REPUBLIC OF KIRIBATI

MINING (BANABA ISLAND PHOSPHATE RE-MINING AGREEMENT) ACT 1988
(No. 10 of 1988)

I assent,

Beretitenti:
1988

AN ACT TO PROVIDE FOR THE APPROVAL AND IMPLEMENTATION
OF AN AGREEMENT FOR THE RE-MINING OF PHOSPHATE ON
BANABA ISLAND AND FOR CONNECTED PURPOSES

Commencement:
1988

MADE by the Maneaba ni Maungatabu and assented to by the Beretitenti.

Short title

1. This Act may be cited as the Mining (Banaba Island Phosphate Re-Mining Agreement) Act 1988.

Interpretation

2. In this Act, unless the context otherwise requires -

"the Agreement" means the Memorandum of Understanding between the Government of the first part, the Rabi Council of the second part and Roche Bros Pty Ltd of Australia of the third part, a copy of which is set out in the Schedule to this Act.

Approval of Agreement

3. The Agreement is hereby approved and shall have effect according to its tenor.

Effect in relation to laws of Kiribati

4. (1) The Agreement shall have the force of law as if it forms part of this Act and shall apply notwithstanding anything to the laws of contrary in any other law in force in Kiribati.

(2) No law at any time in force in Kiribati made after the commencement date of this Act shall affect this Act or the Agreement -

(a) unless the contrary intention appears either expressly or by implication in that law; or

(b) except as provided by this Agreement.

(3) Except where the contrary intention appears, either expressly or by implication in the Agreement and subject to the preceding provisions of this section, all laws at any time in force in Kiribati which are not inconsistent with this Act or the Agreement shall apply to and in relation to all acts, matters or things done or suffered under the Agreement.

Application of Act to the Republic

5. This Act shall apply to, and bind, the Republic.

SCHEDULE

(Section 2)

THIS MEMORANDUM OF UNDERSTANDING is made the 4th day of May 1988 hereinafter referred to as "M.O.U.")

BETWEEN: 	THE GOVERNMENT OF THE REPUBLIC OF KIRIBATI
(hereinafter referred to as "the Government'") of the first part	

AND:	THE RABI COUNCIL OF LEADERS referred to under section 125(b) of the Constitution of the Republic of Kiribati (hereinafter referred to as "the RCL") of the second part	

AND: 	ROCHE BROS PTY LTD a company incorporated in the State of Victoria with its registered office at 568 St. Kilda Road, Melbourne, Victoria, Australia (hereinafter referred to as "RB") of the third part	

records the understanding and arrangements among them relating to the proposed prospecting for phosphate and the proposed mining, treatment, ship loading, export and marketing of phosphate on and from Banaba.

1. 	DEFINITIONS

1.1 	In this M.O.U. unless the context otherwise requires:

"Banaba" means the island of Banaba situated in the Republic of Kiribati 240 nautical miles south west of Tarawa which is particularly described in Schedule 2 of the Constitution of the Republic of Kiribati;

"Committee" means the committee to be set up pursuant to Clause 4.1;

"Free on Board Value" means the revenue received from the sale of phosphate from Banaba calculated on a free on board basis;

"Income Tax Act" means the Income Tax Act of Kiribati as amended and applicable regulations made thereunder;

"Management Fee" means the fee for management services payable by the Company to RB pursuant to Clauses 6.1;

"Mining Act" means the Mineral Development Licensing Ordinance of Kiribati: (Chapter 58) as amended, and applicable regulations made thereunder;

"Mining licence", means an exclusive mining licence granted under Part VI of the Mining Act to the Company for the purposes of mining and exporting phosphate from Banaba;

"Project" means the development contemplated by this M.O.U. for the mining, treatment, ship loading, exporting and marketing of phosphate from Banaba and includes all facilities rehabilitated, constructed and developed for the Project;

"Project Costs" means all costs necessarily incurred in the Project including the costs of the feasibility study, the Management Fee, the RCL Royalties, Government Royalties, the amount of any tax, rate, rent, charge, duty, tariff or levy payable by the Company to the Government, the costs of recruiting and employing staff and labour and obtaining specialist consulting services, the costs of financing the Project, the costs of rehabilitation of plant and other existing Banaba facilities, depreciation, the costs of mining treating and exporting phosphate including freight and insurance, the costs, charges and expense incurred in marketing and organisation of shipment of phosphate, the costs of the airstrip construction referred to in Clause 17 which are not reimbursed by the Government, the costs of relocating Banaban community facilities and any other costs which are necessarily incurred in implementing this M.O.U.

