RULES FOR IMPLEMENTATION OF THE MINERAL RESOURCES LAW

    Article 1  These Rules are formulated in accordance with the Mineral
Resources Law of the People’s Republic of China.

    Article 2  The mineral resources refers to the natural resources formed
through geologic function, which are of value for utilization, and existing
under solid, liquid or gaseous states.

    The varieties of the mineral resources and its classification are listed
in the “Detailed List of Mineral Resources” attached thereunder. The competent
department in charge of the geology and the mineral resources under the State
Council shall report any discovery related to the new varieties of the mineral
resources to the State Council for approval, then make publications.

    Article 3  All mineral resources shall be owned by the state. The state
ownership of the mineral resources, either near the earth’s surface or
underground, shall not change with the ownership of the land or the right to
the use of the land which the mineral resources are attached to.

    The State Council is granted to exercise the ownership of the mineral
resources on behalf of the state. The competent department in charge of
geology and mineral resources under the State Council is authorized by the
State Council to exercise a centralized management over the allocation of
mineral resources.

    Article 4  The exploration and exploitation of the mineral resources
within the territory of the People’s Republic of China and other sea areas
under its jurisdiction must abide by the Mineral Resources Law of the
People’s Republic of China (hereinafter referred to as the Mineral Resources
Law) and these Rules.

    Article 5  The state shall adopt a license system for the exploration and
exploitation of the mineral resources. Anyone who wants to explore the mineral
resources shall apply for registration in accordance with the law, draw the
exploration license, obtain the exploration right. Anyone who wants to exploit
the mineral resources shall apply for registration in accordance with the law,
draw the exploitation license, obtain the mining right.

    The block divided based on the longitude and latitude is the basic unit in
determining both the scope of exploration areas and the scope of
exploitation areas of the mineral resources. The specific methods shall be
formulated by the competent department in charge of geology and mineral
resources under the State Council.

    Article 6  The terms both in the Mineral Resources Law and in these Rules
are defined as follows:

    “Exploration right” means the right to explore the mineral resources
within the scope provided by the exploration license which is legally
obtained. The units or individuals that have obtained the exploration licenses
are called exploration licensees.

    “Mining right” means the right to exploit the mineral resources and own
its products within the scope provided by the exploitation license which is
legally obtained. The units or individuals that have obtained the exploitation
licenses are called concessioners.

    “The special kinds of the mineral ores under protective exploitation
prescribed by the State”  means those minerals are, in view of the need for
the construction of the national economy and high-tech development, or in view
of their scarcity and their value, specified by the State Council, and granted
to exploit by the competent departments concerned under the State Council
according to the state plans.

    “Mining areas under the state plan” means the areas where the mineral
resources are located and zoned by the state for the construction of large or
medium sized mines according to both the national construction plan and the
national mineral resources plan.

    “Mining areas with great value to the national economy” means the mineral
resources protection areas where is zoned by the state based on the need of
the national economic development but have not been listed in the national
construction plan, because the minerals there are rich in deposits, fine in
quality and with a good prospect for development.

    Article 7  The state allows foreign companies, enterprises and other
economic organizations as well as individuals to invest for exploration and
exploitation of the mineral resources within the territory of the People’s
Republic of China and other sea areas under its jurisdiction pursuant to the
relevant laws and regulations of the People’s Republic of China.

    Article 8  The competent department in charge of geology and mineral
resources under the State Council shall be responsible for the supervision and
administration over exploration and exploitation of the mineral resources
throughout the country. The other competent departments concerned under the
State Council shall assist the competent department in charge of geology and
mineral resources under the State Council to conduct the supervision and
administration of exploration and exploitation of mineral resources according
to their functions and powers granted by the State Council..

    The competent departments in charge of geology and mineral resources under
the people’s governments of provinces, autonomous regions and the
municipalities directly under the Central Government shall be responsible for
supervision and administration over the exploration and exploitation of the
mineral resources within their respective administrative areas. The other
competent departments concerned under the people’s governments of provinces,
autonomous regions and municipalities directly under the Central Government
shall assist the competent departments in charge of geology and mineral
resources at the same level to conduct the supervision and administration of
the exploration and exploitation of mineral resources.

