UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 29, 1994
MAGMA COPPER COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 1-10122 86-0219794
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
7400 North Oracle Road, Suite 200, Tucson, Arizona 85704
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(602) 575-5600
Not Applicable
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On November 29, 1994, Magma Copper Company (the "Company")
consummated the acquisition of Empresa Minera Especial Tintaya S.A.
("Tintaya"), a Peruvian company which owns mining concessions and
conducts mining operations in Southern Peru. The Company was the
winning bidder in the privatization of Tintaya, which was acquired
from the Government of Peru. Following the closing, Tintaya's name
was changed to Magma Tintaya S.A.
Under the terms of the purchase, which was determined through a
bid process, the Company paid US$214 in cash and delivered US$55
million face value of Peruvian government debt (which the Company
purchased for a discount), for a 98.43% interest in Tintaya (the
remainder of Tintaya is owned by employees). Magma funded the
purchase through the sale of short-term marketable securities. In
conjunction with the acquisition, Magma also agreed to spend US$85
million for certain capital expenditures over the next 5 years.
Tintaya owns various mining concessions in Southern Peru, as well
as plant and equipment to support ongoing mining operations. The
Company intends to continue to operate these mining properties, to
expand existing operations, and to explore for additional ore
reserves. In this regard, based upon information provided to the
Company in connection with the acquisition, the Tintaya Project
contains nearly 2 billion pounds of recoverable copper. The project
currently consists of an open pit mine which has established reserves
of 58 million tonnes of 1.78% sulfide copper ore. Current operations
process 1.75% copper sulfide ore at the rate of 8,000 tonnes per day,
producing approximately 110 million pounds of copper per year. Over
the next two years the Company intends to expand the mining rate to
10,000 tonnes of ore per day, which would boost sulfide ore production
to 135 million pounds of copper per year. The Company also intends to
do a feasibility study to evaluate how best to exploit a proven and
probable mineral resource estimated at 21.7 million tonnes of 1.57%
oxide copper ore. Based upon a preliminary analysis of the oxide
orebody at Tintaya, the Company believes that the project could
support an SX-EW operation capable of producing 70 million pounds of
copper per year. The Company also believes that if it is successful
in expanding the current rate of sulfide production and in
establishing SX-EW production to achieve total copper production of
200 million pounds per year, Tintaya should be able to reduce its net
cash operating costs to the 50 cents per pound range.
Although the Company made an extensive evaluation of the Tintaya
Project prior to its acquisition, there are certain risks inherent in
the acquisition and operation of foreign properties including the risk
of political instability, the possibility of adverse economic or tax
reforms, restrictions on the repatriation of funds and currency risks.
The Company is pursuing measures to mitigate some of these risks.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
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It is impracticable to provide the required financial
information for Tintaya at the time this report on Form
8-K is filed. The required financial statements will
be filed under Form 8-K/A as soon as practicable but in
no event later than February 13, 1995.
(b) Pro Forma Financial Information.
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It is impracticable to provide the required pro forma
financial information for Tintaya at the time this
report on Form 8-K is filed. The required pro forma
financial information will be filed under cover of a
Form 8-K/A as soon as practicable but in no event later
than February 13, 1995.
(c) Exhibits.
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2.1 Stock Purchase Agreement between Empresa Mineral
Especial Tintaya S.A. and Magma Copper Company
(official translation).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
MAGMA COPPER COMPANY
By \s\ Douglas J. Purdom
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Douglas J. Purdom
Vice President and
Chief Financial Officer
Date: December 14, 1994
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This document represents the Stock Purchase Agreement (the
"AGREEMENT") signed between the party of the first part, Empresa
Minera del Peru S.A. (the "SELLER"), whose business address is
Bernardo Monteagudo No. 222, Magdalena, and who is duly represented
by its Board Chairman, Mr. Raul Otero Bossano, as documented by the
power of attorney conferred upon him by the Extraordinary General
Stockholders Meeting of November 4, 1994; and the party of the
second part, the Consortium (the "BUYERS") formed by MAGMA COPPER
COMPANY, a company organized under the laws of the State of
Delaware, United States of America, and GLOBAL MAGMA LTD, a company
incorporated under the laws of the Cayman Islands, who have jointed
together in a consortium by contract signed between them on
November 23, 1994 in order to participate in the International
Public Auction for the sale of the shares of TINTAYA of which the
Peruvian Government owns 100%; who are headquartered in Tucson,
Arizona and are represented by Mr. Bradford A. Mills in accordance
with the power of attorney granted him by each company and which is
currently being registered with the National Office of Public
Registries in Lima; in accordance with the following terms and
conditions:
I. DEFINITIONS
For the purposes of this AGREEMENT, the parties agree to adopt the
following definitions:
Shares: The shares owned by the Peruvian Government in
TINTAYA, S.A. by way of Empresa Minera del Peru S.A., and which
are being transferred under this AGREEMENT.
