EXECUTION COPY
________________________________________________
CONCENTRATE PURCHASE AND SALES AGREEMENT
BETWEEN
P.T. FREEPORT INDONESIA COMPANY
AND
P.T. SMELTING CO.
________________________________________________
CONTRACT NO. 98-1
TABLE OF CONTENTS
Page
ARTICLE 1 3
Definitions and Interpretation 3
1.1 Definitions 3
1.2 Interpretation 3
ARTICLE 2 3
Product 3
2.1 Expected Analysis 3
2.2 Product Review 5
2.3 Non-Conforming Concentrates 6
(a) Excess Impurities 6
(1) First Ten Contract Years 6
(2) Subsequent Contract Years 7
(b) Adjustments to Smelting and Refining Charges Due
to Copper, Gold and Silver Outside Specified Range 10
(c) Deviation of the Copper Content of the
Concentrates 10
2.4 Shipping Code 12
2.5 Moisture 12
2.6 Title 12
2.7 Implied Warranty Disclaimer 12
ARTICLE 3 12
Quantity 12
3.1 Obligations to Purchase and Sell Contractual Tonnage
and Initial Inventory Period Tonnage 12
3.2 Process for Determination of Contractual Tonnage Figure 13
A. The Rolling Five Year Concentrates Requirements
Forecast and the One Year in Advance Forecasted
Quantity Requirement 13
B. Annual Shipping Schedule Quantity 16
C. Contractual Tonnage Declarations 16
D. Contractual Tonnage Cap 17
3.3 Inventory Allowance 18
3.4 Buyer's Inability to Receive Concentrates 18
3.5 Seller's Inability to Deliver Concentrates 22
3.6 Additional Quantities 23
3.7 Contract Year to Contract Year Adjustments 23
(a) Advance Shipment 23
(b) Delayed Shipment 24
3.8 Seller's Qualified Right to Vary Quantity for Remainder
of Year 24
3.9 Reduction of Contractual Tonnage due to Reduction of
Seller's Ability to Produce 24
3.10 Adjustments Resulting From Quality-Related Reductions
of the Contractual Tonnage Figure 25
3.11 Simplification of Determination of Contractual Tonnage
Figure in the Event of Reduction of Contractual Tonnage 26
ARTICLE 4 26
Term and Termination 26
4.1 Term of Agreement; Conditions Precedent 26
4.2 Termination Prior to Mechanical Completion Due to Delay
or Inactivity 27
ARTICLE 5 28
Delivery of Concentrates 28
5.1 Delivery CIF Port of Discharge 28
5.2 Discharging Berth 28
5.3 Rate of Discharge 28
5.4 Notice of Readiness 29
5.5 Lay Time 29
5.6 Demurrage and Dispatch 30
(a) Bulk Carriers 30
(b) Hopper Barges 30
(c) Payment 31
5.7 Vessel Characteristics 31
(a) Bulk Carriers 31
(b) Hopper Barges and SPV's 32
(c) Vessel Requirements of General Applicability 32
5.8 Overtime 32
5.9 Port Charges 33
5.10 Title and Risk of Loss 33
5.11 Alternate Port 33
5.12 Stevedore Damages 33
5.13 Jetty Damages 34
5.14 Use of Bulk Carrier's Discharging Gear 34
ARTICLE 6 34
Scheduling and Shipments 34
6.1 Initial Inventory Period 34
6.2 First Contract Year 34
6.3 Second Contract Year 35
6.4 Third Contract Year 36
6.5 Fourth and Subsequent Contract Years 37
6.6 General 38
6.7 Buyer's Shipping Instructions and Documentation, Vessel
Information and Further Shipment Confirmation 38
ARTICLE 7 38
Insurance 38
7.1 Insured Value 39
7.2 Insurance Coverage 39
7.3 Claims 39
7.4 Insolvency Exclusion Clause 39
7.5 Seller's Assistance 39
7.6 War Risk Premiums 40
ARTICLE 8 40
Price 40
8.1 Payable Copper 40
8.2 Payable Gold 40
8.3 Payable Silver 40
8.4 Quotational Period 41
8.5 Determination of Price 41
8.6 Copper Price 41
8.7 Gold Price 41
8.8 Silver Price 41
8.9 Conversion to Dollars 41
8.10 Alternate Pricing 42
(a) Pricing Basis No Longer Published or No Longer
Representative 42
(b) Interim Invoicing 42
(c) Referral to Referees 42
ARTICLE 9 43
Deductions for Smelting and Refining Charges and for Impurities 43
9.1 Smelting and Refining Charges for Part A Tonnage 43
(i) Initial Negotiation 43
(ii) Subsequent Negotiations 46
(iii) Agreements Required if Permanent Holiday
Reduction Effected 48
9.2 Smelting and Refining Charges for Part B Tonnage 49
(i) Smelting Charge, Payable Copper Refining Charge
and Price Participation Terms for Part B Tonnage 49
(a) Determination on Basis of Weighted Average of
Eligible Reference Contracts 49
(b) Selection of Auditor 50
(c) Determination of Eligibility for Designated
Reference Contracts 50
(d) Calculation of Weighted Average Figures for
Each Party's Eligible Reference Contracts 53
(e) Calculation of Weighted Average Figures for
the Ertsberg Concentrate Agreement and MMC
Concentrate Agreement. 54
(f) The Auditor's Preliminary and Final
Determinations 55
(g) Effect of Final Report and Retroactive
Adjustment 56
(h) Interim Terms Governing the Period Prior to
Final Report Issuance 56
(ii) Payable Gold and Payable Silver Refining
Charges for Part B Tonnage 56
9.3 Minimum Smelting and Refining Charges; Possible
Recoupment of Lost Revenues 57
9.4 Deductions for Impurities 58
9.5 Exclusive Remedy 59
9.6 General Provisions Applicable to Smelting and Refining
Charges 59
9.7 Special Provisions Applicable to Concentrates with
Copper, Gold and/or Silver Outside the Five-Year
Expected Analysis 60
ARTICLE 10 61
Periodic Review of Commercial Terms 61
10.1 Provision Governing Part A Tonnage Smelting and
Refining Charges and Minimum Smelting and Refining
Charges 61
10.2 Periodic Review of Certain Commercial Terms 61
ARTICLE 11 62
Payments 62
11.1 Manner of Payment 62
11.2 Provisional Price 63
11.3 Provisional Payment 63
11.4 Final Payment 64
11.5 Final Price Determination in the Event of Loss 64
11.6 Interest 65
ARTICLE 12 65
Weighing, Sampling and Determination of Moisture 65
12.1 General Procedures 65
12.2 Determination of Dry Weight 66
12.3 Sample Lots 66
12.4 Number and Handling of Samples 66
12.5 Composite Samples 66
ARTICLE 13 66
Assay 66
13.1 Method for Determining Final Analysis. 66
13.2 Determination of Final Analysis if Shipment Diverted 67
13.3 Designation of Umpire 67
13.4 Determination of Final Analysis Using Umpire's Assay 67
13.5 Analysis of Composite Samples for Impurities 67
ARTICLE 14 68
Taxes 68
14.1 Value Added Tax 68
14.2 Payment of Value Added Tax 68
ARTICLE 15 68
Exemption from Liability and Obligation 68
ARTICLE 16 70
Relief from Economic Hardship 70
16.1 Consultation in the Event of Hardship 70
16.2 Limitations on Right to Request Consultation 70
ARTICLE 17 70
Notices 70
ARTICLE 18 71
Assignment 71
18.1 Binding Effect 71
18.2 Seller's Assignment to the Trustee 71
18.3 Buyer's Assignment to a Trustee 72
18.4 Other Assignments 72
ARTICLE 19 73
Referees 73
19.1 General 73
19.2 Selection of Referees 73
19.3 Proceedings 73
19.4 The Decision 74
ARTICLE 20 74
Arbitration 74
20.1 Amicable Settlement 74
20.2 Arbitration Rules 74
20.3 Arbitrators 75
20.4 Arbitration Award 75
20.5 Award to be Final and Conclusive 76
20.6 Performance of Obligations Pending Decision 76
20.7 Waiver of Right to Terminate Board of Arbitration 76
ARTICLE 21 76
Governing Law 76
ARTICLE 22 77
Force Majeure 77
22.1 Definition 77
22.2 Effect of Force Majeure 77
22.3 Parties to Use Reasonable Efforts 78
ARTICLE 23 79
Default 79
23.1 Events of Default 79
23.2 Notice of Default 79
23.3 Liability for Default 79
ARTICLE 24 79
Non-Waiver of Defaults 79
ARTICLE 25 80
Miscellaneous 80
25.1 Opinion of Buyer's Counsel 80
25.2 Opinion of Seller's Counsel 80
25.3 Entire Agreement 81
25.4 Counterparts 81
25.5 Headings 81
25.6 Publication of Articles 81
LIST OF APPENDICES
Appendix "A" Definitions
Appendix "B" Sample Calculation of MMC's
Receipt of 13% Simple Return
Appendix "C" Price Participation Weighted
Average Calculation - Example
Appendix "D" Price Participation - Weighted
Average Base - Part B
CONCENTRATE PURCHASE AND SALES AGREEMENT
AGREEMENT, effective as of December 11, 1996 between P.T.
FREEPORT INDONESIA COMPANY, an Indonesian limited liability company
which is also domesticated in Delaware, U.S.A. ("Seller"), and P.T.
SMELTING CO., an Indonesian limited liability company ("Buyer").
WHEREAS, Seller operates copper mines in Indonesia pursuant to
the December 30, 1991 Contract of Work between Seller and the
Government, and any subsequent modifications, supplements or
amendments thereto (the "COW") which grants mining rights in a
specified geographic area within the Province of Irian Jaya (the
"Contract Area") to Seller until the year 2021 with two ten-year
extension periods permitted under certain circumstances;
WHEREAS, in furtherance of Seller's obligation under the COW
to build, or cause to be built, a copper smelter and refinery in
Indonesia under certain circumstances, Seller has, in concert with
others and independently, studied the feasibility of the
development, construction, ownership and operation of a 200,000
metric ton per annum copper smelter and refinery to be located at
Gresik, East Java, Indonesia (the "Project");
WHEREAS, at a meeting between Freeport-McMoRan Copper & Gold
Inc., a company organized and existing under the laws of Delaware,
U.S.A. and the parent company of Seller ("FCX") and Mitsubishi
Materials Corporation, a company organized and existing under the
laws of Japan ("MMC") on September 19, 1994, FCX solicited MMC to
construct, own and operate the Project with Seller and Fluor Daniel
Wright Ltd., a company organized and existing under the laws of
British Columbia, Canada ("FLUOR"), and thereafter FCX, Seller and
MMC had several meetings to discuss the concept of a joint venture
to proceed with the Project;
WHEREAS, MMC, FCX and FLUOR, each having decided to
participate in the Project subject to certain terms and conditions,
executed an Agreement in Principle, dated as of January 6, 1995
(the "AIP");
WHEREAS, following execution of the AIP FCX assigned its
interest thereunder to Seller and FLUOR assigned its interest
thereunder to Fluor Daniel Engineers & Constructors, Ltd., a
company organized and existing under the laws of the State of
California ("FDEC");
WHEREAS, following execution of the AIP Seller, MMC and FDEC
have executed a Project Planning Agreement, dated as of May 12,
1995 (the "Project Planning Agreement") which supersedes and
replaces the AIP as to the subject matter of such Project Planning
Agreement;
WHEREAS, among other things, the Project Planning Agreement
provides that the Project will be operated using only Concentrates
as feed material and in this connection:
(a) Seller is agreeable to selling a quantity of
Concentrates equal to one hundred percent (100%) of the copper
concentrates required by Buyer for the Project for so long as
Seller's mining and milling activities shall be operating at an
annual rate sufficient to produce such quantity of Concentrates, in
respect of which Seller shall grant the first and exclusive
priority to Buyer for the delivery of Concentrates produced by
Seller; and
(b) Subject to the required approval by the Government of
Indonesia (which approval Seller shall seek to procure), Seller is
agreeable to selling Concentrates to Buyer and Buyer is agreeable
to buying Concentrates from Seller, on a basis which is fair,
reasonable and reflective of then current market conditions, and
which incorporates the terms and conditions specified in the
Project Planning Agreement for this Agreement;
WHEREAS, following execution of the Project Planning Agreement
FDEC assigned its interest thereunder to Fluor Daniel Asia, Inc.,
a company organized and existing under the laws of the State of
California ("FDA");
WHEREAS, in furtherance of the objectives set forth and agreed
in the AIP and the Project Planning Agreement, MMC, Seller and FDA
entered into a Joint Venture and Shareholders Agreement dated as of
October 25, 1995 as amended by instrument dated May 24, 1996 (the
"Shareholders Agreement"), which Shareholders Agreement provides,
among other things, for the incorporation and management of P.T.
Smelting Co. as an Indonesian limited liability company for the
development, construction, ownership and operation of the Project,
and which amendment provides, among other things, for the
withdrawal of FDA from the Project; and
WHEREAS, under the Project Planning Agreement and the
Shareholders Agreement, the execution by Seller and Buyer of this
Agreement is a condition precedent to the implementation and
operation of the Project in accordance with those agreements; and
Seller and Buyer desire to enter into this Agreement in order to
satisfy that condition and proceed to implement the Project.
NOW, THEREFORE, Seller agrees to sell and deliver, and Buyer
agrees to purchase, pay for and accept delivery of, copper
concentrates on the terms and conditions hereinafter set forth.
ARTICLE 1
Definitions and Interpretation
1.1 Definitions. Unless the context otherwise requires,
all capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in Appendix "A" hereto.
1.2 Interpretation. Unless the context otherwise requires,
words importing the singular number shall include the plural and
vice versa; the headings are for convenience only and shall not
affect the construction hereof, and references herein to any
enactment shall be deemed to include such enactment as reenacted,
amended or extended.
ARTICLE 2
Product
2.1 Expected Analysis. Seller expects that for the first
five (5) Contract Years of the term of this Agreement the
Concentrates will assay, as an average for each calendar month and
Contract Year, on a dry basis, within the following ranges:
Cu - 26% to 38%
Au - 15 grams to 38 grams per DMT
Ag - 35 grams to 90 grams per DMT
Al - 0.5% to 1.7%
As - 0.01% - 0.15%
Bi - 0.002% - 0.02%
Ca - 0.12855%-0.85%
Co - less than 0.02%
Cd - 0.002% - 0.01%
Cl - 0.005% - 0.02%
F - 0.005% - 0.035%
Fe - 18% - 26%
Hg - 0.1 - 0.6 g/t
Mg - 0.1% - .3%
Mo - 0.01% - 0.03%
Ni - less than 0.005%
Pb - 0.01% - 0.1%
S - 26% - 36%
Sb - 0.001% - 0.008%
Se - .01% - 0.03%
SiO2 - 3.0% - 10.0%
Te - 0.001% - 0.02%
Zn - 0.15% - 0.8%
Seller expects that for the second five (5) Contract Years of
the term of this Agreement the Concentrates will assay, as an
average for each calendar month and Contract Year, on a dry basis,
within the following ranges:
Cu - 26% to 46%
Au - 9 grams to 38 grams per DMT
Ag - 35 grams to 200 grams per DMT
Al - 0.3% to 1.7%
As - 0.01% - 0.15%
Bi - 0.002% - 0.05%
Ca - 0.15%-4%
Co - less than 0.020%
Cd - 0.001% - 0.01%
Cl - less than 0.02%
F - 0.005% - 0.04%
Fe - 13% - 27%
Hg - not more than 1 ppm
Mg - 0.1% - 1%
Mo - 0.01% - 0.04%
Ni - less than 0.008%
Pb - 0.01% - 0.3%
S - 25% - 36%
Sb - 0.001% - 0.005%
Se - .02% - 0.05%
SiO2 - 2.0% - 12.0%
Te - 0.001% - 0.02%
Zn - 0.15% - 2.0%
Seller expects that the Concentrates will be free from
deleterious impurities that would prevent the Concentrates from
being treated with processes normally and customarily employed by
major copper smelters. As Seller acquires additional knowledge or
information regarding the chemical and physical characteristics of
(or expected for) the Concentrates, Seller shall make such
knowledge available to Buyer as soon as possible.
2.2 Product Review. Seller shall inform Buyer by October
1 of each year (commencing with October 1 of the second calendar
year preceding the estimated commencement of the first Contract
Year) of the expected approximate analysis of copper (which
expected approximate analysis of copper shall constitute the Annual
Budgeted Copper Grade), gold, silver, alumina (Al x 1.8889), iron,
sulphur, arsenic, bismuth, antimony, chlorine, lead, zinc, nickel
plus cobalt, fluorine and mercury for the Concentrates to be
delivered in the first succeeding Contract Year, plus a preliminary
estimated analysis of such elements or compounds for the succeeding
four (4) Contract Years (the "Preliminary Estimated Analysis").
Seller shall also inform Buyer at least 30 days prior
to the date of the meeting which is held every five (5) years in
accordance with the provisions of Article 10 to review certain
commercial terms, of the chemical analysis of the Concentrates
(including all of the same elements listed in the analysis recited
in Section 2.1) which Seller expects the Concentrates will assay on
a dry basis for the ensuing five (5) Contract Years of the term of
this Agreement (each such analysis, as well as the analysis for the
first five (5) Contract Years set forth in Section 2.01, is
hereinafter referred to as a "Five-Year Expected Analysis").
Such estimates shall be based on the geological and
engineering information and data available to Seller at the time of
the production of such estimates, and shall be as accurate as is
reasonably practicable.
In the event Buyer desires additional information to
clarify or better understand the annual estimate which has been
produced (or any other estimate provided under Sections 2.1 or
2.2), upon request by Buyer, Seller will make available to Buyer's
technical representatives in Seller's offices on a strictly
confidential basis all data and information reasonably requested by
Buyer and shall meet with Buyer's representatives to provide such
explanations or clarifications as Buyer's representatives may
desire (again, on a strictly confidential basis). Due to the
proprietary or confidential nature of such data and information,
Buyer may copy and retain such data or information only with
Seller's prior approval, and Buyer shall not disclose it to third
parties except as required by law or for purposes of evaluation by
Buyer's consultants or by a representative of any lenders to Buyer
in connection with the financing of the Project, who have a need to
have access to such information and who shall agree in writing to
maintain the confidentiality of such data and information.
If during the period following Seller's production of
its annual estimate for one year and prior to its production of its
estimate for the following year Seller develops or obtains
knowledge or information which significantly differs from Seller's
current estimate for the current year, Seller shall furnish Buyer
as soon as practicable with its revised estimate.
2.3 Non-Conforming Concentrates.
(a) Excess Impurities.
(1) First Ten Contract Years. In the event
that the Concentrates delivered hereunder shall at any time during
the first ten (10) Contract Years: (i) have levels of impurities in
excess of the applicable range specified in Section 2.1 (i.e.
either the specified range applicable to the first five (5)
Contract Years or the specified range applicable to the second five
(5) Contract Years) for which the deductions specified in Section
9.4 do not appropriately compensate Buyer, and (ii) such
Concentrates cannot be economically or practically treated at the
then existing Facilities because of the presence of deleterious
elements in harmful quantities (it being understood that condition
(ii) may result from impurities which have a material adverse
effect on the quality of copper cathodes or by-products produced by
the Facilities or from other physical and/or chemical
characteristics of the Concentrates that materially adversely
affect processing by the Facilities), then Buyer shall specify such
objections with particularity to Seller and Buyer and Seller shall
seek in good faith to negotiate an appropriate remedy for any
significant Financial Disadvantage and technical disadvantage which
Buyer may suffer, it being understood that Buyer has a duty to
mitigate its damages. If Buyer and Seller cannot agree on a way to
resolve Buyer's objections within 45 days after Buyer shall have
specified its objections to Seller pursuant to this Section 2.3,
Buyer or Seller may, at its option, exercisable by written notice
to the other party, refer the matter to the referee(s) as provided
in Article 19 for the following purposes: (a) if in dispute, a
determination of whether the conditions specified in clause (i) and
clause (ii) of this Section exist, and, if both of such conditions
exist or are determined to exist, (b) a determination of the
appropriate remedy to compensate Buyer for the Financial
Disadvantage resulting from such conditions, which have not been
and will not be compensated to Buyer pursuant to the other
provisions of this Agreement (including the penalties to which
Seller may be subject), and taking into account the mitigating
measures which Buyer may implement at a reasonable cost and without
undue interruption of its smelter operations (the costs of
mitigating measures to be calculated as part of Buyer's Financial
Disadvantage to the extent that such costs are necessary and
appropriate). Such appropriate remedy may include (i) that Seller
can substitute concentrates originating from other mines (whether
Seller's or a third party's) for Concentrates produced by Seller,
or (ii) the revision of the penalty schedule for impurities, or
(iii) a revision to the smelting and refining charges then in
effect, or (iv) any other appropriate remedy. Any adjustments or
remedies which have been mutually agreed (or determined by
referee(s)) shall be taken into account when the Commercial Terms
for the following Contract Years are determined at the time of each
five year review of Commercial Terms so that the price to be paid
to Seller will not be reduced twice (first, in reaching a remedy
for non-conforming Concentrates, and second, when the Commercial
Terms for subsequent Contract Years are determined).
(2) Subsequent Contract Years. Following the
tenth Contract Year Seller will deliver to Buyer hereunder whatever
quality of Concentrates Seller produces from its then existing
mining and concentration facilities, subject to the condition that
Seller will not ship to Buyer any worse quality Concentrates (with
normal, reasonable variations permitted) than it ships to Seller's
other significant customers (i.e. customers purchasing from Seller
a quantity of 30,000 DMT's or more per year of copper concentrates)
during the year in question. Upon the request of Buyer, which
shall not be made more frequently than once per calendar year
commencing with the year in which the eleventh Contract Year
commences, Buyer and Seller shall select a mutually agreed upon
independent accounting firm, whose costs shall be paid by Buyer,
and Seller shall disclose to such independent accounting firm on
Seller's premises on a confidential basis appropriate data and
information to enable such firm to verify to Buyer whether or not
Seller is in compliance with the above condition. If Seller is
determined to not be in compliance with this obligation at any
time, Seller shall take such measures as are necessary to correct
such situation and reimburse Buyer for all of the relevant costs of
the accounting firm which have been paid by Buyer.
