Joint Venture Agreement, September 30, 1998

CONTRACT


QINGHAI INSTITUTE OF SALT LAKES,
CHINESE ACADEMY OF SCIENCES
PACIFIC LITHIUM LIMITED


30 September, 1998 3 - --------------------------------------------------------------------------------
JOINT VENTURE CONTRACT FOR QINGHAI LITHIUM LIMITED - --------------------------------------------------------------------------------


CHAPTER 1: GENERAL PROVISIONS


In accordance with the "Law of the People's Republic of China on Chinese-Foreign Equity on Joint Ventures" and other relevant Chinese laws, decrees and regulations, Qinghai Institute of Salt Lakes, Chinese Academy of Sciences, and Pacific Lithium Limited of New Zealand, adhering to the principle of equality and mutual benefit and through friendly consultations, agree to establish a joint venture company Qinghai Lithium Ltd. Qinghai Lithium Limited is to be established according to the following contract.


CHAPTER 2: PARTIES OF THE JOINT VENTURE COMPANY


ARTICLE 1


The Parties to this contract are as follows:


- - Qinghai Institute of Salt Lakes, (hereinafter referred to as Party A),
research unit established in accordance with the laws of People's Republic of
China, registered in China, and its legal address is at 18 # Xining Road,
Xining City, Qinghai Province, China. The postal code is 810008.


LEGAL REPRESENTATIVE: Peihua Ma
POSITION: Executive Deputy Director
NATIONALITY: The People's Republic of China
Tel: +86 971 6144306 Fax: +86 971 6146002


- - Pacific Lithium Limited. (hereinafter referred to as Party B), a corporation
established in accordance with the law of New Zealand, registered in New
Zealand, and its legal address is at 5th Floor, 63 Albert St, Auckland, New
Zealand.


LEGAL REPRESENTATIVE: R.T. Johannink
POSITION: Managing Director
NATIONALITY: New Zealand
Tel: +64 9 309 5221 Fax: +64 9 307 1749


CHAPTER 3: ESTABLISHMENT OF JOINT VENTURE COMPANY


ARTICLE 2


In accordance with the "Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures" and other relevant Chinese law, decrees and regulations, both parties agree to establish the joint venture limited liability company (hereinafter referred to as Qinghai Lithium Limited or QLL) in the People's Republic of China.


ARTICLE 3


Upon registration with the appropriate agency, QLL shall be a legal entity within the People's Republic of China. All activities of the joint venture company shall be governed and protected by the laws, decrees, and pertinent rules and regulations of the People's Republic of China. 4 ARTICLE 4


QLL shall be a limited liability company, with the liability of each party limited to its contributed capital, which is stipulated in the contract or any revised version thereof. The profits, risks and losses of the joint venture company shall be shared by the parties in accordance with their respective share-holding.


CHAPTER 4: THE PURPOSE, SCOPE AND SCALE OF THE BUSINESS


ARTICLE 5


The objective of the parties is for QLL to fully implement the new technologies of Party A, for the development and utilization of the salt lakes resources, in conjunction with the advanced technologies owned by Party B in processing fine lithium salts and its experience in the world market, so as to exploit the resources of East Taijinaier Salt Lake located in Qinghai Province. The principal aim is to produce and sell lithium, potassium, borate, magnesium and other salts and all other commercially viable chemicals and to gain a significant share of the world market.


ARTICLE 6


The business scope of the joint venture company is the production and marketing of:


a. lithium
b. potassium
c. borate
d. magnesium
e. other fine chemicals
f. assuming research and development of salt lake products


ARTICLE 7


The site of the joint venture company's (QLL) production activities is located near East Taijinaier Salt Lake and will be established over three distinct phases. The scope of each phase is as follows:


PHASE I (BEGINNING 1998-BEGINNING 2000):


i. construct 100,000 m(2) of solar pond;


ii. optimize their operation and


iii. establish pilot plants for the production of technical grade lithium
carbonate (99.5% - 50-100 tonnes) and boric acid (50-100 tonnes)


PHASE II (BEGINNING 2000 - END 2001):


i. construct 700,000 - 1,400,000m(2) of new solar ponds;


ii. upscale Phase I plant operation to produce 1000-2000 tonnes of lithium
carbonate (technical grade) and 1200-2400 tonnes of boric acid.


iii. construct a facility to produce 20,000 tonnes of potassium sulphate;


iv. produce lithium carbonate of a minimum of 99.9% quality, as well as
lithium hexaflorophosphate, lithium metal and lithium bromide. Volumes
to be specified at a later date.


