EXHIBIT 10.2
CONTRACT OF WORK
BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA
AND
PT IRJA EASTERN MINERALS CORPORATION
CONTENTS
ARTICLE Page
INTRODUCTION 1
1. DEFINITIONS 4
2. APPOINTMENT AND RESPONSIBILITY OF THE COMPANY 9
3. MODUS OPERANDI 11
4. CONTRACT AREA 13
5. GENERAL SURVEY PERIOD 16
6. EXPLORATION PERIOD 18
7. REPORTS AND SECURITY DEPOSIT 21
8. FEASIBILITY STUDIES PERIOD 26
9. CONSTRUCTION PERIOD 30
10. OPERATING PERIOD 32
11. MARKETING 39
12. IMPORT AND RE-EXPORT FACILITIES 43
13. TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY 46
14. RECORDS, INSPECTION AND WORK PROGRAM 57
15. CURRENCY EXCHANGE 60
16. SPECIAL RIGHTS OF THE GOVERNMENT 63
17. EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS 64
18. ENABLING PROVISIONS 67
19. FORCE MAJEURE 72
20. DEFAULT 74
21. SETTLEMENT OF DISPUTES 76
22. TERMINATION 78
23. COOPERATION OF THE PARTIES 83
24. PROMOTION OF NATIONAL INTEREST 86
25. REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE 88
26. ENVIRONMENTAL MANAGEMENT AND PROTECTION 92
27. LOCAL BUSINESS DEVELOPMENT 94
28. MISCELLANEOUS PROVISIONS 99
29. ASSIGNMENT 102
30. FINANCING 103
31. TERM 104
32. GOVERNING LAW 105
ANNEX "A" - CONTRACT AREA 106
ANNEX "B" - MAP OF CONTRACT AREA 108
ANNEX "C" - LIST OF OUTSTANDING MINING AUTHORIZATIONS
AND NATURE RESERVES 109
ANNEX "D" - DEADRENT FOR VARIOUS STAGES OF ACTIVITIES 110
ANNEX "E" - FEASIBILITY STUDY REPORT 111
ANNEX "F" - ROYALTY TARIFF 113
ANNEX "G" - IMPLEMENTATION OF ROYALTY TARIFF 118
ANNEX "H"- RULES FOR COMPUTATION OF INCOME TAX 120
CONTRACT OF WORK
This Agreement, made and entered into in Jakarta, in the
Republic of Indonesia, on the 15th day of August
1994 by and between the Government of the Republic of
Indonesia, represented herein by the Minister of Mines and
Energy of the Government of the Republic of Indonesia
(hereinafter called the "Government") and PT. IRJA EASTERN
MINERALS CORPORATION (a judicial body incorporated in
Indonesia by Notarial Deed Numbered 14 dated August 1st
1994, Decree of Minister of Justice Numbered
C2.12.165.HT.01.01.TH.04 dated 1994) (hereinafter called
the "Company"), all of the shares of which at the time of its
incorporation are owned by:
1. With respect to 80% (eighty) percent of the shares:
EASTERN MINING COMPANY, INC., a company incorporated by
virtue of the law of the State of Delaware, United States
of America, whose address in the United States of America
is at 1615 Poydras Street, New Orleans, LA 70012, with
mailing address in Indonesia is at Plaza 89, 5th Floor,
Jl. H.R. Rasuna Said Kav. X-7 No. 6, Jakarta 12940
(hereinafter called "Eastern");
2. With respect to 10% (ten percent) of the shares:
PT. INDOCOPPER INVESTAMA CORPORATION, a judicial body
incorporated in Indonesia by Notarial Deed Numbered: 89
dated December 23, 1991, made before Muhani Salim, Notary
in Jakarta, which the latest amendment made before S.P.
Henry Shidki, Notary in Jakarta, under No. 113 dated
November 12, 1992, approved by Decree of Minister of
Justice No. C2- 9468.HT.01.04.TH.92 dated November 19,
1992 whose address is at Wisma Bakrie, 6th Floor, Jl. HR
Rasuna Said Kav. B-1, Jakarta 12920 (hereinafter called
"Indocopper");
3. With respect to 10% (ten) percent of the shares:
PT. SEDTCO GANESHA, a judicial body incorporated in
Indonesia by Notarial Deed Numbered 56 dated March 21, 1984
made before Anna Sunarhadi, Notary in Jakarta, which the
latest amendment made before R.N. Sinulingga, Notary in
Jakarta, under No. 483, dated October 1991, approved
by Decree of Minister of Justice No. C2-
6723.HT.01.01.Th. 91 dated November 16, 1991 whose
address is at Lippo Plaza, 3rd Floor, Jl. Jend.
Sudirman Kav. 25, Jakarta 12920 (hereinafter called
"Setdco").
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WITNESSETH THAT:
A. All Mineral resources contained in the territories of the
Republic of Indonesia, including the offshore areas, are
the national wealth of the Indonesian Nation.
B. The Government desires to encourage and promote the
exploration and development of the Mineral resources of
Indonesia. The Government is also desirous of facilitating
the development of ore deposits if commercial quantities
are found to exist and the operation of Mining enterprises
in connection therewith.
C. The Government, through the operation of Mining
enterprises, is desirous of creating growth centers for
regional development, creating more employment
opportunities, encouraging and developing local business
and ensuring that skills, know-how and technology are
transferred to Indonesian nationals, acquiring basic data
regarding and related to the country's Mineral resources
and preserving and rehabilitating the natural Environment
for further development of Indonesia.
D. The Company as an indirect Subsidiary of Freeport-McMoRan
Inc., a Delaware corporation, and a Subsidiary of Freeport-
McMoRan Copper & Gold Inc., a Delaware corporation, has and
has access to the information, knowledge, experience and
proven technical and financial capability and other
resources to undertake a program of General Survey,
Exploration, Feasibility Study, Development, Construction,
Mining, Processing and Marketing with respect to the
Contract Area, and is ready and willing to proceed thereto
under the terms and subject to the conditions set forth in
this Agreement.
E. The Government and the Company recognize that the Contract
Area (as hereinafter defined) is located in an extremely
remote area with a difficult environment and that,
accordingly, the Company may be required to develop special
facilities and to carry out special functions for the
fulfillment of this Agreement.
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F. The Government and the Company are willing to cooperate
in developing the Mineral resources hereinafter described
on the basic provisions hereof and of the laws and
regulations of the Republic of Indonesia, specifically
Law No. 11 of 1967 on the Basic Provisions of Mining
(Undang-Undang Pokok Pertambangan) and Law No. 1 of 1967
on Foreign Capital Investment (Undang-Undang Penanaman
Modal Asing) and its amendment Law No. 11 of 1970 and the
relevant laws and regulations pertaining thereto.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set out to be performed
and kept by the Parties hereto, and intending to be legally
bound hereby, it is stipulated and agreed between the Parties
hereto as follows:
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ARTICLE 1
DEFINITIONS
The terms set forth below shall have the meanings therein
set forth, respectively, wherever the same shall appear in
this Agreement and whether or not the same shall be
capitalized.
1. "Affiliate" of any Person means any other Person that
directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under
common control with, such Person. "Control" (including
the terms "controlled by" and "under common control with"
and "controls") means the possession, directly or
indirectly, of the ability to direct the management and
policies of a Person. Without limiting the generality of
the above, such ability is presumed to exist in a Person
if it holds, directly or indirectly, 25% or more of the
outstanding voting shares of another Person.
2. "Associated Minerals" with respect to a particular
Mineral means Minerals which geologically occur together
with, are inseparable by Mining from and must necessarily
be Mined and Processed together with such Mineral.
3. "Beneficial Use" means a use of the Environment or any
element or segment of the Environment that is conducive
to public benefit, welfare, safety or health and which
requires protection from the effects of waste discharges,
emissions and deposits.
4. "Contract Area" means that area described in Annex "A",
Annex "B", and Article 4.1 of this Agreement.
5. "Contract Properties" with respect to any Mining Area,
means, for the purposes of Article 22, the property of
the Company in Indonesia which is located in such Mining
Area or any Project Area related to such Mining Area.
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6. "Covered Employee" means any person, including an
Expatriate Individual, who is employed or engaged by the
Company or one of its Subsidiaries or Affiliates or
subcontractors.
7. "Department", unless the context otherwise indicates,
means that Government agency charged from time to time
with the administration of the Indonesian Mining laws and
regulations.
8. "Enterprise" means all activities of the Company provided
for in this Agreement or contemplated by this Agreement,
including the General Survey, Exploration, evaluation,
development, construction, Mining, operating, Processing,
selling and all other activities by the Company for the
purposes of or in connection with this Agreement.
9. "Environment" means physical and chemical factors of the
surroundings of human beings, including land, water,
atmosphere, climate, sound, odors, tastes and biological
factors of animals and plants and the social factors of
aesthetics.
10. "Expatriate Individuals" or "Expatriates" means
individuals who are non-Indonesian nationals.
11. "Exploration" means the search for Minerals using
geological, geophysical and geochemical methods,
including the use of boreholes, test pits, trenches,
surface or underground headings, drifts or tunnels in
order to locate the presence of economic Mineral deposits
and to find out their nature, shape and grade, and
"Explore" has a corresponding meaning.
12. "Exploration Areas" means the portions of the Contract
Area which are selected for Exploration as a result of
the General Survey of the Contract Area by the Company
during the General Survey Period provided for in
paragraph 2 of Article 3, or the entire retained area
after the completion of the General Survey Period and any
extension thereto.
13. "Foreign Currency" means any currency other than Rupiah.
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14. "General Survey" means an investigation or a preliminary
Exploration carried out along certain broad features of
an area for surface indications of mineralization.
15. "Government" means the Government of the Republic of
Indonesia, its Ministers, Ministries, Departments,
Agencies and Instrumentalities, and all Regional,
Provincial or District Authorities.
16. "Indonesian Participant" means an Indonesian citizen, an
Indonesian legal entity controlled by Indonesian citizens
or such other Indonesian legal entity as qualifies as an
Indonesian participant under applicable regulations, or
the Government of the Republic of Indonesia.
17. "Minerals" means all natural deposits and natural
accumulations containing chemical elements of all kinds,
either in elemental form or in association or chemical
combination with other metallic or non-metallic elements.
18. "Mining" means recovery activities aimed at the economic
exploitation of one or more identified deposits of
Minerals, and "Mine" has a corresponding meaning.
19. "Mining Areas" means all those territories within the
Contract Area which have been identified by the Company
as containing a potentially economic mineral deposit or
deposits which the Company selects for Mining development
and designates by latitude and longitude on maps and by
description upon or before the expiration of the
Feasibility Studies Period with respect to an Exploration
Area, as one in which the Company shall propose to
commence Mining, subject to paragraph 2 of Article 16,
provided that a Mining Area may be expanded by agreement
of the Department and the Company if as a result of
further Exploration and Mining it becomes apparent that
inclusion of adjacent lands would advance the purposes of
this Agreement by permitting the Mining of the Minerals
identified with respect to such deposits or Associated
Minerals.
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20. "Minister", unless the context otherwise indicates, means
that person who is acting at any given time as the
Minister of the Department of Mines and Energy.
21. "Person" means any individual, partnership, corporation,
wherever organized or incorporated, and all other
judicially distinct entities and associations, whether or
not incorporated.
22. "Pollution" means any direct or indirect alteration of
the physical, thermal, chemical, biological or
radioactive properties of any part of the Environment by
the discharge, emission or deposit of Wastes so as to
affect any Beneficial Use materially and adversely, or to
cause a condition which is hazardous or potentially
hazardous to public health, safety or welfare, or to
animals, birds, wildlife, fish or aquatic life, or to
plants, and "Pollute" has a corresponding meaning.
23. "Precious Metal" means gold, silver, platinum or
palladium.
24. "Processing" means treatment of Mineral ore after it has
been Mined to produce a marketable Mineral concentrate or
a further refined Mineral Product, and "Process" has a
corresponding meaning.
25. "Products" means all ores, Minerals, concentrates,
precipitates and metals, including refined products,
obtained as a result of Mining or Processing, after
deducting any quantities thereof which are lost,
discarded, destroyed or used in research, testing,
Mining, Processing or transportation.
26. "Project Area" means, with respect to any Mining Area, an
area outside such Mining Area designated as a Project
Area and delineated in a feasibility study report for
Mining development by the Company as necessary or
desirable for the Processing facilities and other
infrastructure facilities related to such Mining
development, including any additions to any such area
required for Mining development or Processing.
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27. "Rupiah" means the currency that constitutes legal tender
in Indonesia.
28. "SIPP" ( A Preliminary Survey License ) means the
license granted by the Department which allows the
applicants to the Contract of Work to carry out a
Preliminary Survey prior to the formal signing of the
Contract of Work. The "SIPP" license is awarded by the
Department upon written request by the applicants.
29. "Subsidiary" of any Person means any corporation
controlled by such Person through the direct or indirect
ownership of fifty percent or more of the issued shares
having power to vote or any partnership or joint venture
controlled by such Person.
30. "Waste" includes any matter whether liquid, solid,
gaseous or radioactive, which is discharged, emitted, or
deposited in the Environment in such volume, consistency
or manner as to cause a material and adverse alteration
of the Environment.
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ARTICLE 2
APPOINTMENT AND RESPONSIBILITY OF THE COMPANY
1. The Company is hereby appointed the sole contractor for the
Government with respect to the Contract Area. In
particular, the Company shall be granted the sole rights to
Explore for Minerals in the Contract Area, to Mine any
deposit of Minerals found in the Mining Area, to Process,
store, and transport by any means certain Minerals
extracted therefrom, to market, sell or dispose of all the
Products of such Mining and Processing, inside and outside
Indonesia, and to perform all other operations and
activities which may be necessary or convenient in
connection therewith, with due observance of the
requirements of this Agreement. In consideration for the
grant of such rights, the Company shall perform the work
and carry out the obligations imposed on it by this
Agreement, including, without limitation, the obligation to
make expenditures as provided in paragraph 2 of Article 5,
in paragraph 5 of Article 6 and in paragraph 5 of Article
7, the obligation to pay taxes and other charges to the
Government as provided in Article 12 and 13 and the
obligation to adhere to the Mining standards described in
Article 10 and to the Environmental, safety and health
standards described in Article 26.
2. Notwithstanding paragraph 1 of this Article 2, the Company
shall not Mine any radioactive minerals, hydrocarbon
compounds, nickel, tin or coal without first obtaining the
approval of the Department, and industrial minerals without
first obtaining the approval of the Government.
3. The Company shall have the sole control and management of
all of the Company's activities under this Agreement and
the Company shall have full responsibility therefor and
shall assume all risk with respect thereto in accordance
with the terms and conditions of this Agreement. Without
in any way detracting from the Company's responsibilities
and obligations hereunder, the Company may engage
registered subcontractors, whether or not Affiliates of the
Company, for the execution
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of such phases of its operation as the Company deems
appropriate, including contracting for construction of
facilities and for necessary technical, management and
administrative services. In the event that such services
are contracted from Affiliates, the charges therefor, to
the extent they affect any amounts payable to the
Government pursuant to the terms of this Agreement, shall
comply with the provisions of Article 13 and of Annex "H"
to this Agreement.
4. The Company shall take all reasonable measures to prevent
damage to the rights and property of the Government or
third parties. In the event of negligence on the part of
the Company or its agents or of any registered
subcontractor carrying on operations or activities for the
Company under this Agreement, the Company or such
registered subcontractor, as the case may be, shall be
liable for such negligence in accordance with the laws of
Indonesia.
