Contract of Work - PT Freeport Indonesia

8/11/2019 Contract of Work - PT Freeport Indonesia

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CONTRACT OF WORK

BETWEEN

THE GOVERNMENT OF THEREPUBLI K OF I NDONESI A

AND

PT. FREEPORT I NDONESI A COMPANY

CONTENTS

ARTI CLE Page

I NTRODUCTI ON 1

1. DEFI NI TI ONS 3

2. APPOI NTMENT AND RESPONSI BI LI TY OF THE COMPANY 8

3. MODUS OPERANDI 10

4. CONTRACT AREA 12

5. GENERAL SURVEY PERI OD 15

6. EXPLORATI ON PERI OD 17

7. REPORTS AND SECURI TY DEPOSI T 20

8. FEASI BI LI TY STUDI ES PERI OD 24

9. CONSTRUCTI ON PERI OD 27

10. OPERATI NG PERI OD 29

11. MARKETI NG 35

12. I MPORT AND RE- EXPORT FACI LI TI ES 39

13. TAXES AND OTHER FI NANCI AL OBLI GATI ONS OF THE COMPANY 42

14. RECORDS, I NSPECTI ON AND WORK PROGRAM 56

15. CURRENCY EXCHANGE 59

16. SPECI AL RI GHTS OF THE GOVERNMENT 62

17. EMPLOYMENT AND TRAI NI NG OF I NDONESI AN NATI ONALS 63

18. ENABLI NG PROVI SI ONS 66

19. FORCE MAJ EURE 70

20. DEFAULT 71


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ARTI CLE Page

21. SETTLEMENT OF DI SPUTES 73

22. TERMI NATI ON 75

23. COOPERATI ON OF THE PARTI ES 77

24. PROMOTI ON OF NATI ONAL I NTEREST 78

25. REGI ONAL COOPERATI ON I N REGARD TOADDI TI ONAL I NFRASTRUCTURE 81

26. ENVI RONMENTAL MANAGEMENT AND PROTECTI ON 84

27. LOCAL BUSI NESS DEVELOPMENT 85

28. MI SCELLANEOUS PROVI SI ONS 88

29. ASSI GNMENT 90

30. FI NANCI NG 91

31. TERM 92

32. GOVERNI NG LAW 93

ANNEX "A" - CONTRACT AREA 94

ANNEX "B" - MAP OF CONTRACT AREA 96

ANNEX "C" - LI ST OF OUTSTANDI NG MI NI NG RI GHTS ANDNATURE RESERVES 97

ANNEX "D" - DEADRENT FOR VARI OUSSTAGES OF ACTI VI TI ES 98

ANNEX "E" - FEASI BI LI TY STUDY REPORT 99

ANNEX "F" - RULES FOR COMPUTATI ON OF I NCOME TAX 101

ANNEX "G" - ADDI TI ONAL ROYALTY ON MI NERALEXPORTED AS UNBENEFI CI ATED ORE 107


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CONTRACT OF WORK

Thi s Agreement , made and enter ed i nt o i n J akar t a, i n t he Republ i cof I ndonesi a, on t he 30t h day of December 1991, by and bet weent he Government of t he Republ i c of I ndonesi a, r epr esent ed herei nby t he Mi ni st er of Mi nes and Energy of t he Gover nment of t heRepubl i c of I ndonesi a ( her ei naf t er cal l ed t he "Government ") and

PT Freeport I ndonesi a Company ( a j udi ci al body i ncorpor at ed i nI ndonesi a by Not ar i al Deed Numbered 102 dated 26 December 1991,Decree of Mi ni st er of J ust i ce Numbered C2- 8171. HT. 01. 01. TH. 91dat ed 27 December 1991) (her ei naf t er cal l ed t he "Company") , t heshar es of t he Common St ock of whi ch are owned by:

1. Fr eepor t - McMoRan Copper & Gol d I nc. , a Del aware corporat i on( "FCX") ; and

2. The Gover nment .

WI TNESSETH THAT:

A. Al l Mi ner al r esour ces cont ai ned i n t he t er r i t or i es of t he

Republ i c of I ndonesi a, i ncl udi ng t he of f shor e ar eas, ar e t henat i onal weal t h of t he I ndonesi an Nat i on.

B. The Government desi r es t o encourage and promot e t heexpl orat i on and devel opment of t he Mi neral r esour ces ofI ndonesi a. The Gover nment i s al so desi r ous of f aci l i t at i ngt he devel opment of ore deposi t s i f commer ci al quant i t i es aref ound t o exi st and t he oper at i on of Mi ni ng ent er pr i ses i nconnect i on t her ewi t h.

C. The Gover nment , t hr ough t he operat i on of Mi ni ng ent er pr i ses,i s desi r ous of cr eat i ng gr owt h cent er s f or r egi onaldevel opment , cr eat i ng more empl oyment oppor t uni t i es,

encour agi ng and devel opi ng l ocal busi ness and ensur i ng t hatski l l s, know- how and t echnol ogy ar e t r ansf er r ed t oI ndonesi an nat i onal s, acqui r i ng basi c dat a r egar di ng andr el at ed t o t he count r y s Mi ner al r esour ces and pr eser vi ngand r ehabi l i t at i ng t he nat ur al Envi r onment f or f ur t herdevel opment of I ndonesi a.

D. The Company i t sel f and as an i ndi r ect Subsi di ar y ofFreepor t -

McMoRan I nc. , a Del aware corpor at i on, and a Subsi di ary ofFr eepor t - McMoRan Copper & Gol d I nc. , a Del aware corporat i on,has and has access t o t he i nf ormat i on, knowl edge, exper i enceand pr oven t echni cal and f i nanci al capabi l i t y and otherr esour ces t o undert ake a pr ogr am of General Sur vey,

Expl or at i on, devel opment , const r uct i on, Mi ni ng, Pr ocessi ngand mar ket i ng wi t h r espect t o t he Cont r act Ar ea, and i sr eady and wi l l i ng t o pr oceed t hereto under t he t erms andsubj ect t o t he condi t i ons set f or t h i n t hi s Agr eement .

E. The Gover nment and t he Company r ecogni ze t hat the Cont r actAr ea ( as her ei naf t er def i ned) i s l ocat ed i n an ext r emel yr emote area wi t h a di f f i cul t envi r onment and t hat ,accordi ngl y, t he Company has been and wi l l cont i nue t o ber equi r ed t o devel op speci al f aci l i t i es and t o car r y outspeci al f unct i ons f or t he f ul f i l l ment of t hi s Agr eement .

F. The Gover nment and t he Company are wi l l i ng t o cooperate i n


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devel opi ng t he Mi neral resour ces herei naf t er descr i bed ont he basi s of t he pr ovi si ons her eof and of t he l aws andr egul at i ons of t he Republ i c of I ndonesi a, speci f i cal l y LawNo. 11 of 1967 on t he Basi c Provi si ons of Mi ni ng ( Undang-Undang Pokok Pert ambangan) and Law No. 1 of 1967 on For ei gnCapi t al I nvest ment ( Undang- Undang Penanaman Modal Asi ng) , asi n ef f ect on t he date of t he si gni ng of t hi s Agr eement , and

t he r el evant l aws and r egul at i ons per t ai ni ng t her et o.

G. The Company i s t he corporate successor t o Fr eepor tI ndonesi a, I ncorpor ated, a Del awar e cor porat i on, whi ch was apar t y t o t he Pr i or Cont r act ( as her ei naf t er def i ned) . Thi sAgr eement shal l supersede the Pr i or Cont r act .

NOW, THEREFORE, i n consi der at i on of t he mutual promi ses,covenant s and condi t i ons herei naf t er set out t o be per f ormed andkept by t he Par t i es heret o, and i nt endi ng t o be l egal l y boundher eby, i t i s st i pul at ed and agr eed bet ween t he Par t i es her et o asf ol l ows:

ARTI CLE 1

DEFI NI TI ONS

The t er ms set f or t h bel ow shal l have t he meani ngs t herei n setf or t h, r espect i vel y, wher ever t he same shal l appear i n t hi sAgr eement and whether or not t he same shal l be capi t al i zed.

1. "Af f i l i at e" of any Per son means any other Per son t hatdi r ect l y, or i ndi r ect l y t hr ough one or mor e i nt er medi ar i es,cont r ol s or i s cont r ol l ed by or i s under common cont r olwi t h, such Per son.

2. "Associ at ed Mi ner al s" wi t h r espect t o a par t i cul ar Mi ner al

means Mi ner al s whi ch geol ogi cal l y occur t oget her wi t h, arei nseparabl e by Mi ni ng f r om and must necessar i l y be Mi ned andProcessed t oget her wi t h such Mi ner al .

3. "Benef i ci al Use" means a use of t he Envi r onment or anyel ement or segment of t he Envi r onment t hat i s conduci ve t opubl i c benef i t , wel f ar e, saf et y or heal t h and whi ch r equi r espr ot ect i on f r om t he ef f ect s of wast e di schar ges, emi ssi onsand deposi t s.

4. "Company" means PT Fr eeport I ndonesi a Company, t he cor por at esuccessor t o FI I , and any appr oved corpor ate successor ; and,when used i n r ef erence t o expendi t ures made or other act i ont aken under t he Pr i or Cont r act or t he SI PP, al so means FI I .

5. "Cont r act Ar ea" means t he Cont r act Ar ea Bl ock A and t heCont r act Ar ea Bl ock B.

6. "Cont r act Ar ea Bl ock A" means t he area def i ned i n Annex "A"t o t hi s Agr eement as "Cont r act Area Bl ock A" .

7. "Cont r act Ar ea Bl ock B" means t he area def i ned i n Annex "A"t o t hi s Agreement as "Cont r act Area Bl ock B" , as changed byr educt i ons and ext ensi ons, as t he case may be, i n accordancewi t h t hi s Agr eement .

8. "Cont r act Pr oper t i es", wi t h r espect t o any Mi ni ng Ar ea,


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means, f or t he pur poses of Ar t i cl e 22, t he pr oper t y of t heCompany i n I ndonesi a whi ch i s l ocat ed i n such Mi ni ng Ar ea orany Pr oj ect Ar ea r el at ed t o such Mi ni ng Ar ea.

9. "Cont r ol " ( i ncl udi ng t he t er ms "cont r ol l ed by" and "undercommon cont r ol wi t h" and "cont r ol s" ) means t he possessi on,di rect l y or i ndi rect l y, of t he abi l i t y t o di r ect t he

management and pol i ci es of a Per son. Wi t hout l i mi t i ng t hegener al i t y of t he above, such abi l i t y i s pr esumed t o exi sti n a Per son i f i t hol ds, di r ectl y or i ndi r ectl y, 25% or mor eof t he out st andi ng vot i ng shar es of another Per son.

10. "Cover ed Empl oyee" means any per son, i ncl udi ng an Expat r i at eI ndi vi dual , who i s empl oyed or engaged by t he Company or oneof i t s Subs i di ar i es or Af f i l i at es .

11. "Depar t ment " , unl ess t he cont ext ot her wi se i ndi cat es, meanst hat Government agency charged wi t h t he admi ni st r at i on oft he I ndonesi an Mi ni ng l aws and r egul at i ons.

12. "Ent er pr i se" means al l act i vi t i es of t he Company pr ovi ded

f or i n or cont empl at ed by t hi s Agr eement , i ncl udi ng ( i ) t heGeneral Sur vey, Expl orat i on, eval uat i on, devel opment ,const r uct i on, Mi ni ng, oper at i ng, Pr ocessi ng and sel l i ngact i vi t i es wi t h r espect t o t he Cont r act Ar ea and Pr oj ectAr eas r el at ed t her et o, and Pr oduct s t her ef r om; and ( i i )const r uct i on and oper at i on of t he Smel t er r ef er r ed t o i npar agr aph 4 of Ar t i cl e 10, al l as pr ovi ded her ei n.

13. "Envi r onment " means physi cal f act ors of t he sur r oundi ngs ofhuman bei ngs, i ncl udi ng l and, wat er, atmosphere, cl i mat e,sound, odor s, t ast es and bi ol ogi cal f act ors of ani mal s andpl ant s and t he soci al f act or s of aest het i cs.

14. "Expat r i at e I ndi vi dual s" or "Expat r i at es" means i ndi vi dual swho ar e non- I ndonesi an nat i onal s.

