PRODUCTION RIGHT

Granted in terms of Section 84(1) of the Mineral and Petroleum Resources Development Act, 2002
(Act No. 28 of 2002)

TABLE OF CONTENTS

ANNEXURE INDEX

PRODUCTION RIGHT

GRANTED IN TERMS OF SECTION 84(1) OF THE MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT NO. 28 OF 2002, READ TOGETHER WITH REGULATION 35 PUBLISHED IN THE GOVERNMENT GAZETTE NO. 26275 ON 23 APRIL 2004, PROMULGATED IN TERMS OF SECTION 107 (1) OF THE ACT.

LET IT HEREBY BE KNOWN THAT:

THE REPUBLIC OF SOUTH AFRICA

is the custodian of the mineral and petroleum resources of the State (the ‘Grantor’).

Susan Shabangu

is the Minister of Mineral Resources of the State (together with her successors in title and, where relevant, her predecessors in such role, referred to as the ‘Minister’). The Minister is empowered by virtue of the provisions of Sections 3(2)(a) and 84(1) of the Act (as defined) to grant production rights.

The Minister has by virtue of the provisions of Section 103 of the Act (as defined) delegated, inter alia, the power to grant production rights to

Dr Thibedi Ramontja

the Director-General of the Department of Mineral Resources (the ‘Director-General’).

Molopo South Africa Exploration and Production Proprietary Limited

(Registration No 2005/012157/07)

(the ‘Holder’) has applied for a production right for petroleum in respect of the Production Area, an area as defined pursuant to Section 83 of the Act (as defined)

LET IT THEREFORE BE KNOWN THAT:

On this 20th day of September in the year TWO THOUSAND AND TWELVE (2012) before me,

RONEL STRAUGHAN

a Notary Public, duly sworn and admitted, residing and practicing at CAPE TOWN, (the ‘Notary’) and in the presence of the subscribing competent witnesses personally came and appeared,

MTHOZAMI RICHARDSON XIPHU

the Chief Executive Officer of the South African Agency for the Promotion of Petroleum Exploration and Exploitation (Proprietary) Limited (hereinafter referred to as "the Agency"), Registration No. 1999/015715/07, he or she being duly authorised thereto by virtue of the Power of Attorney granted by the Director General of the Department of Mineral Resources at Pretoria on the 29th day of May 2012, which Power of Attorney has this day been exhibited to me, the Notary, and now remains filed of record in my Protocol, and

PETER DEWDNEY PRICE

he being duly authorised thereto under and by virtue of a Resolution of the Board of Directors of the Holder passed on the 5th day of November 2007, a certified copy of which Resolution has this day been exhibited to me, the Notary, and now remains filed on record in my Protocol with the minutes of the meeting at which such Resolution was passed.

AND THE APPEARERS DECLARED THAT:

The Holder currently holds or has held the Exploration Rights and has applied for a production right for petroleum in respect of the Production Area; and

The Grantor has decided to grant to the Holder this production right for petroleum in respect of the Production Area (as defined) on the terms and conditions set out below.

NOW, THEREFORE, THE GRANTOR HEREBY GRANTS TO THE HOLDER, AND THE HOLDER HEREBY ACCEPTS, THIS PRODUCTION RIGHT SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:

‘Act’ shall mean the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002);

‘Acquired Data’ shall mean all technical information and data (digital or otherwise) and Samples, directly or indirectly, relating to the Production Area that are obtained or created by the Holder in the course of Production Operations (and previous Exploration Operations), including drilling, appraisal, production, completion, and abandonment reports; tests (including reservoir analysis); well logs; maps; production rates, records and statistics; and geological and geophysical information and interpretations; but excluding, for the avoidance of doubt, any Existing Data and/or data which has been obtained from third parties on terms which do not allow for the same to be shared with the Grantor;

‘Affiliate’ of a person shall mean another person which, directly or indirectly, owns, or is owned by, or is owned by a person which owns, that first-mentioned person; ‘owns’ and 'owned' in this definition means the beneficial ownership of 50 (fifty) percent or more of the voting shares or other voting securities of such person;

‘Agency’ shall mean the designated agency as defined in the Act, which, at the date upon which the Exploration Right was granted, was the South African Agency for Promotion of Petroleum Exploration and Exploitation (Soc) Limited, Registration No. 1999/015715/07, also known as Petroleum Agency SA;

‘Annual Production Work Programme’ shall mean the annual work programme for Production Operations, inclusive of the budget of estimated costs and expenses of carrying out the same, that the Holder prepares in accordance with Clause 15;

‘Applicable Laws’ shall mean the laws of the State;

‘Appraisal Operations’ shall mean any operation, study, activity, or matter, whether taking place within or outside of the State, to appraise and evaluate the extent and volume of petroleum within a Discovery made by the Holder in the Production Area and to determine whether such Discovery could be a Commercial Discovery, including, if and to the extent applicable, all production of petroleum necessary in connection with completion and testing of any appraisal well (including, if necessary, any long-term production test) and all plugging and abandonment of any appraisal well and the terms ‘to appraise’ or ‘appraisal’ shall be construed accordingly;

‘Appraisal Programme’ shall mean the appraisal programme for Appraisal Operations that the Holder prepares in accordance with Clause 16;

‘Appraisal Report’ shall have the meaning ascribed to it in Clause 16.4;

‘Chief Executive Officer’ shall have the meaning ascribed to it in the preamble;

‘Claims’ shall have the meaning ascribed to it in Clause 22.2;

‘Commercial Discovery’ shall mean a Discovery by the Holder of petroleum in such quantities as the Holder believes will permit the economic development thereof, on its own or in combination with other existing Discoveries or as part of a unitised development;

‘Confidential Information’ shall have the meaning ascribed to it in Clause 24.1;

‘Day’ shall have the same meaning ascribed to it in the Act.

