CONTRACT OF WORK
BETWEEN
THE GOVERNMENT OF THE
REPUBLIK OF INDONESIA
AND
PT. FREEPORT INDONESIA COMPANY
CONTENTS
ARTICLE Page
INTRODUCTION 1
1. DEFINITIONS 3
2. APPOINTMENT AND RESPONSIBILITY OF THE COMPANY 8
3. MODUS OPERANDI 10
4. CONTRACT AREA 12
5. GENERAL SURVEY PERIOD 15
6. EXPLORATION PERIOD 17
7. REPORTS AND SECURITY DEPOSIT 20
8. FEASIBILITY STUDIES PERIOD 24
9. CONSTRUCTION PERIOD 27
10. OPERATING PERIOD 29
11. MARKETING 35
12. IMPORT AND RE-EXPORT FACILITIES 39
13. TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY 42
14. RECORDS, INSPECTION AND WORK PROGRAM 56
15. CURRENCY EXCHANGE 59
16. SPECIAL RIGHTS OF THE GOVERNMENT 62
17. EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS 63
18. ENABLING PROVISIONS 66
19. FORCE MAJEURE 70
20. DEFAULT 71
ARTICLE Page
21. SETTLEMENT OF DISPUTES 73
22. TERMINATION 75
23. COOPERATION OF THE PARTIES 77
24. PROMOTION OF NATIONAL INTEREST 78
25. REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE 81
26. ENVIRONMENTAL MANAGEMENT AND PROTECTION 84
27. LOCAL BUSINESS DEVELOPMENT 85
28. MISCELLANEOUS PROVISIONS 88
29. ASSIGNMENT 90
30. FINANCING 91
31. TERM 92
32. GOVERNING LAW 93
ANNEX "A" - CONTRACT AREA 94
ANNEX "B" - MAP OF CONTRACT AREA 96
ANNEX "C" - LIST OF OUTSTANDING MINING RIGHTS AND
NATURE RESERVES 97
ANNEX "D" - DEADRENT FOR VARIOUS
STAGES OF ACTIVITIES 98
ANNEX "E" - FEASIBILITY STUDY REPORT 99
ANNEX "F" - RULES FOR COMPUTATION OF INCOME TAX 101
ANNEX "G" - ADDITIONAL ROYALTY ON MINERAL
EXPORTED AS UNBENEFICIATED ORE 107
CONTRACT OF WORK
This Agreement, made and entered into in Jakarta, in the Republic
of Indonesia, on the 30th day of December 1991, by and between
the Government of the Republic of Indonesia, represented herein
by the Minister of Mines and Energy of the Government of the
Republic of Indonesia (hereinafter called the "Government") and
PT Freeport Indonesia Company (a judicial body incorporated in
Indonesia by Notarial Deed Numbered 102 dated 26 December 1991,
Decree of Minister of Justice Numbered C2-8171.HT.01.01.TH.91
dated 27 December 1991) (hereinafter called the "Company"), the
shares of the Common Stock of which are owned by:
1. Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
("FCX"); and
2. The Government.
WITNESSETH THAT:
A. All Mineral resources contained in the territories of the
Republic of Indonesia, including the offshore areas, are the
national wealth of the Indonesian Nation.
B. The Government desires to encourage and promote the
exploration and development of the Mineral resources of
Indonesia. The Government is also desirous of facilitating
the development of ore deposits if commercial quantities are
found to exist and the operation of Mining enterprises in
connection therewith.
C. The Government, through the operation of Mining enterprises,
is desirous of creating growth centers for regional
development, creating more employment opportunities,
encouraging and developing local business and ensuring that
skills, know-how and technology are transferred to
Indonesian nationals, acquiring basic data regarding and
related to the country's Mineral resources and preserving
and rehabilitating the natural Environment for further
development of Indonesia.
D. The Company itself and as an indirect Subsidiary of Freeport-
McMoRan Inc., a Delaware corporation, and a Subsidiary of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation,
has and has access to the information, knowledge, experience
and proven technical and financial capability and other
resources to undertake a program of General Survey,
Exploration, development, construction, Mining, Processing
and marketing with respect to the Contract Area, and is
ready and willing to proceed thereto under the terms and
subject to the conditions set forth in this Agreement.
E. The Government and the Company recognize that the Contract
Area (as hereinafter defined) is located in an extremely
remote area with a difficult environment and that,
accordingly, the Company has been and will continue to be
required to develop special facilities and to carry out
special functions for the fulfillment of this Agreement.
F. The Government and the Company are willing to cooperate in
developing the Mineral resources hereinafter described on
the basis of the provisions hereof and of the laws and
regulations of the Republic of Indonesia, specifically Law
No. 11 of 1967 on the Basic Provisions of Mining (Undang-
Undang Pokok Pertambangan) and Law No. 1 of 1967 on Foreign
Capital Investment (Undang-Undang Penanaman Modal Asing), as
in effect on the date of the signing of this Agreement, and
the relevant laws and regulations pertaining thereto.
G. The Company is the corporate successor to Freeport
Indonesia, Incorporated, a Delaware corporation, which was a
party to the Prior Contract (as hereinafter defined). This
Agreement shall supersede the Prior Contract.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set out to be performed and
kept by the Parties hereto, and intending to be legally bound
hereby, it is stipulated and agreed between the Parties hereto as
follows:
ARTICLE 1
DEFINITIONS
The terms set forth below shall have the meanings therein set
forth, respectively, wherever the same shall appear in this
Agreement and whether or not the same shall be capitalized.
1. "Affiliate" of any Person means any other Person that
directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control
with, such Person.
2. "Associated Minerals" with respect to a particular Mineral
means Minerals which geologically occur together with, are
inseparable by Mining from and must necessarily be Mined and
Processed together with such Mineral.
3. "Beneficial Use" means a use of the Environment or any
element or segment of the Environment that is conducive to
public benefit, welfare, safety or health and which requires
protection from the effects of waste discharges, emissions
and deposits.
4. "Company" means PT Freeport Indonesia Company, the corporate
successor to FII, and any approved corporate successor; and,
when used in reference to expenditures made or other action
taken under the Prior Contract or the SIPP, also means FII.
5. "Contract Area" means the Contract Area Block A and the
Contract Area Block B.
6. "Contract Area Block A" means the area defined in Annex "A"
to this Agreement as "Contract Area Block A".
7. "Contract Area Block B" means the area defined in Annex "A"
to this Agreement as "Contract Area Block B", as changed by
reductions and extensions, as the case may be, in accordance
with this Agreement.
8. "Contract Properties", with respect to any Mining Area,
means, for the purposes of Article 22, the property of the
Company in Indonesia which is located in such Mining Area or
any Project Area related to such Mining Area.
9. "Control" (including the terms "controlled by" and "under
common control with" and "controls") means the possession,
directly or indirectly, of the ability to direct the
management and policies of a Person. Without limiting the
generality of the above, such ability is presumed to exist
in a Person if it holds, directly or indirectly, 25% or more
of the outstanding voting shares of another Person.
10. "Covered Employee" means any person, including an Expatriate
Individual, who is employed or engaged by the Company or one
of its Subsidiaries or Affiliates.
11. "Department", unless the context otherwise indicates, means
that Government agency charged with the administration of
the Indonesian Mining laws and regulations.
12. "Enterprise" means all activities of the Company provided
for in or contemplated by this Agreement, including (i) the
General Survey, Exploration, evaluation, development,
construction, Mining, operating, Processing and selling
activities with respect to the Contract Area and Project
Areas related thereto, and Products therefrom; and (ii)
construction and operation of the Smelter referred to in
paragraph 4 of Article 10, all as provided herein.
13. "Environment" means physical factors of the surroundings of
human beings, including land, water, atmosphere, climate,
sound, odors, tastes and biological factors of animals and
plants and the social factors of aesthetics.
14. "Expatriate Individuals" or "Expatriates" means individuals
who are non-Indonesian nationals.
15. "Exploration" means the search for Minerals using
geological, geophysical and geochemical methods, including
the use of boreholes, test pits, trenches, surface or
underground headings, drifts or tunnels in order to locate
the presence of economic Mineral deposits and to find out
their nature, shape and grade, and "Explore" has a
corresponding meaning.
16. "Exploration Areas" means the portions of the Contract Area
Block B which are selected for Exploration as a result of
the General Survey of the Contract Area Block B by the
Company during the General Survey Period provided for in
paragraph 2 of Article 3.
17. "FII" means Freeport Indonesia, Incorporated, a company
incorporated in Delaware, U.S.A.
18. "Foreign Currency" means any currency other than Rupiah.
19. "General Survey" means an investigation or a preliminary
Exploration carried out along certain broad features of an
area for indications of mineralization.
20. "Government" means the Government of the Republic of
Indonesia, its Ministers, Ministries, Departments, Agencies
and Instrumentalities, and all Regional, Provincial or
District Authorities.
21. "Minerals" means all natural deposits and natural
accumulations containing chemical elements of all kinds,
either in elemental form or in association or chemical
combination with other metallic or non-metallic elements.
22. "Mining" means recovery activities aimed at the economic
exploitation of one or more identified deposits of Minerals,
and "Mine" has a corresponding meaning.
23. "Mining Areas" means the Contract Area Block A and all New
Mining Areas.
24. "Minister", unless the context otherwise indicates, means
that person who is acting at any given time as the Minister
of the Department of Mines and Energy.
25. "New Mining Area" means a portion of the Contract Area Block
B which has been identified by the Company as containing
potentially economic Mineral deposit or deposits, which has
been described by latitude and longitude on maps and by
description delivered by the Company to the Department, and
which has been designated by the Company, on or before the
last day of the Feasibility Studies Period with respect to
an Exploration Area, as one in which the Company intends to
commence Mining; provided that a New Mining Area may be
expanded by agreement of the Government and the Company if
as a result of further Exploration and Mining it becomes
apparent that inclusion of adjacent lands would advance the
purposes of this Agreement by permitting the Mining of the
Minerals identified with respect to such deposits or
Associated Minerals.
26. "Person" means any individual, partnership, corporation,
wherever organized or incorporated, and all other judicially
distinct entities and associations, whether or not
incorporated.
27. "Pollution" means any direct or indirect alteration of the
physical, thermal, chemical, biological or radioactive
properties of any part of the Environment by the discharge,
emission or deposit of Wastes so as to affect any Beneficial
Use materially and adversely, or to cause a condition which
is hazardous or potentially hazardous to public health,
safety or welfare, or to animals, birds, wildlife, fish or
aquatic life, or to plants, and "Pollute" has a
corresponding meaning.
28. "Precious Metal" means gold, silver, platinum or palladium.
29. "Prior Contract" means the Contract of Work dated 7 April
1967 between FII and the Government, as amended and
implemented, which Contract is superseded hereby.
30. "Processing" means treatment of Mineral ore after it has
been Mined to produce a marketable Mineral concentrate or a
further refined Mineral Product, and "Process" has a
corresponding meaning.
31. "Products" means all ores, Minerals, concentrates,
precipitates and metals, including refined products,
obtained as a result of Mining or Processing, after
deducting any quantities thereof which are lost, discarded,
destroyed or used in research, testing, Mining, Processing
or transportation.
32. "Project Area" means, with respect to any Mining Area, an
area outside such Mining Area heretofore designated as a
Project Area or any such area hereafter designated as a
Project Area and delineated in a feasibility study report
for Mining development by the Company as necessary or
desirable for the Processing facilities and other
infrastructure facilities related to such Mining
development, including any additions to any such area
required for Mining, development or Processing.
33. "Rupiah" means the currency that constitutes legal tender in
Indonesia.
34. "SIPP" means the Preliminary Survey License(s) granted by
the Directorate General of Mines on behalf of the Minister
to FII related to preliminary Exploration in Irian Jaya.
35. "Subsidiary" of any Person means any corporation controlled
by such Person through the direct or indirect ownership of
fifty percent or more of the issued shares having power to
vote or any partnership or joint venture controlled by such
Person.
36. "Waste" includes any matter whether liquid, solid, gaseous
or radioactive, which is discharged, emitted, or deposited
in the Environment in such volume, consistency or manner as
to cause a material and adverse alteration of the
Environment.
ARTICLE 2
APPOINTMENT AND RESPONSIBILITY OF THE COMPANY
1. The Company is hereby appointed the sole contractor for the
Government with respect to the Contract Area. In particular,
the Government hereby grants to the Company the sole rights
to Explore for Minerals in the Contract Area, to Mine any
deposit of Minerals found in any Mining Area, to Process,
store, and transport by any means all Minerals extracted
therefrom, to market, sell or dispose of all the Products of
such Mining and Processing, inside and outside Indonesia,
and to perform all other operations and activities which may
be necessary or convenient in connection therewith, with due
observance of the requirements of this Agreement. In
consideration for the grant of such rights, the Company
agrees to perform the work and carry out the obligations
imposed on it by this Agreement, including, without
limitation, the obligation to make investments as provided
in paragraph 2 of Article 5, in paragraph 5 of Article 6 and
in paragraph 5 of Article 7, the obligation to pay taxes and
other charges to the Government as provided in Articles 12
and 13 and the obligation to adhere to the Mining standards
described in paragraph 9 of Article 10 and to the
Environmental, safety and health standards described in
Article 26.
2. Notwithstanding paragraph 1 of this Article 2, the Company
shall not Mine any radioactive minerals, hydrocarbon
compounds, nickel, tin or coal without first obtaining the
approval of the Government.
3. The Company shall have sole control and management of all of
its activities under this Agreement and shall have full
responsibility therefor and shall assume all risk with
respect thereto in accordance with the terms and conditions
of this Agreement. Without in any way detracting from the
Company's responsibilities and obligations hereunder, the
Company may engage subcontractors, whether or not Affiliates
of the Company, for the execution of such phases of its
operations as the Company deems appropriate, including
contracting for construction of facilities and for necessary
technical, management and administrative services. In the
event that such services are contracted from Affiliates, the
charges therefor, to the extent they affect any amounts
payable to the Government pursuant to the terms of this
Agreement, shall comply with the provisions of Article 13
and of Annex "F" to this Agreement.
4. The Company shall take all reasonable measures to prevent
damage to the rights and property of the Government or third
parties. In the event of negligence on the part of the
Company or its agents or of any Registered subcontractor
carrying on operations or activities for the Company under
this Agreement, the Company or such subcontractor, as the
case may be, shall be liable for such negligence in
accordance with the laws of Indonesia.
ARTICLE 3
MODUS OPERANDI
1. The Company is incorporated under the laws of the Republic
of Indonesia and domiciled in Indonesia, and shall be
subject to the laws and the jurisdiction of courts in
Indonesia which normally have jurisdiction over corporations
doing business or incorporated therein. The Company shall
maintain in Jakarta a principal office for receipt of any
notification or other official or legal communication.
2. As part of the Enterprise, the Company will continue its
activities with respect to the Contract Area Block A and
contemplates a program with respect to the Contract Area
Block B commencing with a General Survey of the Contract
Area Block B during a "General Survey Period" as a result of
which certain Exploration Areas will be selected for
Exploration during the period or stage hereinafter referred
to as the "Exploration Period". The remaining program with
respect to each Exploration Area will be divided into three
additional periods or stages hereinafter referred to as the
"Feasibility Studies Period", the "Construction Period" and
the "Operating Period", respectively, with respect to such
Exploration Area. These Periods are further defined in the
following Articles hereof. The Contract Area Block A is in
its Operating Period and, therefore, the foregoing
provisions with respect to other periods or stages are not
applicable to it. It is understood that, as a consequence of
the foregoing, different parts of the Contract Area may be
treated as separate projects which become subject to
different provisions of this Agreement and of the Mining
Laws and Regulation at different times because of the
different periods of activities applicable to the individual
Exploration and Mining Areas.
