Peng  Chuan-Jie
                                          Position:     General  Manager
                                          Nationality:     Chinese

     2.1.2      China  Best  (Asia) Limited, a company incorporated in Hong Kong
                with  its  legal  address  at  2203  Cameron  Commercial Centre,
                458-460  Hennessy  Road,  Hong  Kong.

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

2.2     REPRESENTATIONS  OF PARTY B.  Party B represents and warrants to Party A
        ---------------------------
        as  follows:

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

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

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

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

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

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

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

     2.3.1     Party  A  is a duly organized company validly, existing under the
               laws  of  People's  Republic  of  China;

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

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

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

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

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

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

     2.3.8     upon  signing  of this Contract, Party A shall deliver to Party B
               all  information  concerning  diamonds  or other precious gems in
               Mengyin  County  (other  than  Mine  701)  that  is  in Party A's
               possession  or  control,  and  such  information  is accurate and
               complete;  and

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

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

        ARTICLE 3 - ESTABLISHMENT OF THE CONTRACTUAL JOINT VENTURE COMPANY

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

3.2     NAME.  The  name  of  the  Company  shall  be:
        -----

     3.2.1     in  Chinese:  [GRAPHIC  OMITTED]  and
                             ------------------

<PAGE>
     3.2.2     in  English:  Mengyin  International Diamond Development Co. Ltd.

3.3     LEGAL  ADDRESS.  The  legal address of the Company shall be 047 Xincheng
        ---------------
        Road,  Mengyin  County,  Shandong  Province,  People's Republic of China

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

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

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

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

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

                     ARTICLE 4 - BUSINESS SCOPE AND PROJECT

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

     4.1.1      the  exclusive  right  to explore for, mine and extract diamonds
                and  other  precious  gems throughout Mengyin County except only
                for  Mine  701;

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

     4.1.3      the  exclusive  right to market and sell such diamonds and other
                precious  gems  on the international market through Party B; and

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

                 ARTICLE 5 - TOTAL INVESTMENT REGISTERED CAPITAL

5.1     INITIAL  REGISTERED CAPITAL.  The total investment amount of the Company
        ----------------------------
        is  set  at  U.S.  $11,000,000  consisting  of registered capital of the
        Company  of  U.S.  $10,000,000  and  U.S.  $1,000,000 in working capital
        provided  by banks. The U.S. $10,000,000 can be in United States Dollars
        or  in  kind  or  the equivalent amount in Renminbi in whole or part and
        shall  be  contributed  to  the  Company

<PAGE>
        by  the  Shareholders  at the times and in the forms set out in articles
        5.2  and  5.3  below.  Party  A  and  Party  B shall contribute the U.S.
        $5,000,000  respectively.

5.2.    PARTY  B'S INITIAL CAPITAL CONTRIBUTION.  Party  B may make contribution
        ----------------------------------------
        under  this  article  S  in  the  form of cash, equipment and machinery,
        technology  and  technical  services  recommended  by  the  Management
        Committee and approved by the Board. Equipment and machinery value shall
        be  verified  by  an accounting company and the State Administration for
        the  inspection  of  import  and  export  commodities.

        Party  B  shall  contribute to the Company a total of U.S. $1,000,000 in
        the  form  of United States Dollars within the first year. The remaining
        U.S.  $4,000,000  or  the equivalent amount in Renminbi in whole or part
        will  be  contributed  in  accordance  with the Expenditure Schedule and
        approved  by  the  Board  and subject to article 5.4.1. The Shareholders
        agree  that  Party  B's  obligation to contribute such initial amount is
        subject to the fulfillment of each of the following conditions precedent
        to the satisfaction of Party B (each of which is for the sole benefit of
        and  may  be  waived  by  Party  B).

     5.2.1      the  Feasibility  Study  and  this  Contract  and  Article  of
                Association  have  been  approved  in  writing  by  the Approval
                Authority;

     5.2.2      the  Business  License  has  been  issued by the S.A.I.C. to the
                Company;

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

     5.2.4      Party  B  has  received a written legal opinion of a Chinese law
                firm  acceptable  to  Party  B  confirming  (a) the issuance and
                sufficiency  of  the  foregoing  approvals  and licenses and the
                granting  of  the  Exploration  Rights  to  the Company, (b) the
                legality,  validity  and  bindingness  of  this Contract and the
                Exclusive  Marketing and Sales Contract, and (c) the accuracy of
                the  tax  description  in  the  Contract;

     5.2.5      the Company has signed and delivered the Exclusive Marketing and
                Sales  Agreement;