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ARTICLE 3
MODUS OPERANDI
1. The Company is incorporated under the laws of the Republic
of Indonesia and domiciled in Indonesia, and shall be
subject to the laws and the jurisdiction of courts in
Indonesia which normally have jurisdiction over
corporations doing business or incorporated therein. The
Company shall maintain in Jakarta a principal office for
receipt of any notification or other official or legal
communication.
2. The Company contemplates a program for the Enterprise,
divided into five periods:
i) the "General Survey Period";
ii) the "Exploration Period";
iii) the "Feasibility Studies Period";
iv) the "Construction Period"; and
v) the "Operating Period";,
as such terms are defined in this Agreement.
It is understood that different parts of the Contract Area
may be treated as separate projects which become subject to
different provisions of this Agreement at different times
because of the different periods of activities applicable
to the individual Exploration and Mining Areas.
3. The Company may contract for necessary technical,
management and administrative services, provided that it
shall not be released from any of its obligations
hereunder. In the event that such services are contracted
from Affiliates, such services shall be obtained only at a
charge not more than a non-affiliated party with equivalent
qualifications to perform such services would charge for
provision of such services to equivalent standards. All
such charges should be fair and reasonable and accounted
for in accordance with generally accepted accounting
principles consistently applied. The Company shall produce
on request by the Department evidence verifying all such
charges.
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4. The Company undertakes to conduct all activities hereunder
in the manner and subject to the conditions of Article 2 of
this Agreement and to continue such activities, during the
General Survey, Exploration, Feasibility Study and
Construction Periods of this Agreement without suspension
or interruption of all of the Company's activities, subject
to Article 19 and Article 22, during the term of this
Agreement, provided that such activities may be interrupted
or suspended with the concurrence of the Department. Any
such suspension or interruption of all of the Company's
activities with the concurrence of the Department shall
extend the time periods otherwise applicable with respect
to any of the affected Periods specified in this Agreement.
If such interruption or suspension of all of the Company's
activities continues for more than 365 days and is due to
reasons other than force majeure as provided in Article 19
and the Department has not concurred regarding such
interruption or suspension, then the Government shall be
entitled to declare a default under Article 20. The
Company agrees to keep the Department informed of any
interruption or suspension. Any such interruption or
suspension shall not affect the mutual rights and
obligations of the Parties hereto under this Agreement.
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ARTICLE 4
CONTRACT AREA
1. Contract Area is the area defined in Annex "A" to this
Agreement as changed by reductions and extensions as the
case may be in accordance with this Agreement, excluding
therefrom,
(i) Mining Authorizations granted by the Department
for Category "A" and "B" Minerals (as defined in
Annex "C"), and
(ii) Mining Authorizations granted by the Government
for Category "C" Minerals (as defined in Annex
"C"),
(iii) People Mining's right,
declared before the date of the letter of approval in
principle by the Department of the award of the Contract
Area, and as set forth in Annex "C" attached to and hereby
made part of this Agreement.
2. In the event that any areas covered by Mining Authorization
which were excluded from the Contract Area by the
definition thereof or which on the date of the letter of
approval in principle by the Department of the award of the
Contract Area had a common boundary with the Contract Area
lapse, are cancelled or are relinquished, or by any means
the area of such Authorizations becomes vacant, or any such
area otherwise becomes available, then the Company shall
have, upon application, the right of first refusal to have
such area included in the Contract Area, unless the
Government to grants People's Mining Rights on such area.
Any area so included shall fall into the earliest Period
which then applies to any part of the then existing
Contract Area.
3. The Company may, by written application to the Department,
relinquish all or any part of the Contract Area at any time
and from time to time during the term of this Agreement.
Any such application shall be submitted with a
relinquishment
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report stating all technical and geological findings the
Company has made with respect to the relinquished areas and
the reasons for the relinquishment, supported by field data
of activities undertaken in those areas. All basic data
with respect to the relinquished areas shall be submitted
to the Department and become the property of the
Government. The Company through relinquishment (including
relinquishment pursuant to this paragraph, paragraph 5 of
Article 5 and paragraph 2 of Article 6), shall reduce the
Contract Area:
(i) on or before the end of the General Survey
Period, to not more than seventy-five percent
(75%) of the original Contract Area;
(ii) on or before the second anniversary of the end of
the General Survey Period, to not more than fifty
percent (50%) of the original Contract Area; and
(iii) on or before the end of the Exploration Period,
to not more than twenty-five percent (25%) of the
original Contract Area.
Except as provided in paragraph 5 of this Article 4, the
Company shall not be required by the terms of this
Agreement to relinquish more than 75% of the original
Contract Area. Any such relinquishment shall be without
prejudice to any obligation or liability imposed by or
incurred under this Agreement prior to the effective date
of such relinquishment.
4. The Company shall conduct work within the Contract Area
with the objective of delineating new deposits within the
Contract Area for development during the full term of this
Contract. The Company's development plans shall include
the intended capacity of each mining and processing
operation and any further evaluation work required as
provided in the Feasibility Study and other Exploration
activities.
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5. If the Company has no future plan to conduct Exploration or
development activities with respect to an area within the
Contract Area, or to use such area in connection with other
development activities, or if the Company discovers a
deposit of a Mineral as to which it has no current or
contingent plans to develop (and such area may be used or
such deposit developed by other Persons in a manner which
does not interfere with the rights of the Company under
this Agreement or the activities of the Company permitted
hereby), then, if so required by the Government, the
Company shall relinquish such area or deposit, together
with all the basic geological, exploration, metallurgical
and other data related thereto.
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ARTICLE 5
GENERAL SURVEY PERIOD
1. The Company shall commence, as soon as possible and not
later than six months after the signing of this Agreement,
a General Survey of the Contract Area to determine in what
parts of the Contract Area deposits of Minerals are most
likely to occur. The "General Survey Period" shall end on
that date which shall be 12 (twelve) months after such
commencement. The Department, upon request by the Company,
will grant an extension of 12 (twelve) months for the
General Survey Period for the purpose of completing the
activities to be carried out by it during such Period.
2. By the end of the General Survey Period, including the SIPP
Period, the Company shall have spent, with respect to the
Contract Area, not less than two million United States
Dollars (US$ 2,000,000.00) on field expenditure. Such
expenditures may include general organizational overhead
and administrative expenses directly connected with field
activities under this Agreement.
3. If at the expiration of eighteen months from the date of
the signing of this Agreement or any time there after, it
appears to the Department that the Company has seriously
neglected its obligations with respect to minimum
expenditures as provided in paragraph 2 of this Article,
the Department may require the Company to deliver to the
Department a guarantee to a sum which shall not exceed the
total outstanding expenditure obligations remaining
unfulfilled. Such guarantee in the form of a bond or a
Banker's Guarantee may at the end of the three year period
commencing on the date of the signing of this Agreement be
forfeited to the Government to the extent that the Company
shall have failed to fulfill such expenditure obligations.
Except to the extent of any such forfeiture, such guarantee
shall be released at the end of such three year period.
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4. In connection with the Company's obligations under this
Article, the Company shall submit to the Department, within
two months after the end of the General Survey Period, a
report setting forth the items and amounts of expenditure
during such Period. The Company shall be prepared to
support such report with reasonable documentation of
expenditures should the Department so request.
5. The Company may at any time discontinue the General Survey
with respect to any part or parts of the Contract Area on
the grounds that the continuation of such General Survey is
no longer commercially feasible or practical and shall
apply in writing to the Department in accordance with
paragraph 3 of Article 4 for the relinquishment of such
part or parts of the Contract Area. The Contract Area
shall thereby be reduced to the area which remains after
such relinquishment.
6. If, at any time or times during the General Survey Period,
after the Company has discovered deposits of Minerals in
any part or parts of the Contract Area and has decided to
proceed into the Exploration Period with respect to one or
more of such deposits, it shall submit a written notice and
explanation to such effect to the Department and shall
establish one or more Exploration Areas with respect to
such deposit or deposits and begin the Exploration thereof
without affecting its rights and obligations under this
Agreement in respect of other portions of the Contract
Area.
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ARTICLE 6
EXPLORATION PERIOD
1. Upon completion of the General Survey, the Company shall
commence the "Exploration Period". During the Exploration
Period, the Company shall carry out an Exploration program.
The Exploration program shall include, without limitation,
such detailed geology, geophysics and geochemistry and such
sampling, pitting, and drilling activities as the Company
considers appropriate.
2. The Company may at any time discontinue Exploration in any
Exploration Area on the grounds that the continuation of
such Exploration is no longer commercially feasible or
practical and shall apply in writing to the Department in
accordance with paragraph 3 of Article 4 for the
relinquishment of such Exploration Area from the Contract
Area. The Contract Area shall thereby be reduced to the
area which remains after such relinquishment.
3. If at any time prior to the end of the Exploration Period
the Company discovers one or more deposits of Minerals of
apparent commercial grade and quantity in any Exploration
Area and decides to proceed with further evaluation
thereof, it shall submit a written notice to such effect to
the Department and enter into the Feasibility Studies
Period with respect to such Exploration Area without
affecting its rights and obligations under this Agreement
in respect of the balance of the Contract Area.
Accordingly, the Exploration Period:
(i) shall commence immediately following the end of
the General Survey Period; and
(ii) shall end 36 (thirty-six) months thereafter;
provided that, with respect to any Exploration
Area, it shall end at such earlier date as the
Feasibility Studies Period shall have begun with
respect to such Exploration Area; and
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(iii) The Department upon request by the Company, will
twice grant an extension of 12 (twelve) months
each for the Exploration Period, subject to the
Company's performing its obligations
satisfactorily in accordance with this Agreement.
4. Prior to the end of the Exploration Period, the Company
shall give notice to the Department stating whether or not
the Company desires to proceed into the Feasibility Study
Period with respect to any Exploration Area. Should the
Company give notice to the Department that it does not wish
to proceed into the Feasibility Studies Period with respect
to any Exploration Area, such notice shall constitute an
application in writing to the Department in accordance with
paragraph 3 of Article 4 for the relinquishment of such
Exploration Area from the Contract Area. In such a case,
the Company shall turn over to the Department:
(i) maps indicating all places in such Exploration
Area in which the Company shall have drilled
holes or sunk pits,
(ii) copies of logs of such drill holes and pits and
of assay results with respect to any analyzed
samples recovered therefrom, and
(iii) copies of any geological or geophysical and
geochemical maps of the Exploration Area which
shall have been prepared by the Company.
Any such relinquishment shall be without prejudice to any
obligation or liability imposed by or incurred under this
Agreement prior to the effective date of such
relinquishment.
5. During the Exploration Period, the Company shall spend not
less than six million United States Dollars (US$
6,000,000.00) on further Exploration activities with
respect to the Contract Area. Any expenditure incurred by
the Company during the General Survey Period (including the
SIPP Period) which is greater than the minimum amount
required pursuant to paragraph 2 of Article 5 shall be
credited against and reduce the
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minimum amount which the Company is required to spend
during the Exploration Period. Such expenses may include
general organizational overhead and administrative expenses
directly connected with field activities under this
Agreement. If at the expiration of 24 (twenty-four) months
from the date of the commencement of the Exploration Period
or any time thereafter, it appears to the Department that
the Company has seriously neglected its obligation with
respect to minimum expenditures as provided in this
paragraph, the Department may require the Company to
deliver to the Department a guarantee in the form of a bond
or a banker's guarantee to a sum which shall not exceed the
total outstanding expenditure obligations remaining
unfulfilled. Such guarantee may, at the end of the
Exploration Period, be forfeited to the Government to the
extent that the Company shall have failed to fulfill such
expenditure obligations. Except to the extent of any such
forfeiture, such guarantee shall be released at the end of
the Exploration Period.
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ARTICLE 7
REPORTS AND SECURITY DEPOSIT
1. The Company shall keep the Government informed through the
Department by submitting quarterly progress reports on the
Enterprise and other related activities subject to this
Agreement. The quarterly progress reports shall include
comprehensive data on General Survey, Exploration,
Employment and Expenditures. These progress reports shall
be submitted within 30 (thirty) days after the end of each
calendar quarter plus any part of a calendar quarter that
remains following the date of signing of this Agreement,
and be in such form as the Department may from time to time
prescribe. These quarterly progress reports relating to
Exploration activities shall include:
(i) the results of geological and geophysical
investigation and proving of deposits of Minerals
in the Contract Area and the sampling of such
deposits;
(ii) the results of any general reconnaissance of the
various sites of proposed operations and
activities under this Agreement;
(iii) information concerning the selection of routes
from any Mining Area to a suitable harbor for the
export of Product;
(iv) information concerning the planning of suitable
permanent settlements, including information on
suitable water supplies for permanent settlements
and other facilities;
(v) such other plans and information as to the
progress of the Company's activities in the
Contract Area as the Department may from time to
time require;
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(vi) statements of expenditures during the General
Survey, Exploration, Feasibility Studies, and
Construction Periods; and
(vii) lists of employment and training conducted.
2. Within one year after the beginning of the Feasibility
Studies Period with respect to any Exploration Area, the
Company will also file with the Department a summary of its
geological and metallurgical investigations and all
geological, geophysical, topographic and hydrographic data
obtained from the General Survey and Exploration and a
sample representative of each principal type of
Mineralization encountered in its investigations of such
Exploration Area.
3. No later than the eighth anniversary of the date of the
signing of this Agreement, the Company shall submit to
Department a general geological map of the whole Contract
Area (as then constituted) on the scale of 1:250,000 with
attendant reports based on the Company's geological
observations; such geological map need only contain the
observations of rock types and their distribution and
structure which have been made by the Company during the
General Survey and Exploration Periods.
4. On or before the delivery of the geological map referred to
in paragraph 3 of this Article, the Company shall also
submit to the Department :
(i) maps indicating all places in the Contract Area
in which the Company shall have drilled holes or
sunk pits,
(ii) copies of logs of such drill holes and pits and
of assay results with respect to any analyzed
samples recovered therefrom ,
(iii) copies of any geophysical maps of the Contract
Area which shall have been prepared by the
Company, and
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(iv) all other information directly relevant to the
Company's Exploration activities under this
Agreement which the Department may reasonably
request and which is, or with the exercise of
reasonable efforts by the Company would be,
within the Company's control in order to appraise
the Company's investigation activities under this
Agreement.
5. The Company shall within 30 (thirty) days after the date of
signing of this Agreement establish for the benefit of the
Government in a bank in Indonesia approved by the
Department an interest-bearing escrow account in the amount
of three hundred thousand United States Dollars (US $
300,000.00) less any amount already deposited on the
granting of SIPP, plus a Banker's Guarantee in the amount
of seven hundred thousand United States Dollars (US $
700,000.00), is hereinafter called the "Security Deposit".
The Security Deposit shall be released by the Government as
to 50% (fifty percent) thereof after:
(i) the expiration of the General Survey Period;
(ii) the submission as specified in paragraph 1 of
this Article of four consecutive quarterly
progress reports to the Department or where the
General Survey Period is completed in less than
one year, quarterly reports covering such lesser
period, provided that where the General Survey
Period has been agreed to have commenced prior to
the date of signing of this Agreement, report(s)
covering this earlier period shall count towards
satisfaction of this obligation ; and
(iii) either:
(a) satisfactory performance (according to the
Minister's judgment) for such General Survey
Period, or
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(b) the expenditure by the Company in such
General Survey Period of five hundred
thousand United States Dollars (US$
500,000.00) on the Contract Area.