Projected Balance Sheet: TINTAYA's projected balance sheet as
of the closing date (enclosed herewith as Enclosure A),
expressed in U.S. dollars and reported by Price Waterhouse
along with its comments on the financial statements, and mailed
under cover of letter CEPRI-998/94 dated September 12, 1994.
Final Balance Sheet: TINTAYA's balance sheet as of the closing
date, to be audited by the auditing firm of Pazos, Lopez de
Romana, Rodriguez.
Bid Guidelines: The guidelines for the International Public
Auction called by the Special Committee in charge of promoting
private investment in TINTAYA for the sale of 100% of the
shares representing TINTAYA's corporate capital.
Cepri TINTAYA: The Special Committee in charge of the process
to promote private investment, appointed by Supreme Resolution
No. 044-93-PCM.
The Buyers: Magma Copper Company and Global Magma, Ltd. who
together constitute the consortium formed to participate in the
Internal Public Auction, and who are acquiring ownership of
TINTAYA's shares as a result of the process to promote private
investment in that company.
COPRI: The Commission to Promote Private Investment created by
Legislative Decree No. 674.
Consortium: A group of two or more individuals or legal
entities who are parties to a partnership agreement without
however constituting a new legal person.
Consortiates: The members of the Consortium, Magma Copper
Company and Global Magma, Ltd.
Agreement: The instrument documenting the sale of TINTAYA's
shares owned by the Peruvian Government, to the BUYERS.
Data Room: Center created by CEPRI TINTAYA and TINTAYA where
all information regarding TINTAYA has been brought together.
Financial Statements: The tables which in an orderly and
systematic form reflect TINTAYA's financial and economic
condition, in accordance with generally accepted accounting
principles.
Closing Date: The scheduled closing date is November 29, 1994.
Minero Peru: Empresa Minera del Peru S.A.
The Mine Operator: Magma Copper Company as the Consortiate who
has documented its experience in mining operations during the
prequalification process of the International Public Auction.
The Parties: The parties to the AGREEMENT, i.e. Minero Peru
S.A., as well as Magma Copper Company and Global Magma Ltd.
Equity: The grand total of TINTAYA's assets and liabilities.
Purchase Price: The U.S. dollar amount plus eligible
debentures of the Peruvian foreign debt in accordance with the
provisions of Law No. 26250 and its Regulation, to be paid by
the BUYERS for the shares which are the object of this
AGREEMENT.
Privatization: The process to promote private investment
governed by Legislative Decree No. 674.
The Auction: The International Public Auction convened by the
Special Committee in charge of promoting private investment in
TINTAYA for the sale of TINTAYA's capital shares.
TINTAYA: Empresa Minera Especial TINTAYA, S.A. and its
subsidiary. TINTAYA is an anonymous corporation (sociedad
anonima) with a paid-in capital of S/. 209,006,567.00
represented by 209,006,567 registered common shares, fully
issued and paid. No options or rights to these shares in favor
of third parties exist.
The Seller: Empresa Minera del Peru S.A., its successors or
assignees.
II. GENERAL INFORMATION.
1. By Legislative Decree No. 674, as reflected in the
provisions of its whereas clauses, it was declared in the
national interest to promote private investment in the
businesses representing the Government's entrepreneurial
activities under the provisions of Law No. 24948, in order
to create a climate conducive to the development and growth
of private investment in the area of Government enterprises,
and the manner in which to promote such investment was set
forth.
2. Supreme Resolution No. 044/93-PCM dated February 12, 1993
ratified COPRI's agreement by which TINTAYA was included in
the group of government-managed enterprises, and created the
Special Commission to Promote Private Investment in TINTAYA.
By Supreme Resolution No. 499/93-PCM dated October 29, 1993,
it was decided that the type of private investment promotion
to be applied to TINTAYA were the measures set forth in
Article 2, Subsection a) of Legislative Decree No. 674.
3. The SELLER owns 209,006,567 shares which represent one
hundred percent (100 %) of TINTAYA's capital shares.
4. In accordance with the provisions of Articles 24 and 26 of
Legislative Decree No. 674, the workers of TINTAYA were
given preferred option to acquire up to 10% of the shares
representating TINTAYA's corporate capital. In exercising
this right, they purchased 3,273,245 shares representing
1.57% of the corporate capital.
5. On June 9, 1994, all parties interested in participating in
the prequalifying process for the auction of TINTAYA's
shares were called together, and the BUYERS became a
prequalifying bidder.
6. The procedure for participating in the auction of TINTAYA's
shares was described in the bid guidelines.
7. The proforma balance sheet as of the closing date was made
available on September 12, 1994.
8. The BUYERS submitted all of the documents called for in the
auction guidelines and were declared a qualifying bidder by
CEPRI.
9. Following the auction on October 6, the Consortium formed by
the BUYERS was declared the winner and as a result was
awarded the winning bid.
