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EXHIBIT 10.24
CERTIFICATE OF TRANSLATION
I, Xxxxxx X. Xxxxxxx, Vice President, Exploration of Golden Star
Resources Ltd. (the "Company") declare to the best of my knowledge that the
attached is an accurate English translation of the Exploration Agreement dated
May 13, 1996 between Southern Star Resources Ltd., Estrela Sul do Brasil
Empreendimentos Ltda and Companhia Vale do Rio Doce and Rio Doce Geologia e
Mineracao S.A.
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Vice President, Exploration
State of Colorado )
County of Denver ) ss.
Subscribed and sworn to before me this 26th day of March, 1997 by
Xxxxxx X. Xxxxxxx.
/s/ Xxxxxxxx Xxxxxxxxx
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Notary Public
My Commission Expires: October 25, 1999.
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AGREEMENT FOR CARRYING OUT MINERAL
EXPLORATION AND PROMISE OF
ASSOCIATION FOR THE ECONOMIC
EXPLOITATION OF ORE DEPOSITS,
ENTERED INTO BETWEEN COMPANHIA VALE
DO RIO DOCE AND RIO DOCE GEOLOGIA E
MINERACAO S.A., ON THE ONE SIDE, AND
SOUTHERN STAR RESOURCES LTD. AND
ESTRELA SUL DO BRASIL
EMPREENDIMENTOS LTDA., ON THE OTHER
SIDE.
COMPANHIA VALE DO RIO DOCE, a Brazilian company, having its head office in this
City, at Av. Xxxxx Xxxxxx no. 26, enrolled in the Corporate Taxpayers Record
File (CGC - MF) under no. 33.592.510/0001-54, hereinafter referred to as CVRD,
and its subsidiary RIO DOCE GEOLOGIA E MINERACAO S.A., having its head office
in this City, at Xxx Xxxxx Xxxxx xx. 651 - 17th floor, enrolled in the
Corporate Taxpayers Record File (CGC - MF) under no. 34.230.763/0001-40,
hereinafter referred to as DOCEGEO, and
SOUTHERN STAR RESOURCES, LTD., a company incorporated and existing under the
laws of Barbados, having its head office at no. 0000 Xxxxxxx Xxxxxx, xxxxx
0000, Xxxxxx, Xxxxxxxx, X.X.X., hereinafter referred to as SOUTHERN, and its
Brazilian subsidiary ESTRELA SUL DO BRASIL EMPREENDIMENTOS LTDA., having its
head office in this City, at Av. Nilo Peganha no. 50, suite 1717 (part),
enrolled in the Corporate Taxpayers Record File (CGC - MF) under no.
00.626.882/0001-03, hereinafter referred to as ESTRELA, and both collectively
hereinafter referred to as COMPANY,
all of them together hereinafter referred to as PARTIES, and individually as
PARTY, herein represented by their officers
WHEREAS
I. CVRD and DOCEGEO own mineral rights in relation to areas located in
Para, the geological model of which is favorable to the occurrence of
gold.
II. CVRD has prepared a Program of Associations with private companies to
carry out, at their own risk, geological exploration followed by joint
exploitation of the gold reserves contingently found.
NOW, THEREFORE, the PARTIES decide to enter into this Agreement for carrying
out mineral exploration and promise of association for the economic
exploitation of ore deposits, hereinafter referred to as AGREEMENT, which shall
be governed by the following clauses and conditions:
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CHAPTER I
DEFINITIONS
1. Whenever used in this AGREEMENT, the terms in bold listed below shall have
the following meanings:
1.1 MINERAL RIGHTS, means the ore mining rights represented by
Xxxxxx (Exploration Permit) no. 7.731 (DNPM Proceedings no.
810.354/76), by Xxxxxx no. 827 (DNPM Proceedings no.802.913/78), and
by Xxxxxx no. 4.231 (DNPM Proceedings no. 850.026/89), true and
complete copies of which integrate Annex 1, and include all successor
mineral rights that may be granted, at any time, in the AREAS in full
or in part, and any information concerning them.
1.2 AREAS means the areas covered by the MINERAL RIGHTS, described
in detail in the copies of the Alvaras that constitute Annex 1, which
initially comprise joint areas representing a total of approximately
twenty five thousand (25,000) hectares.
1.3 INITIAL WORK PROGRAM means the work plan submitted by SOUTHERN
in its bid that is an integral part of this document as Annex 2.
1.4 COMPLEMENTARY WORK PROGRAM and COMPLEMENTARY WORK PROGRAMS
mean respectively one or all the work plans submitted by the COMPANY
after the INITIAL WORK PROGRAM for each one (1) year stage of
complementary exploration work.
1.5 COSTS OF THE AREAS means all costs or expenditures made by the
COMPANY in connection with agreements with surface owners or occupants
of the AREAS, or with any other agreements for obtaining or ensuring
access to the AREAS, entered into prior to the disbursement of the
MINIMUM INITIAL INVESTMENT, including all costs or expenditures
stipulated in such agreements in relation to the exploration and
exploitation to be paid after the disbursement of the MINIMUM INITIAL
INVESTMENT. The expenditures dealt with by items 12.2 and 27.2 of this
AGREEMENT shall not be included in the COSTS OF THE AREAS..
1.6 MINIMUM INITIAL INVESTMENT are all costs, expenses,
disbursements, debts and charges, whether direct or indirect, incurred
by the COMPANY, duly substantiated, and exclusively in relation to the
AREAS or the work contemplated by this AGREEMENT and carried out in
them, as specified in Annex 3, except the COSTS OF THE AREAS, up to a
total of five million two hundred thousand reals (R$ 5,200,000.00) as
adjusted by the IGPM index from the date of the execution of this
AGREEMENT to the date on which the total disbursement of the amount is
completed.
1.6.1 The MINIMUM INITIAL INVESTMENT of CVRD will be in the
same amount as the MINIMUM INITIAL INVESTMENT of the COMPANY,
and shall be deemed as having been made by CVRD on the date of
the execution of this AGREEMENT.
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1.7 MINIMUM DISBURSEMENT, called the minimum disbursement in the
COMPANY's bid, are all costs, expenses, disbursements, debts and
charges, whether direct or indirect, incurred by the COMPANY, duly
substantiated, and exclusively in relation to the work carried out in
the AREAS, or that concern them exclusively, as contemplated by this
AGREEMENT as specified in Annex 3, except the COSTS OF THE AREAS, up
to the total of three million seven hundred and seven thousand reals
(R$ 3,707,000.00) as adjusted by the IGPM index from the date of the
execution of this AGREEMENT to the date on which the total
disbursement of the amount is completed.
1.8 DEPOSIT means the aggregate of the measured and/or indicated
mineral resources (as such terms are generally employed in the
international industrial jargon of gold mining) of gold and gold
coproducts or associated metals discovered in the AREAS, provided that
such resources are of approximately one (1) million xxxx ounces or
more.
1.9 FEASIBILITY STUDY means the study of the technical-economical
feasibility of the exploitation of the mineral deposits in the AREAS,
comprising a detailed description of the implementation, development,
mining, processing and marketing strategy for a mine located in the
AREAS, in the form and at the detail level normally required by a
financial institution that is familiar with mining, with the purpose
of financing the projects. The FEASIBILITY STUDY is to take into
consideration the information obtained during the exploration work
carried out previously confirming the existence of the reserves
through detailed drilling, hydrogeologic and geotechnical work,
environmental studies, and the collection of one or more bulk samples
of the ore for metallurgical tests that may require the construction
of one or more shafts, construction of an incline, or work associated
with trial mining. The FEASIBILITY STUDY is to contain estimates both
of capital and operational costs, and is to analyze how to proceed
with the mining operations in order to extract economically and
commercially the target mineral (minerals), identify the ideal
structure for the mining project, and include references to the
relevant marketing and financial aspects.