"Project Income" means all income and revenues from the Project including any returns from the investment of such income and revenues and any residual value of capital assets after taking into account depreciation;

"Prospecting Licence" means an exclusive prospecting licence granted under Part V of the Mining Act for the purposes of searching for and determining available and recoverable phosphate on Banaba;

"Surplus Project Income" means the profits of the Company available for distribution in any year in accordance with Clause 10.2(d);

"year" means calendar year;

"$" means Australian dollars and any obligation to pay or a right to receive an amount of money is an obligation to pay or a right to receive that amount in Australian dollars.

2. 	FEASIBILITY STUDY (PHASE I)

2.1 	RB shall as soon as practicable after this M.O.U. becomes effective in accordance with Clause 18.2 incorporate in Kiribati a company under the Companies Ordinance of Kiribati (Chapter 10A) which company will be a subsidiary of RB either directly or through intermediate subsidiaries. Upon its incorporation the Company will be entitled to the rights conferred upon it by this M.O.U. and RB will ensure that the Company assumes the obligations imposed upon it by this M.O.U. The Company shall, before applying for a Mining Licence, enter into the Adoption Agreement in the form set out in Annex 2 to this M.O.U. with the parties hereto whereby the Company shall adopt and- ratify and become bound by the terms of this M.O.U. and each of the parties hereto agrees this enter into the Adoption Agreement with the Company.

2.2 	The parties agree that the Government and RCL shall each be entitled to appoint a person to be an associate director of the Company who shall have no right to vote at, nor convene, meetings of the Board of Directors of the Company.

2.3 	The Government agrees to grant to the Company as soon as practicable after its incorporation an exclusive Prospecting Licence. The Prospecting Licence shall be for a term of three (3) years pursuant to section 19 of the Mining Act.

2.4	As soon as practicable after the granting of the Prospecting Licence by the Government the Company shall carry out a detailed feasibility study into the commercial viability of the mining, treatment and sale of phosphate on Banaba. The issues to be addressed by the feasibility study will include the issues specified in Annex 1 to this M.O.U.

2.5	All reasonable travel expenses to and from Banaba and out of pocket expenses incurred directly by the representatives of the Government and the RCL during the course of the conduct of the feasibility study on Banaban shall be reimbursed by the Company to the RCL and the Government out of Project Income and such expenses shall be deemed to be Project Costs.

2.6 	If the Project does not commence or is abandoned as a result of the determination by the Company after consultation with the Government and the R.CL that the Project is not commercially viable, each of the parties to this M.O.U. shall bear its expenses referred to in Clause 2.5.

3. 	DEVELOPMENT AND MINING (PHASE II)

3.1	 If upon completion of the feasibility study the Company determines after consultation with the Government -and the RCL that the Project is commercially viable, the Company will advise the Government and the RCL that it intends to proceed with the development and mining of phosphate on Banaba. Upon the receipt of such advice the Government shall grant to the Company an exclusive Mining Licence.

3.2 	The Mining Licence shall be:

(a) in respect of all the land on Banaba excluding such areas as are reserved by the RCL by notice in writing during the period of the feasibility study; and

(b) for a term not exceeding 25 years pursuant to section 32 of the Mining Act

3.3	The Company shall bear all Project Costs and all other costs, expenses and liabilities of the Project.

3.4 	The Company shall have control and possession of the Project and subject to Clause 16 shall be entitled to use all facilities on Banaba excluding the facilities required by the Banaban community.

3.5	The Company shall manage and operate the Project.

3.6	 Nothing in this M.O.U shall be considered or interpreted as constituting the relationship of the Government, the RCL, RB and the Company as a partnership joint venture association or other relationship in which any one or more of the parties may be liable generally for the acts or omissions of any other party nor shall anything in this M.O.U be considered or interpreted as constituting any party the general agent or representative of any other party.

4. 	THE COMMITTEE

4.1	 As soon as practicable after the date of this M.O.U. the Government, the RCL and the Company shall set up and thereafter maintain a Committee which shall meet at least twice a year in Tarawa or such other venue as is agreed to by the parties.