The remaining fifty percent (50%) of this Security Deposit
will be released by the Government when the geological map
referred to in paragraph 3 of this Article has been
submitted to and approved by the Department which approval
the Department shall not unreasonably withhold or delay.
In the event that the Company does not satisfy the above
mentioned requirement within eight (8) years after the date
of signing of this Agreement, the balance of the said
Security Deposit shall automatically be forwarded to the
Government Treasury and the Company shall have no further
claim thereon. Interest on the Security Deposit shall
accrue for the benefit of the Company.
6. Except as otherwise provided in this paragraph 6, the
Government has title to all data and reports submitted by
the Company to the Department or the Government pursuant to
the provisions of this Agreement. Such data and reports
will be treated as strictly confidential by the Government
to the extent that the Company shall so request; provided,
however, that data belonging to the public domain (because
of having been published in generally accessible literature
or of its mainly scientific rather than commercial value,
such as geological and geophysical data) and data which has
been published pursuant to laws and regulations of
Indonesia or of a foreign country in which a shareholder
may be domiciled (such as the yearly report of public
bodies or companies) shall not be subject to the foregoing
restrictions; provided further that the term "data" as used
in this paragraph shall include (without limitation) any
and all documents, maps, plans, worksheets and other
technical data and information, as well as data and
information concerning financial and commercial matters.
In respect of data relating solely to the areas
relinquished by the Company from the Contract Area pursuant
to Article 4, the foregoing restrictions shall cease to
apply as from the
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date of relinquishment of such areas. In addition, where
this Agreement has been terminated pursuant to Article 20
or Article 22, the foregoing restrictions shall cease to
apply.
Notwithstanding the foregoing, exclusive know-how of the
Company, its registered subcontractors or Affiliates
contained in data or reports submitted by the Company to
the Department or the Government pursuant to the provisions
of this Agreement and which shall have been identified as
such by the Company, shall only be used by the Government
in relation to the administration of this Agreement and
shall not be disclosed by the Government to third parties
without the prior written consent of the Company. Such
exclusive know-how, as long as it remains exclusive
know-how of the Company, its registered subcontractors or
Affiliates as the case may be, remains the sole property of
the Company, its registered subcontractors or Affiliates as
the case may be. The provisions of this paragraph shall
survive the termination of this Agreement in accordance
with laws and regulations from time to time in effect
relating to intellectual property. If any such exclusive
know-how is not patentable in accordance with such laws,
the Company may request the Government not to disclose such
know-how for a period of not less than 3 (three) years
after termination of this Agreement.
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ARTICLE 8
FEASIBILITY STUDIES PERIOD
1. The Feasibility Studies Period with respect to any
Exploration Area shall commence on the date the Company
submits a written request to the Department as provided in
paragraph 3 of Article 6 with respect to such Exploration
Area and shall end upon the commencement of the
Construction Period with respect to such Exploration Area
as hereinafter provided.
2. As soon as the Feasibility Studies Period has begun with
respect to any Exploration Area, the Company shall commence
studies to determine the feasibility of commercially
developing the deposit or the deposits of minerals within
such Exploration Area. The Company will be allowed a period
of 12 (twelve) months to complete such studies and to
select and delineate and determine the size of 1 (one) or
more Mining Areas. Each such Mining Area shall include at
least 1 (one) deposit with respect to which the Company
plans to commence construction and Mining operations. The
Government may for one of the reasons specified in
paragraph 2 of Article 16, object to the area proposed as
a Mining Area within three (3) months of the Company's
designation of such Mining Area. The Government and the
Company agree to consult in good faith in an attempt to
overcome any such objections. If after a period of three
(3) months from the date of notification of such objection
by the Government, there has been no resolution of the
matter, then either party may proceed to resolve the matter
in accordance with Article 21 paragraph 1. In the event
that the objection by the Government to any area designed
by the Company as a Mining Area is upheld, and thereafter
during the term of this Agreement it is determined that
Mining is permissible within such area, the Company shall
have the right to carry on such Mining in preference to any
other Person.
After the completion of such Feasibility Studies with
respect to a proposed Mining Area, the Company shall submit
a Feasibility Study Report in the form set out in Annex
"E",
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which shall contain calculations and reasons for the
technical and economical feasibility of conducting Mining
operations within such proposed Mining Area supported by
data, as specified in Annex "E", calculations, drawings,
maps and other relevant information leading toward the
decision whether or not to proceed with such Mining
operations. The Feasibility Study Report with respect to
any proposed Mining Area shall include the then intended
capacity of each proposed Mining and Processing operation
within such Mining Area and any further evaluation work or
further Exploration then deemed to be required.
If the Company considers that the data required and other
necessary matters are not sufficiently available to come to
a final decision within the initial Feasibility Studies
Period with respect to any Exploration Area or if the
Department raises objections to any proposed Mining Area as
set out above, the Company may seek the approval of the
Department to the extension for twelve months of such
Feasibility Studies Period, provided that such request for
extension of the Feasibility Studies Period is submitted to
the Department no later than the eighth anniversary of the
date of the signing of this Agreement.
3. At any time during the Feasibility Studies Period with
respect to any proposed Mining Area, the Company may submit
a written application to the Department that it desires to
proceed with the construction of a Mine within such
proposed Mining Area and facilities to be used by the
Company in its operation.
Upon approval of that application, the Company shall
commence and, with reasonable diligence, execute to
completion the design of the Mine and related facilities
and, subject to completion of the design of the Mine and
related facilities, shall submit supply the same for the
approval of the Department together with an estimate of
the cost of such Mine and related facilities and a time
schedule for the construction thereof which time schedule
shall, to the extent economically and practically feasible,
provide for completing the construction of such Mine and
related facilities within thirty-six (36) months after the
approval of the designs and
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time schedule for construction of such Mine and related
facilities. Within three (3) months after submission of
the design and time schedule, the Department shall notify
the Company of its approval (which will not be unreasonably
withheld) or disapproval thereof, for one of the reasons
specified in paragraph 2 of Article 16. In the event of
disapproval, the Company shall be notified by the
Department of the cause for disapproval and the Department
and the Company shall consult in a good faith to attempt to
remove the cause for such disapproval. If, after a period
of three (3) months from the notification of such
disapproval, there has been no resolution of the matter
then either party may proceed to resolve the matter in
accordance with Article 21 paragraph 1.
4. The Feasibility Study Report as described in Annex "E" with
respect to a proposed Mining Area shall include
Environmental impact studies into the effects of the
operation of the Enterprise on the Environment and shall be
prepared in accordance with the terms of reference set out
in Article 26. Such studies shall be carried out in
consultation with appropriately qualified independent
consultants retained by the Company and approved by the
Government, which approval will not be unreasonably
withheld.
5. The Company shall collaborate with and keep the Department
informed by regular reports as to the progress and results
of and costs incurred in respect of the investigations and
studies and shall as and when the Department may reasonably
require furnish the Department with the investigations and
studies referred to in paragraph 4 above and with copies of
all relevant findings made and reports prepared by the
Company.
6. The Company shall, at the completion of all the
investigations and studies, submit to the Department a
final report stating the results of and the costs incurred
in respect of the investigations and studies and the
Company's analysis of and its conclusions and projections
in respect of those results, and such other information
relating to the Enterprise or the
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Mining Area which is in the possession of the Company and
which the Department may reasonably request.
7. Subject to the provisions of paragraph 6 of Article 7, all
reports and information supplied to the Government under
this Article shall be treated as confidential, with the
exception of those required for use by the Government for
the national interest, provided that (and subject as
aforesaid), if this Agreement is terminated pursuant to
Article 22 hereof, the reports and information shall become
the property of the Government and may be used by the
Government in such manner as it thinks fit.
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ARTICLE 9
CONSTRUCTION PERIOD
1. Following receipt from the Department of approval with
respect to the design and time schedule provided for in
paragraph 3 Article 8 with respect to any Mining Area, the
Company shall, in accordance with such time schedule,
commence construction of the Mine and related facilities
and use its best efforts, subject to the provisions of
Article 19, to execute the same to completion in accordance
with the time schedule referred to in the said paragraph 3.
If such time schedule proves unworkable, the Company may
submit to the Department a revised time schedule for the
Department's approval.
2. The facilities to be constructed during the Construction
Period with respect to any Mining Area may include such of
the following as are appropriate:
(i) Mining facilities and equipment;
(ii) facilities and equipment to treat and beneficiate
the Mineral ore coming from the Mine so as to
produce saleable Products;
(iii) port facilities, which may include docks,
harbors, piers, jetties, dredges, breakwaters,
terminal facilities, workshops, storage areas,
warehouses and loading and unloading equipment;
(iv) transportation and communication facilities,
which may include roads, bridges, vessels,
ferries, airports, landing strips and landing
pads for aircraft, hangars, garages, canals,
aerial tramways, pipelines, pumping stations,
radio and telecommunications facilities,
telegraph and telephone facilities and lines;
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(v) townsites, which may include dwellings, stores,
schools, hospitals, theaters and other buildings,
facilities and equipment for personnel of the
Enterprise, including dependents of such
personnel;
(vi) power, water and sewage facilities, which may
include power plants (which may be hydroelectric,
steam, gas or diesel), power lines, dams,
watercourses, drains, water supply systems and
systems for disposing of tailings, plant wastes
and sewage;
(vii) miscellaneous facilities, which may include
machine shops, foundries and repair shops; and
(viii) all such additional or other facilities, plant
and equipment as the Company may consider
necessary or convenient for the operations of the
Enterprise related to such new Mining Area or for
providing services or carrying on activities
ancillary or incidental thereto.
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ARTICLE 10
OPERATING PERIOD
1. Upon completion of the construction of the Mine and related
facilities provided for in Article 9 with respect to any
Mining Area , the Company shall commence operation of such
Mining Area for which such facilities have been
constructed.
2. The Company shall conduct Mining operations and any
activity of the Enterprise with respect to a Mining Area,
for the duration of the Operating Period of such Mining
Area. The Operating Period for such Mining Area shall be
deemed to commence on the first day of the calendar month
following the first calendar month during which the average
daily throughput is at least seventy percent (70%) of the
design capacity of the facilities constructed for the
purpose of Mining the deposit or deposits in such Mining
Area, but not later than the date falling six (6) months
after the date of completion of such facilities. The
Operating Period for each Mining Area shall continue for 30
(thirty) years beginning at the commencement of the
Operating Period for the first Mining operation, or such
longer period as the Department, on the written application
of the Company, may approve. The commencement of the
Operating Period shall not occur more than eight (8) years
(or such longer period as may result from extensions
granted by the Department for the completion of succeeding
stages under this Agreement) from the commencement of the
General Survey Period allowed for the whole Contract Area.
3. The Company shall process ore to produce a marketable
concentrate. The Company will work towards and assist the
Government in achieving the policy of the establishment of
downstream metals processing facilities in Indonesia in
relation to smelting, refining and/or associated processing
if, according to recognized economic, technical and
scientific standards, the Minerals to be mined by the
Company are of sufficient tonnages and are Minerals
amenable to smelting, refining or associated processing,
and provided it is
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economically and practically feasible to do so. If and
when any such processing facilities (other than a copper
processing facility) are constructed, the Parties agree to
discuss thereafter and consider, in good faith, the
feasibility of subsequent additional processing facilities
which may be in the form of increases in the capacity of
the existing facilities or the establishment of facilities
previously not in existence.
In the event that there is no copper smelter operating or
under construction in Indonesia on or before the fifth
anniversary of the date that the first Mining Area under
this Agreement has entered the Operating Period, then the
Company shall prepare or cause to be prepared a feasibility
study with respect to a possible copper smelter in
Indonesia. The feasibility study so prepared shall be
subject to the Government's review and to a mutual
determination by the Government and the Company as to the
economic viability of such a smelter. Such smelter would
be located at such place within Indonesia as would be most
advantageous to its economic viability. Should such a
smelter be built by the Company or a wholly-owned
Subsidiary, it would constitute a part of the Enterprise
hereunder.
4. The Company shall submit to the Department copies of
studies relating to the feasibility of establishing those
facilities (as described in paragraph 3 of this Article) in
Indonesia prepared by the Company in consultation with an
agency acceptable to the Government.
5. The Company acknowledges the Government's policy to
encourage the domestic processing of all of its natural
resources into final products where feasible. The Company
further acknowledges the Government's desire that a copper
smelter and refinery be established in Indonesia and agrees
that it will make available copper concentrates derived
from the Contract Area for such smelter and refinery so
established in Indonesia as provided below.
During any period during which Processing and refining
facilities have not been established in Indonesia by or on
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behalf of the Company, or any wholly-owned Subsidiary, but
have been established in Indonesia by any other Person, the
Company shall, if it is then producing Products from the
Contract Area and if it is requested to do so by the
Department, sell such Products to such other Person at
prices and terms no less favorable to such Person than
those that could be obtained by the Company from other
purchasers of the same quantity and quality and at the same
time and the same or equivalent places and times of
delivery, provided that the respective contractual terms
and conditions given by the Company to such other Person
shall be no less favorable to the Company.
With respect to the first copper smelter established in
Indonesia by anyone other than the Company or a wholly-
owned Subsidiary of the Company, the quantity of copper
concentrates derived from the Contract Area which the
Company shall make available on the terms set out above
shall be a portion (such portion to be determined by
prorating the quantity of copper concentrates produced by
the Company to the total quantity of copper concentrates
produced in Indonesia) of the quantity of copper
concentrates necessary to satisfy the domestic demand in
Indonesia for refined copper and to permit economic scale
of such project assuming that such project is otherwise
feasible, and further subject to the limitation that the
quantity required shall not be so great as to jeopardize
the sound financial, operating or marketing requirements of
the Company. In making sales to a copper smelter or
refining facility in Indonesia, the Company will not be
treated more adversely, from the standpoint of Governmental
laws and regulations, than if it had sold such Mined
Products as export goods. The obligation of the Company to
sell its Products to another Person pursuant to this
paragraph 5 is subject to any financing agreements, sales
contracts or any smelting and refining contracts entered
into by the Company prior to the establishment of such
facilities by such other Person or any financing agreements
entered into pursuant to paragraph 2 of Article 30.
In the event that during the five year period following the
fifth anniversary of the date that the first Mining Area in
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the Contract Area has entered the Operating Period, a
copper smelter and refinery facility to be located in
Indonesia has not been established or is not in the process
of being constructed by any Person, then, subject to the
mutual determination by the Government and the Company as
to the economic viability of such smelter and refinery, the
Company shall undertake or cause to be undertaken the
establishment of a copper smelter and refinery in Indonesia
to comply with the policy of the Government.
6. The Company is, subject to the rights of third parties,
hereby granted all necessary licenses and permits to
construct and operate the facilities contemplated by this
Agreement in accordance with laws and regulations and such
reasonable safety regulations relating to design,
construction and operation as may from time to time be in
force and of general applicability in Indonesia.
7. The Company shall submit to the Department the following
Reports as to operations within each Mining Area :
(i) a biweekly statistical report beginning with the
first two weeks following the commencement of the
Operating Period, which shall set forth the
amount of material Mined, Processed and exported;
(ii) a monthly report beginning with the first month
following the commencement of the Operating
Period, which shall set forth the number and
describe the location of the active operations
during the preceding month and a brief
description of the work in progress at the end of
the month and of the work contemplated during the
following month.