Notwithstanding anything to the contrary
recited in the foregoing language of this Section 2.3(a)(2), if at
any time during this period Buyer is of the good faith belief that
the Concentrates delivered by Seller hereunder cannot be
economically or practically treated at the then existing Facilities
because of the presence of deleterious elements in harmful
quantities Buyer shall so notify Seller. The above described
condition may result from impurities which have a material adverse
effect on the quality of copper cathodes or by-products produced by
the Facilities or from other physical and/or chemical
characteristics that materially adversely affect processing by the
Facilities.
In the event of such notification by Buyer,
Buyer and Seller shall immediately consider and discuss possible
solutions to such condition, and each of Buyer and Seller shall
promptly take such actions as it determines to be appropriate to
help alleviate the condition, and notify the other party of the
actions, if any, which it is taking. If following the timely
implementation of the measures which each party has decided to take
to help alleviate such condition, Buyer remains of the good faith
belief that the condition which Buyer has provided notice of to
Seller is continuing to exist and that such condition constitutes
the condition which is described above, namely that the
Concentrates delivered by Seller hereunder cannot be economically
or practically treated at the then existing Facilities because of
the presence of deleterious elements in harmful quantities, then
Buyer may either continue to purchase, pay for and accept delivery
of the Contractual Tonnage of Concentrates but with no Financial
Disadvantage payment by Seller, or exercise a right and option
which Buyer may exercise at any time during the continuance of such
condition to reduce the Contractual Tonnage hereunder up to a
maximum Contractual Tonnage reduction equal to the quantity of
copper concentrates which is reasonably necessary for Buyer to
purchase from other sources in order for Buyer to be able to treat
in an economical or practical manner Seller's Concentrates together
with the copper concentrates which Buyer shall purchase from third
parties. In order to exercise such right and option, Buyer shall
provide written notice to Seller of its good faith determination
that the above specified condition exists together with a statement
of the quantity reduction of the Contractual Tonnage which Buyer
has elected to put into effect. Such written notice shall also be
accompanied by written evidence which reasonably demonstrates: (x)
the basis for Buyer's determination that Seller's Concentrates
cannot be economically or practically treated and (y) the basis for
Buyer's determination that the amount of the reduction does not
exceed the maximum allowable reduction as described above.
Buyer shall consult with Seller with respect to
the timing of any such reduction and use all reasonable efforts to
implement such reduction in a manner which minimizes the disruption
of Buyer's and Seller's operations. Any such reduction shall cease
at such time as is mutually agreed or, absent mutual agreement, at
such time as all of the following have occurred: (i) the condition
which gave rise to the reduction no longer exists and Seller has
notified Buyer of such fact, (ii) Seller or Buyer has provided
notice to the other party hereto of the effective date for the
resumption of delivery of the previously reduced quantities which
date must be at least three years following the notice date, (iii)
the period recited in such notice has expired, and (iv) at the
expiration of such period, the condition which gave rise to the
reduction no longer exists. Subject to the four (4) foregoing
conditions (particularly the minimum three year advance notice), if
both Buyer and Seller provide a notice in accordance with condition
(ii) having different effective dates, an earlier effective
resumption date shall take precedence over a later effective
resumption date. Neither Seller nor Buyer shall have any
obligation to retroactively make-up any such portion of the
quantities of reduced Contractual Tonnage.
Seller reserves the right to contest the basis
for and/or the amount of the reduction of Contractual Tonnage
pursuant to this subsection on the grounds that such reduction does
not conform to the provisions of this subsection of this Agreement.
If Seller objects to any such reduction on this basis, Seller
shall promptly notify Buyer of Seller's objection(s) and the
basis(es) for such objection(s), and Buyer and Seller shall then
use their best efforts to resolve any such differences amicably.
If such an amicable resolution is not agreed upon within thirty
(30) days following notice by Seller of its objection, the dispute
shall be conclusively settled by the referee(s) under Article 19 of
this Agreement. Pending such settlement by the referee(s), Buyer
may request, and Seller will not unreasonably deny suspension of
shipments of Concentrates hereunder.
(b) Adjustments to Smelting and Refining Charges Due
to Copper, Gold and Silver Outside Specified Range. In addition to
the foregoing language regarding the consequences of excess levels
of impurities in the Concentrates, Section 9.7 of this Agreement
sets forth certain adjustments to the smelting and refining charges
which will be made in the event the content of copper, gold or
silver in delivered Concentrates is outside the range of the then
current Five-Year Expected Analysis.
(c) Deviation of the Copper Content of the
Concentrates. If the average analysis of copper contained in the
total quantity of Concentrates delivered hereunder with respect to
any calendar month is not within a 5.0% variance of 31.0% (i.e.
29.45% to 32.55%) at any time during the first five (5) Contract
Years, is not within a 7.5% variance of 31.0% (i.e. 28.675% to
33.325%) at any time during the second five (5) Contract Years, or
is not within a mutually agreed upon percentage variance of 31.0%
at any time thereafter during the term of this Agreement (which
percentage figure shall be mutually agreed upon by Buyer and Seller
prior to the end of the tenth Contract Year to directly reflect the
percentage copper grade variance from 31.0% within which the
Facilities are capable of producing 200,000 metric tons per annum
of copper cathodes or, failing mutual agreement, such percentage
variation shall be decided by the referee(s) under Article 19),
then Buyer shall have the right and option but not the obligation
to change the Port of Discharge from Gresik to one or more of the
Approved Japanese Ports for the quantity of Concentrates specified
below which exceed the applicable above specified copper content
variance (i.e. above the upper limit or below the lower limit), and
any additional freight costs for delivery of such Concentrates to
any such Approved Japanese Port shall be for Seller's account. For
any such shipments which are shipped to an Approved Japanese Port
in accordance with the provisions of this paragraph, such Approved
Japanese Port to which such Concentrates are shipped shall be
considered to be the Port of Discharge for all purposes hereunder
and Seller shall invoice Buyer for the same amount and in the same
manner as if such shipment had been made to Gresik, with the
exception that Buyer will take all such actions as are necessary to
assure that: (i) the purchaser or recipient of the Concentrates in
Japan will not obtain any economic benefits of the Floor TC's and
RC's provided for in Section 9.3 of this Agreement, and (ii) the
Floor TC's and RC's will be accounted for in such a manner so as to
preserve the economic benefits thereof exclusively to Buyer and
Seller as provided for in Section 9.3 of this Agreement.
Buyer shall assure that all switched sales or product
exchanges of Concentrates to Approved Japanese Ports shall be in
accordance with generally accepted international business practices
and on competitive world market terms and conditions at the time of
sale or contract, and Buyer shall provide to Seller either a
summary of all significant commercial terms and conditions
governing such sales or a copy of the concentrate sales agreement
governing each such sale, to evidence its compliance with such
obligation to Seller. In the event the Government of Indonesia
requests additional information regarding any such switched sale,
Buyer shall provide such information with a copy to Seller. Seller
shall have the right, which right may not be exercised more
frequently than once per calendar year, to retain a mutually
acceptable independent accounting firm to be compensated solely by
Seller, to audit Buyer's records of such switched sales or product
exchanges to verify to Seller whether or not Buyer is in compliance
with its undertakings hereunder with respect to such sales or
exchanges.
The maximum quantity of Concentrates which Buyer may
switch from Gresik to an Approved Japanese Port shall not exceed
the quantity of Concentrates which are necessary to enable Buyer
through purchases of copper concentrates from third parties to
bring the percentage copper content of the average feed stock of
copper concentrates at the Facilities within the then applicable
above specified percentage variance of 31.0%, except that the
switched quantities may be rounded to the nearest shipping size
configuration.
Prior to implementing the switching of the delivery of
any shipment(s) of Concentrates from Gresik to an Approved Japanese
Port, Buyer and Seller shall consult with each other in good faith
and mutually agree upon a shipping schedule for such switched
shipment(s) which takes into account the operational requirements
of both Seller and Buyer. The minimum cargo size for any cargo
delivered to an Approved Japanese Port shall be approximately
10,000 DMT's and Seller reserves the right to combine switched
shipments with Seller's other shipments to Japan.
In the event that the conditions which permit Buyer to
switch Concentrates from Gresik to an Approved Japanese Port exist
or are threatened, Seller reserves the right to ship to Buyer
hereunder Concentrates produced from Seller's mines and processing
facilities which exceed the permissible percentage variance at the
opposite end of the range from the analysis of the Concentrates
which are creating or threatening to create such conditions, in
order that Seller may reduce or eliminate the quantity of
Concentrates which need to be switched under this Section 2.3(c).
In the event the copper content of the Concentrates
exceeds the variances specified above and Buyer is unable to switch
such Concentrates to an Approved Japanese Port, Buyer shall take
deliveries of such Concentrates at Gresik.
2.4 Shipping Code. The Concentrates will be suitable for
ocean transportation in bulk in accordance with the International
Maritime Organization (IMO) Code and the relevant regulation
applicable to Concentrates in Indonesia (if any).
2.5 Moisture. The moisture content of the Concentrates at
the Port of Loading shall be equal to or more than 6% and less than
9%.
2.6 Title. Seller warrants that it will convey to Buyer
good and marketable title to the Concentrates sold hereunder.
Seller warrants that the Concentrates will be free of all liens,
security interests and other encumbrances at the time title passes
to Buyer.
2.7 Implied Warranty Disclaimer. IMPLIED WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE AND OF MERCHANTABILITY ARE HEREBY
DISCLAIMED.
ARTICLE 3
Quantity
3.1 Obligations to Purchase and Sell Contractual Tonnage
and Initial Inventory Period Tonnage. Except as otherwise
specifically provided in this Agreement, Seller agrees to sell and
deliver on a first and exclusive priority basis (which basis shall
not imply any additional obligations of Seller other than as
expressly set out in this Agreement), and Buyer agrees to purchase,
pay for and accept delivery of, the Contractual Tonnage of
Concentrates in each Contract Year. Except as otherwise provided in
this Agreement, the Contractual Tonnage shall be produced from
Seller's mines in the Contract Area from time to time.
For purposes of determining the Contractual Tonnage for
each Contract Year of the term of this Agreement, Seller and Buyer
recognize that certain preliminary steps must be taken to
facilitate such determination and, accordingly, each of Buyer and
Seller shall fully cooperate to assure that such steps are properly
taken and shall provide all notices, information and documents
called for in this Agreement (including but not limited to the
provision of the information necessary to give meaning to the
relevant defined terms including Annual Budgeted Copper Grade,
Rolling Five Year Concentrates Requirements Forecast, One Year in
Advance Forecasted Quantity Requirement, Annual Shipping Schedule
Quantity and Contractual Tonnage).
Seller also agrees to sell and deliver, and Buyer
agrees to purchase, pay for and accept delivery of, during the
Initial Inventory Period, a certain quantity of Concentrates which
Buyer shall specify to Seller in writing on or before January 1,
1997. Unless otherwise mutually agreed, such quantity shall not
exceed 30,000 DMT's.
3.2 Process for Determination of Contractual Tonnage
Figure. The steps which Buyer and Seller shall comply with in
order to determine the number of tons of Concentrates which shall
constitute the Contractual Tonnage for each Contract Year are as
follows:
A. The Rolling Five Year Concentrates Requirements Forecast
and the One Year in Advance Forecasted Quantity Requirement.
Utilizing the Annual Budgeted Copper Grade and the Preliminary
Estimated Analysis for copper which are furnished by Seller to
Buyer on or before October 1 of each year in accordance with the
provisions of Section 2.2, Buyer shall prepare and furnish to
Seller on or before November 1 of each year (commencing with
November 1 of the second calendar year preceding the expected
commencement of the first Contract Year) with a Rolling Five Year
Concentrates Requirements Forecast reflecting Buyer's forecast of
the Concentrates requirements of the Project for the production of
copper anode for the five (5) ensuing 12 month periods starting
from the estimated commencement of the first Contract Year (which
shall be changed to five (5) Contract Years immediately following
the occurrence of the Mechanical Completion date). Because the
first twelve month period of the first such Forecast covers a
period of time prior to the commencement of production, no figures
are necessary for such 12 month period.
Based on the information available to Buyer as of the date of
execution of this Agreement, Buyer's preliminary first Rolling Five
Year Concentrates Requirements Forecast is as follows:
ROLLING FIVE YEAR CONCENTRATES REQUIREMENTS FORECAST
MAJOR ASSUMPTIONS:
Assumed Date of Commencement of First Contract Year: December 1, 1998
% Cu in conc/(1) 31.0% Production Rate
% Cu in anode 99.4% 1st year 75.0% of nominal year (2)
Smelter Cu
recovery rate 98.5% 2nd year 90.0% of nominal year
3rd+ year 100.0%
FORECAST:
Projected Smelter Concen-
12 Month Furnace Copper Ope. Smelter trates Smelter Cu
Periods Repair Grade Days On-Line Smelted(5) Output(3)
- -------- ------------ --------- ------- ------- ---------- ----------
1 Boiler
inspection 31.0%(1) 350 69.0% 498,858 152,326
2 Boiler
inspection 31.0%(4) 350 82.8% 598,629 182,791
3 Minor repair 31.0%(4) 345 92% 655,642 200,200
4 Boiler
inspection 31.0%(4) 350 92% 665,144 203,102
5 Boiler
inspection 31.0%(4) 350 92% 665,144 203,102
(1) Means estimated Annual Budgeted Copper Grade
(2) 65% 1st half and 85% 2nd half
(3) Means contained copper in anode, and shall not exceed 205,000 metric tons
(4) Means projected copper grade
(5) For clarification this figure is derived as follows: Smelter Cu output
+ Projected Cu Grade + Smelter Cu Recovery Rate
Each Rolling Five Year Concentrates Requirements Forecast
provided by Buyer shall contain all of the assumptions and
forecasted items recited above, and each such item shall reflect
Buyer's diligent, good faith estimate based on the information
which is available to it at the time such Forecast is issued.
The figure recited in each such Forecast (excluding the above
preliminary Forecast) under the "Concentrates Smelted" column for
the 2nd twelve month period (or Contract Year, whichever is
applicable) shall represent Buyer's best estimate of the quantity
of Concentrates which the Facilities will require during such 12
month period (or Contract Year, whichever is applicable), and shall
constitute and be referred to herein as the "One Year in Advance
Forecasted Quantity Requirement".
B. Annual Shipping Schedule Quantity. On or before November
1 of the calendar year preceding the year in which each Contract
Year begins Buyer shall furnish to Seller written notice of the
Annual Shipping Schedule Quantity which shall be its best estimate
of the total quantity of Concentrates which Buyer requires for the
production of copper anodes during such Contract Year. However,
such Annual Shipping Schedule Quantity may not exceed 105% nor be
less than 90% of the DMT quantity of Concentrates which constituted
the One Year in Advance Forecasted Quantity Requirement for such
Contract Year.
Notwithstanding the above recited limitations on the maximum
percentage variances from the One Year in Advance Forecasted
Quantity Requirement, if the Annual Budgeted Copper Grade provided
by Seller on or before October 1 one month prior to the due date of
Buyer's notice to Seller of the Annual Shipping Schedule Quantity
varies by more than one percent (1%) contained copper from the
projected copper grade which was utilized by Buyer in preparing the
Rolling Five Year Concentrates Requirements Forecast containing the
One Year in Advance Forecasted Quantity Requirement for such
Contract Year (e.g. 31% versus 29.9%), then Buyer may in
calculating such Annual Shipping Schedule Quantity exceed such
maximum percentage variations in order to offset such change in the
estimated copper grade.
C. Contractual Tonnage Declarations. The Contractual Tonnage
quantity for each Contract Year shall be that certain quantity of
Concentrates declared by Buyer in accordance with the provisions of
this Section 3.2 which must be a quantity which is between 90% and
100% of the Annual Shipping Schedule Quantity, except that: (i)
with respect to the first six months of the first Contract Year
Buyer shall be obligated to purchase a quantity of Concentrates
which is between 85% and 110% of the total quantity designated by
Buyer for delivery during the first six months of the first
Contract Year in Buyer's preliminary monthly shipping schedule
under Section 6.2, (ii) with respect to the second six months of
the first Contract Year Buyer shall be obligated to purchase a
quantity of Concentrates which is between 90% and 110% of the total
quantity designated by Buyer for delivery during the second six
months of the first Contract Year in Buyer's preliminary monthly
shipping schedule under Section 6.2, and (iii) with respect to the
second Contract Year the Contractual Tonnage quantity must be a
quantity which is between 90% and 105% of the Annual Shipping
Schedule Quantity. The Annual Shipping Schedule Quantity shall be
subject to adjustment as provided in Section 3.3 to take into
account the Inventory Allowance which Buyer may elect to utilize.
With respect to the first Contract Year, such Contractual
Tonnage shall be declared by Buyer not later than 30 days prior to
the beginning of the 12th month of the first Contract Year. With
respect to the second Contract Year such Contractual Tonnage shall
be declared by Buyer no later than 30 days prior to the beginning
of the 10th month of the second Contract Year. With respect to the
third Contract Year such Contractual Tonnage shall be declared by
Buyer no later than the mid-point day of the third Contract Year.
With respect to the fourth Contract Year and each succeeding
Contract Year such Contractual Tonnage shall be declared by Buyer
no later than July 1 within and for the fourth Contract Year and
within and for each succeeding Contract Year.
Notwithstanding anything to the contrary recited in this
Agreement, the Contractual Tonnage for each Contract Year shall be
modified to the extent that the provisions of Section 3.9
(Reduction of Contractual Tonnage due to Reduction in Seller's
Ability to Produce), Section 7.6 (War Risk Premiums) and Articles
15 (Exemption from Liability and Obligation) and 22 (Force Majeure)
become applicable.
D. Contractual Tonnage Cap. Notwithstanding anything to the
contrary recited in this Agreement (except Section 3.7), in no
event shall the Contractual Tonnage of Concentrates for any
Contract Year exceed the quantity of Concentrates required for the
Facilities to produce 205,000 metric tons of copper anodes during
such Contract Year or such proportionately lesser amount in the
case of the third Contract Year, unless otherwise mutually agreed,
and no notice, declaration or forecast provided under this Article
3 (including the Rolling Five Year Concentrates Requirements
Forecast, the One Year in Advance Forecasted Quantity Requirement,
the Annual Shipping Schedule Quantity and the Contractual Tonnage
declaration figures) shall reflect any quantities exceeding such
tonnage cap, unless otherwise mutually agreed.
3.3 Inventory Allowance. In order to assist Buyer in
controlling the levels of supplies of Concentrates in inventory
beginning with the second Contract Year and continuing each
Contract Year thereafter, an Inventory Allowance is established.
Within 30 days following the beginning of the third Contract Year
and within 30 days following the beginning of each Contract Year
thereafter Buyer shall have the right to declare any quantity of
Concentrates between -20,000 DMT's and +30,000 DMT's as the
Inventory Allowance quantity; provided, however, such Inventory
Allowance quantity figure shall be reduced for the third Contract
Year by a fraction thereof the numerator of which is 365 minus the
number of days in such third Contract Year and the denominator of
which is 365. The effect of declaring an Inventory Allowance
quantity is that the Annual Shipping Schedule Quantity for each
year in which such declaration is made shall be automatically
increased or reduced by the quantity of the positive or negative
Inventory Allowance, respectively. Buyer shall submit to Seller at
the time that it submits its Inventory Allowance declaration to
Seller an adjusted annual shipping schedule. The changes to the
shipping schedule resulting from such declaration shall be
allowable notwithstanding any other shipping schedule limitations.
3.4 Buyer's Inability to Receive Concentrates. Buyer shall
use its best efforts to consume or hold in inventory at the
Facilities all quantities of Concentrates which Buyer is obligated
to purchase from Seller hereunder. If, notwithstanding such
efforts, Buyer determines that it will not be able to use or store
at the Facilities the full quantity of Concentrates which it is
obligated to purchase pursuant to this Agreement during a Contract
Year, Buyer shall so notify Seller as early as possible and furnish
Seller with Buyer's best estimate of the quantity of Concentrates
which it will be unable to receive. In such event Buyer and Seller
shall discuss alternative solutions which will minimize adverse
impacts on both parties to the extent feasible. Without in any way
eliminating the possibility of alternative solutions which may be
mutually agreed upon by Buyer and Seller, Buyer and Seller agree to
discuss and implement the following solutions as expeditiously as
possible:
(i) Seller shall temporarily store such Concentrates in its
inventory in Irian Jaya until other measures can be
arranged to the extent such storage is technically and
economically feasible in the good faith opinion of
Seller;
(ii) Seller shall utilize all reasonable efforts to
rearrange its existing shipping schedules with Buyer
and with Seller's other customers (including MMC)
pursuant to the then existing concentrate sales
agreements with such customers, and to reach mutual
agreement with Buyer on an alternative shipping
schedule with respect to such tonnage;
(iii) Buyer shall cause MMC to use its best efforts to
purchase such Concentrates for processing only at its
smelting facilities at Naoshima and/or Onahama through
one or more concentrate sales agreement(s) entered into
between MMC and Buyer, in accordance with terms
mutually agreed upon between Seller and MMC at the time
the sale is made, but which terms shall in any event
generally conform to the terms and conditions then
currently prevailing in the spot market for the sale of
copper concentrates, with Seller making shipping
arrangements and, to the extent that Floor TC's and
RC's would be applicable if such Concentrates were
delivered to the Facilities, such Floor TC's and RC's
will remain payable to Buyer on such quantities of
Concentrates sold to MMC by Buyer. Except as expressly
provided in this subparagraph (iii) and in Section
2.3(c), Buyer shall not, without Seller's prior written
consent, sell or export any Concentrates covered by
this Agreement. Any quantities of Concentrates sold to
MMC in accordance with the provisions of this
subparagraph (iii) shall be credited toward
satisfaction of Buyer's Contractual Tonnage purchase
obligation; and
(iv) Seller shall use its best efforts to sell such
Concentrates to third parties on the most favorable
terms and conditions for Buyer reasonably obtainable by
Seller at the time such sale is entered into. In this
situation Seller and Buyer shall consult with each
other on a continuous basis regarding concentrate sales
opportunities which are available, and Seller shall
provide to Buyer such facts as may be reasonably
requested by Buyer with respect to the terms and
conditions of any contemplated sale which may result in
Buyer making a reimbursement payment to Seller in
accordance with the following language of this
subparagraph (iv), including any offers, counteroffers
and/or rejections Seller obtains with respect to such
contemplated sales, and shall provide Buyer with a
reasonable opportunity to make comments and suggestions
on such proposed terms and conditions before concluding
any such sale. Seller shall be fully reimbursed by
Buyer within 15 days following receipt of Seller's
invoice (including appropriate supporting
documentation) for any additional costs of such sales
on a netback to the discharge port basis (limited to
differences in smelting and refining charges,
differences in penalty deducts, differences in price
participation and differences in payable metals
percentages) compared with the sale of Concentrates
hereunder had they been delivered to Buyer at the
Facilities. Any profits from such sale, calculated on
a netback to the discharge port basis, shall be for
Seller's account. The Floor TC's and RC's applicable
hereunder shall not be applicable to any such sales to
third parties. Any quantities of Concentrates sold by
Seller to third parties in accordance with the
provisions of this subparagraph (iv) shall be credited
toward satisfaction of Buyer's Contractual Tonnage
purchase obligation.
