2008, berween the covERNMENT oF THE REPUBLId Or na,1r,ewl, acting through the MINISTRY oF ENERGY AND MINES (hereinafter referred to as the 'Covemment,,) and Nyala Mines Limrte'{, a company incorporated in Malawi under the compa'ies Act, Cap.46:03 Regishation Number 7976 wbage registered office is c/o Mrrenelupeinbg Mhango & Co., Development House, Henderson Street, Blantyre, Idalawi ftereinafter referred to as "Nyala"). WHEREAS: (A) The Govemment:grantod Nyara a Mihing Licence no. ML0l5 0nao7 on rhe Date; (B) Nyala and the Minisry of Energy and Mines'coneludcd a Memorandum of understanding (MoUi, concerning thirty percent (3wo) participation in Nyal4 on the Date; (c) Pursuant to clause 2(c) of the Mining Licence and the Mou, the validity of the Mining Licence is conditionar upon Nyala entering into this Agreement; (D) Fursuant to clause 2(b) of the Mining Licencc, Nrrala is required to pay the Royalty to the Government; (E) In addition to paynext of the Royarty, and in consideration of the Govemment agpeing to grant Nyala the Mining Licence, Nyala has also 4secd to pay rhe Government a further sa-les Rovarty, once the corundum has been cfi, polished and sold by Columbia; (F) The parties have agtreed to record:the terms of Nyalars agreetnent to pay the sales Royalty to the Govermnent, and its agreememt to grurtthirty percent ( 30n Participation in Nyat4 on the terms and conditions contained in this Agreement; and (G) Nyala has agreed tcr issue to the Govegnment t6n pq cent (l0o//o) of the equity of Nyala and such share holding shall not be diluted before the Initial public offering except by ftrther agreement in writing bstween the parties. The Parties hereby AGREE as follows- ARTTCLE 1 Ilefinitions In this Ageement unless the cortext otherwise requtes or pefmits: "thlrty'percent'? (3070),Palticip4tion in Nyala means (as defined in the MOU) the right granred by Nyala to indigenous Malawians, to acquire up to thi4y porc€nt (30olo )of the issued share capital in Nyal4 effective from the Date; "Agreemenf' mcans this Agreern€nt, as may be amende4 srpplementod or replaced from time totime; "Clinic" means the clinic Iocatert withrn the hospital atlfutspkera" IVIaIawi; "Columbia'' means Columbia Gem House, [nc- of VancouveJ, Washington State, USA; "Corundum" means all conrndura including gerr conrndurU ruby andrsapphire; "Flqte" means 2 Maber 20Al : "fP0"'means Initial Public Offering being ur offer to the public to purchase ordinary shares in Nyala prior to those shares being listed for hading on a Stock Exchange; 'rMining Licenoc" means the ten (10) year mining licencr no. ML015012007 grantd by the Government to Nyala on the Date, in response to Nyalals Mning Licence Application. A duly certified copy of ttre, original lvtining Licenoe is annexed as Appendix I of this Agreement; 'the Ministr;/'means the Ministry of Energy and Mines of lvnahwi; '.MO[J" mcans the Memorandum of,undersanding benreen the MihisEy and Nyala on the Date, a duly certified copy of the original MOU is anacxod hereto as Appendix 2 of this Agreement; '(Ivf[l A" means Malawi Rwenue Auttrority; "Recog[ised,Stock Exchangel? means any or all of London, New Yorlq Frankflrrt, Sydney, Toronto, Johannesburg or Malawi; "Royalty" means the ten percenf (l0fu"; royalty payable by Nyala to the Government upon ttre export of rough Corundum; o'Sales Royalty" means two point five percent Q.sn of tho wholesale sale price of Nyala's share of the cut and pqlished Corundum sold by Columbia; and "Valuation" means US$20 millioq which shall inctude f-unOs to be invested for the refurbishment of the mine and the proposed increase in production. ARTICLE 2 I,lyata Obligations l. In consideration of the Covernment granting the Mining Licence to Nyal4 Nyala shal[- (a) pay to the Govemment teo Fereent (l0Vo) Royalty on the gross value of Corundum exported, in accardance with the Mines and Minerals (Royalty) : Regglations, 1981; (b) pay to the Government an arnount equivalent to the Sales Royalt5r, once the Corundum has bcen cut, polished and sold by Columbia; pay quarterly (c) the Sales Royalff on a basis and calcularcd from receipts of sale by Columbia for the preceding quarter. These figures shall be audited annually and a copv of the audit shall be submiued to eW (d) issue to the Governmetrt ten percent (107q) of the equity of Nyala and such shareholding shall not be Ciluted tnf*re the IPO except by furtlrer agreement in rrynting,between the Parlies. For the purposes of determining the value of the ten pero€nt QAa/a) is"sued to the (icvernment pursuant to this paragraph, Nyala shall be valued at:the Valuation; (e) set up a lapidary in Malawi; (f) train Malawians in lapxiar;'s{ril:s; (g) train Malawians (Nyala employees), in the operation, maintenance and supervision of all machinery used in the mining atrd recolery ofthe Corundum; (h) train Malawians (Nyala employecs),in the,use of oomp-utus for all purposs and satellite navigation equipment for accuretely surveying tfte rnining ar€as; (i) prorido funds and rnaferials to refuibish tt.re local hospital at Katsekera and among others, shall procure new beds and lincn; 0) install a solar panel at dre looa"i hospital at Katsekera to provide lighting; (k) support the operations of the Clinic through the provision of drugs, medicineq dressings and other general medioal supplies for use within ttre local oommunity, including anti-retrovirai druEp for the teaSacnt of ADS. Nyala's financial assistance provided to rhe Clinis shall be but not limited to US$20,000.0t) per calendar yoar; and 0) proVide funds and materials to huild at least four (4) houses for teachers at the school at Kandoma. 