Contract

Between

Ezana Mining Development PLC

And

Geological Survey of Ethiopia

For

Core Drilling Work

At

May Hibey

Tigray National Regional State

February, 2013
Addis Ababa
 CONTRACT

This contract is made at Addis Ababa on this day of 2013

By and Between

The GEOLOGICAL SURVEY OF ETHIOPIA, Ministry of Mines of the Federal

Democratic Republic of Ethiopia

ADDRESS:

Tel: 011 646 33 25,

011 646 33 21,

011 6464478

Fax: 011 646 33 26

E-mail: [email protected]
Addis Ababa, Ethiopia

A legal entity organized and existing under the laws of Ethiopia having its head
office in Addis Ababa hereinafter referred to as “the contractor"
and

Ezana Mining Development PLC

ADDRESS:-
Tel: 251 34 4408778
251 34 4408780
251 34 4405452
Fax: 251 34 4405453
P.O. Box: 788 Mekele
E-mail:- [email protected]
Addis Ababa, Ethiopa
Ethiopia
herein after referred to as “the client"

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WHEREAS the Client is desirous to conduct core drilling work for Gold
exploration in Tigray National Regional State at May Hibey,
located at about 1,175 km from Addis Ababa.

WHEREAS the Contractor has the organizational resources and capabilities

and agrees to conduct the work in accordance with the Terms of reference
provided by the Client and the technical offer made by the Contractor:
Now, therefore the two parties have entered into this contract with terms and
conditions to follow hereinafter.

ARTICLE I

DEFINITIONS

In this Contract, unless the context requires otherwise the following terms and
expressions shall have the following meanings.
1. The "Contract" shall mean this document including all documents, which
have been expressly made part of this Contract.
2. The "Client" shall mean The Ezana Mining Development PLC
3. The "Contractor" shall mean THE GEOLOGICAL SURVEY OF ETHIOPIA
(GSE)
4. The "Work" shall mean the Core Drilling activity undertaken by the
Contractor as per the Contract.
5. "Contract Price" shall mean the sum stated in this Contract, article "V"
Subject to the conditions stipulated in this Contract.
6. "Day and Month" means calendar days and months in accordance with
Gregorian calendar.

ARTICLE II

OBJECTIVES OF THE CONTRACT

The objective of this contract is to conduct core-drilling work as stated in

Annex I, for Gold exploration in May Hibey site Tigray National
Regional State.

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 ARTICLE III

SCOPE OF THE WORK

The scope of the work shall include but shall not be limited to;
1. Drilling of 13 (thirteen) deep boreholes with a cumulative depth of 2,000
meters.
2. Ascertain minimum 75% of core recovery in loose/unconsolidated formation
and more than 90% in consolidated strata.
3. The minimum core diameter shall be 46 millimeter and the maximum 83
millimeter.
4. Core handling and core box labeling should be done carefully by indicating
Borehole number, borehole depth, interval, and core length.
5. Submit the core samples obtained during drilling prior to mobilizing to the
next bore-hole.
6. Recondition the site

ARTICLE IV

COMMENCEMENT AND COMPLETION OF

THE CONTRACT WORK

1. The service shall commence within Seven days after receipt of the payment
indicated under Article "VI” Sub Article 1

2. The contractual period to accomplish the services provided in Article "III" of

this contract should be 71 working days unless otherwise stipulated in this
contract.

ARTICLE V

CONTRACT PRICE

1. The total Contract price for the work shall be Birr 5,735,617.30 five million
seven hundred thirty five thousand six hundred seventeen and thirty cents).

2. The break down of the Contract price is as stipulated in Annex I.

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 ARTICLE VI

TERMS OF PAYMENT

1. Advance payment of 30% of the total contract price amounting to Birr

1,720,685.19 (one million seven hundred twenty thousand six
hundred eighty five and nineteen cents) shall be paid to the
contractor with in seven days of signing the Contract.
2. Progress payment of 30% of the contract price Birr 1,720,685.19 (one
million seven hundred twenty thousand six hundred eighty five
and ninety cents) shall be paid upon completion of 30% of the
physical work.

3. A further progress payment of 30% of the Birr 1,720,685.19 (one

million seven hundred twenty thousand six hundred eighty five
and ninety cents) shall be paid upon completion of 60% the work.