If such Concentrates have not been taken by Buyer at the
Facilities or at an approved Japanese Port if authorized in
accordance with Section 2.3(c), or sold by Buyer to MMC or by
Seller to a third party following efforts to implement the above
measures (i) through (iv) and Seller requires that such quantity be
shipped, Seller will relocate such Concentrates to a mutually
agreed upon alternative storage site and Buyer will fully reimburse
Seller for all costs and expenses and hold harmless and indemnify
Seller for all liabilities associated with such relocation and
storage of such Concentrates (including but not limited to freight,
insurance and warehousing costs). In addition, Buyer shall pay
Seller interest on the fair market value of such Concentrates
(which shall, for purposes of calculating interest under this
paragraph, be determined on a per ton basis using the purchase
price paid by Buyer hereunder for the shipment to Gresik which
immediately preceded the shipment to alternative storage) beginning
90 days following the end of the Contract Year in which Buyer was
obligated to purchase such Concentrates and ending on the date of
re-shipment from storage in the case of the sale of such
Concentrates to a third party or the date payment is due by Buyer
in all other cases. The rate of interest shall be as set forth in
the following paragraph of this Section 3.4. In the event of such
alternative storage, Seller will continue to use its best efforts
to sell such Concentrates to third parties on the most favorable
terms and conditions reasonably obtainable consistent with
subparagraph (iv) above.
Except for interest on the quantities of Concentrates shipped
to alternative storage which shall be governed by the immediately
preceding paragraph of this Section 3.4, Buyer shall pay Seller
interest on the amount due for any quantity of Concentrates
constituting the Contractual Tonnage which is not shipped to Buyer
or to a third party by December 31 of a Contract Year due to
Buyer's inability to receive Concentrates. Such interest shall be
paid by Buyer when payment is made to Seller for such quantity,
either by Buyer or by a third party purchaser of such Concentrates.
Such interest shall be calculated on a per ton basis for the total
number of tons involved using the purchase price per ton paid by
Buyer hereunder for the final shipment of Concentrates to the
Gresik smelter during the immediately preceding Contract Year.
Such interest shall accrue beginning 90 days from the end of the
Contract Year in which Buyer was obligated to purchase such
Concentrates and ending on the date payment is due. The rate of
interest shall be the published prime commercial lending rate of
The Chase Manhattan Bank (National Association) or its successor
for loans in New York in effect from time to time (such rate to be
adjusted simultaneously with each change in such prime commercial
lending rate) and calculated on the basis of a 365-day year.
Notwithstanding anything to the contrary recited in this
Section 3.4, any quantity of Concentrates which Buyer is obligated
to purchase during any Contract Year which is not shipped to Buyer
at Gresik or contractually committed for shipment to a third party
purchaser in accordance with the provisions of this Section 3.4 by
the end of the third month following the end of such Contract Year
shall be paid for by Buyer in accordance with the payment
provisions of this Agreement and including the interest provided
for in this Article 3, except that (i) the Quotational Period for
Payable Copper, Payable Gold and Payable Silver shall be the fourth
month following the end of such Contract Year, (ii) the provisional
invoice for such quantity may be issued by Seller at any time after
the end of such third month following the end of such Contract Year
with provisional payment due on the fifth Business Day following
receipt, and (iii) the final invoice for such quantity may be
issued by Seller at any time after the end of the fourth month
following the end of such Contract Year with final payment due on
the second Business Day following receipt. Passage of title and
risk of loss with respect to such quantity of Concentrates shall
occur upon payment by Buyer of Seller's provisional invoice. To
evidence that title has passed to Buyer Seller shall furnish to
Buyer at the same time that it submits its provisional invoice a
holding certificate in a form which is mutually agreed upon by the
parties. Such holding certificate shall be in lieu of a bill of
lading.
3.5 Seller's Inability to Deliver Concentrates. In the
event Seller is unable to deliver Concentrates in a timely manner
in accordance with Buyer's shipping schedule, Seller shall so
notify Buyer as early as possible and furnish Buyer with Seller's
best estimate of the quantity of which it will be unable to deliver
in a timely manner. In such event Buyer and Seller shall discuss
alternative solutions which will minimize adverse impacts on both
parties to the extent feasible. Without in any way eliminating the
possibility of alternative solutions which may be mutually agreed
upon by Buyer and Seller, if Seller is unable to deliver the
Contractual Tonnage in a timely manner for any Contract Year and a
mutually agreeable solution is not timely found to alleviate such
failure by Seller, Buyer shall have the right to purchase from
third parties on the most favorable terms and conditions for Buyer
reasonably obtainable at the time such sale is entered into a
quantity of Concentrates as close as practicable to the quantity
which Seller is unable to deliver in a timely manner in accordance
with Buyer's shipping schedule established under Article 6. In
this situation Seller and Buyer shall consult with each other on a
continuous basis regarding concentrate purchase opportunities which
are available, and Buyer shall provide to Seller such facts as may
be reasonably requested by Seller with respect to the terms and
conditions of any contemplated purchase and the offers,
counteroffers and/or rejections Buyer obtains, and shall provide
Seller with a reasonable opportunity to make comments and
suggestions on the proposed terms and conditions before concluding
such purchase. Buyer shall be fully reimbursed by Seller within 15
days following receipt of Buyer's invoice (including appropriate
supporting documentation) for any additional costs of such
purchases on a netback to the Port of Discharge basis (limited to
differences in smelting and refining charges, differences in
penalty deducts, differences in price participation and differences
in payable metals percentages) compared with the purchase of
Concentrates hereunder had they been delivered at the Facilities.
Any profits from such purchase, calculated on a netback to the
discharge port basis, shall be for Buyer's account. Subject to
Section 3.9 or unless Seller has failed to act in good faith in the
discharge of its obligation to comply with Buyer's shipping
schedule established under Article 6, Buyer's rights as described
above in this Section 3.5 shall be Buyer's exclusive remedy (but
without limiting Buyer's rights under Section 22.2(c)) for any
failure by Seller to deliver the Contractual Tonnage. Any
quantities of copper concentrates purchased by Buyer from third
parties in accordance with the provisions of this Section 3.5 shall
be credited toward satisfaction of Seller's Contractual Tonnage
sales obligation.
3.6 Additional Quantities. Upon mutual agreement of Buyer
and Seller, Seller may sell and deliver, and Buyer may purchase,
pay for and accept delivery of quantities of Concentrates in excess
of the Contractual Tonnage during any Contract Year(s) on terms and
conditions to be established at the time of such agreement.
3.7 Contract Year to Contract Year Adjustments.
Notwithstanding Section 3.2.D, Seller shall have the right to ship
quantities of Concentrates in excess of or less than the
Contractual Tonnage in order to avoid shipments of less than a full
cargo or because of vessel availability at the end of each Contract
Year.
(a) Advance Shipment. Each Contract Year Seller may
request, and Buyer shall not unreasonably deny Seller's request, to
ship up to 25,000 DMT's in excess of the Contractual Tonnage during
the final month of such Contract Year, in which event the price for
such tonnage in excess of the Contractual Tonnage shall be
determined based on the commercial terms in effect for the
subsequent Contract Year as if shipped out from the Port of Loading
on the first working day of the subsequent Contract Year and
assuming a Date of Arrival six days thereafter for payment and
Quotational Period purposes. Such excess tonnage shall be regarded
as part of the Contractual Tonnage for the subsequent Contract Year
(if there is no succeeding Contract Year, all payment and other
terms and conditions applicable to shipments in such Contract Year
shall be applicable to such excess tonnage); provided, however, if
the weight of the final shipment of Concentrates in any Contract
Year causes the total delivery weight of Concentrates in such
Contract Year to be in excess of the Contractual Tonnage for such
Contract Year by less than 10% of the weight of such final
shipment, such excess tonnage shall be regarded as Contractual
Tonnage for such Contract Year and all payment and other terms and
conditions applicable to shipments in such Contract Year shall be
applicable to such excess tonnage.
(b) Delayed Shipment. If the Contractual Tonnage
for a Contract Year is not delivered by the end of such Contract
Year, Seller may request, and Buyer shall not unreasonably deny
such request (provided that any such denial shall be deemed to be
reasonable if Buyer has made arrangements to purchase substitute
concentrates from a third party or third parties in accordance with
Section 3.5), to ship such delayed tonnage to Buyer in the first
shipment of the succeeding Contract Year or as soon thereafter as
is practicable. Such delayed tonnage shall be regarded as part of
the Contractual Tonnage of the preceding Contract Year and all
terms and conditions of the preceding Contract Year shall apply to
such tonnage. In no event shall such delayed tonnage in respect of
any Contract Year be more than 25,000 DMT's.
3.8 Seller's Qualified Right to Vary Quantity for Remainder
of Year. If due to unexpected operational or production problems or
conditions which arise during the course of any Contract Year and
which do not constitute an event of Force Majeure, Seller
determines that it requires relief from Buyer as to the delivery of
up to 10% of the remaining undelivered balance of the Contractual
Tonnage for such Contract Year, Seller may reduce the Contractual
Tonnage for such Contract Year by up to 10% of the then undelivered
balance subject to obtaining the prior written approval of Buyer.
3.9 Reduction of Contractual Tonnage due to Reduction of
Seller's Ability to Produce. If at any time during the term of
this Agreement, Seller shall be unable after having used all
reasonable efforts, to produce from its mines and processing
facilities in the Contract Area, the full Contractual Tonnage of
Concentrates provided for in this Agreement as the result of the
depletion of ore reserves, either Seller or Buyer may, after
providing notice to the other party, reduce the annual Contractual
Tonnage of Concentrates to be purchased and sold under this
Agreement to 100% of the annual quantity of Concentrates which
Seller is capable of producing from such mines and processing
facilities, in respect of which Seller grants the first and
exclusive priority to Buyer for the production and delivery of such
Concentrates produced by Seller. The party providing the above
notice shall use its best efforts to provide such notice at least
twenty-four (24) months in advance of the effective date of the
reduction, but in no event may such notice be given less than
twelve (12) months in advance of such effective reduction date.
In the event that the Contractual Tonnage quantity is
reduced pursuant to this Section 3.9 and Seller's capability to
produce a larger quantity hereunder is thereafter restored, Seller
shall notify Buyer in writing of such occurrence, and Buyer and
Seller shall discuss in good faith and shall use all reasonable
efforts to mutually agree on an increase of the then existing
Contractual Tonnage of Concentrates to be sold hereunder. No
retroactive make-up of the quantities of reduced Contractual
Tonnage is implied or intended.
3.10 Adjustments Resulting From Quality-Related Reductions
of the Contractual Tonnage Figure. In the event of any reduction
by Buyer of the Contractual Tonnage in accordance with the
provisions of Section 2.3, unless otherwise mutually agreed
pursuant to Section 3.11, Buyer and Seller will continue to provide
the notices and implement the procedures provided for in this
Article 3 to determine the Rolling Five Year Concentrates
Requirements Forecast, the One Year in Advance Forecasted Quantity
Requirement, the Annual Shipping Schedule Quantity, the Contractual
Tonnage and any other relevant terms. Such figures shall be
provided during each Contract Year when such reductions are in
effect in a form which reflects the quantity information without
any reduction and also with the reduction. The difference between
the two quantities shall constitute Buyer's best, good faith
estimate of the quantity of Concentrates which Buyer will attempt
in good faith to purchase from third parties for such Contract Year
as a result of the reduction instituted by Buyer pursuant to
Section 2.3.
A reduction (or subsequent increase) in the Contractual
Tonnage pursuant to Section 2.3 shall automatically result in a
corresponding proportionate reduction (or increase) of the
Contractual Tonnage cap provided for in Section 3.2 D.
3.11 Simplification of Determination of Contractual Tonnage
Figure in the Event of Reduction of Contractual Tonnage. Buyer and
Seller acknowledge that the determination of the Contractual
Tonnage figure for each Contract Year under this Agreement is
complex due to the nature of the agreement which was originally
contemplated between Buyer and Seller, namely a full requirements-
type of concentrate purchase and sales agreement with respect to
the Project. In the event of a reduction in the Contractual
Tonnage in accordance with the provisions of Section 2.3 or Section
3.9, upon the written request of either party, Buyer and Seller
will use their best efforts to agree upon a simplified procedure to
determine the Contractual Tonnage figure which is fair and
reasonable to both parties for each Contract Year following the
institution of such reduction. In the event of a reduction of the
Part A Tonnage under Section 9.1, the provisions of Section
9.1(iii) shall govern.
ARTICLE 4
Term and Termination
4.1 Term of Agreement; Conditions Precedent. Except as
otherwise provided herein, this Agreement shall be valid and
effective as of the Effective Date and shall continue in full force
and effect so long thereafter as Seller's mining and milling
facilities are producing at an annual rate sufficient to produce
one hundred percent (100%) of the copper concentrates required for
the Project in respect of which Seller has granted the first and
exclusive priority to Buyer for the delivery of such Concentrates
produced by Seller; provided, however, that at such time as
Seller's mining and milling facilities are no longer producing one
hundred percent (100%) of the copper concentrates required for the
Project, this Agreement shall nevertheless remain in full force and
effect for the duration of Seller's Contract of Work (including any
extensions or renewals thereof) as to such lesser quantities of
Concentrates which Seller does produce and which Buyer requires for
the operation of the Project in respect of which Seller has granted
the first and exclusive priority to Buyer for the delivery of such
lesser quantities of Concentrates produced by Seller. Seller
agrees to provide Buyer with as much advance notice of the date of
termination or reduced quantity as is reasonably practicable
(without diminishing the applicable notice requirements expressly
provided in this Agreement).
Notwithstanding the passage of the Effective Date,
Buyer's duty to purchase and Seller's obligation to sell the
Concentrates as set forth herein shall not accrue and become
binding until each of the following conditions precedent are
fulfilled:
(a) The occurrence of Mechanical Completion of the
Facilities;
(b) Signature by all parties to all Major Contracts;
and
(c) Receipt by each of Buyer and Seller of all
Government licenses and authorizations necessary to perform its
respective material obligations hereunder.
Notwithstanding the foregoing, lack of satisfaction of
all of the foregoing conditions shall not relieve either Buyer or
Seller of any of their respective obligations set forth in this
Agreement which are to be performed prior to the date when such
conditions are satisfied.
4.2 Termination Prior to Mechanical Completion Due to Delay
or Inactivity. Either party may terminate this Agreement on 90
days prior written notice, if construction of the Facilities is not
commenced prior to December 31, 1996, or thereafter if the
Facilities are no longer under active construction for any period
of 90 consecutive days unless extended by mutual agreement of Buyer
and Seller; it being understood that such extensions will be
provided to the extent reasonably necessary to permit Buyer's
lenders to exercise any cure rights they may have under the Major
Contracts, provided that, without Seller's approval, such
extensions shall not delay termination for more than six (6)
months. In the event this Agreement is terminated pursuant to this
Section 4.2, neither party shall have any liability or obligation
whatsoever to the other party arising out of such termination,
except that if Buyer terminates this Agreement pursuant to this
Section 4.2 after Buyer has committed to purchase certain
quantities of Concentrates hereunder, then Seller shall be
authorized to sell such Concentrates in accordance with the same
terms and conditions as set forth in subparagraph (iv) of Section
3.4.
ARTICLE 5
Delivery of Concentrates
5.1 Delivery CIF Port of Discharge. Seller shall deliver
each shipment of Concentrates CIF Port of Discharge in lots of
approximately 5,000 - 25,000 WMT's as determined by Seller, unless
otherwise mutually agreed, by vessels which are either bulk
carriers or hopper barges carried aboard special purpose vessels
(SPV's) (collectively "vessels").
5.2 Discharging Berth. Buyer's dedicated discharging berth
shall be capable of discharging vessels with a maximum LOA of 193
meters, a maximum beam of 30 meters, a maximum draft of 9.7 meters
and a maximum air draft of 15 meters. Seller shall ship
Concentrates to Buyer in vessels which are within the
characteristics of Buyer's dedicated berth as described above.
Buyer shall designate one (1) safe discharging berth which is
suitable for vessels to discharge always afloat and Buyer shall be
responsible for all arrangements (including, without limitation,
the nomination of stevedores) and expenses (including without
limitation, stevedoring expenses) for discharging each cargo
shipped hereunder. Vessels which either discharge or load their
cargo at their berth shall be discharged in turn with Buyer having
the sole discretion to determine which of such vessels shall be
given preference, provided that Buyer will cooperate with Seller in
its efforts to comply with Buyer's shipping schedule.
5.3 Rate of Discharge.
(a) Buyer shall discharge each cargo from bulk carriers at
an average rate of 3,500 WMT's per weather working day of 24
consecutive hours, excluding Sundays, legal holidays, and customary
local and smelter holidays unless: (i) the bulk carrier is worked
on such days in which event actual time used shall count as lay
time used, or (ii) the bulk carrier is already on demurrage.
(b) Buyer shall discharge the total cargo contained in four
(4) hopper barges in a period not to exceed six (6) days from the
time the SPV tenders Notice of Readiness. Seller shall be
responsible to shift the hopper barges from the fleeting area to
Buyer's berth. Time lost in moving hopper barges from fleeting
area to berth and from berth to fleeting area shall not count as
lay time used. The above recited rate of discharge for hopper
barges may be reviewed upon the request of either party after one
(1) year from the first shipment and, if such a review is conducted
and the actual discharging rate differs substantially from 350
WMT's per hour, Buyer and Seller shall discuss and agree on an
appropriate increase or decrease in the discharging rate.
5.4 Notice of Readiness. Notice of Readiness to discharge
("Notice of Readiness") shall be tendered to Buyer or Buyer's
nominated agent at the Port of Discharge at any time during Normal
Office Hours, whether in berth or not, provided the vessel is in
free pratique and is in all respects ready to discharge. In the
case of hopper barges aboard the SPV's, Notice of Readiness shall
be tendered at any time during Normal Office Hours, provided the
hopper barges have been unloaded from the SPV's and are in the
fleeting area.
5.5 Lay Time. Lay time for vessels at Port of Discharge or
alternate port shall commence:
(i) at 1:00 p.m. the same working day if Notice of
Readiness is tendered during Normal Office
Hours before 12:00 noon, unless discharge of
cargo is sooner commenced, in which event the
time actually used shall count as lay time
used; and
(ii) at 8:00 a.m. the next working day, if Notice of
Readiness is tendered during Normal Office
Hours at or after 12:00 noon, unless discharge
of cargo is sooner commenced, in which event
the time actually used shall count as lay time used.
The bill of lading weight in wet metric tons shall be
used when calculating time allowable for discharge of vessels.
Time lost in waiting for a berth or at the request of
the relevant port authority, moving on or off a berth or from one
berth to another shall count as lay time used. However, if such
request is due to any reason whatsoever attributable to the vessel,
time lost in moving on or off a berth or from one berth to another
shall not count as lay time used.
Any time lost in discharging due to repairing a
vessel's equipment or by the fault of the vessel, its owner, master
or their agents shall not count as lay time used.
Each bulk carrier shall have all necessary onboard
lights for night discharging and the bulk carrier's crews shall
open and close hatches and remove and replace beams at the bulk
carrier's risk and expense, and the time used for such purpose
shall not count as lay time used at the Port of Discharge;
provided, however, if the custom of the port does not permit the
bulk carrier's crew to open and close hatches and remove and
replace any beams, then such activities shall be performed by shore
labor for Buyer's account, and time used for such purpose shall not
count as lay time used. Buyer shall open and close hatches on each
hopper barge at Buyer's risk and expense and the time used for such
purpose shall count as lay time used at the Port of Discharge.
To alleviate any additional costs which Buyer may incur
in opening and closing hatches and performing any other services
related to the handling of hopper barges including tugs needed to
move the barges (after the first movement) to and from the fleeting
area, Seller shall pay Buyer a "Hopper Barge Service Fee" of $0.25
per WMT. The amount of this Service Fee may be reviewed at the
request of either party after one (1) year from the first shipment.
If the documented actual cost of opening and closing hatches and
performing any other services specifically related to the normal
handling of hopper barges including tugs needed to move the barges
to and from the fleeting area varies substantially from $0.25 per
WMT, Buyer and Seller shall discuss and agree on an appropriate
increase or decrease in the Hopper Barge Service Fee.
5.6 Demurrage and Dispatch.
(a) Bulk Carriers. With respect to any cargo which
is not discharged from a bulk carrier within the allowed lay time,
demurrage shall be payable by Buyer to Seller as per the applicable
charter party or other ocean shipping arrangement, subject to a
maximum of $7,500, calculated per running day of 24 hours
(fractions pro rata). Seller shall pay Buyer dispatch money for
lay time saved at the Port of Discharge as per the applicable
charter party or other ocean shipping arrangement, subject to a
maximum of $3,750, calculated per running day of 24 hours
(fractions pro rata).
(b) Hopper Barges. With respect to any cargo which
is not discharged from the hopper barges within the allowed lay
time, demurrage shall be payable by Buyer to Seller calculated per
running day of 24 hours (fractions pro rata) at $0.50 per WMT based
on the total bill of lading weight for each four barge shipment for
the seventh and eighth day after tender of the Notice of Readiness.
If the delay extends beyond the eighth day, then beginning on the
ninth day demurrage shall be payable by Buyer to Seller calculated
per running day of 24 hours (fractions pro rata) at $1.00 per WMT
based on the total bill of lading weight for each four barge
shipment. In the event that Buyer discharges the four barge cargo
in less than six days after the Notice of Readiness, Seller shall
pay Buyer dispatch money for lay time saved at the Port of
Discharge calculated per running day of 24 hours (fractions pro
rata) at $0.25 per WMT based on the total bill of lading weight for
each four barge shipment. The amount of demurrage and dispatch on
hopper barges as recited above may be reviewed at the request of
either party after one (1) year from the first shipment.
(c) Payment. Any payments in respect of demurrage
or dispatch to be made by Buyer or Seller, as the case may be,
pursuant to this Section shall be made promptly after the
presentation of demurrage or dispatch calculations and supporting
shipping documents, such as time sheets and statements of fact.
