Section 6: RENTS, ROYALTIES, TAXES AND DUTIES

(a) MINING AND SURFACE RENT (1) The Company shall pay to the Government annually in advance Mining Rent under each Mining Lease and Additional Mining Lease for each square mile or part thereof embraced within the Mining Lease Area commencing with the Financial Year ending December 31, 1989 and for each subsequent Financial Year, at the rate of US$400 for the first year increasing annually thereafter at the cumulative rate of 5% per annum. (2) In addition, the Company shall pay to the Government annually in advance a Surface Rent under the Mining Lease for all land occupied or used thereunder, for the purposes enumerated in Section 67 of the Minerals Act at the rate of US$4 (four United States Dollars) per acre per annum. Beginning January 1, 2003, the rate shall increase to US$10 (ten United States Dollars) per acre per annum, such rate increasing in respect of each subsequent year at the rate of 3% per annum. The Company may designate and shall demarcate one or more areas within the Mining Lease Area, not to exceed two square miles in total area, for permanent processing and other plant facilities. No. 4 Sierra Rutile Agreement (Ratification) Act 2002 15 (b) ROYALTY (1) As from January 1,1989, the Company shall, subject to Clause 6(d) pay a Royalty to the Government in United States Dollars in respect of each shipment of rutile and/or other titanium-bearing and associated minerals mined under the Mining Lease and sold by the Company as follows: (i) a Royalty at the rate of 3.5% (three and one-half percent) of the gross sales price, free alongside the Sierra Leone port of shipment, payable to the Company in respect of such shipment, such rate to increase beginning January 1, 2006, to 4% (four percent), and (ii) an additional royalty in the amount of US$1,667,000 for each of the years 2010 to 2014 and in the amount of US$1,665,000 for the year 2015, payable in respect of each year but not later than December 31 of such year. (2) Royalties payable hereunder shall constitute an operating cost of the Company and shall be allowed as a deductible expense in ascertaining its income for income tax purposes. Royalties shall not be credited against or considered as part payment of the aggregate income tax liability payable to the Government. (3) Royalties shall be payable to the Government within forty-five (45) days after the end of the months of shipment. The Company shall prepare and deliver to the Director of Mines a statement certified by the Company's representative stating the total tonnage of minerals of each kind and quantity shipped by the Company from Sierra Leone in that month, together with a statement of the gross sales price free alongside the Sierra Leone port of shipment. Upon delivery of such statement the Company will pay to the Government the Royalty payable with respect to the minerals covered by such statement. Every statement of export shall specify the designations and names and addresses of the consignees and shall be accompanied by a copy of the export entries certified by the Comptroller of Customs and Excise. 16 No. 4 Sierra Rutile Agreement (Ratification) Act 2002 (c) INCOME TAX (1) Subject to Clause 6(d), the Company in the conduct of its activities in Sierra Leone pursuant to this Agreement shall be liable for taxes upon its income derived from such activities as well as upon any other income of the Company accruing in, brought into or received in Sierra Leone at a fixed rate of 37.5% per annum or in accordance with the then prevailing fixed rate applicable to companies generally as set forth in the Income Tax Act, 2000, whichever is lower. (2) Notwithstanding the provisions of paragraph (1), the Income Tax payable by the Company in respect of any Financial Year shall not be less than an amount equal to 3.5% (three and one-half percent) of the amount of the turnover of the business of the Company in such Financial Year, as such expression is defined by Section 2 of the Income Tax Act, provided that the Company shall not be liable to pay Income Tax pursuant to the provisions of this Clause until the Financial Year ending December 31, 2005. The Company may offset against any future income tax liability any amount paid under this Clause for the Financial Years ending December 31, 1995 and December 31, 1996. (3) The balance sheets, statements of earnings and cash flow and other financial statements and books of account of the Company shall be restated, maintained and expressed in United States Dollars, and the Income Tax liability of the Company for each year of assessment after June 30, 1987, the end of the Tax Holiday previously granted under the Principal