3. The Company undertakes to conduct all activities hereunder
in the manner and subject to the conditions of Article 2 of
this Agreement and to continue such activities, without
suspension or interruption of all of the Company's
activities, unless with the concurrence of the Government
(which shall be deemed to have been given if the Department
does not object thereto in writing within three months after
it has received written notice from the Company of its
desire to so suspend or interrupt) or as otherwise provided
in Article 19 or Article 22. Any such suspension or
interruption of all of the Company's activities with the
concurrence of the Government shall extend the time periods
otherwise applicable with respect to any of the affected
Periods specified in this Agreement. If such interruption or
suspension of all of the Company's activities continues for
more than 365 days and is due to reasons other than force
majeure as provided in Article 19 and the Government has not
concurred regarding such interruption and suspension, then
the Government shall be entitled to declare a default under
Article 20. The Company agrees to keep the Government
informed of any interruption or suspension. Any such
interruption or suspension shall not affect the mutual
rights and obligations of the Parties under this Agreement.
ARTICLE 4
CONTRACT AREA
1. The Contract Area consists of the Contract Area Block A and
the Xxxxxxxx Xxxx Xxxxx X.
0. Xxxxxxxx Xxxx Xxxxx A is an area, in the mainland of the
island of Irian, consisting of approximately 100 (one
hundred) square kilometers, as defined in Annex "A" to this
Agreement and delineated in Annex "B" to this Agreement.
3. Contract Area Block B is the area defined in Annex "A" to
this Agreement as "Contract Area Block B", as changed by
extensions and reductions in accordance with this Agreement,
excluding therefrom, except as otherwise provided in
paragraph 4 of this Article 4, all
(i) Mining Authorizations granted by the Government for
Category "A" and "B" Minerals (as defined in Annex
"C"), and
(ii) Mining Authorizations granted by the Government for
Category "C" Minerals (as defined in Annex "C"),
(iii) other Mining Rights granted by the Government (as
defined in Annex "C"), and
(iv) the areas shown on Annex "B" as constituting Nature
Reserves.
which are existing as of the date of this Agreement and
which are listed or described in Annex "C" to this
Agreement.
4. In the event that any areas which were excluded from the
Contract Area Block B by the definition thereof or which on
the date of the SIPP had a common boundary with the Contract
Area lapse, are cancelled or are relinquished, or by any
means any such area becomes vacant, or otherwise become
available, then the Company shall have the priority right
upon application to have such area included in the Contract
Area Block B unless the Government grants a People's Mining
Right for such area. Once an area is included in the
Contract Area the Government agrees not to grant a People's
Mining Right thereto. Any area so included shall fall into
the earliest Period which then applies to any part of
Contract Area Block B.
5. The Company may by written application to the Department
relinquish all or any part of the Contract Area at any time
and from time to time during the term of this Agreement. Any
such application shall be submitted with a relinquishment
report stating any technical and geological finding the
Company has made with respect to the relinquished areas and
the reasons for the relinquishment, supported by field data
of activities undertaken in those areas. All basic data with
respect to the relinquished areas shall be submitted to the
Department and become the property of the Government. The
Company through relinquishment (including relinquishment
pursuant to this paragraph, paragraph 5 of Article 5 and
paragraph 2 of Article 6), shall except as otherwise agreed
by the Government, reduce the Contract Area Block B:
(i) on or before the end of the General Survey Period, to
not more than seventy-five percent (75%) of the
original Contract Area Block B;
(ii) on or before the second anniversary of the end of the
General Survey Period, to not more than fifty percent
(50%) of the original Contract Area Block B; and
(iii)on or before the end of the Exploration Period, to
not more than twenty-five percent (25%) of the original
Contract Area Block B.
Except as provided in paragraph 7 of this Article 4, the
Company shall not be required by the terms of this Agreement
to relinquish more than 75% of the original Contract Area
Block B. Any such relinquishment shall be without prejudice
to any obligation or liability imposed by or incurred under
this Agreement prior to the effective date of such
relinquishment.
6. The Company will continue to carry on Exploration on all
prospective parts of the Contract Area with the objective of
delineating new deposits within the Contract Area for
development during the full term of this Agreement. The
Company's development plans shall include the intended
capacity of each Mining and Processing activity and any
further evaluation work required as provided in the related
feasibility study and other Exploration activities.
7. If the Company has no future plan to conduct Exploration or
development activities with respect to an area of Contract
Area Block B, or to use such area in connection with other
development activities, or if the Company discovers a
deposit of a Mineral as to which it has no current or
contingent plans to develop (and such area may be used or
such deposit developed by other Persons in a manner which
does not interfere with the rights of the Company under this
Agreement or the activities of the Company permitted
hereby), then, if so required by the Government, the Company
shall relinquish such area or deposit, together with all the
basic geological, exploration, metallurgical and other data
related thereto.
ARTICLE 5
GENERAL SURVEY PERIOD
1. The Company shall commence, as soon as possible after the
signing of this Agreement, a General Survey of the Contract
Area Block B to determine in what parts of the Contract Area
Block B deposits of Minerals are most likely to occur. The
"General Survey Period" shall end twelve months after such
commencement. The Government, upon request by the Company
will grant an extension of 12 (twelve) months for the
General Survey Period for the purpose of completing the
activities to be carried out by it during such Period.
2. By the end of the General Survey Period, including the SIPP
period, the Company shall have spent, with respect to the
Contract Area Block B, not less than US$ 5,000,000 (Five
Million United States Dollars). Such expenditures may
include general organization overhead and administrative
expenses directly connected with field activities under this
Agreement.
3. If at the expiration of twelve months from the date of the
signing of this Agreement or any time thereafter, it appears
to the Department that the Company has seriously neglected
its obligations with respect to minimum expenditures as
provided in paragraph 2 of this Article, the Department may
require the Company to deliver to the Department a guarantee
in the form of a bond or banker's guarantee to a sum which
shall not exceed the total outstanding expenditure
obligations remaining unfulfilled. Such guarantee may at the
end of the three year period commencing on the date of the
signing of this Agreement be forfeited to the Government to
the extent that the Company shall have failed to fulfill
such expenditure obligations. Except to the extent of any
such forfeiture, such guarantee shall be released at the end
of such three year period.
4. In connection with the Company's obligations under this
Article, the Company shall submit to the Department within
two months after the end of the General Survey Period, a
report setting forth the items and amounts of expenditure
during such Period. The Company shall prepare to support
such report with reasonable documentation of expenditures as
requested by the Department.
5. The Company may at any time discontinue the General Survey
with respect to any part or parts of the Contract Area Block
B on the ground that the continuation of such General Survey
is no longer commercially feasible or practical and shall
apply in writing to the Department in accordance with
paragraph 5 of Article 4 for the relinquishment of such part
or parts of the Xxxxxxxx Xxxx Xxxxx X. Xxx Xxxxxxxx Xxxx
Xxxxx X shall thereby be reduced to the area which remains
after such relinquishment.
6. If, at any time or times during the General Survey Period,
after the Company has discovered deposits of Minerals in any
part or parts of the Contract Area Block B and has decided
to proceed into the Exploration Period with respect to one
or more of such deposits, it shall submit a written notice
and explanation to such effect to the Department and shall
establish one or more Exploration Areas with respect to such
deposit or deposits and begin the Exploration thereof
without affecting its rights and obligations under this
Agreement in respect of other portions of the Contract Area.
ARTICLE 6
EXPLORATION PERIOD
1. Upon completion of the General Survey, the Company shall
commence within the most promising Exploration Areas a
program of Exploration based on the results of such General
Survey. The program of Exploration shall include, as
appropriate, without limitation, detailed geological,
geophysical and geochemical investigation, including
sampling, pitting, dredging and drilling. The Period during
which such Exploration is undertaken constitutes the
"Exploration Period".
2. The Company may at any time discontinue Exploration in any
Exploration Area on the ground that the continuation of such
Exploration is no longer commercially feasible or practical
and shall apply in writing to the Department in accordance
with paragraph 5 of Article 4 for the relinquishment of such
Exploration Area from the Xxxxxxxx Xxxx Xxxxx X. Xxx
Xxxxxxxx Xxxx Xxxxx X shall thereby be reduced to the area
which remains after such relinquishment.
3. If at any time prior to the end of the Exploration Period
the Company discovers one or more deposits of Minerals of
apparent commercial grade and quantity in any Exploration
Area and decides to proceed with further evaluation thereof,
it shall submit a written notice to such effect to the
Department and enter into the Feasibility Studies Period
with respect to such Exploration Area without affecting its
rights and obligations under this Agreement in respect of
the balance of the Contract Area Block B. Accordingly, the
Exploration Period:
(i) shall commence immediately following the end of the
General Survey Period; and
(ii) shall end 36 months thereafter; provided that, with
respect to any Exploration Area, it shall end at such
earlier date as the Feasibility Studies Period shall
have begun with respect to such Exploration Area; and
(iii) the Government upon request by the Company, will
twice grant an extension of twelve months each for the
Exploration Period, subject to the Company's performing
its obligations satisfactorily in accordance with this
Agreement.
4. Prior to the end of the Exploration Period, the Company
shall give notice to the Department stating whether or not
the Company desires to proceed into the Feasibility Studies
Period with respect to any Exploration Areas. If the Company
should give notice to the Department that it does not wish
to proceed into the Feasibility Studies Period with respect
to any Exploration Area, such notice shall constitute an
application in writing to the Department in accordance with
paragraph 5 of Article 4 for the relinquishment of such
Exploration Area from the Contract Area Block B. In such a
case, the Company shall turn over to the Department:
(i) maps indicating all places in such Exploration Area in
which the Company shall have drilled holes or sunk
pits,
(ii) copies of logs of such drill holes and pits and of
assay results with respect to any analyzed samples
recovered therefrom, and
(iii) copies of any geological or geophysical maps of
the Exploration Area which shall have been prepared by
the Company.
Any such relinquishment shall be without prejudice to any
obligation or liability imposed by or incurred under this
Agreement prior to the effective date of such
relinquishment.
5. During the Exploration Period, the Company shall spend not
less than US$ 15,000,000 (Fifteen Million United States
Dollars) on further Exploration activities with respect to
the Contract Area Block B. Any expenditure incurred by the
end of the General Survey Period (including the SIPP Period)
in excess of US$5,000,000 shall be considered to be, part of
such US$15,000,000. If at the expiration of twenty-four
months from the date of the commencement of the Exploration
Period or any time thereafter, it appears to the Department
that the Company has seriously neglected its obligations
with respect to minimum expenditures as provided in this
paragraph, the Company shall deliver to the Department a
guarantee, if required by the Government, in the form of a
bond or banker's guarantee to a sum which shall not exceed
the total outstanding expenditure obligations remaining
unfulfilled. Such guarantee may at the and of the
Exploration Period be forfeited to the Government to the
extent that the Company shall have failed to fulfill such
expenditure obligations. Except to the extent of any such
forfeiture, such guarantee shall be released at the end of
the Exploration Period.
ARTICLE 7
REPORTS AND SECURITY DEPOSIT
1. The Company shall keep the Government informed through
the Department concerning the Enterprise through
submission of quarterly progress reports as to the
Company's plans for and results of its Exploration and
development operations and activities relating to all
areas not in the Operating Period, beginning with a
report as to the first full calendar quarter following
the date of the signing of this Agreement. These
progress reports shall be submitted within 30 days
after the end of each calendar quarter and be in such
form as the Department may from time to time reasonably
prescribe. These quarterly progress reports relating
to Exploration activities shall include:
(i) the results of geological and geophysical investigation
and proving of deposits of Minerals in the Contract
Area Block B and the sampling of such deposits;
(ii) the results of any general reconnaissance of the
various sites of proposed operations and activities
under this Agreement;
(iii) information concerning the selection of routes from any
New Mining Area to a suitable harbor for the transport
of Product;
(iv) information concerning the planning of suitable
permanent settlements, including information on
suitable water supplies for permanent settlements and
other facilities; and
(v) such other plans and information as to the progress of
the Company's activities in the Contract Area Block B
as the Department may from time to time reasonably
require.
2. Within one year after the beginning of the Feasibility
Studies Period with respect to any Exploration Area, the
Company shall also file with the Department a summary of its
geological and metallurgical investigations and all
geological, geophysical, topographic and hydrographic data
obtained from the General Survey and Exploration with
respect to such Exploration Area and a sample representative
of each principal type of Mineralization encountered in its
investigation of such Exploration Area.
3. No later than the fifth anniversary of the date of the
signing of this Agreement, the Company shall submit to the
Department a general geological map of the whole Contract
Area Block B (as then constituted) on the scale of 1 :
250,000 with attendant reports based on the Company's
geological observations; such geological map shall contain
the observations of rock types and their distribution and
structure which have been made by the Company during the
General Survey and Exploration Periods.
4. On or before the delivery of the geological map referred to
in paragraph 3 of this Article, the Company shall also turn
over to the Department:
(i) maps indicating all places in the Contract Area Block B
in which the Company shall have drilled holes or sunk
pits,
(ii) copies of logs of such drill holes and pits and of
assay results with respect to any analyzed samples
recovered from them,
(iii) copies of any geophysical maps of the Contract
Area Block B which shall have been prepared by the
Company, and
(iv) all other information directly relevant to the
Company's Exploration activities under this Agreement
which the Department may reasonably request and which
is, or with the exercise of reasonable efforts by the
Company would be, within the Company's control in order
to appraise the Company's investigation activities
under this Agreement.
5. The Company shall within thirty days after the date of the
signing of this Agreement establish for the benefit of the
Government in a Bank in Indonesia approved by the Department
an interest bearing escrow account in the amount of One
Million United States Dollars (US$ 1,000,000). This amount,
together with the security deposit heretofore made by the
Company in accordance with the SIPP, is hereinafter
collectively called the "Security Deposit".
The Security Deposit shall be released by the Government as
to fifty percent thereof after:
(i) the expiration of the General Survey Period;
(ii) the submission as specified in paragraph 1 of this
Article 7 of four consecutive quarterly progress
reports to the Department or, if the General Survey
Period is completed in less than twelve months, of
quarterly progress reports covering such lesser period;
and
(iii) either:
(a) satisfactory performance (according to the
Minister's judgment) for such twelve-month period,
or
(b) the expenditure by the Company in such General
Survey Period of Five Million United States
Dollars (US$ 5,000,000) on the Contract Area Block
B.
The remaining fifty percent of the Security Deposit will be
released on behalf of the Company when the Geological map
referred to in paragraph 3 of this Article has been
submitted to and approved by the Department, which approval
shall not be unreasonably withheld or delayed. In the event
that the Company does not satisfy the above mentioned
requirement within six years after the date of the signing
of this Agreement, the balance of the said Security Deposit
shall automatically be forwarded to the Government Treasury
and the Company shall have no further claim thereon.
Interest on the Security Deposit shall accrue for the
benefit of the Company.
6. a. Except as otherwise provided in this paragraph 6,
the Government has title to all data and reports
submitted by the Company to the Department or the
Government pursuant to the provisions of this
Agreement. Such data and reports will be treated as
strictly confidential by the Government to the extent
that the Company shall so request; provided, however,
that data in the public domain (because of having been
published in generally accessible literature or of
their mainly scientific rather than commercial value,
such as geological and geophysical data) and data which
have been published pursuant to laws and regulations of
Indonesia or of a foreign country in which a
shareholder may be domiciled (such as the annual report
of public bodies or companies) shall not be subject to
the foregoing restrictions; provided further that the
term "data" as used in this paragraph shall include,
without limitation, any and all documents, maps, plans,
work sheets and other technical data and information,
as well as data and information concerning financial
and commercial matters.
b. In respect of data relating solely to areas
relinquished by the Company from the Contract Area
Block B pursuant to Article 4, the foregoing
restrictions shall cease to apply as from the date of
relinquishment of such areas. In addition, where this
Agreement has been terminated pursuant to Article 20 or
Article 22, the foregoing restrictions shall cease to
apply.
c. Notwithstanding the foregoing, exclusive know-how of
the Company, its sub-contractors or Affiliates
contained in data or reports submitted by the Company
to the Department or the Government pursuant to the
provisions of this Agreement and which shall have been
identified as such by the Company shall only be used by
the Government in relation to the administration of
this Agreement and shall not be disclosed by the
Government to third parties without the prior written
consent of the Company. Such exclusive know-how, as
long as it remains exclusive know-how of the Company,
its sub-contractors or Affiliates as the case may be,
remains the sole property of the Company, its
sub-contractors or Affiliates, as the case may be. The
provisions of this subparagraph (c) shall survive the
termination of this Agreement in accordance with laws
and regulations from time to time in effect relating to
intellectual properties. In the case any such exclusive
know-how is not patentable in accordance with such
laws, the Company may request the Government not to
disclose such know-how for a period of not less than
three years after termination of this Agreement.