10. By virtue of the foregoing, the parties enter into the
present Stock Purchase Agreement in accordance with the
terms and conditions set forth below.
III. TRANSFER OF SHARES AND PAYMENT
1. The SELLER agrees to transfer and consequently transfers to
the BUYERS, and the BUYERS, by promising to pay the purchase
price, acquire possession of or complete, absolute and
unrestricted title to, 205,733,322 shares representing
98.43% of TINTAYA's corporate capital, along with all rights
inherent therein, be they current, future or anticipated,
earned or yet to be earned, including any possible dividends
in cash, kind, or in the form of shares deriving from the
restatement of TINTAYA's corporate capital, as well as any
other benefits which may derive therefrom, without any
limitation whatsoever.
As of the date of this AGREEMENT, no agreements of any kind
exist which would give a third party any option or
conversion rights to acquire TINTAYA shares.
2. Upon the signing of this AGREEMENT, the BUYERS pay the
SELLER on the "closing date" the purchase price of the
shares being acquired. The purchase price is comprised as
follows:
a. US$ 55,000,000.00 (fifty-five million U.S. dollars) in
eligible debentures of the Peruvian foreign debt, in
accordance with the provisions of Law No. 26250 and its
Regulation, plus
b. US$ 214,071,250.60 (two hundred and fourteen million
seventy-one thousand two hundred and fifty and 60/100
U.S. dollars) in cash (financial offer as indicated in
the Guidelines, from which the amount represented by the
shares acquired by the workers has been deducted). Five
percent of this amount shall be deposited in an account
to satisfy the stipulations of Paragraph IV.6.
3. On the closing date and upon payment of the purchase
price, the transfer shall be recorded in the
corresponding share register of TINTAYA.
IV. CLOSING.
1. The closing date shall be November 29, 1994 at the offices
of TINTAYA in the city of Lima.
2. Enclosure A contains TINTAYA's proforma balance sheet in
U.S. dollars as of November 30, 1994 prepared in keeping
with generally accepted Peruvian accounting practices, with
an expert opinion provided by the auditing firm of Price
Waterhouse and accompanied by pertinent comments regarding
the financial statements, as furnished to the BUYERS.
3. Within the timeframe indicated in the following numeral, a
final balance sheet showing TINTAYA's true equity position
as of the closing date will be prepared. The same
principles, guidelines and criteria employed in preparing
the proforma balance shall be used to compile the final
balance sheet as of the closing date.
4. The final balance sheet shall be prepared by TINTAYA and
audited by the auditing firm of Pazos, Lopez de Romana,
Rodriguez, as one of the three auditing firms proposed by
the BUYERS for this purpose and selected by CEPRI TINTAYA.
This final balance will be prepared within four months from
the closing date at TINTAYA's expense. The expert opinion by
the designated auditing firm shall contain the final amount
referred to in the following paragraph.
5. Should the current net assets and the current liabilities of
the proforma balance differ from those of the final balance
sheet, the latter shall prevail. Should the current assets
minus the current liabilities shown in the final balance be
less than those shown in the proforma balance, the SELLER
shall return the differential to the BUYERS. If the opposite
is the case, the return shall be by the BUYERS to the
SELLER.
The differential to be returned by the SELLER to the BUYERS,
or vice versa, refers only to the difference between current
assets and liabilities, and in no way considers fixed
assets, intangible assets, other assets or other
liabilities, which will be assumed as shown on the final
balance sheet and in the physical condition and position
they are in.
The valuation criteria for current assets and liabilities
employed in the preparation of the proforma balance shall
also be adopted in preparing the final balance sheet,
including the valuation of concentrates at their selling
price, less the cost of transportation to the port and the
cost of embarkation.
The difference, as determined by the auditors of the final
balance sheet, shall be repaid by the benefitting party
within thirty days from completion of the final balance
referred to in the preceding section, and shall accrue
interest at the six month LIBOR rate (6.3125% per year), as
published by the Wall Street Journal on November 23, 1994,
beginning with the closing date. Payment shall be in U.S.
dollars.
6. As a guarantee for the possible reimbursement to which the
BUYERS may be entitled as a result of the implementation of
the preceding article, five percent of the amount of the
cash price paid by the BUYERS as part of the purchase price
shall be deposited with the Banco Continental until such
time as the auditing firm shall submit the final balance.
7. As a guarantee for the possible reimbursement to which the
SELLER may be entitled as a result of the implementation of
Paragraph IV.5., above, the BUYERS shall present a letter of
guarantee or a stand-by letter of credit in favor of the
SELLER. This document, which shall be valid for up to five
months following the closing date, shall be for an amount
equal to five percent of the cash price paid by the BUYERS,
plus interest for the aforesaid period at the six month
LIBOR rate (6.3125% annually) as published by the Wall
Street Journal in its November 23, 1994 issue, and shall be
unconditional, irrevocable, immediately executable, jointly
and severally liable, and without right of excussio.