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

5.3     PARTY  A'S  CAPITAL  CONTRIBUTION.  Party  A may make contribution under
        ----------------------------------
        this  article  5  in  the form of cash, labour supply, land, exploration
        rights,  rights-of-way,  surface rights, water rights, electricity power
        source  and  other  rights  required to allow the Company to explore and
        mine  for  diamonds  as  required  and  recommended  by  the  Management
        Committee  and  approved  by  the  Board.  As  Party A's U.S. $1,000,000
        capital  contribution,  Party A shall, no later than sixty (60) business
        days  after  the  day  the  Business  License has been issued, cause the
        Exploration  and  Mining  License  to be issued to the Company, provided
        that:

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

               (a)     any  person, company, entity or governmental authority in
                       respect  of  the  issuance  of the Exploration and Mining
                       License;

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

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

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

     5.3.2      upon  the issuance of the Exploration License and Mining License
                to  the  Company  and the payment of all amounts contemplated by
                article  5.3.1,  Party  A  shall  be  deemed  to  have  made  a
                contribution  to  the  Company's  registered  capital.

     5.3.3.     upon  payment  of  any  part of the remaining registered capital
                contribution  of  U.S. $4,000,000 in the form allowed in article
                5.2  or  the  equivalent  amount  in

                Renminbi  in whole or part by Party B under Article 5.2, Party A
                shall  be  deemed  to  have made a contribution to the Company's
                registered  capital  equal  to  the same amount of that payment.

5.4     REVERIFICATION  AND EXPLORATION PROGRAM.  The funds contributed by Party
        ----------------------------------------
        B under article 5.2 shall be used for the Reverification and Exploration
        Program.  All diamonds and other precious gems found or extracted during
        the Reverification, and Exploration Program shall belong to the Company,
        and  may  be  sold under the Exclusive Marketing and Sales Contract. The
        profits  arising from such sales shall be distributed as contemplated in
        article  12.4.

     5.4.1      if  after  the  investment of any part of the initial investment
                the  results  of Reverification and Exploration Program indicate
                the  diamond  deposits are not economically feasible to mine and
                Company's Management Committee's mining engineers recommend that
                no  further funds be expended on the property, the parties agree
                that  article  16.3  shall  apply.

5.5.    BANK  LOANS.  If  the  Company  requires  funds in addition to Party B's
        ------------
        initial  capital  contribution  under article 5.2, the parties shall use
        their  best  efforts  to  obtain  all such funds from Chinese or foreign
        banks.  The  Company  shall  grant  such security over its assets as the
        lender  may  require.

5.6     ADDITIONAL  SHAREHOLDER CONTRIBUTIONS.  If the Company requires funds in
        --------------------------------------
        addition  to the bank loans obtained under article 5.5, the Shareholders
        shall  contribute  such  funds  to  the Company subject to the following
        conditions:

<PAGE>
     5.6.1      neither  Shareholder  shall  be  required to make any additional
                contribution  under  this  article  5.6  unless both parties are
                satisfied with the results of the Reverification and Exploration
                Program  and  such  contributions  shall be used only to pay for
                such  exploration  and mining expenditures as may be recommended
                by the General Manager, and or management committee and approved
                by  the  Board  by  a  duly  passed  resolution;

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

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

     5.6.4      if  the  Shareholders  are  required  to  make  additional
                contributions  under  this  article  5.6, whether in the form of
                shareholders loans or registered capital, each Shareholder shall
                provide  one-half  of  such  contribution;

               ARTICLE 6 - ASSIGNMENT, ENCUMBRANCES AND TRANSFERS

6.1     ASSIGNMENT.  The  obligations or liabilities of each Shareholder in this
        -----------
        Contract  hereunder  cannot  at  any time be assigned by any Shareholder
        without  the  prior  express  written  consent of the other Shareholder.

6.2     ENCUMBRANCES  IN  FAVOUR  OF  LENDERS.  If  the Company agrees to borrow
        -------------------------------------
        funds  from  a  lender, any Shareholder giving a guarantee to the lender
        may,  if  required  by  the  lender,  mortgage or otherwise encumber its
        Investment  or any part thereof in favour of such lender as security for
        the  loan  but  only  if  such lender enters into an agreement with both
        Shareholders  (satisfactory  in  form  and  substance  to  both of them)
        agreeing  to  be  bound  by  the  provisions  of  this  Contract.

6.3     TRANSFERS.  Any  Shareholder  (in  this  article,  the  "Transferring
        ---------
        Shareholder")  that is not in breach of the terms hereof may transfer to
        a  subsidiary  of  the  Transferring  Shareholder  all  or  part  of its
        Investment.