1.10 VALUE OF THE MINERAL RIGHTS or NET PRESENT VALUE of NPV means
the value, on the date of the evaluation, of the proven and probable
ore reserves defined in the FEASIBILITY STUDY of the AREAS, after
deducting the taxes and statutory royalty payments. Such value shall
be stated in U.S. dollars and shall be calculated with a cost of
capital (internal discount rate) of eight point seven percent (8.7%)
per year, based on the immediate development of a mine in the AREAS,
based on the basic assumptions used in the FEASIBILITY STUDY, with one
hundred percent (100%) of equity financing, assuming free salability
of the gold in the international markets, and the U.S. dollar as
constant. Any supplementary resources that may be reasonably inferred,
even if they that are not categorized as proven or probable reserves
in the FEASIBILITY STUDY, shall be accounted as increments in the NET
PRESENT VALUE analysis, being processed in the same facilities
included in the capital and operational cost model used in the initial
calculations of the NET PRESENT VALUE. Alternative methods, such as
rate of return analysis, shall not be employed in the calculation of
the NET PRESENT VALUE, but only the net present value method as
described in this agreement.
1.11 TOTAL EXPENDITURES means the total expenditures made jointly
by the PARTIES during the WORK PROGRAMS and the preparation of the
FEASIBILITY STUDY, after the disbursement by the COMPANY of the
MINIMUM INITIAL INVESTMENT, except the COSTS OF THE AREAS and the
MINIMUM INITIAL
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INVESTMENT. Costs, expenses, disbursements, debts and charges, whether
direct or indirect, made by the COMPANY, related to or incidental upon
any work done in the AREAS or concerning exclusively the AREAS or the
products derived therefrom, according to Annex 3, that are not COSTS
OF THE AREAS, shall be included in the calculation of the TOTAL
EXPENDITURES.
1.12 WORK PROGRAM means the INITIAL WORK PROGRAM or any
COMPLEMENTARY WORK PROGRAM that may be carried out, if applicable.
1.13 ASSOCIATION means a corporation or any other type of
association between the COMPANY and CVRD or their respective
affiliates that will provide to the PARTIES the most advantageous ways
to implement a mine and exploit the MINERAL RIGHTS according to
Brazilian laws, administrative, tax and business factors, subject to
the provisions of Chapter IX and the other ones of this AGREEMENT. In
the event any of the PARTIES retains a ROYALTY instead of its INTEREST
PERCENTAGE in the ASSOCIATION, pursuant to the terms established
herein, the term ASSOCIATION shall refer to the operating company that
is implementing and exploiting a mine to the benefit of the other
PARTY.
1.13.1 The PARTIES shall have assured to them the necessary
flexibility to adopt the procedures aiming to the formation of
the ASSOCIATION in the most advantageous way for them in
relation to the limitations of Brazilian legislation and their
administrative conveniences, and subject to any requests CVRD
may make to the COMPANY as for such way, in order to obtain
the AUTHORIZATIONS.
1.14 ASSOCIATION AGREEMENT means an association agreement or any
other type of agreement that regulates in detail the terms and the
conditions under which the ASSOCIATION will operate and will be
managed. The ASSOCIATION AGREEMENT shall contain all the terms and
conditions specifically set forth in this AGREEMENT for inclusion in
the ASSOCIATION AGREEMENT, as well as the terms of Annex 4 that are
appropriate to the type of ASSOCIATION, plus the additional terms over
which the PARTIES may reach an agreement.
1.15 ROYALTY means the amount equivalent to a percentage on the
gold production ascertained after the refining, upon the mining and
beneficiating of the demonstrated reserves contained in the MINERAL
RIGHTS.
1.16 OPTION has the meaning attributed in clause 6 hereof.
1.17 PARTICIPATING INTEREST means
(i) prior to the formation of the ASSOCIATION, the percentage
of contribution of each one of the PARTIES to the aggregate
amount of the TOTAL EXPENDITURES plus the MINIMUM INITIAL
INVESTMENT of each PARTY; and
(ii) after the formation of the ASSOCIATION, and when it is
mentioned in this AGREEMENT, the percentage equivalent to the
interest of one PARTY in the stock capital of the ASSOCIATION.
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1.18 AUTHORIZATIONS means all governmental, legislative,
ministerial or other kind of approvals, consents or collateral
signatures of any type that are required by the legislation in force
or by the bylaw of CVRD or of DOCEGEO for admission to and for the
formation of the ASSOCIATION with the COMPANY and for the performance
of the ASSOCIATION AGREEMENT.
1.19 PVI or PRESENT VALUE OF THE CAPITAL INVESTMENT means the
present value of the capital investment forecasted in the FEASIBILITY
STUDY to implement the business.
1.20 CONTROL means the holding of the majority of the voting
capital of a corporation and the permanent power to elect the majority
of its board.
1.21 IGPM means the General Index of Prices in the Market ("Indice
Geral de Pregos do Xxxxxxx)" of Xxxxxxx Xxxxxx Foundation.
CHAPTER II
PURPOSE
2. The following constitute the purpose of this agreement:
2.1 The carrying out by the COMPANY, on its own account and risk,
of mineral exploration work, specifically; for gold, in the AREAS.
2.2 The promise hereby made by CVRD to directly or indirectly
associate with the COMPANY for the economic exploitation of the gold
deposits which may be found in the AREAS.
2.3 The grant of an OPTION to the COMPANY, subject to the
provisions of item 1.17 and of clause 22, to obtain an PARTICIPATING
INTEREST in the ASSOCIATION, that is to hold the MINERAL RIGHTS and
carry out the exploitation of gold and associated minerals discovered
in the AREAS, provided that the FEASIBILITY STUDY results positive,
and subject to the AUTHORIZATIONS and other provisions of this
AGREEMENT.
2.4 To establish the terms and clauses that shall govern the
COMPANY, CVRD and DOCEGEO during the mineral exploration in the AREAS,
the preparation of the FEASIBILITY STUDY and, if applicable, the
formation of the ASSOCIATION.
CHAPTER III
TITLE ON THE MINERAL RIGHTS
3. CVRD represents it is the beneficial titleholder of the mineral rights
represented by Xxxxxx (Exploration Permit) no. 7.731 (DNPM Proceedings no.
810.354/76), by Xxxxxx no. 827 (DNPM Proceedings no.802.913/78), which are in
perfect order, duly registered and recorded, free and clear of any
encumbrances, and validly authorize the exploration for gold in the AREAS in
accordance with the applicable laws.
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4. DOCEGEO represents it is the beneficial titleholder of the mineral
rights represented by Xxxxxx no. 4.231 (DNPM Proceedings no. 850.026/89), which
is in perfect order, duly registered and recorded, free and clear of any
encumbrances, and validly authorizes the exploration for gold in the AREAS in
accordance with the applicable laws.
4.1 DOCEGEO and CVRD represent that the ore exploration right
dealt with by this clause is free and clear of any encumbrances except
for the Waiver signed on 06/24/91 with the National Department of
Mineral Exploration (DNPM) which is an integral part of Annex I of
this AGREEMENT, and undertake to use their best efforts to render it
ineffective.
5. CVRD and DOCEGEO undertake to maintain the MINERAL RIGHTS under their
title, in perfect order, and free and clear of any encumbrances and charges,
for as long as this AGREEMENT is in effect, fulfilling all necessary legal
requirements to that effect.
5.1 In the event CVRD or DOCEGEO are no longer the titleholders of
the MINERAL RIGHTS, while this AGREEMENT is still effective, due to
any action or omission of CVRD or DOCEGEO, or due to the event dealt
with by item 4.1 of this AGREEMENT, this AGREEMENT shall be considered
automatically terminated, and CVRD shall pay the COMPANY as liquidated
damages:
(i) within thirty (30) days as of the loss of the title
of said MINERAL RIGHTS, an amount equal to one hundred and
fifty percent (150%) of all expenditures made by it until
then, except the COSTS OF THE AREAS, in case the loss of the
MINERAL RIGHTS occurs before the existence of a DEPOSIT is
evidenced, whereby the COMPANY hereby waives any other
remedies and benefits it might have under the legislation in
force;
(ii) the PARTICIPATING INTEREST of the COMPANY multiplied
by the VALUE OF THE MINERAL RIGHTS, in five (05) annual
installments adjusted by the IGPM index, in the event the loss
of the MINERAL RIGHTS occurs after the existence of a DEPOSIT
is evidenced but before the completion of a FEASIBILITY STUDY
considered positive, whereby the COMPANY hereby waives any
other remedies and benefits it might have under the
legislation in force;
(iii) the PARTICIPATING INTEREST of the COMPANY multiplied
by the VALUE OF THE MINERAL RIGHTS, in five (05) annual
installments adjusted by the IGPM index, in the event the loss
of the MINERAL RIGHTS occurs after the completion of a
FEASIBILITY STUDY considered positive, whereby the COMPANY
hereby waives any other remedies and benefits it might have
under the legislation in force;
5.2 In the event the loss of the MINERAL RIGHTS occurs after the
DEPOSIT is evidenced, but before the completion of a FEASIBILITY
STUDY, the PARTIES agree to complete the FEASIBILITY STUDY in the way
regulated in this AGREEMENT, so that it is possible to calculate the
indemnification dealt with by item 5.1 (ii), above.