8. On the closing date the SELLER shall:
a. Turn over to the BUYERS a certified copy of the Public
Document of TINTAYA's most recent capital increase,
reflecting the number of shares being acquired;
b. Ensure that the transfer of shares to the BUYERS is
recorded in TINTAYA's share register;
c. Provide a certified copy of the minutes of the meeting of
the corporate body of Minero Peru S.A. authorizing its
representative to participate in the AGREEMENT;
d. Formally turn TINTAYA over to the BUYERS.
9. On the closing date, the BUYERS shall pay the SELLER the
purchase price as indicated in Paragraph III.2.
10. The report to be presented by the auditing firm of Pazos,
Lopez de Romana y Rodriguez in accordance with Paragraph
IV.4 shall be final.
In the event the differential discussed in Paragraph IV.5.
is in favor of the SELLER, based on the audit report, [the
SELLER] shall proceed to collect the amount it is due
against the Letter of Credit referred to in Paragraph IV.7,
following which the BUYERS may freely dispose of the balance
of the Letter of Credit. Likewise, the guarantee deposit
referred to in Paragraph IV.6 shall be released back to the
SELLER. Also, if the audit report determines that the
differential discussed in Paragraph IV.5 is in favor of the
BUYERS, the BUYERS shall be paid the sum they are owed at
the LIBOR rate shown in the aforementioned Paragraph IV.5 by
the Banco Continental against the guarantee deposited in
accordance with Paragraph IV.6, following which the SELLER
shall freely dispose of the remaining balance. The Letter of
Credit referred to in Paragraph IV.7 shall also be released.
The Banco Continental shall use the audit report as the
basis on which to proceed in accordance with the
stipulations in this article, without requiring any
additional documentation.
V. BUYERS' REPRESENTATIONS AND GUARANTEES.
The BUYERS represent and guarantee to the SELLER all of the
following information and understand that the SELLER is
entering into this AGREEMENT on the basis of such
representations and guarantees.
1. The BUYERS declare that they have, directly or through third
parties, conducted their own investigation, examination,
inquiry and evaluation of this purchase during the due
diligence process, based on data made accessible, available
and provided by TINTAYA, except for the adjustments to the
balance resulting from the audit referred to in Paragraph
IV.5. No adjustments to the contractually agreed purchase
price shall be admissible at a later date on grounds that
the true situation and reality of TINTAYA was not known.
Data about TINTAYA were provided by means of the Memorandum
of Information, the answers to the questions on the
guidelines, the documentation available in the Data Room,
and [any additional] information requested directly by the
BUYERS or through authorized third parties. All information
concerning TINTAYA was at the full disposal of the BUYERS
during the due diligence period. Within this context, the
BUYERS assume responsibility for their due diligence on the
basis of the information available and provided by TINTAYA,
and hence shall not hold CEPRI TINTAYA, its members, the
SELLER or the Government of Peru responsible for their
decision to buy, inasmuch as said decision was made at
BUYERS' sole competence and risk.
The statements contained in the preceding paragraph are
irrespective of the SELLER's representations and guarantees
in Paragraph VI of this AGREEMENT.
2. The BUYERS are duly organized and existing under the laws of
their [respective] places of incorporation, and have full
authorization and legal competence to assume their
obligations in the exercise of commercial activities in all
jurisdictions where such authorization is required by virtue
of such activities or ownership of assets.
The BUYERS hold the necessary permits, authorizations,
licenses, clearances, concessions and approvals to engage in
their business activities and are fully authorized and
competent in all jurisdictions to comply with the
obligations assumed by signing and executing this AGREEMENT.
3. The signing of this AGREEMENT, as well as the fulfillment of
all of the commitments contained herein, has been duly
approved by the appropriate corporate entities or by the
governmental agencies of the BUYERS' countries of origin,
where required.
4. Other than those that have already been obtained, no legal
requirements exist in the countries where the BUYERS are
incorporated or have their principal seats of business,
which might require said BUYERS to obtain approvals of any
kind prior to entering into or executing this AGREEMENT.
5. No legal, judicial, statutory, conventional or other
provisions exist which might prevent this AGREEMENT from
being signed or executed by the BUYERS.
6. Other than the statements reflected in this AGREEMENT, the
BUYERS' decision to acquire the shares which are the object
of this AGREEMENT was not taken on the basis of any implied
or expressed representation on the part of the SELLER or
person(s) associated with TINTAYA.
7. The BUYERS declare that they are unaware of any legal
actions, lawsuits, judgments, other legal proceedings or
sentences not yet executed that may be pending against them,
which might be intended to prevent the signing or execution
of this AGREEMENT.
8. The BUYERS have not entered into any contract or agreement
that might commit the SELLER or TINTAYA to make any
payment(s) as a result of BUYERS' successful share purchase.
9. The BUYERS assume full responsibility for the accuracy and
veracity of the representations and guarantees they have
made in this AGREEMENT, for a period equal to the
fulfillment of the Investment Agreement assumed.