(iii) a quarterly report beginning with the first
quarter following the commencement of the
Operating Period with respect to each Mining Area
concerning the progress of its operations in such
Mining Area, which report shall describe in
reasonable detail the Mining activities carried
on in such Mining
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Area, including the number of workmen employed in
such Mining Area as of the end of the quarter in
question and a description of the work in
progress at the end of the quarter in question
and of work contemplated during the following
quarter; and
(iv) an annual report beginning with the first
complete year following the commencement of the
Operating Period with respect to each Mining Area
which shall include:
(a) a description in reasonable detail of
the Mining activities carried on in
such Mining Area;
(b) the total volume of ores, kind-by-kind,
broken down into volumes Mined, volumes
transported from the Mines and their
corresponding destination, volumes
stockpiled at the Mines or elsewhere in
Indonesia, volumes sold or committed
for export (whether actually shipped
from Indonesia or not), volumes
actually shipped from Indonesia (with
full details as to purchaser,
destination and terms of sale); and
(c) work accomplished and work in progress
at the end of the year in question with
respect to all of the installations and
facilities related to such Mining Area,
together with a full description of all
work programmed for the ensuing year
with respect to such installations and
facilities, including a detailed report
of all investment actually made or
committed during the year in question
and all investment committed for the
ensuing year or years.
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(v) the Company shall also furnish the
Department all other information related to
the Company's activities under this
Agreement of whatever kind and which is or
could, by the exercise of reasonable efforts
by the Company, have been within the control
of the Company which the Department may
request in order that the Department may be
fully appraised of the Company's activities.
Biweekly reports shall be submitted in eightfold within two
weeks after the end of the two week period in question.
Monthly and quarterly reports shall be submitted in
eightfold within thirty (30) days of the end of the month
or quarter in question. Annual reports shall be submitted
in eightfold within ninety (90) days of the end of the year
in question.
8. The Company shall be in full and effective control and
management of all matters relating to the operation of the
Enterprise including the production and marketing of its
Products. The Company may make expansions, modifications,
improvements and replacements of the Enterprise's
facilities, and may add additional new facilities, as the
Company shall consider necessary for the operation of the
Enterprise or for the provision of services or activities
ancillary or incidental to the Enterprise. All such
expansions, modifications, improvements, replacements and
new additional facilities shall be considered part of the
project facilities.
9. The Company accepts the rights and obligations to conduct
operations and activities in accordance with the terms of
this Agreement. The Company shall conduct all such
operations and activities in a good technical manner in
accordance with such good and acceptable international
Mining engineering standards and practices as are
economically and technically feasible, and in accordance
with the modern and accepted scientific and technical
principles. In accordance with such standards, the Company
undertakes to use its best efforts to optimize the Mining
recovery of ore from proven reserves and metallurgical
recovery of Minerals from the ore to the extent it is
economically and technically feasible to do so, using
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appropriate modern and effective techniques, materials and
methods designed to achieve minimum wastage and maximum
safety as provided in the applicable laws and regulations
of Indonesia from time to time in effect. The Company
shall use its best efforts to conduct all operations and
activities under this Agreement so as to minimize loss of
natural resources, and to protect natural resources against
unnecessary damage.
10. The Government will authorize the Company to freely select
the vessels and other transportation facilities to be used
in connection with imports and exports of articles under
this Agreement. In addition, the Company shall have the
right at all times to purchase from vendors of its choice
all equipment, materials and supplies necessary for the
operations of the Company hereunder, and to enter into
arrangements to make use of any facilities belonging to
other Persons(whether or not Affiliates of the Company)
upon such terms and subject to such conditions, including
terms of payment, as to ownership and otherwise, as it
deems appropriate; provided that the Department shall have
the right to object to specific vendors or specific
arrangements on the basis of national security or foreign
policy concerns of the Government. In any case where the
Government is the sole economic source of supply for any
article or commodity necessary for the Enterprise, adequate
supplies of such article or commodity shall be made
available for sale to the Company at prices not greater
than the fair market value thereof.
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ARTICLE 11
M A R K E T I N G
1. The Company shall have the right to export the Products
obtained from its operations under this Agreement, subject
to the obligations set forth in paragraph 5 of Article 10.
Any such export shall be on such credit terms as the
Company deems appropriate for marketing its Products, and
neither the Company nor any of the purchasers of such
Products shall be required by the Government to obtain
letters of credit or other credit documents at any bank or
other institutions in Indonesia or elsewhere in connection
with marketing such Products, or otherwise. Without in any
way limiting the Company's basic right to export its
Products, such export will be subject to the reporting and
other non-monetary provisions of the export laws and
regulations of Indonesia from time to time in effect and to
the provisions of paragraph 2 of this Article. Subject to
any pre-existing contracts for the sale of Products to
others, and the obligation to make available concentrates
in order to satisfy the Company's obligations under
paragraph 5 of Article 10, the Company shall give priority
to satisfying domestic Indonesian requirements for use of
its Products in Indonesia. Sales to Indonesian customers
will be on terms and at prices which are competitive with
those provided to non-Indonesian customers.
2. The Company shall sell the Products in accordance with
generally accepted international business practices, and
use its best efforts to do so at prices and on terms of
sale which will maximize the economic return from the
operations hereunder, giving effect to world market
conditions and other circumstances prevailing at the time
of sale or contract; provided that the Government shall
have the right, on a basis which is of general
applicability and non-discriminatory as to the Company, to
prohibit the sale or export of Minerals or Products if such
sale or export would be contrary to the international
obligations of the Government or to external political
considerations affecting the national interest of
Indonesia. In the event of such prohibition (other than a
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quota requirement imposed pursuant to an International
Commodity Marketing Agreement), if the Company is unable to
find alternative markets on equivalent terms and
conditions, the Company shall be given assistance and
cooperation by the Government to overcome the possible
consequences of such prohibition.
3. To the extent deemed necessary by the Company to secure
financing for the Enterprise hereunder or to comply with
its obligations to the lenders thereunder, however, the
Company shall have the right , subject to paragraph 2 of
this Article 11, to enter into long-term contracts for the
sale of its Products hereunder subject to the obligations
set forth in paragraph 5 of Article 10 and in paragraph 1
of this Article 11.
4. In the event that sales are made or contracted to be made
to Affiliates, the prices to be paid therefor, to the
extent they affect any amounts payable to the Government
pursuant to the terms of this Agreement, shall comply with
the provisions of Article 13 and, to the extent applicable,
of Annex "H" to this Agreement. The Company shall submit
to the Government any proposed contract of sale to an
Affiliate for approval as complying with the foregoing
provisions. If it does so, and the Government approves
the contract, the contract shall be deemed for purposes
hereof to comply with the foregoing provisions. In any
event sales commitments with Affiliates shall be made only
at prices based on or equivalent to arm's length sales and
in accordance with such terms and conditions at which such
agreement would be made if the parties had not been
Affiliates, with due allowance for normal selling discounts
or commissions. Such discounts or commissions allowed the
Affiliates must be no greater than the prevailing rates so
that such discounts or commissions will not reduce the net
proceeds of sales to the Company below those which it would
have received if the parties had not been Affiliates. No
selling discounts or commissions shall be allowed an
Affiliate in respect of sales for consumption by it.
Within ninety days after the end of each calendar year, the
Company will deliver to the Department a report describing
in such reasonable detail as the Department may reasonably
request all
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sales contracts entered into during the preceding
calendar year with Affiliates in accordance with the
provisions of this paragraph 4.
5. If the Government believes that any figures related to
sales to Affiliates and used in computing any amounts
payable to the Government hereunder are not in
accordance with the provisions of paragraph 4 of this
Article (or, if such sales were pursuant to a contract,
theretofore approved pursuant to the provisions of such
paragraph 4, are not in accordance with such contract),
the Government may within twenty - four months after the
calendar quarter in which such Products were sold, but
not thereafter, so advise the Company in writing. The
Company shall submit evidence of the correctness of the
figures within forty-five days after receipt of such
advice. Within forty-five days after receipt of such
evidence, the Department may give notice to the Company
in writing that it is still not satisfied with the
correctness of the figures and, within ten days after
receipt of such notice by the Company, a Committee,
consisting of one representative of and appointed by the
Government and one representative of and appointed
by the Company, shall be constituted to review the
issue. The Committee shall meet as soon as
convenient at a mutually agreeable place in Indonesia and
if the members of the Committee do not reach agreement
within twenty days after their appointment or such
longer period as the Government and the Company mutually
agree, the representatives shall appoint a third
member of the Committee, who shall be a person of
international standing in jurisprudence and shall be
familiar with the international Mineral industry. The
Committee, after reviewing all the evidence, shall
determine whether the figures used by the Company or any
other figures are in accordance with paragraph 4 of this
Article (or an approved contract, as the case may be).
The decision of two members of the Committee shall be
binding upon the Parties. Failure of two
representatives to appoint a third member of the Committee
shall require the issue to be submitted to arbitration
pursuant to this paragraph, appropriate retroactive
adjustment shall be made in conformity with the
Committee's decision. The Company and the Government
each shall pay the expenses of
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its own member on the Committee and one half of all other
expenses of the Committee's proceedings.
6. In the event that the Company produces a concentrate
containing any Precious Metals which are easily
recoverable, the Company shall, if it is economically
feasible, make maximum efforts to recover such Precious
Metals.
7. In the event of a sale of copper concentrates, gold or
silver to an Affiliate or to the domestic market or to the
Government's designated agency, it is understood that,
unless otherwise agreed by the Parties, the price of such
Products shall be determined on the basis of a formula
price which is generally used in the sale of comparable
products among unrelated parties.
8. If at any stage in the course of its marketing arrangement,
the Company refines, or takes delivery of gold or silver
refined from its Products, then such gold and silver will
be in a form and bear marks which will make it acceptable
in the international precious metals markets. For gold,
this means the London Gold Market; for silver this means
the London Silver Market.
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ARTICLE 12
IMPORT AND RE-EXPORT FACILITIES
1. The Company may import into Indonesia capital goods,
equipment (including but not limited to laboratory and
computer equipment located outside its field operations),
machinery (including spare parts), vehicles (except for
sedan cars and station wagons), aircraft, vessels, other
means of transport, supplies, safety equipment, explosives
(in accordance with prevailing laws and regulations), raw
materials, and chemicals being items needed for use in the
Mining, Exploration, Feasibility Study, construction,
production and supporting technical activities of the
Enterprise. All such imports (excluding foodstuffs,
wearing apparel and other vital necessities for the
personal needs of the Company's employees and their
dependents) shall be exempt from import duties and obtain
full relief from and postponement of payment of value added
tax (VAT) (excluding VAT on spare parts) payable in
accordance with the prevailing laws and regulations for the
duration of the period commencing as from the date of
signing of this Agreement up to and including the tenth
year of the Operating Period. For any equipment directly
used to support its technical operations, such as
laboratory and computer equipment located outside its field
operations, the tax exemptions or tax reliefs shall be the
same as above. In case the Company is operating more than
one Mining Area, this tenth year of the Operating Period
shall be computed from the date of the commencement of
operation of the first Mining Area.
2. The provisions of this Article shall also be applicable to
Persons engaged as registered subcontractors of the Company
to carry on work or perform services with respect to the
Enterprise.
3. The exemption from import duties and relief from and
postponement of value added tax (VAT) as referred to in
paragraph 1 of this Article shall apply only to the extent
that the imported goods are not produced or manufactured in
Indonesia or that locally produced or manufactured products
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are not available on a competitive time, cost and quality
basis without duty or tax, provided that for the purpose of
comparing the costs of imports and the cost of goods
manufactured or produced in Indonesia a premium (not in
excess of twelve and one-half percent) shall be applied to
the cost of imports.
4. Any equipment and materials (which must be clearly
identified) imported by the Company or registered
subcontractor(s) of the Company for the exclusive purpose
of providing services to the Company and intended to be
re-exported will be exempted from import duties, value
added tax and other levies. If such equipment and
materials shall not have been re-exported by the time for
re-export (as established at the time of import), the
Company or the registered subcontractor(s) of the Company,
as the case may be, shall, unless extended or exempted for
reasons acceptable to the Government, pay import duties,
value added tax and other levies not paid upon entry in
accordance with then existing law. The Company shall be
responsible for proper implementation of its registered
subcontractor(s) obligations under this Article.
5. Any item imported by the Company or its registered sub-
contractor(s) pursuant to this Article which is no longer
needed for the Exploration, Mining and Processing
activities of the Company may be sold outside Indonesia and
re-exported free from export taxes and other customs duties
(excluding income tax/capital gains tax) and value added
tax after compliance with laws and regulations which shall
at the time of such sale be in force and of general
application in Indonesia. No imported item shall be sold
domestically or used otherwise than in connection with the
Enterprise except after compliance with import laws and
regulations which are at the time of such import in force
and of general application in Indonesia.
6. In view of the fact that goods and services will have to be
imported from abroad and that various parts of the Contract
Area are remote, for all practical purposes, from presently
existing seaports and other ports of entry for customs
purposes, the Government will consider establishing such
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seaport or port of entry and the requisite customs office
thereat as the Company shall reasonably request from time
to time; in consideration thereof, each such customs office
so established at the request of the Company shall be
furnished and maintained by the Company at its expense and
according to the existing rules and regulations.
7. During the period within which the Company is allowed to
import free from duties and value added tax, the Company
shall submit to the Department, not later than November 15
of each year, a list of equipment and material to be
imported during the next calendar year to enable the
Department to review and to approve the various items to be
imported for the Enterprise. Notwithstanding the
foregoing, the Company may request (stating the cause) the
Department to amend the list of equipment and material as
required during the year.
8. Personal effects (including household and living equipment
and goods) belonging to a Covered Employee who is an
Expatriate shall be freely exportable and shall be exempt
from import or re-export licenses, fees and duties, in
accordance with prevailing laws and regulations.
9. Except as otherwise specifically provided in this Article,
the Company shall duly observe import restrictions and
prohibitions and rules and procedures of general
application.
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ARTICLE 13
TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY
Subject to the terms of this Agreement, the Company shall pay to
the Government and fulfill its tax liabilities, including its
obligation as tax collector, as hereinafter provided:
(i) Deadrent in respect of the Contract Area or the Mining
Area;
(ii) Royalties in respect of the Company's production of
Minerals;
(iii) Income taxes in respect of income received or accrued
by the Company;
(iv) Personal income tax (PPh. Article 21);
(v) Obligation to withhold income taxes in respect of
payment of dividend, interest, including remuneration,
due to loans payment warranty, rents, royalties, and
other income related to the utilization of property,
remuneration on technical and management services as
well as other service;
(vi) Value Added Tax (PPN) and Sales Tax on Luxury Goods
(PPn BM) on import and delivery of taxable goods and
or services;
(vii) Stamp duty on the documents;
(viii) Import duty on goods imported into Indonesia;
(ix) Land and Building Tax (PBB) in respect of:
(a) the Contract Area or the Mining Area; and
(b) the utilization of land area and buildings in
where the Company constructs facilities for its
Mining operations.
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(x) Levies, taxes, charges and duties imposed by Local
Government in Indonesia which have been approved by
the Central Government;
(xi) General administrative fees and charges for facilities
or services rendered and special rights granted by the
Government to the extent that such fees and charges
have been approved by the Central Government.
(xii) Duty on register and transfer of ownership certificate
on ships, as well as motor vehicles in Indonesia.
The Company shall not be subject to any other taxes, duties,
levies, contributions, charges or fees now or hereafter levied
or imposed or approved by the Government other than those
provided for in this Article and elsewhere in this Agreement.
1. Deadrent in respect of the Contract Area or the Mining
Area.