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CHAPTER IV
OPTION TO ASSOCIATE
6. CVRD and DOCEGEO hereby grant to the COMPANY (i) the exclusive and
irrevocable right to carry out work in the AREAS, pursuant to the MINERAL
RIGHTS, and (ii) the OPTION to acquire a PARTICIPATING INTEREST in the
ASSOCIATION to be formed, subject to the provisions of item 1.17 and of clause
22, conditioned on the cumulative occurrence of the three events listed below:
6.1 A positive FEASIBILITY STUDY is obtained; AND
6.2 CVRD obtains the AUTHORIZATIONS; AND
6.3 The COMPANY has made the MINIMUM INITIAL INVESTMENT.
7. The OPTION shall be considered automatically exercised by the COMPANY
as soon as the events listed in clause 6, above, occur.
7.1 The COMPANY may fail to exercise the OPTION and terminate this
AGREEMENT, without obligations or liabilities in relation to the
MINERAL RIGHTS or to the AREAS, by written notice to CVRD, at any
time, provided that the COMPANY has made the MINIMUM DISBURSEMENT
already. Otherwise the COMPANY shall pay CVRD the difference between
the MINIMUM DISBURSEMENT and the actual amount of expenditures that
have been made already to the date of the notice of termination.
CHAPTER V
EXPLORATION WORK
8. The COMPANY undertakes to carry out all geological exploration works
in accordance with the mining/environmental legislations, with the WORK
PROGRAMS and under the following conditions:
8.1 The COMPANY shall be responsible, at its sole discretion, for
the mineral exploration work in the AREAS, comprising all managerial,
technical and administrative activities, within the scope of the WORK
PROGRAM.
8.2 The COMPANY shall have full power and authority over the AREAS
to carry out the mineral exploration work substantially within the
periods of time scheduled in the WORK PROGRAM, except where due to a
force majeure. However, CVRD and DOCEGEO shall use their best efforts
to assist it in order to assure the development of the work in the
AREAS according to the WORK PROGRAM.
8.3 All matters related to the exploration work will be dealt by
the COMPANY with DOCEGEO, which only for this purpose will act on
behalf of CVRD. After the execution of this AGREEMENT, DOCEGEO shall
appoint its permanent technical representatives, whose
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responsibilities shall be to act in favor of DOCEGEO, and shall
provide the COMPANY with their names and other data required for
communication with DOCEGEO under this AGREEMENT.
8.4 The COMPANY undertakes to submit for DOCEGEO's approval, which
is not to be unreasonably withheld, every three (3) months, a report
with the partial results of the exploration and a statement of the
expenses made in the period of time, also informing the contingent
discovery of the occurrence of any other mineral substance. DOCEGEO
may ask the COMPANY, through notice in writing, within fifteen (15)
days after receiving the report, additional details or clarifications
regarding any information contained in any report, and the COMPANY
shall immediately render the respective clarifications. In the event
DOCEGEO does not reply in a term of 15 days counted from the receipt
of the report, the latter shall be deemed approved.
8.5 This AGREEMENT and the MINERAL RIGHTS shall encompass gold and
any other minerals that are coproducts of gold, or that are otherwise
closely related to gold, considering as such those that, for an
efficient economic exploitation, should be mined and processed jointly
with gold. The ownership, exploration and contingent commercial
exploitation of any other substances will be incumbent upon CVRD or
DOCEGEO exclusively, whereby no indemnification or reimbursement for
expenditures made is due to the other PARTIES.
8.5.1 The COMPANY and the ASSOCIATION may make use of sand,
gravel, timber and other minerals and natural resources
existing in the AREAS, on a non-commercial basis, in order to
comply with the provisions of this AGREEMENT and the
ASSOCIATION AGREEMENT, subject to the legislation in force.
8.6 CVRD and DOCEGEO undertake to offer to the COMPANY the right
of first refusal to associate with CVRD for the exploitation of any
commercial minerals not encompassed in this AGREEMENT and in the
MINERAL RIGHTS, according to item 8.5, above, whenever such right may
be offered by CVRD to third parties, and under the same terms and
conditions.
8.7 CVRD and DOCEGEO may, whenever they wish, and at their
expense, on three (3) days' notice to the COMPANY, and through the
prior accrediting of persons, carry out the surveillance of the
exploration work and of this AGREEMENT, whereby the COMPANY will be
obligated to facilitate the surveillance action, permitting free
access to all locations, documents, data and elements related to its
performance.
9. The COMPANY, except in case of force majeure, undertakes to start the
exploration work in a term of ninety (90) days counted from the execution of
this AGREEMENT, whereby all time references included in the INITIAL WORK
PROGRAM will be extended for an equal period of time.
10. The term required for the COMPANY to carry out the INITIAL WORK
PROGRAM is thirty (30) months. The COMPANY may be authorized by DOCEGEO to make
changes in the INITIAL WORK PROGRAM or any COMPLEMENTARY WORK PROGRAM, based on
the results of the program performed and other circumstances that may arise
during the performance of such WORK PROGRAM. DOCEGEO may not unreasonably
withhold or delay its authorization.
11. In the hypothesis that at the and of the term required for carrying
out the INITIAL WORK PROGRAM the existence of a DEPOSIT has not been confirmed
yet, but there being a reasonable
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possibility of attainment of such goal, the PARTIES shall agree to continue the
exploration work, under this clause, provided that the sum of the periods of
tune of the INITIAL WORK PROGRAM and the COMPLEMENTARY WORK PROGRAMS does not
exceed the limit of fifty four (54) months.
11.1 After the completion of the INITIAL WORK PROGRAM, exploration
shall be divided in stages with the duration of one (1) year each, or
longer periods of time to be agreed upon mutually between the PARTIES.
At least thirty (30) days before the end of each stage, the COMPANY
shall deliver to DOCEGEO, for examination and approval as for its
technical and economic adequacy, the COMPLEMENTARY WORK PROGRAM of the
subsequent stage.
11.2 DOCEGEO may refuse to approve the COMPLEMENTARY WORK PROGRAM
only for well-founded motives.
11.2.1 The COMPLEMENTARY WORK PROGRAM shall be deemed
accepted by DOCEGEO in case the latter does not notify the
COMPANY in writing about its refusal, along with the
justifications and suggested revisions, within thirty (30)
days after its receipt.
11.2.2 In the event divergences arise among the PARTIES
about the COMPLEMENTARY WORK PROGRAM, that cannot be solved
prior to the date of the start of the new suggested
COMPLEMENTARY WORK PROGRAM, the PARTIES shall resolve such
disputes according to Chapter XII of this AGREEMENT. The
resolutions obtained according to that chapter, regarding the
proposed COMPLEMENTARY WORK PROGRAM, shall be final and
binding upon the PARTIES. The PARTIES agree that the COMPANY
shall proceed with the proposed COMPLEMENTARY WORK PROGRAM
during this period of time and that the expenses of the
exploration work shall not exceed the amounts spent during the
most recently completed WORK PROGRAM.
11.3 In the event the existence of a DEPOSIT is not evidenced after
the end of the fifty four (54) months counted from the start of the
INITIAL WORK PROGRAM, this AGREEMENT shall be automatically
terminated, whereby the COMPANY shall not be entitled to any
indemnification under any title, but will be obligated to transfer all
its results to CVRD. If the COMPANY has not made the MINIMUM
DISBURSEMENT yet, it shall pay CVRD the difference between such amount
and the expenditures actually made.