VI. SELLER'S REPRESENTATIONS AND GUARANTEES.
The SELLER represents and guarantees to the BUYERS all of the
information provided below, and recognizes that the BUYERS are
entering into this AGREEMENT on the basis of such declarations
and assurances.
1. The SELLER is an entity duly organized and validly existing
under Peruvian law and is fully authorized and competent to
assume the obligations arising from the signing and
execution of this AGREEMENT in all jurisdictions where such
authorization may be required owing either to the nature of
such activities or the ownership of assets.
TINTAYA holds the necessary permits, authorizations,
licenses, clearances, concessions and approvals to carry out
its activities.
2. The signing of this AGREEMENT, as well as the fulfillment of
all of the commitments contained herein, was duly approved
by the necessary corporate or governmental entities.
The AGREEMENT is signed by the persons listed in the
introduction, who are fully authorized to act in
representation of the SELLER and to enter into commitments
on his behalf as provided herein.
3. The SELLER has furnished the BUYERS certified and accurate
copies of TINTAYA's Articles of Incorporation, bylaws, and
amendments thereto up to the closing date.
4. The SELLER's signing of this AGREEMENT and the fulfillment
of the obligations arising therefrom are within the scope of
the SELLER's powers. They are in keeping with the laws and
other provisions and statutes applicable to the act
contemplated in this AGREEMENT, including the provisions
pertaining to the public auction, and were duly authorized
by COPRI and the SELLER's competent entities. Thus, the
SELLER need not complete any further steps or procedures
before entering into this agreement and fulfilling the
commitments arising therefrom.
Other than the rights of TINTAYA's workers expressly stated
in this AGREEMENT, the SELLER's signing of this AGREEMENT
shall not produce any third party rights to guarantees
regarding the shares, nor entitle any third party to
exercise preferential stock purchase rights.
5. There are no provisions under the laws of Peru or any other
authority in this country, or applicable due to the nature
or identity of the SELLER, which would require the SELLER to
secure any approvals, other than those already in hand,
before entering into this AGREEMENT and fulfilling any and
all of the obligations and guarantees deriving therefrom in
a timely and complete manner.
6. The legal standards under which the SELLER or TINTAYA were
incorporated contain no law, regulation, decree, statute,
ruling, sentence or corporate provision, nor is there any
mortgage, public instrument, loan or guarantor agreement,
lien, encumbrance, contract or any other kind of agreement
binding upon the SELLER which might affect said SELLER's
assets; nor is there any action, lawsuit or procedure
pending before an ordinary or arbitration court or a
governmental agency which might preclude, conflict with or
impede the signing of this AGREEMENT and the fulfillment of
the SELLER's obligations.
7. The SELLER has furnished the BUYERS with TINTAYA's financial
statements for the years 1992 and 1993 prepared by TINTAYA's
independent outside auditors, as well as the proforma
balance discussed in Paragraph IV.2. These financial
statements reasonably reflect TINTAYA's equity position as
of the dates shown, as well as operating results and cash
flows for the business year indicated, in accordance with
generally accepted Peruvian accounting principles.
The SELLER also declares that, other than those shown, he is
unaware of the existence of any liabilities, assets or
contingencies arising from tax, labor, legal or other types
of obligations. In any instance where non-recorded
liabilities or contingencies deriving from events which
occurred before the closing date should arise, they shall be
assumed by the SELLER to the extent they were actually
generated during the SELLER's management, and on condition
that any such claims be presented within two years from the
closing date, except for the tax contingencies governed by
the provisions of Paragraph VII.
The reimbursement referred to in the preceding paragraph is
subject to the BUYERS' notifying the SELLER within thirty
calendar days from learning of the existence of such
contingency. In any case, the BUYERS shall mount an active
defense of the SELLER's interests in any potential
administrative or legal complaints against the SELLER, and
shall allow the latter's active participation as an
interested third party by making all necessary support
available to him.
In the event the unrecorded assets should include accounts
receivable, the BUYERS shall make reimbursement to the
SELLER when they are collected.
The SELLER shall assume responsibility toward the BUYERS
for any liabilities totaling more than US$ 250,000.00 (two
hundred and fifty thousand U.S. dollars).
8. The shares transferred under this AGREEMENT are fully
subscribed and paid for. They are unencumbered by any
judicial or extrajudicial measures or liens of any kind, and
except for the restrictions negotiated in this AGREEMENT,
are freely transferable.
9. Enclosure B contains TINTAYA's Financial Rehabilitation
Contract with the Supreme Government, as well as a copy of
Emergency Decree No. 044-94, by which the Government assumed
TINTAYA's foreign debt. It also contains the list of waivers
from the banks who have accepted the debt assumption. The
[Government's] assumption of the foreign debt was legally
valid, and TINTAYA has no obligation from this debt. The
SELLER assumes responsibility for any claim which might be
presented against TINTAYA by creditors of the aforementioned
debt.