15. "Expl orat i on" means t he sear ch f or Mi ner al s usi nggeol ogi cal , geophysi cal and geochemi cal met hods, i ncl udi ngt he use of bor ehol es, t est pi t s, t r enches, sur f ace orunder gr ound headi ngs, dr i f t s or t unnel s i n or der t o l ocat et he pr esence of economi c Mi neral deposi t s and t o f i nd outt hei r nat ur e, shape and gr ade, and "Expl ore" has acor r espondi ng meani ng.

16. "Expl orat i on Ar eas" means t he port i ons of t he Cont r act Ar eaBl ock B whi ch ar e sel ect ed f or Expl or at i on as a r esul t oft he General Sur vey of t he Cont r act Ar ea Bl ock B by t he

Company dur i ng t he General Survey Per i od pr ovi ded f or i npar agr aph 2 of Ar t i cl e 3.

17. "FI I " means Fr eepor t I ndonesi a, I ncor porat ed, a companyi ncor por at ed i n Del awar e, U. S. A.

18. "For ei gn Cur r ency" means any cur r ency ot her t han Rupi ah.

19. "Gener al Sur vey" means an i nvest i gat i on or a pr el i mi naryExpl or at i on car r i ed out al ong cer t ai n br oad f eat ur es of anar ea f or i ndi cat i ons of mi ner al i zat i on.

20. "Government " means the Gover nment of t he Republ i c of


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I ndonesi a, i t s Mi ni st er s, Mi ni st r i es, Depar t ment s, Agenci esand I nst r ument al i t i es, and al l Regi onal , Pr ovi nci al orDi str i ct Aut hor i t i es .

21. "Mi ner al s" means al l nat ur al deposi t s and nat ur alaccumul at i ons cont ai ni ng chemi cal el ement s of al l ki nds,ei t her i n el ement al f or m or i n associ at i on or chemi cal

combi nat i on wi t h ot her met al l i c or non- met al l i c el ement s.

22. "Mi ni ng" means r ecover y act i vi t i es ai med at t he economi cexpl oi t at i on of one or mor e i dent i f i ed deposi t s of Mi ner al s,and "Mi ne" has a cor r espondi ng meani ng.

23. "Mi ni ng Ar eas" means t he Cont r act Ar ea Bl ock A and al l NewMi ni ng Ar eas.

24. "Mi ni st er ", unl ess t he cont ext ot her wi se i ndi cat es, meanst hat per son who i s act i ng at any gi ven t i me as t he Mi ni st erof t he Depar t ment of Mi nes and Energy.

25. "New Mi ni ng Ar ea" means a por t i on of t he Cont r act Area Bl ock

B whi ch has been i dent i f i ed by t he Company as cont ai ni ngpot ent i al l y economi c Mi ner al deposi t or deposi t s, whi ch hasbeen descr i bed by l at i t ude and l ongi t ude on maps and bydescr i pt i on del i ver ed by t he Company t o t he Depar t ment , andwhi ch has been desi gnat ed by t he Company, on or bef or e t hel ast day of t he Feasi bi l i t y St udi es Per i od wi t h r espect t oan Expl or at i on Ar ea, as one i n whi ch t he Company i ntends t ocommence Mi ni ng; pr ovi ded t hat a New Mi ni ng Ar ea may beexpanded by agreement of t he Government and t he Company i fas a r esul t of f ur t her Expl or at i on and Mi ni ng i t becomesapparent t hat i ncl usi on of adj acent l ands woul d advance t hepur poses of t hi s Agr eement by per mi t t i ng t he Mi ni ng of t heMi ner al s i dent i f i ed wi t h r espect t o such deposi t s or

Associ at ed Mi ner al s.

26. "Per son" means any i ndi vi dual , par t ner shi p, cor por at i on,wher ever or gani zed or i ncor por at ed, and al l ot her j udi ci al l ydi st i nct ent i t i es and associ at i ons, whet her or noti ncor por at ed.

27. "Pol l ut i on" means any di r ect or i ndi r ect al t er at i on of t hephysi cal , t her mal , chemi cal , bi ol ogi cal or r adi oact i vepr oper t i es of any par t of t he Envi r onment by t he di schar ge,emi ssi on or deposi t of Wast es so as t o af f ect any Benef i ci alUse mat eri al l y and adver sel y, or t o cause a condi t i on whi chi s hazar dous or pot ent i al l y hazar dous t o publ i c heal t h,saf et y or wel f ar e, or t o ani mal s, bi r ds, wi l dl i f e, f i sh or

aquat i c l i f e, or t o pl ant s, and "Pol l ut e" has acor r espondi ng meani ng.

28. "Preci ous Met al " means gol d, si l ver , pl at i num or pal l adi um.

29. "Pri or Cont r act " means t he Cont r act of Work dated 7 Apr i l1967 bet ween FI I and t he Gover nment , as amended andi mpl ement ed, whi ch Cont r act i s superseded hereby.

30. "Processi ng" means t r eat ment of Mi ner al ore af t er i t hasbeen Mi ned t o produce a marketabl e Mi ner al concent r at e or af ur t her r ef i ned Mi ner al Pr oduct , and "Pr ocess" has acor r espondi ng meani ng.


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31. "Pr oduct s" means al l or es, Mi ner al s, concent r at es,pr eci pi t at es and met al s, i ncl udi ng r ef i ned pr oduct s,obt ai ned as a r esul t of Mi ni ng or Processi ng, af t erdeduct i ng any quant i t i es ther eof whi ch ar e l ost , di scar ded,dest r oyed or used i n r esear ch, t est i ng, Mi ni ng, Pr ocessi ngor t r anspor t at i on.

32. "Proj ect Ar ea" means, wi t h r espect to any Mi ni ng Ar ea, anarea out si de such Mi ni ng Ar ea heretof ore desi gnated as aProj ect Ar ea or any such area hereaf t er desi gnated as aPr oj ect Ar ea and del i neat ed i n a f easi bi l i t y st udy r epor tf or Mi ni ng devel opment by t he Company as necessary ordesi r abl e f or t he Pr ocessi ng f aci l i t i es and ot heri nf r ast r uctur e f aci l i t i es r el at ed t o such Mi ni ngdevel opment , i ncl udi ng any addi t i ons t o any such arear equi r ed f or Mi ni ng, devel opment or Pr ocessi ng.

33. "Rupi ah" means the cur r ency t hat const i t ut es l egal t ender i nI ndonesi a.

34. "SI PP" means t he Prel i mi nary Sur vey Li cense( s) gr ant ed byt he Di r ect or at e Gener al of Mi nes on behal f of t he Mi ni st ert o FI I r el at ed t o pr el i mi nar y Expl or at i on i n I r i an J aya.

35. "Subsi di ary" of any Per son means any cor porat i on cont r ol l edby such Per son t hr ough t he di r ect or i ndi r ect owner shi p off i f t y percent or more of t he i ssued shar es havi ng power t ovot e or any par t ner shi p or j oi nt vent ur e cont r ol l ed by suchPer son.

36. "Wast e" i ncl udes any mat t er whet her l i qui d, sol i d, gaseousor r adi oact i ve, whi ch i s di schar ged, emi t t ed, or deposi t edi n t he Envi r onment i n such vol ume, consi st ency or manner as

t o cause a mat er i al and adver se al t er at i on of t heEnvi r onment .

ARTI CLE 2

APPOI NTMENT AND RESPONSI BI LI TY OF THE COMPANY

1. The Company i s hereby appoi nt ed t he sol e cont r actor f or t heGover nment wi t h respect t o t he Cont r act Ar ea. I n par t i cul ar ,t he Gover nment her eby grant s t o t he Company t he sol e r i ght st o Expl ore f or Mi ner al s i n t he Cont r act Ar ea, t o Mi ne anydeposi t of Mi ner al s f ound i n any Mi ni ng Ar ea, t o Pr ocess,st ore, and t r anspor t by any means al l Mi ner al s ext r act edt her ef r om, t o mar ket , sel l or di spose of al l t he Pr oduct s of

such Mi ni ng and Processi ng, i nsi de and out si de I ndonesi a,and t o per f or m al l other oper at i ons and act i vi t i es whi ch maybe necessary or conveni ent i n connect i on t her ewi t h, wi t h dueobser vance of t he r equi r ement s of t hi s Agreement . I nconsi der at i on f or t he gr ant of such r i ght s, t he Companyagr ees t o per f or m t he wor k and car r y out t he obl i gat i onsi mposed on i t by t hi s Agr eement , i ncl udi ng, wi t houtl i mi t at i on, t he obl i gat i on t o make i nvest ment s as pr ovi dedi n par agr aph 2 of Ar t i cl e 5, i n par agr aph 5 of Ar t i cl e 6 andi n par agr aph 5 of Ar t i cl e 7, t he obl i gat i on t o pay t axes andother char ges t o t he Government as pr ovi ded i n Ar t i cl es 12and 13 and t he obl i gat i on t o adhere t o t he Mi ni ng st andardsdescr i bed i n par agr aph 9 of Ar t i cl e 10 and t o t he


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Envi r onment al , saf ety and heal t h st andards descr i bed i nArt i cl e 26.

2. Notwi t hst andi ng par agr aph 1 of t hi s Ar t i cl e 2, t he Companyshal l not Mi ne any r adi oact i ve mi neral s, hydr ocar boncompounds, ni ckel , t i n or coal wi t hout f i r st obt ai ni ng t heapproval of t he Gover nment .

3. The Company shal l have sol e cont r ol and management of al l ofi t s act i vi t i es under t hi s Agr eement and shal l have f ul lr esponsi bi l i t y t her ef or and shal l assume al l r i sk wi t hr espect t her et o i n accor dance wi t h t he t erms and condi t i onsof t hi s Agr eement . Wi t hout i n any way detr act i ng f r om t heCompany s r esponsi bi l i t i es and obl i gat i ons her eunder , t heCompany may engage subcont r actor s, whether or not Af f i l i atesof t he Company, f or t he execut i on of such phases of i t soperat i ons as the Company deems appropr i at e, i ncl udi ngcont r acti ng f or const r ucti on of f aci l i t i es and f or necessar yt echni cal , management and admi ni st r at i ve servi ces. I n t heevent t hat such ser vi ces ar e cont r act ed f r om Af f i l i at es, t hechar ges t her ef or, t o t he extent t hey af f ect any amount s

payabl e t o t he Government pur suant t o t he t erms of t hi sAgr eement , shal l compl y wi t h t he pr ovi si ons of Ar t i cl e 13and of Annex "F" t o t hi s Agr eement .

4. The Company shal l t ake al l r easonabl e measur es t o preventdamage t o t he r i ght s and pr opert y of t he Government or t hi r dpar t i es. I n t he event of negl i gence on t he par t of t heCompany or i t s agent s or of any Regi st ered subcont r actorcar r yi ng on oper at i ons or act i vi t i es f or t he Company undert hi s Agreement , t he Company or such subcont r act or , as t hecase may be, shal l be l i abl e f or such negl i gence i naccor dance wi t h the l aws of I ndonesi a.

ARTI CLE 3

MODUS OPERANDI

1. The Company i s i ncorporated under t he l aws of the Republ i cof I ndonesi a and domi ci l ed i n I ndonesi a, and shal l besubj ect t o t he l aws and t he j ur i sdi ct i on of cour t s i nI ndonesi a whi ch nor mal l y have j ur i sdi ct i on over cor porat i onsdoi ng busi ness or i ncor porat ed t her ei n. The Company shal lmai nt ai n i n J akar t a a pr i nci pal of f i ce f or r ecei pt of anynot i f i cat i on or ot her of f i ci al or l egal communi cat i on.