and Supplemental Agreements, shall be assessed and payable in United States Dollars. (4) (i) All capital expenditures incurred by the Company since its inception and in the future shall be restated, maintained and/or expressed at their original United States Dollar cost. (ii) The chargeable income of the Company for each Financial Year shall be determined after deduction of the following capital allowances, to the extent claimed by the Company in respect of such Financial Year, and subject to paragraph (iii) hereof: an initial allowance in the first year at the rate of 40% (forty percent) of the original United States Dollar cost of qualifying expenditures, and thereafter, an annual allowance at the rate of 20% (twenty percent) per annum of the original United States Dollar cost of qualifying expenditures until the whole of such cost is allowed. 18 No. 4 Sierra Rutile Agreement (Ratification) Act 2002 (ii) The amount of Royalties payable by the Company in respect of its Financial Years ending December 31, 1989 and December 31, 1990 shall not exceed 150% and 200% respectively, of the amount of Royalties paid by the Company in respect of its Financial Year ended December 31, 1988. (iii) In the event that either Income Tax or Royalties payable pursuant to Paragraph (d) (1) (i) or (ii) does not equal 150% or 200% as the case may be, of the amount of Income Tax or Royalties paid by the Company in respect of its Financial Year ended December 31, 1988, the combined amount of Income Tax and Royalties payable by the Company in respect of its Financial Years ending December 31, 1989 and 1990 shall not exceed 150% and 200% respectively, of the combined amounts of Income Tax and Royalties paid by the Company in respect of its Financial Year ended December 31, 1988. (iv) The amounts of Income Tax paid by the Company in Leones in respect of its Financial Year ending December 31, 1988 shall be expressed in United States Dollars at the official rates of exchange respectively prevailing on the due dates for the payment thereof (2) By way of credit against future Royalties as provided in paragraph (3) the Company will advance to the Government on an interest free basis the total sum of US$2,040,000 (hereinafter referred to as the "Royalty Credit"), of which US$1,000,000 was advanced on January 19, 1990, and the balance of US$1,040,000 was advanced on January 18, 1991. (3) Until exhausted, the Royalty Credit shall be offset against any royalties payable by the Company, whether due at the date of this Agreement or any time thereafter. (e) ADDITIONAL INCOME TAX (1) The Company shall pay to the Government in United States Dollars an Additional Income Tax to the extent that the annual weighted average gross sales price per ton of all rutile sold, free alongside the Sierra Leone port of shipment, payable to the Company in respect of total shipments during each Financial Year No. 4 Sierra Rutile Agreement (Ratification) Act 2002 19 exceeds $625 per ton, adjusted as set forth in paragraph (2). Such excess shall be divided into the increments shown in Column 1 of the table below. Additional Income Tax shall be due on each such increment at the rate applicable thereto shown in Column 2 of that table, the aggregate thereof being the total Additional Income Tax due per ton of rutile shipped by the Company in such Financial Year. | *(Column 1)* *Increments in* *Price per Ton* *US$* | *(Column 2)* *Rate of Tax on* *each Increment* % | |---|---| | 625-675 | 10 | | 676-725 | 15 | | 726-775 | 20 | | 776 and up | 25 | (2) With effect from January 1, 1992 the rutile price of US$625 per ton together with the prices defining the four increments of any excess over that price shown in Column 1 of the table above shall each be increased at the cumulative rate of 4% (four percent) per annum. (3) Additional Income Tax payable hereunder, as well as Minor Taxes as provided for under Clause 6(i) hereof, shall constitute an operating cost of the Company and shall be allowed as a deductible expense in ascertaining its income for purposes of Income Tax. (4) (i) Where in any month the Company ships rutile sold at a price per ton in excess of the price of US$625 per ton (as increased in accordance with paragraph (2) the Company shall submit to the Commissioner of Income Tax within forty-five (45) days after the end of that month a statement certified by the Company's. representative stating the total tonnage of such rutile shipped by the Company from Sierra Leone in that month and the gross sales price payable therefor free alongside the Sierra Leone port of shipment. Upon delivery of such statement the Company will pay to the Government on a provisional basis the