10. Enclosure C contains complete information regarding
TINTAYA's workers, their total number, total monthly payroll
and breakdown by category as of August 30, 1994. As of the
closing date, no substantial changes have taken place.
11. Enclosure D contains a comprehensive list of financial
commitments, retirement pay, pensions and other worker
benefits, including the accumulated reserve for compensation
of time served, as well as those on deposit at financial
institutions. Other than these, no other responsibilities
toward the workers exist.
12. Enclosure E contains a complete list of TINTAYA's real
estate holdings, including the mining claims and water use
rights to which it holds title and which are currently in
effect. All of these are free of any encumbrance,
attachment, mortgage, usufruct or covenant.
TINTAYA has clear title to all its movable and real estate
assets, and they are free of encumbrances, liens, pledges,
mortgages, guarantees or any other limitations.
Appropriate supporting documentation is in TINTAYA's
possession.
13. TINTAYA has complied with all obligations, both formal and
substantive, related to its mining claims.
All mining patents are current, and none were allowed to
expire.
14. Enclosure F contains a list of pending legal actions,
arbitration matters and other proceedings. No other
proceedings were instituted, nor are there any not yet
executed legal sentences or arbitration awards against
TINTAYA amounting to more than five thousand U.S. dollars
(US$ 5,000.00).
15. Enclosure G is TINTAYA's Tax Stability Contract with the
Supreme Government which is currently in force. If desired,
the BUYERS may cancel or subrogate this contract and sign a
new Tax Stability Contract with the Supreme Government.
16. TINTAYA has filed all national, regional and municipal tax
declarations for which it was responsible, and has either
paid all of its tax liabilities, regardless of whether or
not they appear in these declarations, or has set aside the
required reserves in its financial statements. In accordance
with Paragraph 7 of this AGREEMENT, the SELLER assumes
responsibility for any tax-related contingencies which may
arise.
17. Enclosure H contains a list of contracts made available to
the BUYERS in the Data Room. TINTAYA is not party to any
contract of substance that was not listed in this enclosure.
18. Enclosure I contains a copy of TINTAYA's bylaws in effect on
the closing date.
19. Enclosure J contains a complete list of unpaid accounts
receivable over 90 days old which exceed US$ 10,000.00 (ten
thousand U.S. dollars) per client.
20. TINTAYA has not disregarded, in any significant aspect, the
laws, regulations, orders, mandates or urban restrictions in
Peru including, but not limited to, those pertaining to
environmental protection or the national historical or
cultural heritage.
TINTAYA has complied and continues to comply with any and
all provisions and requirements related to the protection of
the environment and natural resources as established in
Legislative Decree No. 613 [and] supplemental, amending and
regulatory statutes. TINTAYA's operations infringe neither
wholly nor in part against the existing statutes concerning
human health or the animal or plant world.
Any contingencies relating to environmental matters and
deriving from TINTAYA's mining operations conducted before
the closing date shall be the SELLER's responsibility.
21. The Tax Stability Agreement referred to in Item 15 of this
paragraph shall not end nor become extinct as a direct
result of the signing of this AGREEMENT, nor shall any other
contract end to which TINTAYA is a party.
22. TINTAYA is the sole and complete owner of EGESSA.
Consequently, all guarantees and representations contained
in this clause also extend to EGESSA.
23. Any and all claims the BUYERS may present relative to the
nonfulfillment of the representations and guarantees set
forth in this clause shall be in writing and provide
specific details as to the nature of the claim and the
alleged monetary value involved.
24. Should TINTAYA or the BUYERS be sued in a court of law or
receive a judicial, administrative or any other kind of
notification related to some event or act involving the
SELLER's representations or guarantees, the former agrees to
inform the SELLER within the shortest possible time to
permit the SELLER to assume the obligations set forth above
and to release TINTAYA or the BUYERS of any responsibility
in the matter.
25. The SELLER assumes responsibility for the accuracy and
veracity of the statements and guarantees expressed in this
clause for a period of five years.
VII. TAX-RELATED CONTINGENCIES.
1. TINTAYA has filed all of its tax returns on time and in due
form and paid all taxes required under Peruvian law up to
the closing date. The SELLER therefore agrees to assume
payment of any tax contingencies generated by taxes
comprised within the National Taxation System or any other
public entity after the CLOSING DATE, which represent
obligations deriving from taxable events or payments accrued
prior to said date, and provided they are not [already]
reflected in the proforma balance sheet. The SELLER shall
assume payment of such taxes along with applicable
interests, surcharges and late fees, as well as any
adjustments of the tax owed.
2. The SELLER agrees to provide an address to which the BUYERS
shall send any notifications received and for which the
SELLER is responsible.
If the SELLER provides no such address, the BUYERS shall
forward all notifications intended for the SELLER to the
address shown in this AGREEMENT, by notarized letter.