2. As par t of t he Ent er pr i se, t he Company wi l l cont i nue i t sact i vi t i es wi t h r espect t o t he Cont r act Ar ea Bl ock A and

cont empl at es a pr ogr am wi t h r espect t o t he Cont r act Ar eaBl ock B commenci ng wi t h a General Sur vey of t he Cont r actAr ea Bl ock B dur i ng a "Gener al Sur vey Per i od" as a r esul t ofwhi ch cer t ai n Expl or at i on Ar eas wi l l be sel ect ed f orExpl or at i on dur i ng t he per i od or stage her ei naf t er r ef er r edt o as t he "Expl or at i on Per i od" . The r emai ni ng pr ogr am wi t hr espect t o each Expl or at i on Ar ea wi l l be di vi ded i nt o t hr eeaddi t i onal per i ods or st ages her ei naf t er r ef er r ed t o as t he"Feasi bi l i t y St udi es Per i od", t he "Const r uct i on Per i od" andt he "Oper at i ng Per i od", r espect i vel y, wi t h r espect t o suchExpl or at i on Ar ea. These Per i ods ar e f ur t her def i ned i n t hef ol l owi ng Ar t i cl es her eof . The Cont r act Ar ea Bl ock A i s i ni t s Oper at i ng Per i od and, t her ef or e, t he f oregoi ng


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pr ovi si ons wi t h r espect t o ot her per i ods or stages ar e notappl i cabl e to i t . I t i s under st ood t hat , as a consequence oft he f oregoi ng, di f f er ent par t s of t he Cont r act Ar ea may bet r eat ed as separate pr oj ects whi ch become subj ect t odi f f er ent pr ovi si ons of t hi s Agr eement and of t he Mi ni ngLaws and Regul at i on at di f f erent t i mes because of t hedi f f er ent per i ods of acti vi t i es appl i cabl e to the i ndi vi dual

Expl orat i on and Mi ni ng Ar eas.

3. The Company undert akes t o conduct al l act i vi t i es her eunderi n t he manner and subj ect t o t he condi t i ons of Ar t i cl e 2 oft hi s Agr eement and t o cont i nue such act i vi t i es, wi t houtsuspensi on or i nt er r upt i on of al l of t he Company sact i vi t i es, unl ess wi t h t he concur r ence of t he Gover nment( whi ch shal l be deemed t o have been gi ven i f t he Depar t mentdoes not obj ect t her et o i n wr i t i ng wi t hi n t hr ee mont hs af t eri t has r ecei ved wr i t t en not i ce f r om t he Company of i t sdesi r e t o so suspend or i nt er r upt ) or as ot her wi se pr ovi dedi n Ar t i cl e 19 or Ar t i cl e 22. Any such suspensi on ori nt er r upt i on of al l of t he Company s act i vi t i es wi t h t heconcurr ence of t he Government shal l ext end t he t i me per i ods

ot her wi se appl i cabl e wi t h r espect t o any of t he af f ect edPer i ods speci f i ed i n t hi s Agr eement . I f such i nt er r upt i on orsuspensi on of al l of t he Company s act i vi t i es cont i nues f ormore t han 365 days and i s due t o r easons ot her t han f or cemaj eur e as provi ded i n Ar t i cl e 19 and t he Gover nment has notconcur r ed r egardi ng such i nt er r upt i on and suspensi on, t hent he Government shal l be ent i t l ed t o decl are a def aul t underAr t i cl e 20. The Company agr ees t o keep t he Governmenti nf ormed of any i nt er r upt i on or suspensi on. Any suchi nt er r upt i on or suspensi on shal l not af f ect t he mut ualr i ght s and obl i gat i ons of t he Par t i es under t hi s Agr eement .

ARTI CLE 4

CONTRACT AREA

1. The Cont r act Ar ea consi st s of t he Cont r act Ar ea Bl ock A andt he Cont r act Ar ea Bl ock B.

2. Cont r act Ar ea Bl ock A i s an area, i n t he mai nl and of t hei sl and of I r i an, consi st i ng of appr oxi mat el y 100 ( onehundr ed) squar e ki l omet er s, as def i ned i n Annex "A" t o t hi sAgreement and del i neated i n Annex "B" t o t hi s Agr eement .

3. Cont r act Ar ea Bl ock B i s t he area def i ned i n Annex "A" t ot hi s Agreement as "Cont r act Ar ea Bl ock B" , as changed byext ensi ons and r educt i ons i n accor dance wi t h t hi s Agreement ,

excl udi ng t her ef r om, except as other wi se pr ovi ded i npar agr aph 4 of t hi s Ar t i cl e 4, al l

( i ) Mi ni ng Aut hori zat i ons gr ant ed by t he Gover nment f orCategory "A" and "B" Mi neral s ( as def i ned i n Annex"C") , and

( i i ) Mi ni ng Aut hori zat i ons gr ant ed by t he Gover nment f orCat egory " C" Mi ner al s ( as def i ned i n Annex "C") ,

( i i i ) other Mi ni ng Ri ght s gr ant ed by the Gover nment ( asdef i ned i n Annex "C" ) , and


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( i v) t he areas shown on Annex "B" as const i t ut i ng Natur eReserves.

whi ch are exi st i ng as of t he date of t hi s Agr eement andwhi ch ar e l i st ed or descr i bed i n Annex "C" t o t hi sAgr eement .

4. I n t he event t hat any areas whi ch were excl uded f r om t heCont r act Ar ea Bl ock B by t he def i ni t i on t her eof or whi ch ont he dat e of t he SI PP had a common boundar y wi t h the Cont r actAr ea l apse, ar e cancel l ed or ar e r el i nqui shed, or by anymeans any such ar ea becomes vacant , or ot herwi se becomeavai l abl e, t hen t he Company shal l have t he pr i or i t y r i ghtupon appl i cat i on t o have such ar ea i ncl uded i n t he Cont r actAr ea Bl ock B unl ess t he Gover nment grant s a Peopl e s Mi ni ngRi ght f or such area. Once an ar ea i s i ncl uded i n t heCont r act Ar ea t he Gover nment agr ees not t o grant a Peopl e sMi ni ng Ri ght t her et o. Any ar ea so i ncl uded shal l f al l i nt ot he ear l i est Per i od whi ch t hen appl i es t o any par t ofCont r act Ar ea Bl ock B.

5. The Company may by wr i t t en appl i cat i on t o t he Depar t mentr el i nqui sh al l or any par t of t he Cont r act Ar ea at any t i meand f r omt i me t o t i me dur i ng t he t er m of t hi s Agr eement . Anysuch appl i cat i on shal l be submi t t ed wi t h a r el i nqui shmentr epor t st at i ng any t echni cal and geol ogi cal f i ndi ng t heCompany has made wi t h r espect t o the r el i nqui shed areas andt he r easons f or t he r el i nqui shment , suppor t ed by f i el d dat aof act i vi t i es under t aken i n t hose ar eas. Al l basi c dat a wi t hr espect t o t he r el i nqui shed ar eas shal l be submi t t ed t o t heDepar t ment and become t he pr oper t y of t he Gover nment . TheCompany thr ough r el i nqui shment ( i ncl udi ng r el i nqui shmentpur suant t o t hi s par agr aph, par agr aph 5 of Ar t i cl e 5 andpar agr aph 2 of Ar t i cl e 6) , shal l except as ot her wi se agr eed

by t he Gover nment , r educe t he Cont r act Ar ea Bl ock B:

( i ) on or bef or e t he end of t he Gener al Sur vey Per i od, t onot more t han sevent y- f i ve percent ( 75%) of t heor i gi nal Cont r act Ar ea Bl ock B;

( i i ) on or bef or e t he second anni ver sar y of t he end of t heGeneral Sur vey Per i od, t o not more t han f i f t y per cent( 50%) of t he or i gi nal Cont r act Ar ea Bl ock B; and

( i i i ) on or bef or e t he end of t he Expl or at i on Per i od, t onot more t han t went y- f i ve per cent ( 25%) of t he ori gi nalCont r act Ar ea Bl ock B.

Except as pr ovi ded i n par agr aph 7 of thi s Ar t i cl e 4, t heCompany shal l not be r equi r ed by t he t erms of t hi s Agr eementt o r el i nqui sh mor e t han 75% of t he or i gi nal Cont r act Ar eaBl ock B. Any such r el i nqui shment shal l be wi t hout pr ej udi cet o any obl i gat i on or l i abi l i t y i mposed by or i ncur r ed undert hi s Agr eement pr i or t o t he ef f ect i ve dat e of suchr el i nqui shment .

6. The Company wi l l cont i nue t o car r y on Expl orat i on on al lpr ospect i ve par t s of t he Cont r act Ar ea wi t h t he obj ect i ve ofdel i neat i ng new deposi t s wi t hi n t he Cont r act Ar ea f ordevel opment dur i ng t he f ul l t er m of t hi s Agr eement . TheCompany s devel opment pl ans shal l i ncl ude t he i ntended


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capaci t y of each Mi ni ng and Processi ng act i vi t y and anyf ur t her eval uat i on wor k r equi r ed as pr ovi ded i n t he r el at edf easi bi l i t y st udy and ot her Expl or at i on acti vi t i es.

7. I f t he Company has no f ut ur e pl an t o conduct Expl orat i on ordevel opment act i vi t i es wi t h r espect t o an ar ea of Cont r actAr ea Bl ock B, or t o use such ar ea i n connect i on wi t h other

devel opment act i vi t i es, or i f t he Company di scover s adeposi t of a Mi ner al as t o whi ch i t has no cur r ent orcont i ngent pl ans t o devel op ( and such area may be used orsuch deposi t devel oped by ot her Per sons i n a manner whi chdoes not i nt er f er e wi t h t he r i ght s of t he Company under t hi sAgr eement or t he act i vi t i es of t he Company per mi t t edher eby) , t hen, i f so r equi r ed by t he Gover nment , t he Companyshal l r el i nqui sh such ar ea or deposi t , t oget her wi t h al l t hebasi c geol ogi cal , expl or at i on, met al l ur gi cal and ot her dat ar el at ed t her et o.

ARTI CLE 5

GENERAL SURVEY PERI OD

1. The Company shal l commence, as soon as possi bl e af t er t hesi gni ng of t hi s Agr eement , a Gener al Sur vey of t he Cont r actAr ea Bl ock B t o determi ne i n what par t s of t he Cont r act Ar eaBl ock B deposi t s of Mi ner al s ar e most l i kel y t o occur . The"General Sur vey Per i od" shal l end t wel ve mont hs af t er suchcommencement . The Gover nment , upon r equest by t he Companywi l l gr ant an ext ensi on of 12 ( t wel ve) mont hs f or t heGeneral Sur vey Per i od f or t he pur pose of compl et i ng t heact i vi t i es t o be car r i ed out by i t dur i ng such Per i od.

2. By t he end of t he Gener al Sur vey Per i od, i ncl udi ng t he SI PPper i od, t he Company shal l have spent , wi t h r espect t o t he

Cont r act Ar ea Bl ock B, not l ess t han US$ 5, 000, 000 ( Fi veMi l l i on Uni t ed St at es Dol l ar s) . Such expendi t ur es mayi ncl ude gener al organi zat i on over head and admi ni st r at i veexpenses di r ect l y connect ed wi t h f i el d act i vi t i es under t hi sAgr eement .

3. I f at t he expi r at i on of twel ve mont hs f r om t he dat e of t hesi gni ng of t hi s Agr eement or any t i me ther eaf t er , i t appear st o t he Depar t ment t hat t he Company has ser i ousl y negl ect edi t s obl i gat i ons wi t h r espect t o mi ni mum expendi t ur es aspr ovi ded i n paragr aph 2 of t hi s Ar t i cl e, t he Depar t ment mayr equi r e t he Company t o del i ver t o t he Depar t ment a guar ant eei n t he f orm of a bond or banker s guar ant ee t o a sum whi chshal l not exceed t he t otal out st andi ng expendi t ur e

obl i gat i ons r emai ni ng unf ul f i l l ed. Such guar ant ee may at t heend of t he t hree year per i od commenci ng on t he dat e of t hesi gni ng of t hi s Agr eement be f orf ei t ed t o t he Gover nment t ot he ext ent t hat t he Company shal l have f ai l ed t o f ul f i l lsuch expendi t ur e obl i gat i ons. Except t o t he ext ent of anysuch f orf ei t ur e, such guarant ee shal l be r el eased at t he endof such t hr ee year per i od.

4. I n connect i on wi t h t he Company s obl i gat i ons under t hi sAr t i cl e, t he Company shal l submi t t o t he Depar t ment wi t hi nt wo mont hs af t er t he end of the General Sur vey Per i od, ar eport set t i ng f or t h t he i t ems and amount s of expendi t ur edur i ng such Per i od. The Company shal l pr epare t o suppor t


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such r epor t wi t h r easonabl e document at i on of expendi t ur es asr equest ed by t he Depar t ment .