ARTICLE 8
FEASIBILITY STUDIES PERIOD
1. The Feasibility Studies Period with respect to any
Exploration Area shall commence on the date the Company
submits the written request to the Department provided for
in paragraph 3 of Article 6 with respect to such Exploration
Area and shall end upon the commencement of the Construction
Period with respect to such Exploration Area as hereinafter
provided.
2. As soon as the Feasibility Studies Period has begun with
respect to any Exploration Area, the Company shall commence
studies to determine the feasibility of commercially
developing the deposit or deposits of Minerals within such
Exploration Area. The Company will be allowed a period of
twelve months to complete such studies and to select and
delineate and determine the size of one or more New Mining
Areas. Each such New Mining Area shall include at least one
deposit with respect to which the Company plans to commence
construction and Mining operations. The Department may, for
one of the reasons specified in paragraph 2 of Article 16,
object to the area proposed as a New Mining Area within
three months of the Company's designation of such New Mining
Area. The Government and the Company agree to consult in
good faith in an attempt to overcome any such objections. If
after a period of three months from the date of notification
of such objection by the Government there has been no
resolution of the matter, then either Party may proceed to
resolve the matter in accordance with paragraph 1 of Article
21. In the event that the objection by the Department to any
area designated by the Company as a New Mining Area is
upheld, and thereafter during the term of this Agreement it
is determined that Mining is permissible within such area,
the Company shall have the right to carry on such Mining in
preference to any other Person.
3. After the completion of the Feasibility Studies with respect
to a New Mining Area within an Exploration Area, the Company
shall submit a Feasibility Study Report in the form set out
in Annex "E", which shall contain calculations and reasons
for the technical and economical feasibility of conducting
Mining operations within such New Mining Area, supported by
data, as specified in Annex "E", calculations, drawings,
maps and other information relevant to the decision whether
or not to proceed with such Mining operations. The
Feasibility Study with respect to any New Mining Area shall
include the then intended capacity of each Mining and
Processing operation within such New Mining Area and any
further evaluation work or further Exploration then deemed
to be required. If the Company considers that the data
required and other necessary matters are not sufficiently
available to come to a final decision within the initial
Feasibility Studies Period with respect to any Exploration
Area or if the Department has raised objections with respect
to any proposed New Mining Area within such Exploration Area
as set out above, the Company may seek the approval of the
Government to the extension for twelve months of such
Feasibility Studies Period, provided that such request for
extension of the Feasibility Studies Period is submitted to
the Government no later than the eighth anniversary of the
date of the signing of this Agreement.
4. At any time during the Feasibility Studies Period with
respect to any New Mining Area, the Company may submit a
written application to the Department that it desires to
proceed with the construction of a Mine within such New
Mining Area and facilities to be used by the Company in its
operation thereof. The Department shall be deemed to have
approved any such application if it does not, in writing,
object to the same within three months of receipt of such
application. After approval of such application, the
Company shall promptly commence and with reasonable
diligence execute to completion the design of the Mine and
related facilities. Upon completion of such design, the
Company shall submit the design and Mining plan to the
Department for approval, together with an estimate of the
cost of such Mine and related facilities and a time schedule
for the construction thereof. Such time schedule shall, to
the extent economically and practically feasible, provide
for completing the construction of such Mine and related
facilities within thirty-six months after the approval of
the design, Mining plan and time schedule. Within three
months after submission of the design, Mining plan and time
schedule, the Department shall notify the Company of its
approval thereof or its disapproval thereof, for one of the
reasons specified in paragraph 2 of Article 16. In the event
of disapproval, the Department shall notify the Company of
the cause for disapproval and the Government and the Company
shall consult in a good faith attempt to remove the cause
for such disapproval. If after a period of three months from
the notification of such disapproval there has been no
resolution of the matter, then either party may proceed to
resolve the matter in accordance with paragraph 1 of Article
21. If within three months of any such submission, the
Company has not received any objection in writing, the
Company may consider that such submission has been approved.
5. The Feasibility Study Report as described in Annex "E" with
respect to a New Mining Area shall include environmental
impact studies into the effects on the Environment of the
operations of the Enterprise within such New Mining Area and
shall be prepared in accordance with the terms of reference
set out in Article 26. Such studies may be carried out in
consultation with appropriately qualified independent
consultants retained by the Company and approved by the
Government in accordance with the rules and procedures then
in force in Indonesia.
6. The quarterly reports provided pursuant to paragraph 1
Article 7 will include data as to the progress and results
of and costs incurred in respect of the investigations and
studies carried on during the Feasibility Studies Periods
with respect to the various Exploration Areas.
7. With respect to any Exploration Area as to which no
Feasibility Study Report has theretofore been submitted
pursuant to paragraph 3 of this Article, the Company shall
submit to the Government a final report stating the results
of and the costs incurred in respect of the investigations
and studies thereof and the Company's analysis of and its
conclusions in respect of those results.
8. All reports and information supplied to the Government under
this Article shall be subject to the provisions of paragraph
6 of Article 7 relating to confidentiality.
ARTICLE 9
CONSTRUCTION PERIOD
1. Following receipt from the Department of approval with
respect to the design, Mining plan and time schedule
provided for in paragraph 4 of Article 8 with respect to any
New Mining Area, the Company shall, in accordance with such
time schedule, commence construction of the facilities and
use its best efforts, subject to the provisions of Article
19, to complete such facilities within such time schedule.
If such time schedule proves unworkable, the Company may
submit to the Department a revised time schedule for the
Department's approval. If within three months of such
submission, the Company has not received any objection in
writing, the Company may consider that such revised time
schedule has been approved.
2. The facilities to be constructed during the Construction
Period with respect to any New Mining Area may include such
of the following as are appropriate:
(i) Mining facilities and equipment;
(ii) facilities and equipment to treat and beneficiate the
Mineral ore coming from the Mine so as to produce
saleable Products;
(iii) port facilities, which may include docks, harbors,
piers, jetties, dredges, breakwaters, terminal
facilities, workshops, storage areas, warehouses and
loading and unloading equipment;
(iv) transportation and communication facilities, which may
include roads, bridges, vessels, ferries, airports,
railroads, landing strips and landing pads for
aircraft, hangars, garages, canals, aerial tramways,
pipelines, pumping stations, radio and
telecommunication facilities, and telegraph and
telephone facilities and lines;
(v) townsites, which may include dwellings, stores,
schools, hospitals, theaters and other buildings,
facilities and equipment for personnel of the
Enterprise, including dependents of such personnel;
(vi) power, water and sewage facilities, which may include
power plants (which may be hydroelectric, steam, gas or
diesel), power lines, dams, watercourses, drains, water
supply systems and systems for disposing of tailings,
plant wastes and sewage;
(vii) miscellaneous facilities, which may include
machine shops, foundries and repair shops; and
(viii) all such additional or other facilities, plant and
equipment as the Company may consider necessary or
convenient for the operations of the Enterprise related
to such New Mining Area or for providing services or
carrying on activities ancillary or incidental thereto.
3. The Company anticipates that, with respect to one or more of
the New Mining Areas, it will employ facilities which have
been created by the Company pursuant to the provisions of
the Prior Contract. The Company shall be authorized to
continue to employ such facilities for all purposes of this
Agreement during the full term hereof, including any
extensions of such term.
4. In carrying out its activities with respect to the
Construction Periods related to the New Mining Areas, the
Company shall comply with and be subject to the provisions
of paragraph 9 of Article 10.
ARTICLE 10
OPERATING PERIOD
1. After completion of the construction of the facilities
provided for in Article 9 with respect to a New Mining Area
or an operable portion thereof, the Company shall promptly
commence operation of such New Mining Area or part thereof
for which such facilities have been constructed.
2. The Company shall conduct Mining operations and any activity
of the Enterprise with respect to any Mining Area during the
Operating Period. Contract Area Block A is in the Operating
Period. The Contract Area Block B shall enter into the
Operating Period on the earliest of (i) the first day of the
calendar month following the first calendar month during
which the aggregate average daily throughput is at least
seventy percent of the design capacity of all facilities
constructed or to be constructed pursuant to all Feasibility
Studies providing for the Mining and Processing of deposits
in the Contract Area Block B, (ii) the date which is six
months after the date of completion of such facilities, and
(iii) the end of eight years (or such longer period as may
result from extensions granted by the Department for the
completion of earlier stages under this Agreement) from the
date of the signing of this Agreement. The Operating Period
shall continue for a period measured by the initial term of
this Agreement and any extensions thereof pursuant to
paragraph 2 of Article 31.
3. If, at any time prior to the time when the Contract Area
Block B shall have entered into the Operating Period as
provided in paragraph 2 of this Article 10, the Company has
commenced Mining in any New Mining Area and the average
daily throughput from Mining with respect to such New Mining
Area is at least seventy percent of the design capacity of
all facilities constructed or to be constructed pursuant to
the Feasibility Study providing for the Mining and
Processing of the deposit or deposits in such Mining Area,
the Company shall submit a written notice to the Department
to such effect and, as of the first day of the following
month, but in no event later than the date which is six
months after the date of completion of such facilities, such
New Mining Area shall be deemed to have entered into the
Operating Period, without affecting the Company's rights and
obligations hereunder with respect to the balance of the
Contract Area Block B.
4. The Company shall Process ore to produce metal or other
marketable Product. For that purpose, the Company shall
prepare or cause to be prepared a feasibility study with
respect to a possible smelter in Indonesia, which shall be
subject to the Government's review and to a mutual
determination by the Government and the Company as to the
economic viability of such a smelter. Such smelter would be
located at such place within Indonesia as would be most
advantageous to its economic viability. Should such a
smelter be built by the Company or a wholly-owned
Subsidiary, it would constitute a part of the Enterprise
hereunder.
5. The Company acknowledges the Government's policy to
encourage the domestic processing of all of its natural
resources into final products where feasible. The Company
further acknowledges the Government's desire that a copper
smelter and refinery be established in Indonesia and agrees
that it will make available copper concentrates derived from
the Contract Area for such smelter and refinery so
established in Indonesia as provided below.
During any period during which smelting and refining
facilities with respect to any Mined Product of the Company
have not been established in Indonesia by or on behalf of
the Company, or any wholly-owned Subsidiary, but have been
established in Indonesia by any other Person, the Company
shall, if so requested by the Government, sell such Mined
Products to such other Person at prices and terms no less
favorable to such Person than those that could be obtained
by the Company from other purchasers of the same quantity
and quality and at the same time and the same or equivalent
places and times of delivery, provided that the respective
contractual terms and conditions given by the Company to
such other Person shall be no less favorable to the Company.
With respect to the first copper smelter established in
Indonesia by anyone other than the Company or a wholly-owned
Subsidiary of the Company, the quantity of copper
concentrates derived from the Contract Area which the
Company shall make available on the terms set out above
shall be sufficient to satisfy the domestic demand in
Indonesia for refined copper and to permit economic scale of
such project assuming that such project is otherwise
feasible, and further subject to the limitation that the
quantity required shall not be so great as to jeopardize the
sound financial, operating or marketing requirements of the
Company. In making sales to a smelter or refining facility
in Indonesia, the Company will not be treated more
adversely, from the standpoint of Governmental laws and
regulations, than if it had sold such Mined Products as
export goods. The obligation of the Company to sell its
Products to another Person pursuant to this paragraph 5 is
subject to any financing agreements, sales contracts or any
smelting and refining contracts entered into by the Company
prior to the establishment of such facilities by such other
Person or any financing agreements entered into pursuant to
paragraph 2 of Article 30.
In the event that during the five year period commencing on
the signing of this Agreement, a copper smelter and refinery
facility to be located in Indonesia has not been established
or is not in the process of being constructed by any Person,
then, subject to the mutual determination by the Government
and the Company as to the economic viability of such smelter
and refinery, the Company shall undertake or cause to be
undertaken the establishment of a copper smelter and
refinery in Indonesia to comply with the policy of the
Government.
6. The Company is, subject to the rights of third parties,
hereby granted all necessary licenses and permits to
construct and operate the smelter referred to in paragraph 4
of this Article 10 and the facilities described in paragraph
2 of Article 9 in accordance with applicable laws and
regulations from time to time in effect, including such
reasonable safety regulations relating to design,
construction and operation as may from time to time be in
effect and of general applicability in Indonesia.
7. The Company shall submit to the Department the following
reports as to operations within each Mining Areas:
(i) a biweekly statistical report beginning with the first
two weeks following the commencement of the Operating
Period, which shall set forth the amount of material
Mined, Processed, shipped and exported;
(ii) a monthly report beginning with the first month
following the commencement of the Operating Period,
which shall set forth the number and describe the
location of the active operations during the preceding
month and a brief description of the work in progress
at the end of the month and of the work contemplated
during the following month;
(iii) a quarterly report beginning with the first
quarter following the date of the signing of this
Agreement with respect to the Contract Area Block A and
beginning with the first quarter following the
commencement of the Operating Period with respect to
each New Mining Area concerning the progress of its
operations in such Mining Area, which report shall
describe in reasonable detail the Mining activities
carried on in such Mining Area, including the number of
workmen employed in such Mining Area as of the end of
the quarter in question and a description of the work
in progress at the end of the quarter in question and
of the work contemplated during the ensuing quarter;
and
(iv) an annual report beginning with the year which includes
the date of the signing of this Agreement with respect
to the Contract Area Block A and beginning with the
first full year following the commencement of the
Operating Period with respect to each New Mining Area
which shall:
a. describe in reasonable detail the Mining
activities carried on in such Mining Area;
b. include the total volume of ores, kind-by-kind,
broken down between volumes Mined, volumes
transported from the Mines and their corresponding
destination, volumes stockpiled at the Mines or
elsewhere in Indonesia, volumes sold or committed
for export (whether actually shipped from
Indonesia or not), volumes actually shipped from
Indonesia (with information as to purchaser,
destination and terms of sale); and
c. include work accomplished and work in progress at
the end of the year in question with respect to
all of the installations and facilities related to
such Mining Area, together with a full description
of all work programmed for the ensuing year with
respect to such installations and facilities,
including a detailed report of all investment
actually made or committed during the year in
question and all investment committed for the
ensuing year or years.
Biweekly reports shall be submitted in eightfold within two
weeks after the end of the two weeks in question. Monthly
reports shall be submitted in eightfold within two weeks
after the end of the month in question. Quarterly reports
shall be submitted in eightfold within thirty days after the
end of the quarter in question. Annual reports shall be
submitted in eightfold within ninety days after the end of
the year in question.
8. The Company shall have full and effective control and
management of all matters relating to the operation of the
Enterprise including the production and marketing of its
Products. The Company may make expansions, modifications,
improvements and replacements of the Enterprises's
facilities, and may add new facilities as the Company shall
consider necessary for the operation of the Enterprise or to
provide services or to carry on activities ancillary or
incidental to the Enterprise. All such expansions,
modifications, improvements, replacements and additions
shall be considered part of the project facilities.
9. The Company accepts the rights and obligations to conduct
operations and activities in accordance with the terms of
this Agreement. The Company shall conduct all such
operations and activities in a good technical manner in
accordance with such good and acceptable international
Mining engineering standards and practices as are
economically and technically feasible, and in accordance
with modern and accepted scientific and technical
principles. In accordance with such standards, the Company
undertakes to use its best efforts to optimize the Mining
recovery of ore from proven reserves and metallurgical
recovery of Minerals from the ore to the extent it is
economically and technically feasible to do so, using
appropriate modern and effective techniques, materials and
methods designed to achieve minimum wastage and maximum
safety as provided in the applicable laws and regulations of
Indonesia from time to time in effect. The Company shall use
its best efforts to conduct all operations and activities
under this Agreement so as to minimize loss of natural
resources, and to protect natural resources against
unnecessary damage.
