Second Schedule., The Tonkolili Agreement Ordinance

RoYALTIES PAYABLE BY CoMPANY TO GovERNMENT DuRING TERM OF PERMANENT LEASE. IRON ORE. 1. From 1st October 1943 to date of first commercial shipment of iron ore won from demised areas or until the date on which the Permanent Lease is determined or cancelled under Clause 8 (b) or 10 (d) whichever is the earlier a royalty of 2d. per ton on all iron ore shipped from Marampa Concession. 2. From date of first commercial shipment of iron ore won from demised areas a tonnage royalty on all iron ore shipped from the demised areas and/or the Marampa Concession calculated on following scale- If the net average realised price per ton free on board at Pepel in any year does not exceed 8s. 9d. a royalty of 3d. per ton hereinafter referred to as " the basic royalty." This royalty shall be increased by One Halfpenny per ton for every 6d. of increase or any part thereof in net average realised price f.o.b. Pepel above 8s. 9d. per ton. Provided that should the said part of any such increase be less than One Halfpenny the royalty shall be increased by the actual amount of such increase instead of by One Halfpenny. Thus-If net average realised price per ton f.o.b. Pepel exceeds 8s. 9d. but does not exceed 9s. 3d.-a royalty of 3td. per ton. If net realised price per ton f.o.b. Pepel exceeds 9s. 3d. but does not exceed 9s. 9d. a royalty of 4d. per ton. And so on in the same scale. But- If the net average realised price per ton f.o.b. Pepel shall be Ss. 9!d. the royalty payable shall be 3!d. per ton and not 3ld. per ton. If the net average realised price per ton f.o.b. Pepel shall be 9s. 9kd. the royalty payable shall be 4kd. per ton and not 4td. per ton. 3. The royalties mentioned in Clauses 1 and 2 of this Schedule shall be paid to the Government without deduction of British income tax. 4. Net average realised price per ton f.o.b. Pepel in any year shall be calculated as follows- (a) Take the total gross proceeds including payments in respect of cargoes lost at sea (if any) received by the Company in respect of all ore shipped from the demised areas and/or from the Marampa Concession during the year under review before deduction of any charges. (b) Deduct from such total proceeds the following total expenses of the Company for such year- (i) All transport charges from f.o.b. Pepel to point or points at which delivery is effected to buyers. Such transport charges shall include ocean freight cost of discharging where this is not included in ocean freight demurrage on steamers (if any) light harbour or dock dues (including canal dues) where these are not included in the ocean freight cost of lighter and/or rail freight (including cost of loading and/or discharging into and from lighters andfor railway trucks where such costs are not included in lighter and/or rail freights) stocking and relifting charges and any other charges of similar nature. (ii) All selling charges including selling agents' commission brokerage sampling and analysis checkweighing insurance (including credit insurance) bill stamps and discounting charges on bills receivable advertising and any other charges of similar nature. (iii) Head office charges including fees paid to directors and/or technical consultants managerial and/or secretarial fees legal and arbitration expenses audit fees salaries and pensions of staff save those for the time being on the payroll of the Company in Sierra Leone financial charges on remittances to Sierra Leone travelling expenses office rents in United Kingdom (including local rates and taxes) postages (including telegrams cables and telephone charges) stationery and similar charges and expenses and any sums paid by the Company whether in the form of damages or otherwise on sales and freight contracts the Company bringing into account any similar sums received by it. Provided that deductions shall only be made on account of such charges mentioned in subparagraphs (ii) and (iii) of paragraph (b) of this clause as are fair and reasonable charges incurred in the course of the Company's normal business. The Auditors of the Company shall with each of the statements prepared in accordance with clause 8 of this Schedule give a certificate stating that the said charges are fair and reasonable as aforesaid. In certifying as aforesaid the Auditors shall have and shall state that they have had due regard to the allocation of a fair proportion of the total head office and selling charges to the activities if any of the Company other than activities relating to the production transport and sale of Sierra Leone iron ore. (iv) A charge in respect of allocation to sinking fund in respect of the capital originally invested in the development of the Tonkolili Mineral Areas and of any further capital therein invested after these areas have been brought into production. Such charge shall be the amount which it is necessary to allocate annually to a sinking fund accumulating at three per cent. per annum compound interest in order that the amount to the credit of sinking fund shall at the end of 30 years be equivalent to the capital sum which it is required to amortise. (v) A sum equivalent to the amount which the Company will require to pay as income tax to the British Inland Revenue and as Profits Tax to the Government in respect of the net sums allocated to sinking fund as in (iv) immediately preceding. (vi) Any tax duty or imposition on the product paid or payable by the Company whether in the form of import duty sales tax or otherwise howsoever. (vii) Any other charge of whatsoever nature which shall be a legitimate deduction from gross proceeds in computing the net realised price f.o.b. Pepel and shall be so certified by the Company's auditors. (c) To arrive at net average realised price per ton divide total net amount arrived at by making aforesaid deductions from said total gross proceeds by number of tons of iron ore shipped from Pepel during year under review. 