5. The Company may at any t i me di scont i nue t he General Sur veywi t h r espect t o any par t or par t s of t he Cont r act Ar ea Bl ockB on t he gr ound t hat t he cont i nuat i on of such General Sur veyi s no l onger commer ci al l y f easi bl e or pr act i cal and shal l

appl y i n wr i t i ng t o t he Depar t ment i n accordance wi t hpar agr aph 5 of Ar t i cl e 4 f or t he r el i nqui shment of such par tor par t s of t he Cont r act Ar ea Bl ock B. The Cont r act Ar eaBl ock B shal l t hereby be r educed t o t he area whi ch r emai nsaf t er such r el i nqui shment .

6. I f , at any t i me or t i mes dur i ng t he Gener al Sur vey Per i od,af t er t he Company has di scover ed deposi t s of Mi neral s i n anypar t or part s of t he Cont r act Ar ea Bl ock B and has deci dedt o pr oceed i nt o t he Expl or at i on Per i od wi t h r espect t o oneor mor e of such deposi t s, i t shal l submi t a wr i t t en not i ceand expl anat i on t o such ef f ect to t he Depart ment and shal lest abl i sh one or more Expl orat i on Ar eas wi t h r espect t o suchdeposi t or deposi t s and begi n the Expl or at i on ther eof

wi t hout af f ect i ng i t s r i ght s and obl i gat i ons under t hi sAgr eement i n r espect of other port i ons of t he Cont r act Ar ea.

ARTI CLE 6

EXPLORATI ON PERI OD

1. Upon compl et i on of t he General Sur vey, t he Company shal lcommence wi t hi n t he most promi si ng Expl orat i on Ar eas apr ogr am of Expl orat i on based on t he r esul t s of such GeneralSur vey. The pr ogr am of Expl or at i on shal l i ncl ude, asappr opr i at e, wi t hout l i mi t at i on, det ai l ed geol ogi cal ,geophysi cal and geochemi cal i nvest i gat i on, i ncl udi ng

sampl i ng, pi t t i ng, dr edgi ng and dr i l l i ng. The Per i od dur i ngwhi ch such Expl orat i on i s under t aken const i t ut es t he"Expl or at i on Per i od".

2. The Company may at any t i me di scont i nue Expl or at i on i n anyExpl orat i on Ar ea on the gr ound that t he cont i nuat i on of suchExpl or at i on i s no l onger commer ci al l y f easi bl e or pr act i caland shal l appl y i n wr i t i ng t o t he Depar t ment i n accor dancewi t h par agr aph 5 of Ar t i cl e 4 f or t he rel i nqui shment of suchExpl orat i on Ar ea f r om t he Cont r act Ar ea Bl ock B. TheCont r act Ar ea Bl ock B shal l t hereby be r educed t o t he areawhi ch r emai ns af t er such rel i nqui shment .

3. I f at any t i me pr i or t o t he end of t he Expl or at i on Per i od

t he Company di scovers one or more deposi t s of Mi ner al s ofappar ent commerci al gr ade and quant i t y i n any Expl orat i onAr ea and deci des t o pr oceed wi t h f ur t her eval uat i on t her eof ,i t shal l submi t a wr i t t en not i ce t o such ef f ect t o t heDepar t ment and ent er i nt o t he Feasi bi l i t y St udi es Per i odwi t h r espect t o such Expl or at i on Ar ea wi t hout af f ect i ng i t sr i ght s and obl i gat i ons under t hi s Agr eement i n r espect oft he bal ance of t he Cont r act Ar ea Bl ock B. Accor di ngl y, t heExpl or at i on Per i od:

( i ) shal l commence i mmedi atel y f ol l owi ng t he end of t heGeneral Sur vey Per i od; and


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( i i ) shal l end 36 mont hs t her eaf t er ; pr ovi ded t hat , wi t hr espect t o any Expl or at i on Ar ea, i t shal l end at suchear l i er dat e as t he Feasi bi l i t y St udi es Per i od shal lhave begun wi t h respect t o such Expl orat i on Ar ea; and

( i i i ) t he Government upon r equest by t he Company, wi l lt wi ce gr ant an ext ensi on of t wel ve mont hs each f or t he

Expl orat i on Per i od, subj ect t o t he Company s per f ormi ngi t s obl i gat i ons sat i sf actori l y i n accor dance wi t h t hi sAgreement .

4. Pri or t o t he end of t he Expl orat i on Per i od, t he Companyshal l gi ve not i ce t o t he Depart ment st at i ng whet her or nott he Company desi r es to pr oceed i nt o t he Feasi bi l i t y St udi esPer i od wi t h respect t o any Expl orat i on Ar eas. I f t he Companyshoul d gi ve not i ce t o t he Depar t ment t hat i t does not wi sht o pr oceed i nt o t he Feasi bi l i t y St udi es Per i od wi t h r espectt o any Expl or at i on Ar ea, such not i ce shal l const i t ut e anappl i cat i on i n wr i t i ng t o t he Depar t ment i n accor dance wi t hpar agr aph 5 of Ar t i cl e 4 f or t he r el i nqui shment of suchExpl or at i on Ar ea f r omt he Cont r act Ar ea Bl ock B. I n such a

case, t he Company shal l t ur n over t o t he Depart ment :

( i ) maps i ndi cat i ng al l pl aces i n such Expl or at i on Ar ea i nwhi ch t he Company shal l have dr i l l ed hol es or sunkpi t s ,

( i i ) copi es of l ogs of such dr i l l hol es and pi t s and ofassay r esul t s wi t h r espect t o any anal yzed sampl esr ecover ed t heref r om, and

( i i i ) copi es of any geol ogi cal or geophysi cal maps oft he Expl orat i on Ar ea whi ch shal l have been pr epared byt he Company.

Any such r el i nqui shment shal l be wi t hout pr ej udi ce t o anyobl i gat i on or l i abi l i t y i mposed by or i ncur r ed under t hi sAgr eement pr i or t o t he ef f ect i ve dat e of suchr el i nqui shment .

5. Dur i ng t he Expl orat i on Per i od, the Company shal l spend notl ess t han US$ 15, 000, 000 ( Fi f t een Mi l l i on Uni t ed St at esDol l ar s) on f ur t her Expl or at i on acti vi t i es wi t h r espect t ot he Cont r act Ar ea Bl ock B. Any expendi t ur e i ncur r ed by t heend of t he Gener al Sur vey Per i od ( i ncl udi ng t he SI PP Per i od)i n excess of US$5, 000, 000 shal l be consi der ed t o be, par t ofsuch US$15, 000, 000. I f at t he expi r at i on of t went y- f ourmont hs f r om t he dat e of t he commencement of t he Expl orat i on

Per i od or any t i me t her eaf t er , i t appear s to t he Depar t mentt hat t he Company has ser i ousl y negl ect ed i t s obl i gat i onswi t h r espect t o mi ni mum expendi t ur es as pr ovi ded i n t hi spar agr aph, t he Company shal l del i ver t o t he Depar t ment aguar ant ee, i f r equi r ed by t he Gover nment , i n t he f orm of abond or banker s guar ant ee t o a sum whi ch shal l not exceedt he tot al out st andi ng expendi t ur e obl i gat i ons r emai ni ngunf ul f i l l ed. Such guar ant ee may at the and of t heExpl orat i on Per i od be f or f ei t ed t o t he Gover nment t o t heextent t hat t he Company shal l have f ai l ed t o f ul f i l l suchexpendi t ur e obl i gat i ons. Except t o t he ext ent of any suchf or f ei t ur e, such guar ant ee shal l be r el eased at t he end oft he Expl or at i on Per i od.


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ARTI CLE 7

REPORTS AND SECURI TY DEPOSI T

1. The Company shal l keep t he Government i nf or med t hrought he Depart ment concerni ng t he Ent erpr i se t hr ough

submi ssi on of quar t er l y pr ogr ess r epor t s as t o t heCompany s pl ans f or and r esul t s of i t s Expl orat i on anddevel opment oper at i ons and act i vi t i es r el at i ng t o al lar eas not i n t he Oper at i ng Per i od, begi nni ng wi t h ar epor t as t o t he f i r st f ul l cal endar quar t er f ol l owi ngt he dat e of t he si gni ng of t hi s Agr eement . Thesepr ogr ess r epor t s shal l be submi t t ed wi t hi n 30 daysaf t er t he end of each cal endar quar t er and be i n suchf orm as t he Depart ment may f r om t i me t o t i me reasonabl ypr escri be. These quar t er l y pr ogr ess r epor t s r el at i ngt o Expl or at i on acti vi t i es shal l i ncl ude:

( i ) t he r esul t s of geol ogi cal and geophysi cal i nvest i gat i onand pr ovi ng of deposi t s of Mi ner al s i n t he Cont r act

Ar ea Bl ock B and the sampl i ng of such deposi t s;

( i i ) t he r esul t s of any gener al r econnai ssance of t hevar i ous si t es of pr oposed oper at i ons and act i vi t i esunder t hi s Agr eement ;

( i i i ) i nf or mat i on concer ni ng t he sel ecti on of r out es f r om anyNew Mi ni ng Ar ea t o a sui t abl e har bor f or t he t r anspor tof Pr oduct ;

( i v) i nf or mat i on concer ni ng t he pl anni ng of sui t abl eper manent set t l ement s, i ncl udi ng i nf ormat i on onsui t abl e wat er suppl i es f or permanent set t l ement s and

ot her f ac i l i t i es ; and

( v) such other pl ans and i nf ormat i on as t o t he pr ogr ess oft he Company s act i vi t i es i n t he Cont r act Ar ea Bl ock Bas t he Depar t ment may f r om t i me t o t i me r easonabl yr equi r e.

2. Wi t hi n one year af t er t he begi nni ng of t he Feasi bi l i t ySt udi es Per i od wi t h r espect t o any Expl or at i on Ar ea, t heCompany shal l al so f i l e wi t h t he Depart ment a summary of i t sgeol ogi cal and met al l ur gi cal i nvest i gat i ons and al lgeol ogi cal , geophysi cal , t opogr aphi c and hydr ogr aphi c dat aobt ai ned f r om t he General Sur vey and Expl orat i on wi t hr espect t o such Expl orat i on Ar ea and a sampl e r epr esent at i ve

of each pr i nci pal t ype of Mi ner al i zat i on encount er ed i n i t si nvest i gat i on of such Expl or at i on Ar ea.

3. No l at er t han t he f i f t h anni ver sar y of t he dat e of t hesi gni ng of t hi s Agr eement , t he Company shal l submi t t o t heDepar t ment a gener al geol ogi cal map of the whol e Cont r actAr ea Bl ock B ( as t hen const i t ut ed) on t he scal e of 1 :250, 000 wi t h at t endant r epor t s based on t he Company sgeol ogi cal obser vat i ons; such geol ogi cal map shal l cont ai nt he obser vat i ons of r ock t ypes and t hei r di st r i but i on andst r uct ure whi ch have been made by t he Company dur i ng t heGener al Sur vey and Expl orat i on Per i ods.


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4. On or bef ore t he del i ver y of the geol ogi cal map r ef er r ed t oi n par agr aph 3 of t hi s Ar t i cl e, t he Company shal l al so t ur nover t o t he Depar t ment :

( i ) maps i ndi cat i ng al l pl aces i n t he Cont r act Ar ea Bl ock Bi n whi ch t he Company shal l have dr i l l ed hol es or sunkpi t s ,

( i i ) copi es of l ogs of such dr i l l hol es and pi t s and ofassay r esul t s wi t h r espect t o any anal yzed sampl esr ecover ed f r omt hem,

( i i i ) copi es of any geophysi cal maps of t he Cont r actAr ea Bl ock B whi ch shal l have been prepared by t heCompany, and

( i v) al l ot her i nf or mat i on di r ectl y r el evant t o t heCompany s Expl orat i on act i vi t i es under thi s Agr eementwhi ch t he Depar t ment may r easonabl y r equest and whi chi s, or wi t h t he exer ci se of r easonabl e ef f or t s by t heCompany woul d be, wi t hi n the Company s cont r ol i n or der

t o appr ai se t he Company s i nvest i gat i on act i vi t i esunder t hi s Agr eement .

5. The Company shal l wi t hi n t hi r t y days af t er t he dat e of t hesi gni ng of t hi s Agr eement est abl i sh f or t he benef i t of t heGovernment i n a Bank i n I ndonesi a approved by t he Depar t mentan i nterest bear i ng escr ow account i n t he amount of OneMi l l i on Uni t ed St at es Dol l ar s (US$ 1, 000, 000) . Thi s amount ,t oget her wi t h t he secur i t y deposi t her et of ore made by t heCompany i n accor dance wi t h t he SI PP, i s her ei naf t ercol l ecti vel y cal l ed t he "Secur i t y Deposi t ".