10. The Government will authorize the Company to freely select
the vessels and other transportation facilities to be used
in connection with imports and exports of articles under
this Agreement. In addition, the Company shall have the
right at all such times to purchase from vendors of its
choice all equipment, materials and supplies necessary for
the operations of the Company hereunder, and to enter into
arrangements to make use of any facilities belonging to
other Persons (whether or not Affiliates of the Company)
upon such terms and subject to such conditions, including
terms of payment, as to ownership and otherwise, as it deems
appropriate; provided that the Department shall have the
right to object to specific vendors or specific arrangements
on the basis of national security or foreign policy concerns
of the Government. In any case where the Government is the
sole economic source of supply for any article or commodity
necessary for the Enterprise, adequate supplies of such
article or commodity shall be made available for sale to the
Company at prices not greater than the fair market value
thereof.
ARTICLE 11
MARKETING
1. The Company shall have the right to export the Products
obtained from its operations under this Agreement, subject
to the obligations set forth in paragraph 5 of Article 10.
Any such export shall be on such credit terms as the Company
deems appropriate for marketing its Products, and neither
the Company nor any of the purchasers of such Products shall
be required by the Government to obtain letters of credit or
other credit documents at any bank or other institutions in
Indonesia or elsewhere in connection with marketing such
Products, or otherwise. Without in any way limiting the
Company's basic right to export its Products, such export
will be subject to the reporting and other non-monetary
provisions of the export laws and regulations of Indonesia
from time to time in effect and to the provisions of
paragraph 2 of this Article. Subject to any preexisting
contracts for the sale of Products to others, and the
obligation to make available concentrates in order to
satisfy the Company's obligations under paragraph 5 of
Article 10, the Company shall give priority to satisfying
domestic Indonesian requirements for use of its Products in
Indonesia. Sales to Indonesian customers will be on terms
and at prices which are competitive with those provided to
non-Indonesian customers.
2. The Company shall sell the Products in accordance with
generally accepted international business practices, and use
its best efforts to do so at prices and on terms of sale
which will maximize the economic return from the operations
hereunder, giving effect to world market conditions and
other circumstances prevailing at the time of sale or
contract; provided that the Government shall have the right,
on a basis which is of general applicability and non-
discriminatory as to the Company, to prohibit the sale or
export of Minerals or Products if such sale or export would
be contrary to the international obligations of the
Government or to external political considerations affecting
the national interest of Indonesia. In the event of such
prohibition (other than a quota requirement imposed pursuant
to an International Commodity Marketing Agreement), if the
Company is unable to find alternative markets on equivalent
terms and conditions, the Company shall be given assistance
and cooperation by the Government to overcome the possible
consequences of such prohibition.
3. To the extent deemed necessary by the Company to secure
financing for the Enterprise hereunder or to comply with its
obligations to the lenders thereunder, however, the Company
shall have the right to enter into long-term contracts for
the sale of its Products hereunder subject to the
obligations set forth in paragraph 5 of Article l0 and in
paragraph 1 of this Article 11.
4. In the event that sales are made or contracted to be made to
Affiliates, the prices to be paid therefor, to the extent
they affect any amounts payable to the Government pursuant
to the terms of this Agreement, shall comply with the
provisions of Article 13 and, to the extent applicable, of
Annex "F" to this Agreement. The Company shall submit to the
Government any proposed contract of sale to an Affiliate for
approval as complying with the foregoing provisions. If it
does so, and the Government either so approves the contract
or fails to respond within three months of such submission,
the contract shall be deemed for purposes hereof to comply
with the foregoing provisions. In any event sales
commitments with Affiliates shall be made only at prices
based on or equivalent to arm's length sales and in
accordance with such terms and conditions at which such
agreement would be made if the parties had not been
Affiliates, with due allowance for normal selling discounts
or commissions. Such discounts or commissions allowed the
Affiliates must be no greater than the prevailing rates so
that such discounts or commissions will not reduce the net
proceeds of sales to the Company below those which it would
have received if the parties had not been Affiliates. No
selling discounts or commissions shall be allowed an
Affiliate in respect of sales for consumption by it. Within
ninety days after the end of each calendar year, the Company
will deliver to the Department a report describing in such
reasonable detail as the Department may reasonably request
all sales contracts entered into during the preceding
calendar year with Affiliates in accordance with the
provisions of this paragraph 4.
5. If the Government believes that any figures related to sales
to Affiliates and used in computing any amounts payable to
the Government hereunder are not in accordance with the
provisions of paragraph 4 of this Article (or, if such sales
were pursuant to a contract, theretofore approved pursuant
to the provisions of such paragraph 4, are not in accordance
with such contract), the Government may within twelve months
after the calendar quarter in which such Products were sold,
but not thereafter, so advise the Company in writing. The
Company shall submit evidence of the correctness of the
figures within forty-five days after receipt of such advice.
Within forty-five days after receipt of such evidence, the
Government may give notice to the Company in writing that it
is still not satisfied with the correctness of the figures
and, within ten days after receipt of such notice by the
Company, a Committee, consisting of one representative of
and appointed by the Government and one representative of
and appointed by the Company, shall be constituted to review
the issue. The Committee shall meet as soon as convenient
at a mutually agreeable place in Indonesia and if the
members of the Committee do not reach agreement within
twenty days after their appointment or such longer period as
the Government and the Company mutually agree, the
representatives shall appoint a third member of the
Committee, who shall be a person of international standing
in jurisprudence and shall be familiar with the
international Mineral industry. The Committee, after
reviewing all the evidence, shall determine whether the
figures used by the Company or any other figures are in
accordance with paragraph 4 of this Article (or an approved
contract, as the case may be). The decision of two members
of the Committee shall be binding upon the Parties. Failure
of two representatives to appoint a third member of the
Committee shall require the issue to be submitted to
arbitration pursuant to Article 21 of this Agreement. Within
ninety days after the issue has been finally decided
pursuant to this paragraph, appropriate retroactive
adjustment shall be made in conformity with the Committee's
decision. The Company and the Government each shall pay the
expenses of its own member on the Committee and one half of
all other expenses of the Committee's proceedings.
6. In the event that the Company produces a concentrate
containing any Precious Metals which are easily recoverable,
the Company shall, if it is economically feasible, make
maximum efforts to recover such Precious Metals.
7. In the event of a sale of copper concentrates, gold or
silver to an Affiliate or to the domestic market or to the
Government's designated agency, it is understood that,
unless otherwise agreed by the Parties, the price of such
Products shall be determined on the basis of a formula price
which is generally employed in the sale of comparable
products among unrelated parties.
8. If at any stage in the course of its marketing arrangement,
the Company refines, or takes delivery of gold or silver
refined from its Products, then such gold and silver will be
in a form and bear marks which will make it acceptable in
the international precious metals markets. For gold, this
means the London Gold Market; for silver this means the
London Silver Market.
ARTICLE 12
IMPORT AND RE-EXPORT FACILITIES
1. The Company may import into Indonesia capital goods,
equipment, machinery (including spare parts), vehicles
(except for sedan cars and station wagons), aircraft,
vessels, other means of transport, consumables (including
safety equipment, chemicals and explosives) and raw
materials being items needed for use in the Mining,
Exploration, feasibility study, construction, production and
supporting technical activities of the Enterprise.
2. For the period beginning on the date of the signing of this
Agreement and ending on the eighteenth anniversary of such
date, and except as otherwise provided in paragraph 4 of
this Article, the imports permitted by paragraph 1 of this
Article (other than foodstuffs, wearing apparel and other
vital necessities for the personal needs of the Company's
employees and their dependents) shall be exempted from
import duties and shall obtain full relief from and
postponement of value added tax ("VAT") otherwise payable as
provided by the laws and regulations from time to time in
effect.
3. The provisions of this Article shall also be applicable to
Persons engaged as registered subcontractors of the Company
to carry on work or perform services with respect to the
Enterprise, and to any equipment directly used to support
the technical operations of the Company or any such
subcontractor such as laboratory and computer equipment
located outside its field operations.
4. The exemption from import duties and relief from and
postponement of VAT as referred to in paragraph 2 of this
Article shall apply only to the extent that the imported
goods are not produced or manufactured in Indonesia and
available on a competitive time, cost and quality basis,
without duty or tax except that for the purposes of
comparing the costs of imports and the cost of goods
manufactured or produced in Indonesia a premium (not in
excess of twelve and a half percent) shall be applied to the
cost of imports.
5. Any equipment (which must be clearly identified) and
unconsumed material imported by the Company or registered
subcontractors of the Company for the exclusive purpose of
providing services to the Company and intended to be re-
exported will be exempt from import duties and entitled to
relief from VAT and other levies. If such equipment and
material shall not have been re-exported by the time for re-
export (as established at the time of import), the Company
or the subcontractors of the Company, as the case may be,
shall, unless such re-export time has been extended or
exempted for reasons acceptable to the Government, pay
import duties, VAT and other levies not paid upon entry.
The Company shall be responsible for proper implementation
of its sub-contractors' obligations under this Article.
6. Any item imported by the Company or its registered sub-
contractors pursuant to this Article and no longer needed
for the Exploration, Mining and Processing activities of the
Company may be sold outside Indonesia and re-exported free
from export taxes and other customs duties (excluding
capital gains tax) and from VAT tax after compliance with
laws and regulations which shall at the time of such sale be
in effect and of general application in Indonesia. No
imported item shall be sold domestically or used otherwise
than in connection with the Enterprise except after
compliance with import laws and regulations which are at the
time of such import in effect and of general application in
Indonesia.
7. In view of the fact that goods and services will have to be
imported from abroad and that the Contract Area Block B is
remote, for all practical purposes, from presently existing
sea ports and other ports of entry for customs purposes, the
Government will consider establishing such sea port or port
of entry and the requisite customs office thereat as the
Company shall reasonably request from time to time; in
consideration thereof, each such customs office so
established at the request of the Company shall be furnished
and maintained by the Company at its expense and according
to the laws and regulations from time to time in effect.
8. During the Operating Period, the Company shall submit to the
Government, not later than November 15 of each year, a list
of equipment and material to be imported during the next
calendar year to enable the Government to review and to
approve the various items to be imported for the Enterprise.
Notwithstanding the foregoing, the Company may request
(stating the cause) the Government to amend the list of
equipment and material as required during the year.
9. Personal effects (including household and living equipment
and goods) belonging to a Covered Employee who is an
Expatriate shall be exempt from import or re-export
licenses, fees and duties.
10. Except as otherwise specifically provided in this Article or
in Article 13, the Company shall duly observe import
restrictions and prohibitions and rules and procedures of
general application.
ARTICLE 13
TAXES AND OTHER FINANCIAL OBLIGATIONS
OF THE COMPANY
Subject to the terms of this Agreement, the Company shall pay to
the Government and fulfill its tax liabilities as hereinafter
provided:
(i) Deadrent in respect of the Contract Area or any Mining
Area.
(ii) Royalties in respect of the Company's production of
Minerals.
(iii) Income taxes with respect to the Taxable Income of
the Company.
(iv) Personal income tax.
(v) Withholding taxes on dividends, interest and royalties,
rental, technical service, management service and other
service.
(vi) Value Added Tax on purchases and sales of taxable
goods, except as otherwise provided herein.
(vii) Stamp duty on legal documents.
(viii) Import duty on goods imported into Indonesia,
except as otherwise provided herein.
(ix) Land and Building Tax (PBB).
(x) Levies, taxes, charges and duties imposed by Regional
Government in Indonesia which have been approved by the
Central Government.
(xi) General administrative fees and charges for facilities
or services rendered and special rights granted by the
Government to the extent that such fees and charges
have been approved by the Central Government.
(xii) Tax on the transfer of ownership of motorized
vehicles and ships in Indonesia.
(xiii) Tax compliance.
The Company shall not be subject to any other taxes, duties,
levies, contributions, charges or fees now or hereafter levied or
imposed or approved by the Government other than those expressly
provided for in this Article and elsewhere in this Agreement.
1. Deadrent in respect of the Contract Area or any Mining Area.
The Company shall pay, in Rupiah, in United States Dollars
or in such other currencies as may be mutually agreed, an
annual amount as deadrent to be measured by the number of
hectares included in the Contract Area or any Mining Area as
the case may be, calculated on January 1st and July 1st of
each year, such payments to be made in advance and in two
installments each payable within thirty days after the said
dates during the term of this Agreement and payable as
stipulated in Annex "D" attached hereto.
2. Royalties in respect of the Company's production of
Minerals.
The Company shall pay royalties in respect of the Mineral
content of Products from the Mining Areas, to the extent
that any Mineral in such Products shall be a Mineral for
which value according to general practice is paid to the
Company by a buyer. Royalties shall be paid in Rupiah, in
United States Dollars or in such other currencies as may be
mutually agreed, and shall be paid within sixty days
following the end of each calendar quarter. Each payment
shall be accompanied by a statement in reasonable detail
showing the basis of computation of royalties due in respect
of shipments or sales made during the preceding calendar
quarter.
Royalties will be computed as follows:
a. With respect to copper sold as concentrates (together
with Precious Metals which constitute Associated
Minerals with such copper) or smelted or refined by or
on behalf of the Company:
(i) In the case of copper so sold as concentrates, the
amount of the royalty to be paid in respect of the
payable copper content of the concentrates sold by
the Company during any calendar quarter shall be
an amount equal to the value of CR in the
following formula:
CR = [(P x ACP) - SRFS] x PCT
where,
P = the number of pounds of payable
copper contained in the concentrates
sold during any calendar quarter;
ACP = the Applicable Copper Price
determined as provided in (b) below;
SRFS = the smelting and refining charges,
and freight and other selling costs,
incurred by the Company in respect of
such concentrates; and
PCT = the following applicable percentage;
(1) if the Applicable Copper price is
US $ 0.9000 per pound or less; PCT
= 1.50%
(2) if the Applicable Copper Price is
more than US $ 1.1000 per pound;
PCT = 3.50%
(3) if the Applicable Copper Price is
more than US $ 0.9000 per pound but
not more than US $ 1.1000 per
pound; a rate computed using the
following formula;
_____ _____
: ACP - 90 :
: 1.50 + _________ :
PCT = : :
: 10 :
:_____ _____:
where PCT = royalty rate in
percent, and
ACP = the
Applicable Copper
Price in US cents
per pound.
(ii) In the case of copper smelted or refined by or on
behalf of the Company, the royalty shall be based
on the payable copper content of the concentrates
smelted or refined by the Company during any
calendar quarter and shall be determined by the
foregoing formula with SRFS being the smelting and
refining charges, and freight and other selling
costs, which would have been incurred by the
Company in respect of such concentrates had such
concentrates been party (which, if the Company has
sold any copper concentrates during such calendar
quarter, shall be the average SRFS applicable
thereto); and
(iii) The applicable royalty rate with respect to
the Precious Metals which constitute Associated
Minerals with such copper shall be 1% of the sales
price, based on the Applicable Gold Price or the
Applicable Silver Price.
b. The following definitions are applicable to the
provisions of this Agreement with respect to Royalties:
(i) The term "Applicable Copper Price" shall mean,
with respect to the copper contained in the
concentrates sold by the Company during any
calendar quarter, a price equal to the official
London Metal Exchange cash seller's price for
copper-higher grade as published by "Metals Week"
averaged over such calendar quarter.
(ii) The term "Applicable Gold Price" shall mean, with
respect to the gold contained as an Associated
Mineral in the concentrates sold by the Company
during any calendar quarter, a price equal to the
mean of the London bullion market spot morning
("initial") and afternoon ("final") price for gold
in United States currency as published in "Metals
Week" averaged over such calendar quarter.
(iii) The term "Applicable Silver Price" shall
mean, with respect to the silver contained as an
Associated Mineral in the concentrates sold by the
Company during any calendar quarter, a price equal
to the London bullion brokers spot price in United
States currency as published in "Metals Week"
averaged over such calendar quarter.
(iv) The term "payable", when used in connection with
the copper, gold and silver content of
concentrates sold by the Company, shall mean that
portion of such content for which a price is paid
to the Company.