4.2 	Each party shall be entitled to two representatives on the Committee. One of the representatives appointed by the Government shall be a senior official of the Ministry responsible for Mineral Resources who shall act as Chairman of the Committee,

4.3	 The Committee shall:

(a) monitor the management and operations of the Company to ensure that such management and operations are not contrary to the provisions of this M.O.U.:

(b) receive reports from the Company on the progress and results of the Project;

(c) consider means of assisting the Project to maximise profitability;

(d) distribute Surplus Project Income in accordance with clause 10; and

(e) act on all other matters requiring the decision or approval of the Committee.

4.4	All reasonable costs and expenses incurred by a party relating to the attendance of its representatives at meetings of the Committee shall be reimbursed by the Company out of Project income and shall be deemed to be Project Costs.

4.5 	The Chairman of the Committee shall have a deliberative vote as well as a casting vote.

5.	 PROJECT FUNDING AND FINANCING

5.1	RB shall provide funds to the Company for the establishment and development of the Project by way, of equity investment in the Company and/or through loans and/or the provision of other financial accommodation to the Company. The Government, RCL and RB shall discuss appropriate debt to equity ratios for the Company on completion of the feasibility study having regard to each of the following factors:

(a) RD has undertaken the responsibility for the total financing of the Project;

(b) the agreed concept is to share the benefits of the Project equally;

(c) the issue of the debt to equity ratio has arisen because of the necessity to incorporate a Local company as the vehicle to manage and operate the Project;

(d) RD's intention is to have a nominal level of equity in the Project; and

(e) the Government's concern that the debt to equity ratio of the Company may not be in accordance with the policy of the Government in respect of foreign investment in Kiribati.

5.2	The Company shall be at liberty to finance the establishment and development of the Project by the use of loans or other financial accommodation from third parties on such terms and conditions as it thinks fit. Any loan finance required by the Company will be obtained from the Bank of Kiribati unless there exists a commercial reason for using an alternative source. Such commercial reasons would include the Bank's inability to provide a particular kind of financial accommodation or to provide it at international competitive rates. The Company shall not borrow or enter into any major financial accommodation without prior consultation with the Government and the RCL.

5.3 	The parties acknowledge that the Company shall be entitled to repay or discharge any loans or other financial liability borrowed or incurred by it out of Project Income. The parties further acknowledge that the Company shall repay or discharge all such loans or financial Liability as quickly as possible and in any event in accordance with the Schedule of repayment or period agreed to between the Company and the relevant lender or other person providing such financial accommodation.

6.	MANAGEMENT FEE & DIVIDENDS

6.1 	Subject to Clause 10 RB will provide management services to the Company during the entire life of the Project for a fee equal to 2% of the Free on Board Value of all phosphate sold by the Company. Such Management Fee shall be paid within 30 days of receipt of payments by the Company from the buyers. The Government agrees that such Management fee shall not be subject to tax in Kiribati.

6.2	Subject to clause 10 RB undertakes to ensure that the Company shall declare and pay dividends on a quarterly basis or at such other intervals as the Company considers appropriate.

6.3 	The Management Services to be provided by RB to the Company will include:

(a) the overall responsibility for the management of the Project and for reporting to the Committee;

(b) the selection of a Project Manager and Project Administration Manager;

(c) the provision of managerial, administrative and technical direction to the Project Manager;

(d) the arrangement of marketing and organisation of shipment of phosphate from the Project; and

(e) the procurement of finance for the Project including the giving of guarantees by RL.

6.4 	RB shall furnish the Government and the RCL with particulars relating to the personnel referred to in Clause 6.3(b). Such particulars shall include details of the calibre and/or qualifications of the said personnel, their job description, level of salaries, remuneration and other conditions of service.

6.5 	The parties to this M.O.U. agree that the particulars referred to in Clause 6.4 shall be subject to the approval of the Board of Directors of the Company.

7.	 ROYALTY TO THE RCL

7.1 	Subject to Clause 10 the Company will pay to the RCL a royalty at the rate of $7 per tonne of phosphate shipped (in this M.O.U. referred to as "RCL Royalties"). Such royalty shall be paid within 30 days of receipt of payments by the Company from the buyers.