The Company shall pay, in Rupiah, or in such other
currencies as may be mutually agreed, an annual amount of
money as deadrent to be measured by the number of hectares
included in the Contract Area or Mining Area respectively,
calculated on January 1st and July 1st of each Year, such
payments to be made in advance and in two installments each
payable within thirty (30) days after the said dates during
the term of this Agreement and payable as stipulated in
Annex "D" attached hereto.
2. Royalties in respect of the Company's production of
Minerals.
(i) The Company shall pay royalties in respect of the
products (as defined in Annex "F" and detailed in
Annex "G") from the Mining Area, to the extent that
such products are products for which value according
to general practice is paid or payable to the Company
by a buyer. Royalties shall be paid in Rupiah or such
other currency as may be mutually agreed and shall be
paid on or before the last day of the month following
each calendar quarter. Each payment shall be
accompanied by a statement showing in reasonable
detail the basis of computation of royalties due in
respect of the production of the Company during the
preceding calendar quarter.
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Royalties will be computed from the rates specified in
Annex "F" as follows:
a) the tonnage or quantity by weight used in the
computation shall be based on final product
produced by the Company. In the case of
concentrates or ore bullion, the quantity by
weight of each mineral, and or metal subject to
royalty shall be properly determined by
internationally accepted assay methods.
b) the Government shall (upon written request by the
Company) specify the royalty tariff in column 5
of Annex "F" for those minerals which no tariff
reference is given.
(ii) The Company undertakes that any mining, processing or
treatment of ore prior to domestic sale or export
shipment by the Company shall be conducted in
accordance with such generally accepted international
standards as are economically and technically
feasible, and in accordance with such standards the
Company undertakes to use all reasonable efforts to
optimize the mining recovery of ore from proven
reserves and metallurgical recovery of products
from the ore provided it is economically and
technically feasible to do so, and shall submit
evidence to the Department of compliance with this
undertaking. Royalty shall be payable annually in
lump sum on any industrial minerals derived from the
Enterprise and used for the Company's construction
purposes such as but not limited to roads,
bridges, railways, port facilities, airports,
community buildings, housing or any other
infrastructure used in relation to the Enterprise
the amount of which will be negotiated between the
Company and the regional Government
(iii) If, in the opinion of the Government, the Company is
failing without good cause to recover products at the
recovery rate indicated in the feasibility study, it
may give notice in writing to the Company.
Within three (3) months of the receipt of this notice
the Company shall either:
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a) Commence work to improve its mining method,
treatment and processing facilities to the
reasonable satisfaction of the Government,
provided that the Company shall in no event be
obliged to conduct mining, processing or
treatment activities otherwise than as provided
in Article 13.2 (ii);
b) submit to the Government evidence in
justification of its performance in accordance
with sub-paragraph (ii) of this Article 13
paragraph 2. In the event that the Government
remains unsatisfied with the Company's
performance in mining ore from the proven reserve
and recovering products from the ore, the
Government shall have the right to commission
independent technical studies to determine a fair
average recovery rate taking into account the
nature of the proven reserve and the ore and the
economic and technical feasibility of achieving
increased recovery by the Company in accordance
with sub-paragraph (ii) of this Article 13
paragraph 2. Such studies shall be carried out
by internationally recognized consultants
appointed by the Government and agreed to by the
Company. The Government and the Company shall
have the right to prepare submissions to the
consultants. If the said consultants find that
the performance of the Company's operations is
not satisfactory, then the cost shall be borne by
the Company. If it is found that the
performance of the Company's obligations is
satisfactory, then the cost shall be borne by the
Government. If following the completion of such
studies, the Company fails within a reasonable
period to achieve the recovery rate indicated by
such studies, the Government shall have the
right, if the Company is not then observing its
undertaking in sub-paragraph (ii) of this
Article 13 paragraph 2, to increase the royalty
applicable to such products in proportion to the
extent that the recovery of such products by
the Company falls short of the fair average rate
indicated by such studies. But at no time shall
the payment of
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such increased royalty free the
Company from the obligation to observe its
undertaking in sub-paragraph (ii) of this Article
13 paragraph 2.
3. Income taxes with respect to the Taxable Income of the
Company:
(i) The Company shall pay Income Tax on income, that is
any increase in economic ability received or accrued
by the Company, whether originating from within or
outside Indonesia, in whatever name and form,
including but not limited to gross profit from
business, dividends, interest and royalties; and the
tax rates to be charged for the duration of this
Agreement shall be as follows:
(a) Fifteen percent (15%) for taxable income up to
Rp 10,000,000 (ten million Rupiah);
(b) Twenty five percent (25%) for taxable income
exceeding Rp 10,000,000 (ten million Rupiah), up
to Rp 50,000,000 (fifty million Rupiah);
(c) Thirty five percent (35%) for taxable income
exceeding Rp 50,000,000 (fifty million Rupiah).
(ii) To calculate taxable income, the rules for
computation of income tax as provided for in Annex "H"
attached to and made part of this Agreement shall
apply. Except as otherwise stipulated in this
Agreement, the rules provided in Income Tax Law 1984,
Law No. 6 Year 1983, and its implementation
regulations, shall apply.
4. Personal income tax (PPh Article 21)
(i) The Company has liability to withhold and remit income
tax on income related to work, including remuneration
and pension paid to employees of the Company as
Domestic tax payers according to Article 21 of the
Income Tax Law 1984.
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(ii) Expatriate Individuals who are employed or engaged by
the Company who are present in Indonesia for less than
183 (one hundred eighty three) days in any twelve
month period shall be subject to income tax through
withholding tax by the Company based on Article 26 of
the Income Tax Law 1984, with a rate of 20% (twenty
percent) or such lower percentage due to the
enforcement of any relevant Tax Treaty on the gross
income, for services conducted in Indonesia. The
income tax of such Expatriate Individuals which is
taxable in Indonesia include all kind of remuneration
paid to them for services rendered in Indonesia.
(iii) Expatriate individuals who are employed or engaged by
the Company and who are present in Indonesia for more
than 183 (one hudnred and eighty three) days in any
twelve month period or intending to reside in
Indonesia, shall be subject to income tax through
withholding tax by the Company based on Article 21 of
the Income Tax Law 1984, from the income paid to the
Company's employees with consideration being given to
the regulations relating to deductible income. The
income of such Expatriate Individuals shall include
all kinds of remuneration paid to them by the Company,
due regard to the intended agreement in paragraph 7 of
Annex "H".
5. Income taxes on dividends, interest, rents, royalties, and
other income related to the utilization of property and
compensation paid for technical services, management
services and other services.
The Company in accordance with the Income Tax Law 1994 and
regulation prevailing at the date of the signing of this
Agreement is obliged to withhold and remit to the
Government income taxes at a rate specified in this Article
or such lower rate due to the enforcement of relevant Tax
Treaty as follows:
(i) Dividends, interest in whatever form including loan
payment warranty;
(ii) Rents, royalties and other income related to the
utilization of property;
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(iii) Compensation paid for technical services or managerial
services and other services performed in Indonesia.
The rate of such withholding tax in force as from the date of
signing of this Agreement are:
(a) fifteen percent (15%) in the case of payments of
dividends, interest, rents, royalties, and other
income related to the use of property paid to the
domestic tax payer.
(b) nine percent (9%) on compensation paid for technical
and managerial services performed in Indonesia in the
case of payment performed to the domestic tax payer.
(c) twenty percent (20%) or any lower due to the
enforcement of relevant Tax Treaty in the case of such
income paid to foreign tax payer.
6. Value Added Tax (VAT) and/or Sales Tax for Luxury Goods
according to the Value Added Tax Law 1984 and its
implementation regulations either which have been passed or
shall be passed after this Agreement.
Due regard to the general liability aimed in Value Added
Tax Law 1984 and all of its implementation regulations, the
Company has liabilities:
(i) To report its business to be solidified as
Taxable firm.
(ii) As a taxable firm to collect and remit Value
Added Tax on delivery of Products (Output Tax) at
a rate of ten percents (10%) or other rates in
accordance with Value Added Tax Law 1984 and its
implementation regulations.
(iii) As tax collector to collect and remit Value Added
Tax and/or Sales on Luxury Goods based on Decree
of the President of the Republic of Indonesia
Number 56 Year 1988 or other similar decree.
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(iv) The Company is subject to the Value Added Tax
and/or Sales Tax on Luxury Goods, on import, or
purchasing taxable goods or obtaining taxable
services which is based on Value Added Tax Law
1984 and its implementation regulations subject
to Value Added Tax and/or Sales Tax on Luxury
Goods.
(v) Limited to the importing or obtaining taxable
goods in the form of machinery, equipment, and
factory equipment, are granted postponement of
payment on Value Added Tax and/or Sales Tax on
Luxury Goods in accordance with the prevailing
regulation.
(vi) Value Added Tax paid on import or domestic
obtianing of taxable goods or services (Input
Tax) are creditable to Output Tax in accordance
with provided Value Added Tax Law 1984 and its
implementation regulations.
(vii) In case of Input Tax is greater than Output Tax
for a certain tax period, overpayment of the
Input Tax can be compensated with the Output Tax
for the following tax period or a refund may be
requested. The refund will be made within the
latest time period of one (1) month since the
refund request accepted in the Notification
Letter.
7. Stamp Duty on Documents.
The Company is levied to Stamp Duty in accordance with the
provisions stipulated in the Law No. 13 Year 1985 regarding
Stamp Duty.
8. Import Duty on goods imported into Indonesia.
(i) Exemption and tax reliefs on import of capital goods,
equipment and machinery and supplies are granted to
the Company based on Law No. 1 Year 1967 concerning
Foreign Capital Investment as amended by Law No. 11
Year 1970 as provided in Article 12 above.
(ii) Import of other goods into Indonesian customs
including personal effects shall be subject to the
prevailing law and regulation.
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(iii) Excise Tax on tobacco and liquor are subject to
taxation in accordance with the rules of prevailing
legislation.
9. Land and Building Tax (PBB).
The Company shall pay Land and Building Tax (PBB), in
Rupiah or in such other currencies as may be mutually
agreed, as follows:
(i) During pre-production Periods (General Survey,
Exploration, Feasibility Studies and Construction),
the Company shall pay Land and Building Tax an amount
equal to the amount of deadrent as stated in Article
13 paragraph (1) of this Agreement.
(ii) During the operation/production Period, the Company
shall pay Land and Building Tax an amount equal to the
amount of deadrent plus an amount of 0.5% X 30% of
gross revenues from mining operation.
(iii) During the Contract Period, the Company shall also pay
Land and Building Tax on land/water and building
outside or inside the Contract Area/Mining Area used
by the Company for its facilities which are closed to
the public, an amount to be measured by the number of
square metres of land/water and floor space and type
of the building in accordance with the provisions of
Law No. 12 Year 1985 and the classification and the
amount of NJOP stipulated by the District Head Office
of the Directorate General of Taxation.
(iv) Imposition and payment of Land and Building Tax for
Contract Area/Mining Area during pre-production Period
as stipulated in sub paragraph (i) above, follows the
rules regulated for deadrent.
(v) Imposition and payment of Land and Building Tax for
Contract Area/Mining Area during the
operation/production Period and for land/water and
building used by the Company, follows the imposition
rules stipulated in sub paragraph (i) and sub
paragraph (ii) above, and prevailing rules for Land
and Building Tax payment generally in force.
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10. The Company shall pay levies and taxes, charges, and duties
imposed by Regional Government in Indonesia which have been
approved by the Central Government in accordance with the
prevailing laws and regulations at rates and calculated in
a manner not greater than the amount calculated based on
laws and regulations in force at the date of signing of
this Agreement.
11. The Company shall pay general administrative fees and
charges for facilities or services and special rights
granted by the Regional Government to the extent that such
fees and charges have been approved by the Central
Government.
12. Tax on the transfer of ownership right.
The Company shall pay tax on transfer of ownership rights
for:
(i) Motor vehicles levied by the Local Government where
the vehicles are registered at a rate accordance with
the relevant Regional Government regulations.
(ii) Registration certificate and transfer of ships or sea
transportation means operating in Indonesia.
Tax compliance of the Company and its subsidiaries or its
Affiliates in connection with formal and material tax
obligations such as Tax Identification Number, Tax
Return, Tax payment, reporting, etc. and rights on
taxation namely tax objection to amount of tax, refund, tax
credit, compensation and penalties are subject to
provisions provided in Law Number 6 Year 1983 concerning
General Tax Provisions and Procedures, Income Tax Law 1984,
Value Added Tax Law 1984, Law Number 12 Year 1985
concerning Land and Building Tax, Law Number 13 Year 1985
on Stamp Duty and all of its implementation regulations.
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In determining the Company's net taxable income, sound,
consistent and generally accepted accounting principles as
usually used in the mining industry shall be employed,
provided, however, that where more than one accounting
practice is found by the Government to prevail with regard
to the particular item, the Government shall consult with
the Company in relation to such particular item. Without
limiting the generally of the foregoing, for accounting
purposes, the Government shall in no event be bound by the
Company's characterization of any transaction with an
Affiliate as stated by the Company. In the event that the
Government has determined an unreasonable situation or not
in accordance with general practice followed by independent
parties in similar transactions on a certain payment,
deduction, charges for expenses or other transaction with
an Affiliate for the purposes of determining the Company's
income tax, the Government shall substitute the payment,
deduction, charges for expenses or other transactions which
would have prevailed had the transaction occurred between
independent parties.
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ARTICLE 14
RECORDS, INSPECTION AND WORK PROGRAM
1. The Company shall always conduct and maintain in Indonesia,
precise, complete, and systematic technical records and
compose financial records showing a true and fair view of
all of its operations and the status of proven, probable
and possible ore reserves, including mining, processing,
transportation and marketing records in accordance with
generally accepted accounting principles, stated in Rupiah
or in equivalent United States Dollars. The financial and
other records may be presented in English and US Dollar
contiguous with its conversion in Rupiah.
Tax Return (SPT) with its appendices and tax payment
liability shall be maintained in Indonesian language and
Rupiah currency.
The Company is obliged to keep its book and records, and
its principle document and other document relating to their
operation for ten (10) years.
The Company shall furnish to the Government annual
financial statements consisting of a balance sheet and a
statement of income and all such other financial
information in accordance with generally accepted
accounting principles in Indonesia and all such other
information concerning its operations in reasonable detail
and such detail as the Government may reasonably request.
2. The Government and its authorized representatives have the
right to review and audit such financial statement within
five (5) years after the end of such fiscal year. In the
event of the Government does not issue any assessment for
additional tax payment within such five (5) year period,
the right of Government shall be expired (invalidated),
except the tax payer is condemned for criminal act as
referred to in Article 13 paragraph (7) and Article 15
paragraph (4) Law No. 6 Year 1983.
3. The Government and its authorized representatives may enter
upon the Contract Area and any other place of business of
the Company to inspect its operation at any time from time
to time during regular business hours. The Company shall
render necessary assistance to enable the representatives
to inspect such technical and financial records relating to
the Company's
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operation and shall give said representatives
such information as the said representatives may reasonably
request. The representatives shall conduct such inspection
on their own risk and shall avoid interference to the
normal operations of the Company.
4. The Company shall submit to the Government not later than
November fifteenth (15th) or February fifteenth (15th) of
each year during the term of this Agreement its work
program, budget plan, sales contract and marketing/sales
plan for the following year in sufficient detail to permit
the Government to review such physical, financial and
marketing/sales program and determine whether they are in
accordance with the Company's obligations under this
Agreement. A work program and budget for the first year of
this Agreement shall be submitted as soon as possible after
the signing of this Agreement.