5.7 Vessel Characteristics.
(a) Bulk Carriers. Bulk carriers will be single
deck ore carriers (no tween deckers), having no shaft tunnels or
center bulkheads in the holds, and with holds sufficiently wide to
be opened for normal grab discharge to avoid abnormal trimming and
Seller shall use all reasonable efforts to assure that Concentrates
are not loaded in spaces which are not accessible for normal grab
discharge; provided that, if Seller uses its best efforts to
charter a bulk carrier having the characteristics described above
but is unable to do so, Seller shall reimburse Buyer for any addi-
tional discharging expense, demurrage incurred, or loss of dispatch
resulting from such bulk carrier having different characteristics.
In no event shall Seller enter into a long term charter party for
a bulk carrier not having the characteristics described above.
Buyer and Seller shall have the right to appoint a mutually
acceptable qualified independent marine surveyor to survey any bulk
carrier at the Port of Discharge in order to determine the extent
to which such bulk carrier may be unsuitable for normal grab
discharging and the amount, if any, of additional discharging
expenses resulting from unsuitability, and such determination shall
be final and binding on the parties hereto. If an independent
marine surveyor is requested to survey any bulk carrier, (i) Seller
shall pay the expenses of the independent marine surveyor if the
independent marine surveyor determines that the bulk carrier is
unsuitable for normal grab discharging and that additional
discharging expenses will be incurred, and (ii) Buyer shall pay the
expenses of the independent marine surveyor if the independent
marine surveyor determines that the bulk carrier is suitable for
normal grab discharging.
(b) Hopper Barges and SPV's. Hopper barges will be
single deck (without tween decks) and with holds sufficiently wide
to be open for normal grab discharge to avoid abnormal trimming.
Four hopper barges will be carried aboard the special purpose
vessel and the total so carried will be considered a single
shipment. Each hopper barge will carry between approximately 1,300
DMT's and 1,500 DMT's of Concentrates for a total shipment of
between approximately 5,200 DMT's and 6,000 DMT's each voyage.
(c) Vessel Requirements of General Applicability.
Such bulk carriers, SPV's and hopper barges shall (i) carry all
necessary certificates which are required to trade within
Indonesian waters, and (ii) comply with all Government regulations,
and, unless otherwise agreed, be classed +100A1 at Lloyds or
equivalent, and shall be no more than 20 years of age (subject to
Seller's compliance with the provisions of Section 7.1 setting
forth Seller's responsibility for the payment of any overage
premium for cargo insurance), and be insurable in the New York,
London, or other internationally recognized insurance market.
Such vessels shall have specifications which conform to
the berth conditions set forth in Section 5.2 of this Agreement,
unless otherwise mutually agreed. Such specifications shall be
automatically updated during the term of this Agreement if Buyer's
dedicated berth at the Port of Discharge is improved so as to be
able to accept larger vessels.
Seller shall not charter or load Concentrates into
vessels from any shipping company as to which, because of its
financial condition, there exists reasonable grounds for insecurity
about the ability of such shipping company to carry out the normal
execution of its shipping obligations.
5.8 Overtime. Any overtime payable for discharging outside
normal working hours shall be paid by the party ordering such
overtime, except that officer's and crew's overtime shall always be
for Seller's account.
5.9 Port Charges. Seller shall hold Buyer free and
harmless from all port charges, harbor dues, pilotage, crew's
expense, light dues, the first movement of hopper barges to and
from the fleeting area, and all other charges and dues customarily
paid by a vessel at any Port of Discharge or alternate port as
provided in Section 5.11.
Port charges associated with second and any subsequent
movement of hopper barges to and from Buyer's dedicated berth shall
be for Buyer's account.
5.10 Title and Risk of Loss. Title and all risks of loss
shall pass to Buyer as cargo progressively crosses the rail of the
vessel at the Port of Loading. Except as provided in Section 7.4
(Insolvency Exclusion Clause) and except for sales made to MMC or
to third parties as provided in Section 3.4 (Buyer's Inability to
Receive Concentrates), Buyer agrees that throughout the term of
this Agreement Buyer shall be absolutely and unconditionally
committed to purchase, pay for and accept delivery of, all
Concentrates as to which title and risk of loss have passed to
Buyer. This provision is not intended to affect Buyer's
Contractual Tonnage purchase obligation.
5.11 Alternate Port. If the discharge of a cargo of
Concentrates at the Port of Discharge is affected by a strike or
walk-out or by damage, whether from natural or other causes, to
such Port of Discharge and the same has not been settled or
repaired within 48 hours, Buyer shall notify Seller within 12 hours
after the expiration of such 48 hour period, as to whether Buyer
desires that (i) such vessel wait until such strike or walk-out is
at an end or such damage is repaired, or (ii) such vessel proceed
to an alternate safe port where it can safely unload the
Concentrates. Promptly upon receipt of such notice from Buyer,
Seller shall direct the vessel to comply with Buyer's notice
provided that the Master of the vessel judges such port to be safe.
If the vessel proceeds to wait at the Port of Discharge and
discharging is delayed beyond the expiration of lay time, demurrage
shall be payable by Buyer to Seller at one-half the rate specified
in Section 5.6. If the vessel proceeds to an alternate safe port,
there shall be no additional freight charge payable by Buyer unless
the distance between the original Port of Discharge and the
alternate port exceeds 100 nautical miles, in which event the
additional freight in respect of the distance in excess of 100
nautical miles shall be payable by Buyer.
5.12 Stevedore Damages. Damages caused by stevedores
nominated and/or appointed by Buyer shall be settled directly
between the stevedores and the vessel owners; provided, however,
Buyer shall remain financially responsible for such damages in the
event the stevedores and the vessel owners fail to reach an
agreement or the stevedores fail for any other reason to pay the
vessel owner for such damages.
5.13 Jetty Damages. Damages to the jetty caused by vessels
chartered by Seller shall be settled directly between Buyer and the
vessel owner; provided, however, Seller shall remain financially
responsible for such damage in the event Buyer and the vessel owner
fail to reach an agreement or the vessel owner fails for any other
reason to pay Buyer for such damages.
5.14 Use of Bulk Carrier's Discharging Gear. Seller shall
have the right in its discretion to furnish bulk carriers (i)
having discharging gear on board or (ii) having no discharging gear
on board; provided, however, that such bulk carrier's discharging
gear shall not hinder discharging operations by Buyer's shore
cranes. Notwithstanding the above, should the bulk carrier's on
board discharging gear hinder discharging operations, then Section
5.7(a) shall apply. In the event that Buyer desires to utilize the
bulk carrier's discharging gear for discharging any cargo, Seller
shall use its best efforts to obtain the ship owner's consent for
such use. Buyer shall hold Seller harmless from all charges for or
in connection with each cargo or portion thereof of Concentrates so
discharged.
ARTICLE 6
Scheduling and Shipments
6.1 Initial Inventory Period. On or before November 1 of
the calendar year preceding the year in which Mechanical Completion
is expected to occur, Buyer and Seller shall mutually agree upon
the schedule of shipments of the quantities of Concentrates
specified in Section 3.1 which are to be shipped during the Initial
Inventory Period. Revisions to the schedule of shipments for the
Initial Inventory Period shall be as mutually agreed upon by the
parties.
6.2 First Contract Year. Buyer shall provide to Seller on
or before November 1 of the calendar year preceding the year in
which the first Contract Year is expected to begin, a preliminary
monthly shipping schedule for the first Contract Year based on
Buyer's then current projections for such period. The sum of the
quantities reflected for all 12 months in such preliminary monthly
shipping schedule for the first Contract Year shall not exceed the
Annual Shipping Schedule Quantity for such Contract Year.
With respect to the first six months of the first
Contract Year, at least 60 days prior to the beginning of each
month Buyer shall advise Seller in writing of its anticipated
quantity requirements for such month. For the first six month
period of the first Contract Year Buyer may change its monthly
quantity requirements without any limit in the percentage change
from one month to the next; provided, however, at least 30 days
prior to the beginning of each month during the first six months of
the first Contract Year Buyer shall furnish to Seller its final
written declaration of its quantity requirements for such month.
The month identified in such final written declaration for the
shipment of particular cargoes shall be considered to be the Month
of Scheduled Shipment with respect to such cargoes. In addition,
the quantity recited in each such final declaration shall
constitute the quantity of Concentrates which Buyer is obligated to
purchase and which Seller is obligated to deliver during such
monthly period.
With respect to the second six months of the first
Contract Year, at least 90 days prior to the beginning of each
month Buyer shall advise Seller in writing of its anticipated
requirements for such month. In providing such notice of
anticipated requirements, Buyer shall limit the quantity variation
for each such month so that it does not exceed plus 25% or minus
50% of the quantity which is set out with respect to the same month
in the shipping schedule which Buyer furnishes to Seller on or
before November 1 pursuant to the first paragraph of this Section
6.2. At least 60 days prior to the beginning of each month during
the second six months of the first Contract Year Buyer shall
furnish to Seller its final written declaration of its quantity
requirements for such month so long as such declaration is within
the variances specified above. The month identified in such final
written declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such monthly period.
6.3 Second Contract Year. Buyer shall provide to Seller on
or before November 1 of the calendar year preceding the year in
which the second Contract Year begins, a preliminary monthly
shipping schedule for the second Contract Year based on Buyer's
then current projections for such period. The sum of the quantities
reflected for all 12 months in such preliminary monthly shipping
schedule for the second Contract Year shall not exceed the Annual
Shipping Schedule Quantity for such Contract Year.
At least 30 days prior to the beginning of each
consecutive three month period of the second Contract Year, Buyer
shall furnish to Seller in writing the final declaration of its
quantity requirements for each of such three calendar months. In
providing such final declaration, Buyer shall limit the quantity
variation for each such month so that it does not exceed plus 25%
or minus 50% of the quantity which is set out with respect to the
same month in the shipping schedule which Buyer furnishes to Seller
on or before November 1 pursuant to the first paragraph of this
Section 6.3, and Buyer shall limit the quantity variation for each
three month period so that it does not exceed plus 10% or minus 25%
of the quantity which is set out with respect to the same three-
month period in the shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.3. The month identified in such final written
declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three month period.
6.4 Third Contract Year. Buyer shall, if requested by
Seller, provide to Seller on or before November 1 of the calendar
year preceding the year in which the third Contract Year begins, a
preliminary monthly shipping schedule for the third Contract Year
based on Buyer's then current projections for such period. The sum
of the quantities reflected for all months in such preliminary
monthly shipping schedule for the third Contract Year shall not
exceed the Annual Shipping Schedule Quantity for such Contract
Year; provided, however, Buyer will issue an adjusted monthly
shipping schedule in such Contract Year if it elects to exercise
its rights to an Inventory Allowance in accordance with the
provisions of Section 3.3.
At least 30 days prior to the beginning of each
consecutive three-month period (except in the case of the final
period which may be less than three months) of the third Contract
Year, Buyer shall furnish to Seller in writing the final
declaration of its quantity requirements for each of such three
calendar months (which in the case of the final period shall be
reduced to whatever lesser period remains in the third Contract
Year). In providing such final declaration, Buyer shall limit the
quantity variation for each such month so that it does not exceed
plus 25% or minus 25% of the quantity which is set out with respect
to the same month in the shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.4, and Buyer shall limit the quantity variation for
each three-month period so that it does not exceed plus 10% or
minus 25% of the quantity which is set out with respect to the same
three-month or lesser period in such shipping schedule which Buyer
furnishes to Seller on or before November 1 pursuant to the first
paragraph of this Section 6.4. The month identified in such final
written declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three-month (or lesser) period.
6.5 Fourth and Subsequent Contract Years. Buyer shall, if
requested by Seller, provide to Seller on or before November 1 of
the calendar year preceding the commencement of the fourth and each
subsequent Contract Year a preliminary monthly shipping schedule
for the fourth (or subsequent) Contract Year based on Buyer's then
current projections for such year. The sum of the quantities
reflected for all months in such preliminary monthly shipping
schedule for such Contract Year shall not exceed the Annual
Shipping Schedule Quantity for such Contract Year; provided,
however Buyer may issue an adjusted monthly shipping schedule in
any such Contract Year in which it elects to exercise its rights to
an Inventory Allowance in accordance with the provisions of Section
3.3.
At least 30 days prior to the beginning of each
calendar quarter of such Contract Year, Buyer shall furnish to
Seller in writing the final declaration of its quantity
requirements for each calendar month in such calendar quarter. In
providing such final declaration, Buyer shall limit the quantity
variation for each such month so that it does not exceed plus 25%
or minus 25% of the quantity which is set out with respect to the
same month in the shipping schedule which Buyer furnishes to Seller
on or before November 1 pursuant to the first paragraph of this
Section 6.5, and Buyer shall limit the quantity variation for each
three-month period so that it does not exceed plus 10% or minus 25%
of the quantity which is set out with respect to the same three-
month period in such shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.5. The month identified in such final written
declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three-month period.
6.6 General. Seller shall deliver each shipment of
Concentrates reflected in the latest shipping schedule provided by
Buyer in accordance with the provisions of this Article 6 during
the month identified in such schedule, provided that Buyer uses all
reasonable efforts to reflect in its shipping schedules the
spreading of shipments as evenly as practicable throughout each
Contract Year of the term of this Agreement taking into account
Buyer's operational requirements. Any failure by Seller to comply
with such schedule shall be governed by the provisions of Section
3.5. Any modifications of shipping schedules not provided for
herein shall be in accordance with the mutual agreement of Buyer
and Seller.
6.7 Buyer's Shipping Instructions and Documentation, Vessel
Information and Further Shipment Confirmation. Each party hereto
shall provide to the other party hereto all shipping instructions
and information, documentation, vessel information, arrival and
departure information, tonnage figures, stowage plans and other
information and papers reasonably requested by such other party to
assure the orderly delivery of all Concentrates which are to be
sold and delivered under this Agreement.
ARTICLE 7
Insurance
Seller shall effect cargo insurance with an internationally
reputed insurance company(ies) on the following conditions:
7.1 Insured Value. The insured value shall be 110% (one
hundred ten percent) of the value of the Concentrates as per the
invoice for the provisional payment, subject to adjustment to the
final value, as determined in accordance with this Agreement.
In the event that Seller's insurance company shall at
any time charge an overage premium on vessels which are over 15
years of age, Seller shall bear and pay the full amount of such
overage premium without any obligation on the part of Buyer to
reimburse Seller for any portion of such premium.
7.2 Insurance Coverage. The insurance shall designate
Buyer or the collateral trustee or agent acting for the Project
lenders who is designated by Buyer, as the loss payee(s). Such
coverage shall be valid from the time when the Concentrates pass
the ship's rail of the carrying vessel at the Port of Loading until
final destination at the receiving smelter's warehouse and shall be
effective under the terms of the Institute Cargo Clause (A) or its
equivalent, average irrespective of percentage, including the risk
of all fire or heating even when caused by inherent vice or
spontaneous combustion, and Institute War Clause and Institute
Strike, Riots and Civil Commotion Clauses or their equivalents.
7.3 Claims. Claims for total or partial loss and/or damage
shall be payable based on the value as per the invoice for the
provisional payment subject to later adjustment to the final value.
Such claims shall also include expenditure directly associated with
the loss (including but not limited to surveyor's fees and salvage
and removal costs), if any, arising from such loss and/or damages.
Any claim shall be payable in Dollars.
7.4 Insolvency Exclusion Clause. The price of any cargo
shipped hereunder shall be reduced to the extent of any loss
reasonably suffered by Buyer in any situation where all or any
portion of a cargo insurance claim submitted by Buyer is denied for
the reason that a shipment has been seized and the cargo sold or
damaged due to the insolvency of the ship owner or carrier and
Seller either knew or should have known that such insolvency might
prevent the normal prosecution of the voyage.
7.5 Seller's Assistance. If any Concentrates are lost or
damaged, Seller shall, upon the request of Buyer, assist in the
recovery of the insurance from the insurers.
7.6 War Risk Premiums. Seller shall bear the full cost of
the premiums for war risk insurance up to one percent (1%) of the
estimated value of the Concentrates in any shipment. In the event
such premiums exceed one percent (1%), Buyer and Seller will each
pay one-half (1/2) of the excess cost over one percent (1%), with
Seller including the charge for Buyer's one-half (1/2) of such excess
premiums on its invoice to Buyer for the affected shipment(s).
Notwithstanding the foregoing, Buyer and Seller may discuss and
mutually agree on other alternatives such as not carrying war risk
on any particular shipment(s) if they mutually agree in writing
that the cost of such insurance is excessive.
ARTICLE 8
Price
8.1 Payable Copper. Payable Copper shall mean 96.55% of
the full copper content (as ascertained by assay in accordance with
Article 13) of each DMT of Concentrates, subject to a minimum
deduction of 1.05 units for the first five Contract Years. The
definition of this term shall be reviewed prior to the end of the
fifth Contract Year hereunder, and every five years thereafter in
accordance with the provisions of Article 10.
8.2 Payable Gold. Payable Gold shall mean 97.0% of the
full gold content (as ascertained by assay in accordance with
Article 13) of each DMT of Concentrates. The definition of this
term shall be reviewed prior to the end of the fifth Contract Year
hereunder, and every five years thereafter in accordance with the
provisions of Article 10.
8.3 Payable Silver. Payable Silver shall mean (i) 90% of
the full silver content (as ascertained by assay in accordance with
the provisions of Article 13) of each DMT of Concentrates if the
full silver content is greater than or equal to 30 grams per DMT of
Concentrates, subject to a minimum deduction of 15 grams; and (ii)
zero percentage (i.e. no payment) if such full silver content of
each DMT of Concentrates is less than 30 grams. The definition of
this term shall be reviewed prior to the end of the fifth Contract
Year hereunder, and every five years thereafter in accordance with
the provisions of Article 10.
8.4 Quotational Period. Quotational Period shall mean,
with respect to Payable Copper in any portion of any shipment, the
third calendar month following the month in which the Date of
Arrival occurs, and with respect to Payable Gold and Payable Silver
in any portion of any shipment, the Month of Scheduled Shipment.
8.5 Determination of Price. The price of each shipment of
Concentrates sold hereunder shall be an amount equal to the sum of
the following payments less the sum of the deductions set forth in
Article 9.
8.6 Copper Price. Buyer shall pay for the Payable Copper
in Concentrates sold hereunder at a price equal to the daily
official London Metal Exchange Grade A Settlement price (the "LME
Copper - Grade A Settlement Price") quoted in Dollars, as published
in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.7 Gold Price. Buyer shall pay for the Payable Gold in
Concentrates sold hereunder at a price equal to the daily average
of the London free bullion market "Initial" and "Final" quotations
for gold (the "London Gold Price") quoted in Dollars, as published
in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.8 Silver Price. Buyer shall pay for the Payable Silver
in Concentrates sold hereunder at a price equal to the daily London
bullion brokers spot price for silver quoted in Dollars, as
published in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.9 Conversion to Dollars. The prices of copper, gold and
silver, if quoted in any currency other than Dollars by "Platt's
Metals Week" (or any other publication substituted for "Platt's
Metals Week" by mutual agreement of Seller and Buyer), shall be
converted daily during any applicable Quotational Period into
Dollars by using the noon buying rate for the applicable currency
for cable transfers as certified by the Federal Reserve Bank of New
York for customs purposes. The average price for any such
Quotational Period shall be calculated by totaling the Dollar
equivalence of the daily prices during such period and dividing
such total by the number of pricing days in such period.
8.10 Alternate Pricing.
(a) Pricing Basis No Longer Published or No Longer
Representative. In the event that (i) "Platt's Metals Week" ceases
to be published, or ceases to publish any quotation specified in
this Article 8 for determining the prices for copper, gold or
silver, or publishes and does not later correct an erroneous
quotation for copper, gold or silver, of a value then being
obtained for copper, gold or silver (as applicable), or (ii) it is
the reasonable belief of Buyer or Seller that the quotations are no
longer representative of the fair market values then being obtained
by non-integrated mines for copper, gold and silver contained in
copper concentrates, then, upon written notice by Seller or Buyer
to the other, the parties shall promptly confer and agree on a new
pricing basis for the Payable Copper, Payable Gold or Payable
Silver in the Concentrates to be sold hereunder.
(b) Interim Invoicing. If Seller or Buyer shall
give notice as provided in Section 8.10(a), Seller shall have the
right by written notice to Buyer to invoice provisionally at the
"Interim Price" (as hereinafter determined) and Buyer shall
thereafter pay, on the basis of the Interim Price until (i) Seller
and Buyer shall reach agreement with respect to a new pricing basis
for the metal concerned or (ii) a referee's decision shall have
been made as hereinafter provided, whichever shall first occur.
The Interim Price shall be the applicable price(s) applied to the
last previous shipment sold hereunder prior to such written notice.
(c) Referral to Referees. In the event that
within 60 days after the date of any notice pursuant to this
Section 8.10, Seller and Buyer shall not reach agreement regarding
an appropriate basis for the fair market value of the copper, gold
and/or silver content of the Concentrates to be sold hereunder,
either Seller or Buyer shall have the right to refer the matter to
the referee(s) as provided in Article 19 for the sole purpose of
determining such basis or reference method.
ARTICLE 9
Deductions for Smelting and Refining Charges and for Impurities
9.1 Smelting and Refining Charges for Part A Tonnage.
Subject to the provisions of Section 9.3 (Floor TC's and RC's) of
this Agreement, the smelting and refining charge(s) applicable to
Part A Tonnage in each cargo of Concentrates delivered hereunder
shall be determined as follows:
(i) Initial Negotiation. During the period January
1, 1998 through March 31, 1998 (or earlier with the approval of
both parties) Seller and Buyer shall conduct negotiations in good
faith for the purpose of reaching agreement by no later than March
31, 1998 on the following matters:
(a) A percentage of the Payable Copper price
determined pursuant to Article 8, the applicable price range for
such percentage and the associated (price participation) formula
for smelting and refining charges for the Payable Copper price
which is outside of such designated price range (or alternatively
two or more different percentages of such Payable Copper price with
a corresponding range of prices which are applicable to each such
percentage) for each cargo of Concentrate sold hereunder during the
period commencing with the first delivery of Concentrates hereunder
and continuing through December 31, 2003, which shall constitute a
combined smelting and refining charge for Part A Tonnage for such
period; and
(b) Whether or not gold and silver refining
charges will be applicable to Part A tonnage, and the amount (if
any) of such charges applicable for the same period specified in
(a) above, all based on the generally prevailing market for price
sharing type contracts.