    The municipal people’s governments with administrative districts and the
people’s governments of autonomous prefectures and the people’s governments of
counties as well as their departments in charge of mineral resources shall be
responsible for conducting supervision and management over the state-owned
mining enterprises approved by them according to law, and shall also be
responsible for conducting supervision and administration over the
collective-owned mining enterprises, the private-owned mining enterprises,
individual miners as well as the units and individuals who undertake the
exploration within their respective administrative areas in their respective
administrative areas according to law. And they shall protect the lawful
rights and interests of the exploration licensees and the concessioners
pursuant to law.

    Article 9  Exploring any mineral resources, anyone should go through the
formalities concerning the application, examination, approval and the
registration in accordance with the regulations on the exploration
registration of the mineral resources which are issued by the State Council.

    Where exploring the special kinds of mineral ores, anyone should go
through the formalities concerning the application, examination, approval and
registration which are stipulated by the State Council.

    Article 10  Where the state-owned mining enterprises exploit the mineral
resources, they shall go through the formalities concerning the application,
examination, approval and mining registration in accordance with the State
Council’s regulations governing mining registration. Where they want to
exploit the mineral areas under the state plan, the mining areas with great
value to the national economy, or the special kinds of mineral ores under
protective exploitation prescribed by the state, they shall, with the approval
documents from the relevant competent departments under the State Council go
through the formalities concerning the application, examination and approval
and the mining registration.

    Where they want to exploit the special kinds of mineral ores, they shall
go through the formalities concerning application, examination and approval
and mining registration in accordance with the relevant stipulations of the
State Council.

    Article 11  The establishment of state-owned mining enterprises shall
meet the following requirements in addition to conditions prescribed by laws
and regulations:

    (1) having the mineral resources exploration report required for mine
construction;

    (2) having the feasibility study report required for mine construction
project (including the mineral resources utilization proposal and the report
on the influence on the environment within the mining areas);

    (3) having the definite scope of the mine and the mining area;

    (4) having the mine design; and

    (5) having the  technical support required for production.

    The State Council, the competent departments under the State Council and
the people’s governments of provinces, autonomous regions and municipalities
directly under the Central Government shall, pursuant to the state regulations
regarding fixed assets investment and the conditions given hereinabove,
exercise examination over the application for establishment of the state-owned
mining enterprises before the approval is to be granted.

    Article 12 The application for establishing the collective-owned mining
enterprises and private mining enterprises as well as individual miners shall
go through the formalities concerning the examination, approval and the mining
registration prescribed by the relevant regulations which is issued by the
province, autonomous region and municipality directly under the Central
Government.

    Article 13 Application for establishing the collective-owned mining
enterprises or private mining enterprises shall meet the following
requirements in addition to the conditions prescribed by laws and regulations:

    (1) having the mineral resources exploration materials required for the
mine construction and which shall also be appropriate to the mining scale;

    (2) having the definite mining scope which has been approved without
dispute;

    (3) having the necessary funds, equipment and technical personnel required
appropriate to the scale of the mine to be constructed;

    (4) having the feasibility study report, mine design or mining proposal
appropriate to the mine to be constructed, also in line with the state
industrial policies and the technical regulations; and

    (5) the mine chief shall be equipped with basic knowledge regarding to the
mining production, safety control and environmental protection.

    Article 14 Where the individuals apply for mining, they shall meet the
following requirements:

    (1) holding the definite mining scope which has been approved without
dispute;

    (2) holding the necessary funds, equipment and technical personnel
required appropriate to the scale of mine to be constructed;

    (3) holding necessary mineral resources exploration materials required and
the mining proposal that has been approved; and

    Article 15 The unified plan for the mineral resources exploration shall
be carried out by the state. The competent department in charge of geology and
mineral resources under the State Council shall organize and map out the
national medium and long term plans over the mineral exploration under the
guidance of the competent department in charge of planning under the State
Council, in accordance with the national medium and long term economic and
social development programs, and based on the exploration plans adopted by the
relevant competent departments in charge under the State Council.

    The national annual mineral exploration plan and the annual mineral
exploration plan of provinces, autonomous regions and municipalities directly
under the Central Government shall be made respectively by the competent
department in charge of geology and mineral resources under the State Council
and the competent departments in charge of geology and mineral resources under
the people’s governments of provinces, autonomous regions and municipalities
directly under the Central Governments with other competent departments
concerned, in accordance with the national medium and long term exploration
plans. After the approval granted by the competent departments in charge of
planning under the people’s governments at the same level, they shall be
carried out.