                ARTICLE 7 - RESPONSIBILITIES OF EACH SHAREHOLDER

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

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

<PAGE>
     7.1.2      provide  registered  capital  and  shareholder's  loans  to  the
                Company  subject  to  and  in  accordance  with  the  terms  and
                conditions  of  articles  5.2  and  5.6  above;

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

     7.1.4     entrusted  to  sell  on the Company's behalf on the international
                market,  all  diamonds  and relevant products and other precious
                gems  mined  by  the  Company,  in accordance with the Exclusive
                Marketing  and  Sales  Agreement, and the parties agree that the
                Exclusive  Marketing  and Sales Agreement shall be signed by the
                Company  and  Party  B within thirty (30) days after the date of
                the  Business  License;

     7.1.5      remit  to  Party A U.S.D. 5,000 for its share of the expenses of
                the  Feasibility  Study  on the execution date of this Contract;
                and

     7.1.6      handling  any  other  matter  entrusted  by  the  Company.

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

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

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

               (b)     shall  not be cancelable except only if the Company fails
                       for  a  period  of two (2) consecutive years to carry out
                       exploration  and/or  mining of diamonds or other precious
                       gems  in  Mengyin  County  for  any reason other than (i)
                       force  majeure (as defined in article 18) or (ii) because
                       it  has  proven  uneconomic  for  the Company to carry on
                       mining  during such period, and the Company has failed to
                       recommence  mining operations within six (6) months after
                       receiving  notice  to  do  so  from the Mining Authority;

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

<PAGE>
               (a)     the  exclusive  right  to  explore  for, mine and extract
                       diamonds  and  other  precious  gems  throughout  Mengyin
                       County  except  only  for  Mine  701;

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

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

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

               provided  that  such  rights:

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

     7.2.3      immediately  deliver  to  Party B upon request true and complete
                copies  of  all  of the geological data including maps, reports,
                surveys,  exploration data and other historical data relating to
                the  finding  and  mining of diamonds, kimberlite, precious gems
                and  ores  bearing  precious  gems  located  in  Mengyin County;

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

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

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

               (b)     office  space  in Mengyin County to enable the Company to
                       carry  out  its  work  and  business;  and

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

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

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

<PAGE>
                       ARTICLE 8 - THE BOARD OF DIRECTORS

8.1     DATE  OF  ESTABLISHMENT.  The Board shall be established on the date the
        ------------------------
        Business  License  is  issued.

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

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

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

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

8.6     BOARD DECISIONS.  The Board shall manage the business and affairs of the
        ----------------
        Company. Board issues shall be decided by the approval of a 51% majority
        of the votes cast by the directors present at a duly constituted meeting
        of  the  Board  except  that  the  approval  of 75% of all the directors
        present at a duly constituted meeting of the Board shall be required for
        each  of  the  issues  set  out  below:

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

     8.6.2      any increase in the registered capital of the Company other than
                an increase in the registered capital resulting from an increase
                in  the  registered  capital  resulting  from  a  requirement to
                contribute  monies  pursuant  to article 5.6. Such increases are
                hereby  approved  in  advance  by  the  Shareholders,  and  the
                Shareholders  each  agree to cause the Board to vote unanimously
                in  favour  thereof;

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

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

<PAGE>
                by  the  votes  of at least 51% of the directors present at such
                later  meeting.

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

8.8     QUORUM.  A  quorum  shall  be formed by any five (5) directors. For such
        -------
        purpose,  a  director shall be deemed present at a meeting or conference
        telephone  call  either  if  he  participates  in  person  or  by  the
        representation  of  a  duly  appointed  alternate  director.

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

                           ARTICLE 9 - GENERAL MANAGER

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

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

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

     9.2.2      implementing  budgets  and  plans  approved  by  the  Board;

     9.2.3      maintaining  an  accounting  system  and  a system of financial,
                budgetary  and internal controls designed by any one of the five
                (5)  largest Chinese registered accounting firms selected by the
                Board;

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

     9.2.5      payroll  administration;

     9.2.6      labour  relations  and  personnel  administration;

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

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

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

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

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

                      ARTICLE 10 - PURCHASES AND CONTRACTS

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

                         ARTICLE 11 - EMPLOYMENT MATTERS

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

11.2    LABOR MARKET.  The  Company shall be entitled to hire employees from the
        -------------
        labor market by placing advertisements or using other direct methods for
        recruiting employees, either from China or from abroad, as it deems fit.
        Salaries  and  benefits  payable  to  any management level employee from
        China shall be based on standards prevailing in the Chinese labor market
        for  such  kind  of  employee,  and salaries and benefits payable to any
        employee from outside of China shall be based on standards prevailing in
        the  international market for such kind of employee. Such employees, the
        Company  and  the  parties hereto shall be required to keep confidential
        all  the  terms  of  the  engagement  of  such  employees.