11.4 If CVRD or the COMPANY, for any motive and at any time after
the COMPANY has equalized the MINIMUM INITIAL INVESTMENT, do not
contribute to the expenditures required for carrying out the WORK
PROGRAM the way they should according to this AGREEMENT, and one of
the PARTIES wishes to proceed with further exploration works in order
to try and define a DEPOSIT, such PARTY is authorized to proceed, at
its own cost, with the remaining exploration and/or the resource
evaluation. In such case, the PARTICIPATING INTEREST of the PARTY that
has not contributed shall be diluted and shall decrease permanently to
the extent it does not participate in such continuation of the
exploration work in accordance with clause 22 of this AGREEMENT.
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11.5 If the COMPANY, at its discretion and at any time, decides to
discontinue its participation, it shall withdraw from this AGREEMENT
and relinquish its OPTION.
11.5.1 In this hypothesis, and in case the COMPANY has not
completed the MINIMUM DISBURSEMENT, it shall pay CVRD, in
thirty (30) days, the difference between such amount and the
disbursement actually made. In this case, the COMPANY shall
not be entitled to any indemnification or reimbursement of the
amounts spent in the AREAS that are the subject matter of this
AGREEMENT.
CHAPTER VI
RELATIONS WITH SURFACE OWNERS AND GOLD DIGGERS
12. The COMPANY undertakes to carry out and put into effect, on its
account and responsibility, all understandings and agreements with the surface
owners of the lands where it will enter to carry out the exploration works,
aiming to obtain the due authorization, where the COMPANY deems necessary to
obtain such authorization, and/or agreements for their participation in a
future exploitation of the deposit(s).
12.1 No understanding or agreement with any surface owner may
create an obligation of any kind for CVRD nor may it compromise the
future economic exploitation of the deposit(s) that may be carried out
by the contingent association of the COMPANY with CVRD, or by the
latter severally. All understandings or agreements with any surface
owner shall be entered into or carried out only through the COMPANY.
12.1.1 CVRD shall pay its proportional share of any costs or
additional compensations that may arise after the COMPANY has
equalized the MINIMUM INITIAL INVESTMENT, relative to the
removal of surface owners, gold diggers (garimpeiros) or third
parties that are occupying the AREAS, not included in the
COSTS OF THE AREAS, provided that it has approved the terms of
such obligations. CVRD may not unreasonably withhold its
approval to such terms
12.2 In the event the PARTIES agree on the need to acquire real
estate and/or fixed improvements for the future exploitation of the
MINERAL RIGHTS before the ASSOCIATION is formed, CVRD and the COMPANY
shall acquire them proportionately to their respective PARTICIPATING
INTEREST and hold them as jointly owned property.
12.2.1 In the event of expiration or termination of this
AGREEMENT for any motive, at any time, without the transfer of
the MINERAL RIGHTS to the COMPANY or to the ASSOCIATION, the
COMPANY undertakes to sell, upon written request from CVRD,
and CVRD to buy, its share of the jointly owned property for
the acquisition price as adjusted by the IGPM.
12.2.2 In the even of expiration or termination of this
AGREEMENT for any motive, at any time, where there has been a
transfer of the MINERAL RIGHTS to the COMPANY or to the
ASSOCIATION, CVRD undertakes to sell, upon written request
from the COMPANY, and the COMPANY to buy, its share of the
jointly owned property for the acquisition price as adjusted
by the IGPM.
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13. Prior to the completion of the WORK PROGRAMS, the COMPANY undertakes
to inform CVRD of any trespass or attempted trespass by third parties onto the
AREAS, including gold diggers, as well as to resort to all legal,
administrative and judicial means to prevent the entry or stay of such third
parties in the AREAS. CVRD shall provide all reasonable assistance that may be
requested, and shall take all actions that may be necessary and in the name of
the holder of the legal authorization of the MINERAL RIGHTS, as the may PARTIES
agree at the proper time, in order to enable it to handle such issues more
easily.
CHAPTER VII
FEASIBILITY STUDY
14. In the event the exploration results positive as for the existence of
a DEPOSIT, at the end of the term provided for in the INITIAL WORK PROGRAM and
all COMPLEMENTARY WORK PROGRAMS, or alternatively, at any time, regardless of
the total fulfillment of the physical-financial time schedule of the INITIAL
WORK PROGRAM and of the COMPLEMENTARY WORK PROGRAMS, as long as satisfactory
work has been carried out, expressly accepted by DOCEGEO, CVRD and the COMPANY
shall carry out a FEASIBILITY STUDY in the AREAS and shall mutually participate
in its completion, in accordance with their respective PARTICIPATING INTEREST.
If any of the PARTIES, after electing to participate in the FEASIBILITY STUDY,
fails to participate in the totality of its PARTICIPATING INTEREST, it shall be
diluted and its PARTICIPATING INTEREST shall decrease permanently as provided
for in clause 22.
14.1 After the demonstration of the existence of a DEPOSIT, CVRD
may not refuse to participate in the FEASIBILITY STUDY.
14.2 The refusal of the COMPANY to invest in the FEASIBILITY STUDY
shall entail its waiving the right to participate in the ASSOCIATION,
in which hypothesis this AGREEMENT shall be automatically terminated,
without the COMPANY having right to any indemnification or
reimbursement for the expenditures made with the exploration work,
transferring all its rights and results to CVRD.
15. The PARTIES shall contract with an independent consulting firm that
has international reputation, specialized in this type of evaluation, to be
selected and paid jointly by the PARTIES in the proportion of their
PARTICIPATING INTEREST, to carry out the FEASIBILITY STUDY. In case the PARTIES
do not reach an agreement about the consulting company, the PARTIES shall
request the International Chamber of Commerce to make the selection, mutually
binding themselves to the decision.
16. The PARTIES agree that the technical-economical exploitation of the
deposit shall be considered as feasible, and the FEASIBILITY STUDY shall be
considered as positive, if it demonstrates that:
(i) the NPV is greater than zero; and
(ii) the absolute NPV/PVI relation is greater or equal to 0.5.
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16.1 The FEASIBILITY STUDY shall also be considered positive iL.
(i) the NPV is greater than zero; a
(ii) the absolute NPV/PVI relation is between zero and 0.5
(zero point five), and
(iii) the FEASIBILITY STUDY contains positive recommendations
for the development of a mine in the AREAS with such
information (including the economic feasibility and the total
cost of implementation of a mine in any portion of the AREAS)
and in such a way that the report is sufficient to assure all
construction and mining permits, and further to:
(a) assure financing from a financial
institution, in commercially reasonable conditions,
for at least a part of the capital costs required to
implement a mine in the AREAS, pledging as guaranty
all assets of the PARTIES' operations employed in the
AREAS; or
(b) indicate a sufficiently strong economic
return, so that at least one of the PARTIES to this
AGREEMENT is willing and capable to make the
additional and/or necessary investments to obtain the
additional financing required to proceed with the
implementation of a mine in the AREAS.
16.2 In the event an additional investment or financing is required
to proceed with the implementation of a mine in the AREAS, as
indicated by a positive FEASIBILITY STUDY, and only one of the PARTIES
makes the additional investment or secures the required additional
financing, the PARTICIPATING INTEREST of the PARTIES will be increased
or decreased, as applicable, in the proportion required to reflect the
additional investments by the PARTY in the project.
16.3 The MINERAL RIGHTS and all assets of the ASSOCIATION may be
pledged as guaranty by the PARTIES or any one of the PARTIES in order
to obtain financing for the implementation of a mine in the AREAS.
17. In the event the FEASIBILITY STUDY is not considered positive in
accordance with the provisions of this Chapter, this AGREEMENT shall be
automatically terminated, whereby the COMPANY will not be entitled to any
rights, indemnification of reimbursement for any expenditures made.
17.1 In this case, the COMPANY shall pay CVRD, in a term of thirty
(30) days counted from the completion of the FEASIBILITY STUDY, the
difference between the MINIMUM DISBURSEMENT and the expenditures
actually made, in case the COMPANY has not yet disbursed the total
amount of the MINIMUM DISBURSEMENT.
18. Notwithstanding the provisions of clause 17, above, in the event the
FEASIBILITY STUDY is not considered positive, but any of the PARTIES believe
that with additional exploration a positive FEASIBILITY STUDY could be
obtained, this AGREEMENT will not be ended and the PARTIES will proceed
carrying out the exploration for one (1) more year. At the end of such term, in
case a positive FEASIBILITY STUDY is not obtained, the provisions of clause 17,
above, shall be applicable.