    Where laws made the authority of examination and approval upon the
exploration plan otherwise, the stipulations in the laws shall prevail.

    Article 16  The exploration licensees are granted the following rights:

    (l) conducting exploration operations in the areas, within the terms and
on the proper objects prescribed by the exploration license;

    (2) erecting power, water supply pipes and communication lines in the
exploration area and in the neighboring areas, but they shall not affect or
damage the original power, water supply facilities and the communication
lines from functioning;

    (3) passing through the exploration areas and the neighboring areas;

    (4) using the land temporarily according to the need of exploring project;

    (5) priority in obtaining the exploration right to explore the discovered
minerals within the exploration areas;

    (6) priority in obtaining the mining right to exploit the minerals within
the exploration areas;

    (7) selling the mineral products recycled during the exploration operation
in accordance with the project design that has been approved, except for those
minerals which shall be sold to the designated units only as prescribed by the
State Council.

    When exercising their rights provided hereinabove, the exploration
licensees shall abide by other laws and regulations which require them to
obtain the approval or go through the other formalities.

    Article 17  The exploration licensees shall fulfill the following
obligations:

    (l) starting the exploration operation within the time limit prescribed,
and completing the exploration within the time limit prescribed by the
exploration license;

    (2) reporting to the exploration registration authorities the situation
relating to the start of exploration, ect.;

    (3) the exploration shall be conducted in accordance with the exploration
construction designs. No arbitrary exploitation will be permitted;

    (4) conducting comprehensive exploration as well as evaluation over the
paragenetic and associated minerals while ascertaining the key minerals;

    (5) compiling the mineral exploration reports, submitting it to the
relevant departments for examination and approval;

    (6) submitting the mineral resources exploration achievement files in
accordance with the stipulations of the State Council;

    (7) complying with the relevant laws and regulations regarding labor
safety production, land recovery and environmental protection; and

    (8) taking immediate efforts upon the completion of exploration to block
the wells and holes left by the exploration or adopting other measures, to
eliminate dangerous elements.

    Article 18 The exploration licensees may exploit the complex mineral
deposits which is permitted by the state to be exploited while being explored.
But they shall submit the supporting proof documents to the original licensing
authorities, the mineral reserves examination and approval administration and
the competent departments in charge of the exploration project. After the
approval is granted, the exploitation registration shall be made in accordance
with the regulations of the State Council regarding exploitation registration.

    Article 19 The mineral exploration report shall be examined and approved
in accordance with the following procedures:

    (l) the mineral reserves examination and approval administration under the
State Council shall be responsible for the examination and approval of the key
and large-scale mineral exploration report used for mine construction and of
the underground water exploration report used for the construction of large
scale water supply bases;

    (2) the mineral reserves examination and approval administrations of
provinces, autonomous regions and municipalities directly under the Central
Government shall be responsible for the examination and approval of the
ordinary large, medium and small scale mineral deposits exploration reports
used for mine construction and of the underground water exploration report
used for the construction of medium or small sized water supply bases;

    The mineral reserves examination and approval authorities or the competent
departments concerned above the exploration units shall reply within six
months upon the receipt of the mineral exploration reports.

    Article 20 The mineral exploration reports and other exploration data
with value shall be provided for use with compensation in accordance with the
provisions made by the State Council.

    Article 21 In case of the exploration licensees, after obtaining the
temporary right to use the land, damage the properties of other people during
the exploration, they shall make compensations according to the following
stipulations:

    (l) compensation for damages caused to the arable land shall be made on
the annual basis according to the average yield of the land in the past three
years, and to be calculated according to the local market average price, to be
paid annually. They shall also be responsible for the recovery of the arable
land and return the land in due course;

    (2) compensation for damages caused to the grass land shall be made in
accordance with the stipulations of the above clause and shall be paid in
annual basis. They shall also be responsible for recovery of the grassland
vegetation and return them in due course;

    (3) compensation for damages caused to the agricultural or economic crops
on the cultivated land shall be made according to the average yield of the
land damaged in the past three years, and shall be calculated according to the
local market average price at the time of compensation;

    (4) compensation for damages caused to bamboo or trees shall be made
according to the actual numbers of bamboo and trees damaged. And the amount
of compensation shall be calculated on a number basis according to the local
market average price;

    (5) compensation for damages caused to the fixtures on the land shall be
made according to the actual damages degree and shall be calculated according
to the local market price.