7.2 	If the Company proceeds to mine phosphate on a commercial basis following the feasibility study and such mining is carried out for a minimum aggregate period of 180 days, and if over the life of the Project the aggregate revenues, including royalties, received by the RCL from the Project are less than $7,000,000, the Company shall prior to the final distribution of Surplus Project Income, if it has mined all of the previously unmined phosphate bearing land in Banaba, pay to the RCL the difference between such aggregate revenues and $7,000,000. However if the Company has mined only part of the previously unmined phosphate bearing land the minimum payment payable by the Company to the RCL shall be that part of $7,000,000 which bears the same proportion to $7,000,000 as the area of the newly mined land on Banaba bears to the aggregate o£ the newly mined land and the unmined phosphate bearing land. In this Clause newly mined land means land which prior to mining by the Company has not been mined by others.

8.	ROYALTY TO GOVERNMENT

8.1	 Subject to Clause 10 the Company shall pay to the Government a royalty at the rate of 2 % of the F.O.B. Value of phosphate sold by the Company in accordance with Section 47 of the Mining Act (in this M.O.U. referred to as the "Government Royalties"). Such royalty shall be paid within 30 days of receipt o£ payment by the Company from the buyers

8.2 	The Government agrees that the Company shall not be required to pay an annual charge pursuant to Section 51 of the Mining Act.

9.	TAXATION

9.1	The parties agree that the taxation scat as of the Company, RB and the RCL shall be determined in accordance with the Income Tax Act.

9.2	The Government agrees to the following matters concerning the taxation of the Company, RB and the RCL in connection with the Project:

(a) capital expenditure on assets provided or acquired by the Company shall be subject to depreciation allowances. The parties acknowledge that the Company will be able to depreciate the assets fully over the life of the Project;

(b) the surplus between the depreciated value and the income from disposal of assets of the Project will be treated as income of the Company in assessing tax payable by the Company. Conversely any deficiency between the depreciated value and the income from resale will be an allowable deduction to the Company for income tax purposes; and

(c) taxation of foreign workers on the Project and their dependants will be similar to that applying to professional, technical and other spilled foreign workers currently employed in the commercial sector in Kiribati.

9.3 	The Company shall have the right to acquire and import into Kiribati and use any plant, machinery, equipment, vehicles, explosives, fuels, reagents and supplies:

(a) required for the construction, installation, provision, expansion, maintenance or operations of any of the facilities of the project; or

(b) otherwise required for the purposes of the Project;

(c) to export phosphate from Kiribati.

9.4	It is expected that the Project will be declared by the relevant Government minister or official to be a resource development thus exempting the Company from all import duties and levies of general application on all imported items referred to in Clause 9.3 (but excluding, items classified as consumption items).

9.5	 If any rate, tax., charge, dues duty, tariff or other levy is imposed on the export of phosphate from Kiribati, such rate, tax, etc will not apply to, or be payable by, the Company in respect of the export of phosphate by the Company from Kiribati.

10. 	FINANCIAL PRINCIPLES

10.1	 The parties agree that subject only to Clause 7.2, each of RB, the RCL and the Government should ultimately receive over the life of the Project an equal share of revenue from the Project.

10.2	 For the purposes of this Clause 10:

(a) "RB's Return" means in respect of any year the amount of the management Fee and dividends received during that year from the Company after deducting from such amount the amount of tax paid or payable thereon.

(b) "RCL's Return" means in respect of any year the amount of the RCL Royalties received from the Company during that year after deducting from such amount the amount of tax paid or payable hereon.

(c) "Government's Return" means in respect of any year all taxes, royalties, rates, rents, charges, duties, tariffs or other levies paid or payable to the Government in respect of that year by the RCL, RB or the company or any member of the Company which are attributable to the Project including without limitation the Government Royalties, taxes on the management Fee and on dividends or interest paid by the Company, taxes on the RCL Royalties and taxes on the profits of the Company but excluding import duties on consumption items and taxes payable in respect of salaries paid and other payments made by the Company in respect of services rendered to the Company.

(d) The surplus Project Income in respect of a year shall be determined by deducting, front the total Project Income during that year;

(i) total Project Costs incurred by the Company during that year;

(ii) an amount of profits which the Company in its discretion determines to set aside as being necessary reserves or provisions to meet capital costs, working capital, finance costs and other project cash flow requirements for that or any subsequent years and pending any such application such reserves or provisions may, at the discretion of the directors of the Company, be used for the Project or be invested in such investments as the directors think fit; and

(iii) dividend payments.