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18.1 In the event only one of the PARTIES believe that with
additional exploration a positive FEASIBILITY STUDY could be obtained,
then this AGREEMENT will not be ended, and such PARTY may proceed at
its own expense.
18.2 If by the end of one (1) year counted from the date on which
the FEASIBILITY STUDY has not been considered positive the PARTY that
has proceeded with the exploration has not obtained a FEASIBILITY
STUDY considered positive according to this Chapter, the provisions of
clause 17, above, shall be applicable.
18.3 If by the end of one (1) year counted from the date on which
the FEASIBILITY STUDY has not been considered positive the PARTY that
has proceeded with the exploration has obtained a FEASIBILITY STUDY
considered positive according to this Chapter, the other PARTY shall
have the option to regain the PARTICIPATING INTEREST it had before the
start of the additional exploration pursuant to this clause, through
the reimbursement of an amount equal to such PARTICIPATING INTEREST
multiplied by one hundred percent (100%) of the expenditures made
during such year by the PARTY that proceeded with the exploration.
19. If the FEASIBILITY STUDY results positive, according to the provisions
of this Chapter, the provisions of Chapter IX of this AGREEMENT shall apply.
CHAPTER VIII
EXPENDITURES
20. During the carrying out of the exploration work provided for in
Chapter V, above, the expenditures shall be made in the following manner:
20.1 Until the COMPANY has disbursed the MINIMUM INITIAL
INVESTMENT, all expenditures of any nature, required to carry out the
exploration work, including, without limitation, all taxes, fees,
contributions and parafiscal obligations arising or that may arise out
of this AGREEMENT and its subject matter, as well as labor
obligations, social burdens and damages caused to third parties as a
consequence of carrying out the mineral exploration, shall run
exclusively on its account.
20.2 CVRD and the COMPANY shall jointly bear, in the proportion
established in clause 22, below, all expenditures that exceed the
MINIMUM INITIAL INVESTMENT, according to the INITIAL WORK PROGRAM and
the COMPLEMENTARY WORK PROGRAMS, as well as the costs or compensations
defined under item 12.1.1, except the COSTS OF THE AREAS, which under
any hypothesis shall be borne exclusively by the COMPANY, and those
resulting from negligence or breach of the laws in force on the part
of the COMPANY.
20.3 The amount of contingent fines that may be applied to CVRD or
DOCEGEO, for an action or omission of the COMPANY, shall be advanced
by the latter for the respective payments, or, in case these are made
by them, shall be reimbursed by it.
20.4 The COSTS OF THE AREAS shall be borne by the COMPANY
severally.
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20.5 The COMPANY shall not be liable, under any hypothesis, for any
expenditures resulting from environmental damages causes prior to the
execution of this AGREEMENT, or that are not directly attributable to
the COMPANY under the law, and its rights in this AGREEMENT may not be
reduced or affected in any way for such motive.
20.6 The COMPANY shall not be responsible, under any hypothesis,
for any expenditures deriving from obligations to employees or
laborers, or other actions related to the AREAS, which were performed
or assumed by third parties other than the COMPANY, including, without
limitation, actions or omissions or work performed (i) by or on behalf
of CVRD or DOCEGEO or any other agreements or obligations of CVRD or
DOCEGEO prior to the execution of this AGREEMENT by the COMPANY and
(ii) by surface owners, gold diggers or other occupants or users of
the AREAS, and in such cases the provisions of Chapter XI shall remain
applicable, as well as the other provisions of this AGREEMENT.
21. The expenditures related to carrying out the FEASIBILITY STUDY shall
be divided between CVRD and the COMPANY, in the proportion established in
clause 22, below.
21.1 If the FEASIBILITY STUDY is started before the COMPANY has
completed the MINIMUM INITIAL INVESTMENT, the difference between such
amount and the amount actually spent shall be paid by the COMPANY
before CVRD contributes with its share of participation in the costs
of such study.
21.2 During the period of time between the obtainment of a
FEASIBILITY STUDY considered positive and the obtainment or denial of
the AUTHORIZATIONS, the PARTIES are to make jointly, in the proportion
of their respective PARTICIPATING INTEREST, the expenditures necessary
for maintaining the MINERAL RIGHTS, and are to agree mutually as for
any other required and appropriate expenditure and activity to be
undertaken in such period of time.
22. The joint disbursements of the PARTIES during the WORK PROGRAMS and
the FEASIBILITY STUDY shall obey the following proportion:
22.1 All joint disbursements shall be made by CVRD and the COMPANY
in equal proportions, in order to assure that at the completion of the
FEASIBILITY STUDY each one has a participation of fifty percent (50%)
in the TOTAL EXPENDITURES.
22.2 In the event CVRD or the COMPANY fail to make the required
disbursements in the in proportion of fifty percent (50%) each, their
respective PARTICIPATING INTEREST in the TOTAL EXPENDITURES shall be
automatically and permanently altered in order to reflect the
disbursements each PARTY has actually made.
22.3 The PARTIES that have their PARTICIPATING INTEREST in the
TOTAL EXPENDITURES altered pursuant item 22.2, above, shall make the
subsequent joint disbursements in the proportion of the new
PARTICIPATING INTEREST, and if they do not make it, their respective
PARTICIPATING INTEREST shall be altered again under item 22.2, above.
22.4 The COMPANY shall notify the PARTIES in writing, at least
thirty (30) days in advance, of the need of the disbursements,
specifying respective amount, according to the
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physical-financial time schedule that is a part of the INITIAL WORK
PROGRAM, or if applicable, of the COMPLIMENTARY WORK PROGRAM approved
by DOCEGEO.
22.5 Within a term of twenty (20) days counted from the receipt of
the notice dealt with by item 22.4, above, CVRD and the COMPANY shall
make the required disbursements.
CHAPTER IX
ASSOCIATION
23. In the hypothesis that the FEASIBILITY STUDY is considered positive
under Chapter VII, CVRD shall directly or indirectly organize with the COMPANY
an ASSOCIATION to promote the exploitation of the mineral asset, provided that
the COMPANY has made the MINIMUM INITIAL INVESTMENT.
23.1 It is hereby agreed that the admission of CVRD in the
ASSOCIATION is conditioned on the obtainment of the AUTHORIZATIONS,
under the legislation in force at the time when the formation of the
ASSOCIATION is considered.
23.2 Immediately upon the completion or determination of a positive
FEASIBILITY STUDY, CVRD shall arrange the AUTHORIZATIONS required for
creating the ASSOCIATION. CVRD undertakes to use its best efforts in
the obtainment of the AUTHORIZATIONS, and represents that despite
having no cognizance of any reason to believe that they will not be
granted, some AUTHORIZATIONS are totally discretionary and arbitrary,
and may be unreasonably denied.
23.3 As soon as the AUTHORIZATIONS are obtained, the ASSOCIATION
AGREEMENT shall become effective, and in accordance with its terms,
CVRD and the COMPANY shall create the ASSOCIATION.
23.4 Immediately after the completion or determination of a
positive FEASIBILITY STUDY, the COMPANY shall pay to CVRD the
difference between the MINIMUM INITIAL INVESTMENT and the amount
actually spent, if the total amount of the MINIMUM INITIAL INVESTMENT
has not been totally disbursed.
23.5 As of the obtainment of a positive FEASIBILITY STUDY, and
until the AUTHORIZATIONS are obtained, the necessary and appropriate
actions and activities concerning the AREAS and the MINERAL RIGHTS
shall be agreed between the PARTIES, which, if necessary, shall
contribute jointly, in accordance with their respective PARTICIPATING
INTEREST, pursuant to the provisions of Chapter VIII.
23.6 In the event that at any moment after the obtainment of a
positive FEASIBILITY STUDY and after the total disbursement of the
MINIMUM INITIAL INVESTMENT by the COMPANY, CVRD waives forming the
ASSOCIATION with the COMPANY, CVRD shall transfer the MINERAL RIGHTS
to the COMPANY, except if such waiver is due to non- obtainment of the
AUTHORIZATIONS.