The Secur i t y Deposi t shal l be r el eased by t he Government as

t o f i f t y per cent t her eof af t er :

( i ) t he expi r at i on of t he Gener al Sur vey Per i od;

( i i ) t he submi ssi on as speci f i ed i n par agr aph 1 of t hi sAr t i cl e 7 of f our consecut i ve quar t er l y pr ogr essr epor t s t o t he Depar t ment or , i f t he Gener al Sur veyPer i od i s compl et ed i n l ess t han t wel ve mont hs, ofquar t er l y pr ogr ess r epor t s cover i ng such l esser per i od;and

( i i i ) ei t her :

( a) sat i sf act ory per f ormance ( accor di ng t o t he

Mi ni st er s j udgment ) f or such t wel ve- mont h per i od,or

( b) t he expendi t ure by t he Company i n such GeneralSur vey Per i od of Fi ve Mi l l i on Uni t ed St at esDol l ar s ( US$ 5, 000, 000) on t he Cont r act Ar ea Bl ockB.

The r emai ni ng f i f t y percent of t he Secur i t y Deposi t wi l l ber el eased on behal f of t he Company when t he Geol ogi cal mapr ef er r ed t o i n par agr aph 3 of t hi s Ar t i cl e has beensubmi t t ed t o and approved by t he Depar t ment , whi ch approvalshal l not be unr easonabl y wi t hhel d or del ayed. I n t he event


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t hat t he Company does not sat i sf y t he above ment i onedr equi r ement wi t hi n si x year s af t er t he dat e of t he si gni ngof t hi s Agr eement , t he bal ance of t he sai d Secur i t y Deposi tshal l aut omat i cal l y be f orwarded t o t he Government Treasuryand t he Company shal l have no f ur t her cl ai m t hereon.I nt er est on the Secur i t y Deposi t shal l accrue f or t hebenef i t of t he Company.

6. a. Except as otherwi se pr ovi ded i n t hi s par agr aph 6,t he Government has t i t l e t o al l dat a and r epor t ssubmi t t ed by t he Company t o t he Depar t ment or t heGovernment pur suant t o t he pr ovi si ons of t hi sAgr eement . Such data and r epor t s wi l l be t r eat ed asst r i ct l y conf i dent i al by t he Gover nment t o t he extentt hat t he Company shal l so r equest ; pr ovi ded, however ,t hat data i n t he publ i c domai n ( because of havi ng beenpubl i shed i n gener al l y accessi bl e l i t er at ur e or oft hei r mai nl y sci ent i f i c r at her t han commer ci al val ue,such as geol ogi cal and geophysi cal dat a) and data whi chhave been publ i shed pur suant t o l aws and r egul at i ons ofI ndonesi a or of a f orei gn count r y i n whi ch a

shar ehol der may be domi ci l ed ( such as t he annual r epor tof publ i c bodi es or compani es) shal l not be subj ect t ot he f or egoi ng r est r i ct i ons; pr ovi ded f ur t her t hat t het er m " dat a" as used i n t hi s par agr aph shal l i ncl ude,wi t hout l i mi t at i on, any and al l document s, maps, pl ans,work sheets and other t echni cal dat a and i nf ormat i on,as wel l as dat a and i nf ormat i on concer ni ng f i nanci aland commerci al mat t er s.

b. I n r espect of dat a r el at i ng sol el y t o areasr el i nqui shed by t he Company f r om t he Cont r act Ar eaBl ock B pur suant t o Ar t i cl e 4, t he f or egoi ngr est r i ct i ons shal l cease t o appl y as f r om t he dat e of

r el i nqui shment of such ar eas. I n addi t i on, wher e t hi sAgreement has been t ermi nat ed pur suant t o Ar t i cl e 20 orAr t i cl e 22, t he f or egoi ng r est r i cti ons shal l cease t oappl y.

c. Notwi t hst andi ng t he f oregoi ng, excl usi ve know- how oft he Company, i t s subcont r act or s or Af f i l i at escont ai ned i n dat a or r epor t s submi t t ed by t he Companyt o t he Depar t ment or t he Gover nment pursuant t o t hepr ovi si ons of t hi s Agr eement and whi ch shal l have beeni dent i f i ed as such by t he Company shal l onl y be used byt he Gover nment i n r el at i on t o t he admi ni st r at i on oft hi s Agr eement and shal l not be di scl osed by t heGover nment t o t hi r d par t i es wi t hout t he pr i or wr i t t en

consent of t he Company. Such excl usi ve know- how, asl ong as i t r emai ns excl usi ve know- how of t he Company,i t s subcont r act or s or Af f i l i at es as t he case may be,r emai ns t he sol e pr opert y of t he Company, i t ssub- cont r act ors or Af f i l i at es, as the case may be. Thepr ovi si ons of t hi s subpar agr aph ( c) shal l sur vi ve t het ermi nat i on of t hi s Agr eement i n accor dance wi t h l awsand r egul at i ons f r om t i me t o t i me i n ef f ect r el at i ng t oi nt el l ect ual pr oper t i es. I n t he case any such excl usi veknow- how i s not pat ent abl e i n accordance wi t h suchl aws, t he Company may r equest the Government not t odi scl ose such know- how f or a peri od of not l ess t hant hr ee year s af t er t er mi nat i on of t hi s Agr eement .


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ARTI CLE 8

FEASI BI LI TY STUDI ES PERI OD

1. The Feasi bi l i t y St udi es Per i od wi t h r espect t o anyExpl or at i on Ar ea shal l commence on t he dat e t he Company

submi t s t he wr i t t en r equest t o t he Depar t ment pr ovi ded f ori n par agr aph 3 of Ar t i cl e 6 wi t h r espect t o such Expl or at i onAr ea and shal l end upon t he commencement of t he Const r uct i onPer i od wi t h r espect t o such Expl or at i on Ar ea as her ei naf t erpr ovi ded.

2. As soon as t he Feasi bi l i t y St udi es Per i od has begun wi t hr espect t o any Expl orat i on Ar ea, t he Company shal l commencest udi es t o det er mi ne t he f easi bi l i t y of commer ci al l ydevel opi ng t he deposi t or deposi t s of Mi ner al s wi t hi n suchExpl orat i on Ar ea. The Company wi l l be al l owed a per i od oft wel ve mont hs t o compl et e such st udi es and t o sel ect anddel i neate and det ermi ne t he si ze of one or mor e New Mi ni ngAr eas. Each such New Mi ni ng Ar ea shal l i ncl ude at l east one

deposi t wi t h r espect t o whi ch t he Company pl ans t o commenceconst r uct i on and Mi ni ng operat i ons. The Depart ment may, f orone of t he r easons speci f i ed i n par agr aph 2 of Ar t i cl e 16,obj ect t o t he area proposed as a New Mi ni ng Ar ea wi t hi nt hree mont hs of t he Company s desi gnat i on of such New Mi ni ngAr ea. The Government and t he Company agr ee t o consul t i ngood f ai t h i n an at t empt t o over come any such obj ect i ons. I faf t er a per i od of t hr ee mont hs f r om t he dat e of not i f i cat i onof such obj ect i on by t he Gover nment t her e has been nor esol ut i on of t he mat t er , t hen ei t her Part y may pr oceed t or esol ve t he matt er i n accor dance wi t h par agr aph 1 of Ar t i cl e21. I n t he event t hat t he obj ect i on by the Depar t ment t o anyarea desi gnat ed by t he Company as a New Mi ni ng Ar ea i s

uphel d, and t her eaf t er dur i ng t he t er m of t hi s Agr eement i ti s det er mi ned t hat Mi ni ng i s per mi ssi bl e wi t hi n such ar ea,t he Company shal l have t he r i ght t o carr y on such Mi ni ng i npr ef er ence to any ot her Per son.

3. Af t er t he compl et i on of t he Feasi bi l i t y St udi es wi t h r espectt o a New Mi ni ng Ar ea wi t hi n an Expl or at i on Ar ea, t he Companyshal l submi t a Feasi bi l i t y St udy Repor t i n t he f or m set outi n Annex "E" , whi ch shal l cont ai n cal cul at i ons and r easonsf or t he t echni cal and economi cal f easi bi l i t y of conduct i ngMi ni ng operat i ons wi t hi n such New Mi ni ng Ar ea, suppor t ed bydat a, as speci f i ed i n Annex "E", cal cul at i ons, dr awi ngs,maps and other i nf ormat i on r el evant t o t he deci si on whetheror not t o pr oceed wi t h such Mi ni ng oper at i ons. The

Feasi bi l i t y St udy wi t h r espect t o any New Mi ni ng Ar ea shal li ncl ude t he t hen i nt ended capaci t y of each Mi ni ng andProcessi ng operat i on wi t hi n such New Mi ni ng Ar ea and anyf ur t her eval uat i on work or f ur t her Expl orat i on t hen deemedt o be r equi r ed. I f t he Company consi ders t hat t he dat ar equi r ed and ot her necessar y mat t er s ar e not suf f i ci ent l yavai l abl e t o come t o a f i nal deci si on wi t hi n t he i ni t i alFeasi bi l i t y St udi es Per i od wi t h r espect to any Expl or at i onAr ea or i f t he Depar t ment has r ai sed obj ect i ons wi t h r espectt o any proposed New Mi ni ng Ar ea wi t hi n such Expl orat i on Ar eaas set out above, t he Company may seek t he approval of t heGover nment t o t he ext ensi on f or t wel ve mont hs of suchFeasi bi l i t y St udi es Per i od, pr ovi ded t hat such r equest f or


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ext ensi on of t he Feasi bi l i t y St udi es Per i od i s submi t t ed t ot he Government no l ater t han t he ei ght h anni ver sary of t hedat e of t he si gni ng of t hi s Agr eement .

4. At any t i me dur i ng the Feasi bi l i t y St udi es Per i od wi t hr espect t o any New Mi ni ng Ar ea, t he Company may submi t awr i t t en appl i cat i on t o t he Depar t ment t hat i t desi r es t o

pr oceed wi t h t he const r uct i on of a Mi ne wi t hi n such NewMi ni ng Ar ea and f aci l i t i es t o be used by t he Company i n i t soperat i on t her eof . The Depar t ment shal l be deemed t o haveappr oved any such appl i cat i on i f i t does not , i n wr i t i ng,obj ect t o t he same wi t hi n t hr ee mont hs of r ecei pt of suchappl i cat i on. Af t er appr oval of such appl i cat i on, t heCompany shal l pr ompt l y commence and wi t h r easonabl edi l i gence execut e t o compl et i on t he desi gn of t he Mi ne andr el at ed f aci l i t i es. Upon compl et i on of such desi gn, t heCompany shal l submi t t he desi gn and Mi ni ng pl an t o t heDepar t ment f or appr oval , t ogether wi t h an est i mat e of t hecost of such Mi ne and r el at ed f aci l i t i es and a t i me schedul ef or the const r uct i on t her eof . Such t i me schedul e shal l , t ot he extent economi cal l y and pr act i cal l y f easi bl e, pr ovi de

f or compl et i ng t he const r uct i on of such Mi ne and r el atedf aci l i t i es wi t hi n t hi r t y- si x mont hs af t er t he appr oval oft he desi gn, Mi ni ng pl an and t i me schedul e. Wi t hi n t hr eemont hs af t er submi ssi on of t he desi gn, Mi ni ng pl an and t i meschedul e, t he Depart ment shal l not i f y t he Company of i t sappr oval t her eof or i t s di sappr oval t her eof , f or one of t her easons speci f i ed i n par agr aph 2 of Ar t i cl e 16. I n t he eventof di sappr oval , t he Depart ment shal l not i f y t he Company oft he cause f or di sappr oval and t he Government and t he Companyshal l consul t i n a good f ai t h at t empt t o r emove t he causef or such di sappr oval . I f af t er a per i od of t hr ee mont hs f r om

t he not i f i cat i on of such di sappr oval t her e has been nor esol ut i on of t he mat t er , t hen ei t her part y may pr oceed t o

r esol ve t he matt er i n accor dance wi t h paragr aph 1 of Ar t i cl e21. I f wi t hi n t hr ee mont hs of any such submi ssi on, t heCompany has not r ecei ved any obj ect i on i n wr i t i ng, t heCompany may consi der t hat such submi ss i on has been approved.