2. [n accordanoe with the terms of the MOU, Nyala agrecs to gp-ant Malawiqns the right to participate in Nyala by the purchase of up to thirty percent (30W of the issuesshare capital of Nyala: Provided that the applieation and payrnctrt shall bc made within twelve (12) months fiom the datl this A.ereemi':nt enters into force. a two (2) ycars J. Within of the llate, Nyala shall- (a) incorporate a subsidiarv eorporate entity in Malawi for the purpose of cutting and marketing the lesser value Csrundum and selling tfiis Corundum within Malawi; and (b) take Nyala to listing on a Recognised Stock Exchange via an IPO, subject to the ability of the market to raise firnds at the time. 4. The thirty percent $AVr) Participation in Nyala applies to par4$?ph 30) above such that in the prospectus pieoared by Nyala for the IPO, Nyala agrees, subject to paragaph 2 above, to reserve for suhscription by Malawians an amount equivalent to thirty percent (307o) or an). part thereof remainkrg ,of, the issrcd share capital which would be available in Nyala post-listing if by that dafie the,total thirty pcrcont (30Yr) Participation would not have bEen satisfied. AR ILCH 3 Govemment Obligations l. In consideration of N,vala"'s agree*:ent tc.issue ten percent (l}W of Nyala's equity to the Governmert pursuant tcr Article 2 (l) (d) and to pay the Sales Royalty, the Government agrees- (a) that Nyala may import materials; consumables and equipment to be used in the mining and processing of minerals in ac4ordance with &e Mining Licence free of dutv ancl ta,c: Provided that in the casq of gquipmenL Nyala shall not sell any of the equipment nrithin,Mala*i fbr a pgriod, of fiver(S) years ftom the date of 6 import. For the avoidance of doub!, these exeurpdors shall not extend to any imports by ernployces of Nyala eithor for their own use or for resale; (b) that Nyala be exempt frorn Resource Rent Tax; (c) tlrat Nyala be exernp! li*rn Value Added Tax on capital purehases for the use (d) that Nyala tle e'.xempt from Fuel Duty at the nrling rate for fuel used in direct mining operations *rrly" The said fuel shall be purchased ftom an approved supplier in an approv-ed rnernaer. Apprcrv*.l shall be granted by the Malawi Revenue Aruhnriry'irl)rrn $ satisfactory submission by the supplier; (e) to issue c.ertificates of exemptinn t: Nyala frorn these duties and taxes; and (0 to the timelv issue of various licenees qrd permits. ARTTCI-E 4 SEI-I.[,EMENT OF DISP1ITES Any dispute which may arise relaring to the interpretation or application of this Agreement and which qannor be sealed amieably by the P'arties, shall, at the request of either Party, be submitted tor arlr!'Bntior in accordance with the Arbitration Act, Cap.6:03. ARTICLE 5 .dMENDItdEt"lT OI.- T t{IS AGREEMENT l. Any amendment of this Agreerneng shall he made by mutual a$eement of the Parties and in writing. .irll''[1{-]} E d '[ERMINA:I'i{]N (}r AGREEIvffiNT l. Either Party may at any time give nosisc in rrriting to the othor Party of any fundamental breaeh (Notice of Fundamental Breachi of either this Agreement or the Mining Licenee 7 requiring the Party in breash fo r*tifr the bleach withiu three (3) mondrs from the date of receipt of the Notice ol Fundarrrrr:rxl lJoticc. lf the said breach is not rectified within the three (3) month$ thcn the Par v that issusd the Noticc of Breaoh may terminate this Agreement by notice,in writing to rhe Party rlrat is in breach. 2. [n such cases this A m*t :;hal! ter-.aimte tuvelve (12] noonths after the date of recoipt of the notice byithe other Party, u*le+s the ilotice to terminate is withdrawn by nnutual agreement of the Pa4ies before ttre exprry of this period. ARTICLE 7 RNTRY Ii!'['{} f?t}RCE ANr} DLIP*-A,fiON t. This Agreement shall enter into ftrrce on the date of signature and shall remain in force for the duration of the mining iicence. 2. The duration of this AgSe.e,ment mav i:e extended by mutual qgreemcnt of the Parties. AR ICLE 8 I{L}T'ICHS In the event notices require to be served by one party to this A to the other they shall be served as follows: (a) to the Governrnent: (i) - by posi: &iin::*tr3".tf iinergy and Mfutes, hivate Bag J50, i,ilungw*e 3. lvlalawi; - tiv e-mail; ; (ii) - by post: Miristrr. r:f ;:'inance- Privare Bag 30049, Lilongwe, Malawi; (b) to Nyala by,post: - Nyala Mines Lirnited, P^O, i]*r I12, Ntcheq h4alawi; and - by e-maift rys.apn end GO\TERhIING LAW This fureement shall be governed by the Laws ofthe Republic of Malawi. IN WITNESS WHEREOF, dre Parties he.reto have ttrough theii rdrorized represontatives signed this Agreement on the date firsr abov* -;ryiiffen. , SIGNED and SEALED by the Government of the Republic of Malawi ln the presence of; SIGNED and SEALEI) by r{YALA MINESTIMTED Director.