23.7 If the required AUTHORIZATIONS are denied or are not obtained
within one hundred and fifty (150) days, that may be renewed for one
single additional period of time of
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one hundred and fifty (150) by written notice from the COMPANY, after
the completion of a positive FEASIBILITY STUDY on the AREAS, CVRD
shall not transfer the MINERAL RIGHTS to the COMPANY, but shall pay to
the COMPANY, under the title of indemnification, an amount equal to
its PARTICIPATING INTEREST multiplied by the VALUE OF THE MINERAL
RIGHTS, in five (5) annual installments, converted into reals on the
date of each respective payment by the sales quotation published on
the date of each respective payment, in item 5 of the PTAX 800
Transaction of SISBACEN, Banco Central do Brasil, whereby the first
installment shall be paid within sixty (60) days after the term
stipulated above or its renewal or after the formal denial of any
required AUTHORIZATION.
23.8 At any time prior to making the payment dealt with by item
23.7, above, CVRD may give written notice to the COMPANY indicating
the ROYALTY percentage it wishes to permit the COMPANY to retain in
lieu of the payment specified in item 23.7. The COMPANY shall have
thirty (30) days counted from the receipt of such notice from CVRD, to
accept or reject in writing the ROYALTY offer. If the COMPANY rejects
the ROYALTY offer made by CVRD, CVRD shall make the payment dealt with
by item 23.7 within thirty (30) days counted from the notice of such
rejection.
24. The initial PARTICIPATING INTEREST of CVRD and the COMPANY in the
stock capital of the ASSOCIATION shall be equal to their respective
PARTICIPATING INTEREST at the time of the formation of the ASSOCIATION.
24.1 The capital infusions to the ASSOCIATION shall made in
accordance with a timetable that takes into consideration the
reasonable period of time for the PARTIES to secure the necessary
funds.
25. In the event that the PARTICIPATING INTEREST of the COMPANY, prior to
the obtainment of the AUTHORIZATIONS, becomes less than fifteen percent (15%),
and as long as the COMPANY has not refused to invest in the FEASIBILITY STUDY,
CVRD shall not organize an ASSOCIATION with it to promote the exploitation of
the mineral asset, but shall pay it an indemnification of five percent (5%) of
the NET PRESENT VALUE, of the enterprise, as determined by the FEASIBILITY
STUDY, in five (5) annual installments, converted into reals on the date of
each respective payment by the sales quotation published on the date of each
respective payment in item 5 of PTAX 800 Transaction of SISBACEN, Banco Central
do Brasil.
26. Whatever may be the hypothesis of its incorporation, the final
composition of the association shall observe the requirements for companies
formed under the Brazilian laws, defined in article 176 of the Brazilian
Federal Constitution.
27. The ASSOCIATION shall be organized as follows:
27.1. CVRD and DOCEGEO shall take all steps required to transfer
MINERAL RIGHTS to the ASSOCIATION at the same time its formation is
being processed.
27.2 The ASSOCIATION may, up to the limit it may deem necessary,
acquire assets that may represent improvements to the AREAS in the
implementation of a mine, including but not being limited to real
estate of the AREAS, roads, power transmission lines, and other mining
improvements or equipment items that have been acquired by the COMPANY
and the costs of which have not been credited to the MINIMUM INITIAL
INVESTMENT or the TOTAL
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EXPENDITURES. The COMPANY shall sell or lease such assets to the
ASSOCIATION for an appropriate compensation to be agreed upon by the
PARTIES, which shall be based on the highest value of (i) the fair
market value of such assets, and (ii) in the case of assets acquired
by the COMPANY from surface owners or occupants of the AREAS in order
to permit the access for the exploration, the price paid by the
COMPANY in acquiring them.
27.3 Upon the formation of the ASSOCIATION, the PARTIES shall
capitalize the TOTAL EXPENDITURES and the MINIMUM INITIAL INVESTMENT
made by the PARTIES, except the COSTS OF THE AREAS.
27.3.1 The PARTIES acknowledge as already made by CVRD the
MINIMUM INITIAL INVESTMENT corresponding to the same amount as
that one that shall be realized by the COMPANY, which may also
be capitalized as provided for in this item 27.3.
28. After the existence of a DEPOSIT has been evidenced, CVRD shall
provide the COMPANY with a draft of the ASSOCIATION AGREEMENT. The PARTIES
agree to use their best efforts to reach in good faith a final form of
ASSOCIATION AGREEMENT within one hundred and twenty (120) days after the
delivery of the initial draft to the COMPANY.
28.1 The ASSOCIATION AGREEMENT shall be substantially consistent
with this AGREEMENT and with the basic principles that shall govern
the ASSOCIATION, defined in Annex 4 - Basic Principles of the
Association, and shall additionally contain all clauses of this kind
of agreement, as the legislation in force at the time of its
preparation may determine.
28.2 If the ASSOCIATION AGREEMENT is not executed within thirty
(30) days as of the date on which the OPTION is exercised, the terms
of this AGREEMENT shall be applicable until the ASSOCIATION AGREEMENT
is executed.
29. SOUTHERN hereby undertakes to keep the CONTROL of ESTRELA while this
AGREEMENT is in force and while the ASSOCIATION exists in the event ESTRELA
becomes a party of the ASSOCIATION.
CHAPTER X
DEFAULT AND TERMINATION
30. This AGREEMENT may be terminated for all legal purposes by either
PARTY in case of breach of any of its clauses, without detriment to the
recovery of losses, damages and lost profits ascertainable through ordinary
judicial procedure.
30.1 In the hypothesis of a breach of any clause of the present
AGREEMENT, the PARTY that deems itself injured shall notify the other,
formally, in writing, the cognizance of the event.
30.2 The termination shall take place in a term of sixty (60)
running days counted from such notice, in the event the effects of
such breach, as well as the causes thereof, are not cured in such
term.
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30.3 In the event the defaulting PARTY has commenced to cure such a
breach within a term of sixty (60) days counted from the notice dealt
with by item 30.1, above, the defaulting PARTY shall have one hundred
and eighty (180) days counted from the notice dealt with by item 30.1,
above, to cure the breach completely. Within the sixty (60) days
subsequent to the end of such term, in case the breach is not
completely cured, the PARTY that deems itself impaired may terminate
this AGREEMENT.
31. Notwithstanding item 30, above, if the COMPANY is the defaulting
party, CVRD shall have the right to terminate this AGREEMENT only in the event
the default occurs prior to the exercise of the OPTION by the COMPANY, and when
it impairs CVRD substantially as to the objective of this AGREEMENT, as for
example a material failure to perform on the part of the COMPANY in conducting
the WORK PROGRAM. For the other default cases, CVRD will be entitled to recover
from the COMPANY, if applicable, the actual amount relative to damages caused
by it.
32. Besides the default hypotheses regulated in clauses 30 and 31, above,
this AGREEMENT shall be automatically terminated for all legal purposes in the
hypotheses of items 5.1, 7.1, 11.3, 11.5, 14.2, 23.6, 23.7, 34.4 and 35.1, and
of clauses 9, 17, 25 and 36, each one regulating the consequences of the
termination in each case, respectively.
33. In the event of expiration or termination of this AGREEMENT, or under
any hypothesis in which the COMPANY withdraws from this AGREEMENT, the COMPANY
shall deliver to CVRD all data derived from its mineral exploration work,
except professional geological analyses.
CHAPTER XI
ACT OF GOD AND FORCE MAJEURE
34. If any of the PARTIES is temporarily prevented from fulfilling its
obligations in full or in part, as a consequence of an act of God or of force
majeure, it shall communicate the fact immediately to the other ones and ratify
the communication in writing, informing the damaging effects of the event and
the expected duration thereof. The affected PARTY shall resume performance as
soon as reasonably possible.
34.1 For purposes of this AGREEMENT, to be considered as acts of
God and force majeure, among other events that are beyond the
reasonable control of the PARTIES according to the Brazilian
legislation, are the following events, as long as they prevent the
PARTY from complying with its obligations in full or in part: (i)
laws. regulations, instructions from the government or a governmental
entity; (ii) judicial order; (iii) fire, explosion, earthquake, storm,
flood, drought or other adverse and unpredictable meteorological
conditions, and (iv) acts of war or conditions deriving from war,
declared or non-declared, or attributable to it;
34.2 Once the occurrence of an act of God or of force majeure is
verified, the compliance with the obligations of the PARTY that are
assumed as a function of the present AGREEMENT shall become suspended,
as well as all other terms and periods of times contemplated therein.