4. The remaining 10% of the contract price Birr 573,561.73 (five hundred
seventy three thousand five hundred sixty one and seventy three
cents) shall be paid upon completion of the contract work and removal of
equipment from site.

5. At the completion of the work the contractor shall submit to the client the
actual work executed and their respective price request (payment
certificate) as per cost break down shown in Annex I.

ARTICLE VII

OBLIGATION OF THE CLIENT

The Client Shall:

1. Provide and locate the drilling points on the ground.

2. Prepare site and access road to reach the drilling points
3. Prepare level ground area sufficient to erect rig and to lay drilling tools.

4. Obtain the necessary permit to get into the area from local authorities.

5. Pay all compensations for farmer’s crop damage due to the performance
of the project activity

6. Take all reasonable steps to ensure that the Contractor is not impeded in

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 the execution of its duties and obligations under the terms of this
Contract.

7. Bear the extra cost provided if work is done beyond that stipulated and
specified in the Contract and with a written request by the Client. The
cost for extra work shall include 7% of the additional value which is for the
service cars we provide for our drilling crew.

8. Assign authorized representative geologist/engineer to monitor the work

done and to counter sign the work acceptance sheet on behalf of the
Client with in 24 hours of end of boring each hole.

9. Effect payments in favor of the Contractor’s account in the manner and

time as stipulated in Article VI of the Contract.

10. Receive core samples and any other samples as recovered form the
borehole for further sample storage.

ARTICLE VIII

OBLIGATIONS OF THE CONTRACTOR

The Contractor shall:

1. Perform all the obligations stipulated in this Contract for successful
completion of the work with care, skill and diligence and shall carry out all
the responsibilities in accordance with the recognized international
standards with the state of the art of the profession and shall adhere to
the schedule of services as provided in Annex III of this Contract.
2. Provide all labor, supplies, drilling equipment, spare parts, tools, fuel, etc.
that are required to carry out this work as per the requirements of the
specification.
3. Carry out Services by the persons of adequate qualification and
experience as in Annex II. Should it become necessary to replace any of
the persons, the Contractor can arrange with a prior written approval of
the Client by providing a person of equal competence and experience.

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4. Upon receipt of a written request of the Client for removal or replacement
of its personnel for good cause, promptly remove and replace such
persons at own cost.

5. Mobilize all machineries & equipments to the work site as per Annex II.

6. Allow the assigned counterpart professional to supervise the execution of

the activities; supervision shall be carried out without affecting the day-to-
day activities.

7. Take all reasonable steps to protect the environment and avoid damage
or nuisance to any property as a result of pollution or other causes arising
as a consequence of the activities.
8. Remove all materials and equipment including all refuses from the site at
the end of the fieldwork.
9. Recondition borehole location after drilling.

ARTICLE IX

PENALTIES FOR DELAY

1. Failure on the part of the Contractor to complete the work as per

specification shall entail by way of penalty 0.1 % per day of the contract
price up to 10% of the total Contract price.
2. Failure on the part of the Client to pay timely to the Contractor shall entail
by way of penalty 0.1% per day of the contract price up to a maximum of
10% of the total contract price.
3. The Client shall pay 1000 birr per hour for 14 hour per day for delays of
more than 24 hours if drilling rig is kept idle because of failure of locating
drilling point or delay of obtaining the necessary permit to get into the
area from local authorities, not receiving core samples, failure of site and
access road preparation.
ARTICLE X

FORCE MAJEURE

1. Neither party shall be liable for non-performance if the non-performance is

due to force majeure as stipulated in the Civic code of Ethiopian.

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2. If either party is delayed in the performance of its obligations under this
Contract by circumstances of force majeure the Contract period shall be
extended for a period of time equal to such delay.
3. If due to force majeure the performance of obligation is impossible for a
successive period of 15 days, either party may terminate this Contract by
giving a written notice 15 days in advance. In such a case both parties
shall fulfill their respective obligations outstanding up to the time of
occurrence of force majeure.

ARTICLE XI

TERMINATION AND AMENDEMENT

1. Either party may terminate the Contract where the other party fails to
perform any of its obligations under the Contract by giving 15 days written
notice.
2. In such case both parties shall fulfill their respective obligation outstanding
up to the time of the contract.
3. The Signatory parties may amend the Contract by the agreement based on
the reasonable fact.