RB shall ensure that the Company shall not, at any time declare more in dividends (net of taxation) than is equal to RB's one third share of the revenue from the Project less RB's Management Fee.

10.3	 Within 60 days after the end of each year the Company shall advise the Committee of the Surplus Project Income for the immediately preceding year (the "relevant year"). The Committee shall agree to the division of the Surplus Project Income between RD, the RCL and the Government in a ratio which ensures that after taking into account Re's Return, the RCL's Return and the Government's Return for the relevant year each of RB, the RCL and the Government receives an equal share of revenue from the Project.

10.4	 If the objective of Clauses 10.1 and 10.3 is not fulfilled in respect of any year the amount of RB's Return, the RCL's Return and/or the Government's Return in respect of the succeeding year or years shall be adjusted, and the Surplus Project Income shall be divided between R.B, the RCL and the Government in respect of that year or those years by the Committee between RB, the RCL and the Government as appropriate to attain such objective. If such objective is not capable of being achieved prospectively, the parties agree that the Committee shall be entitled to adjust the amount of revenue received from the Project by RB, the RCL and the Government in preceding years so as to attain the objective and the party or parties against whom such adjustment is made shall pay or refund to the other party or parties the amount necessary to give effect to the objective.

11.	FOREIGN EXCHANGE AND OVERSEAS PAYMENTS

11.1	 RB shall have the right to realise its investment in the Company and the Project at a fair value.

11.2 	The Company will not be restricted or hindered from transferring money from Kiribati, for goods or services imported for the Project, for the repayment of loan principal and payment of interest thereon, for payment in respect of other financial services provided in respect of the Project and for payment of dividends to foreign shareholders, and RIB will not be restricted or hindered from repatriating its profits from the Project whether by way of Management Fee or dividends.

11.3 	RCL will not be restricted or hindered from repatriating the RCL Royalties received from the Company and any other money received from the Company.

11.4	The relationships between the Company and each of the parties (including in the case of RIB all companies in the Roche Bros. group of companies wheresoever incorporated.) shall be on a normal arm's length commercial basis.

12.	TERMINATION

If the Company determines that further mining of phosphate on Banaba is not commercially viable the Company by giving not less than two (2) months' notice in writing to the Committee may either terminate mining or suspend miring (or any other activity for such period as the Company thinks appropriate. If the Company decides to terminate mining there shall be as soon as practicable thereafter a final distribution of any Surplus Project Income in accordance with Clause 10. Section 38 of the Mining Act shall not apply to any decision by the Company to cease suspend or curtail mining.

13.	THE RCL

13.1	The RCL hereby covenants and warrants to each of the Government and R3 and for each of their benefit and the benefit of the Company that the RCL has full power and authority to act for and on behalf of Banaban landowners so as to bind them and their successors and assigns to the arrangements set out in this M.O.U. and undertakes to consolidate all claims from landowners on Banaba and to act on their behalf in respect of royalties and taxation obligations.

13.2 	The RCL acknowledges that no compensation in respect of the phosphate bearing land (and such other areas or land as are agreed by the RCL and RB or the Company from time to time) shall be payable by the Government, ED or the Company to the RCL or the Banaban people or any of them before on or after the termination of mining by the Company on Banaba for any loss or damage arising from the mining or other activities of the Project on Banaba and further acknowledges that the arrangements between the Company and the RCL contained in Clause 7.2 are in lieu of any payment of such compensation.

13.3	 RCL hereby indemnifies and holds each of the Government, ED and the Company and each of their successors and assigns against all claims, demands, pauses of actions, and suits, and any other liabilities by or on behalf of individual landowners relating to or arising out of the management and operations of the Project. This indemnity shall be a continuing indemnity and shall not merge or be extinguished on completion and/or termination of the Project but shall remain in full force and effect and shall ensure for the benefit of the Government, RB and the Company and their respective successors.

14. 	FINANCIAL RECORDS

14.1	 The Company shall keep complete, true and accurate records and accounts pertaining to the operations of the Project including, without limitation, records and accounts on sales, tonnages and prices. Such records and accounts shall be kept in accordance with generally accepted accounting principles and practices consistently applied and shall be audited by an independent firm of international chartered accountants.

14.2 	Each representative of the Government or the RCL on the Committee, or a nominee appointed in writing by such representative, shall have the right at all reasonable times to inspect all books, records, contracts and other documents or things pertaining to the Project in the possession or control of the Company.