5. In addition, the following shall be delivered to the
Ministry:
(i) Conformed copies of all sales, management, commercial
and financial agreements concluded with Affiliates and
independent parties and all other agreements concluded
with Affiliates, to be submitted within one month
after conclusion;
(ii) Monthly reports setting forth the quantities and
qualities of ore produced, shipped, sold, utilized or
otherwise disposed of and the prices obtained.
The Company shall furnish to the Government all other
information of whatever kind relative to the Enterprise
which the latter may request, which is, or could by the
exercise of reasonable efforts by the Company have been,
within the control of the Company in order that the
Government may be fully appraised of the Company's
exploration and exploitation activities.
6. All information mentioned in paragraph 5 of this Article
furnished to the Government shall be either in English or
Indonesian and all financial data shall be recorded in
Rupiah or United States of America currency and records
shall also be kept of conversion rates applied to the
original currency.
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7. The Company shall maintain all original records and reports
relating to its activities and operations under this
Agreement including all documents relating to financial and
commercial transactions with independent parties and
Affiliates in its principal office in Indonesia. These
records and reports shall be open to inspection by the
Government through an authorized representative. Such
reports and records shall be maintained in Indonesian or
English and all financial data shall be recorded in Rupiah
or United States of America currency and the records shall
also be kept of conversion rates applied to the original
currency.
8. The Company shall require the Company's co-participants,
Affiliates and sub-contractors to the extent that such co-
participant, Affiliate, or subcontractor carries out
operations and activities in furtherance of the Company's
obligations, activities and operations under this
Agreement, to keep all financial statements, records, data
and information necessary to enable the Company to observe
the provisions of this Article 14.
9. Without prejudice to paragraph 6 of Article 7, any
information supplied by the Company shall (except with the
written consent of the Company which shall not be
unreasonably withheld) be treated by all persons in the
service of the Government of the Republic of Indonesia as
confidential, but the Government shall nevertheless be
entitled at any time to make use of any information
received from the Company for the purpose of preparing and
publishing aggregated returns and general reports on the
extent of ore prospecting or ore mining operations in
Indonesia and for the purpose of any arbitration or
litigation between the Government and the Company.
10. All records, reports, plans, maps, charts, accounts and
information which the Company is or may from time to time
be required to supply under the provisions of this
Agreement shall be supplied at the expense of the Company.
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ARTICLE 15
CURRENCY EXCHANGE
1. All investment remittances into Indonesia for the purpose
of any expenditures to be made in Indonesia shall be
deposited into a foreign investment account (the "PMA
Account") established at one or more foreign exchange banks
in Indonesia. All such investment remittances shall be
used in accordance with the prevailing investment
regulations applicable to foreign investment law companies
established under the Foreign Investment Law, Law No. 1 of
1967, and its amendment Law No. 11 of 1970. The conversion
or sale of foreign exchange originating from the PMA
foreign currency account is to be done with foreign
exchange banks and not necessarily so with Bank Indonesia.
2. The Company shall be granted the right to transfer abroad,
in any currency it may desire, funds in respect of the
following items, provided that such transfers are effected
in accordance with the prevailing laws and regulations and
at prevailing rates of exchange generally applicable to
commercial transactions:
(i) Net operating profits of the Company in
proportion to the shareholding of any
non-Indonesian investor;
(ii) Repayment of loan principal and the interest
thereon, insofar as it is a part of the Company's
investment which has been approved by the
Government;
(iii) Allowance for depreciation of the capital assets
generally applicable to foreign investment
companies established under the Foreign
Investment Law, Law No. 1 of 1967, as amended;
(iv) Proceeds from sales of shares sold pursuant to
paragraph 3 of Article 24;
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(v) Expenses for Expatriates employed by the Company
and their families and for training of Indonesian
personnel abroad;
(vi) Debts of the Company denominated in foreign
currency, including debts owed to contractors and
sellers of equipment and raw materials, or for
commissions;
(vii) Technical assistance fees;
(viii) License fees;
(ix) Agency commissions payable to third parties
abroad;
(x) Payments to foreign suppliers of the Company, to
the extent that the purchases of foreign goods
and services, including management and related
services, are necessary for the operation of the
Company or the Enterprise;
(xi) Repatriation of capital on the liquidation of the
Company, or resulting from capital restructuring
approved by the Government; and
(xii) Any other foreign exchange facilities provided
from time to time to foreign investment companies
established under the Foreign Investment Law, Law
No. 1 of 1967, as amended or provided by any
regulations adopted pursuant thereto or by any
other laws or regulations.
3. The proceeds of sales of Minerals and any Products derived
from them can be used as the Company sees fit. Without
prejudicing the foregoing rights of the Company, the
Company agrees that with regard to the proceeds of the
Company's export sales it shall comply with laws and
regulations from time to time in force, except as Bank
Indonesia and the company may otherwise agree. The terms
and conditions of any such agreement between Bank Indonesia
and the Company shall not be less favorable than those
contained in any other similar agreements by Bank Indonesia
and other Mining companies now or hereafter in effect.
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4. The Company in the exercise and performance of its rights
and obligations set forth in this Agreement shall be
authorized to pay abroad, in any currency it may desire,
without conversion into Rupiah, for the goods and services
it may require and to defray abroad, in any currency it may
desire, any other expenses incurred for operations under
this Agreement.
5. All Expatriates who are Covered Employees in any capacity
shall have the right to freely retain or dispose of outside
of Indonesia any of their funds located outside Indonesia;
freely transfer outside of Indonesia any of their personal
funds located in Indonesia and shall be entitled to import
into Indonesia such foreign currencies as may be required
for their needs.
6. In respect of other matters of foreign currency arising in
any way out of or in connection with this Agreement, the
Company shall be entitled to receive treatment no less
favorable to the Company than that accorded to any other
Mining Company carrying on operations in Indonesia.
7. Subject to the foregoing paragraphs of this Article 15, the
Company shall comply with all financial reporting and
approval requirements applicable to foreign investment law
companies established under the Foreign Investment Law, Law
No. 1 of 1967.
8. The Company shall forward financial reports in accordance
with the procedures required by Bank Indonesia.
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ARTICLE 16
SPECIAL RIGHTS OF THE GOVERNMENT
1. The Company and its shareholders agree that they will not,
without the Goverment's prior approval :
(i) amend the Articles of Association of the Company;
(ii) change the basic nature of the business of the
Company;
(iii) voluntarily liquidate or wind up the Company;
(iv) merge or consolidate the Company with any other
Company;
(v) pledge or otherwise use as security the Minerals in
the Contract Area.
2. The Government reserves the right to withhold its approval
of plans and designs relating to construction, operation,
expansion, modification and replacement of facilities of
the Enterprise in the Contract Area which may
disproportionately and unreasonably damage the surrounding
Environment or limit its further development potential or
significantly disrupt the socio-political stability in the
area or be adverse to the interests of national security.
3. The Government shall have the right of access to the
Contract Area as provided in paragraph 3 of Article 14.
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ARTICLE 17
EMPLOYMENT AND TRAINING
OF INDONESIAN PARTICIPANTS
1. The Company shall employ Indonesian personnel, giving
preference to local residents, to the maximum extent
practicable consistent with efficient operations,
subject to the provisions of the laws and regulations
which may from time to time be in force in Indonesia.
2. The Company shall not be restricted in its assignment
or discharge of personnel; provided, however, that
subject to the foregoing requirements, the terms and
conditions of such assignment and discharge or
disciplining of Indonesian personnel shall be carried
out in compliance with the laws and regulations of
Indonesia which at the time are generally applied.
3. The Company shall seek to provide direct Indonesian
participation in the Enterprise through the inclusion
of Indonesian nationals in the management of the
Company and among the members of its Board of
Directors. To this end at least one seat on the Board
of Directors will continuously be occupied by an
Indonesian national from the date of incorporation of
the Company. The Company will also train Indonesian
nationals to occupy other responsible positions.
4. The Company shall conduct a comprehensive training
program for Indonesian personnel in Indonesia and,
subject to the approval of the Government, in other
countries and carry out such program for training and
education in order to meet the requirement for various
classifications of full time employment for its
operations in Indonesia within the shortest
practicable period of time. The Company shall also
conduct a program to acquaint all Expatriate employees
and registered subcontractors with the laws and
customs of Indonesia.
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5. The Company and its registered subcontractors may bring
into Indonesia such Expatriate Individuals as in the
Company's judgement are required to carry out its
operations efficiently; provided however, that the Minister
may make known to the Company, and the Company shall duly
observe, objections based on grounds of national security
or foreign policy of the Government. At the Company's
request (which shall be accompanied by information
concerning the education, experience and other
qualifications of the individuals concerned) and in
compliance with the rules and regulations in effect from
time to time, the Government will make arrangement for the
acquisition of all necessary permits, (including entry and
exit permits, work permits, visas and such other permits,
as may be required); in this connection the Company shall
periodically submit its manpower requirement plans,
manpower report, training program and training report in
the framework the Indonesianization process to the
Department.
6. The Company agrees that there shall at all times be equal
treatment, facilities and opportunities among employees in
the same job classification with respect to salaries,
facilities and opportunities within the Mining industry
regardless of nationality and the Company shall duly
observe the existing manpower laws and regulations which
may from time to time be in force in Indonesia.
Notwithstanding the foregoing, it shall not be a violation
to give preference as to opportunity to Indonesians in
light of the policy of the Government to increase the
employment of Indonesians to the maximum extent possible,
nor to pay Expatriates brought into Indonesia pursuant to
paragraph 5 of this Article at a higher rate than local
employees in situations where, with respect to a given job
classification, there is a need to employ such Expatriates.
7. The Company acknowledges that pursuant to Law No. 14 of
1969, employees of the Company have the right to form a
trade union for purposes of collective bargaining with the
Company. The
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Company. The Company acknowledges that it may be required
from time to time to enter into collective bargaining with
such trade union. Therefore the Company is obliged to
morally support the employees to form the union and to
liaise with
8. Prior to the establishment of a permanent
settlement,the Company shall furnish free medical care
and attention to all its employees working in the
Contract Area as is reasonable and shall maintain or
have available adequate medical services at least
commensurate with such services provided in similar
circumstances in Indonesia. If the Company
establishes a permanent settlement in connection with
a Mining Area or a Project Area related to such Mining
Area, the Company shall furnish such free medical
care and attention to all its employees and all
Government officials requested by the Company working
in such Mining Area or Project Area as is reasonable
and shall establish a staff and maintain a dispensary,
clinic or hospital which shall be reasonably adequate
under the circumstances according to the prevailing
laws and regulations of Indonesia.
9. If in connection with a Mining Area or a Project Area
related to such Mining Area, the Company establishes a
permanent settlement incorporating families for the
employees associated with the Enterprise, the Company
shall provide, free of charge, primary and secondary
education facilities for the children of all employees
working in such Mining Area or Project Area. Rules,
regulations and standards of general application for
comparable education facilities in Indonesia
established by the Department of Education and Culture
shall be followed.
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ARTICLE 18
ENABLING PROVISIONS
1. The Government will grant the Company the necessary rights
and will take such other action as may be desirable to
achieve the mutual objectives of this Agreement. The
Company shall have the following rights:
(i) the sole right to enter the Contract Area or any
Mining Area for the purposes of this Agreement, to
make drill holes, test pits and excavations, and to
take and remove, without royalty or other charge,
samples for assays and for metallurgical, pilot plant
and laboratory research purposes, including bulk
samples for such purposes; provided that the Company
shall have received the approval by the Department
prior to the export of any such samples, to be given
in advance on a yearly basis, and shall pay any
royalties applicable thereto.
(ii) to enter upon and remain within the Contract Area and
the Project Areas (related to the Contract Area
(including portions of the air space and shore line),
subject to the right of the Department to object to
any Mining Area as provided in paragraph 2 of Article
8. The Company shall recognize the items referred to
in Article 16 of Law No. 11 of 1967, subject to the
provision of paragraph 2 of the said Article 16.
2. In carrying out its activities under this Agreement, the
Company, subject to the laws and regulations from time to
time in effect in Indonesia, shall have the right to
construct facilities as it deems necessary, provided that:
(i) in connection with the use of land by the Company for
construction of facilities as provided in this
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Agreement, the Company shall pay the usual surveying
and registration fees charged by the Land Registration
Office. In acquiring titles to land outside any
Mining Area, the Company shall comply with laws and
regulations of general application from time to time
in effect.
(ii) in connection with the activities of the Company, but
subject to the provisions of Article 13, the Company
shall pay generally applicable fees and charges for
services performed, facilities provided and special
rights granted by the Government; provided that such
services, facilities and rights are requested by the
Company.
3. Subject to laws and regulations which may from time to time
be in force in Indonesia, and subject also to the
provisions of paragraph 2 of Article 25 and paragraph 2 of
Article 16, the Company may at any time file with the
Department a plan or plans and may thereafter file
additional or amended plans covering:
(i) the Mining Area or Areas in which the Company proposes
to construct facilities related to production;
(ii) all other areas in which the Company proposes to
construct any other facilities necessary for the
Enterprise and the location of all such rights in and
over land including easements, right of way and rights
to lay or pass on, over or under land, any roads,
railways, pipes, pipelines, sewers, drains, wires,
lines or similar facilities as may be necessary for
the Enterprise; and
(iii) all other areas in which the Company shall have the
right to construct such additional facilities as the
Company deems necessary or convenient for the
Enterprise.
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The Government shall thereupon make arrangements for the
Company to utilize and remain within all such areas and
such land covered by such plans (or such comparable areas
as may be agreed between the Government and the Company)
and to exercise the other rights specified above with
respect to each such area. The use and occupancy of any
areas covered by such plans shall not be subject to payment
by the Company of any charges or fees other than those
specified elsewhere in this Agreement. The plans filed
pursuant to this paragraph shall, to the extent
practicable, give description in sufficient detail to
permit precise identification of the designated areas. The
Government shall assist the Company in arrangements for any
necessary resettlement of local inhabitants whose
resettlement from any part of the Contract Area or the
Project Areas is necessary and the Company shall pay for
the resettlement and give reasonable compensation for any
dwelling, privately owned lands (including such land
ownership based on any Indonesian customs or customary
laws, generally or locally applicable), privately owned
crops and flora or other improvements in existence on any
such parts which are taken or damaged by the Company in
connection with its activities under this Agreement.
4. Subject to the non-monetary provisions laid down in
generally applicable central Government, regional
Government and Provincial laws and regulations from time to
time in effect, and to the payments provided for in Article
13 of this Agreement but to no other payments to the
Government, and without prejudice to the rights of private
parties created prior to the beginning of the Construction
Period and to payments of reasonable compensation to any
such private party holding rights created prior to the
beginning of the Construction Period as may be customary in
the Contract Area, the Company at its own expense may take
and use from the Contract Area or Project Area such timber
(for construction purposes), soil, stone, sand, gravel,
lime, water, other products and materials as are necessary
for or are to be used
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by the Enterprise. In doing so, and except as otherwise
provided in this Agreement, the Company shall observe the
existing regulations in effect on the date of the signing
of this Agreement governing the exploitation and use of
said natural resources.
5. The Company shall also have the right, in compliance with
existing rules and regulations in effect on the date of the
signing of this Agreement, to clear away and remove such
timber, overburden and other obstructions as may be
necessary or desirable for the Mining, construction of
facilities and any other operations of the Company under
this Agreement, provided that the Company shall take into
account other rights granted by the Government such as
grazing, timber cutting and cultivation rights, and rights
of way, by conducting its operations under this Agreement
so as to interfere as little as possible with such rights.
