CONFORMED COPY LOAN NUMBER 1200 CH Project Agreement (Copper Sector Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE MINERIA DATED MARCH 24, 1976 CONFORMED COPY LOAN NUMBER 1200 CH Project Agreement (Copper Sector Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE MINERIA DATED MARCH 24, 1976 PROJECT AGREEMENT AGREEMENT, dated March 24, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and EMPRESA NACIONAL DE MINERIA (hereinafter called ENAMI). WHEREAS by the Loan Agreement of even date herewith between Republic of Chile (hereinafter called the Borrower) and the Bank, the Bank has agreed to lend to the Borrower an amount in various currencies equivalent to thirty-three million dollars ($33,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that ENAMI agree to undertake such obligations toward the Bank as hereinafter set forth; WHEREAS by a subsidiary loan agreement of even date herewith between the Borrower and ENAMI, the Borrower has agreed to relend to ENAMI an amount in various currencies equivalent to three million four hundred and six thousand dollars ($3,460,000) out of the proceeds of the Loan on the terms and conditions therein set forth; and WHEREAS ENAMI, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require. the several terms defined in the Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II The Project Section 2.01. ENAMI shall carry out Part B of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. 4 Section 2.02. (a) In order to assist ENAMI in carrying out Part B(ii) of the Project, ENAMI shall employ consultants whose qualifications, experience and terms and cond.tions of employment shall be satisfactory to the Bank. (b) ENAMI shall assign, for training with the consultants referred to in the preceding paragraph (a), such counterpart personnel as shall be required for Part B(ii) of the Project. Section 2.03. Except as the Bank shall otherwise agree, goods, works and services (other than consultants' services) for Part B of the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with. the provisions of Schedule I to this Agreement. Section 2.04. (a) ENAMI undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ENAMI to replace or repair such goods. (b) Except as the Bank may otherwise agree, ENAMI shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) ENAMI shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) ENAMI: (i) shall maintain records adequate to record the progress of Part B of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan relent to it by the Borrower, and to disclose the use thereof in Part B of the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enaA. the Bank's representatives to visit the facilities and construction sites incluc:J in Part B of the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning Part B of the Project, the expenditure of the proceeds of the Loan so relent to it and the goods and services financed out of such proceeds. 0 5 (c) ENAMI shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of ENAMI and any relevant records and documents. Section 2.06. ENAMI shall duly perform all its obligations under its Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, ENAMI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving its Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) ENAMI shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement and under its Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) ENAMI shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of Part B of the Project, the accomplishment of the purposes of the Loan, or the performance by ENAMI of its obligations under this Agreement and under its Subsidiary Loan Agreement. Section 2.08. ENAMI shall take all reasonable measures to ensure that the execution and operation of Part B of the Project are carried out with due regard to ecological and environmental factors. ARTICLE III Management and Operations of ENAMI Section 3.01. ENAMI shall at all times manage its affairs, carry on its operations and maintain its financial position, all in accordance with appropriate engineering, financial and administrative practices, and under the supervision of experienced and competent management. Section 3.02. ENAMI shall at all times take all steps necessary: (i) to maintain its right to carry on its operations, including Part B of the Project, and (ii) except as the Bank shall otherwise agree, to acquire and to retain such land, properties, including mining properties, and interests thereon, and to acquire, maintain and renew such licenses, consents, franchises or other rights, as may be necessary or useful for the conduct of its operations. Section 3.03. ENAMI shall operate and maintain its plant, equipment, properties and facilities and make all necessary renewals and repairs thereof, all in accordance with appropriate engineering practices. 6 Section 3.04. Except as the Bank shall otherwise agree, ENAMI shall not sell, lease, transfer or otherwise dispose of any of its properties or assets required for the efficient carrying on of its operations, including Part B of the Project. Section 3.05. Except as the Bank shall otherwise agree, ENAMI shall obtain title to all goods financed in whole or in part with the proceeds of the Loan, free and clear of all liens. Section 3.06. ENAMI shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. ENAMI shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. ENAMI shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of ENAMI and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. ENAMI shall: (i) consult with the Bank prior to modifying its pricing policies referred to in Section 4.04 of the Loan Agreement; and (ii) take all necessary steps for improving the operational efficiency of its mining, concentrating, smelting and refining facilities in order to reduce its operating costs. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. 7 Section 5.02, This Agreement and all obligations of the Bank and of ENAMI thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 44098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUJ) For ENAMI: Empresa Nacional de Mineria Mac Iver 459 Casilla 100-D Santiago, Chile 8 Cable address: Telex: ENAMI 40574 Santiago Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of FNAMI may be taken or executed by its Executive Vice-President or such other person or persons as he shall designate in writing. Section 6.03. ENAMI shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ENAMI, take any action or execute any documents required or permitted to be taken or executed by ENAMI pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s / Adalbert Krieger Regional Vice President Latin America and the Caribbean EMPRESA NACIONAL DE MINERIA By /s / Andres Zauschquevich Authorized Representative 9 SCHEDULE 1 Procurement A. General Procedures 1. Except as provided in Part A.2 hereof, contracts shall be let under procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Minor equipment and materials, estimated to cost not more than the equivalent of $50,000 each, shall be procured after solicitation of quotations from suppliers in at least three countries which shall be members of the Bank (including Switzerland), provided that the aggregate cost of the goods so to be procured shall not exceed the equivalent of $250,000. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic and Regional Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Chile and in countries which are a party to the Latin American Free Trade Association and the -artagena Agreement may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages to be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following four groups: (1) Group A: bids offering goods manufactured in Chile if the bidder shall have established to the satisfaction of ENAMI and the Bank 10 that the manufacturing cost of such goods includes a value added in Chile equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Chile. (3) Group C: bids offering goods manufactured in a country other than Chile which is a party to the Latin American Free Trade Association and the Cartagena Agreement. (4) Group D: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result c f the comparison under paragraph (c) above, the lowest bid is a bid from group C or group D, all group C and group D bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C and group D bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid or a group C bid in such further comparison is the lowest, it shall be selected for the award. (e) If, as a result of the further comparison under paragraph (d) above, a bid from group D is the lowest, all group D bids shall be finally compared with the lowest evaluated bid from group C, as determined Linder paragraph (c) above, after adding to the c.i.f. bid price of goods to be imported offered in each group D bid, for the purpose of this final comparison only, an amount equal to the smaller of (i) the difference between the amount of customs duties and other import taxes which would actually be payable for the importation of goods offered in such group D bid and for the importation of goods offered in the group C bid, or (ii) 15% of the c.i.f. price of goods to be imported offered in such group D bid. If the lowest bid in such comparison is the group C bid, it shall be selected for the award; if not, the lowest evaluated bid from group D, as determined under paragraph (c) above, shall be selected for the award. 11 C. Review of Procurement Decisions by the Bank Review of invitation to bid and of proposed awards and final contracts: (a) Before bids are invited, ENAMI shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documcnts or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) Promptly after the bids have been received, ENAMI shall inform the Bank of the names of the bidders and the respective amounts of the bids. (c) After bids have been received and evaluated, ENAMI shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform ENAMI and state the reasons for such determination. (d) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (e) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution before sending to the Bank the first application for withdrawal of funds from the Loan Account in respect of such contract.