    Article 22  No compensation shall be made when the exploration licensees
conducting exploration on the waste mountain slopes, hillsides, wasteland,
abandoned desert, or on the sand, river, lake or sea beaches where there are
no agricultural crops or other fixtures attached. However, the exploration
shall neither impede the navigation, irrigation or flood control activities
nor shall it cause any damages to such facilities. Meanwhile, necessary
measures shall be taken upon the completion of the exploration for preventing
the loss of water and erosion of soil and for ecological environmental
protection.

    Article 24  The national allocation and development and utilization of the
mineral resources shall be conducted in consideration of the interests of the
long term and the present, and of both the Central Government and the
localities, and shall be carried out by unified plan, sufficient protection,
rational exploitation and comprehensive utilization.

    Article 25 The competent department in charge of geology and mineral
resources under the State Council shall be responsible for organizing the
relevant competent departments under the State Council and the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government to map out the national mineral resources plan, under
the guidance of competent department in charge of planning under the State
Council, and based on the mid and long term national economic and social
development programs. The plan shall be carried out after the approval from
the State council has been granted.

    The national mineral resources plan shall make an overall arrangement on
the allocations of the national mineral resources, and shall delineate a
rational scope for the examination and approval and development to the mineral
resources granted by the Central Government and by the people’s governments of
provinces, autonomous regions and municipalities directly under the Central
Government.

    Article 26 The mineral resources development plan shall be the overall
plan regarding the development and construction of the mine areas.

    The mineral resources development plan shall consist of the industrial
development plan and the regional development plan.

    The industrial development plans of the mineral resources shall be made
and implemented in accordance with the allocation of the mineral resources
given to the respective departments by the national mineral resources plan.

    The regional mineral resources development plans shall be made by the
people’s governments of provinces, autonomous regions and municipalities
directly under the Central Government in accordance with the allocation of
mineral resources given to the respective provinces, autonomous regions and
municipalities directly under the Central Government by the national mineral
resources plan; the regional plans shall also give an overall arrangement,
and shall delineate a rational scope within which the people’s governments at
levels of provinces, municipalities and counties are enpost_titled to make the
examination and approval over the mineral resources development.

    The industrial development plans and regional development plans of the
mineral resources shall be submitted to both the competent departments in
charge of planning and geology and mineral resources under the State Council
for records.

    Both the competent departments in charge of planning and geology and
mineral resources under the State Council are authorized to redress the
industrial or regional development plans that is not fit into the national
mineral resources plan.

    Article 27 The establishment, changes or revocation regarding the mines
under the state plan or the mines with great value to the national economy
shall be brought up by the relevant competent departments under the State
Council attached with the reports of detailed reports and other supporting
proof materials. Both the competent departments in charge of planning and
geology and mineral resources under the State Council shall be responsible for
conducting examination and approval, and jointly issue the notice in written
form to the people’s governments at the county level. The people’s governments
at county level shall make a public announcement within one month upon receipt
of the notice and shall submit it to both the competent departments in charge
of planning and geology and mineral resources under the State Council for
records.

    Article 28 The confirmation or revocation of the special minerals under
protective exploitation prescribed by the state shall be brought up by the
relevant competent departments under the State Council, attached with
supporting proof documents, submitted to the State Council for approval after
the permission is granted by both the competent departments in charge of
planning and geology and mineral resources upon the examination.

    Article 29  Before the exploitation of the mineral resources, the units or
individuals shall entrust the units that hold the relevant mine design
certificates to conduct the feasibility study and designing. No feasibility
study and design are required for mining the scattered minerals or for mining
sand, rocks and clay that can only be used as building materials, but the
mining proposals and the environmental protection measures are required.

    The mine design shall be made in accordance with the mine design
assignment instruction and shall adopt rational mining sequence, mining method
and ore-dressing technology.

    The mine design shall be examined and approved in accordance with the
relevant provisions of the state; No construction shall be permitted without
the approval.

    Article 30 Any concessioners are granted the following rights:

    (l) conducting the mining activities within the term and the exploitation
area prescribed by the mining license;

    (2) selling the mineral products by themselves, except for those minerals
which the State Council has prescribed for a unified purchase by the
designated units only;

    (3) constructing within the mine area the production and living facilities;

    (4) obtaining in accordance with law the right to use the land required for
the production; and

    (5) other rights granted by laws and regulations.

    Article 31 The concessioners shall f