ARTICLE XII

SETTLEMENT OF DISPUTES

1. Any dispute, controversy misunderstanding or claim arising out of or

related to this Contract shall to the extent possible be settled amicably
between the parties.
2. If no agreement is reached within 15 days, the disagreement should be
referred to the Ethiopian courts having competent jurisdiction.

ARTICLE XIII

GOVERNING LAW

This Contract, and all amendments, modifications or supplements hereto, shall

be governed by interpreted and construed in accordance with the laws of
Ethiopia regardless of the place of agreement, place of performance.

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 ARTICLE XIV

ANNEXES

The following annexes are expressly made part of the contract.

1. Price Quotation for Core Drilling at may May Hibey Site. (Annex I)
2. Machinery and Manpower (Annex II)
3. Work Schedule (Annex III)
4. Payment for Drilling Crew (Annex IV)

ARTICLE XV

COMING INTO FORCE OF THE CONTRACT

This Contract shall come into force on the date of the two parties have affixed
their signature and seal here below.

Addis Ababa- February, 2013

FOR and on behalf of THE CLIENT FOR and on behalf of THE

CONTRACTOR

Signature Signature

Date: Date

WITNESSES

NAME SIGNATURE DATE

1.

2.

3.

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4.

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 Annex 1
Bill of quantity for 2000m total depth of core drilling around May Hibey area
/round trip 2350 km distance from Addis Abeba/

Item Description Rate Unit Qty Sub-total

No. (Birr) (Birr)
1. Mobilization and demobilization
Lump No 1 1,072,540.0
(machinery and manpower)
sum 0
2. Inter-borehole Mobilization
2.1 If the inter-borehole distance
5000.00 No 11 55,000. 00
within 0-8km
2.2 If the inter-borehole distance
7,000.00 No — Rate only
within 8.1km - 16km
2.3 If the inter-borehole distance
9,00.00 No — Rate only
within 16.1km - 20km
3 Core drilling with PQ size inclined drilling
3.1 From surface to 50m 2,190.00 M Rate only
3.2 Core drilling with HQ (64.5mm) inclined drilling
3.2.1 From Surface to 50m 2,132.00 M 650 1,358,800.0
0
3.2.2 From 50.1 - 100m 2,295.00 M 650 1,491,750.0
0
3.2.3 From 100.1 - 150m 2,377.00 M — Rate only
3.2.4 From 150.1 - 200m 2,459.00 M — Rate only
33 Core drilling with NQ (46mm) inclined drilling
3.3.1 From 50.1 - 100m 1,884.00 M — Rate only
3.3.2 From 100.1 - 150m 1,945.00 M 650 1,264,250.0
0
3.2.3 From 150.1 - 200m 2,010.00 M 50 100,500.00
3.2.4 From 200.1 - 250m 2,072.00 M — Rate only
4. Reconditioning borehole location after
500.00 No 13 6,5 00.00
drilling
5. Placing concrete bench mark on
850.00 No 13 11,050.00
drilling borehole
6 Sum 5,360,390.0
0
For service cars we provide for our drilling crew 7% of the sum 375,227.30

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 Ground Total 5,735,617.3
0

Annex II

Machinery and Man Power

- we shall deploy two core drilling rig with a drilling capacity up to

300m using NQ size.
- Water vessel truck to transport water from water source to
drilling site.
- A high-up (crane) to transport drilling equipment from site to site
- In-hole equipment (rods, casings, core-barrel, … ) sufficient to
drill up to 300m depth.
- Generator for night operation.
- One drilling engineer for drilling supervision.
- One tool pusher with more than 20 years experience on drilling.
- 12 drillers with the same experience as the tool pusher.
- two mechanic.
- 7 drivers.

Annex III

Work schedule

- The drilling work will take 71 working days using two drilling rigs

4 5 55 61 67 71

days

Mobilization

Rigging up

Operation __________________

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Inter BH mob _______

Rig down _____

Demobilization _____

Activities

Annex IV

Payment for drilling crew

It is agreed that on top of the total contract cost stated in Annex

I of this contract document, Ezana Mining Development PLC will
also pay birr 70 per day per person for the drilling crew for food
subsidy.

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