Notwithstanding the above, each of Buyer and Seller
shall have the right and option at any time within the 18 month
period preceding the deadline date for reaching a negotiated
agreement on such Part A Tonnage charges, to obtain from a third
party and submit a copy thereof to the other party hereto a written
competitive offer(s) satisfying the following criteria: (1) in the
case of Buyer, a bona fide offer to sell and deliver copper
concentrates to the Gresik smelter or, in the case of Seller, a
bona fide offer to purchase from Seller copper concentrates
produced from Seller's mines and processing facilities in
Indonesia, (2) having a term or duration of five (5) years or more,
(3) having commercial smelting and refining terms based on a price
sharing formula and not having other commercial terms and
conditions which have the effect of distorting the level of such
smelting and refining charges (such as inadequate price adjustments
and penalties to appropriately reflect variances in concentrate
quality, or exceptionally high or low percentages of payable
metals), and (4) the party tendering such offer may not be an
Affiliate of the party hereto which is receiving the offer or have
any financial linkages to the party hereto receiving such offer
which could affect the commercial terms offered. The sum of the
tonnage represented by the competitive offers shall be a quantity
which is greater than or equal to 100,000 DMT's per year (i.e. the
average annual quantity during the first five years covered by such
offer) with no single offer representing less than 50,000 DMT's per
year (based on the same calculation of the average annual
quantity). Unless the parties otherwise agree, if more than one
offer is submitted by a party hereto and the terms offered in such
offers are not identical to each other, the submitting party must
assure that they are structured in a manner whereby a combined
weighted average of the smelting and refining charge terms can be
readily calculated from the face of such offers.
The party hereto which is the recipient of a
competitive offer(s) submitted to it by the other party hereto in
accordance with the preceding paragraph shall have a period of
three (3) months following its receipt of such offer(s) to decide
whether to accept the smelting and refining charges reflected in
such offer(s) as a whole (which shall be the combined weighted
average thereof if more than one competitive offer has been
submitted) or to reject such charges as a whole. The failure of the
party receiving such offer(s) to agree to the charges contained in
such offer(s) as a whole within such three (3) month period of time
shall constitute a rejection of such charges.
During the period when such offer(s) is (are) under
consideration, Buyer and Seller may by mutual agreement have
discussions to determine whether a compromise is feasible on such
smelting and refining charges for the Part A Tonnage (i.e. whether
a solution other than the acceptance of the offered charges is
feasible), but neither party shall be obligated to compromise. In
the event that the party to whom such third party offer(s) was
submitted submits its own third party offer(s) to the other party
hereto meeting all of the above described criteria and quantity
requirements within the above described three (3) month evaluation
period and the smelting and refining charges contained in such
subsequent offer(s) is (are) more favorable to the party submitting
such subsequent offer(s), then Buyer and Seller shall immediately
conduct good faith negotiations to resolve the differences between
such offers in an effort to reach agreement upon the smelting and
refining charges which will be applicable from the initial delivery
of Concentrates hereunder through December 31, 2003. If agreement
is not reached as a result of such negotiations by the end of a
period of 3 months following the first submittal of a third party
offer in accordance with this Section 9.1(i) or by the end of such
other period as is mutually agreed upon, Buyer and Seller may by
mutual agreement (but shall not be obligated to) submit such third
party offers or sets of offers to a referee(s) for final
determination in accordance with the provisions of Article 19, and
in such event the referee(s) shall take into account the two (2)
offers or sets of offers which have been submitted and decide the
Part A Tonnage smelting and refining charges which shall be
applicable from the initial delivery of Concentrates hereunder
through December 31, 2003. If there is no mutual agreement
following such negotiation regarding the two (2) third party offers
or sets of offers and if the parties do not decide to have a
referee(s) determine such charges, then the same consequences shall
apply as are set forth in the penultimate (next to last) paragraph
of this Section 9.1(i).
If the recipient of a third party offer(s) submitted to
it by the other party hereto agrees to accept such Part A Tonnage
smelting and refining charges as a whole, if mutual agreement is
reached on such smelting and refining charges, or if the referee
resolves the two (2) offers or sets of offers, then such smelting
and refining charges shall be applicable to all of the Part A
Tonnage commencing with the first delivery of Concentrates
hereunder and continuing through December 31, 2003.
If the recipient of such offer(s) rejects such smelting
and refining charges (either expressly or impliedly), or if Buyer
and Seller shall otherwise fail to agree upon the above specified
smelting and refining charges for Part A Tonnage prior to March 31,
1998, then notwithstanding anything contained in this Agreement to
the contrary, provided that offers (i.e. by Buyer or Seller) or
third party offers (i.e. the third party offers which are
specifically described above) have been submitted in good faith by
both parties, Seller shall be relieved from the obligation to sell
and deliver to Buyer and likewise Buyer shall be relieved from the
obligation to purchase, pay for and accept delivery from Seller of
fifty percent (50%) of the Part A Tonnage, in the case of the
failure of the parties to agree or, in the case of the rejection of
a third party offer(s), a quantity of Concentrates selected by the
party rejecting the smelting and refining charges contained in the
third party offer(s) which shall be equal to either (a) fifty
percent (50%) of the Part A Tonnage, or (b) the annual quantity
represented by the competitive third party offer(s). Either of
such quantity reductions shall be hereinafter referred to as the
"Permanent Holiday Tonnage"; and in either situation the reduction
shall commence on January 1, 1999 and continue for the remainder of
the term of this Agreement. If the rejecting party fails to notify
the party which submitted the offer(s) within thirty (30) days of
its rejection, with respect to its selection of the (a) or (b)
quantity, then (a) shall apply. In the event of such a reduction,
the smelting and refining charges which are applicable to the Part
B Tonnage shall apply to one hundred percent (100%) of the Part A
Tonnage during the period from the first shipment hereunder through
December 31, 1998, and to the portion of the Part A Tonnage which
does not constitute the Permanent Holiday Tonnage from January 1,
1999 through December 31, 2003.
If the smelting and refining charges for Part A Tonnage
for the period from the date of the initial shipment hereunder
through December 31, 2003 are not resolved prior to the time of the
initial shipment hereunder, then any shipments of Concentrates
which are delivered prior to such final resolution shall utilize
the Part B Tonnage smelting and refining charges, and as soon as a
resolution is reached a retroactive adjustment payment shall be
made with respect to all shipments on which a payment is made
between the date of the first shipment hereunder and the date of
the final resolution for the amount of the difference between the
pricing based on the Part B Tonnage smelting and refining charges
and the pricing based on the finally resolved Part A Tonnage
smelting and refining charges.
(ii) Subsequent Negotiations. In the event Buyer and
Seller determine or reach agreement on the smelting and refining
charges for the Part A Tonnage in accordance with Section 9.1(i) as
a result of negotiations, as a result of the acceptance of the
smelting and refining charges contained in a third party offer(s)
or with the referee resolving the differences between two (2) third
party offers or sets of offers, then on or before March 31, 2003
and on or before March 31 of each fifth year thereafter, Buyer and
Seller shall comply with the procedures set forth in Section 9.1
(i) including but not limited to the obligations associated with
the right of each party to submit a third party offer(s) in order
to determine the smelting and refining charges which will be
applicable to the Part A Tonnage for the five (5) Contract Years
commencing on January 1, 2004 with respect to the first such
settlement under this Section 9.1(ii), and with the same timing to
apply to each subsequent five (5) Contract Years, mutatis mutandis.
If as a result of the compliance by Buyer and Seller
with the procedures provided for in the immediately preceding
paragraph of this Section 9.1(ii): (i) Buyer and Seller mutually
agree on the smelting and refining charges which shall be
applicable for the ensuing five (5) Contract Years, (ii) Buyer or
Seller agrees to the smelting and refining charges for such period
contained in a third party offer(s) submitted to it by the other
party hereto, or (iii) the referee resolves the differences between
two (2) offers or sets of offers, all in the manner provided in
Section 9.1(i), then upon the occurrence of any of such events the
smelting and refining charges as so determined shall be applicable
to all Part A Tonnage for the ensuing five (5) Contract Years.
In the event the Part A Tonnage has not previously been
reduced due to the failure of the parties to agree on smelting and
refining charges, and in any subsequent five (5) year negotiation
agreement is not reached utilizing the Section 9.1(i) procedures,
then notwithstanding anything to the contrary recited above in this
Section 9.1(ii) Buyer and Seller shall determine the amount of the
Permanent Holiday Tonnage reduction in accordance with the
procedures set forth in Section 9.1(i), and a Part A Tonnage
reduction equal to such Permanent Holiday Tonnage shall be
effective from the commencement of the applicable ensuing five (5)
Contract Years through the end of the term of this Agreement, and
in such event the smelting and refining charges which are
applicable to the Part B Tonnage for each of the ensuing five (5)
Contract Years shall apply during each of the ensuing five (5)
Contract Years to the portion of the Part A Tonnage which does not
constitute the Permanent Holiday Tonnage.
In the event a Permanent Holiday Tonnage reduction of
Part A Tonnage has occurred, either under Section 9.1(i) or Section
9.1(ii), then notwithstanding anything to the contrary recited in
this Section 9.1(ii), Buyer and Seller shall meet at such times as
may be mutually agreed and conduct negotiations in good faith and
conclude such negotiations by March 31 of each fifth year
thereafter (i.e. 2003, 2008 and so on, as applicable) with respect
to: (a) a percentage of the Payable Copper price determined
pursuant to Article 8, the applicable price range for such
percentage and the associated (price participation) formula for
smelting and refining charges for the Payable Copper price which is
outside of such designated price range (or alternatively two or
more percentages of such Payable Copper price with a corresponding
range of prices which are applicable to each such percentage) which
shall constitute a combined smelting and refining charge during the
ensuing five (5) Contract Years for the portion of the Part A
Tonnage which does not constitute the Permanent Holiday Tonnage,
and (b) whether or not gold and silver refining charges will be
applicable during such five (5) Contract Years period to such Part
A Tonnage and, if they are determined to be applicable based on the
generally prevailing market, the amount of such charges. If
agreement is reached in accordance with the foregoing provisions of
this paragraph, the agreed upon charges shall be applicable to the
above specified Part A Tonnage for the ensuing five (5) Contract
Years. If despite such good faith negotiations mutual agreement on
such charges is not reached between Buyer and Seller by March 31 of
such year, then the smelting and refining charges which are
applicable to the Part B Tonnage during each of the ensuing five
(5) Contract Years shall apply to such Part A Tonnage for each of
such ensuing five (5) Contract Years.
(iii) Agreements Required if Permanent Holiday
Reduction Effected. If a reduction in Part A Tonnage is effected as
a result of the application of this Section 9.1, then
notwithstanding anything to the contrary recited in Section 6.6 or
any other provision of this Agreement, from and after the effective
date of such reduction any changes to the shipping schedule
provided by Buyer by November 1 of each year shall be by mutual
agreement. In the event of such reduction, Buyer and Seller shall
also promptly discuss and agree upon an appropriate amendment to
this Agreement reflecting the change which has occurred in the
nature of this Agreement. Such amendment shall consist of the
following items: (1) the adoption of a simplified procedure to
determine the Contractual Tonnage figure, which is fair and
reasonable to both parties, (2) proper revisions to the alumina
penalty due to the possibility of blending of the Concentrates with
copper concentrates supplied by third parties, and (3) the
establishment of audit procedures to verify that Buyer's third
party purchases are and continue to be in accordance with generally
accepted international business practices and on competitive world
market terms and conditions at the time of sale or contract.
9.2 Smelting and Refining Charges for Part B Tonnage.
(i) Smelting Charge, Payable Copper Refining Charge
and Price Participation Terms for Part B Tonnage. Subject to the
provisions of Section 9.3 (Floor TC's and RC's) and Article 10
(review of commercial terms) of this Agreement, the smelting
charge, the Payable Copper refining charge and the price
participation terms applicable to Part B Tonnage in each cargo of
Concentrates delivered hereunder shall be determined as follows:
(a) Determination on Basis of Weighted Average of
Eligible Reference Contracts. The smelting charge, the Payable
Copper refining charge and the price participation terms applicable
to Part B Tonnage for each calendar year shall be determined by
calculating the weighted average of each of such terms as contained
in each of three (3) separate groups of Reference Contracts, the
first group being those eligible designated Reference Contracts
submitted by Seller, the second group being those eligible
designated Reference Contracts submitted by Buyer, and the third
group being the Ertsberg Concentrate Agreement and the MMC
Concentrate Agreement (in each case as referred to in item (viii)
of the definition of "Contracts Criteria" in Appendix "A" hereto)
and then calculating the combined weighted average of such three
(3) groups of Reference Contracts for each such term (with equal
weight being given to each of the three groups), all in accordance
with the procedures described in this Section 9.2(i), and the
weighted average figures for the above identified terms which are
determined every calendar year thereafter shall be applicable to
50% of the Part B Tonnage for the Contract Year in which the
determinations are made and also to 50% of the Part B Tonnage for
the following Contract Year. Notwithstanding the above: (1) as to
shipments made during the portion of a calendar year which is prior
to completion of the annual determination in accordance with the
process set forth in (b) through (f) of this Section, such terms
shall be as provided for in subsection (h) of this Section 9.2; (2)
the weighted average figures for the above identified terms which
are determined preceding the commencement of the first Contract
Year shall be applicable to 100% of the Part B Tonnage for the
calendar year which includes the Initial Inventory Period and the
beginning of the First Contract Year; (3) the weighted average
figures for the above identified terms which are determined
following the commencement of the first Contract Year shall be
applicable to 100% of the Part B Tonnage for the calendar year
which includes both the end of the First Contract Year and the
beginning of Second Contract Year; and (4) the weighted average
figures for the above identified terms which are determined
following the commencement of the second Contract Year and which
shall be applicable to 100% of the Part B Tonnage for the calendar
year which includes both the end of the Second Contract Year and
all of the third Contract Year, shall also be applicable to 50% of
the Part B Tonnage for the fourth Contract Year.
(b) Selection of Auditor. As early as practicable
during the first three months of each calendar year (including but
not limited to any calendar year comprising a Contract Year) Buyer
and Seller shall select by mutual agreement and retain an
internationally recognized auditor to perform the responsibilities
of the auditor as specified in this Section 9.2(i). Such auditor's
fees and expenses shall be borne equally by the parties. At the
time the auditor is retained such auditor shall be provided with a
copy of this Agreement on a strictly confidential basis for use in
its work hereunder.
Prior to such selection of the auditor, and as soon as
practicable following the date of execution of this Agreement,
Seller shall develop guidelines and hypothetical examples for use
by the auditor in order for such auditor to efficiently and
properly perform its duties and responsibilities hereunder, and
Seller shall review with Buyer such guidelines and hypothetical
examples, and obtain Buyer's concurrence which shall not be
unreasonably delayed or withheld, prior to submitting them to the
auditor.
(c) Determination of Eligibility for Designated
Reference Contracts. Within three (3) Business Days following the
commencement of the third month of each calendar year except as
contemplated in item (ix) of the definition of Contracts Criteria
in Appendix "A" hereto, commencing with calendar year 1998 (or such
later calendar year in which the first delivery of Concentrates to
the Facilities is expected to occur), each of Seller and Buyer
shall designate as many concentrate sales and/or purchase
agreements to which it is a party (or, in the case of Buyer, to
which MMC is a party) as exist up to a maximum of three (3) such
agreements which such party believes are eligible Reference
Contracts, meaning Reference Contracts which satisfy all of the
Contracts Criteria. If Buyer or Seller, in its good faith judgment,
believes that it has three (3) or less eligible Reference Contracts
satisfying all of the Contracts Criteria, such party shall
designate all such Reference Contracts that it does have.
Each party's designations shall be in writing and delivered by
express courier service or facsimile to the auditor. Each such
designation shall clearly identify the Reference Contract being
designated. Such identification shall include, at a minimum, the
name of the agreement, the name of the buyer(s) and the seller(s),
the effective date and duration of the agreement and the
contractual tonnage for the annual period which is covered by the
"Current Settlement" (excluding any tonnage which will be shipped
during periods beyond the first annual period following such
settlement). The phrase "Current Settlement" shall mean a
settlement of the commercial terms identified above which is
concluded during the period from October 1 of the immediately
preceding year to March 1 of the current year except as
contemplated in item (ix) of the definition of Contracts Criteria
in Appendix "A" hereto, which applies to tonnage being utilized by
the designating party in its weighted average calculations and
which tonnage is obligated to be shipped under such agreement
during the annual period covered by such settlement.
Each designation shall be accompanied by a written
certification signed by an authorized representative of the
designating party that such designated Reference Contract satisfies
all of the Contracts Criteria including a brief explanation as to
why each Contracts Criteria has been satisfied. A copy of each such
Reference Contract shall be provided to the auditor on a strictly
confidential basis together with the designation, certification and
explanations for such Reference Contract.
Each party shall simultaneously provide to the other party a
copy of the designation, certification and explanations for each
Reference Contract which it designates but not a copy of the
Reference Contract being designated. The party receiving the
designation and accompanying materials shall have seven (7)
Business Days following its receipt of such designation and
accompanying materials to provide to the auditor by express courier
service or facsimile any comments or objections it may have
regarding the eligibility of such designated Reference Contract
(with a copy to the designating party).
Based on the auditor's determination as to whether or not each
designated Reference Contract satisfies all of the Contracts
Criteria, such auditor shall notify both parties of the acceptance
as eligible or rejection as ineligible of each designated Reference
Contract. In order to expedite the completion of the auditor's
work, the auditor may, if it so desires, provide a notice of
acceptance or rejection as soon as it determines that a Reference
Contract is eligible or ineligible without waiting for the
completion of its evaluations of other Reference Contracts. If a
party which has one or more of its designated Reference Contracts
rejected has one or more other Reference Contracts which it has not
previously designated and which it believes to satisfy all of the
Contracts Criteria, then such affected party shall within three (3)
Business Days following its receipt from the auditor of a rejection
notice designate either a single substitute Reference Contract or
two (2) such substitute Reference Contracts (designating one as its
first preference and the other one as its second preference), in
the same manner as the original designation. If a party whose
Reference Contract(s) was (were) rejected has two (2) or more other
concentrate purchase or sale agreements which it believes qualify
as Reference Contracts, it shall be obligated to designate two (2)
substitute Reference Contracts (with its first and second
preferences indicated to the auditor). The auditor shall evaluate
the second preference substitute Reference Contract only if
required for the party who submitted such second substitute
Reference Contract to have the full number of eligible Reference
Contracts. If notwithstanding the submittal of such substitute
Reference Contract(s) the auditor does not rule as eligible the
full number of Reference Contracts for a party, then the remaining
Reference Contracts which were submitted by such party and which
are determined to be eligible shall be used exclusively in such
party's weighted average determinations.
Notwithstanding anything to the contrary recited in this
Section 9.2(i), each calendar year each party shall have the option
of making one but not more than one discretionary change in its
designations of eligible designated Reference Contracts. A
designated Reference Contract which is eligible for one or more
years but which subsequently expires or is terminated, under which
a Current Settlement is not made, or which no longer satisfies all
of the Contracts Criteria, shall be deleted as one of such party's
eligible designated Reference Contracts, but such deletion and any
substitution therefor shall not be considered to be a discretionary
change for purposes of this paragraph.
(d) Calculation of Weighted Average Figures for
Each Party's Eligible Reference Contracts. Upon completion of the
review of all designated Reference Contracts by the auditor, if
Buyer or Seller has received a ruling from the auditor that at
least one of its designated Reference Contracts is eligible, then
such party shall promptly calculate the weighted average figure for
each of the above identified terms taking into account the Current
Settlement which is applicable to all eligible tonnage (i.e. the
tonnage which is being sold by Seller or purchased by Buyer or MMC)
to be delivered under all of its eligible designated Reference
Contracts during the annual period covered by such Current
Settlement. Such calculations, the results thereof and a brief
explanatory report of how each figure was determined shall be
furnished to the auditor (with a copy sent to the other party)
within five (5) Business Days following the completion of the
auditor's rulings on all designated Reference Contracts.
If either Seller or Buyer is unable to designate any Reference
Contracts satisfying all of the Contracts Criteria, or the auditor
does not rule as eligible any of such designated Reference
Contracts, then such party's concentrate sales agreements shall not
be taken into account in making the combined weighted average
determinations under this Section 9.2.
The weighted average figure for the smelting charge shall be
calculated separately from the weighted average figure for the
Payable Copper refining charge. In the event that the smelting
charge and the Payable Copper refining charge is expressed on a
combined smelting and refining charge basis in any eligible
designated Reference Contract, the smelting charge shall be
calculated separately from the Payable Copper refining charge for
such Reference Contract in a manner which allows direct comparison
of the smelting and Payable Copper refining figures on a similar
number basis. In other words, the number of Dollars used for a
smelting charge shall equal the number of tenths of a cent used for
the refining charge. For example, in an eligible designated
Reference Contract which recites a combined smelting and refining
charge of $0.20 per pound of Payable Copper for copper concentrates
with a 44% copper grade and with a Payable Copper figure of 96.5%,
such combined smelting and Payable Copper refining charge shall be
converted to a $97.00 smelting charge and a $0.097 Payable Copper
refining charge, and such latter figures utilized in the weighted
average calculations for the smelting charge and the Payable Copper
refining charge for such Reference Contract.
With respect to calculation of the weighted average figures
for price participation, for each eligible designated Reference
Contract the price participation shall be determined for each price
of copper and averaged together on a weighted average basis. An
illustration of the proper method for each party to use in
calculating its weighted average figure for price participation is
set out on Appendices (C) and (D).
(e) Calculation of Weighted Average Figures for the
Ertsberg Concentrate Agreement and MMC Concentrate Agreement. At
the same time that Seller calculates and furnishes to the auditor
the weighted average figures for its own eligible designated
Reference Contracts, Seller shall separately calculate and furnish
to the auditor (with a copy to Buyer) a weighted average figure for
each of the above identified terms together with a brief
explanatory report, taking into account all quantities covered by
Seller's Current Settlement under (1) the Ertsberg Concentrate
Agreement, plus (2) the MMC Concentrate Agreement. For purposes of
these Section 9.2(i) calculations, both of these contracts
(including their successors as described in the definitions of such
Agreements) shall be deemed to be eligible designated Reference
Contracts. The provisions of subsection (d) governing how such
calculations will be made shall also apply to the calculation of
the weighted average figures for this group of eligible designated
Reference Contracts.