6. The Company may, at its own expense, also take and use any
of such products and materials from other areas outside the
Contract Area or any Project Area subject to the rights of
other parties, to the approval of the Government, and to
the payment of such compensation as may be agreed between
the Company and such other parties or the Government and in
accordance with the prevailing laws and regulations in
effect on the date of the signing of this Agreement.
7. At the request of the Company, the Government shall co-
operate in a joint endeavor to alleviate any interference
which may arise from others operating under conflicting
rights.
8. The Company and the Government recognize that the existing
and proposed operations hereunder are to be carried out in
an extremely remote area with a difficult environment and
that, accordingly, the Company may be required to develop
special facilities and carry out special functions for the
fulfillment
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of this Agreement. In recognition of the added burdens and
expenses to be borne by the Company and the additional
services to be performed by the Company as a result of the
location of its activities in a difficult environment, the
Government recognizes that appropriate arrangement may be
required to minimize the adverse economic and operational
costs resulting from the administration of the laws and
regulations of the Government from time to time in effect,
and in construing the Company's obligations to comply with
such laws and regulations.
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ARTICLE 19
FORCE MAJEURE
1. Any failure by the Government or by the Company to carry
out any of its obligations under this Agreement shall not
be deemed a breach of contract or default if such failure
is caused by force majeure, that party having taken all
appropriate precautions, due care and reasonable
alternative measures with the objectives of avoiding such
failure and of carrying out its obligations under this
Agreement. If any activity is delayed, curtailed or
prevented by force majeure, then anything in this Agreement
to the contrary notwithstanding, the time for carrying out
the activity thereby affected and the term of this
Agreement specified in Article 31 shall each be extended
for a period equal to the total of the periods during which
such causes or their effects were operative, and for such
further periods, if any, as shall be necessary to make good
the time lost as a result of such force majeure. For the
purposes of this Agreement, force majeure shall include
among other things: war, insurrection, civil disturbance,
blockade, sabotage, embargo, strike and other labor
conflict, riot, epidemic, earthquake, storm, flood, or
other adverse weather conditions, explosion, fire,
lightning, adverse order or direction of any government de
jure or de facto or any instrumentality or subdivision
thereof, act of God or the public enemy, breakdown of
machinery having a major effect on the operation of the
Enterprise and any cause (whether or not of the kind
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hereinbefore described) over which the affected party has
no reasonable control and which is of such a nature as to
delay, curtail or prevent timely action by the party
affected.
2. The party whose ability to perform its obligations is
affected by force majeure shall notify as soon as
practicable the other party thereof in writing, stating the
cause, and the parties shall endeavor to do all reasonable
acts and things within their power to remove such cause;
provided, however, that neither party shall be obligated to
resolve or terminate any disagreement with third parties,
including labor disputes, except under conditions
acceptable to it or pursuant to the final decision of any
arbitral, judicial or statutory agencies having
jurisdiction to finally resolve the disagreement. As to
labor disputes, the Company may request the Government to
co-operate in a joint endeavor to alleviate any conflict
which may arise.
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ARTICLE 20
D E F A U L T
1. Subject to provisions of Article 19 of this Agreement, in
the event that the Company is found to be in default in the
performance of any provision of this Agreement, the
Government, as its remedy under this Agreement, shall give
the Company written notice thereof (which notice must state
that it is pursuant to this Article) and the Company shall
have a period of a maximum 180 (one hundred and eighty)
days after receipt of such notice to correct such default.
The actual time within which to correct such default shall
be stipulated in the said written notice in each individual
case as may be reasonable under the circumstances
considering the nature of the default. In the event the
Company corrects such default within such period, this
Agreement shall remain in full force and effect without
prejudice to any future right of the Government in respect
of any future default. In the event the Company does not
correct such default within the time stipulated in the
notice, the Government shall have the right to terminate
this Agreement in accordance with the provisions of Article
22 as the case may be.
A failure by the Company to comply with a non-material or
non- substantive provision of this Agreement relating to
one or more Mining Areas, and not to all Mining Areas or to
the Enterprise as a whole, shall not be considered to be a
default under this Article 20. In the event of such
failure, after
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notice to the Company in accordance with the preceding
paragraph and failure by the Company to correct such
failure in accordance therewith, the Government shall have
the right to close such Mining Areas or any part thereof
and to require the Company to relinquish such Mining Areas
or such parts.
2. Notwithstanding the provision of paragraph 1 of this
Article, in the event the Company shall be found to be in
default in the making of any payment of money to the
Government which the Company is required to make pursuant
to Article 12 or Article 13, the period within which the
Company must correct such default shall be 30 (thirty) days
after the receipt of notice thereof. The penalty for late
payment shall be an interest charge on the amount in
default from the date the payment was due, at the rate of
the New York prime interest rate in effect at the date of
default plus 4% (four percent). This or other penalties
provided for in this Article may not be taken as deductions
in the calculation of taxable income.
3. The Company shall not be deemed to be in default in the
performance of any provision of this Agreement concerning
which there is any dispute between the parties until such
time as all disputes concerning such provision, including
any contention that the Company is in default in the
performance thereof or any dispute as to whether the
Company was provided a reasonable opportunity to correct a
default, have been settled as provided in Article 21.
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ARTICLE 21
SETTLEMENT OF DISPUTES
1. The Government and the Company hereby consent to submit all
disputes between the parties hereto arising, before or
after termination hereof, out of this Agreement or the
application hereof or the operations hereunder, including
contentions that a party is in default in the performance
of its obligations hereunder, for final settlement, either
by conciliation, if the parties wish to seek an amicable
settlement by conciliation, or to arbitration. Where the
parties seek an amicable settlement of a dispute by
conciliation, the conciliation shall take place in
accordance with the UNCITRAL Conciliation Rules contained
in resolution 35/52 adopted by the United Nations General
Assembly on 4 December, 1980 and entitled "Conciliation
Rules of the United Nations Commission on International
Trade Law" as at present in force. Where the Parties
arbitrate, the dispute shall be settled by arbitration in
accordance with the UNCITRAL Arbitration Rules contained in
resolution 31/98 adopted by the United Nations General
Assembly on 15 December, 1976 and entitled "Arbitration
Rules of the United Nations Commission on International
Trade Law" as at present in force. The foregoing provisions
of this paragraph do not apply to tax matters which are
subject to the jurisdiction of Majelis Pertimbangan Pajak
(The Consultative Board of Taxes). The language to be used
in conciliation and arbitration proceedings shall be the
English language, unless the parties otherwise agree.
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2. Before the Government or the Company institutes an
arbitration proceeding under the UNCITRAL Arbitration
Rules, it will use its best endeavors to resolve the
dispute through consultation and use of administrative
remedies; provided that the Company shall not be obligated
to pursue any such remedies for more than 90 (ninety) days
after it has notified the Government of an impending
dispute if such remedies involve a request or application
to the Government or any of its departments or
instrumentalities.
3. Conciliation or arbitration proceedings conducted pursuant
to this Article shall, if appropriate arrangements can be
made, be held in Jakarta, Indonesia, unless the parties
agree upon another location or unless the aforesaid rules
or the procedures thereunder otherwise require. The
provisions of this Article shall continue in force
notwithstanding the termination of this Agreement. An
award pursuant to any such arbitration proceedings shall be
enforceable against and binding upon the parties hereto,
and shall be specifically enforceable in Indonesia, whether
or not the proceedings have been held in Indonesia.
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ARTICLE 22
TERMINATION
1. At any time during the term of this Agreement, after having
used all reasonable diligence in its endeavor to conduct
its activities under this Agreement, if in the Company's
opinion the Enterprise is not workable, the Company shall
consult with the Department and may thereafter submit a
written notice to terminate this Agreement. Such notice
shall be accompanied with all relevant data and information
related to the Company's activities under this Agreement
which have not been previously submitted to the Department,
including but not limited to documents, maps, plans,
worksheets and other technical data and information.
Within a period not later than 6 (six) months from the date
the Company submits the notice to terminate, the Department
shall by written notice to the Company either (i) confirm
such termination, or (ii) specify the particular data
and/or information required by this paragraph which the
Company has not furnished and which the Department has
determined must be furnished prior to termination of this
Agreement.
This Agreement shall terminate and the Company shall be
relieved of all further obligations under this Agreement
upon the earlier to occur of (a) the date of the
Department's written confirmation of termination; (b) 90
(ninety) days after the date on which the Company submits
to the Department the data and/or information required by
the Department as
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provided in subsection (ii) of the preceding paragraph; or
(c) the date which is 6 (six) months after the Company
submitted its notice of termination to the Department if
the Department does not give any written notice regarding
termination within such 6 (six) months period.
2. If termination occurs during the General Survey or
Exploration Periods, the Company shall have a period of 6
(six) months within which to sell, remove or otherwise
dispose of its property in Indonesia and to furnish the
Government with the information to be turned over to it in
respect of the work which the Company has performed to the
date of the giving of the aforementioned notice. Any
property not so removed or otherwise disposed of shall
become the property of the Government without any
compensation to the Company.
3. If termination occurs during the Feasibility Studies
Period, all property of the Company, movable and immovable,
located in the Contract Area shall be offered for sale to
the Government, which shall have an option, valid for 30
(thirty) days from the date of such offer, to buy all such
property at a fair and reasonable market price from the
Company payable in United States Dollars or in any currency
freely convertible in Indonesia and through a bank to be
agreed upon by both parties within 90 (ninety) days after
acceptance by the Government of such offer. If the
Government does not accept such offer within the said 30
(thirty) day period, the Company may sell, remove or
otherwise dispose of any or all of such property during a
period of 6 (six) months after the expiration of such
offer. Any property not so sold, removed
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or otherwise disposed of shall become the property of
the Government without any compensation to the Company.
4. If termination occurs during the Construction Period, all
property of the Company, both movable and immovable,
located in the Contract Area shall in the first instance be
offered for sale to the Government which shall have an
option, valid for 30 (thirty) days from the date of such
offer, to buy all such property at a fair and reasonable
market price from the Company payable in United States
Dollars or in any currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold, removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
5. If termination occurs during the Operating Period, or by
reason of the expiration of the term of this Agreement, all
property of the Company, both movable and immovable,
located in the Contract Area shall be offered for sale to
the Government at cost or market value whichever is the
lower, but in no event lower than the depreciated book
value. The Government shall have an option, valid for 30
(thirty) days from the date of such offer, to buy all such
property at the agreed value payable in United States
Dollars or in any
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currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
6. It is agreed, however, that any property of the Company in
Indonesia, movable or immovable, as shall at the
termination of this Agreement be in use for public purposes
such as roads, schools and/or hospitals, with their
equipment, shall immediately become the property of the
Government without any compensation to the Company; and the
Company shall recognize the items referred to in paragraph
(c) of sub-paragraph 1 of Article 24 of Law No. 11, 1967
relating to safety and the right to excavate, and
paragraphs 3, 4, 5 of Article 46 of Government Regulations
No. 32 of 1969.
7. All sales, removals or disposals of the Company's property
pursuant to the termination of this Agreement shall be
effected according to the prevailing laws, and regulations;
any gain or loss from sale or disposal as relating to the
written down book value shall be determined in accordance
with Article 13 of this Agreement. All values shall be
based on generally accepted accounting principles.
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8. Rights and obligations which have come into effect prior to
the termination of this Agreement and rights and
obligations relating to transfer of currencies and
properties which have not yet been completed at the time of
such termination shall continue in effect for the time
necessary or appropriate fully to exercise such rights and
discharge such obligations. Additionally, the Company shall
be granted the right to transfer abroad all or any proceeds
of sale received under this Article 22 subject to the
requirement of paragraph 2 of Article 15.
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ARTICLE 23
COOPERATION OF THE PARTIES
1. The Parties to this Agreement agree that they will at all
times use their best efforts to carry out the provisions of
this Agreement to the end that the Enterprise may at all
times be conducted with efficiency and for the optimum
benefit of the Parties.
2. The Company agrees to plan and conduct all operations under
this Agreement in accordance with the standards and
requirements imposed elsewhere in this Agreement for the
sound and progressive development of the Mining industry in
Indonesia, to give at all times full consideration to the
aspirations and welfare of the people of the Republic of
Indonesia and to the development of the Nation, and to
cooperate with the Government in promoting the growth and
development of the Indonesian economic and social
structure, and subject to the provisions of this Agreement,
at all times to comply with the laws and regulations of
Indonesia.
3. At any time during the term of this Agreement, upon request
by either party, the Government and the Company may consult
with each other:
(a) to determine whether in the light of all relevant
circumstances, the financial or other provisions of
this Agreement need revision in order to ensure the
continued viability of the Enterprise. Such
circumstances shall include the conditions under which
the mineral,
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production is carried out such as the
size, location and overburden of mineral deposits, the
quality of the mineral, the market conditions for the
mineral, the prevailing purchasing power of money and
the terms and conditions prevailing for comparable
mineral ventures. In reaching agreement on any
revision of this Agreement pursuant to this paragraph
3, both parties shall ensure that no revision of this
Agreement shall prejudice the Company's ability to
retain financial credibility abroad and to raise
finance by borrowing internationally in a manner and
on terms normal to the mining industry, and
(b) Such consultation shall be carried out in a spirit of
cooperation with due regard to the intent and
objectives of the respective parties. Both parties
desire to realize the success of the Enterprise for
the benefit of its shareholders and the people of the
Republic of Indonesia, the development of the Nation,
the growth and development of the economic and social
structure, the continued operation of the Company and
the development of the mineral resources of the
Republic of Indonesia.
4. The Department, on behalf of the Government agrees that
during the term of this Agreement the Government,
consistent with Law No. 1 of 1967 on Foreign Capital
Investment, (i) will take no action which is inconsistent
with the provisions of this Agreement so as to adversely
affect the conduct of the Enterprise hereunder, including,
without limitation, any
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action of condemnation or nationalization of the Enterprise
or any part thereof, and (ii) will at all times cooperate
with the Company in handling all administrative actions and
determinations relating to the Enterprise in the most
expeditious manner consistent with orderly procedures.
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ARTICLE 24
PROMOTION OF NATIONAL INTEREST
1. In the conduct of its activities under this Agreement the
Company shall, consistent with its rights and obligations
elsewhere under this Agreement, give preference to
Indonesian consumers' requirements for its Products and the
Company and its Affiliates and subcontractors shall, in
good faith to the fullest practicable extent, utilize
Indonesian manpower, services and raw materials produced
from Indonesian sources and products manufactured in
Indonesia to the extent such services and products are
available on a competitive time, cost and quality basis,
provided that in comparing prices of goods produced or
manufactured in Indonesia to the price of imported goods
there shall be added a premium (not in excess of twelve and
a half percent) and other expenses (excluding VAT) incurred
up to the time the imported goods are landed in Indonesia.
2. The Company shall offer for sale to Indonesian
Participants, on the basis of the fair market value
thereof, an amount of shares which, after giving effect to
such sale, directly or indirectly, will result in the
Company being in compliance with the requirements of
Government Regulation No. 20 of 1994 as such requirements
apply from time to time to share ownership in Foreign
Capital Investment Companies.
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3. If the Company requires additional equity capital for the
enterprise, the Company may obtain such capital by sales to
any person even though such sales may increase the
proportionate ownership of the Company's capital stock by
person who are not Indonesians Participants; provided that
the Company shall at all times thereafter be in compliance
with the requirements of Government Regulation No. 20 of
1994.