                      ARTICLE 12 - TAXES. FINANCE AND AUDIT

12.1    COMPANY  TAXES.  The  Company  shall  pay  taxes  in accordance with the
        --------------
        stipulations  of  published  and  publicly  available  Chinese  laws and
        regulations  using  the  maximum  deductions  and  allowable

<PAGE>
        deductions  and  preferential  treatments  allowed  in  the  laws  and
        regulations of the Income Tax Law for Foreign Investment Enterprises and
        Foreign  Companies.  The  Company  shall apply for the maximum allowable
        deductions  and  the maximum allowable credits and the maximum allowable
        preferential  treatments  allowed  in  these  same  laws and regulations
        covering  duties  and  taxes.

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

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

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

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

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

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

     12.4.4     if the United States Dollars available from the Company's normal
                operations (excluding foreign currency exchange transactions) is
                insufficient  to  pay  the  dividends  of  both  Shareholders in
                foreign  exchange,  the  '  Company  shall use the United States
                Dollars which it does have, if any, to pay Party B's dividend on
                a  priority  basis;

12.5    FISCAL  YEAR.  The  Company's  fiscal  year shall commence on July 1 and
        -------------
        end on June 30 of each year, except for the first fiscal year which will
        commence on the day the Business License is issued and end on June 30 of
        the  same  year.

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

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

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

<PAGE>
     12.8.1     quarterly unaudited financial statements within four (4) days of
                the  end  of  each  fiscal  quarter;

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

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

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

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

12.10   AUDITORS.  The Company's  books  shall be audited by the China office of
        --------
        one  of the international accounting firms licensed to practice in China
        or  which  has established a joint venture in China licensed to practice
        in  China,  as  selected  by  the  Party  B  in  writing.

12.11   BANK  ACCOUNTS.  The  Company  shall  open  such bank accounts as deemed
        --------------
        necessary  by  the  board  of  directors.

                             ARTICLE 13 - INSURANCE

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

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

                   ARTICLE 14 - DURATION OF THE JOINT VENTURE

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

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

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

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

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

          ARTICLE 15 - DISPOSAL OF COMPANY ASSETS ON EXPIRY OF DURATION

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

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

     15.1.2     cause  the  Business  License  to  be  cancelled.

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

15.3    SURVIVAL OF TERMS.  The  provisions of this Article 15 shall survive the
        -----------------
        expiry or early termination of the Duration of the Joint Venture for any
        reason.

             ARTICLE 16 - AMENDMENT AND TERMINATION OF THE CONTRACT

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

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

16.3    RESCISSION OF CONTRACT.  If  for any reason the conditions precedent set
        ----------------------
        forth  in  article  S.2 and 5.4 have not all been fulfilled or waived in
        writing  by  Party  B  on  or  prior to the 180th day after the Business
        License  has  been  issued,  at Party B's option, this Contract shall be
        deemed  terminated  and  of  no  force  and effect, the Company shall be
        dissolved,  and  the

<PAGE>
        Shareholders  shall  have  no  liability  of  any kind hereunder to each
        other.

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

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

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

16.5    GOVERNMENT  APPROVAL.  If  any  Shareholder  gives  a  notice requesting
        --------------------
        early termination under article 16.4 and the Board resolves according to
        article  8.6.5 to dissolve the Company, the Shareholders shall and shall
        cause  the  Company  and  the  Board  to  make  such applications to the
        Approval Authority, and to take all such other steps as may be necessary
        to  complete  the  dissolution  of  the  Company in accordance herewith.

16.6    SURVIVAL  OF  CERTAIN  PROVISIONS  AND  OBLIGATIONS.  The  provisions of
        ---------------------------------------------------
        Article  15  and  this  article  16.6  and  all other provisions of this
        Contract  necessary  to give full force and effect thereto shall survive
        the expiration or early termination of the Duration of the Joint Venture
        for  any  reason.  Notwithstanding  the termination of this Contract, no
        Shareholder  shall  by  reason  of  such  termination be relieved of any
        obligation or liability accrued hereunder prior to such termination, all
        of  which  shall  remain  enforceable  until  fully  satisfied.