2 5 PHASE III (AFTER 2002 -):


i. upscale Phase II operation to produce 10,000 - 15,000 tonnes of lithium
carbonate (technical grade) and 12,000-14,000 tonnes of boric acid;


ii. produce 100,000 - 200,000 tonnes of potassium sulphate;


iii. produce lithium carbonate of a minimum of 99.9% quality; as well as
lithium hexaflorophosphate, lithium metal and lithium bromide. Volumes
to be specified at a later date.


CHAPTER 5: TOTAL AMOUNT OF INVESTMENT AND THE REGISTERED CAPITAL


ARTICLE 8


The total amount of investment of QLL for Phase I is 1.50 million USD.


ARTICLE 9


The registered capital of the joint venture company is 1.50 million USD, of which Party A shall pay 0.75 million USD, accounting for 50% shareholding. The payment of Party A includes USD in cash, USD of production equipment and USD of intellectual property. Party B shall pay 0.75 million USD, accounting for 50% shareholding, which includes USD in cash and USD of intellectual property. The value of intangible assets shall be determined in accordance with Article 10.


Where Renminbi are used, the exchange price to be applied shall be the medium price indicated by State Administration of Foreign Exchange Control of China on the due date of payment. Accordingly changes of foreign exchange rate, both parties shall increase or decrease the contributed equipment to maintain the proportion of the contributed capital. All the assets contributed by both parties are to be evaluated by the Qinghai Administrative Bureau of State Owned Property and banks at provincial level to verify the amount and date of payment.


ARTICLE 10


Party A shall contribute its assets and first payment to the joint venture company as per a Cashflow and Investment Schedule that is to be determined during September 1998. Party B shall contribute its assets and first payment to the joint venture company as per a Cashflow and Investment Schedule that is to be determined during September 1998. The date of payments shall conform to the date of the money order received by the Bank of China.


A Cash flow and Investment Schedule for the joint venture company shall be determined at the time of signing this joint venture contract (Appendix 1) and shall dictate the deposit of funds by Party A and Party B to the Joint Venture Company. The Schedule shall also outline the value of both parties production equipment and intellectual property which may form part of QLL. Should either party fail to meet its obligations to the Cashflow and Investment Schedule, that Party shall give up its share-holding in the registered capital of the joint venture company.


ARTICLE 11


Both parties shall re-invest to the joint venture company in proportion to their share-


3 6 holding at Phase II and Phase III with the expansion in production scale and development. At Phase II, other Chinese or foreign companies may be invited to take up to 50% of the company.


ARTICLE 12


Upon payment of investment in either cash or the materials stipulated in Article 9, an accountant registered in China will be invited by QLL to verify the payments and provide a verification report to QLL. On receiving the report, QLL shall issue a Share Certificate to each party which shall include the date and amount of their respective share-holding.


ARTICLE 13


During the term of the joint venture company, no party shall be allowed to reduce the capital which has been contributed to the joint venture company. Should any party of the joint venture company intend to assign all or part of its contributed investment to a third party, consent shall be obtained from the other parties as well as the examining and approving authority.


ARTICLE 14


During the term of the joint venture company, no party shall be allowed to mortgage any part of the investment to a third party without unanimous approval of the board of directors.


CHAPTER 6: RESPONSIBILITIES OF EACH PARTY TO QLL


ARTICLE 15


Party A shall be responsible for the following matters:


1) Applications for approval, registration, business license and other matters,
relating to the establishment of the joint venture company, from relevant
departments in China;


2) The construction of large-scale solar ponds, design and construction of the
workshops and production facilities at East Taijinaier Salt Lake;


3) Assisting the joint venture company in purchasing or leasing equipment,
materials, raw materials, items for office use, means of transportation and
communication facilities;


4) Assisting the joint venture company in recruiting Chinese employees;


5) Assisting foreign employees with applications for entry visas, work licenses
and processing their traveling requirements;


6) Responsible for handling any other matters entrusted by the joint venture
company.


Party B shall be responsible for the following matters:


1) Assisting the joint venture company in purchasing machinery, equipment
...