(v) The term "pound" shall mean, with respect to
copper, sixteen ounces (avoirdupois).
(vi) The term "ounce" shall mean, with respect to gold
and silver, a xxxx ounce of 31.1035 grams.
(vii) The term "smelting and refining charges,
freight and other selling costs" shall mean with
respect to concentrates sold by the Company, the
aggregate amount of costs in respect of such
concentrates that are deductible from gross sales
in determining Net Sales.
c. The prices of copper, gold and silver, if quoted in
pounds sterling (or other foreign currency) rather than
in United States Dollars by "Metals Week" (or any other
publication substituted for "Metals Week" by mutual
agreement of the Company and the Department), shall be
converted daily during any calendar quarter into United
States Dollars by using the noon buying rate for
sterling (or other foreign currency) for cable
transfers as certified by the Federal Reserve Bank of
New York for customs purposes. The average price for
any such calendar quarter shall be calculated by
totalling the United States Dollar equivalents of the
daily prices (or daily mean prices, in the case of
gold) and dividing such total by the number of market
days in such quarter.
d. In the event that either the Company or the Department
believes that the market price of copper, gold or
silver price specified in this Article 13 is no longer
quotable or determinable from reliable published
sources, then, upon written notice by the Company or
the Department to the other, the Company and the
Department shall promptly consult with a view toward
determining a new published market price for copper,
gold or silver, as the case may be, such new published
market price to be the same, so far as practicable, as
that specified above. If the Company or the Department
shall give such notice, the Company shall continue to
pay royalties on the basis of a published market price
determined by the Company in good faith for the metal
concerned, in the case of all concentrates shipped
during the period commencing with the date of such
notice and ending with the date on which the Company
and the Department shall reach agreement with respect
to a new published market price for the metal
concerned.
e. The computation of the amount of the copper royalty
payment in respect of the concentrates sold by the
Company during a given calendar quarter shall be made
on the basis of the final dry weight, assay, and
smelting and refining charges, freight and other
selling costs determined in accordance with the
applicable sales, transportation, insurance and other
contracts as evidenced by final invoices, cargo and
freight bills, and other documents related to shipping
and handling. To the extent that the final dry weight,
assay, and smelting and refining charges, freight and
other selling costs have not been determined, such
computation shall be made on the basis of the
provisional dry weight, assay, or smelting and refining
charges, freight and other selling costs as determined
in accordance with the applicable sales,
transportation, insurance and other contracts as
evidenced by provisional invoices, freight bills and
other documents, subject to upward or downward
adjustment on the basis of the final dry weight, assay,
or smelting and refining charges, freight or other
selling costs. If the amount of the royalty payment
made in respect of any cargo of concentrates on the
basis of the provisional dry weight, assay, or smelting
and refining charges, freight or other selling costs is
more or less than the amount thereof computed on the
basis of the final dry weight, assay, or smelting and
refining charges, freight and other selling costs, the
amount of the excess or deficiency shall be subtracted
from or added to, as the case may be, the amount of the
royalty payment due on the quarterly payment date next
following the determination of such final dry weight,
assay or smelting and refining charges, freight or
other selling costs.
Each payment shall be accompanied by a certificate
signed by an executive director of the Company showing
in reasonable detail the computation of the amount of
the royalty payment due, including the amount of any
adjustment in royalty payments made in respect of any
prior quarter.
f. Concentrates shall be deemed to be sold when title
passes to the purchaser pursuant to the applicable
contract of sale.
g. In the ease of Precious Metals and other Minerals not
covered by the provisions of paragraph (a), the
applicable royalty rate shall be computed on the basis
of the market value of the contained Mineral refining
charges, and freight and other selling costs, with the
royalty rates (which may vary with the applicable
market prices) being determined by negotiation between
the Company and the Government, based on the general
economic principles reflected in the royalty rates
established in this paragraph for copper and Precious
Metals which are Associated Minerals; provided,
however, that in no event will such royalty rates be
less than 1% nor more than 3.5%. Such negotiation
shall be completed, with respect to any Mineral, prior
to the time the Company first begins construction of
any Mining facilities with respect to such Mineral as
permitted by this Agreement. The actual computation of
the royalties will be based on the provisions and
principles contained in the foregoing paragraphs (b)
through (f).
h. The Company shall pay any applicable Additional Royalty
in Respect of Minerals Exported as Unbeneficiated Ore
from Indonesia ("Additional Royalty"). Additional
Royalty shall be payable only to the extent that any
Mineral in the Company's Products exported from
Indonesia shall be a Mineral for which value according
to general practise is paid to the Company by a buyer.
The rate of Additional Royalty to be paid shall be as
stipulated in Annex "G" attached hereto. The Additional
Royalty shall be increased or decreased in the same
proportion that the currant price shall be different
from those prices set out in Annex "G" for each Mineral
sold. Additional Royalty shall not be payable on:
(i) The export of Precious Metals in the form of
Associated Minerals, dore bullion bars or
concentrates or
(ii) Any Mineral exported in a form listed as exempt in
column 6 of Annex "G".
The rules applicable to Additional Royalty shall be,
with necessary adjustment, those rules of computation
and payment of royalty set out above in this paragraph
2 (exclusive of the limitations on rate specified in
paragraph (g) above). The Government will (upon written
request from the Company) determine the stage of
Products exempt from Additional Royalty or any Mineral
for which no stage is specified in column 6 of Annex
"G", such stage to be consistent with the stages
specified in column 6 of Annex "G" for similar
Minerals. For any Minerals or ore for which no
international price is given on or ore for which no
international price is given on Annex "G" the
Government will (upon written request from the Company)
determine such price based upon general economic
principles applicable to the determination of royalty
for copper and Precious Metals specified above in this
paragraph 2.
3. Incomes taxes with respect to the Taxable Income of the
Company.
The Company will pay corporate income tax (calculated in
accordance with Annex "F") on income, meaning any increase
in economic prosperity received or accrued by the Company,
whether originating from within or without Indonesia, in
whatever name and form, including but not limited to gross
profit from business, dividends, interest and royalties; the
tax rates which shall be applied throughout the term of this
Agreement shall be as follows:
(a) 15% tax rate for taxable income up to Rp 10.000.000
(ten million Rupiah);
(b) 25% tax rate for taxable income from Rp 10.000.000 (ten
million Rupiah) to Rp 50.000.000 (fifty million
Rupiah); and
(c) 35% tax rate for taxable income above Rp 50.000.000
(fifty million Rupiah).
For the purposes of calculation of taxable income, the rules
for computation of corporate income tax as provided for in
Annex "F" attached to and made part of this Agreement shall
apply and except as otherwise stipulated in this Agreement
and the said Annex "F", the rules as provided in Income Tax
Law 1984, Law No. 7 of 1983 and the regulations thereunder,
shall apply.
4. Personal income tax.
(i) The Company shall withhold and remit income taxes on
remuneration of the Company's employees according to
Article 21 of Income Tax Law 1984, Law No. 7 of 1983.
(ii) Remuneration of Covered Employees whose work situs is
in a remote area shall not include the following in
kind or other benefits provided by the Company:
(a) medical services provided to Covered Employees
(including their dependents), including services
provided pursuant to paragraph 7 of outside the
Contract Area or any Project Area to executive
directors of the Company at the Vice President
level or higher shall be reviewed on a case-by-
case basis to determine if such services are
remuneration;
(b) annual leave for Covered Employees (including
their dependents) who reside in a remote area;
(c) the cost of education within the Contract Area or
related Project Area of dependents of Covered
Employees (including their dependents), including
education provided pursuant to paragraph 8 of
Article 17;
(d) housing in a remote area provided to Covered
Employees (including their dependents); and
(e) food provided to Covered Employees at any remote
area location.
(iii) Expatriate Individuals who are employed or engaged
by the Company or its Subsidiaries or its sub-
contractors and who are present in Indonesia for 183 or
less days in any twelve month period shall be subject
to withholding of tax at the rate of 20% (or such
lesser percentage as shall apply under any relevant
Double Tax Agreement) on the gross remuneration for
services rendered in Indonesia based an Article 26
Income Tax Law 1984, Law No. 7 of 1983. The income of
such Expatriate Individuals which is taxable in
Indonesia shall include only remuneration paid to them
for services rendered in Indonesia.
(iv) Expatriate Individuals who are employed or engaged by
the Company or its Subsidiaries or its subcontractors
and who are present in Indonesia for more than 183 days
in any twelve month period or intend to reside in
Indonesia, shall be liable for Indonesian personal
income tax. The Company shall deduct personal income
tax based on Article 21 Income Tax Law 1984, Law No. 7
of 1983 from the income received by the employee from
the Company with consideration being given to the
regulations relating to deductible income. The income
of such Expatriate Individuals shall include all kinds
of remuneration paid to them by their employer but
shall exclude employee benefits which either are not
deductible in calculating the taxable income of the
Company or are set out in clause (ii) of this paragraph
4.
5. Withholding taxes on dividends, interest and royalties.
(a) The Company shall, in accordance with the Income Tax
Law 1984 and the laws and regulations prevailing at the
date of the signing of this Agreement, withhold and
remit to the Government withholding taxes on the
payment of royalties, rent and other compensation
related to the use of property and compensation paid
for technical assistance or management services
performed in Indonesia, at the following rates (or such
lesser rates as shall be applicable from time to time
under any relevant Double Tax Agreement): fifteen
percent to the case of payments to a resident taxpayer
and twenty percent in the case of payments to a
nonresident taxpayer.
(b) The Company (and its Subsidiaries and Affiliates to the
extent carrying out functions hereunder) shall, in
accordance with the Income Tax Law 1984 and the laws
and regulations prevailing at the date of the signing
of this Agreement, withhold and remit to the Government
withholding taxes on the payment of dividends at the
rate of fifteen percent (or such lesser rate as shall
be applicable from time to time under any relevant
Double Tax Agreement).
(c) The Company shall, in accordance with the Income Tax
Law 1984 and the laws and regulations prevailing at the
date of the signing of this Agreement, withhold and
remit to the Government withholding taxes on the
payment of interest at the following rates (or such
lesser rates as shall be applicable from time to time
under any relevant Double Tax Agreement): fifteen
percent in the case of payments to a resident taxpayer
and twenty percent in the case of payments to a
nonresident taxpayer; provided that, during the term of
this Agreement, the Company (and its Subsidiaries and
Affiliates to the extent carrying out functions
hereunder) shall be exempt from any Government
withholding taxes on any interest in whatever form
which is payable on any indebtedness of the Company
(and such Subsidiaries and Affiliates) pursuant to loan
agreements entered into prior to the date of the
signing of this Agreement. For such purpose, interest
includes payments for loan guarantees and other
payments which are characterized as interest for
purposes of Indonesian law and loan agreements include
all debt agreements providing for the payment of such
interest.
6. Value Added Tax and Sales Tax on Luxury Goods imposed
on import and delivery of taxable goods and services.
With regard to the obligation contemplated by the Value
Added Tax on Goods and Services and Sales Tax on Luxury
Goods, Value Added Tax Law 1984, Law No. 8 of 1983 and
its implementing regulations as in effect on the date
of the signing of this Agreement (the "VAT Law") the
Company (for itself and its Subsidiaries and Affiliates
to the extent carrying out functions hereunder) agrees,
except as otherwise provided in this Agreement, as
follows:
(i) It shall register its business as a taxable firm
for Value Added Tax Purposes;
(ii) It shall withhold and remit upon sale and delivery
of Mined Products tax (output tax) at the
applicable rate or rates under the VAT Law;
(iii) It shall withhold and remit tax under the VAT
Law in accordance with the Decree of the President
of the Republic of Indonesia No. 56 of Year 1988
or decrees having similar effect;
(iv) The Company shall be subject to the obligation to
pay tax under the VAT Law on the import or
purchase of taxable goods or procurement of
taxable services;
(v) Tax under the VAT Law, especially on the import or
purchase of taxable goods in the form of machinery
and other equipment, may be deferred pursuant to
the regulations in effect from time to time.
(vi) Payments under the VAT Law on import and domestic
purchasing of taxable goods and services (input
tax) are creditable against payments of output tax
under the VAT Law.
(vii) If the input tax is more than the output tax,
the excess may be either applied against the
output tax for the next taxable period or refunded
to the Company, as requested by the Company. Any
such refund shall be made within one month after
the date of the letter requesting such refund.
7. Stamp duty on legal documents.
As provided in Law No. 13 of 1985 dated December 27, 1985 re
Stamp Duty.
8. Import duty on goods imported into Indonesia.
(i) Exemption and tax reliefs on import of capital goods,
equipment, machinery (including spare parts), vehicles
(except for sedan cars and station wagons), aircraft,
vessels, other means of transport, consumables
(including chemicals and explosives, but excluding dry
goods and foodstuffs) and raw materials are accorded to
the Company, as provided in Article 12 above, by virtue
of Law No. l of 1967 concerning Foreign Capital
Investment as amended in Law No. 1 of 1967.
(ii) Other goods including personal effects are subject to
import duty laws and regulations from time to time in
effect, except as otherwise provided in Article 12.
(iii) Tobacco and liquor are subject to excise tax in
accordance with the prevailing law.
9. Land and Building Tax (PBB). The Company shall pay Land and
Building Tax (PBB), in Rupiah, as follows:
(i) During the General Survey, Exploration, Feasibility
Studies and Construction Periods, an amount equal to
the amount of deadrent. During the Operating Period,
an amount equal to the amount of deadrent, plus an
additional annual land tax equal to 0.5% times 20% of
gross revenues from Mining operations. Such payments
shall be made in accordance with the provisions set
forth in paragraph 1 of this Article.
(ii) An amount to be measured by the number of square meters
of land area and floor space used by the Company for
its facilities which are closed to the public, such
payment to be made during the term of this Agreement in
accordance with the laws and regulations from time to
time in effect; provided, that the tariffs imposed on
the Company shall be only those of general
applicability in the Mining industry in Indonesia.
10. Levies, taxes, charges and duties imposed by Regional
Governments in Indonesia which have been approved by the
Central Government and are at rates no higher than the fees
and charges prevailing as at the date of the signing of this
Agreement and calculated in a manner no more onerous to the
Company than that prevailing as at the date of the signing
of this Agreement.
11. Except as otherwise provided in this Agreement, general
administrative fees and charges for facilities or services
rendered and special rights granted by the Government to the
extent that such fees and charges have been approved by the
Central Government and are at rates no higher than the fees
and charges prevailing as at the date of the signing of this
Agreement and calculated in a manner no more onerous to the
Company than that prevailing as at the date of the signing
of this Agreement.
12. Tax on the transfer of ownership shall be payable on
motorized vehicles (the tax levied by the Regional
Government where the vehicles are registered at rates
according to the relevant Regional Government regulations
from time to time in effect) and on ships or vessels working
in Indonesia (the tax levied by the Directorate General of
Sea Communication, Ministry of Communication, where the
ships or vessels are registered).
13. Tax Compliance.
(i) The Company shall maintain appropriate tax books and
records and otherwise comply with the tax filing and
payment requirements of the Republic of Indonesia and
any other taxing jurisdictions which may lawfully
impose any tax on the Company.
(ii) The Company and its Subsidiaries and Affiliates are
subject to the provisions of Income Tax Law 1984, Law
No. 7 of 1983 and Law No. 6 of 1983 concerning General
Tax Provisions and Procedures and of this Agreement in
connection with such formal and procedural tax matters
as Tax Identification Number, Tax Return, tax payment,
reporting and rights as to taxation such as tax
objection, refund, tax credit, compensation and
penalties.
(iii) The Company shall maintain tax records for the
Government, in a manner consistent with Article 14 and
may compute and pay all tax payments in United States
Dollars.