2122 Cap. 202] Tonkolili Agreement (1937) 5. It is expressly declared and agreed- {a) That the Company shall not make from the total gross proceeds any of the deductions specified in Clause 4 (b) (i) (ii) (iii) (vi) and (vii) of this Schedule unless the sums so deducted represent expenses which have actually been incurred by the Company. (b) That the deductions to be made from gross proceeds in respect of allocation to sinking fund in accordance with Clause 4 (b) (iv) and (v) of this Schedule shall cease when the amount to the credit of sinking fund is equivalent to the total capital invested in the Tonkolili undertaking. (c) That the Company shall not be entitled to charge against gross proceeds any sum in respect of sinking fund for the amortisation of the capital of the Marampa railway port and shipping installation save that any capital sums expended in adapting extending altering or renewing the said milway and shipping installation or any part or parts thereof (including rolling stock) with a view to the more convenient handling stocking and shipment of Tonkolili Minerals shall be deemed to be part of the capital expenditure upon the Tonkolili undertaking. 6. Within three months after 30th June and 31st December in each year commencing 31st December 1943 the Company to deliver to Government a statement certified by the Company's Auditors of the quantities of iron ore shipped at Pepel from the demised areas andjor the Marampa Concession during the six months preceding such 30th June or 31st December as the case may be save that the first statement to be delivered after 31st December 1943 shall be for the period from 1st October 1943 to 31st December 1943. 7. (a) Each such half-yearly statement to be accompanied by a provisional payment in respect of royalties and/or dead rent the amount of which shall be calculated as in sub-paragraph (b) below. (b) (i) For the period from 1st October 1943 to 31st December 1943 and for each half-year thereafter up to and including the half-year during which the first shipment of iron ore is made from the demised areas the provisional payment shall be a sum equal to Two Pence multiplied by the number of tons shipped during the half-year or other period covered by the account. (ii) From the half-year following that during which the first shipment of iron ore is made from the demised areas the provisional payment shall be a sum equal to Three Pence multiplied by the number of tons shipped during the half-year. (iii) If at the end of any year commencing with the year ending 31st December 1943 the Government shall be entitled to dead rent in accordance with Clause 8 (g) hereof and the provisional payments to be made under sub-paragraphs (i) and (ii) of this clause in respect of that year are together less than the dead rent due to Government then the second provisional payment in respect of any such year shall be increased to such an amount as will together with that of the first provisional payment equal the dead rent due to Government. (iv) In order to co-ordinate the dates on which dead rent shall be payable under Clause 8 (g) with the date of termination of the Company's financial year on 31st December in each year a pro rata calculation as to the amount of dead rent accrued shall be made as at the 31st December :; ,I Tonkolili Agreement (1937} [Cap. 202 immediately succeeding the date on which dead rent commences to accrue under Clause 8 (g). 8. (a) Within six months after the end of the Company's financial year on 31st December in each year commencing with the year during which the first shipment is made from the demised areas the Company shall prepare and deliver to the Government a final statement certified by the Company's Auditors in respect of all iron ore shipped from the demised areas and/or the Marampa Concession during the year under review. Such statement shall show the gross proceeds received by the Company in respect of such shipments the amounts deducted therefrom for expenses in accordance with Clause 4 (b) of this Schedule the net average realised price per ton f.o.b. Pepel and the total royalties due to the Government on such shipments. It shall also show the Company's cost per ton of placing the ore from the demised areas f.o. b. Pepel. In computing such cost the Company shall be allowed to include all charges or expenses actually incurred in connection with the exploitation of the iron ore deposits in the demised areas and/or the Marampa Concession other than such charges or expenses as may in accordance with Clause 4 (b) of this Schedule be deducted from gross proceeds when ascertaining the net average realised price f.o.b. Pepel. (b) Together with such final statement the Company shall remit to Government an amount being the total royalties due to Government in respect of the year under review less the amount of any provisional payments made in respect thereof in accordance with Clause 7 of this Schedule. (c) The final computation of royalties due to the Government made in accordance with paragraph (a) of this clause shall be based upon the tonnage of ore shipped in the year UJ;lder review as invoiced by the Company to receiving works save that the weights of cargoes lost at sea (if any) shall be taken as being the bill of lading weights of such cargoes. 