14.3	 The Company shall prepare and deliver financial reports on the Project on a quarterly basis to the Committee.

15.	EMPLOYMENT

15.3	 The Company shall employ Banabans resident on Banaba or, failing that, other I-Kiribati citizens on the Project where such persons axe qualified for the relevant positions on the Project which are sought to be filled from time to time.

15.2 	 The Company will also, if it considers it necessary, be able to employ foreign workers on the Project.

16. 	RELOCATION

16.1	 The Company shall be responsible for the relocation of existing Banaban community facilities to sites agreed by the Company and the RCL on non-phosphate lands on Banaba to a standard appropriate to local standards on Banaba Island and for carrying out such rehabilitation on Banaba as is considered feasible and economic by the Company following discussions with the representatives on the Government and the RCL during the course of the conduct of the feasibility study.

16.2	 The RCL agrees to make available all remaining phosphate areas on Banaba for mining purposes, except those areas referred to in Clause 3.2(a). This will be done if the Company decides to proceed with the mining of phosphate on Banaba on completion of the feasibility study and in conformity with the Company's mining programme and its programme for relocation of Banaban community facilities.

17. 	AIRSTRIP

17.1 	The Company shall, if shown by the feasibility study to be warranted and economically viable and agreed to by the Government, construct and establish an airstrip on Banaba.

17.2	 The costs of such construction and establishment shall be borne in equal shares by the Government and the Company. The Company shall invoice the Government its share of such costs on completion of the airstrip in accordance with the standard requirements of the Kiribati Civil Aviation Authority and the Government shall pay or reimburse such costs within 30 days of the date of the invoice.

18. 	FORMAL AGREEMENT AND ENABLING LEGISLATION

18.1	The arrangements outlined in this M.O.U. are intended to be legally binding but the parties agree that, unless otherwise decided, they will, prior to the commencement of PHASE II, proceed in good faith to negotiate a more detailed agreement to give effect to the principles outlined in this M.O.U. Each of this M.O.U. and such agreement shall require enabling legislation by the legislature of Kiribati.

18.2	This M.O.U. is conditional on such enabling legislation being passed in such form and containing such matters as are acceptable to all parties to this M.O.U. and shall not come into force or effect unless and until such enabling legislation is passed in that form and containing those matters.

19. 	GOVERNING LAW

This M.O.U. shall be governed by and construed in accordance with the law of Kiribati which the parties acknowledge and agree includes, so far as they are relevant, the rules of international law.

20. 	ARBITRATION

All disputes arising in connection with this M.O.U. shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

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ANNEX 1

FEASIBILITY STUDY ISSUES

1. Estimated quantity and quality of available phosphate.

(i) In situ reserves in present building lease/areas, roads and other unmined areas.

(ii) Estimation if recoverable phosphate in old mined areas.

2. The suitability of existing equipment; buildings and structures for use in a future mining and processing operation and the assessment of the costs to bring them into operating condition.

3. The condition of all marine facilities including inspection of the moorings, a review of the ship-handling methods of and an assessment of the cost of bringing the marine facilities into operable condition.

4. The requirements for new mobile and fixed equipment including an assessment of the ability to land the most suitable equipment on the island.

5. The requirement for infrastructure to maintain the proposed operations.

6. Full economic studies to determine the most economic methods of mining the phosphate including equipment selection, mine planning scheduling, staff, etc,

7. Market investigations to assess saleability of production and the required rate of production.

8. Shipping investigations to determine the likely freight rates allowing for loading methods used at the Island which in turn will determine the FOB prices for study purposes.

9. Assessment of cost of finance and other terms and conditions.

10. Profit projections.

11. Consideration of the existing Banaba Community facilities and alternative locations for these facilities on non-phosphate lands.

12. The standard of alternative facilities to be provided.

13. The programme for relocation or replacement of community facilities.

14. The programme for mining with particular reference to relocation of the Banaban resident population.

15. Mining methods and the effects of mining on the resident Banabans.

16. Suitable locations for temporary accommodation for the workforce required for the Project and the effects of a temporary workforce or, the resident Banabans.

17. Allocation of resources such as drinking water to the permanent and temporary population.

18. Introduced facilities such as power supply, retail stores outlets, telecommunications and possible use by the permanent population.

19. Availability of workers from the present resident community, the Banaban community on Rabi and from elsewhere in Kiribati.