5. The Feasi bi l i t y St udy Report as descr i bed i n Annex "E" wi t hr espect t o a New Mi ni ng Ar ea shal l i ncl ude envi r onment ali mpact st udi es i nt o t he ef f ect s on t he Envi r onment of t heoperat i ons of t he Enterpr i se wi t hi n such New Mi ni ng Ar ea andshal l be pr epar ed i n accor dance wi t h t he t er ms of r ef er enceset out i n Ar t i cl e 26. Such st udi es may be car r i ed out i nconsul t at i on wi t h appr opr i at el y qual i f i ed i ndependentconsul t ant s r et ai ned by t he Company and approved by t heGover nment i n accordance wi t h t he r ul es and procedures t hen

i n f or ce i n I ndonesi a.

6. The quar t er l y r epor t s provi ded pur suant t o par agr aph 1Ar t i cl e 7 wi l l i ncl ude dat a as t o t he pr ogr ess and r esul t sof and cost s i ncur r ed i n r espect of t he i nvest i gat i ons andst udi es car r i ed on dur i ng t he Feasi bi l i t y St udi es Per i odswi t h r espect t o t he var i ous Expl or at i on Ar eas.

7. Wi t h r espect t o any Expl orat i on Ar ea as t o whi ch noFeasi bi l i t y Study Repor t has t her et of ore been submi t t edpur suant t o par agr aph 3 of t hi s Ar t i cl e, t he Company shal lsubmi t t o t he Gover nment a f i nal r epor t st at i ng t he r esul t sof and t he cost s i ncur r ed i n r espect of t he i nvest i gat i ons


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and st udi es t hereof and t he Company s anal ysi s of and i t sconcl usi ons i n r espect of t hose r esul t s.

8. Al l r epor t s and i nf ormat i on suppl i ed t o t he Gover nment undert hi s Ar t i cl e shal l be subj ect t o t he pr ovi si ons of par agr aph6 of Art i cl e 7 rel at i ng t o conf i dent i al i t y.

ARTI CLE 9

CONSTRUCTI ON PERI OD

1. Fol l owi ng r ecei pt f r om t he Depar t ment of appr oval wi t hr espect t o t he desi gn, Mi ni ng pl an and t i me schedul epr ovi ded f or i n par agr aph 4 of Ar t i cl e 8 wi t h r espect t o anyNew Mi ni ng Ar ea, t he Company shal l , i n accordance wi t h sucht i me schedul e, commence const r uct i on of the f aci l i t i es anduse i t s best ef f or t s, subj ect t o t he pr ovi si ons of Ar t i cl e19, t o compl et e such f aci l i t i es wi t hi n such t i me schedul e.I f such t i me schedul e proves unwor kabl e, the Company maysubmi t t o t he Depar t ment a r evi sed t i me schedul e f or t heDepar t ment s appr oval . I f wi t hi n thr ee mont hs of such

submi ssi on, t he Company has not r ecei ved any obj ect i on i nwr i t i ng, t he Company may consi der t hat such r evi sed t i meschedul e has been approved.

2. The f aci l i t i es t o be const r uct ed dur i ng t he Const r uct i onPer i od wi t h r espect t o any New Mi ni ng Ar ea may i ncl ude suchof t he f ol l owi ng as ar e appr opr i at e:

( i ) Mi ni ng f aci l i t i es and equi pment ;

( i i ) f aci l i t i es and equi pment t o t r eat and benef i ci at e t heMi neral ore comi ng f r om t he Mi ne so as t o pr oducesal eabl e Pr oduct s;

( i i i ) por t f aci l i t i es, whi ch may i ncl ude docks, har bor s,pi er s, j et t i es, dr edges, br eakwat er s, t er mi nalf aci l i t i es, workshops, st or age ar eas, war ehouses andl oadi ng and unl oadi ng equi pment ;

( i v) t r anspor t at i on and communi cat i on f aci l i t i es, whi ch mayi ncl ude r oads, br i dges, vessel s, f er r i es, ai r por t s,r ai l r oads, l andi ng st r i ps and l andi ng pads f orai r cr af t , hangar s, gar ages, canal s, aer i al t r amways,pi pel i nes, pumpi ng st at i ons, r adi o andt el ecommuni cat i on f aci l i t i es, and t el egr aph andt el ephone faci l i t i es and l i nes;

( v) t ownsi t es, whi ch may i ncl ude dwel l i ngs, st or es,school s, hospi t al s, t heat er s and ot her bui l di ngs,f aci l i t i es and equi pment f or per sonnel of t heEnt er pr i se, i ncl udi ng dependent s of such per sonnel ;

( vi ) power, wat er and sewage f aci l i t i es, whi ch may i ncl udepower pl ant s ( whi ch may be hydr oel ect r i c, st eam, gas ordi esel ) , power l i nes, dams, wat er cour ses, dr ai ns, wat ersuppl y systems and systems f or di sposi ng of t ai l i ngs,pl ant wast es and sewage;

( vi i ) mi scel l aneous f aci l i t i es, whi ch may i ncl udemachi ne shops, f oundr i es and repai r shops; and


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( vi i i ) al l such addi t i onal or ot her f aci l i t i es , pl ant andequi pment as t he Company may consi der necessar y orconveni ent f or t he oper at i ons of t he Ent er pr i se r el at edt o such New Mi ni ng Ar ea or f or pr ovi di ng servi ces orcar r yi ng on acti vi t i es anci l l ar y or i nci dent al t her et o.

3. The Company ant i ci pates t hat , wi t h r espect t o one or more oft he New Mi ni ng Ar eas, i t wi l l empl oy f aci l i t i es whi ch havebeen cr eat ed by t he Company pur suant t o t he provi si ons oft he Pri or Cont r act . The Company shal l be aut hor i zed t ocont i nue t o empl oy such f aci l i t i es f or al l pur poses of t hi sAgr eement dur i ng t he f ul l t er m her eof , i ncl udi ng anyext ensi ons of such t er m.

4. I n car r yi ng out i t s acti vi t i es wi t h r espect t o t heConst r uct i on Per i ods r el at ed t o t he New Mi ni ng Ar eas, t heCompany shal l compl y wi t h and be subj ect t o t he pr ovi si onsof par agr aph 9 of Ar t i cl e 10.

ARTI CLE 10

OPERATI NG PERI OD

1. Af t er compl et i on of t he const r ucti on of t he f aci l i t i espr ovi ded f or i n Ar t i cl e 9 wi t h r espect t o a New Mi ni ng Ar eaor an operabl e por t i on t hereof , t he Company shal l pr ompt l ycommence oper at i on of such New Mi ni ng Ar ea or par t t her eoff or whi ch such f aci l i t i es have been const r uct ed.

2. The Company shal l conduct Mi ni ng operat i ons and any act i vi t yof t he Ent er pr i se wi t h r espect t o any Mi ni ng Ar ea dur i ng t heOperat i ng Per i od. Cont r act Ar ea Bl ock A i s i n t he Oper at i ngPer i od. The Cont r act Ar ea Bl ock B shal l ent er i nt o t he

Oper at i ng Per i od on t he ear l i est of ( i ) t he f i r st day of t hecal endar mont h f ol l owi ng t he f i r st cal endar mont h dur i ngwhi ch t he aggr egat e aver age dai l y t hr oughput i s at l eastsevent y per cent of t he desi gn capaci t y of al l f aci l i t i esconst r uct ed or t o be const r uct ed pur suant t o al l Feasi bi l i t ySt udi es pr ovi di ng f or t he Mi ni ng and Pr ocessi ng of deposi t si n t he Cont r act Ar ea Bl ock B, ( i i ) the dat e whi ch i s si xmont hs af t er t he dat e of compl et i on of such f aci l i t i es, and( i i i ) t he end of ei ght year s ( or such l onger per i od as mayr esul t f r om extensi ons gr ant ed by t he Depar t ment f or t hecompl et i on of ear l i er st ages under t hi s Agr eement ) f r om t hedat e of t he si gni ng of t hi s Agr eement . The Operat i ng Per i odshal l cont i nue f or a per i od measur ed by the i ni t i al t er m oft hi s Agr eement and any ext ensi ons t her eof pur suant t o

par agr aph 2 of Ar t i cl e 31.

3. I f , at any t i me pr i or t o t he t i me when t he Cont r act Ar eaBl ock B shal l have ent er ed i nt o t he Oper at i ng Per i od aspr ovi ded i n paragr aph 2 of t hi s Ar t i cl e 10, t he Company hascommenced Mi ni ng i n any New Mi ni ng Ar ea and t he aver agedai l y t hr oughput f r omMi ni ng wi t h respect t o such New Mi ni ngAr ea i s at l east sevent y per cent of t he desi gn capaci t y ofal l f aci l i t i es const r uct ed or t o be const r uct ed pur suant t ot he Feasi bi l i t y St udy pr ovi di ng f or t he Mi ni ng andPr ocessi ng of t he deposi t or deposi t s i n such Mi ni ng Ar ea,t he Company shal l submi t a wr i t t en not i ce t o t he Depar t mentt o such ef f ect and, as of the f i r st day of t he f ol l owi ng


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mont h, but i n no event l at er t han t he dat e whi ch i s si xmont hs af t er t he dat e of compl et i on of such f aci l i t i es, suchNew Mi ni ng Ar ea shal l be deemed t o have ent er ed i nto t heOperat i ng Per i od, wi t hout af f ect i ng t he Company s r i ght s andobl i gat i ons her eunder wi t h r espect t o t he bal ance of t heCont r act Ar ea Bl ock B.

4. The Company shal l Process or e t o produce met al or ot hermarket abl e Product . For t hat pur pose, t he Company shal lpr epar e or cause t o be pr epar ed a f easi bi l i t y st udy wi t hr espect t o a possi bl e smel t er i n I ndonesi a, whi ch shal l besubj ect t o t he Gover nment s r evi ew and t o a mutualdeter mi nat i on by t he Gover nment and t he Company as t o t heeconomi c vi abi l i t y of such a smel t er . Such smel t er woul d bel ocat ed at such pl ace wi t hi n I ndonesi a as woul d be mostadvant ageous t o i t s economi c vi abi l i t y. Shoul d such asmel t er be bui l t by t he Company or a whol l y- ownedSubsi di ar y, i t woul d const i t ut e a par t of t he Ent er pr i sehereunder .

5. The Company acknowl edges t he Government s pol i cy t o

encour age t he domest i c pr ocessi ng of al l of i t s nat ur alr esour ces i nt o f i nal pr oduct s wher e f easi bl e. The Companyf ur t her acknowl edges t he Government s desi r e t hat a coppersmel t er and r ef i ner y be establ i shed i n I ndonesi a and agr eest hat i t wi l l make avai l abl e copper concent r at es der i ved f r om

t he Cont r act Ar ea f or such smel t er and r ef i ner y soest abl i shed i n I ndonesi a as pr ovi ded bel ow.

Dur i ng any per i od dur i ng whi ch smel t i ng and r ef i ni ngf aci l i t i es wi t h r espect t o any Mi ned Product of t he Companyhave not been est abl i shed i n I ndonesi a by or on behal f oft he Company, or any whol l y- owned Subsi di ary, but have beenest abl i shed i n I ndonesi a by any other Person, t he Company

shal l , i f so r equested by t he Government , sel l such Mi nedProduct s t o such ot her Per son at pr i ces and t erms no l essf avorabl e t o such Per son t han t hose t hat coul d be obt ai nedby t he Company f r om ot her pur chaser s of the same quant i t yand qual i t y and at t he same t i me and t he same or equi val entpl aces and t i mes of del i ver y, pr ovi ded t hat t he r espect i vecont r act ual t erms and condi t i ons gi ven by t he Company t osuch other Per son shal l be no l ess f avorabl e t o the Company.