9. (a) If at the end of the year immediately following that during which the first commercial shipment is made from the demised areas the cost to the Company of placing the ore from the demised areas f.o.b. Pepel as shown by the final statement rendered in accordance with Clause 8 (a) of this Schedule is materially less than 6s. 2d. per ton f.o.b. or materially in excess of that figure either the Government or the Company may request a revision in the basic royalty of 3d. per ton. (b) If at the end of the sixth eleventh or sixteenth years following that during which the first commercial shipment is made from the demised areas or at the end of any further five-year period thereafter the average cost to the Company of placing the ore from the demised areas f.o.b. Pepel during any such five-year period is materially less or materially in excess of the average cost during the period preceding that under review either the Government or the Company may request a revision in the basic royalty current during such five-year period whether or not such basic royalty has previously been revised under the provisions of this clause. (c) It is declared that the general object of any revision contemplated under paragraphs (a) and (b) of this clause is to redress any hardship which may arise either to Government or Company either from a general change in world price levels or from an alteration in cost of working due to a change of labour or social conditions in Sierra Leone or from any other cause beyond the control of the Government or the Company. (d) If either the Government or the Company shall request a revision under paragraphs (a) or (b) of this clause and the two parties shall be unable S.L.-VoL. IV-13 2124 Cap. 202] Tonkolili Agreement (1937) to agree as to the extent of the revision the question shall be submitted to arbitration in accordance with Clause 27 of this Agreement. (e) Any revision agreed upon or settled by arbitration shall affect only the basic royalty and the average realised price f.o.b. Pepel upon which such royalty is based. It shall not affect the sliding scale of increases for which provision is made in Clause 2 of this Schedule. {f) Any such revision shall remain in force for a period of five years at the end of which period a further revision may take place under paragraph (b) of this clause. 10. The Company's Auditors to be Messrs. Deloitte Plender Griffiths & Company or such other Chartered Accountants or firm of Chartered Accountants as may be appointed from time to time by the shareholders of the Company and approved by Government. 11. In arriving at the net average realised price f.o.b. Pepel in accordance with Clause 4 of this Schedule the Company's Auditors or such other person as may be appointed by the Governor acting on behalf of Government may exclude from average- (i) Any sales of iron ore made to or any charter or freight contract made with- (a) Any person firm or company which has a direct financial interest in the Company exceeding ten per cent. of its total share capital and loan capital (if any). (b) Any firm or company in which the Company has a financial interest exceeding ten per cent. of its share capital and loan capital (if any). (ii) Should any such sales of iron ore or any charters or freight contracts be rejected from average the quantities of iron ore sold andfor freighted thereunder shall for the purposes of the computation required by Clause 4 of this Schedule be deemed to have realised the same price f.o.b. Pepel as that of the average disclosed by the remaining transactions of the Company during the year under average. (iii) Provided that notwithstanding anything contained in this clause the Company may seek the prior approval of its Auditors of any sale of iron ore made to or any charter or freight contract made with any such person firm or company as is described in paragraph (i) (a) and (b) of this clause and if the Auditors shall approve any such sale or charter or freight contract it shall not thereafter be excluded from average in computing the Company's net average realised price f.o.b. Pepel. OTHER MINERALS. 12. Any taxes payable in respect of any minerals other than iron ore won by the Company from the demised areas shall not exceed the lowest taxes payable to the Government by any other person firm or company mining the like minerals in Sierra Leone. 13. The royalty to be paid by the Company in respect of any mineral other than iron ore won by it from the demised areas shall if no other person firm or company be mining such mineral in Sierra Leone be agreed between the Company and the Government but (except in the case of gold platinum and precious stones) shall not exceed 5 per cent. of the value of the minerals as mined such value to be calculated at the mine mouth. 14. (a) Any royalty due to the Government on crude gold exported by the Company shall be paid by the Company in accordance with Rule 5 (3) of the Minerals Rules. (b) Payment of all royalties other than those on crude gold and on iron ore shall be payable to the Government at half-yearly intervals and within three months after the close of each half-year. Provided that if in the case of any mineral other than crude gold or iron ore the royalty payable is based on a percentage of profits or a percentage of realised selling prices the Company shall make provisional payments at the end of each half-year in respect of royalties due and shall make final payments in respect of each year within three months after the Company's accounts for that year have been prepared and certified by the Company's Auditors the procedure generally following that laid down in Clauses 6, 7 and 8 of this Schedule in regard to the method of payment of royalties on iron ore. GENERAL. 15. The Government shall not levy or impose any export tax or royalty or other direct tax on minerals won from the demised areas other than and except royalties or taxes aforesaid.