amount of Additional Income Tax which the Company estimates will be due as at the end of the Financial Year with respect to such rutile shipment. Every such statement 20 No. 4 Sierra Rutile Agreement (Ratification) Act 2002 shall specify the designation and names and addresses of the consignees and shall be accompanied by a copy of the export entries certified by the Comptroller of Customs and Excise. (ii) Within forty-five (45) days from the end of each Financial Year, the Company shall submit to the Commissioner of Income Tax a statement certified by the Company's representative stating the total tonnage of all rutile shipped by the Company from Sierra Leone in the prior Financial Year and the weighted average gross sales price thereof free alongside Sierra Leone port of shipment. Upon delivery of such statement, the Company will pay to the Government (or deduct from the next payment due it) the difference between the total amount of Additional Income Tax due as aforesaid and the aggregate of the estimated monthly Additional Income Tax payments made by the Company for such Financial Year in accordance with sub-paragraph (i) . (f) SPECIAL WITHHOLDING TAX Withholding taxes on dividends, interest and management fees paid by the Company to its shareholders shall be as follows: (i) any such tax on dividends shall not be charged on dividends paid prior to the Financial Year commencing January 1, 2005 and shall not in any event exceed 10% (ten percent) of the gross amount of the dividend paid; (ii) any such tax on interest shall not be charged on interest paid prior to the Financial Year commencing January 1, 2011 and shall not in any event exceed 10% (ten percent) of the gross amount of interest paid; and (iii) a tax shall not be charged on management fees paid prior to the Financial Year commencing January 1, 2003 and shall not in any event exceed 10% of the gross amount of the management fee paid. No. 4 Sierra Rutile Agreement (Ratification) Act 2002 21 (g) LIMITATION OF CHARGES ON IMPORTS (1) (i) Notwithstanding the current charges, fees, duties and levies made by the Government on imports into Sierra Leone, the Government and the Company agree that for the duration of this Agreement the percentage *ad valorem* charges for levies, duties, fees, Taxes, surcharges and all other amounts levied on, or payable by the Company in respect of, imports of mining machinery, plant and equipment and consumable mining stores as defined in paragraph (ii) of this Clause will be 5% (five percent) in the aggregate, provided that the Company shall not be liable to pay any levies, duties, fees, Taxes, surcharges, and other amounts (including, without limitation, any inspection fee, whether pursuant to Clause 11(1) (1) or otherwise) levied on or payable by the Company in respect of imports of mining machinery, plant and equipment and consumable mining stores (as defined in Clause 6(g) (1) (ii) of this Agreement) necessary to complete the Refurbishment Works, subject to the following: (a) the Company submitting comprehensive schedules of items for which the concession is sought; (b) the Company providing an inventory, to the best of its ability, as of December 31,1994; and (c) the Company providing an asset register, to the best of its ability, as of December 31, 1994. (ii) The term "mining machinery, plant and equipment and consumable mining stores" shall include all machinery, plants and equipment useful to and used by the Company in clearing land, removing minerals therefrom and transporting, separating, handling, and packaging such minerals for sale, including, without prejudice to the generality of the foregoing, construction materials for mining and processing, dredges, barges, tow boats, pumps, piping, screens, concentrating and separating 22 No. 4 Sierra Rutile Agreement (Ratification) Act 2002 equipment, power generating and distributing equipment, cranes, lorries, road building equipment, mineral storage, conveying handling and consumable mining stores and packaging facilities together with accessories, spare parts and appliances for use and used exclusively with any of the foregoing. (iii) The term "plant" includes prefabricated fixtures not including buildings or building materials, as well as special purpose vehicles such as dumpers and shuttle trucks for use in mining or dredging. (iv) The term "machinery" means machinery consisting of a combination of moving parts and mechanical elements, which may be put in motion by physical or mechanical force, admitted as such by the Comptroller of Customs and Excise. (2) (i) For the duration of this Agreement, the Company shall have the right to import into Sierra Leone the whole of