                         ARTICLE 17 - BREACH OF CONTRACT

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

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

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

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

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

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

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

                           ARTICLE 18 - FORCE MAJEURE

18.1    EVENT  OF  FORCE  MAJEURE.  An Event of Force Majeure includes any fire,
        -------------------------
        explosion, accident, earthquake, tidal wave, strike, picketing, lockout,
        labour  dispute,  flood,  drought,  embargo,  war, riot or insurrection,
        uprising, rebellion, or any other event whether similar or dissimilar to
        the  foregoing  which  shall  be  beyond  the  reasonable control of the
        Shareholder affected thereby and which shall delay, interrupt or prevent
        the  performance  in  whole or in part by such Shareholder of any of its
        obligations  hereunder  other  than  an  obligation  to  pay  money.

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

18.3    EFFECT  OF  AN EVENT OF FORCE MAJEURE.  Subject  to the giving of notice
        -------------------------------------
        provided  for  in  the  immediately  preceding  article:

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

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

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

<PAGE>
        the  early  termination  of  the  Project  pursuant to the provisions of
        article  16.4.

                           ARTICLE 19 - APPLICABLE LAW

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

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

                       ARTICLE 20 - SETTLEMENT OF DISPUTES

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

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

                           ARTICLE 21 - MISCELLANEOUS

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

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

     21.1.2     telexed  or  telecopied to the addressee at the numbers referred
                to  below,  confirmed by delivery by courier, in which case such
                notice  or  other  communication  shall

<PAGE>
                conclusively  be  deemed  to  have  been  given to the addressee
                thereof  on the day upon which it was received if received prior
                to  3:00  p.m.  (local time) on such day or on the next business
                day  if  received after 3:00 p.m. (local time) on a business day
                or  on  the next business day if received on a day that is not a
                business  day:

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

                    Meng  Mountain  Diamond  Development  Corporation
                    047  Xin  Cheng  Road
                    Mengyin  County
                    Shandong  Province
                    People's  Republic  of  China

                    Attention:  Peng  Chuan-Jie
                    Telephone:  549-1-71873

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

                    China  Best  (Asia)  Limited
                    2203  Cameron  Commercial  Centre
                    458-460  Hennessy  Road
                    Hong  Kong

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

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

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

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

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

21.5    FURTHER  ASSURANCES  COOPERATION.  Each  of  the parties hereto shall do
        --------------------------------
        all  things and execute all documents necessary or desirable in order to
        carry  out the intents of this Contract, and shall fully co-operate with
        each  other  and the Company in all respect in good faith to ensure that
        the  Company  operates  in  the

<PAGE>
        manner  contemplated  herein and achieves the purpose set out in article
        "C".

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

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

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

     21.6.3     any  other  action  acceptable  to  Party  B.

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

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

IN WITNESS WHEREOF duly authorized officers of each of the parties have executed
this  Contract  in  Beijing  on  this  31st  day  of  January,  1994.
                    -------            ----           -------

MENG  MOUNTAIN  DIAMOND                     CHINA  BEST  (ASIA)  LIMITED
DEVELOPMENT  CORPORATION

Per:     /s/  Peng  Chuan-Jie               Per:     /s/  Po  Sun  Liu
     -------------------------------        --------------------------------
     Name:  Peng  Chuan-Jie                 Name:  Po  Sun  Liu
     Title:  General  Manager               Title:     Chairman  and
                                                       Chief  Executive  Officer

Witness:                                    Witness:

/s/  Jason  Lee                             /s/  Jiang  Yong  Pu
---------------------------------           ---------------------------------
Name:  Jason  Lee,  LLB.  LLM.              Name:  Jiang  Yong  Pu

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

                             Attorny' s Attestation

                                                              February lst, 1994
Shandong Mengshan Diamond Development Company (Party A) and Hong Kong China Best
(Asia)  Company Ltd.(Party B) after friendly consultation, on January 31st, 1994
in  Hilton  Hotel,  Beijing  signed  this  contract of cooperation in which they
unanimously decided to establish a limited liability company, in Mengyin county,
Shandong, China, to explore, mine and process diamonds and other precious stones
as  well  as  to  sell  above-mentioned  products on international markets.  The
contract  also  clarifies  the  shareholders'  position for both sides and their
powers  and  duties.

Party  A's  general  manager Mr. Peng Chuan Jie, Party B's president and general
manager  Mr.  James  Poe  represent  each  party  in  signing  the  contract.

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

Attested  by  The  Dragon  Law  Office,  Beijing,  China.

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

                                   /s/  Cun  Zhu
                                   -----------------------------------------
                                   Cun  Zhu,  Attomey

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

<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]