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The Government of the Republic of Serbia

In the service of citizens

Contract on concession for borate ore exploration

Belgrade, 16 February 2006

Serbian Minister of Energy and Mining Radomir Naumov and Commercial Director of the multinational company Rio Tinto Adam Parr signed a contract on granting a concession to Rio Tinto for borate ore exploration and exploitation of the Jarandol Basin near Baljevac on the river Ibar.

Speaking at a press conference, Naumov said that the signing of the concession contract, the first in the last 70 years, is of great importance for Serbia, since it is estimated that more than 700 people will be employed on the excavation site, which will considerably improve the situation in that poor part of the country and stop the unfavourable demographic tendency.

He added that indirect benefits for domestic industry are quite significant, since refined boric acid is predominantly used in the ceramic and glass industry, isolation material production, agriculture and washing detergent production.

The estimated amount of borate ore deposits total nearly 7.5 million tonnes, said Naumov and added that exploration should begin in approximately four months, whereas the contract envisages a five-year period for geological exploration and production of project documentation and a 25-year exploatation period.

According to Naumov, the contract also envisages construction of the mine and state-of-the-art facilities for production of refined boric acid powder, with a capacity of 30,000 to 100,000 tonnes a year.The total value of the project is €140 million.

The compensation for the concession is 1% of the income from the sale of refined boric acid plus 5% as compensation for exploiting minerals. Apart from that, there will also be VAT funds going into the budget, as well as profit tax and other taxes and contributions, concluded Naumov.

State Secretary of International Economic Relations Vlatko Sekulovic stressed that the contract signed with Rio Tinto is a major boost for Serbia because it sends a positive signal to other investors.

Rio Tinto's Commercial Director Adam Parr said that in the past four years, Serbia created a positive investment climate. He said he believes Rio Tinto will perform their work satisfactorily and added that the company will take the greatest care not to harm the environment in any way.

Parr said Rio Tinto will invest €20 million in geological research in Serbia and drafting a feasibility study.

Late last April, the Serbian government called a tender for giving concessions for exploration and exploitation of borate ore in the Jarandol Tertiary Basin. Besides Rio Tinto, a company Erin Ventures Inc also applied for the tender.