4. In the event of an increase in the share capital of the
Company, the Indonesian Participants shall be entitled to
subscribe for new shares in proportion to their existing
shareholding so as to give them the opportunity to maintain
their existing proportionate shareholding in the Company;
provided that the foregoing shall not apply to shares which
the Company lists on any Indonesian stock exchange.
5. In no event shall shares held by Indonesian Participants be
treated less favorably than those held by any others.
6. The Indonesian Participants shall be entitled to appoint
members of the Board of Commissioners of the Company in
proportion to their shareholding in the Company, but the
Company shall not be required to increase the number of
members of its Board of Commissioners beyond 10 (ten)
simply to maintain absolute proportionality of the members
of the Board of Commissioners appointed by the foreign
participant(s) and by the Indonesian Participants.
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ARTICLE 25
REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE
1. The Company shall at all times cooperate with the
Government in utilizing its best efforts to plan and
coordinate its activities, and proposed future projects in
the Contract Area or the Project Areas in conjunction with
regional development either provincial or in the villages.
Living accommodation and facilities and working conditions
provided by the Company for its operations shall be of a
Government standard commensurate with those of good
employers operating in Indonesia.
2. In relation to the region, the Company shall endeavor to
assist the Government in maximizing the economic and social
benefits generated by the Enterprise in the Contract Area
in respect to:
(i) coordinating such benefits with local and regional
infrastructure studies undertaken by the Government
together with any benefits generated by other
interested local, foreign and international public and
private entities; and
(ii) assisting and advising the Government, when requested,
in its planning of the infrastructure and regional
development which the Company may deem useful to the
Enterprise and to existing and future industries and
activities in the area of the Enterprise.
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3. The Company shall allow the public and the Government to
use any wharf and harbor installations, air strips or roads
which have been constructed by the Company pursuant to this
Agreement and which are located outside the Mining Areas
and the related Project Areas provided that;
(i) any such use shall be subject to such regulations and
limitations as the Company will reasonably impose, and
shall in no event adversely affect or interfere with
the Company's operations hereunder and
(ii) the Company shall be entitled to impose such charges
therefor as shall be appropriate to reflect the cost
of maintaining such facilities and, with respect to
any commercial use of such facilities, the capital
cost thereof.
4. The Company shall maintain and be responsible for the
maintenance of all roads in the Mining Areas.
5. All roads constructed by the Company outside the Mining
Areas, to the extent used by the public, and in accordance
with paragraph 1 of this Article 25, shall be public roads
for the purposes of the provisions of the traffic laws and
regulations which may be from time to time in effect in
Indonesia. To the extent that the plans and designs for the
Enterprise as approved by the Government so provide and
thereafter from time to time, the Government will make such
special regulations under the traffic laws as it considers
necessary or desirable for the proper safety of the users
of the said roads.
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6. If the Company's use of the existing public roads results
in or is likely to result in significant damage or
deterioration, the Company shall pay to the Government or
other authority having control over the roads the cost (or
an equitable proportion thereof having regard to the use of
such roads by others) of preventing or making good such
damages or deterioration or of upgrading to a standard
necessary having regard to the increased traffic. In
addition, the Government or other authority having control
over any such road may require the Company to pay a
maintenance user charge based upon what is fair and
reasonable having regard to the continuing cost (excluding
any profit to the Government or such other authority) of
operation and maintenance of that road and the use of that
road by others. In lieu of making such payments, the
Company will have the right to elect to maintain at its own
expense any such road needed by it for its operations
hereunder.
7. In the event that the Government is unable to provide
adequate telecommunications facilities, the Company may, in
accordance with rules and regulations from time to time in
effect in Indonesia, install and operate such
telecommunications facilities; provided that it shall allow
the Government and the public to use such facilities on the
following terms: (i) any such use shall be subject to such
regulations and limitations as the Company will reasonably
impose, and shall in no event adversely affect or interfere
with the Company's operations hereunder and (ii) the
Company shall be entitled to impose such charges therefor
as will be appropriate to reflect the cost of maintaining
and operating such facilities and, with respect to any
commercial use of such facilities, the capital cost
thereof.
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8. In the event that prior to any such installation by the
Company, adequate telecommunications facilities can be
provided by the Government, the Company shall be obliged to
use the Government's network and pay reasonable standard
charges for telecommunications services.
9. The Company may at its own cost, in accordance with the
laws and regulations from time to time in effect in
Indonesia, construct and establish and develop camps or
permanent facilities sufficient to service the needs of the
Enterprise.
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ARTICLE 26
ENVIRONMENTAL MANAGEMENT AND PROTECTION
1. The Company shall, in accordance with prevailing
Environmental protection and natural preservation laws and
regulations of Indonesia from time to time in effect, use
its best efforts to conduct its operations under this
Agreement so as to minimize harm to the Environment and
utilize recognized modern Mining industry practices to
protect natural resources against unnecessary damage, to
minimize Pollution and harmful emissions into the
Environment, to dispose of Waste in a manner consistent
with good Waste disposal practices, and in general to
provide for the health and safety of its employees and the
local community. The Company shall not take any acts which
may unnecessarily and unreasonably block or limit the
further development of the resources of the area in which
it operates.
2. The Company shall, according to laws and regulations
existing from time to time, install and utilize such
internationally recognized modern safety devices, and shall
observe such internationally recognized modern safety
precautions as are provided and observed under conditions
and operations comparable to those undertaken by the
Company under this Agreement, including measures designed
to prevent and control fires.
3. The Company shall, in accordance with prevailing laws and
regulations, include in the Feasibility Study for each
Mining Area an Environmental impact study which analyzes
the
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potential impact of its operations on land, water, air,
biological resources and human settlements. The
Environmental impact statement will also outline measures
which the Company intends to use to mitigate adverse
impacts.
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ARTICLE 27
LOCAL BUSINESS DEVELOPMENT
1. The Company shall, to the extent reasonably and
economically practicable, having regard to the nature of
the particular goods and services, promote, support,
encourage and lend assistance to Indonesian nationals
desirous of establishing enterprises and businesses
providing goods and services for the Enterprise and for the
permanent settlement(s) (if any) constructed by the Company
and the residents thereof, and shall generally promote,
support, encourage and assist the establishment and
operation of local enterprises outside any Mining Area.
2. The Company shall make maximum use of Indonesian sub-
contractors where services are available from them at
competitive prices and of comparable standards with those
obtainable from elsewhere, whether inside or outside
Indonesia.
3. Insofar as it is practicable the Company shall give first
preference in its assistance hereunder to landowners in and
other people originating from the area of the Enterprise.
4. Except as otherwise agreed by the Department, the Company
shall, at the commencement of the Feasibility Studies
Period with respect to an Exploration Area, appoint, for
such period as is reasonably necessary, a member of its
staff who has had experience within Indonesia of the
establishment, control and
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day-to-day running of enterprises controlled and run by
Indonesians who shall:
(i) identify activities related to the Enterprise
including the provision of goods and services as
described above which can be carried on by Indonesian
nationals or local enterprises ;
(ii) advise and assist Indonesian nationals desirous of
carrying on those activities or of establishing
enterprises to do the same; and
(iii) implement, or assist in the implementation of, the
Business Development Program as hereinafter described
on behalf of the Company.
The staff member appointed for this purpose shall be a full
time employee of the Company.
5. The Company shall, directly or indirectly, provide funds
for, and assist in the development of a Business and
Community Development Program designed to assist
Indonesian Participants in the province in which the
Enterprise is located, which Program shall be submitted to
the Government as part of the Company's feasibility study
report as described in Annex "E".
6. Except as otherwise agreed by the Government, the Business
Development Program will make provision as far as is
practicable for the following (except to the extent of
activities to be carried out directly by the Company):
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(i) enterprises involved in the supply and maintenance of
Mining equipment and the provision of consumable
supplies;
(ii) subcontracting to self - employed equipment operators
for road construction and maintenance;
(iii) subcontracting of site preparation, construction and
maintenance of houses, Government buildings,
industrial facilities and other works and buildings
and facilities to be established, including
concreting, welding, tank constructions, steel
fabrication, plumbing, electrical work and timberwork;
(iv) enterprises involved in town services such as sewerage
and garbage collection, treatment and disposal,
passenger transport, freight carriage of consumer
items and stevedoring (except in relation to the
shipping of the Products of the Mine);
(v) enterprises involved in trade stores, supermarkets,
other retail outlets, canteens, restaurants, taverns,
cinemas, social clubs, cleaning and laundry, and
vehicle maintenance and repair facilities;
(vi) enterprises involved in the supply of fresh fruits,
vegetables, meat and fish; and
(vii) other activities agreed to by the Company and the
Government;
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7. Except as otherwise agreed by the, Government the Business
Development Program shall also include details of:
(i) the time schedule for its implementation;
(ii) those additional activities which could be established
by Indonesian nationals;
(iii) those activities in which the Company intends to
commence operating but which will be transferred to
Indonesian nationals at a later date, on a commercial
basis; and
(iv) any facilities by way of training, technical or
financial assistance which can be made available to
facilitate the smooth transition of ownership and
operation to Indonesian nationals.
8. Except as otherwise agreed by the Government, the Business
Development Program shall be reviewed annually by the
Company, in consultation with the Government, and may be
altered by mutual consent between the Company and the
Government with a view to securing the maximum benefit to
Indonesian nationals and local enterprises from the
operations of the Company and the carrying out of the
Enterprise.
9. Except as otherwise agreed by the Department, the Company
shall consult from time to time with representatives of the
Government and furnish the Government at quarterly
intervals with a report concerning the following:
(i) the implementation of the training and manpower
aspects of the Business Development Program;
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(ii) the implementation of provisions relating to local
purchasing of supplies; and
(iii) the implementation of provisions relating to local
business development.
10. The Government agrees to assist the Company in securing
appropriate land rights to allow the Company to accomplish
the foregoing.
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ARTICLE 28
MISCELLANEOUS PROVISIONS
1. Each of the parties agrees to execute and deliver all such
further instruments, and to do and perform all such further
acts and things, as shall be necessary or convenient to
carry out the provisions of this Agreement.
2. Any notice, request, waiver, consent, approval and other
communication required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly
given or made when it shall be delivered by hand or by
mail, telegram, cable or radiogram, with postage or
transmission charges fully prepaid, to the party to which
it is required or permitted to be given or made at such
party's address hereinafter specified, or at such other
addresses as such party shall have designated by notice to
the party giving such notice or making such request:
To the Government addressed to :
The Ministry of Mines and Energy of the
Republic of Indonesia
c/o. The Director General of Mines
Jalan Jenderal Gatot Subroto Kav. 49
JAKARTA - INDONESIA
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To the Company at its principal office in Jakarta with one
copy by airmail, telegram, telex, cable, radiogram, or
facsimile with postage or transmission charges fully
prepaid to:
P.T. Irja Eastern Minerals Corporation.
Plaza, 5th floor
Jl.H.R.Rasuna Said Kav.X-7 No.6
Jakarta 12940
with a copy to:
Eastern Mining Company, Inc.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
or such other address as the Company may notify from time
to time.
3. The Minister or his designee may take any action or give
any consent on behalf of the Government which may be
necessary or convenient under or in connection with this
Agreement for its better implementation and any action so
taken or consent so given shall be binding upon the
Government and any instrumentality or subdivision thereof.
4. When required by the context of this Agreement, each number
(singular or plural) shall include all numbers and each
gender shall include all genders. The headings appearing
in this Agreement are not to be construed as
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interpretations of the text or provisions herof, but are
intended only for convinience of reference.
5. The terms of this Agreement (including the Annexes hereto)
constitute the entire agreement between the Parties hereto
and no previous communications, representations or
agreements, either oral or written between the Parties
hereto with respect to the subject matter therof shall vary
the terms of this Agreement.
6. Unless the context otherwise expressly requires, where
reference is made in this Agreement to the laws or
regulations of Indonesia such reference shall be to the
laws and regulations of Indonesia generally applicable to
foreign Mining companies in Indonesia in force from time to
time.
7. Where an approval or consent or concurrence of the
Department or the Government of Indonesia or any
subdivision or instrumentality thereof is required, and
where an application is made by the Company to the
Government of Indonesia under this Agreement such approval
or consent will not be unreasonably withheld or delayed.
Furthermore, if within 3 (three) months after a written
application or request, the Company has not received any
objection in writing from the Government, such application
or request shall be deemed to be approved or accepted.
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ARTICLE 29
A S S I G N M E N T
1. This Agreement may not be transferred or assigned
(including for the purpose of financing) in whole or in
part, without the prior written consent of the Department;
provided, however that where the Department consents to a
transfer or assignment, the Company shall not be relieved
from any of its obligations hereunder except to the extent
that the transferee or assignee shall assume such
obligations.
2. The shareholders in the Company shall not transfer shares
in the Company without the prior written consent of the
Department which decision will not be unreasonably withheld
or delayed; provided that the written consent of the
Department shall not be required in the case of:
(a) a transfer of shares pursuant to Article 24;
(b) shares listed on an Indonesian stock exchange; or
(c) a transfer by a shareholder of all or some of its
shares to Freeport-McMoRan Copper & Gold Inc. or an
Affiliate thereof.
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ARTICLE 30
FINANCING
1. The Company shall have sole responsibility for financing
the Enterprise and shall maintain sufficient capital to
carry out its obligations under this Agreement. The Company
may determine the extent to which the financing shall be
accomplished through issuance of shares of the Company or
through borrowings by the Company, provided that from the
start of the Construction Period the Company shall endeavor
to maintain a ratio of shareholder's capital to third party
borrowings so as to reasonably assure the continuing
solvency of the Company for the benefit of the Government,
the lenders and the shareholders.
2. Any long term borrowing by the Company under this Agreement
shall be on such repayment terms and at such effective
rates of interest (including discounts, compensating
balances and other costs of obtaining such borrowings) as
are reasonable and appropriate for Mining companies in
circumstances then prevailing in the international money
markets after complying with existing procedures for
obtaining foreign loans.
3. For the purpose of securing financing, the Company may
mortgage, pledge or otherwise encumber its assets, subject
to paragraph 1 of Article 29.
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ARTICLE 31
T E R M
1. This Agreement shall become effective on the date set out
at the beginning of this Agreement.
2. Subject to the provisions herein contained, this Agreement
shall continue in force until the expiration of the last
Operating Period for a Mining Area and for such additional
period, if any, for which this Agreement shall be renewed
or otherwise extended. The Company shall be entitled to
apply for two successive ten year extensions subject to
Department approval. The Department will not unreasonably
withhold or delay such approval. Such application by the
Company may be made at any time during the term of this
Agreement, including any prior extension.
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ARTICLE 32
GOVERNING LAW
1. Except as otherwise expressly provided herein, this
Agreement, its implementation and operation shall be
governed and construed and interpreted in accordance
with the laws of the Republic of Indonesia which are
presently in force. This Agreement shall have the
force and effect of law for both the Company and the
Government.
2. This Agreement has been drawn up in both the
Indonesian and English languages and both texts are
valid. In the event of any divergency between the two
texts, however, the English text shall prevail and
shall be considered the official text.
In witness whereof, the Parties hereto have caused this
Agreement to be duly executed as of the date appearing at
the beginning of this Agreement.
FOR THE GOVERNMENT OF THE
REPUBLIC OF INDONESIA,
By : ____________________________
Minister of Mines and Energy
FOR P.T. EASTERN MINING COMPANY
By : ___________________________
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