If only one of the two (2) above identified agreements is in
effect for the calendar year under consideration, or if a Current
Settlement has been made under only one of such agreements, then
only the figures reflected in such agreement which has been
currently settled shall be utilized. If neither of such two
agreements is in effect for such calendar year or if no Current
Settlement has been effected under such agreement(s) for such
calendar year, then such concentrate sales agreements shall not be
taken into account in making the weighted average determinations
under this Section 9.2(i).
Each party, within five (5) Business Days following receipt of
the weighted average figures, supporting calculations and
explanatory reports produced by the other party, shall furnish to
the auditor for its consideration any questions, comments or
objections it may have regarding such figures, calculations and
reports produced by the other party.
(f) The Auditor's Preliminary and Final
Determinations. The auditor, promptly after receiving the above
described weighted average figures and supporting calculations and
explanations, and any comments or objections made by the non-
submitting party, shall evaluate such information and then make any
adjustments it deems appropriate to each party's calculations.
Such adjustments may be made by the auditor if the auditor finds
simple mathematical errors, errors resulting from a
misinterpretation of this Section 9.2(i), errors resulting from a
misinterpretation of any eligible designated Reference Contract,
errors due to the failure to take into account factors which
unreasonably distort a figure being utilized by a party in its
calculations or for other reasons deemed appropriate by the
auditor.
The auditor shall then issue to both parties a preliminary
report reciting its determination as to each weighted average
figure (including an explanation of any adjustments which it has
made) for each of the three above described groups of Reference
Contracts. The auditor shall simultaneously calculate and include
in its preliminary report a weighted average figure for each of the
above described terms, giving equal weight to each of the three
separate groups of Reference Contracts without consideration of the
tonnage included in any of the three constituent weighted average
figures [e.g., (Group 1 Weighted Average Smelting Charge Figure x
1/3) + (Group 2 Weighted Average Smelting Charge Figure x 1/3) +
(Group 3 Weighted Average Smelting Charge Figure x 1/3) = Weighted
Average Smelting Charge Figure]; provided, however, if one or more
of the three groups of Reference Contracts is not to be taken into
account in making the weighted average determinations hereunder,
then the weighted average shall be determined by the auditor by
giving equal weight to each of the remaining category(ies) of
Reference Contracts.
Each party shall have five (5) Business Days following receipt
of the auditor's preliminary report of the weighted average figures
for each of the above recited terms to submit to the auditor any
comments or objections which it may have to such figures and
report. The auditor shall promptly consider such comments or
objections and submit its final combined weighted average figures
and final report to the parties.
(g) Effect of Final Report and Retroactive
Adjustment. The combined weighted average figures reflected in the
auditor's final report shall constitute the smelting charge, the
Payable Copper refining charge and the price participation terms
applicable to Part B Tonnage in each cargo of Concentrates
delivered hereunder during the then current calendar year. Such
terms shall be reflected in all invoices for shipments following
issuance of the final report and shall be made retroactive to the
first day of the calendar year. An adjustment statement with
accompanying invoice or payment, as appropriate, shall be issued by
Seller as soon as practicable following Seller's receipt of the
final report, to reflect any differences between the amount of the
payments previously made by Buyer based on the interim terms which
are applicable between the first day of the calendar year and the
date of the adjustment, and the amounts which are applicable to
such periods based on the final report of the auditor.
(h) Interim Terms Governing the Period Prior to
Final Report Issuance. The smelting charge, the Payable Copper
refining charge and the price participation terms applicable to the
Part B Tonnage for any period of any calendar year prior to the
issuance of the auditor's final report for such year with respect
to any portion of the Part B Tonnage as to which the above
identified terms have not yet been determined, shall be: (i) with
respect to the initial annual determination for 1998 (or such later
calendar year in which the first delivery of Concentrates to the
smelter is expected to occur), the weighted average of (a) the
smelting and Payable Copper refining charge and price participation
terms reflected in the most recent Part B settlement under the
Ertsberg Concentrate Agreement, and (b) the smelting and Payable
Copper refining charge and price participation terms reflected in
the most recent settlement under the MMC Concentrate Agreement,
utilizing the quantity which has been settled in the most Current
Settlement for MMC's account under each such agreement, and (ii)
with respect to the annual determinations for all subsequent
calendar years, the smelting and Payable Copper refining charge and
price participation terms applicable hereunder for the immediately
preceding calendar year.
(ii) Payable Gold and Payable Silver Refining
Charges for Part B Tonnage. The Payable Gold refining charge for
all Part B Tonnage shall be $6.00 per ounce of Payable Gold, and
the Payable Silver refining charge for all Part B Tonnage shall be
$0.35 per ounce of Payable Silver.
9.3 Minimum Smelting and Refining Charges; Possible
Recoupment of Lost Revenues. Notwithstanding anything to the
contrary recited in this Agreement, if at any time during the
period commencing with the first shipment hereunder during the
Initial Inventory Period and ending with the ninth anniversary of
the Commencement of Commercial Operations, the smelting and
refining charges for all payable metals (copper, gold and silver)
and any applicable price participation (on a combined basis) for
the average of the Part A Tonnage and the Part B Tonnage are below
$0.21 per pound of Payable Copper, then the smelting and refining
charges for all such payable metals including any applicable price
participation (on a combined basis) for the average of the Part A
Tonnage and the Part B Tonnage shall be $0.21 per pound of Payable
Copper (the "Floor TC's and RC's"). The applicability and amount
of the Floor TC's and RC's shall be determined on a shipment-by-
shipment basis and reflected on Seller's final invoice for each
shipment of Concentrates hereunder, whenever the Floor TC's and
RC's are applicable.
At least 180 days prior to the ninth anniversary of the
Commencement of Commercial Operations, Seller and Buyer shall meet
for the purpose of negotiating and agreeing upon a new "Floor TC's
and RC's" figure which shall be at a level which is sufficient to
cover all projected costs of debt service, if any, associated with
the Project Loans or any refinancing thereof, and cash operating
costs. Such new Floor TC's and RC's figure shall remain in effect
from the ninth anniversary to the fifteenth anniversary of the
Commencement of Commercial Operations, and so long thereafter as
mutually agreed upon at the time such negotiation takes place, it
being understood that neither party shall propose to extend the
applicability of such Floor TC's and RC's beyond such fifteenth
anniversary any longer than is necessary to fully repay the Project
Loans or any refinancing thereof. If for any reason agreement on
such figure is not reached by 90 days prior to the ninth
anniversary date, such figure shall be determined by arbitration
(and giving effect to the requisite level thereof contemplated by
this paragraph) in accordance with the provisions of Article 20 of
this Agreement. Such Floor TC's and RC's figure shall be subject
to the required approval of the Government, which approval Seller
shall seek to procure on a timely basis in good faith.
If at any time (i) MMC has received an average annual
simple return of 13% on its total capital contribution (which
includes subordinated loans) and Seller has been reimbursed for all
return amounts which it previously assigned to MMC, sample
calculations of which occurrences are set forth on Appendix "B"
hereto, and (ii) the smelting and refining charges for all payable
metals (on a combined basis) for the Part A Tonnage and the Part B
Tonnage shall be more than $0.10 per pound of Payable Copper above
the Floor TC's and RC's, then to the extent necessary to reimburse
Seller for any loss of revenues in prior periods due to the
application of the Floor TC's and RC's in accordance with the
foregoing paragraphs of this Section 9.3, the smelting and refining
charges for all payable metals (on a combined basis) for Part A
Tonnage and Part B Tonnage shall be $0.10 per pound of Payable
Copper above the Floor TC's and RC's. The reference in (i) above
to MMC and Seller shall in each case be inclusive of any successor
to each such entity.
The calculation of such return on equity positions
shall be the responsibility of Buyer. Such calculation shall be
made not less frequently than once per year following the
Commencement of Commercial Operations, and not less frequently than
once per calendar quarter when Buyer determines in good faith that
such return will be realized in less than one year; and a copy
shall be furnished to Seller. Seller shall have the right to
conduct an annual audit of Buyer's calculations, including the
information supporting the figures reflected in such calculation,
and Buyer shall make such information and calculation available to
Seller. The parties shall promptly resolve any disagreements
regarding such calculation.
9.4 Deductions for Impurities. The following amounts, if
applicable pursuant to Section 12.5, shall be deducted from the
Seller's final invoices for each cargo of Concentrates sold
hereunder. The amounts stated below are deductions per DMT of
Concentrates in such cargo.
As: If the arsenic assay exceeds 0.2 unit,
$2.50 for each 0.1 unit of such excess
(fractions pro rata).
Bi: If the bismuth assay exceeds 0.05 unit,
$0.30 for each 0.01 unit of excess
(fractions pro rata).
Sb: If the antimony assay exceeds 0.1 unit,
$0.50 for each 0.01 unit of such excess
(fractions pro rata).
Cl: If the chlorine assay (other than for
possible seawater contamination) exceeds
0.05 unit, $0.50 for each 0.01 unit of
such excess (fractions pro rata).
Pb: If the lead assay exceeds 1 unit, $1.50
for each one unit of such excess
(fractions pro rata).
Zn: If the zinc assay exceeds 3 units, $1.50
for each one unit of such excess
(fractions pro rata).
Ni plus Co: If the nickel plus cobalt assay exceeds
0.5 unit, $0.30 for each 0.1 unit of such
excess (fractions pro rata).
F: If the fluorine assay exceeds 330 ppm,
$0.10 for each 10 ppm of such excess
(fractions pro rata).
Hg: If the mercury assay exceeds 10 ppm, $0.20
for each 1 ppm of such excess (fractions
pro rata).
Alumina: If the alumina assay (A1 x 1.8889) over
three consecutive calendar months averages (on
a weighted average basis) in excess of 3%,
$3.00 for each 1% of such excess (fractions
pro rata). This penalty may be reviewed at
the end of the fifth Contract Year upon the
request of either party upon furnishing a
written request to do so to the other party.
9.5 Exclusive Remedy. The deductions per DMT of
Concentrates set forth in Section 9.4 shall be the Seller's sole
obligation and the Buyer's exclusive remedy for the quality of or
the impurities in the Concentrates, except as otherwise expressly
provided in Sections 2.3, 2.5 and 9.7.
9.6 General Provisions Applicable to Smelting and Refining
Charges. For purposes of computing the smelting and refining
charges applicable to each cargo sold under this Agreement, each of
the different smelting and refining charges shall be applied
proportionately to the total quantity of such cargo. For example,
during all periods of time when agreement is in effect with respect
to the smelting and refining charges applicable to all of the Part
A Tonnage, for each cargo of Concentrates sold, 50% of the smelting
and refining charges shall be computed in accordance with the
provisions of this Article 9 governing Part A Tonnage, 50% of the
smelting and refining charges shall be computed as provided in
accordance with the provisions of this Article 9 governing Part B
Tonnage; and the weighted average of the two calculations shall be
the smelting and refining charges applicable to that cargo (subject
to adjustment in accordance with Section 9.3, if applicable).
All commercial terms and conditions applicable to Concentrates
sold hereunder during the first calendar year portion of the first
Contract Year shall also be applicable to the sale of Concentrates
to Buyer during the Initial Inventory Period except as specifically
provided in Section 9.1.
9.7 Special Provisions Applicable to Concentrates with
Copper, Gold and/or Silver Outside the Five-Year Expected Analysis.
If the average analysis of copper, gold and/or silver contained in
the total quantity of Concentrates delivered hereunder with respect
to any consecutive three (3) calendar months is outside the ranges
of the Five-Year Expected Analysis provided by Seller to Buyer in
accordance with the provisions of Section 2.2 for the then current
five (5) Contract Year period, then upon the written request of
either Seller or Buyer, Buyer and Seller shall promptly meet for
the purpose of mutually agreeing on adjustments to the smelting and
refining charges (including consideration of price participation
terms) and to the definition of the payable metal(s) which is (are)
outside such five (5) year range to a level which is equivalent to
the world market smelting and refining charges and payable metals
definitions for copper concentrates of the same quality. If the
parties cannot agree on such adjustments within 30 days from the
date of the first meeting held for such purpose, then the parties
shall mutually refer the matter to the referee(s) under Article 19.
Pending resolution of such adjustments, the current smelting and
refining charges and payable metals definitions applicable to
Concentrates having copper, gold and silver within the then current
five (5) year specifications shall be utilized in calculating
payments for shipments hereunder, with an appropriate retroactive
adjustment made as soon as the adjustments are determined (with
interest at the 60 day LIBOR rate plus 0.5% per annum). The
provisions of this Section shall not be applicable to those
quantities of Concentrates delivered by Seller and which are within
the Five-Year Expected Analysis ranges provided by Seller to Buyer
in accordance with the provisions of Section 2.2 for the then
current five (5) Contract Year period. Any adjustment to smelting
and refining charges (including price participation terms) under
this Section 9.7 shall in no event increase or diminish the effect
or applicability of Section 9.3 of this Agreement.
ARTICLE 10
Periodic Review of Commercial Terms
10.1 Provision Governing Part A Tonnage Smelting and
Refining Charges and Minimum Smelting and Refining Charges.
Provisions governing the smelting and refining charges applicable
to Part A Tonnage are set forth in Section 9.1, and the provisions
of this Article 10 shall have no application to the Part A Tonnage
smelting and refining charges. The provisions of this Article 10
shall also have no application to Section 9.3.
10.2 Periodic Review of Certain Commercial Terms. Between
January 1, 2003 and March 31, 2003 and between January 1 and March
31 of each fifth year thereafter during the term of this Agreement,
Buyer and Seller shall meet at a neutral location which alternates
between a location selected by Seller and a location selected by
Buyer, in order to review with each other the Commercial Terms of
this Agreement and to agree on such terms on a basis which is fair,
reasonable and reflective of then current market conditions. For
purposes of this Section 10.2 the term "Commercial Terms" shall
mean: (1) the definitions of the terms "Payable Copper", "Payable
Gold" and "Payable Silver" contained in Sections 8.1, 8.2 and 8.3,
(2) the definitions of the term Quotational Period contained in
Section 8.4, (3) the payment terms of Article 11, (4) the penalties
contained in Section 9.4, (5) the discharging rates contained in
Section 5.3, (6) the amount of dispatch and demurrage contained in
Section 5.6, and (7) the definition of Contracts Criteria contained
in Appendix "A" and the number of Reference Contracts recited in
Section 9.2(i)(c) to be included in each of Buyer's and Seller's
group of Reference Contracts used in determining the smelting
charge, the Payable Copper refining charge and the price
participation terms applicable to Part B Tonnage. All agreements
reached as a result of such periodic review shall be reflected in
a written amendment hereto signed by both Buyer and Seller reciting
the settlement of the Commercial Terms which will be applicable for
the ensuing period of five (5) Contract Years. If agreement on any
Commercial Term(s) is (are) not reached by the end of the month of
March of any such fifth year, unless such deadline date is extended
by mutual written agreement, and a party hereto is of the good
faith opinion that a Commercial Term(s) is (are) either no longer
fair, reasonable and reflective of the current market (as to item
numbers 1-6 above), or is no longer functional or within the
original intent of this Agreement (as to item number 7 above), then
such party may refer such Commercial Term(s) to the referee(s) on
or before April 15 of such year by notice in accordance with the
procedure set forth in Article 19. The party referring such
Commercial Term(s) to the referee(s) shall bear and pay all of the
costs and expenses associated with such referee(s) determination,
unless the referee(s) shall determine that the merits of the
arguments submitted by the non-referring party lack significant
merit in which case the referee(s) may require a different sharing
of such costs and expenses. Pending a determination of any such
Commercial Term(s) referred to the referee(s), the Commercial
Term(s) which were in effect for the immediately preceding Contract
Year shall be applicable, and promptly following such determination
a retroactive adjustment to the beginning of such five (5) Contract
Year period shall be made with interest on the amount of the
adjustment equal to the published prime commercial lending rate of
The Chase Manhattan Bank (National Association) or its successor
for loans in New York applicable for each day thereof on the date
of determination, for the period from April 1 to the date the
retroactive adjustment is made. If agreement between Buyer and
Seller is not reached during the course of any such periodic review
as to any Commercial Term(s) and such Commercial Term(s) is (are)
not referred to the referee(s) in accordance with the above
described procedure, then such Commercial Term(s) as to which
mutual agreement is not reached or decided by the referee(s) shall
remain in effect as it existed during the immediately preceding
Contract Year and shall continue in effect for the ensuing five (5)
Contract Year period and until changed in accordance with the
periodic review procedures of this Section 10.2 during a subsequent
review.
ARTICLE 11
Payments
11.1 Manner of Payment.
(a) All payments by Buyer for Concentrates sold
hereunder shall be net cash, in Dollars, and shall be paid in good
and collected funds by wire transfer to "The Chase Manhattan Bank
N.A., New York, New York, ABA No. 021000021, for credit to P.T.
Freeport Indonesia Company Sales Proceeds Account No. 920-1-
073278", unless and until Seller shall otherwise direct. Buyer
shall notify Seller by telex or facsimile at the time it makes a
payment as provided above.
(b) All payments by Seller in connection with the
sale of Concentrates hereunder shall be net cash, in Dollars, and
shall be paid in good and collected funds by wire transfer to an
account specified by Buyer and acceptable to Seller (which
acceptance shall not be unreasonably withheld), unless and until
Buyer shall otherwise direct. Seller shall notify Buyer by telex
or facsimile at the time it makes a payment as provided above.
(c) Bank charges, if any, in respect of payments
hereunder shall be for the account of the party transferring funds.
11.2 Provisional Price. For purposes of provisional
invoicing as provided in Section 11.3, the provisional price of
each cargo of Concentrates shall be determined by Seller by
reference to loaded weights, estimated assays, and except as
provided otherwise in Section 8.10 of this Agreement the respective
prices for (i) Payable Copper determined pursuant to Section 8.6 of
this Agreement as if the applicable Quotational Period for Payable
Copper were the two full calendar weeks prior to the date of
shipment, less applicable smelting and refining charges, and (ii)
Payable Gold and Payable Silver determined pursuant to Sections 8.7
and 8.8 of this Agreement, less applicable refining charges, as if
the applicable Quotational Period for Payable Gold and Payable
Silver were the two full calendar weeks prior to the date of
shipment.
11.3 Provisional Payment. Seller shall present the
following documents to Buyer: (i) Seller's provisional invoice,
(ii) Seller's weight, moisture and assay certificates based on
loaded weights and Seller's provisional assay certificate, (iii) a
full set of clean on-board ocean bills of lading or charter party
bills of lading reflecting that freight is payable by Seller, and
(iv) original insurance policy or certificate upon each shipment.
Buyer shall make a provisional payment equal to 90% of the
provisional price as determined pursuant to Section 11.2 for the
Payable Copper, Payable Gold and Payable Silver in each shipment of
Concentrates sold hereunder, such provisional payment to be made on
the fifth Business Day after the Date of Arrival. The provisional
invoice shall reflect Seller's preliminary calculation of any
applicable penalties based on the best information available to
Seller at the time such invoice is prepared. Seller shall prepare
the documents described above in such number of sets, and otherwise
in accordance with such directions, as Buyer shall reasonably
specify in light of Buyer's own financing and other requirements.
11.4 Final Payment. Seller shall transmit to Buyer its
final invoice for each cargo of Concentrates by telex or facsimile
within two Business Days after dry weights and assays shall have
been agreed and the final price applicable to such cargo shall have
been determined. The final price shall include such adjustments to
the penalties recited in Seller's provisional invoice as are
appropriate to take into account the results of the final assays.
Final payment for each cargo of Concentrates sold hereunder shall
be made by Buyer on the second Business Day after receipt of
Seller's final invoice, or if the final price as shown on Seller's
final invoice is less than the amount of the provisional payment
made by Buyer pursuant to Section 11.3, the amount of the
difference shall be paid by Seller on the second Business Day after
Seller has transmitted its final invoice to Buyer or, at the option
of Buyer, Buyer may deduct such amount from sums thereafter
becoming due and payable to Seller.
11.5 Final Price Determination in the Event of Loss. In
case of (i) total loss or damage of the Concentrates at any time
prior to weighing, sampling and moisture determination at the
Receiving Works, or (ii) a total or partial loss or damage of the
Concentrates in any cargo delivered at an alternate port at any
time, the final invoice shall be based upon full dry weights and
assays as determined at time of loading.
In case of partial loss of the Concentrates in any
cargo delivered at the Receiving Works prior to weighing, sampling
and moisture determination at the Receiving Works, the final
invoice shall be based upon (i) the dry weight as determined at the
time of loading and (ii) the weighted average of the final assays
for copper, gold and silver, (as ascertained by assay in accordance
with Article 13 of this Agreement) as determined from the portion
of such cargo safely delivered to Buyer.
In case of damage to a portion of the Concentrates in
any cargo delivered to the Receiving Works, the final invoice shall
be based upon the dry weight determined at the Receiving Works and
the weighted average of the final assays for copper, gold and
silver, (as ascertained by assay in accordance with Article 13 of
this Agreement) as determined from the portion of such cargo safely
delivered to Buyer without damage.
In case of a total loss prior to delivery at the
Receiving Works, the Date of Arrival will be deemed to have
occurred 10 days after completion of loading at the Port of Loading
for purposes of determining Quotational Periods and payment dates.
In case of total loss prior to delivery at any Port of Discharge
other than Gresik, the Date of Arrival will be deemed to have
occurred 20 days after completion of loading at the Port of Loading
for purposes of determining Quotational Periods and payment dates.
11.6 Interest. In the event that any payment of moneys to
be made by either party to the other pursuant to this Agreement
shall not be made on or before the date such payment is due and
payable in accordance with the provisions of this Agreement, the
party which shall be liable for such payment shall also pay
interest on such late payment calculated from the date such payment
was due and payable through the date such payment is made at the
published prime commercial lending rate of The Chase Manhattan Bank
(National Association) or its successor for loans in New York in
effect from time to time (such rate to be adjusted simultaneously
with each change in such prime commercial lending rate), plus 2%,
and calculated on the basis of a 365-day year. Notwithstanding the
above, the provisions of Section 3.4 shall govern the calculation
of interest and the interest rate applicable to payments for
certain Concentrates which Buyer is unable to take delivery of in
a timely manner hereunder.