(iv) In determining the Company's net taxable income, sound,
consistent and generally accepted accounting principles
used in the Mining industry shall be employed,
provided, however, that where more than one accounting
practice is found to prevail, the Government shall
consult with the Company with regard to the particular
item. Without limiting the generality of the
foregoing, the Government shall in no event be bound by
the Company's characterization of any transaction with
an Affiliate for accounting purposes. In the event that
the Government establishes that any payment, deduction,
charges or expenses or other transaction with an
Affiliate is not fair, reasonable and consistent with
the general practice that would have been followed by
independent parties in connection with a transaction of
a similar nature, the Government may, for the purposes
of determining the Company's income tax liability,
substitute the payment, deduction, charges or expenses
or other transaction which would have prevailed had the
transaction occurred between independent parties.
ARTICLE 14
RECORDS, INSPECTION AND WORK PROGRAM
1. The Company shall maintain in Indonesia technical, financial
and tax records relating to its operations hereunder which
are comparable in detail and type to those being maintained
on the date of the signing of this Agreement with respect to
its current operations in Indonesia. Such financial and tax
records may be maintained in Rupiahs or United States
dollars as selected by the Company, and in English. The
Company shall furnish to the Government annual financial
statements consisting of a balance sheet and related
statement of income and all such other financial information
concerning the Enterprise and its operations hereunder in
accordance with generally accepted accounting principles in
Indonesia and all such other information concerning its
operations in such detail as the Government may reasonably
request.
2. The Government and its authorized representatives have the
right to review and audit such financial statement and tax
returns within five years after the end of the latest period
covered thereby. The failure by the Government to make a
claim for additional payment on account of deadrent,
royalties, tax or other payments to the Government within
such five year period shall preclude any such claim by the
Government thereafter.
3. The Government and its authorized representatives may enter
the Contract Area and any other place of business of the
Company to inspect the operations at any time and from time
to time during regular business hours. The Company shall
render necessary assistance to enable such representatives
to inspect technical, financial and tax records relating to
the Company's operations and shall give such representatives
such information as such representatives may reasonably
request. The representatives shall conduct such inspections
at their own risk and shall avoid interference with normal
operations of the Company.
4. The Company shall submit to the Department no later than
November 15 in each year during the term of this Agreement
its work program, budget plan, sales contract and
marketing/sales plan for the following year in sufficient
detail to permit the Department to review such physical,
financial and marketing/sales program and determine whether
they are in accordance with the Company's obligations under
this Agreement. A work program and budget for the first
year of this Agreement with respect to the Contract Area
Block B shall be submitted as soon as possible after the
signing of this Agreement.
5. (a) The Company shall also furnish to the Department
the reports called for by Article 7, by paragraph 7 of
Article 10 and by Article 11.
(b) The Company shall furnish to the Government such other
information of whatever kind relative to the Enterprise
and not otherwise being delivered to the Government or
the Department as the Government may reasonably
request, which is, or with the exercise of reasonable
efforts by the Company would be, within the control of
the Company in order that the Government may be fully
appraised of the Company's Exploration and exploitation
activities.
6. All information mentioned in paragraph 5 of this Article
furnished to the Department may be in English and all
financial data will be recorded in United States Dollars.
All such information shall be subject to the provisions of
paragraph 6 of Article 7 relating to confidentiality.
7. The Company shall maintain original records and reports
relating to its activities and operations under this
Agreement including documents relating to financial and
commercial transactions with independent parties and
Affiliates in its principal office in Indonesia. These
records and reports shall be open to inspection by the
Government through an authorized representative. Such
reports and records shall be maintained in Indonesia and all
financial data shall be recorded in Rupiah currency or
United States Dollars and records shall also be kept of
conversion rates applied to the original currency.
8. The Company shall require its Subsidiaries, Affiliates and
subcontractors, to the extent that such Subsidiaries,
Affiliates and subcontractors are acting on the Company's
behalf with respect to the Company's obligations, activities
and operations under this Agreement, to keep all financial
statements, records, data and information necessary to
enable the Company to observe the provisions of this Article
14.
9. All records, reports, plans, maps, charts, accounts and
information which the Company is or may from time to time be
required to supply under the provisions of this Agreement
shall be supplied at the expense of the Company.
ARTICLE 15
CURRENCY EXCHANGE
1. All investment remittances into Indonesia for the purpose of
any expenditures to be made in Indonesia (including but not
limited to equity capital and loan capital) shall be
deposited into a foreign investment account (the "PMA
Account") established at one or more foreign exchange banks
in Indonesia. All such investment remittances shall be used
in accordance with the investment regulations from time to
time in effect applicable to foreign investment law
companies established under the Foreign Investment Law, Law
No. 1 of 1967, as amended. The conversion or sale of foreign
exchange originating from PMA foreign currency accounts is
to be done with foreign exchange banks and not necessarily
with Bank Indonesia.
2. The Company shall be granted the right to transfer abroad,
in any currency it may desire, funds in the PMA Account or
received by the Company in Rupiah in respect of the
following items, provided that such transfers are effected
in accordance with the laws and regulations then in effect
and at prevailing rates of exchange generally applicable to
commercial transactions:
(i) Net operating profits of the Company in proportion to
the shareholding of any non-Indonesian investor;
(ii) Repayment of loan principal and the interest thereon,
insofar as it is a part of the Company's capital
investment which has been approved by the Government;
(iii) Allowance for depreciation of capital assets
generally applicable to foreign investment companies
established under the Foreign Investment Law, Law No. 1
of 1967, as amended;
(iv) Proceeds from sales of shares sold pursuant to
paragraph 2 of Article 24;
(v) Expenses for Expatriates employed by the Company and
their families and for training of Indonesian personnel
abroad;
(vi) Debts of the Company denominated in foreign currency,
including debts owed to contractors and sellers of
equipment and raw materials, or for commissions;
(vii) Technical assistance fees;
(viii) License fees;
(ix) Agency commissions payable to third parties abroad;
(x) Payments to foreign suppliers of the Company, to the
extent that the purchases of foreign goods and
services, including management and related services,
are necessary for the operation of the Company or the
Enterprise;
(xi) Repatriation of capital on the liquidation of the
Company;
(xii) Any other foreign exchange facilities provided
from time to time to foreign investment companies
established under the Foreign Investment Law, Law No. 1
of 1967, as amended or provided by any regulations
adopted pursuant thereto or by any other laws or
regulations.
3. The proceeds of sales of Minerals and any Products derived
from them can be used as the Company sees fit. Without
prejudice to the foregoing rights of the Company, the
Company agrees that with regard to the proceeds of the
Company's export sales it shall comply with laws and
regulations from time to time in force to the extent not
inconsistent with the preceding sentence, except as Bank
Indonesia and the Company may otherwise agree. The terms and
conditions of any such agreement between Bank Indonesia and
the Company shall not be less favorable to the Company than
those contained in any other similar agreements by Bank
Indonesia and other mining companies now or hereafter in
effect.
4. The Company in the exercise and performance of its rights
and obligations set forth in this Agreement shall be
authorized to pay abroad, in any currency it may desire,
without conversion into Rupiah, for the goods and services
it may require and to defray abroad, in any currency it may
desire, any other expenses incurred for mining operations
under this Agreement.
5. All Expatriates who are Covered Employees in any capacity
shall have the right to freely retain or dispose of any of
their funds or assets outside Indonesia and shall be
entitled to import into Indonesia such foreign currencies as
may be required for their needs.
6. In respect of other matters of foreign currency arising in
any way out of or in connection with this Agreement, the
Company shall be entitled to receive treatment no less
favorable to the Company than that accorded to any other
Mining company carrying on operations in Indonesia.
7. Subject to the foregoing paragraphs of this Article 15, the
Company shall comply with all financial reporting and
approval requirements applicable to foreign investment law
companies established under the Foreign Investment Law, Law
No. 1 of 1967.
8. The Company shall forward financial reports in accordance
with the procedures required by Bank Indonesia.
ARTICLE 16
SPECIAL RIGHTS OF THE GOVERNMENT
1. The Company and its shareholders agree that they will not
without the Government's prior approval:
(i) amend the Articles of Incorporation of the Company in
any material respect;
(ii) change the basic nature of the business of the Company;
(iii) voluntarily liquidate or wind up the Company;
(iv) merge or consolidate the Company with any other
company; or
(v) pledge or otherwise use as security the Minerals in the
Contract Area.
2. The Government reserves the right to withhold its approval
of plans and designs relating to construction, operation,
expansion, modification and replacement of facilities of the
Enterprise in the Contract Area Block B which may
disproportionately and unreasonably damage the surrounding
Environment or limit its further development potential or
significantly disrupt the socio-political stability in the
area or be adverse to the interests of national security.
As more fully described in paragraph 4 of Article 8, such
approval shall not unreasonably be withheld or delayed; and,
if within three months after submission of such plans or
designs the Government does not raise any objection, then
such plans or design will be considered approved.
3. The Government shall have the right of access to the
Contract Area as provided in paragraph 3 of Article 14.
ARTICLE 17
EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS
1. The Company shall continue to employ Indonesian personnel to
the maximum extent practicable consistent with efficient
operations, subject to the provisions of the laws and
regulation which may from time to time be in force in
Indonesia.
2. The Company shall not be restricted in its assignment or
discharge of personnel; provided however that subject to the
foregoing requirements the terms and conditions of such
assignment and discharge or disciplining of Indonesian
personnel shall be carried out in compliance with the laws
and regulations of Indonesia which at the time are generally
applied.
3. The Company shall continue to seek to provide direct
Indonesian participation in the Enterprise through the
inclusion of Indonesian nationals in the management of the
Company. The Company will also train Indonesian nationals to
occupy other responsible positions.
4. The Company shall continue to conduct a comprehensive
training program for Indonesian personnel in Indonesia and,
subject to the approval of the Government, in other
countries and shall carry out such program for training and
education in order to meet the requirement for various
classifications of full time employment for its operations
in Indonesia. With respect to any New Mining Area, such
program shall be carried out as soon as practicable after
the beginning of the Construction Period with respect to
such New Mining Area. The Company shall also conduct a
program to acquaint all Expatriate employees and registered
subcontractors with the laws and customs of Indonesia.
5. The Company and its registered subcontractors may bring into
Indonesia such Expatriate Individuals as in the Company's
judgment are required to carry out efficiently the
operations of the Company hereunder; provided however, that
the Department may make known to the Company, and the
Company shall duly observe, objections based on grounds of
national security or foreign policy of the Government. At
the Company's request (which shall be accompanied by
information concerning the education, experience and other
qualifications of the individuals concerned) and in
compliance with the laws and regulations in effect from time
to time, the Government will facilitate the issuance of all
necessary permits, visas and such other permits as may be
required; in this connection the Company shall periodically
submit its manpower requirement plans, manpower report,
training program and training report in the framework of the
Indonesianization process to the Government.
6. The Company agrees that there shall at all times be equal
treatment, facilities and opportunities among employees in
the same job classification with respect to salaries,
facilities and opportunities within the Mining industry
regardless of nationality and the Company shall duly observe
the manpower laws and regulations from time to time in
effect in Indonesia. Notwithstanding the foregoing, it shall
not be a violation of the foregoing provision to give
preference as to opportunity to Indonesians in light of the
policy of the Government to increase the employment of
Indonesians to the maximum extent possible, nor to continue
to pay Expatriates brought into Indonesia pursuant to
paragraph 5 of this Article at a higher rate than local
employees in situations where, with respect to a given job
classification, there is a need to employ such Expatriates.
7. The Company shall furnish such free medical care and
attention to all its employees working in any Mining Area or
in any Project Area related to such Mining Area as is
reasonable and shall maintain or have available adequate
medical services at least commensurate with such services
provided in similar circumstances in Indonesia. With respect
to a Company established permanent settlement with respect
to a Mining Area, the Company shall furnish such free
medical care and attention to all its employees and all
Government officials requested by the Company working in
such Mining Area or in any Project Area related to such
Mining Area as is reasonable and shall maintain a staff and
a dispensary, clinic or hospital which shall be reasonably
adequate under the circumstances according to the laws and
regulations of Indonesia from time to time in effect.
8. With respect to any Mining Area as to which the Company has
established a permanent settlement incorporating families
for the employees associated with the Enterprise, the
Company shall provide, free of charge, primary and secondary
education facilities for the children living in any Project
Area related to such Mining Area of employees working in
such Mining Area or in any Project Area related to such
Mining Area. Rules, regulations and standards of general
application for comparable education facilities in Indonesia
established by the Department of Education and Culture shall
be followed.
9. The Company acknowledges that pursuant to Law No. 14 of
1969, employees of the Company have the right to form a
trade union for purposes of collective bargaining with the
Company. Certain of the Company's employees are members of a
trade union which has been recognized by the Company as well
as by the Government, and a collective labor agreement with
such union is currently in effect. The Company acknowledges
that it may be required from time to time to enter into
collective bargaining with such trade union.
ARTICLE 18
ENABLING PROVISIONS
1. The Government will grant the Company the necessary rights
and will take such other action as may be desirable to
achieve the mutual objectives of this Agreement. The Company
shall have the following rights:
(i) the sole right to enter the Contract Area or any Mining
Area for the purposes of this Agreement, to make drill
holes, test pits and excavations, and to take and
remove, without royalty or other charge, samples for
assays and for metallurgical, pilot plant and
laboratory research purposes, including bulk samples
for such purposes, provided that the Company shall have
received the approval of the Government prior to the
export of any such samples, to be given prospectively
on a quarterly basis and shall pay any royalties
applicable thereto.
(ii) to enter upon and remain within the Contract Area and
the Project Areas related to the Contract Area
(including portions of the air space and shore line),
subject to the right of the Department to object to any
New Mining Area as provided in paragraph 2 of Article
8. The Company shall recognize the items referred to in
Article 16 of Law No. 11 of 1967, subject to the
provision of paragraph 2 of the said Article 16.
2. In carrying out its activities under this Agreement, the
Company, subject to the laws and regulations from time to
time in effect in Indonesia, shall have the right to
construct facilities as it deems necessary; provided that:
(i) In connection with the use of land by the Company for
construction of facilities as provided in this
Agreement, the Company shall pay the usual surveying
and registration fees charged by the Land Registration
Office. In acquiring titles to land outside any New
Mining Area, the Company shall comply with laws and
regulations of general application from time to time in
effect.
(ii) In connection with the activities of the Company, but
subject to the provisions of Article 13, the Company
shall pay generally applicable fees and charges for
services performed, facilities provided and special
rights granted by the Government; provided that such
services, facilities and rights are requested by the
Company.
3. Subject to laws and regulations from time to time be in
force in Indonesia, and subject also to the provisions of
paragraph 2 of Article 25 and paragraph 2 of Article 16, the
Company may at any time file with the Department a plan or
plans, and may thereafter file additional or amended plans,
covering:
(i) the New Mining Area or Areas in which the Company
proposes to construct facilities related to production
from the Contract Area Block B;
(ii) all other areas within the Contract Area Block B in
which the Company proposes to construct any other
facilities necessary for the Enterprise, and the
location of all such rights in and over land, including
easements, rights of way and rights to lay or pass on,
over and under land, any roads, railways, pipes,
pipelines, sewers, drains, wires, lines or similar
facilities as may be necessary for the Enterprise; and
(iii) all other areas in which the Company shall have
the right to construct such additional facilities as
the Company deems necessary or convenient for the
Enterprise, including Project Areas related to the
Contract Area Block A.
The Government shall thereupon make arrangements for the
Company to utilize and remain within all such areas and such
land covered by such plans (or such comparable areas as may
be agreed between the Government and the Company) and to
exercise the other rights specified above with respect to
each such area. The use and occupancy of any areas covered
by such plans shall not be subject to payment by the Company
of any charges or fees other than those specified elsewhere
in this Agreement. The plans filed pursuant to this
paragraph shall, to the extent practicable, give
descriptions in sufficient detail to permit precise
identification of the designated areas. The Government
shall assist the Company in arrangements for any necessary
resettlement of local inhabitants whose resettlement from
any part of the Contract Area Block B or the Protect Areas
is necessary and the Company shall pay for the resettlement
and give reasonable compensation for any dwelling, privately
owned lands (including such landownership based on any
Indonesian customs or customary laws, generally or locally
applicable) or other improvements in existence on any such
parts which are taken or damaged by the Company in
connection with its activities under this Agreement.