3. In any event, the BUYERS shall always be fully authorized to
make the demanded payments and require the SELLER to
reimburse them, along with any expenses incurred.
4. The commitment assumed by the SELLER under this clause shall
be in effect for a period of five (5) years from the date
this AGREEMENT is signed, and shall additionally be valid
for as long as needed to process any contingent payment
reclamation received during the aforementioned five-year
period.
VIII. BUYERS' OBLIGATIONS FOLLOWING THE TRANSFER
1. The BUYERS declare their understanding that the fundamental
consideration in this transfer in their favor, within the
scope of the process to promote private investment in
TINTAYA, is their technical and financial capacity to
develop mining activities in the area, and they therefore
undertake to maintain a stake in the shareholdership, or in
the ownership structure of TINTAYA, of not less than
fifty-one percent (51%), with the mine operator maintaining
a minimum of twenty-five percent (25%). In either case, this
obligation shall remain in force during the term of the
Investment Agreement referred to in Paragraph IX.
2. The BUYERS, having the form of a consortium, shall maintain
the percentages set forth in the preceding numeral and
notify the SELLER of any changes in the makeup of their
consortium during the term of the Investment Agreement.
3. In the event the BUYERS fail to maintain the [above]
percentages or to make the notifications mentioned in the
preceding sections, the BUYERS shall pay the SELLER, within
15 business days from such event, an amount equal to
TINTAYA's equity at the time the aforementioned
noncompliance occurs, and in an amount that corresponds
proportionally to the percentage of the total shares
transferred.
4. Following the closing date, the BUYERS agree to:
i. Cooperate with COPRI, CEPRI and the SELLER, without
distinction between them, to obtain access from TINTAYA
to any ledgers or records pertaining to questions or
matters which may arise after the closing date, [but]
which concern measures or situations that occurred prior
thereto, and
ii. Ensure that TINTAYA's workers and officials cooperate
with any of the SELLER's directors, officials or
employees, without distinction, in providing any
reasonable assistance requested by the SELLER regarding
the matters referred to in the preceding paragraph.
IX. INVESTMENT AGREEMENT
1. In accordance with the commitment undertaken by the BUYERS
in their letter submitted during the public auction process,
the BUYERS agree to make an investment in TINTAYA of US$
85,000,000.00 (eighty-five million U.S. dollars) at an
invariable rate, predicated upon its value on the date of
the AGREEMENT, within a maximum of five years.
The investment shall consist of maintaining production and
improving productivity. It also includes the cost of mine
development and the performance of a feasibility study to
evolve a treatment process for [copper] oxides on the basis
of tests conducted in a pilot plant.
2. Compliance with the Investment Agreement shall be audited by
the auditing firm of Coopers & Lybrand (Hansen-Holm, Alonso
y Cia.), chosen by CEPRI TINTAYA from among the firms
proposed by the BUYERS.
In the event this firm is unable to perform the audit at the
time needed because it has gone out of business or for other
reasons inherent to the designated auditor, the audit shall
be conducted by Price Waterhouse (Querol Dongo-Soria y
Asociados). Should this firm also be unable to do the audit
for the same reasons, it shall be handled by Coleridge y
Asociados. If none of the three firms is in a position to
perform the audit, the BUYERS shall request the SELLER to
designate another auditing firm. In all cases, the auditing
fees shall be borne by TINTAYA.
The U.S. Producer Price Index for Capital Equipment
published by the U.S. Department of Labor, Bureau of Labor
Statistics, shall be applied in verifying compliance with
the Investment Agreement.
Compliance with the Investment Agreement will be documented
on the basis of the report issued by the auditing firm and
will release the BUYERS from the corresponding obligations.
3. If at the end of the investment period the amount invested
by the BUYERS is less than the amount specified in the
Investment Agreement, the BUYERS shall pay the SELLER a sum
equal to 25% (twenty-five percent) of the difference at an
invariable rate.
4. The Investment Agreement undertaken by the BUYERS may be
modified if an unforeseen event or an act of higher force
during its execution causes a delay in the fulfillment of
the AGREEMENT.
Should the BUYERS seek to invoke higher force or unforeseen
events, they shall make written notification to the SELLER
with reasonable alacrity.
Following qualification of a cause of higher force, the
deadline for the fulfillment of the Investment Agreement
shall be extended for as long as the cause persists. All
obligations comprised within the pending Investment
Agreement shall be extended by the duration of the higher
force.
X. APPLICABLE LAW AND ARBITRATION
1. This AGREEMENT shall be subject to, interpreted and executed
in accordance with the laws of the Republic of Peru.