ARTICLE 12
Weighing, Sampling and Determination of Moisture
12.1 General Procedures. Weighing, sampling and
determination of moisture for each cargo shall be carried out in
accordance with accepted industry standards and with reliable
modern equipment (i) by Seller at Seller's expense at Seller's Port
of Loading and (ii) by Buyer at Buyer's expense at the Receiving
Works. The methodology of the sampling and moisture determination
shall be as mutually agreed by Seller and Buyer. Unless otherwise
mutually agreed, Seller shall be entitled to have not more than two
of its own representatives present, or at its own expense to be
represented by an independent weigher and sampler, at the Receiving
Works, and Buyer shall be entitled to have not more than two of its
own representatives present, or to be represented at its own
expense by an independent weigher and sampler, at Seller's Port of
Loading.
12.2 Determination of Dry Weight. Subject to Section 11.5,
the dry weight as determined at the Receiving Works shall govern
for the purpose of final settlement of the price for each cargo.
If any shipment is diverted to an alternate port pursuant to
Section 5.11, Seller's dry weight at the Port of Loading shall
govern unless Buyer obtains Seller's prior written consent to
utilize the dry weight at the alternate port, which consent Seller
shall not unreasonably withhold.
12.3 Sample Lots. Each lot shall form a separate and
complete delivery for all purposes of this Agreement. Subject to
the express provisions of this Agreement, the size of each lot
shall be approximately 500 wet metric tons or such other quantity
as may be mutually agreed.
12.4 Number and Handling of Samples. The sample taken from
each lot of Concentrates as specified in this Article 12 shall be
divided into six equal parts, two for Seller, two for Buyer, one
for the umpire and one for reserve. Seller shall cause its agent
promptly after completion of sampling to send via prepaid
airfreight the umpire samples to the umpire appointed pursuant to
Section 13.3. The reserve samples shall be retained by Seller's
agent where taken.
12.5 Composite Samples. For the purpose of conducting
analyses of elements set forth in Section 9.4, four sets of
composite samples shall be taken from each cargo -- one for Seller,
one for Buyer, one for the umpire and one for reserve. The umpire
and reserve samples shall be distributed and/or retained as
provided in Section 12.4.
ARTICLE 13
Assay
13.1 Method for Determining Final Analysis. From the
samples taken in accordance with Article 12 at the Receiving Works,
assays for copper, gold and silver, respectively, shall be made
independently by the respective assayers of Seller and Buyer, and
the results of such assays shall be exchanged simultaneously on a
lot by lot basis within 40 days from time of sampling. The mean of
such results shall be final and binding upon the parties hereto, if
such results show that the differences between Seller's and Buyer's
assays are within the following limits:
Copper 0.3%
Gold 0.5 gram per DMT
Silver 15.0 grams per DMT
13.2 Determination of Final Analysis if Shipment Diverted.
If any shipment is diverted to an alternate port pursuant to
Section 5.11 other than any Port of Discharge, Seller's analysis at
the Port of Loading shall govern unless Buyer obtains Seller's
prior written consent to utilize the analysis at the alternate
port, which consent Seller shall not unreasonably withhold.
13.3 Designation of Umpire. If such results show that the
difference between Seller's and Buyer's assays for the copper, gold
or silver exceeds the applicable limit specified in Section 13.1,
either Seller or Buyer shall have the right, exercisable by notice
to the other, to refer the matter to an umpire mutually acceptable
to the parties, which acceptance shall not be unreasonably refused.
If neither Seller nor Buyer shall so refer the matter to the
umpire within 10 days after the date of exchange of such results,
the mean of such results shall be final and binding upon the
parties hereto.
13.4 Determination of Final Analysis Using Umpire's Assay.
If either Seller or Buyer shall so refer the matter to the umpire,
the umpire's assay shall be made on the basis of the umpire's
samples. The umpire shall be instructed to advise both Seller and
Buyer of the results of the umpire's assay by facsimile and mail.
The mean of the results of the umpire's assay and the results of
the assay of the party whose results are nearer to that of the
umpire's results shall be final and binding on the parties hereto.
If the results of the umpire's assay shall be the mean of the
results of the assays of the respective parties, the results of the
umpire's assay shall govern. The cost of the umpire shall be paid
by the losing party, except that, if the results of the umpire's
assay is the mean of the results of the respective parties, the
cost shall be shared equally by Seller and Buyer.
13.5 Analysis of Composite Samples for Impurities. Buyer
shall have the right, exercisable by notice in writing given not
later than 55 days after the completion of sampling in accordance
with Article 12, to exchange assays with Seller for any one or more
of the impurities referred to in Section 9.4. From the composite
samples held by Seller and Buyer, each party, at its own expense,
shall assay each of the designated impurities. The assay results
shall be exchanged within 10 days after the Buyer's notice to
Seller. If such results show that the mean of Seller's and Buyer's
assays exceeds the limits enumerated for such penalty elements in
Section 9.4, either Seller or Buyer shall have the right,
exercisable by notice to the other, to have any difference or
differences resolved by an umpire assay in accordance with Section
13.4. If neither Seller nor Buyer shall so notify the other in
writing within 10 days after such assay exchange, the mean of the
results of Seller's and Buyer's assays shall be final and binding
upon the parties hereto.
ARTICLE 14
Taxes
14.1 Value Added Tax. If Indonesian Value Added Tax, Sales
Tax or any other similar tax (but excluding tax imposed on net
income), hereinafter collectively, "VAT", is payable in connection
with this Agreement or the concentrate sales made hereunder, Seller
shall, in the manner required by applicable Indonesian tax law and
practice, calculate the amount of VAT payable and submit a proper
Faktur Pajak ("VAT Invoice") to Buyer along with Seller's invoice
prepared in accordance with Article 11 of this Agreement. Any such
VAT Invoice must comply with then applicable Indonesian tax law and
practice. Should Buyer be appointed a collector of VAT, then
Seller will supply to Buyer the required copies of the VAT Invoice
and the tax payment forms (Surat Setoran Pajak, or "SSP").
14.2 Payment of Value Added Tax. Buyer shall discharge the
VAT obligations reflected in the VAT Invoice in a manner consistent
with then applicable Indonesian tax laws and practice and shall
provide Seller with appropriate evidence of Buyer's discharge of
such obligations as required by such law and practice.
ARTICLE 15
Exemption from Liability and Obligation
In no event shall Buyer or Seller be liable, whether arising
under contract, tort (including negligence), strict liability or
otherwise, for loss of anticipated profits or consequential loss or
damage of any nature arising at any time from any cause whatsoever,
incurred or claimed to have been incurred by the other party
hereto. This Article 15 shall apply notwithstanding any other
provision of this Agreement.
The liability and obligation of Seller to deliver Concentrates
to Buyer under this Agreement shall be released and discharged if
Seller closes permanently all of its mining and milling operations
at its presently known deposits and at any new ore body(ies) in the
Contract Area for any reason; provided that Seller has given Buyer
at least 18 months prior written notice before such closure, and
the effect of such permanent closure shall be the automatic
termination of this Agreement for all purposes except for
liabilities which accrued prior to the effective termination date.
Buyer agrees to keep any such notice received from Seller
confidential until such time as the information concerning Seller's
permanent closure of all its mining and milling operations at its
known deposits and at any new ore body(ies) in the Contract Area
becomes public knowledge; provided, however, Buyer shall have the
right to disclose the information to its lenders, collateral
trustee or collateral agent, shareholders, significant customers,
or if required by law or regulation (including, without limitation
the regulations of any securities exchange on which Buyer's
securities are traded). In the event of such disclosure, Buyer
shall use its best efforts to obtain confidential treatment of the
information.
If Buyer decides to withdraw from the copper smelting business
for any reason, the liability and obligation of Buyer to take
delivery of Concentrates under this Agreement shall be released and
discharged; provided that Buyer has given Seller at least 18 months
prior written notice before such withdrawal, and the effect of such
permanent closure shall be the automatic termination of this
Agreement for all purposes except for liabilities which accrued
prior to the effective termination date. Seller agrees to keep any
such notice of withdrawal received from Buyer confidential until
such time as the information concerning Buyer's withdrawal from the
copper smelting business becomes public knowledge; provided,
however, Seller shall have the right to disclose the information to
its lenders, Trustees, shareholders, significant customers, or if
required by law or regulation (including, without limitation, the
regulations of any securities exchange on which Seller's securities
are traded). In the event of such disclosure, Seller shall use its
best efforts to obtain confidential treatment of the information.
ARTICLE 16
Relief from Economic Hardship
16.1 Consultation in the Event of Hardship. The provisions
of this Agreement are intended by Buyer and Seller to operate
fairly over the term of this Agreement. Buyer and Seller recognize
that it is impracticable to make provision for every contingency
which may arise during the term of this Agreement. In the future,
should circumstances arise which were unforeseeable at the time
this Agreement was made and which actually have caused severe
economic hardship to either Buyer or Seller from the continued
operation of this Agreement, then Buyer and Seller agree to
promptly consult together and review the provisions of this
Agreement and, in the spirit of good faith and fair dealing,
consider possible modifications thereof which might lessen such
severe economic hardship. Such economic difficulties shall not be
cause for the termination of this Agreement or relieve any party
from its obligations under this Agreement. No modification of this
Agreement shall be made except by mutual agreement of the parties
hereto in writing.
16.2 Limitations on Right to Request Consultation. It is
not intended that this Article 16 be invoked to deprive a party of
savings or advantages arising from the efficiency of the party
which contributes to the profitability of its operations.
ARTICLE 17
Notices
All notices, requests, directions and other communications
required or permitted by any provision of this Agreement shall be
in writing and in the English language and shall be sufficiently
given or transmitted if delivered by hand, sent by telegraph, telex
or telecopy, by registered mail or by internationally recognized
express courier service, and addressed (1) in the case of Buyer,
Plaza 89, 6th Floor, S-602, J1. H.R. Rasuna Said Kav. X-7, No. 6,
Jakarta 12940, Indonesia, FAX: 21-522-9615, and (ii) in the case of
Seller, 1615 Poydras Street, New Orleans, LA 70112, U.S.A., Telex:
62759930 with answerback - FREESULPH NO, FAX: (504) 582-1835, or at
such other address as may be designated in writing respectively by
Buyer or Seller, as the case may be, as the proper address to which
such communications should be mailed or delivered to it, and shall
become effective on the date of receipt by the party to which it
shall be addressed. If given other than by hand, by registered
mail or by internationally recognized express courier service, such
communication shall be promptly confirmed by letter.
ARTICLE 18
Assignment
18.1 Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors of the parties hereto
and, subject to the further provisions of this Article 18, the
respective permitted assigns of such parties.
18.2 Seller's Assignment to the Trustee. Pursuant to the
terms of the Trust Agreement, upon execution hereof, this Agreement
and all rights and interests of Seller and PT-RTZ hereunder shall
automatically be assigned to the Trustee acting under such Trust
Agreement, for the benefit, amongst others, of Seller and PT-RTZ
and certain lenders to Seller or PT-RTZ. Said Trustee may further
assign the rights and interests previously referred to in this
Section 18.2 to an additional trustee or receiver as contemplated
by the Trust Agreement. In the event the Trust Agreement is
terminated, Seller and PT-RTZ may further assign such rights and
interests to any person who has or is entitled to an interest in
the COW or who has the right to participate in the production of
Concentrates to be sold and delivered under this Agreement or to
the Trustee in trust for any such person.
By executing this Agreement Buyer hereby acknowledges and
consents to any and all such assignments and agrees that (i) all
payments made pursuant to this Agreement by Buyer shall be made to
said Trustee (or to an additional trustee, or a receiver, if so
directed by the Trustee) without any deduction, counterclaim or
setoff other than adjustments contemplated by and deductions
specified in this Agreement other than incremental taxes or
liabilities associated with each payment to the Trustee and (ii) in
the event an Allocation Notice or an Enforcement Notice (as defined
in the Trust Agreement) shall have been given to the Trustee or, in
the event the Trust Agreement is terminated and a further
assignment by Seller or PT-RTZ as mentioned above is entered into,
Buyer shall accept performance by or on behalf of said Trustee,
such assignee, an additional trustee, a receiver or a successor
operator appointed to conduct operations contemplated by the COW,
provided that such performance shall in all other respects be in
accordance with the provisions of this Agreement. Buyer shall
execute and deliver such other documents, and do such acts and
things, as may be necessary or appropriate to acknowledge or
accomplish any assignment or assignments contemplated by, and to
effectuate the intent and purpose of, this Section 18.2.
18.3 Buyer's Assignment to a Trustee. Buyer shall have the
right to assign to a collateral trustee or collateral agent under
a trust agreement(s) or other similar agreement, all rights and
interests which Buyer now has or which shall hereafter arise under
this Agreement, as amended or modified from time to time, including
Buyer's right to receive proceeds payable to it in accordance with
this Agreement, for the sole purpose of providing security to one
or more lenders, and, in the event of any such assignment, Seller
agrees that (i) any payments to be made in accordance with the
terms of this Agreement by Seller shall, if and to the extent so
directed by Buyer, be made to the assignee or assignees, or one or
more duly appointed representatives thereof, without any deduction,
counterclaim or setoff other than adjustments contemplated and
deductions specified in this Agreement and (ii) in case of a
default under a security instrument, Seller shall accept
performance by such assignee or assignees or one or more such
representatives, provided that such performance shall in all other
respects be in accordance with the provisions of this Agreement.
Seller shall execute and deliver such other documents, and do such
acts and things, as may be necessary or appropriate to accomplish
any assignment or assignments contemplated by, and to effectuate
the intent and purpose of, this Section 18.3.
18.4 Other Assignments. Except as provided in Sections 18.2
and 18.3, this Agreement shall not be assignable by Buyer or Seller
without the express written consent of the other party, which
consent shall not be unreasonably withheld, and only in accordance
with a written instrument, in form and substance satisfactory to
the non-assigning party, by which the assignee or assignees shall
assume all the obligations hereunder of the assigning party. The
assumption of such obligations by the assignee shall not relieve
the assigning party of such obligations except to the extent that
such assignee or assignees shall in fact perform such obligations.
ARTICLE 19
Referees
19.1 General. In the event that any matter shall be
referred to referees pursuant to Sections 2.3, 8.10(c), 9.1(i)(b),
9.7 or Article 10, the referee mutually selected by the parties or,
failing such mutual selection, a majority of the three referees
appointed in accordance with this Article 19, shall make the
necessary determination. Each of Buyer and Seller shall use all
reasonable efforts to assure that the referee(s) shall be persons
qualified by reason of their experience and knowledge with respect
to both the worldwide marketing of copper concentrates and the
copper smelting business.
19.2 Selection of Referees. The party referring the
decision to the referees shall give notice in writing to the other
party. The parties shall then promptly confer with each other and
use all reasonable efforts to mutually agree upon the appointment
of a single referee to decide the matter involved. If agreement is
reached on such referee, both parties shall engage such referee.
If, notwithstanding such efforts, the parties are unable to
mutually agree upon a single referee within 15 days following the
date of receipt of the notice initiating such dispute resolution
process by the party to whom such notice was addressed, then the
party who sent the initiating notice shall appoint one referee. The
other party shall then appoint the second referee. In the event of
an unreasonable delay by either party in appointing a referee in
accordance with the above procedures, the Singapore International
Arbitration Centre, upon the application of the other party hereto,
shall appoint such referee within 30 days after such application is
made. A third referee shall be appointed by mutual agreement
between the parties. If the parties cannot agree on the third
referee within 45 days after the notice was given, the third
referee will be appointed by application to the Singapore
International Arbitration Centre who shall appoint the third
referee within 30 days after such application is made.
19.3 Proceedings. The referee(s) shall conduct its (their)
proceedings in accordance with rules it (they) shall establish for
itself (themselves) and it (they) shall use its (their) best
efforts to come to a decision within a period of 90 days from the
date on which the last referee was appointed. The parties shall
cooperate in good faith in providing the referee(s) with any
relevant information or necessary assistance it (they) may request.
19.4 The Decision. The referees shall be deemed to be
acting as experts and not as arbitrators, and their decision shall
be binding on the parties to the maximum extent of the law and be
deemed to be incorporated into this Agreement. Each such award
shall be retroactive to the date of the notice referred to in
Section 2.3, 8.10(a), 9.1(i)(b), or 9.7, or Article 10 as
applicable. Except where the referees decide to assess all costs
against the losing party and except as specifically provided to the
contrary elsewhere in this Agreement, each party shall be
responsible for and pay its own costs and expenses in such
negotiations and proceedings, including but not limited to the fees
and expenses of its attorneys, accountants, engineers and other
experts, plus one-half of all costs and expenses of the proceeding
itself including but not limited to the costs of rental or other
payment for the meeting room(s) or other place(s) where the
proceeding occurs, and each party shall bear the cost of the
referee nominated by it or on its behalf and the parties shall each
bear an equal share of the cost of the third referee.
ARTICLE 20
Arbitration
20.1 Amicable Settlement. Any dispute arising out of or in
connection with this Agreement or its performance, including the
validity, scope, meaning, construction, interpretation,
application, breach or termination hereof shall to the extent
possible be settled amicably by negotiation and discussion between
the parties. Either party wishing to invoke the right to conduct
such settlement negotiations shall give written notice to the other
party of the substance of the dispute and propose a schedule of
conferences to resolve the matter.
20.2 Arbitration Rules. Any such dispute not settled by
amicable agreement within 60 days of receipt of the written notice
described in Section 20.1 (or such other period as may be agreed by
both parties in writing in any specific case) shall be finally
settled by arbitration in Singapore as an international arbitration
under the auspices of the Singapore International Arbitration
Centre and applying the UNCITRAL Arbitration Rules, excluding only
those matters which are to be settled by referees or where another
settlement procedure is specifically provided for in this
Agreement. In the event of a conflict between the UNCITRAL
Arbitration Rules and the terms of this Agreement, the terms of
this Agreement shall govern. Documents may be submitted in either
English or Japanese without the need for translation.
20.3 Arbitrators. Any arbitration hereunder shall be
conducted in both the English and Japanese languages before a panel
of three arbitrators. Each arbitrator shall preferably be fluent
in both English and Japanese, but if fluent in only one of such
languages, such arbitrator shall retain an experienced interpreter
paid for by the appointing party (or in the case of the third
arbitrator the interpreter, if needed, shall be retained by such
arbitrator and paid for by the parties equally), and shall be
appointed in accordance with the following provisions:
(a) each of the Buyer and Seller shall appoint one
arbitrator and the two arbitrators so appointed shall
select the third arbitrator (who shall not be a
resident or national of the U.S. or Japan). The third
arbitrator shall act as the presiding arbitrator;
(b) if within a period of 30 days from the date of the
notice of arbitration, a party has failed to appoint an
arbitrator, or, the two appointed arbitrators have
failed to select the third arbitrator within 30 days
after both arbitrators have been appointed, the
Chairman of the Singapore International Arbitration
Centre shall appoint such arbitrator or arbitrators as
have not been appointed.
20.4 Arbitration Award. The award rendered in any
arbitration commenced hereunder shall apportion the costs of the
arbitration. With respect to the period of time from the effective
date of this Agreement up to and including the date on which the
Project Loans have been fully repaid, consistent with the
provisions of Article 631 R.V. (Reglement op de Rechtsvordering),
the parties expressly agree that the arbitrators shall be bound by
the strict rules of law in making their decisions, and shall not
render decisions ex aequo et bono. With respect to the period of
time following the date on which the Project Loans have been fully
repaid, consistent with the provisions of Article 631 R.V., the
arbitrators shall not be bound by strict rules of law where they
consider the application thereof to particular matters to be
inconsistent with the spirit of this Agreement and the underlying
intent of the parties, and as to such matters their conclusions
shall reflect their judgment of the correct interpretation of all
relevant terms hereof and the correct and just enforcement of this
Agreement in accordance with such terms.
20.5 Award to be Final and Conclusive. The award rendered
in any arbitration commenced hereunder shall be final and
conclusive, and judgment thereon may be entered in any court having
jurisdiction for its enforcement. The parties expressly agree to
waive Article 641 of the Indonesian Code of Civil Procedure and
Articles 15 and 108 of Law No. 1 of 1950 (Supreme Court Rules), and
accordingly there shall be no appeal to any court from the decision
of the panel of arbitrators. No party shall be entitled to
commence or maintain any action in a court of law upon any matter
in dispute until such matter shall have been submitted and decided
as herein provided and then only for the enforcement of the board
of arbitration's award.
20.6 Performance of Obligations Pending Decision. Pending
submission to the board of arbitration and thereafter until the
board of arbitration gives its award, the parties hereto agree that
they will continue to perform all their respective obligations
under this Agreement without prejudice to the final judgment in
accordance with the said award.
20.7 Waiver of Right to Terminate Board of Arbitration. The
parties hereto expressly agree to waive the applicability of
Article 650.2 of the Indonesian Commercial Code, so that the
appointment of the board of arbitration shall not terminate as of
the sixth month from the date of its appointment. The mandate of
the board of arbitration reconstituted in accordance with the terms
hereof shall remain in effect until a final arbitral award has been
issued by the board of arbitration.
20.8 The parties hereto agree that any matter which is
expressly subject to final settlement or negotiation pursuant to
Section 2.3, 8.10(c), 9.1(i)(b), 9.7 or Article 10, shall not be
referred to arbitration pursuant to this Article 20.
ARTICLE 21
Governing Law
The provisions of this Agreement shall be governed in all
respects by and construed in accordance with the laws of the State
of New York, U.S.A.
ARTICLE 22
Force Majeure
22.1 Definition. The term "Force Majeure" shall mean any
event beyond the control of the party affected thereby, including
without limitation, acts of God or the public enemy, war, warlike
operations, strikes, labor slowdowns or other work stoppages, labor
shortages, combination of workmen, suspension of labor, lockout or
other labor disturbance, fire, flood, explosion, earthquake, storm,
tidal wave or similar disturbance, drought, breakdown of machinery
or facilities, inability to obtain raw materials, operating
materials, plant equipment or materials required for maintenance or
repairs, sabotage, riot, confiscation, embargo, action of any
government including the passage of new legislation, court orders
and future orders (lawful or otherwise) of any regulatory body
having jurisdiction, accident, lack of truck or railroad
transportation or seaboard freight facilities, or delays in route,
or without limiting the generality of the foregoing, any other
disabling causes beyond the reasonable control of Seller or Buyer.
22.2 Effect of Force Majeure. Either party to this
Agreement shall be excused from making or accepting deliveries of
Concentrates to the extent described in this Article 22 when its
inability to perform is due to Force Majeure. The party claiming
force majeure shall give prompt notice thereof to the other party,
specifying the nature of the Force Majeure in reasonable detail as
well as its estimated duration, upon its occurrence. Notice shall
also be given immediately upon the termination of the Force
Majeure. The notice given on the occurrence of an event of Force
Majeure shall be referred to as a declaration of Force Majeure. If
the party receiving the declaration of Force Majeure disputes that
an event of Force Majeure has occurred, the matter will be resolved
as provided in Article 20, it being understood, however, that such
dispute shall not defeat the effectiveness of such notice pending
the resolution of such dispute. In the event of such dispute, the
parties will expedite the completion of arbitration to the maximum
extent feasible.