Wi t h r espect t o t he f i r st copper smel t er est abl i shed i nI ndonesi a by anyone other t han t he Company or a whol l y- ownedSubsi di ary of t he Company, t he quant i t y of copperconcent r ates der i ved f r om t he Cont r act Ar ea whi ch t heCompany shal l make avai l abl e on t he t erms set out above

shal l be suf f i ci ent t o sat i sf y t he domest i c demand i nI ndonesi a f or r ef i ned copper and to per mi t economi c scal e ofsuch pr oj ect assumi ng t hat such pr oj ect i s other wi sef easi bl e, and f ur t her subj ect t o t he l i mi t at i on t hat t hequant i t y r equi r ed shal l not be so gr eat as t o j eopar di ze thesound f i nanci al , operat i ng or mar ket i ng r equi r ement s of t heCompany. I n maki ng sal es t o a smel t er or ref i ni ng f aci l i t yi n I ndonesi a, t he Company wi l l not be t r eat ed moreadver sel y, f r om t he st andpoi nt of Government al l aws andr egul at i ons, t han i f i t had sol d such Mi ned Pr oduct s asexport goods. The obl i gat i on of t he Company t o sel l i t sProduct s t o another Per son pur suant t o t hi s par agr aph 5 i ssubj ect t o any f i nanci ng agr eement s, sal es cont r act s or any


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smel t i ng and r ef i ni ng cont r acts ent ered i nt o by t he Companypr i or t o t he est abl i shment of such f aci l i t i es by such ot herPer son or any f i nanci ng agr eement s ent ered i nt o pur suant t opar agr aph 2 of Ar t i cl e 30.

I n t he event t hat dur i ng t he f i ve year per i od commenci ng ont he si gni ng of t hi s Agr eement , a copper smel t er and r ef i ner y

f aci l i t y to be l ocat ed i n I ndonesi a has not been est abl i shedor i s not i n t he pr ocess of bei ng const r uct ed by any Per son,t hen, subj ect t o t he mut ual det ermi nat i on by the Governmentand t he Company as t o t he economi c vi abi l i t y of such smel t erand r ef i nery, t he Company shal l under t ake or cause t o beunder t aken t he est abl i shment of a copper smel t er andr ef i ner y i n I ndonesi a t o compl y wi t h t he pol i cy of t heGover nment .

6. The Company i s, subj ect t o t he r i ght s of t hi r d par t i es,her eby gr ant ed al l necessary l i censes and per mi t s t oconst r uct and oper at e the smel t er r ef er r ed t o i n par agr aph 4of t hi s Ar t i cl e 10 and t he f aci l i t i es descri bed i n par agr aph2 of Ar t i cl e 9 i n accordance wi t h appl i cabl e l aws and

r egul at i ons f r om t i me t o t i me i n ef f ect , i ncl udi ng suchr easonabl e saf et y r egul at i ons r el at i ng t o desi gn,const r uct i on and operat i on as may f r omt i me t o t i me be i nef f ect and of gener al appl i cabi l i t y i n I ndonesi a.

7. The Company shal l submi t t o t he Depar t ment t he f ol l owi ngr eport s as t o oper at i ons wi t hi n each Mi ni ng Ar eas:

( i ) a bi weekl y st at i st i cal r epor t begi nni ng wi t h t he f i r stt wo weeks f ol l owi ng t he commencement of t he Oper at i ngPer i od, whi ch shal l set f or t h t he amount of mat er i alMi ned, Processed, shi pped and expor t ed;

( i i ) a mont hl y r epor t begi nni ng wi t h t he f i r st mont hf ol l owi ng t he commencement of t he Oper at i ng Per i od,whi ch shal l set f or t h t he number and descr i be t hel ocat i on of t he act i ve oper at i ons dur i ng t he pr ecedi ngmont h and a br i ef descr i pt i on of t he work i n pr ogr essat t he end of t he mont h and of t he wor k cont empl at eddur i ng t he f ol l owi ng mont h;

( i i i ) a quar t er l y r epor t begi nni ng wi t h t he f i r stquar t er f ol l owi ng t he dat e of t he si gni ng of t hi sAgreement wi t h r espect t o the Cont r act Ar ea Bl ock A andbegi nni ng wi t h t he f i r st quar t er f ol l owi ng t hecommencement of t he Oper at i ng Per i od wi t h r espect t oeach New Mi ni ng Ar ea concerni ng t he pr ogr ess of i t s

oper at i ons i n such Mi ni ng Ar ea, whi ch r epor t shal ldescri be i n r easonabl e det ai l t he Mi ni ng acti vi t i escar r i ed on i n such Mi ni ng Ar ea, i ncl udi ng the number ofwor kmen empl oyed i n such Mi ni ng Ar ea as of t he end oft he quar t er i n quest i on and a descr i pt i on of t he worki n pr ogr ess at t he end of t he quar t er i n quest i on andof t he work cont empl ated dur i ng t he ensui ng quart er ;and

( i v) an annual r epor t begi nni ng wi t h t he year whi ch i ncl udest he dat e of t he si gni ng of t hi s Agr eement wi t h r espectt o t he Cont r act Ar ea Bl ock A and begi nni ng wi t h t hef i r st f ul l year f ol l owi ng t he commencement of t he


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Oper at i ng Per i od wi t h r espect t o each New Mi ni ng Ar eawhi ch shal l :

a. descr i be i n r easonabl e det ai l t he Mi ni ngact i vi t i es car r i ed on i n such Mi ni ng Ar ea;

b. i ncl ude t he t ot al vol ume of or es, ki nd- by- ki nd,

br oken down bet ween vol umes Mi ned, vol umest r anspor t ed f r omt he Mi nes and t hei r cor r espondi ngdest i nat i on, vol umes st ockpi l ed at t he Mi nes orel sewhere i n I ndonesi a, vol umes sol d or commi t t edf or export ( whet her act ual l y shi pped f r om

I ndonesi a or not ) , vol umes act ual l y shi pped f r om I ndonesi a ( wi t h i nf or mat i on as t o pur chaser ,

dest i nat i on and ter ms of sal e) ; and

c. i ncl ude work accompl i shed and work i n pr ogr ess att he end of t he year i n quest i on wi t h r espect t oal l of t he i nstal l at i ons and f ac i l i t i es rel at ed t osuch Mi ni ng Ar ea, t oget her wi t h a f ul l descr i pt i onof al l work pr ogr ammed f or t he ensui ng year wi t h

r espect t o such i nstal l at i ons and f aci l i t i es,i ncl udi ng a det ai l ed r epor t of al l i nvest mentactual l y made or commi t t ed dur i ng t he year i nquest i on and al l i nvest ment commi t t ed f or t heensui ng year or year s.

Bi weekl y r epor t s shal l be submi t t ed i n ei ght f ol d wi t hi n t woweeks af t er t he end of t he t wo weeks i n quest i on. Mont hl yr epor t s shal l be submi t t ed i n ei ght f ol d wi t hi n t wo weeksaf t er t he end of t he mont h i n quest i on. Quar t er l y r epor t sshal l be submi t t ed i n ei ght f ol d wi t hi n t hi r t y days af t er t heend of t he quar t er i n quest i on. Annual repor t s shal l besubmi t t ed i n ei ght f ol d wi t hi n ni net y days af t er t he end of

t he year i n quest i on.

8. The Company shal l have f ul l and ef f ect i ve cont r ol andmanagement of al l matt er s r el at i ng t o t he oper at i on of t heEnt er pr i se i ncl udi ng t he pr oduct i on and mar ket i ng of i t sProducts. The Company may make expansi ons, modi f i cat i ons,i mpr ovement s and repl acement s of t he Ent erpr i ses sf aci l i t i es, and may add new f aci l i t i es as t he Company shal lconsi der necessar y f or t he oper at i on of t he Ent er pr i se or t opr ovi de ser vi ces or t o car r y on acti vi t i es anci l l ar y ori nci dent al t o t he Ent er pr i se. Al l such expansi ons,modi f i cat i ons, i mpr ovement s, r epl acement s and addi t i onsshal l be consi der ed par t of t he pr oj ect f aci l i t i es.

9. The Company accept s t he r i ght s and obl i gat i ons t o conductoper at i ons and act i vi t i es i n accor dance wi t h t he t er ms oft hi s Agreement . The Company shal l conduct al l suchoper at i ons and act i vi t i es i n a good t echni cal manner i naccor dance wi t h such good and accept abl e i nt ernat i onalMi ni ng engi neer i ng s t andar ds and pr act i ces as areeconomi cal l y and t echni cal l y f easi bl e, and i n accor dancewi t h moder n and accept ed sci ent i f i c and t echni calpr i nci pl es. I n accor dance wi t h such st andar ds, t he Companyunder t akes t o use i t s best ef f or t s t o opt i mi ze t he Mi ni ngr ecover y of ore f r om pr oven r eser ves and met al l ur gi calr ecover y of Mi ner al s f r om t he or e t o t he ext ent i t i seconomi cal l y and t echni cal l y f easi bl e t o do so, usi ng


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appr opr i ate moder n and ef f ect i ve t echni ques, mat er i al s andmet hods desi gned t o achi eve mi ni mum wast age and maxi mum

saf et y as pr ovi ded i n t he appl i cabl e l aws and r egul at i ons ofI ndonesi a f r omt i me t o t i me i n ef f ect . The Company shal l usei t s best ef f or t s t o conduct al l oper at i ons and acti vi t i esunder t hi s Agr eement so as t o mi ni mi ze l oss of nat ur alr esour ces, and t o pr ot ect nat ur al r esour ces agai nst

unnecessar y damage.

10. The Government wi l l aut hor i ze t he Company t o f r eel y sel ectt he vessel s and ot her t r anspor t at i on f aci l i t i es t o be usedi n connect i on wi t h i mport s and expor t s of ar t i cl es undert hi s Agr eement . I n addi t i on, t he Company shal l have t her i ght at al l such t i mes t o pur chase f r om vendor s of i t schoi ce al l equi pment , mater i al s and suppl i es necessary f ort he operat i ons of t he Company hereunder , and t o ent er i nt oar r angement s t o make use of any f aci l i t i es bel ongi ng t oother Per sons ( whether or not Af f i l i at es of t he Company)upon such t erms and subj ect to such condi t i ons, i ncl udi ngt erms of payment , as t o owner shi p and ot her wi se, as i t deemsappr opr i ate; pr ovi ded t hat t he Depart ment shal l have t he

r i ght t o obj ect t o speci f i c vendor s or speci f i c ar r angement son the basi s of nat i onal secur i t y or f or ei gn pol i cy concer nsof t he Gover nment . I n any case wher e t he Government i s thesol e economi c sour ce of suppl y f or any ar t i cl e or commodi t ynecessary f or t he Ent er pr i se, adequat e suppl i es of suchar t i cl e or commodi t y shal l be made avai l abl e f or sal e t o t heCompany at pr i ces not great er t han t he f ai r market val uet her eof .

ARTI CLE 11

MARKETI NG

1. The Company shal l have t he r i ght t o expor t t he Productsobt ai ned f r om i t s oper at i ons under thi s Agr eement , subj ectt o t he obl i gat i ons set f or t h i n par agr aph 5 of Ar t i cl e 10.Any such expor t shal l be on such credi t t erms as t he Companydeems appr opr i at e f or market i ng i t s Product s, and nei t hert he Company nor any of t he pur chaser s of such Product s shal lbe r equi r ed by the Gover nment t o obt ai n l et t er s of cr edi t orot her cr edi t document s at any bank or other i nst i t ut i ons i nI ndonesi a or el sewhere i n connect i on wi t h market i ng suchPr oduct s, or ot her wi se. Wi t hout i n any way l i mi t i ng t heCompany s basi c r i ght t o expor t i t s Product s, such exportwi l l be subj ect t o t he r eport i ng and other non- monet ar ypr ovi si ons of t he expor t l aws and r egul at i ons of I ndonesi af r om t i me t o t i me i n ef f ect and t o t he pr ovi si ons of

par agr aph 2 of t hi s Ar t i cl e. Subj ect t o any pr eexi st i ngcont r act s f or t he sal e of Product s t o ot her s, and t heobl i gat i on t o make avai l abl e concent r at es i n order t osat i sf y t he Company s obl i gat i ons under paragr aph 5 ofAr t i cl e 10, t he Company shal l gi ve pr i or i t y t o sat i sf yi ngdomest i c I ndonesi an r equi r ement s f or use of i t s Product s i nI ndonesi a. Sal es t o I ndonesi an cust omer s wi l l be on t ermsand at pr i ces whi ch ar e compet i t i ve wi t h t hose pr ovi ded t onon- I ndonesi an cust omers.