its requirements for fuel other than petrol and kerosene from such suppliers and on such terms and conditions as it may determine, provided that the Company may purchase fuel in Sierra Leone where such fuel can be supplied on a competitive basis in terms of price, quality and other delivery terms. (ii) The maximum amount of import, customs and excise duties and all other levies or charges (including the import inspection fee referred to in Clause 11(l) imposed by the Government on such fuel imports shall be as follows: | | | |---|---| | Imports in Financial Years 1997 through 2003: | 8% of CIF price payable by the Company; | | Imports in Financial Years 2004 and 2005: | 10% of CIF price payable by the Company; | | Imports thereafter: | 12% of CIF price payable by the Company. | No. 4 Sierra Rutile Agreement (Ratification) Act 2002 23 (iii) Subject to the provisions of this Agreement, the Company in the conduct of its activities in Sierra Leone pursuant to the provisions of this Agreement shall be subject to the provisions of the Customs Act Cap. 271, and the Customs Tariff Act, No. 16 of 1978 and Rules thereunder currently in force and as may be from time to time amended. (h) Development Certificate The Government and the Company agree and confirm that for the purposes of the Development Act (and the Development Certificate No. 32 dated March 15, 1972 issued to the Company thereunder), the Income Tax Act, this Agreement and the Agreements replaced hereby and for all other purposes that: (i) the Production Day of the Company was June 30, 1984 and that the expiration date of the Tax Holiday period was June 30, 1987, and (ii) in respect of the Tax Holiday period referred to in paragraph (i), no income taxes, surtaxes, or taxes based on minimum chargeable income are or shall become due or payable or outstanding by the Company and/or by its parent company with respect to the Company. (i) No Other Taxes etc. (1) The Company shall not be liable for any Taxes other than: (i) those expressly assumed by the Company pursuant to the provisions of this Agreement; (ii) the payment of taxes deducted from the emoluments of employees of the Company as required under the Income Tax (PAYE) Rules; (iii) the payment of Payroll Taxes at the applicable rate; (iv) the payment of Immigration Fees at the applicable rate; and (v) Minor Taxes. 24 No. 4 Sierra Rutile Agreement (Ratification) Act 2002 (2) For the purpose of paragraph (1), the expression "Minor Taxes" means all Taxes that: (i) are generally applicable to all corporations on a non-discriminatory basis, and (ii) do not result in a payment, or payments in the aggregate, which exceed(s): (a) in any Financial Year, the equivalent of US$100,000, or (b) over any five year period, the equivalent of US$250,000 and the "applicable rate" in respect of Payroll Tax shall not exceed US$10 (or its Leone equivalent) per annum per employee who is a national of any of the Economic Community of West African States ("ECOWAS") and US$500 (or its Leone equivalent) per annum per employee who is not an ECOWAS national and in respect of Immigration Fees (consisting of Residence Permit, Work Permit and Multiple Entry Visa) shall not exceed US$110 (or its Leone equivalent) for each ECOWAS national and US$450 (or its Leone equivalent) for each national other than an ECOWAS national. (3) If notwithstanding the above provisions the Company or its shareholders, as a result of either the activities of the Company or as the result of distributions or other payments made by the Company to its shareholders, or either of them, becomes liable to pay any Taxes pursuant to the laws of Sierra Leone, except for those expressly assumed by the Company pursuant to this Agreement, then the Government will, upon demand, hold the Company harmless in respect of any payment of Taxes made by the Company, including for this purpose any penalties, fines or interest paid or payable by the Company in connection therewith, whether for late payment or otherwise. (4) The Company may, as an alternative to exercising its rights under paragraph (3) elect to offset any sum otherwise payable to the Company under that provision against any monies then or subsequently due to the Government under the provisions of this Agreement. No. 4 Sierra Rutile Agreement (Ratification) Act 2002 25 (j) Coming Into Effect of Fiscal Regime Subject to the coming into effect of this Agreement in accordance with Clause 12 hereof, the fiscal regime described in this Clause 6 shall take effect beginning January 1, 1989 and, subject always to Clause 6(d) hereof, the provisions relating to payments herein contained shall be deemed to have been in force from that date.