4. Subject to the non-monetary provisions of generally
applicable Central Government, Regional Government and
Provincial laws and regulations from time to time in effect,
and to the payments provided for in Article 13 of this
Agreement but to no other payments to the Government, and
with due recognition of the rights of private parties
created prior to the beginning of the Construction Period
and subject to payments of such reasonable compensation to
any such private party with rights thereto created prior to
the beginning of the Construction Period as may be customary
in the Contract Area Block B, the Company may take and use
from the Contract Area or any Project Area such timber (for
construction purposes), soil, stone, sand, gravel, lime,
water and other products and materials as are necessary for
or are to be used by the Enterprise. In connection with the
foregoing and except as otherwise provided in this
Agreement, the Company shall observe the laws and
regulations in effect on the date of the signing of this
Agreement governing the exploitation and use of such natural
resources.
5. The Company shall also have the right, in compliance with
laws and regulations in effect on the date of the signing of
this Agreement, to clear away and remove such timber,
overburden and other obstructions as may be necessary or
desirable for the Mining, construction of facilities and any
other operations of the Company under this Agreement,
provided that the Company shall take into account other
rights granted by the Government such as grazing, timber
cutting and cultivation rights, and rights of way, by
conducting its operations under this Agreement so as to
interfere as little an possible with such rights.
6. The Company may, at its own expense, also take and use any
of such products and materials from other areas outside the
Contract Area or any Project Area subject to the rights of
other parties, to the approval of the Government, and to the
payment of such compensation as may be agreed between the
Company and such other parties or Government and in
accordance with the laws and regulations in effect on the
date of the signing of this Agreement.
7. At the request of the Company, the Government shall
cooperate in a joint endeavour to alleviate any interference
which may arise from others operating under conflicting
rights.
8. The Company and the Government recognize that the existing
and proposed operations hereunder are to be carried out in
an extremely remote area with a difficult environment and
that, accordingly, the Company has been and will be required
to develop special facilities and carry out special
functions for the fulfillment of this Agreement. In
recognition of the added burdens and expenses to be borne by
the Company and the additional services to be performed by
the Company as a result of the location of its activities in
a difficult environment, the Government recognizes that
appropriate arrangement may be required to minimize the
adverse economic and operational costs resulting from the
administration of the laws and regulations of the Government
from time to time in effect, and in construing the Company's
obligations to comply with such laws and regulations.
ARTICLE 19
FORCE MAJEURE
1. Any failure by the Government or by the Company to carry out
any of its obligations under this Agreement shall not be
deemed a breach of contract or default if such failure is
caused by force majeure, that party having taken all
appropriate precaution, due care and reasonable alternative
measures with the objectives of avoiding such failure and of
carrying out its obligations under this Agreement. If any
activity is delayed, curtailed or prevented by force
majeure, then anything in this Agreement to the contrary
notwithstanding, the time for carrying out the activity
thereby affected and the term of this Agreement specified in
Article 31 shall each be extended for a period equal to the
total of the periods during which such causes or their
effects were operative, and for such further periods, if
any, as shall be necessary to make good the time lost as a
result of such force majeure. For the purposes of this
Agreement, force majeure shall include among other things:
war, insurrection, civil disturbance, blockade, sabotage,
embargo, strike and other labor conflict, riot, epidemic,
earthquake, storm, flood, or other adverse weather
conditions, explosion, fire, lightning, adverse order or
direction of any Government de jure or de facto or any
instrumentality or subdivision thereof, act of God or the
public enemy, breakdown of machinery having a major effect
on the operation of the Enterprise and any cause (whether or
not of the kind hereinbefore described) over which the
affected party has no reasonable control and which is of
such a nature as to delay, curtail or prevent timely action
by the party affected.
2. The Party whose ability to perform its obligations is
affected by force majeure shall notify as soon as
practicable the other party thereof in writing, stating the
cause, and the parties shall endeavour to do all reasonable
acts and things within their power to remove such cause;
provided, however, that neither party shall be obligated to
resolve or terminate any disagreement with third parties,
including labor disputes, except under conditions acceptable
to it or pursuant to the final decision of any arbitral,
judicial or statutory agencies having jurisdiction to
finally resolve the disagreement. As to labor disputes, the
Company may request the Government to cooperate in a joint
endeavour to alleviate any conflict which may arise.
ARTICLE 20
DEFAULT
1. Subject to the provisions of Article 19 of this Agreement,
in the event that the Company is found to be in default in
the performance of any provision of this Agreement, the
Government, as its remedy under this Agreement, shall give
the Company written notice thereof (which notice must state
that it is pursuant to this Article) and the Company shall
have a reasonable period specified in such notice, not in
excess of one hundred and eighty days after receipt of such
notice, to correct such default. In the event the Company
corrects such default within such period, this Agreement
shall remain in full force and effect without prejudice to
any future right of the Government in respect of any future
default. In the event the Company does not correct such
default within the time stipulated in the notice, the
Government shall have the right to terminate this Agreement
in accordance with the provisions of Article 22.
Any failure by the Company to comply with any provisions of
this Agreement relating to one or more Mining Areas, and not
to all Mining Areas or to the Enterprise as a whole, shall
not be considered to be a default under this Article 20. In
the event of such failure, after notice to the Company in
accordance with the preceding paragraph and failure by the
Company to correct such failure in accordance therewith, the
Government shall have the right to close such Mining Areas
or any part thereof and to require the Company to relinquish
such Mining Areas or such parts.
2. Notwithstanding the provision of paragraph 1 of this
Article, in the event the Company shall be found to be in
default in the making of any payment of money to the
Government which the Company is required to make pursuant to
Article 12 or Article 13, the period within which the
Company must correct such default shall be thirty days after
the receipt of notice thereof. The penalty for late payment
shall be an interest charge on the amount in default from
the date the payment was due, at the rate of the New York
prime interest rate in effect at the date of default plus
4%. This and other penalties provided for in this Article
may not be taken as deduction in the calculation of taxable
income.
3. The Company shall not be deemed to be in default in the
performance of any provision of this Agreement concerning
which there is any dispute between the Parties until such
time as all disputes concerning such provision, including
any contention that the Company is in default in the
performance thereof or any dispute as to whether the Company
was provided a reasonable opportunity to correct a default,
have been settled as provided in Article 21.
ARTICLE 21
SETTLEMENT OF DISPUTES
1. The Government and the Company hereby consent to submit all
disputes between the Parties hereto arising, before or after
termination hereof, out of this Agreement or the application
hereof or the operations hereunder, including contentions
that a Party is in default in the performance of its
obligations hereunder, for final settlement, either by
conciliation, if the Parties wish to seek an amicable
settlement by conciliation, or to arbitration. Where the
Parties seek an amicable settlement of a dispute by
conciliation, the conciliation shall take place in
accordance with the UNCITRAL Conciliation Rules contained in
resolution 35/52 adopted by the United Nations General
Assembly on 4 December, 1980 and entitled "Conciliation
Rules of the United Nations Commission on International
Trade Law" as at present in force. Where the Parties
arbitrate, the dispute shall be settled by arbitration in
accordance with the UNCITRAL Arbitration Rules contained in
resolution 31/98 adopted by the United Nations General
Assembly on 15 December, 1976 and entitled "Arbitration
Rules of the United Nations Commission on International
Trade Law" as at present in force. The foregoing provisions
of this paragraph do not apply to tax matters which are
subject to the jurisdiction of Majelis Pertimbangan Xxxxx
(The Consultative Board of Taxes). The language to be used
in conciliation and arbitration proceedings shall be the
English language, unless the Parties otherwise agree.
2. Before the Government or the Company institutes an
arbitration proceeding under the UNCITRAL Arbitration Rules,
it will use its best endeavors to resolve the dispute
through consultation and use of administrative remedies;
provided that the Company shall not be obligated to pursue
any such remedies for more than one hundred and twenty days
after it has notified the Government of an impending dispute
if such remedies involve a request or application to the
Government or any of its departments or instrumentalities.
3. Conciliation or arbitration proceedings conducted pursuant
to this Article shall, if appropriate arrangements can be
made, be held in Jakarta, Indonesia, unless the Parties
agree upon another location or unless the aforesaid rules or
the procedures thereunder otherwise require. The provisions
of this Article shall continue in force notwithstanding the
termination of this Agreement. An award pursuant to any such
arbitration proceedings shall be enforceable against and
binding upon the Parties hereto, and shall be specifically
enforceable in Indonesia, whether or not the proceedings
have been held in Indonesia.
ARTICLE 22
TERMINATION
1. At any time during the term of this Agreement, after having
used all reasonable diligence in its endeavour to conduct
its activities under this Agreement, if in the Company's
opinion the Enterprise is not workable, the Company shall
consult with the Department and may thereafter submit a
written notice to terminate this Agreement and to be
relieved of its obligations hereunder. At the time of the
submission of such notice, the Company shall make available
to the Department, to the extent requested by the
Department, all relevant data and information related to the
Company's activities under this Agreement which have not
theretofore been delivered to the Department. Such data and
information shall include but not be limited to documents,
maps, plans, work sheets and other technical data and
information. Upon confirmation of termination by the
Department or within a period of six months from the date of
the giving of such written notice by the Company, whichever
shall first occur, this Agreement shall automatically
terminate and the Company shall be relieved of its
obligations under this Agreement except as hereinafter
specifically provided in this Article.
2. Upon termination of this Agreement pursuant to this Article
22 or termination of this Agreement by reason of the
expiration of the term of this Agreement, all Contract
Properties, movable and immovable, of the Company within the
Project Areas and Mining shall be offered for sale to the
Government at cost or market value, whichever is the lower,
but in no event lower than the depreciated book value. The
Government shall have an option, valid for thirty days from
the date of such offer, to buy, within ninety days after
acceptance by the Government of such offer, all such
property at the agreed value payable in United States
Dollars and through a bank to be agreed upon by both
Parties. If the Government does not accept such offer within
the said thirty day period, the Company may sell, remove or
otherwise dispose of any or all of such property during a
period of twelve months after the expiration of such offer.
The Government will use its best efforts to facilitate the
disposition by the Company of any of such Contract
Properties that the Company desires to dispose of. Any of
such Contract Properties not so sold, removed or otherwise
disposed of shall become the property of the Government
without any compensation to the Company.
3. It is agreed, however, that any Contract Properties, movable
and immovable, which shall at time of any such termination
be in use for a public purpose such as roads, schools and
hospitals, with the equipment therein, within Indonesia
shall immediately become the property of the Government
without any compensation to the Company; and the Company
shall recognize the items referred to in paragraph (c) of
sub-paragraph 1 of Article 24 of Law No. 11 of 1967 relating
to safety, and paragraphs 3, 4 and 5 of Article 46 of
Government Regulations No. 32 of 1969.
4. All sales, removals or disposals of the Company's property
pursuant to any such termination shall be effected according
to the laws and regulations from time to time in effect; any
gain or loss from sale or disposal as related to the written
down book value shall be determined in accordance with
Article 13 of this Agreement. All values shall be based on
generally accepted accounting principles.
5. Rights and obligations which have come into effect prior to
any such termination and rights and obligations relating to
transfer of currencies and properties which have not yet
been completed at the time of such termination shall
continue in effect for the time necessary or appropriate
fully to exercise such rights and discharge such
obligations. Additionally, the Company shall be granted the
right to transfer abroad all or any proceeds of sale
received under this Article 22 subject to the requirements
of Article 15.
ARTICLE 23
COOPERATION OF THE PARTIES
1. The Parties to this Agreement agree that they will at all
times use their best efforts to carry out the provisions of
this Agreement to the end that the Enterprise may at all
times be conducted with efficiency and for the optimum
benefit of the Parties.
2. The Company agrees to plan and conduct all operations under
this Agreement in accordance with the standards and
requirements imposed elsewhere in this Agreement for the
sound and progressive development of the Mining industry in
Indonesia, to give at all times full consideration to the
aspirations and welfare of the people of the Republic of
Indonesia and to the development of the Nation, and to
cooperate with the Government in promoting the growth and
development of Indonesian economic and social structure, and
subject to the provisions of this Agreement, at all times to
comply with the laws and regulations of Indonesia from time
to time in effect.
3. The Department on behalf of the Government agrees that
during the term of this Agreement the Government, consistent
with Law No. 1 of 1967 on Foreign Capital Investment, (i)
will take no action which is inconsistent with the
provisions of this Agreement so as to adversely affect the
conduct of the Enterprise hereunder, including, without
limitation, any action of condemnation or nationalization of
the Enterprise or any part thereof, and (ii) will at all
times cooperate with the Company in handling all
administrative actions and determinations relating to the
Enterprise in the most expeditious manner consistent with
orderly procedures.
ARTICLE 24
PROMOTION OF NATIONAL INTEREST
1. In the conduct of its activities under the Agreement, the
Company shall, consistent with its rights and obligations
elsewhere under this Agreement, give preference to
Indonesian consumers' requirements for its Products and the
Company and its Affiliates and subcontractors shall in good
faith and to the fullest practicable extent utilize
Indonesian manpower, services and raw materials produced
from Indonesian sources and products manufactured in
Indonesia to the extent such services and products are
available on a competitive time, cost and quality basis,
provided that in comparing prices of goods produced or
manufactured in Indonesia to the price of imported goods
there shall be added a premium (not in excess of twelve and
a half percent) and other expenses (excluding VAT) incurred
up to the time the imported goods are landed in Indonesia.
2. From time to time during the periods herein specified, the
Company will offer for sale or cause to be offered for sale
shares of the capital stock of the Company in furtherance of
the policy of Indonesia to encourage ownership in Indonesian
companies by Indonesian Nationals, in the manner provided in
this paragraph 2 of Article 24. For purposes of this
paragraph 2 of Article 24, the term "Indonesian National"
means an Indonesian citizen, an Indonesian legal entity
controlled by Indonesian citizens, or the Government of the
Republic of Indonesia.
a. As soon as practicable after the date of the signing of
this Agreement, but in any event commencing no later
than the fifth anniversary of the date of the signing
of this Agreement and concluding no later than the
tenth anniversary of the date of the signing of this
Agreement, the Company will offer for sale in public
offerings on the Jakarta Stock Exchange or otherwise to
Indonesian Nationals, to the extent requested by the
Government to meet the requirements of then existing
laws and regulations and to the extent the financial
market conditions in Indonesia at the time permit the
shares to be sold in an orderly market at a fair price,
sufficient shares to equal, after giving effect of such
sale, directly or indirectly, 10% of the outstanding
issued share capital of the Company.
b. During the first twelve-month period following the
tenth anniversary of the date of the signing of this
Agreement, and in each twelve-month period thereafter
for a total of ten such periods, to the extent
requested by the Government to meet the requirements of
then existing Indonesian law and to the extent the
financial market conditions in Indonesia at the time
permit the shares to be sold in an orderly market at a
fair price, the Company will offer for sale in public
offerings on the Jakarta Stock Exchange, or otherwise
to Indonesian Nationals, sufficient shares to equal,
after giving effect to such sales, directly or
indirectly, 2.5% of the outstanding issued share
capital of the Company, until such time as the
aggregate number of shares sold pursuant to this
paragraph 2 of this Article 24 shall be sufficient to
equal, directly or indirectly, after giving effect to
all such sales and any shares now or hereafter owned by
the Government, 45% of the outstanding issued share
capital of the Company; provided that at least 20% of
such outstanding issued share capital shall have been
sold on the Jakarta Stock Exchange, and provided,
further, that if at least 20% of such outstanding
issued share capital is not so sold on the Jakarta
Stock Exchange, the Company shall be required to sell
or cause to be sold in public offerings on the Jakarta
Stock Exchange, or otherwise to Indonesian Nationals,
sufficient shares to equal a total of 51% of the issued
share capital of the Company not later than the
twentieth anniversary of the date of the signing of
this Agreement, to the extent requested by the
Government to meet the requirements of then existing
laws and regulations and to the extent the financial
market conditions in Indonesia at the time permit the
shares to be sold in an orderly market at a fair price.
c. The Government and the Company agree that any sales of
shares in excess of those required to be made in any
period shall reduce the number of shares required to be
offered in the next succeeding period or periods, and
that any shares required to be offered in one period
but not sold during such period shall be added to the
number of shares so offered for sale in the next
succeeding period or periods.
d. If after the signing of this Agreement then effective
laws and regulations or Government policies or actions
impose less burdensome divestiture requirements than
set forth herein, such less burdensome divestiture
requirements shall be applicable to the parties to this
Agreement.
e. The shares to be sold will be either newly issued
shares or shares held by foreign shareholders.
f. The proceeds from sales pursuant to this paragraph will
not be subject to tax in the hands of the Company or to
its shareholders, provided such shareholders do not
have a permanent establishment in Indonesia.
g. Sales pursuant to this paragraph shall satisfy all
requirements of Indonesian law with respect to the
required sale of stock interests in the Company to
Indonesian Nationals.