2. Any controversies, disagreements, legal suits, disputes,
complaints or differences arising from the present AGREEMENT
or in connection with this AGREEMENT or any matter contained
therein, or on the basis of its validity, existence,
applicability, invalidity, voidability, cancellation,
rescission or termination shall be resolved by international
legal arbitration in accordance with the Regulation of the
United Nations Commission for International Trade Law
(CNUDMI) in effect on the date of this AGREEMENT. The
decision shall be final and binding, and the parties waive
any right to appeal, repeal or mount any other legal
challenge to the arbitration award, except for the
interpretation or correction of the decision or the issuance
of a new judgment in keeping with the aforementioned
Regulation.
In the event one of the parties files an appeal based on
procedural violations as referred to in Paragraph 56 of
Decree Law No. 25935, the judges and courts of the city of
Lima, Peru, shall have jurisdiction.
3. The arbitration court to be convened shall consist of three
arbitrators, appointed in accordance with the provisions set
forth in the preceding paragraph, and shall have no
association with, nor interest of any kind in, the parties
to this contract.
4. Should it be necessary to appoint a nominating authority in
accordance with the aforementioned Regulation, the parties
shall designate the International Arbitration Court of the
International Chamber of Commerce.
5. The arbitrators may have any nationality or country of
residence, regardless of which entity appoints them.
6. The place of arbitration shall be the city of Lima, Peru.
7. The arbitration proceedings shall be held in Spanish and
English. All documentation submitted shall be translated
into both Spanish and English, as the case may be.
8. The matter in dispute shall be determined on the basis of
the pleadings and answers in the suit, as well as on the
basis of counter-claims, changes, amendments and subsequent
legal recourses in accordance with the Regulation referred
to in Section 2 of this clause. In all cases of disagreement
between the parties regarding the matter in dispute, it is
the prerogative of the arbitration court to decide it.
9. The parties agree that the arbitration sentence passed, as
provided in this clause, shall be executable in the courts
of any jurisdiction.
10. The parties irrevocably and unconditionally waive any
diplomatic recourse relative to this AGREEMENT, which shall
however not affect the BUYERS' right to obtain MIGA and OPIC
or other similar insurance derived from international
agreements providing investment guarantees.
Should the Government of Peru adopt measures or take steps
during the period while the Investment Agreement referred to
in Paragraph IX is in effect which would cause the BUYERS to
collect on their investment insurance from OPIC, MIGA or
similar entities, the BUYERS may freely assign their share
in the ownership structure of TINTAYA to the insurers, and
this shall not constitute a violation of the restrictions
set forth in Paragraph VIII.1.
11. The cost of arbitration shall be borne by the losing party.
If both parties lose, the arbitration court shall decide the
ratio at which the cost will be distributed.
XI. GOVERNMENT GUARANTEE
As provided by Decree Law 25570, the Peruvian Government by
means of Supreme Decree No. 101-94-PCM has guaranteed and
granted sureties to the BUYERS in this AGREEMENT with regard to
the obligations and commitments assumed and effected by the
SELLER in this AGREEMENT.
XII. MISCELLANEOUS PROVISIONS
1. This document, along with its enclosures, the BUYERS'
financial offer, the questions to the auction guidelines,
and the auction guidelines themselves are integral parts of
the present AGREEMENT. Should there be any discrepancies
between these documents, the following order of preference
shall apply:
Agreement
Financial Offer
Answers to the Questions on Auction Guidelines
Auction Guidelines
2. This AGREEMENT shall neither be amended nor supplemented
without the express written consent of the parties.
This AGREEMENT supersedes all verbal or written agreements
between the parties.
3. Should any provision of this agreement be invalid or
unenforceable, such invalidity shall be interpreted narrowly
and shall not affect the validity of the rest of the
AGREEMENT.
4. Each party shall bear its own costs in connection with the
negotiation, signing and execution of this AGREEMENT.
5. All notifications, summons, suits, petitions or any other
kind of communication shall be made in writing and shall be
considered legally served when hand-delivered, sent by
courier, or transmitted by fax or telex, and their receipt
at the following addresses has been confirmed:
<PAGE>
TO THE BUYERS
Magma Copper Company and Global Magma, Ltd.
7400 North Oracle Road
Suite 200
Tucson, Arizona 85704
U.S.A.
TO THE SELLER
Empresa Minera del Peru
Bernardo Monteagudo 222
Magdalena
Lima - Peru
6. The terms and conditions of this AGREEMENT shall be binding
and applicable in favor of the parties and their successors.
7. This AGREEMENT is signed on the basis of the representations
and guarantees contained therein.
8. The cost of converting this AGREEMENT into a Public Document
shall be borne by the BUYERS.
9. The headings or titles of the clauses of this AGREEMENT [do
not]
constitute part thereof and were employed only to facilitate
its perusal.
10. This document is executed in Spanish. Should any
discrepancies exist between this document and its
translation, the Spanish-language version shall prevail.
11. All expenditures, costs and taxes which may arise from this
transfer shall be at the expense of the BUYERS.
Lima, November 29, 1994
FOR THE SELLER: FOR THE BUYERS:
[ Signature ] [ Signature ]
[Marginal initials]