(a) As soon as possible following a declaration of
Force Majeure the parties shall discuss all relevant details of the
Force Majeure, including but not limited to all facts which would
assist in evaluating the projected duration of such Force Majeure.
At the end of such meeting or as soon thereafter as practicable the
party which declared such Force Majeure shall notify the non-
declaring party of its updated best estimate of the projected
duration of the Force Majeure.
(b) If the estimated duration of the event of Force
Majeure is no more than 15 consecutive days, the quantity of
Concentrates which cannot be delivered or accepted as a result of
such event of Force Majeure shall be delivered as soon as
practicable following the termination of such event of Force
Majeure.
(c) If the estimated duration of the event of Force
Majeure is more than 15 consecutive days, either party may, by
notice in writing to the other party, cancel in whole or in part
the sale and purchase of the quantity of Concentrates which cannot
be delivered or accepted, as a result of, and during the period of
continuance of the event of Force Majeure in which event the
Contractual Tonnage for such Contract Year shall be automatically
reduced by the quantity of Concentrates which are affected or
reasonably foreseen to be affected by the declaring party. If such
cancellation is made in respect of an event of Force Majeure
declared by Seller, Buyer shall be free to purchase from third
party suppliers of copper concentrates the quantities of
Concentrates which it reasonably requires during the estimated
duration of the Force Majeure event.
If any event of Force Majeure results in a suspension
of Seller's Concentrate production for more than 15 consecutive
days, Seller shall use its best efforts to deliver to Buyer, and
Buyer shall use its best efforts to accept delivery of, that
portion (provided that such portion shall be at least 5,000 DMT) of
the Concentrates allocated to this Agreement which had been
produced prior to the interruption of production by the event of
Force Majeure and Buyer shall accept and pay for all such
Concentrates so delivered.
22.3 Parties to Use Reasonable Efforts. Both parties agree
to use all reasonable efforts from time to time and at all times to
prevent the occurrence of any event of Force Majeure, and to cause
the termination of any event of Force Majeure that has occurred.
Notwithstanding the foregoing, the settlement of labor disputes
shall be entirely in the discretion of the party affected thereby
and there shall be no obligation on the affected party to test or
refrain from testing the validity of any order, regulation or law
relating to such labor disputes.
ARTICLE 23
Default
23.1 Events of Default. A party shall be deemed to be in
default of this Agreement if any of the following occur:
A. The party shall have become voluntarily or
involuntarily the subject of any receivership, bankruptcy or
insolvency proceedings; or
B. the party has committed a material breach of
any provision of this Agreement and such breach is not cured within
ninety (90) days after notice thereof is given to the defaulting
party, or within such longer period of time as may be reasonable
under the circumstances where the cure of the breach cannot be
completed within 90 days notwithstanding the continuous best
efforts of the defaulting party.
23.2 Notice of Default. If either party claims the other
party is in default with respect to the provisions of this
Agreement, the party so claiming shall give notice to the party
alleged to be in default, designating such claimed default and
providing all particulars of which it is aware. Within thirty (30)
days after its receipt of such notice, the party alleged to be in
default may either (a) cure such default, or (b) in good faith give
the other party notice that the party alleged to be in default
denies that such default has occurred. In the event a default is
denied by a party, said party shall not be deemed to be in default
hereof unless and until said party is found by a final, non-
appealable arbitral decision to be in default.
23.3 Liability for Default. In the event that a party's
default is confirmed by arbitration as provided in Article 20, the
arbitrators shall be entitled to grant to the non-defaulting party
such relief as they determine to be appropriate, subject to the
limitation of Article 15 that neither party shall be entitled to
loss of anticipated profits or consequential damages.
ARTICLE 24
Non-Waiver of Defaults
The failure of either party hereto to require in any one or
more instances strict performance of any of the provisions of this
Agreement, or a waiver by either party at any time of its rights
with respect to a default under this Agreement by the other party
hereto, or an election not to take advantage of any of its rights
thereunder shall not be deemed a waiver of any such rights (except
to the extent, and only to the extent, specifically waived in
writing). No delay in asserting or enforcing any right hereunder
shall be deemed a waiver of or limitation on such right; provided,
however, that this Article shall not operate as a waiver of any
applicable statute of limitations.
ARTICLE 25
Miscellaneous
25.1 Opinion of Buyer's Counsel. Buyer shall deliver to
Seller and/or to the Trustee under the Trust Agreement, for the
benefit of each of them, if requested to do so in writing at any
time prior to the Effective Date, an opinion of Buyer's counsel as
to the following:
(a) that the Buyer has been duly created and is
validly existing under the laws where Buyer was incorporated;
(b) that Buyer has full corporate power and
authority to own its properties and conduct the business in which
it is engaged and to make and perform this Agreement; and
(c) that this Agreement has been duly authorized,
executed and delivered by Buyer and constitutes the legal, valid
and binding obligation of Buyer, enforceable in accordance with its
terms.
25.2 Opinion of Seller's Counsel. Seller shall deliver to
Buyer and/or to a collateral lender or collateral agent of Buyer's
Project lenders, for the benefit of each of them, if requested to
do so in writing at any time prior to the Effective Date, an
opinion of Seller's counsel as to the following:
(a) that the Seller has been duly created and is
validly existing under the laws where Seller was incorporated;
(b) that Seller has full corporate power and
authority to own its properties and conduct the business in which
it is engaged and to make and perform this Agreement; and
(c) that this Agreement has been duly authorized,
executed and delivered by Seller and constitutes the legal, valid
and binding obligation of Seller, enforceable in accordance with
its terms.
25.3 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof. Neither this Agreement nor any provision hereof can be
waived, changed, discharged or terminated except by an instrument
in writing signed by the party against which the enforcement of any
waiver, change, discharge or termination is sought.
25.4 Counterparts. This Agreement may be executed in any
number of counterparts and shall become binding when executed by
Seller and by Buyer. Each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same agreement.
25.5 Headings. The headings of the respective Articles,
Sections and Subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to be a part
of this Agreement or considered in construing this Agreement.
25.6 Publication of Articles. Seller hereby releases the
Direksi (executive officers) and the Komisaris (commissioners) of
Buyer from any personal liability that such Direksi or Komisaris
may have hereunder solely as a consequence of Buyer having executed
this Agreement prior to the publication of its Articles of
Association in the Official Gazette of the Republic of Indonesia.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year
first above written.
WITNESS: P.T. FREEPORT INDONESIA COMPANY
_______________________ By ___________________________
Louis T. Zawislak
Senior Vice President
WITNESS: P.T. SMELTING CO.
________________________ By _____________________________
APPENDIX "A"
DEFINITIONS
Attached to and made a part of that certain Concentrate Purchase
and Sales Agreement between P.T. Freeport Indonesia Company and
P.T. Smelting Co., dated as of December 11, 1996.
NOTE: ALL REFERENCES IN THIS APPENDIX "A" TO SECTION NOS. ARE TO
THE SECTION NOS. OF THE ABOVE REFERENCED AGREEMENT.
1. "Affiliate" shall mean any entity which directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with a party to this
Agreement; where control is determined by possession, directly or
indirectly, through one or more intermediaries, of the ability to
direct the management and policies of an entity and control shall
be presumed to exist whenever one person or entity holds,
directly or indirectly, through one or more intermediaries,
twenty-five percent (25%) or more of the outstanding voting
shares or interests in another entity.
2. "AIP" shall have the meaning set forth in the fourth
WHEREAS clause of this Agreement.
3. "Agreement" shall mean the Concentrate Purchase and
Sales Agreement between Buyer and Seller to which this Appendix
"A" is attached.
4. "Annual Budgeted Copper Grade" shall mean with respect
to each Contract Year the percentage of copper contained in
Concentrates to be delivered hereunder as estimated by Seller
pursuant to Section 2.2 as part of the annual product review, and
as furnished to Buyer under the provisions of this Agreement.
5. "Annual Shipping Schedule Quantity" shall have the
meaning set forth in Section 3.2 B.
6. "Approved Japanese Port" shall mean Naoshima and
Onahama and, if and when Nippon Mining and Metals Co., Ltd. is a
shareholder of Buyer, Saganoseki.
7. "Business Day" shall mean any day other than Saturday,
Sunday or a day that is a bank or public holiday in the State of
New York, United States of America or in Jakarta or Gresik,
Indonesia (one of such Indonesian locations to be specified by
Buyer as soon as possible following the date of this Agreement),
as applicable.
8. "CIF" shall have the meaning set forth for such term in
the publication Incoterms (latest edition).
9. "Commencement of Commercial Operations" shall mean the
earlier of (i) the Production Date and (ii) the first anniversary
of the date of Mechanical Completion.
10. "Commercial Terms" shall have the meaning specified in
Section 10.2.
11. "Concentrates" shall mean sulphide flotation copper
concentrates produced at and originating from the Contract Area.
12. "Contract Area" shall have the meaning set forth in the
first WHEREAS clause to this Agreement.
13. "Contracts Criteria" shall mean and include the
following characteristics of a Reference Contract:
(i) The party designating the Reference Contract must be a
signatory party to such Contract. For purposes of this criteria
as it applies to the Reference Contracts designated by Buyer, MMC
must be a signatory party;
(ii) The Reference Contract must have a term of at least two
(2) years;
(iii) The Reference Contract must be for the sale of 30,000
DMT's or more for the account of the designating party's account
for the year under consideration. However, a 30,000 DMT per year
concentrate sales agreement which quantity consists of two (2)
15,000 DMT per year bricks is acceptable provided the terms used
in the designating party's calculations of its weighted average
figures are in the first year of the brick (terms in later years
of a brick shall not be used because it is deemed that they do
not represent the current market). Buyer and Seller will
designate larger annual tonnage concentrate sales agreements in
preference to smaller annual tonnage concentrate sales agreements
unless special circumstances exist which cause the designating
party to believe in good faith that the larger annual tonnage
agreements are less representative of the then current world
market terms and conditions;
(iv) The quantity which a party may use from any particular
Reference Contract for purposes of making its weighted average
calculation shall be limited to the quantity which such party is
purchasing or selling under such Contract (i.e. a party cannot
use quantities intended for another party);
(v) The Reference Contract must be between the owner of a
smelter and the owner of a mine;
(vi) The Reference Contract must be between parties who are
not Affiliates;
(vii) A Reference Contract must not be between a party to
this Agreement and a third party (or such third party's
Affiliate) with whom the designating party has given or received
special financial or other consideration (such as a loan or other
contractual arrangement) which may affect the commercial terms of
such Reference Contract. Notwithstanding the foregoing, if a
party designates such a Contract and the other party raises this
criteria as an issue, then if the submitting party presents
arguments to the auditor which satisfy such auditor that the
terms were negotiated on a strictly arms length basis and were
not affected by such special financial or other consideration,
such Contract will be deemed to satisfy this criteria;
(viii) Neither the Ertsberg Concentrate Agreement nor the
MMC Concentrate Agreement shall be designated by either party as
these agreements are utilized in accordance with the provisions
of Section 9.2(i);
(ix) All commercial terms of the Reference Contracts which
are used in the weighted average calculations must have been
settled during the period from October 1 of the immediately
preceding year to March 1 of the current year and be applicable
to the immediately succeeding annual period following such
settlement. If a party is unable to settle a Reference Contract
by March 1 which was scheduled for settlement on or before March
1 according to the terms of such Contract, but gives notice to
the auditor that it believes in good faith that such settlement
will be concluded prior to March 31, and such party then
concludes such settlement during the month of March and provides
all of such terms as settled to the auditor by March 31, then
such Contract will be deemed to satisfy this criteria;
(x) The Reference Contract must be for copper concentrates
which are generally considered within the market as "clean
concentrates" and which have a current average annual copper
grade of 26% to 46%. "Clean concentrates" shall mean copper
concentrates not containing impurities or other characteristics
which cause the smelting and refining charges for such
concentrates to be inflated relative to the generally applicable
market level of such charges; and
(xi) A Reference Contract shall not be designated by a party
to replace a Reference Contract which has previously been ruled
eligible by the auditor, unless it: (a) is the replacement for an
eligible Reference Contract as a result of a party's exercise of
its discretionary right to replace one eligible Reference
Contract per calendar year, or (b) is a replacement for a
previously eligible Reference Contract which has terminated or
does not satisfy all of the Contracts Criteria for the current
annual period.
14. "Contractual Tonnage" with respect to each Contract
Year shall mean the quantity of Concentrates measured in DMTs
which Buyer is obligated to purchase, pay for and accept delivery
of and which Seller is obligated to sell and deliver during such
Contract Year, which quantity is determined in accordance with
the provisions of Section 3.2, it being understood that the term
"Contractual Tonnage" as set out in Section 3.2 may be modified
in accordance with the express written provisions of other
sections of this Agreement.
15. "Contract Year" shall mean, with respect to the first
Contract Year, the period of time commencing three (3) months
following the date of Mechanical Completion and ending twelve
(12) months following such date; with respect to the second
Contract Year, the period of time commencing at the end of the
first Contract Year and ending twelve (12) months following such
date; with respect to the third Contract Year, the period of time
commencing at the end of the second Contract Year and ending at
midnight on December 31 (at the Port of Loading) of the calendar
year in which such third Contract Year began; and with respect to
the fourth Contract Year and each succeeding Contract Year during
the term of this Agreement, each calendar year thereafter at the
Port of Loading.
16. "COW" shall have the meaning set forth in the first
WHEREAS clause of this Agreement.
17. "Current Settlement" shall have the meaning set forth
in subsection (c) of Section 9.2(i) of this Agreement.
18. "Date of Arrival" shall mean, with respect to shipments
to a Port of Discharge or alternate port within Indonesia, the
date on which the carrying vessel tenders Notice of Readiness at
such port, and with respect to shipments to a Port of Discharge
or alternate port outside Indonesia, the date on which the vessel
carrying such quantity first reports officially to customs,
quarantine or such other location at which vessels customarily
report for discharging cargos at such port.
19. "Effective Date" shall mean the date first written
above (subject to approval of this Agreement by the Government).
20. "Ertsberg Concentrate Agreement" shall mean that
certain Concentrate Sales Agreement between Seller and certain
Japanese corporations, dated December 31, 1990, as amended, and
any concentrate sales agreement between Seller and any one or
more of such Japanese corporations (but which must in any event
include MMC) entered into upon or following expiration of such
December 31, 1990 Agreement, as amended.
21. "Facilities" shall mean the copper smelter, refinery,
jetty and other facilities of the Project.
22. "Financial Disadvantage" shall mean the net impact to
the affected party resulting from the failure of the other party
to comply with the terms of this Agreement and consisting of (i)
documented actual lower revenues from sales, plus (ii) any costs
and expenses incurred which are in excess of those costs which
would otherwise have been incurred (including increased general
and administrative expenses and the increased costs of purchasing
concentrates), and minus (iii) any costs and expenses avoided
thereby or reduced as a result of each party's duty to mitigate
losses; but Financial Disadvantage shall not include any losses
or costs arising out of third party liabilities.
23. "Five-Year Expected Analysis" shall have the meaning
set forth in Section 2.2.
24. "Floor TC's and RC's" shall have the meaning set forth
in Section 9.3 of this Agreement.
25. "FLUOR", "FDEC" and "FDA" shall have the meanings set
forth in the WHEREAS clauses of this Agreement.
26. "Government" shall mean the Government of the Republic
of Indonesia and its Ministries, agencies and political
subdivisions.
27. "Initial Inventory Period" shall mean the three month
period following Mechanical Completion.
28. "Inventory Allowance" shall have the meaning set forth
in Section 3.3 of this Agreement.
29. "Major Contracts" shall mean those contracts as
described in subparagraphs (a) through (g) (inclusive) of Section
4.3 of the Project Planning Agreement.
30. "Mechanical Completion" of the Facility means when,
except for minor items of work that would not affect the
performance or operation of the Facility such as painting,
landscaping and so forth, (a) all materials and equipment for the
Facility have been installed by the Contractor or Subcontractors
in accordance with the plans and the Scope Book, and checked and
tested for alignment, lubrication, rotation and hydrostatic or
pneumatic pressure integrity; (b) the Facility has been flushed
and cleaned out as necessary; (c) all systems are ready to
commence start-up, testing and operations; and (d) a Punchlist of
the uncompleted items shall be established and mutually agreed
upon by Owners, Independent Engineer and Contractor, provided
that Owner and Independent Engineer may waive, in writing,
completion of Punchlist items. It is understood that Mechanical
Completion can be accomplished in incremental steps, the sum
total of which, after Notice in accordance with Section 8.2 of
the Construction Contract described below, shall constitute
Mechanical Completion of the Facility. All capitalized words in
this definition shall have the meaning ascribed to them in the
Construction Contract between P.T. Chiyoda International
Indonesia and Buyer, effective as of May 31, 1996.
31. "MMC" shall have the meaning set forth in the third
WHEREAS clause of this Agreement.
32. "MMC Concentrate Agreement" shall mean that certain
Concentrate Sales Agreement between Seller and MMC, dated as of
January 1, 1995, as amended, and any concentrate sales agreement
between Seller and MMC entered into upon or following expiration
of such January 1, 1995 Agreement, as amended.
33. "Month of Arrival" with reference to each cargo of
Concentrates shall mean the calendar month the Date of Arrival
falls in.
34. "Month of Scheduled Shipment" with reference to each
cargo of Concentrates shall mean the calendar month set forth in
the shipping schedule provided by Buyer to Seller pursuant to
Article 6, as it is finally revised or amended in accordance with
the provisions of such Article.
35. "Normal Office Hours" shall mean (i) on Monday through
Friday, from _____:00 to _____:00, and (ii) on Saturday, from
_____:00 to _____:00; provided, however, Normal Office Hours
shall not include (unless such days are worked) national
holidays, customary local and smelter holidays, and Saturdays
customarily not worked by the office personnel at the Receiving
Works. The times to be inserted in the blank spaces above shall
be mutually agreed upon by Buyer and Seller as soon as possible
following the date of this Agreement.
36. "Notice of Readiness" shall have the meaning set forth
in Section 5.4.
37. "One Year in Advance Forecasted Quantity Requirement"
shall have the meaning set forth in Section 3.2 A.
38. "Part A Tonnage" shall mean fifty percent (50%) of the
Concentrates delivered in each cargo during each Contract Year of
the term of this Agreement. The smelting and refining charge
deduction for Part A Tonnage shall be determined as provided for
in Section 9.1.
39. "Part B Tonnage" shall mean fifty percent (50%) of the
Concentrates delivered in each cargo during each Contract Year of
the term of this Agreement. The smelting and refining charge
deduction for Part B Tonnage shall be determined as provided for
in Section 9.2.
40. "Payable Copper" shall have the meaning set forth in
Section 8.1 of this Agreement.
41. "Payable Gold" shall have the meaning set forth in
Section 8.2 of this Agreement.
42. "Payable Silver" shall have the meaning set forth in
Section 8.3 of this Agreement.
43. "Permanent Holiday Tonnage" shall have the meaning set
forth in Section 9.1(i).
44. "Port of Discharge" shall mean Buyer's dedicated berth
at Gresik, Java, Indonesia or such other port(s) as may be
mutually agreed upon. The term "Port of Discharge" shall also
mean an Approved Japanese Port with respect to shipments of
Concentrates to such Approved Japanese Port in accordance with
the provisions of Section 2.3(c).
45. "Port of Loading" shall mean Amamapare, Irian Jaya,
Indonesia or such other port at which Concentrates are loaded for
shipment to the Port of Discharge.
46. "Preliminary Estimated Analysis" shall have the meaning
specified in Section 2.2.
47. "Production Date" shall mean the date when the first
1,200 metric tons of anodes of a quality acceptable by Buyer for
refining by Buyer's refinery have been produced over a period of
four consecutive days by Buyer's smelter.
48. "Project" shall have the meaning set forth in the
second WHEREAS clause of this Agreement.
49. "Project Loans" shall mean the total committed amount
of the term and working capital loans to be provided pursuant to
the initial financing documents to be entered into by Buyer and
certain lenders for the financing of the Project (other than
loans to Buyer from its shareholders).
50. "Project Planning Agreement" shall have the meaning set
out in the sixth WHEREAS clause of this Agreement including any
subsequent modifications, supplements or amendments thereto.
51. "Quotational Period" shall have the meaning set forth
in Section 8.4 of this Agreement.
52. "Receiving Works" shall mean the Port of Discharge or
the Facilities, whichever is applicable.
53. "Reference Contract" shall mean a concentrate purchase
or sales agreement which is or may be designated by Buyer or
Seller in accordance with and for the purposes set out in Section
9.2.
54. "Rolling Five Year Concentrates Requirements Forecast"
shall have the meaning set forth in Section 3.2 A.
55. "Shareholders Agreement" shall have the meaning
specified in the ninth WHEREAS clause of this Agreement.
56. "Trust Agreement" shall mean the Restated Trust
Agreement dated as of October 11, 1996, among Seller, P.T. RTZ-
CRA Indonesia ("PT-RTZ"), The Chase Manhattan Bank (National
Association), as Depository, and First Trust of New York,
National Association, as Trustee, as such Restated Trust
Agreement may be amended, modified and/or restated from time to
time, or any successor agreement pursuant to which Seller and/or
PT-RTZ, as participants holding certain undivided interests in
the COW and in the agreements pursuant to which Concentrates are
sold, shall assign or has assigned any rights and interests which
Seller and PT-RTZ now have or may hereafter have under this
Agreement (as this Agreement may be amended and modified from
time to time) including but not limited to the right to receive
sales proceeds, for the purposes, inter alia, of facilitating the
administration of the respective interests of Seller and PT-RTZ
and of providing security to one or more lenders to Seller or PT-
RTZ from time to time.
57. "Trustee" shall have the meaning specified in the
definition of Trust Agreement.
58. "Weights, Measures and Currencies" shall mean:
A metric ton = 2,204.62 pounds (avoirdupois)
A ton = a metric ton
A DMT = a dry metric ton
A WMT = a wet metric ton
A unit = a hundredth part
An ounce = a troy ounce of 31.1035 grams
A pound = 453.593 grams (avoirdupois)
Dollars = currency of the United States
of America (represented by the sign "$")