Once the act of God or force majeure has ceased, the PARTIES shall
agree on a reasonable period of time to resume their obligations in
this AGREEMENT.
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34.3 The occurrence of facts pertinent to the regional climatic
conditions, as well as their consequences, shall not be considered a
cause for extending the terms forecasted in the COMPANY's proposal.
34.4 Any PARTY may terminate this AGREEMENT if the conditions of
suspension of the obligations persist for a period of time longer than
eighteen (18) months, without any right to indemnification or
reimbursement of the expenditures made by the PARTIES.
35. The entry and staying of third parties in the AREAS, entailing the
temporary interruption of the exploration work, shall be considered force
majeure, but shall not be subject to the provisions of item 34.4, above.
35.1 If the hypothesis of this clause occurs before the existence
of the DEPOSIT is evidenced and the conditions for suspending the
obligations persist for a period of time longer than eighteen (18)
months, either PARTY may terminate this AGREEMENT.
35.2 If the hypothesis of this clause occurs after the existence of
the DEPOSIT is evidenced, the fulfillment of the obligations of the
PARTIES that have been assumed as a function of this AGREEMENT shall
be suspended for an indeterminate period.
36. Notwithstanding the provisions of item 5.1, above, in the event CVRD
or DOCEGEO lose their title over the MINERAL RIGHTS by reason of force majeure,
despite having taken all actions possible to keep them, this AGREEMENT shall be
terminated, whereby no indemnification under any title shall be due to any of
the PARTIES.
CHAPTER XII
TECHNICAL ARBITRATION
37. Any controversies of a technical, geological, economic and financial
nature involving the exploration work or the FEASIBILITY STUDY, shall be
settled in the way described next:
37.1 In the event of any dispute resulting from this AGREEMENT, any
of the PARTIES may commence the procedures provided for under this
Chapter, calling a meeting of the presidents, members of the board of
directors or senior representatives of the PARTIES designated by them
and with capacity to enter into a binding agreement.
37.2 The representatives of the PARTIES shall meet within thirty
(30) days counted from the date of the notice calling the meeting, and
shall use their best efforts to reach a negotiated settlement of the
dispute.
37.3 If the representatives of the PARTIES are unable to reach a
settlement within thirty (30) days after the commencement of the
negotiations, the PARTIES agree to submit such dispute to arbitration
by a specialized consulting company of international reputation in the
segment of gold mineral exploration, contracted by common consent by
the PARTIES, which shall bear the costs in equal portions.
37.4 The decision of the contracted consulting company in relation
to the matter shall be delivered within thirty (30) days after the
contracting, shall be final and shall be binding upon
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the PARTIES. If any of the PARTIES refuses to abide by the decision of
the consulting company, in accordance with this AGREEMENT and the
provisions of its Chapter IX, such refusal shall amount to a default
for purposes of Chapter X, and it shall be subject to the precepts
contained therein.
CHAPTER XIII
FINAL PROVISIONS
38. It is forbidden to the PARTIES, their directors and officers,
employees, agents or consultants to render information to third parties about
the nature or the progress of the performance of this AGREEMENT, as well as to
divulge, through any communication means, data and reports relative to the work
carried out, the technology adopted and the technical documentation involved,
unless by express written authorization of the other ones or when the
disclosure of confidential information is (i) required by law or by any
applicable governmental or regulatory authority or public stock exchange, or
(ii) made to consultants who have a relation with the project, contracted by
one of the PARTIES, provided that the PARTY providing confidential information
to such consultant is responsible for any breach of this confidentiality
covenant by its consultants.
39. None of the PARTIES may assign or transfer this AGREEMENT in full or
in part, unless with the prior authorization of the other ones, except if such
assignment or transfer is to a controlled company and provided that the
assigning PARTY commits itself to keep it as such while this AGREEMENT is in
force.
40. The following shall complement this AGREEMENT, being an integral part
of it as subsidiary instruments, in the form o annexes:
Annex 1 - Copies of the Mineral Rights and of the Descriptive Memos of the
Areas and of the Waiver signed on 06/24/91 with DNPM.
Annex 2 - SOUTHERN's proposal of 07.11.95.
Annex 3 - Description of Expenditures
Annex 4 - Basic Principles of the ASSOCIATION
Annex 5 - CVRD's Selection Conditions
The terms defined herein, when employed in the Annexes, shall have the same
meanings. When the provisions contained in any of the Annexes contradict the
terms of this AGREEMENT, the terms of this AGREEMENT shall prevail.
41. This AGREEMENT is to be governed and construed according to the
Brazilian laws. Elected are the courts of the County of Rio de Janeiro, to the
exclusion of any other one, no matter how privileged, to settle any divergences
or pending items deriving from this AGREEMENT.
42. CVRD and DOCEGEO represent and warrant to the COMPANY that they have
obtained all the authorizations required for the execution, fulfillment and
performance of the terms of this AGREEMENT and for the grant of the OPTION.
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43. In the event that any of the provisions or sections of this AGREEMENT
is held to be unenforceable or invalid according to the Brazilian law, the
PARTIES shall negotiate for such clauses of this AGREEMENT an equitable
adjustment, so that this AGREEMENT produces effects and that the validity and
enforceability of the remaining provisions are not affected.
44. In the event of relinquishment by the COMPANY of its rights to or
interest in the OPTION or in the ASSOCIATION, and once this AGREEMENT is
expired or terminated hereunder, the COMPANY shall have no additional rights,
obligations or liabilities covered by this AGREEMENT or other ones, in relation
to the OPTION, the MINERAL RIGHTS or the ASSOCIATION mentioned herein.
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45. This AGREEMENT shall be prepared in Portuguese and in English, to
reflect the intentions of the PARTIES, whereby only the Portuguese version
shall have legal effects.
In witness whereof, the parties execute this instrument, in four (4)
counterparts with the same tenor, in the presence of the witnesses who sign
below.
Rio de Janeiro, 13 xx Xxxx de 1996
COMPANHIA VALE DO RIO DOCE
/s/ Xxxxxxxxx Xxxx Xxxxxxxxx /s/ Xxxxxxxxx X. Xxxxxxxxx Fo
Name: Xxxxxxxxx Xxxx XXXXXXXXX Name: Xxxxxxxxx X. XXXXXXXXX Xx
Title: Presidente Title: Vice Presidente
RIO DOCE GEOLOGIA E MINERACEO S.A.
/s/ Xxxxx Xxxxxxx Xxxxxx /s/ Xxxx Xxxxxxx Xxxxx Xxxxx
Name: Xxxxx Xxxxxxx XXXXXX Name: Xxxx Xxxxxxx Xxxxx XXXXX
Title: Director - Presidente Title: Dir-Adm-Financeiro
SOUTHERN STAR RESOURCES
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxx X. XXXXXXX Name: Xxxxxxx X. XXXXXX
Title: Director Title: President
ESTRELA SUL DO BRASIL EMPREENDIMENTOS LTDA.
/s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. XXXXXXX
Title: Gerente
Witnesses:
/s/ Xxxxxx Xxxxxxx X. Xxxxxx /s/ Xxxxxx Xxxxx XX Xxxxx
Name: Xxxxxx Xxxxxxx X. XXXXXX Name: Xxxxxx Xxxxx XX XXXXX
Address: Av. Xxxxx Xxxxxx, 26/8o Address: Xx. Xxxxx Xxxxxx, 26/8(o)
Tax Record File: Tax Record File:
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ANNEX 3
DESCRIPTION OF EXPENDITURES
1. In computing and accounting the expenditures of the COMPANY with the
purpose of calculating the INITIAL WORK PROGRAM, the MINIMUM INITIAL INVESTMENT
and its share of the TOTAL EXPENDITURES, the COMPANY shall receive credit for
all reasonable costs, expenses and charges, direct or indirect, exclusive of
the COSTS OF THE AREAS, related to any activities that concern the AREAS,
performed by the COMPANY or its subsidiaries with the amount of such costs,
expenses and charges being determined and including, without limitations:
(a) wages and benefits and social burdens for its employees that
are engaged in activities related to the AREAS, consultant and
consulting fees, allocated legal advice and accounting charges and
fees, transportation and lodging, service rendering company and other
charges with contractors, or expenses by others who perform activities
that are a part of the purposes and obligations of the COMPANY, that
are subject to this AGREEMENT.