20. Appropriate wage rates and conditions for Banabans and for introduced people of other nationalities.

21. Local customs to be observed.

22. Suitable locations, dimensions and alignment for a permanent airstrip on Banaba.

ANNEX 2

ADOPTION AGREEMENT

THIS AGREEMENT is made this ……………….. day of ………………………………..1988

BETWEEN THE GOVERNMENT OF THE REPUBLIC OF KIRIBATI (hereinafter referred to as "the Government") of the first part,

THE RABI COUNCIL OF LEADERS referred to under section 125(b) of the Constitution of the Republic of Kiribati (hereinafter referred to as "the RCL") of the second part,

ROCHE BROS PTY LTD a company incorporated in the state of Victoria, Australia with its registered office at 568 St. Kilda Road, Melbourne, Victoria, Australia (hereinafter referred to as "RB") of the third part and

ROCHE BROS KIRIBATI LTD, a company incorporated in Kiribati and having its registered office on Betio, Tarawa, Republic of Kiribati (hereinafter referred to as "the company") of the fourth part.

WHEREAS the company has been incorporated in accordance with the intention of its promoters as expressed in the Memorandum of Understanding (M.O.U.) hereinafter referred to.

AND WHEREAS it is necessary and/or desirable that the company should adopt and be bound by the said M.O.U.

NOW THEREFORE IT IS HEREBY AGREED as follows -

1. The M.O.U. entered into between the Government of the first part, the RCL of the second part and RB of the third part and dated ...........................19..., a certified true copy of which is attached hereto, is hereby adopted by the company in the same manner and takes effect in all respects as if the company had been in existence at the date thereof and had been a party thereto.

2. The company shall perform and do all such acts and things as, by the said M.O.U., the parties hereto or any one of them undertook (expressly or impliedly) to procure that the company would perform or do.

3. The Government, the RCL and RB hereby ratify and confirm the said M.O.U. in all respects and extend to the company the undertakings by them or each of them with regard to or for the benefit of the company contained in the said M.O.U.

IN WITNESS WHEREOF this agreement has been, duly executed by the parties the day and year first above written.

SIGNED for and on behalf of 
the REPUBLIC OF KIRIBATI
in the presence of-
…………………………………
…………………………………..	)
)
) 		
		…………………………………….	

The Common Seal of the RABI COUNCIL OF LEADERS (the RCL) was hereunto affixed in the presence of -
…………………………………
………………………………….	)
)
)
)		
		…………………………………….	

The Common Seal of the ROCHE BROS PTY LTD was hereunto affixed in the presence of -
…………………………………
………………………………….	)
)
)		
		……………………………………..	

The Common Seal of the ROCHE BROS KIRIBATI LTD (the company) was hereunto affixed in the presence of -
…………………………………
………………………………….	)
)
)
)		
		……………………………………...	

IN WITNESS WHEREOF the parties have executed this M.O.U. the day and year first hereinbefore mentioned.

SIGNED for and on behalf of THE
GOVERNMENT OF THE REPUBLIC OF
KIRIBATI	)
)
)	

SIGNED for and on behalf of THE
RABI COUNCIL OF LEADERS	)
)	

SIGNED for and on behalf of THE
ROCHE BROS. PTY. LTD.	)
)	

______________________

MINING (BANABA ISLAND PHOSPHATE RE-MINING AGREEMENT)
ACT 1988

EXPLANATORY MEMORANDUM

This short Act seeks to approve and implement a Memorandum of Understanding (M.O.U.) entered into between the Government of Kiribati of the first part, the Rabi Council on behalf of the concerned landowners of Banaba of the second part and Roche Eros Pty Ltd., a company incorporated in Victoria, Australia, of the third part relating to the re-mining of phosphate on Banaba Island.

The need for such an Act arises, among other things, from the fact that -

(a) section 48(1) and (2) of the Mineral Development Ordinance (Cap. 58) provides that where the appropriate Minister on behalf of the Government "enters into an agreement concerning royalties with any person who is or may become liable to the payment of royalties" under the Ordinance (Cap 58), such an agreement shall not have effect "unless and until ratified by an Ordinance ..."; and

(b) the exigencies of the M.O.U. require that, in order to achieve the objective of the parties thereto, the provisions of some Kiribati laws (including Acts of the Kiribati legislature) which are now in existence or which may be enacted in the future should not apply to the M.O.U. either at all or only partially.