3. The Company shall continue to seek to include Indonesian
citizens among the members of its Board of Commissioners
(Dewan Komisaris). To this end at least one seat on the
Board of Commissioners will continuously be occupied by an
Indonesian citizen who shall be designated by the Company
with the approval of the Government.
ARTICLE 25
REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE
1. The Company will at all times cooperate with the Government
in utilizing its best efforts to plan and coordinate its
activities, and proposed future projects in the Contract
Area or the Project Areas. Living accommodation and
facilities and working conditions provided by the Company
for its operations shall be of a Government standard
commensurate with those of good employers operating in
Indonesia.
2. In relation to the region, the Company will endeavour to
assist in maximizing the economic and social benefits
generated by the Enterprise in the Contract Area in respect
to:
(i) coordinating such benefits with local and regional
infrastructure studies limitations by the Government
together with any benefits generated by other
interested local, foreign and international public and
private entities; and
(ii) assisting and advising the Government, when requested,
in its planning of the infrastructure and regional
development which the Company may deem useful to the
Enterprise and to existing and future industries and
activities in the area of the Enterprise.
3. The Company shall allow the public and the Government to use
any wharf and harbor installations, air strips or roads
which have been constructed by the Company pursuant to this
Agreement and which are located outside the Mining Areas and
the related Project Areas provided that;
(i) any such use shall be subject to such regulations and
limitations as the Company shall reasonably impose, and
shall in no event adversely affect or interfere with
the Company's operations hereunder and
(ii) the Company shall be entitled to impose such charges
therefor as shall be appropriate to reflect the cost of
maintaining such facilities and, with respect to any
commercial use of such facilities, the capital cost
thereof.
4. The Company shall maintain and be responsible for the
maintenance of all roads in the Mining Areas.
5. All roads constructed by the Company outside the Mining
Areas, to the extent used by the public, shall be public
roads for the purposes of the provisions of the traffic laws
and regulations from time to time in effect in Indonesia. To
the extent that the plans and designs for the Enterprise as
approved by the Government so provide and thereafter from
time to time, the Government shall make such special
regulations under the traffic laws as it considers necessary
or desirable for the proper safety of the users of the said
roads.
6. If the Company's use of the existing public roads results in
or is likely to result in significant damage or
deterioration, the Company shall pay to the Government or
other authority having control over the roads the cost (or
an equitable proportion thereof having regard to the use of
such roads by others) of preventing or making good such
damages or deterioration or of upgrading to a standard
necessary having regard to the increased traffic. In
addition, the Government or other authority having control
over any such road may require the Company to pay a
maintenance user charge based upon what is fair and
reasonable having regard to the continuing cost (excluding
any profit to the Government or such other authority) of
operation and maintenance of that road and the use of that
road by others; provided, that, in lieu of making such
payments, the Company shall have the right to elect to
maintain at its own expense any such road needed by it for
its operations hereunder.
7. In the event that the Government is unable to provide
adequate telecommunications facilities, the Company may, in
accordance with rules and regulations from time to time in
effect in Indonesia, install and operate such
telecommunications facilities; provided that it shall allow
the Government and the public to use such facilities on the
following terms: (i) any such use shall be subject to such
regulations and limitations as the Company shall reasonably
impose, and shall in no event adversely affect or interfere
with the Company's operations hereunder and (ii) the Company
shall be entitled to impose such charges therefor as shall
be appropriate to reflect the cost of maintaining and
operating such facilities and, with respect to any
commercial use of such facilities, the capital cost thereof.
In the event that, prior to any such installation by the
Company, adequate telecommunications facilities of the type
needed by the Enterprise can be provided by the Government,
the Company shall be obliged to use the Government's network
and pay reasonable standard charges for telecommunications
services.
8. The Company may at its own cost, in accordance with the laws
and regulations from time to time in effect in Indonesia,
construct and establish and develop camps or permanent
facilities sufficient to service the needs of the
Enterprise.
ARTICLE 26
ENVIRONMENTAL MANAGEMENT AND PROTECTION
1. The Company shall, in accordance with prevailing
Environmental and natural preservation laws and regulations
of Indonesia from time to time in effect, use its best
efforts to conduct its operations under this Agreement so as
to minimize harm to the Environment and utilize recognized
modern Mining industry practices to protect natural
resources against unnecessary damage, to minimize Pollution
and harmful emissions into the Environment, to dispose of
Waste in a manner consistent with good Waste disposal
practices, and in general to provide for the health and
safety of its employees and the local community. The
Company shall not take any acts which may unnecessarily and
unreasonably block or limit the further development of the
resources of the area in which it operates.
2. The Company shall install and utilize such internationally
recognized modern safety devices and shall observe such
internationally recognized modern safety precautions as are
provided and observed under conditions and operations
comparable to those undertaken by the Company under this
Agreement, including measures designed to prevent and
control fires.
3. The Company shall include in the Feasibility Study for each
New Mining Area an Environmental Impact Study which analyzes
the potential impact of its operations on land, water, air,
biological resources and human settlements. The
Environmental study will also outline measures which the
Company intends to use to mitigate adverse impacts.
ARTICLE 27
LOCAL BUSINESS DEVELOPMENT
1. The Company shall to the extent reasonably and economically
practicable, having regard to the nature of the particular
goods and services, promote, support, encourage and lend
assistance to Indonesian nationals desirous of establishing
enterprises and businesses providing goods and services for
the Enterprise and for any permanent settlements constructed
by the Company and the residents thereof, and shall
generally promote, support, encourage and assist the
establishment and operation of local enterprises outside the
Mining Areas and any related Project Areas.
2. The Company shall make maximum use of Indonesian
subcontractors where services are available from them at
competitive prices and of comparable standards with those
obtainable from other third party suppliers, whether inside
or outside Indonesia.
3. Insofar as it is practicable, the Company shall give first
preference in its assistance hereunder to landowners in and
other people originating from the area of the Enterprise.
4. Except as otherwise agreed by the Government, the Company
shall, at the commencement of the Feasibility Studies Period
with respect to an Exploration Area, appoint for such period
as is reasonably necessary, a member of its staff who has
had experience within Indonesia with respect to the
establishment, control and day-to-day running of enterprises
controlled and run by Indonesians and who shall:
(i) identify activities related to the Enterprise including
the provision of goods and services as described above
which can be carried on by Indonesian nationals or
local enterprise on a basis which is competitive as to
time, cost and quality to the goods and services
otherwise available to the Company;
(ii) advise and assist Indonesian nationals desirous of
carrying on those activities or of establishing
enterprises to do the same; and
(iii) implement, or assist in the implementation of, the
Business and Community Development Program as
hereinafter described on behalf of the Company.
The staff member appointed for this purpose shall be a full
time employee of the Company.
5. The Company will, directly or indirectly, provide funds for,
and assist in the development of, a Business and Community
Development Program designed to assist Indonesian nationals
in the province in which the Enterprise is located. The
Company and the Government have agreed to cooperate closely
in carrying out such program.
6. Except as otherwise agreed by the Government, the Business
and Community Development Program will make provision
insofar as is practicable for the following (except to the
extent of activities to be carried out directly by the
Company):
(i) enterprises involved in the supply and maintenance of
Mining equipment and the provision of consumable
supplies;
(ii) subcontracting to self-employed equipment operators for
road construction and maintenance work;
(iii) subcontracting of site preparation, construction
and maintenance of houses, Government buildings,
industrial facilities and other works and buildings and
facilities to be established, including concreting,
welding, tank constructions, steel fabrication,
plumbing, electrical work and timberwork;
(iv) enterprises involved in town services such as sewer and
garbage collection, treatment and disposal, passenger
transport, freight carriage of consumer items and
stevedoring (except in relation to the shipping of the
Products of the Mine).
(v) enterprises involved in trade stores, supermarkets,
other retail outlets, canteens, restaurants, taverns,
cinemas, social clubs, cleaning and laundry, and
vehicle maintenance and repair facilities;
(vi) enterprises involved in the supply of fresh fruits,
vegetables, meat and fish; and
(vii) other activities agreed to by the Company and the
Government;
in each case on a basis which is competitive as to time,
cost and quality to the goods and services otherwise
available to the Company.
7. Except as otherwise agreed by the Government, the Business
and Community Development Program shall also include details
of:
(i) the time schedule for its implementations;
(ii) those additional activities which could be established
by Indonesian nationals;
(iii) those activities in which the Company intends to
commence operating but which will be transferred to
Indonesian nationals at a later date, on a commercial
basis; and
(iv) any facilities by way of training, technical or
financial assistance which can be made available to
facilitate the smooth transition of ownership and
operation to Indonesian nationals.
8. Except as otherwise agreed by the Government, the Business
and Community Development program shall be reviewed annually
by the Company, in consultation with the Government, and may
be altered by mutual consent between the Company and the
Government with a view to securing the maximum benefit to
Indonesian nationals and local enterprises from the
operations of the Company and the carrying out of the
Enterprise.
9. Except as otherwise agreed by the Government, the Company
shall consult from time to time with representatives of the
Government and furnish the Government annually with a report
concerning the following:
(i) the implementation of the training and manpower aspects
of the Business and Community Development Program;
(ii) the implementation of provisions relating to local
purchasing of supplies; and
(iii) the implementation of provisions relating to local
business development.
ARTICLE 28
MISCELLANEOUS PROVISIONS
1. Each of the Parties agrees to execute and deliver all such
further instruments, and to do and perform all such further
acts and things, as shall be necessary or convenient to
carry out the provisions of this Agreement.
2. Any notice, request, waiver, consent approval and other
communication required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly
given or made when it shall be delivered by hand or by mail,
telegram, cable or radiogram, with postage or transmission
charges fully prepaid, to the Party to which it is required
or permitted to be given or made at such Party's address
hereinafter specified, or at such other addresses as such
Party shall have designated by notice to the Party giving
such notice or making such request:
To the Government addressed to:
The Ministry of Mines and Energy of the Republic
of Indonesia
c/o The Director General of Mines
Jalan Jenderal Gatot Xxxxxxx Xxx. 00
Xxxxxxx 00000, Xxxxxxxxx
To the Company at its principal office in Jakarta with one
copy by airmail telegram, telex, cable or radiogram, with
postage or transmission charges fully prepaid to:
P.T. Freeport Indonesia Company
X.X. Xxx 0000
Xxxxxxx 00000, Xxxxxxxxx
Sampoerna Building, 5th floor
Jalan H. X. Xxxxxx Xxxx X-0 Xx. 0
Xxxxxxx 00000, Xxxxxxxxx,
With a copy to:
Freeport-McMoRan Copper & Gold Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxx of America
3. The Minister or his designee may take any action or give any
consent on behalf of the Government which may be necessary
or convenient under or in connection with this Agreement for
its better implementation and any action so taken or consent
so given shall be binding upon the Government and any
instrumentality or subdivision thereof.
4. This Agreement shall have the force and effect of law. This
Agreement shall supersede the Prior Contract. The Government
and the Company have entered into a Memorandum of
Understanding which sets forth certain matters necessary to
the supersession of the Prior Contract and the continuation
by the Company under this Agreement of the operations
previously conducted under the Prior Contract. By its
approval of this Agreement the Government acknowledges its
responsibility for this Agreement and the Memorandum of
Understanding.
5. When required by context of this Agreement, each number
(singular or plural) shall include all numbers and each
gender shall include all genders. The headings appearing in
this Agreement are not to be construed as interpretations of
the text or provisions hereof, but are intended only for
convenience of reference.
6. The terms of this Agreement (including the Annexes hereto
and the Memorandum of Understanding referred to in paragraph
4 of this Article) constitute the entire agreement between
the Parties hereto and no previous communications,
representations or agreements, either oral or written
between the Parties hereto with respect to the subject
matter thereof shall vary the terms of this Agreement.
7. Unless the context otherwise expressly requires, where
reference is made in this Agreement to the laws or
regulations of Indonesia such reference shall be to the laws
and regulations of Indonesia generally applicable to foreign
Mining companies in Indonesia in effect from time to time.
8. Where an approval or consent or concurrence of a Ministry or
the Government of Indonesia or any subdivision or
instrumentality thereof is required, and where an
application is made by the Company to the Government of
Indonesia under this Agreement, such approval or consent
will not be unreasonably withheld or delayed.
ARTICLE 29
ASSIGNMENT
1. This Agreement may not be transferred or assigned (including
for the purpose of financing) in whole or in part, without
the prior written approval of the Minister; provided, that,
in the event of any such transfer or assignment, the Company
shall not be relieved from any of its obligations hereunder
except to the extent that the transferee or assignee shall
assume such obligations.
2. The shareholders in the Company shall not transfer shares in
the Company without the prior written consent of the
Minister which shall not be unreasonably withheld or
delayed; provided that the written consent of the Minister
shall not be required in the case of:
a. a transfer of shares pursuant to Article 24 or, with
respect to shares listed on the Jakarta Stock Exchange,
subsequent transfers thereof; or
b. a transfer by a shareholder of all or some its shares
to FCX or an Affiliate thereof.
ARTICLE 30
FINANCING
1. The Company shall have sole responsibility for financing the
Enterprise and shall maintain sufficient capital to carry
out its obligations under this agreement. The Company may
determine the extent to which the financing shall be
accomplished through issuance of shares of the Company or
through borrowings by the Company; provided, that, the
Company shall at all times maintain a ratio of shareholders
capital to indebtedness which is sufficient to reasonably
assure its solvency for the benefit of the Government and
its creditors and shareholders.
2. Any long term borrowing by the Company pursuant to
agreements entered into after the date of signing of this
Agreement shall be on such repayment terms and at such
effective rates of interest (including discounts,
compensating balances and other costs of obtaining such
borrowings) as are reasonable and appropriate for Mining
companies in circumstances then prevailing in the
international money markets, after complying with existing
procedures for obtaining foreign loans.
3. For the purpose of securing financing, the Company may
mortgage, pledge or otherwise encumber its assets, subject
to paragraph 1 of Article 29.
ARTICLE 31
TERM
1. This Agreement shall become effective on the date of the
signing of this Agreement.
2. Subject to the provisions herein contained, this Agreement
shall have an initial term of 30 years from the date of the
signing of this Agreement; provided that the Company shall
be entitled to apply for two successive ten year extensions
of such term, subject to Government approval. The Government
will not unreasonably withhold or delay such approval. Such
application by the Company may be made at any time during
the term of this Agreement, including any prior extension.
ARTICLE 32
GOVERNING LAW
1. Except as otherwise expressly provided herein, this
Agreement, its implementation and operation shall be
governed and construed and interpreted in accordance with
the laws of the Republic of Indonesia which are presently in
force.
2. This Agreement has been drawn up in both the Indonesian and
English languages and both texts are valid. In the event of
any divergency between the two texts, however, the English
text shall prevail and shall be considered the official
text.
In witness whereof, the Parties hereto have caused this Agreement
to be duly executed as of the date appearing at the beginning of
this Agreement.
FOR THE GOVERNMENT OF THE
REPUBLIC OF INDONESIA
/s/XXXXXXXXX XXXXXXXXXXXX
---------------------------------------------
MINISTER OF MINES AND ENERGY
FOR P.T. FREEPORT INDONESIA COMPANY
BY: /s/HOEDIATMO HOED
---------------------------------------------
President Director