(b) office facilities and equipment, communications instruments,
materials and supplies, field equipment, fuel, nourishment, geological
and legal surveys, trenching and drilling, opening of roads and wood
trails, data collection and analyses, sample collection, metallurgical
and geophysical research, mapping, engineering design, geological or
geophysical analyses;
(c) drilling equipment, heavy equipment, vehicles and other major
equipment items, whether purchased, rented or contracted, for the
COMPANY purposes related to the AREAS, and
(d) mobilization and demobilization, customs duties, employee
contributions, sales, use of the goods, assets turnover, ad valorem or
other taxes that fall upon any of the preceding items employed in the
exploration and evaluation of the AREAS.
2. Furthermore, an amount equal to twelve point five per cent (12.5%) of
the total of all costs, expenses and charges described in item 1, above, shall
be included in the expenditures attributable to the COMPANY with the purpose of
reflecting the allocable portion of the administrative costs and other overhead
of the COMPANY, its controlling companies, or any of its subsidiaries, in
relation to the COMPANY's activities concerning the AREAS.
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ANNEX 4
BASIC PRINCIPLES OF THE ASSOCIATION
The PARTIES hereby agree that the ASSOCIATION shall be incorporated and managed
under observance of the following basic principles:
1. The ASSOCIATION may be incorporated under the authorized capital
system;
2. The PARTIES that become shareholders shall elect the administrators of
the ASSOCIATION in accordance with their respective stock interests, whereby
the applicable legislation shall be respected;
2.1 The representation of the PARTIES in the corporate bodies of
the ASSOCIATION shall be proportional to their respective
PARTICIPATING INTEREST, whereby the initial number of members of the
Board of Directors shall be four (4).
3. The PARTIES hereby agree that as long as both PARTIES hold each an
PARTICIPATING INTEREST higher than thirty three and one third percent (33-1/3%)
in the ASSOCIATION, the following matters and rules shall mandatorily be
included in the ASSOCIATION bylaw:
3.1 The ASSOCIATION may issue common and preferred shares;
3.2 The deliberations involving the matters specified below shall
be made by unanimous consent in the ASSOCIATION's shareholders
meeting:
3.2.1 Amendments of the bylaw entailing changes in the
rights and obligations of the PARTIES, as well as amendment of
the corporate purpose of the ASSOCIATION,
3.2.2 Any transformation, merger, incorporation or split-up
of the ASSOCIATION, its participation in another corporation
of in a group of corporations,
3.2.3 The public or private issuance of new shares, common
or preferred, and the respective fixation of the issuance
price, and the issuance of debentures, convertible into shares
or not, of participation certificates, subscription bonuses or
share purchase options, except when carried out within the
limits of the ASSOCIATION's authorized capital, if applicable;
3.2.4 The adoption of reinvestment, expansion, or new
investment project policies, and the distribution of
non-mandatory dividends or the payment of dividends higher
than the mandatory ones;
3.2.5 The dissolution or liquidation of the ASSOCIATION;
3.2.6 The authorization to the administrators to confess
bankruptcy or to apply for a judicial composition with
creditors;
3.2.7 Any change in the number of members of the Board of
Directors; and
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3.2.8 The abandonment of the AREAS or of the MINERAL RIGHTS.
3.3 It shall be incumbent upon the Board of Directors to
deliberate about the following matters, with the favorable vote of at
least sixty six and two thirds percent (66-2/3% of its members:
3.3.1 Election and dismissal of officers of the ASSOCIATION
and determination of their respective duties;
3.3.2 Approval of any business or amendment of same between
the ASSOCIATION and any of its shareholders, or any natural
person or legal entity directly or indirectly related to its
shareholders.
3.3.3 Making of any relevant new investments of the
ASSOCIATION;
3.3.4 Approval of the annual budgets and of the policy for
the sale of gold and the distribution of gold;
3.3.5 Sale or transfers, under any title, of relevant
assets of the ASSOCIATION,
3.3.6 Appointment of independent auditors, and
3.3.7 Issuance of guaranties.
3.4 In the event of a deadlock on decisions of the General
Shareholders Meeting that require the approval of both PARTIES, the
matter shall be decided by arbitration.
3.5 Notwithstanding any of the above provisions, the PARTIES agree
that the controlling shareholder shall not, under any circumstance,
take any action contrary to the wish of a minority shareholder that
may cause (i) loss or dilution of its interest without its right of
first refusal being offered to it as for the subscription of shares in
increases of capital as provided by law, or (ii) lead it to benefit
another company, whether Brazilian or foreign, to the detriment of the
interest of minority shareholders in the profits. The ASSOCIATION
AGREEMENT shall contain provisions relative to this matter, negotiated
in good faith by the PARTIES.
4. The PARTIES that become shareholders hereby agree that the following
matters and rules shall mandatorily be a part of the shareholders agreement to
be signed by them upon the incorporation of the ASSOCIATION:
4.1 The PARTIES that become shareholders shall have, in proportion
to the number of shares they hold, the preference in the acquisition
of shares and or securities representing stock rights held by the
PARTY shareholder that wishes to withdraw from the ASSOCIATION, in
equality of conditions with third parties.
4.1.1 Third parties that may contingently participate in
the ASSOCIATION by acquiring shares from the PARTIES shall
mandatorily adhere to the shareholders agreement in order to
maintain the control of the ASSOCIATION.
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4.2 Under observance of its primary purpose, the ASSOCIATION shall
be managed with the purpose of generating profits, having in mind its
highest interests, which shall always prevail over the specific
interests of its shareholders, in case of conflict.
4.3 The administration of the ASSOCIATION shall always seek high
efficiency, productivity, competitively and profitability levels, and
the maximization of the value of the resources.
4.4 The administration of the ASSOCIATION shall adopt efficient
control and accounting instruments, and modern managerial systems.
4.5 The board of executive officers of the ASSOCIATION, elected by
its Board of Directors, shall be composed exclusively of professional
executives.
4.6 The strategic decisions of the ASSOCIATION shall take into
account the shareholders' maximum interest of preserving the purpose
of the ASSOCIATION and maximizing the return on their investments, and
further of adopting a realistic and consistent dividend policy, the
basic guidelines of which shall be established by the Board of
Directors.
4.7 The capital structure shall follow the parameters to be
established by the Board of Directors, so as to reflect a solid
financial position, always taking into consideration the investment
programs that may be required to carry out the projects.
4.8 If CVRD holds more than fifty percent (50%) of the voting
capital of the ASSOCIATION, it shall be contracted to operate the
mine, without detriment to the latter continuing operating the mine
through an agreement between the ASSOCIATION and CVRD when it holds an
interest lower than such percentage. To this end, a separate agreement
shall be entered into between CVRD and the ASSOCIATION, that shall
provide about the rights and obligations of the parties involved in
relation to the rendering of such service under market terms and
conditions.
4.9 The PARTIES shall use their best efforts to help the
ASSOCIATION to obtain financing on attractive conditions, and in case
it is necessary, the PARTIES may authorize the pledge of the assets of
the ASSOCIATION or give guaranties in the proportion of their
PARTICIPATING INTEREST in the ASSOCIATION. In the event the
ASSOCIATION is not able to obtain financing or loans on reasonable
conditions, the PARTIES shall contribute to the ASSOCIATION the funds
required, on reasonable terms and in the proportion of their
PARTICIPATING INTEREST.
4.10 The ASSOCIATION shall distribute the maximum of dividends,
subject to its commitments and financial obligations, its payment and
indebtedness capacity, legal and bylaw reserves, as well as the
development of its investments and businesses.
4.11 The ASSOCIATION shall be structured so that the PARTIES
recover the investment made in the economically fastest and best way.
4.12 In the event either PARTY has its interest diluted to less
than fifteen percent (15%) of the total stock capital of the
ASSOCIATION, it will be automatically obligated to transfer free of
charge to the other PARTY or to the subsidiary of such PARTY, as
applicable, all of its stock interest. As of the moment when it
transfers its interest, the PARTY will be entitled to a royalty of
five percent (5%) of the net profit of the ASSOCIATION, calculated
according to the Brazilian Corporation Law.
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