Clause 2 of the M.O.U. provides that as soon as practicable after the M.O.U. comes into operation, Roche Bros Pty Ltd shall incorporate in Kiribati a private limited liability company which will be a wholly owned subsidiary of Roche Bros Pty Ltd. However, both the Government and the Rabi Council are each entitled to appoint one person to be an associate director of the Company. Such directors shall have no voting rights or poser to convene meetings of the Board of Directors of the Company.

Furthermore, the Government undertakes under the said Clause 2 to grant to the company after its incorporation, an exclusive prospecting licence for a period of three (3) years pursuant to the said Cap. 58 to enable the company to carry out a detailed feasibility study to determine whether or not the mining of phosphate on Banaba is commercially viable.

The costs of the feasibility study will be a Project Cost and in the event that the project does not commence or is abandoned on grounds that it is not commercially viable each of the Government, the Rabi Council and Roche Bros shall bear its expenses.

Clause 3 of the M.O.U. provides for the granting by the Government of an exclusive Mining licence to the company for a tern not exceeding 25 years if the feasibility study proves that the project is commercially viable. The said licence shall cover all the land on Banaba except areas reserved by the Rabi Council during the feasibility study.

The clause further provides that all the costs, expenses and liabilities of the project shall be borne by the said company which shall manage and operate the project.

Under Clause 4 of the M.O.U., a committee to be composed of two (2) representatives of each of the parties shall be established to, among other things, distribute the surplus Project Income as defined under the M.O.U. The Chairman of the Committee shall be a senior official of the Ministry of Natural Resource Development who shall have a deliberative as well as a casting vote.

PROJECT FUNDING AND FINANCE

Clause 5of the M.O.U. envisages that Roche Bros Pty Ltd will provide funds for the establishment and development of the project by way of equity investment in the Company to be incorporated and/or through loans, etc. The parties to the M.O.U. will discuss appropriate debt to equity ratios for the company (i.e. the size of company's share capital to be composed of monies provided by Roche Eros vis-a-vis the portion of the share capital made up of borrowings or loan in respect of which interest will have to be paid) on completion of the feasibility study.

MANAGEMENT FEE, ROYALTY TO GOVERNMENT AND THE RABI COUNCIL

Clauses 6, 7 and 8 of the M.O.U. provide, among other things, that -

(a) Roche Bros will be paid a tax free management fee equal to 2% of the Free on Board (F.O.B.) value of all phosphate sold by the company in consideration of the provision of management services to the company over the entire life of the project;

(b) the Government will be paid royalty at the rate of 2% of the F.O.B. value of all phosphate sold by the company;

(c) the Rabi Council will be paid a royalty at the rate of $7 per tonne of phosphate sold by the company. However the Rabi council is guaranteed a minimum payment of seven million dollars (7 million) if -

(i) the company proceeds to mine phosphate on a commercial basis following the feasibility study; and

(ii) such mining is carried out for a Period of 180 days or more; and

(iii) the company mines all previously unmined phosphate bearing; land on Banaba; and

(iv) the aggregate revenues received by the Rabi Council over the life of the project are less than seven million dollars $7 million).

However if part only of the previously unmined phosphate bearing land is mined before operations cease then only a similar proportion of the $7 million will be paid to the Rabi Council.

TAXATION

Clause 9 of the M.O.U. provides that generally, the company, the Rabi Council and Roche Bros will pay tax to the Kiribati Government in accordance with the Kiribati Income Tax legislation.

FINANCIAL PRINCIPLES

The M.O.U. envisages that subject only to the guaranteed minimum payment of $7 million to the Rabi Council already referred to, each of the Kiribati Government, the Rabi Council and Roche Los should ultimately receive over the life of the project an equal share of revenues from the project.

Other notable features of the M.O.U. may be summarised as follows:-

(a) the company shall be responsible for relocating existing Banaban community facilities to agreed sites on non phosphate bearing lands;

(b) priority will be given to Banabans resident on Banaba in respect of employment on the project;

(c) the company will construct an airstrip on Banaba if proved by feasibility study to be economically viable and agreed to by the Government of Kiribati; the cost will be borne in equal shares by the company (as a project cost) and the Government;

(d) this M.O.U. is intended to be legally binding subject to approval and implementation by an Act of the Kiribati legislature (Maneaba ni Maungatabu).

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