2. The Company shal l sel l t he Product s i n accordance wi t hgener al l y accept ed i nt er nat i onal busi ness pract i ces, and usei t s best ef f or t s t o do so at pr i ces and on t er ms of sal e


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whi ch wi l l maxi mi ze t he economi c r etur n f r omt he oper at i onsher eunder , gi vi ng ef f ect t o worl d mar ket condi t i ons andot her ci r cumst ances pr evai l i ng at t he t i me of sal e orcont r act ; pr ovi ded t hat t he Gover nment shal l have t he r i ght ,on a basi s whi ch i s of gener al appl i cabi l i t y and non-di scr i mi nat or y as t o t he Company, t o pr ohi bi t t he sal e orexpor t of Mi ner al s or Pr oduct s i f such sal e or expor t woul d

be cont r ar y t o t he i nt er nat i onal obl i gat i ons of t heGover nment or t o ext er nal pol i t i cal consi der at i ons af f ect i ngt he nat i onal i nt er est of I ndonesi a. I n t he event of suchpr ohi bi t i on ( ot her t han a quot a r equi r ement i mposed pur suantt o an I nternat i onal Commodi t y Market i ng Agr eement ) , i f t heCompany i s unabl e t o f i nd al t ernat i ve market s on equi val entt erms and condi t i ons, t he Company shal l be gi ven assi st anceand cooperat i on by t he Gover nment t o over come t he possi bl econsequences of such pr ohi bi t i on.

3. To t he extent deemed necessary by t he Company t o secur ef i nanci ng f or t he Ent er pr i se her eunder or t o compl y wi t h i t sobl i gat i ons to t he l enders thereunder , however , t he Companyshal l have t he r i ght t o ent er i nt o l ong- t er m cont r acts f or

t he sal e of i t s Pr oduct s her eunder subj ect t o t heobl i gat i ons set f or t h i n par agr aph 5 of Ar t i cl e l 0 and i npar agr aph 1 of t hi s Ar t i cl e 11.

4. I n t he event t hat sal es are made or cont r acted t o be made t oAf f i l i at es, t he pr i ces t o be pai d t her ef or , t o t he ext entt hey af f ect any amounts payabl e t o t he Gover nment pur suantt o t he t er ms of t hi s Agr eement , shal l compl y wi t h t hepr ovi si ons of Ar t i cl e 13 and, t o t he ext ent appl i cabl e, ofAnnex "F" t o t hi s Agreement . The Company shal l submi t t o t heGover nment any pr oposed cont r act of sal e t o an Af f i l i at e f orappr oval as compl yi ng wi t h t he f or egoi ng pr ovi si ons. I f i tdoes so, and t he Gover nment ei t her so approves t he cont r act

or f ai l s to r espond wi t hi n t hr ee mont hs of such submi ssi on,t he cont r act shal l be deemed f or purposes hereof t o compl ywi t h t he f or egoi ng pr ovi si ons. I n any event sal escommi t ment s wi t h Af f i l i ates shal l be made onl y at pr i cesbased on or equi val ent t o ar m s l engt h sal es and i naccordance wi t h such t erms and condi t i ons at whi ch suchagr eement woul d be made i f t he par t i es had not beenAf f i l i at es, wi t h due al l owance f or nor mal sel l i ng di scount sor commi ssi ons. Such di scounts or commi ssi ons al l owed t heAf f i l i at es must be no gr eat er t han t he pr evai l i ng r at es sot hat such di scount s or commi ssi ons wi l l not r educe t he netproceeds of sal es to t he Company bel ow t hose whi ch i t woul dhave r ecei ved i f t he par t i es had not been Af f i l i at es. Nosel l i ng di scount s or commi ssi ons shal l be al l owed an

Af f i l i at e i n r espect of sal es f or consumpt i on by i t . Wi t hi nni net y days af t er t he end of each cal endar year , t he Companywi l l del i ver t o t he Depar t ment a r epor t descr i bi ng i n suchr easonabl e det ai l as t he Depar t ment may r easonabl y r equestal l sal es cont r act s ent er ed i nt o dur i ng t he pr ecedi ngcal endar year wi t h Af f i l i at es i n accor dance wi t h t hepr ovi si ons of t hi s par agr aph 4.

5. I f t he Gover nment bel i eves t hat any f i gur es r el at ed t o sal est o Af f i l i ates and used i n comput i ng any amount s payabl e t ot he Gover nment her eunder are not i n accordance wi t h t hepr ovi si ons of par agr aph 4 of t hi s Ar t i cl e ( or , i f such sal eswer e pur suant t o a cont r act , t her et of ore appr oved pur suant


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t o t he pr ovi si ons of such par agr aph 4, ar e not i n accor dancewi t h such cont r act ) , t he Gover nment may wi t hi n twel ve mont hsaf t er t he cal endar quar t er i n whi ch such Product s were sol d,but not t her eaf t er , so advi se t he Company i n wr i t i ng. TheCompany shal l submi t evi dence of t he cor r ectness of t hef i gur es wi t hi n f or t y- f i ve days af t er r ecei pt of such advi ce.Wi t hi n f or t y- f i ve days af t er r ecei pt of such evi dence, t he

Gover nment may gi ve not i ce to the Company i n wr i t i ng t hat i ti s st i l l not sat i sf i ed wi t h t he cor r ectness of t he f i gur esand, wi t hi n t en days af t er r ecei pt of such noti ce by t heCompany, a Commi t t ee, consi st i ng of one r epr esent at i ve ofand appoi nted by t he Gover nment and one r epr esent at i ve ofand appoi nt ed by t he Company, shal l be const i t uted t o r evi ewt he i ssue. The Commi t t ee shal l meet as soon as conveni entat a mut ual l y agr eeabl e pl ace i n I ndonesi a and i f t hemembers of t he Commi t t ee do not r each agreement wi t hi nt went y days af t er t hei r appoi nt ment or such l onger per i od ast he Gover nment and t he Company mut ual l y agree, t her epr esent at i ves shal l appoi nt a t hi r d member of t heCommi t t ee, who shal l be a per son of i nt ernat i onal st andi ngi n j ur i spr udence and shal l be f ami l i ar wi t h t he

i nt er nat i onal Mi ner al i ndust r y. The Commi t t ee, af t err evi ewi ng al l t he evi dence, shal l det ermi ne whet her t hef i gur es used by t he Company or any other f i gur es are i naccor dance wi t h par agr aph 4 of t hi s Ar t i cl e ( or an appr ovedcont r act , as t he case may be) . The deci si on of t wo member sof t he Commi t t ee shal l be bi ndi ng upon t he Par t i es. Fai l ur eof t wo r epr esent at i ves t o appoi nt a t hi r d member of t heCommi t t ee shal l r equi r e t he i ssue t o be submi t t ed toar bi t r at i on pur suant t o Ar t i cl e 21 of t hi s Agr eement . Wi t hi nni net y days af t er t he i ssue has been f i nal l y deci dedpur suant t o t hi s par agr aph, appr opr i at e r et r oact i veadj ust ment shal l be made i n conf ormi t y wi t h t he Commi t t ee sdeci si on. The Company and t he Gover nment each shal l pay the

expenses of i t s own member on the Commi t t ee and one hal f ofal l other expenses of t he Commi t t ee s proceedi ngs.

6. I n t he event t hat t he Company produces a concent r atecont ai ni ng any Preci ous Met al s whi ch ar e easi l y r ecover abl e,t he Company shal l , i f i t i s economi cal l y f easi bl e, makemaxi mum ef f ort s t o r ecover such Preci ous Met al s.

7. I n t he event of a sal e of copper concent r at es, gol d orsi l ver t o an Af f i l i at e or t o t he domest i c mar ket or t o t heGover nment s desi gnat ed agency, i t i s unders t ood that ,unl ess other wi se agr eed by t he Par t i es, t he pr i ce of suchProduct s shal l be deter mi ned on t he basi s of a f ormul a pr i cewhi ch i s general l y empl oyed i n t he sal e of comparabl e

pr oduct s among unr el ated part i es.

8. I f at any st age i n t he cour se of i t s mar ket i ng ar r angement ,t he Company r ef i nes, or t akes del i ver y of gol d or si l verr ef i ned f r om i t s Pr oduct s, t hen such gol d and si l ver wi l l bei n a f orm and bear mar ks whi ch wi l l make i t accept abl e i nt he i nt er nat i onal pr eci ous met al s mar ket s. For gol d, t hi smeans t he London Gol d Market ; f or si l ver t hi s means t heLondon Si l ver Mar ket .

ARTI CLE 12

I MPORT AND RE- EXPORT FACI LI TI ES


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1. The Company may i mpor t i nto I ndonesi a capi t al goods,equi pment , machi ner y ( i ncl udi ng spar e par t s) , vehi cl es( except f or sedan car s and st at i on wagons) , ai r cr af t ,vessel s, other means of t r ansport , consumabl es ( i ncl udi ngsaf ety equi pment , chemi cal s and expl osi ves) and r awmat er i al s bei ng i t ems needed f or use i n t he Mi ni ng,

Expl or at i on, f easi bi l i t y study, const r ucti on, pr oducti on andsuppor t i ng t echni cal acti vi t i es of t he Ent er pr i se.

2. For t he per i od begi nni ng on t he dat e of t he si gni ng of t hi sAgreement and endi ng on t he ei ght eenth anni ver sar y of suchdate, and except as other wi se pr ovi ded i n paragr aph 4 oft hi s Ar t i cl e, t he i mpor t s per mi t t ed by par agr aph 1 of t hi sAr t i cl e ( ot her t han f oodst uf f s, wear i ng appar el and ot hervi t al necessi t i es f or t he per sonal needs of t he Company sempl oyees and t hei r dependent s) shal l be exempted f r om

i mpor t dut i es and shal l obt ai n f ul l r el i ef f r om andpost ponement of val ue added t ax ( "VAT") ot her wi se payabl e aspr ovi ded by t he l aws and r egul at i ons f r omt i me t o t i me i nef f ect .

3. The pr ovi si ons of thi s Ar t i cl e shal l al so be appl i cabl e t oPer sons engaged as r egi st ered subcont r act or s of t he Companyt o car r y on wor k or per f or m ser vi ces wi t h r espect t o t heEnt er pr i se, and t o any equi pment di r ect l y used t o supportt he t echni cal operat i ons of t he Company or any suchsubcont r act or such as l abor atory and comput er equi pmentl ocat ed out si de i t s f i el d oper at i ons.

4. The exempt i on f r om i mpor t dut i es and r el i ef f r om andpost ponement of VAT as r ef err ed t o i n paragr aph 2 of t hi sAr t i cl e shal l appl y onl y t o t he extent t hat t he i mpor t edgoods are not produced or manuf act ured i n I ndonesi a and

avai l abl e on a compet i t i ve t i me, cost and qual i t y basi s,wi t hout dut y or t ax except t hat f or t he pur poses ofcompar i ng t he cost s of i mpor t s and t he cost of goodsmanuf actured or pr oduced i n I ndonesi a a pr emi um ( not i nexcess of t wel ve and a hal f percent ) shal l be appl i ed t o thecost of i mpor t s.

5. Any equi pment ( whi ch must be cl ear l y i dent i f i ed) andunconsumed mat er i al i mport ed by t he Company or r egi st er edsubcont r actors of t he Company f or t he excl usi ve pur pose ofpr ovi di ng ser vi ces t o t he Company and i ntended t o be r e-expor t ed wi l l be exempt f r om i mpor t dut i es and ent i t l ed t or el i ef f r om VAT and ot her l evi es. I f such equi pment andmat er i al shal l not have been r e- export ed by the t i me f or r e-

expor t ( as est abl i shed at t he t i me of i mport ) , t he Companyor t he subcont r act or s of t he Company, as t he case may be,shal l , unl ess such r e- export t i me has been extended orexempted f or r easons accept abl e t o t he Gover nment , payi mpor t dut i es, VAT and other l evi es not pai d upon ent r y.

The Company shal l be r esponsi bl e f or proper i mpl ementat i onof i t s subcont r actor s obl i gat i ons under t hi s Ar t i c l e.

6. Any i t em i mpor t ed by t he Company or i t s r egi st er ed sub-cont r act ors pur suant t o t hi s Ar t i cl e and no l onger neededf or t he Expl or at i on, Mi ni ng and Pr ocessi ng act i vi t i es of t heCompany may be sol d out si de I

Contract of Work - PT Freeport Indonesia

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