‘Discovery’ shall mean the discovery by the Holder of a geological feature within the Production Area that is determined by the Holder to be capable of producing petroleum;

‘Discovery Report’ shall have the meaning ascribed to it in Clause 16.1.3;

‘Divestment Participating Interest’ shall have the meaning ascribed to it in Clause 20.1.1;

‘Environmental Management Programme’ shall have the meaning ascribed to it in the Act, being the environmental management programme for the Production Area prepared by the Holder and approved by the Grantor, a copy of which is attached hereto at Annexure C, as amended from time to time;

‘Exploration Operations’ shall have the meaning ascribed to it in the Act, which for the purposes of this Production Right shall include Appraisal Operations;

‘Exploration Right’ shall mean the exploration rights in respect of petroleum and its by-products granted by the Grantor to the Holder, with reference numbers

‘Gas Market Development Period’ shall have the meaning ascribed to it in Clause 6.2;

‘Final Reporting Period’ shall mean a period beginning on the day after the final complete Quarter of this Production Right and ending on the final day of the Initial Period or, where this Production Right has been renewed in terms of Section 85 of the Act, the final day of the final Renewal Period of this Production Right;

‘First Reporting Period’ shall mean a period beginning on the Effective Date and ending on the first to occur of 30th June, 30th September, 31st December or 31st March thereafter;

‘Gas’ shall mean any petroleum which at normal temperature and pressure is in a gaseous phase existing in a natural condition in the earth’s crust, regardless of the nature of the host rock, and includes any gas which has in any manner been returned to such natural condition, and includes condensate of such gas, but does not include gas obtained by destructive distillation or gas arising from a marsh or other surface deposit;

‘Gas Market Development Period’ shall have the meaning ascribed to it in Clause 32.1;

‘Good International Petroleum Industry Practices’ shall mean those good, sound and generally accepted prevailing standards, practices, considerations, and procedures that are applied by reasonable and prudent companies and operators in the international petroleum industry under conditions and circumstances similar to those experienced in the Production Area;

‘Government’ shall mean the government of the State;

‘Grantor’ shall have the meaning ascribed to it in the preamble;

‘Grantor Group’ shall mean, collectively, the Grantor, the Department of Mineral Resources (including the Minister) and the Agency (including the Chief Executive Officer), and the directors, officers, employees, agents, and representatives of each of the aforementioned;

‘HDP’ means historically disadvantaged person(s) as defined in the

‘Holder’ shall have the meaning ascribed to it in the preamble;

‘Holder Group’ shall mean, collectively, the Holder, the Holder’s Affiliates, contractors and sub-contractors of the Holder and the Holder’s Affiliates used in connection with Production Operations hereunder and the directors, officers, employees, agents and representatives of each of the aforementioned;

‘Initial Period’ shall mean a period 30 (thirty) years commencing from the Effective Date;

‘Legislative Changes’ shall have the meaning ascribed to it in Clause 27.1.3;

‘Minister’ shall have the meaning ascribed to it in the Act;‘Participating Interest’ shall mean the undivided share (expressed as a percentage) in all of the rights and obligations derived from this Production Right granted in respect of all or any part of the Production Area;

‘Party’ shall mean the Grantor or the Holder, as the case may be, and ‘Parties’ shall mean both of them;

‘Petroleum’ shall have the meaning ascribed to it in the Act;

‘Petroleum Bearing Area’ shall have the meaning ascribed to it in Clause 31.1;

‘Production Area’ shall mean the area within the State described in Clause 3, excluding those portions relinquished or abandoned from time to time or severed there from in accordance herewith;

‘Production Operations’ shall have the meaning ascribed to it in the Act;

‘Production Right’ shall mean this production right in respect of petroleum and its by-products, granted in terms of Section 84(1) of the Act read together with Regulation 35 published in the Government Gazette on 23 April 2004 and promulgated in terms of Section 107 (1) of the Act;

‘Production Work Programme’ shall mean the production work programme attached hereto as Annexure B, as amended from time to time;

‘Prospective Buyer’ shall have the meaning ascribed to it in Clause 20.1.1;

‘Quarter’ shall mean a three-month period beginning on 1st January, 1st April, 1st July or 1st October of each Year;

‘Regulations’ shall mean the regulations promulgated in terms of Section 107(1) of the Act;

‘Renewal Period’ shall mean that period of time for which this Production Right is renewed in terms of Section 85 of the Act read together with Regulation 38;

‘Respondent’ shall have the meaning ascribed to it in Clause 34.6;

‘Royalty Legislation’ shall mean the Mineral and Petroleum Resources Royalty Act, 2008 (Act No. 28 of 2008) and the Mineral and Petroleum Resources Royalty (Administration) Act, 2008 (Act No. 29 of 2008) and other such legislation which may be promulgated by the State governing the payment of royalties to the State;

‘Samples’ shall mean physical samples of rock, fluid and other materials acquired by the Holder in the course of conducting Production Operations for the purpose of preserving and analysing such samples;

‘State’ shall mean the Republic of South Africa;

‘State Option’ shall have the meaning ascribed to it in Clause 28.1;

‘Social and Labour Plan” shall mean the social and labour plan referred to in section 84(1)(i) of the Act read together with Regulation 46, that the holder prepares and which has been approved by the Grantor attached hereto as Annexure D

‘Technical Advisory Committee’ shall mean the committee established by the Parties in accordance with Clause 8.1;

‘Technical Member’ shall have the meaning ascribed to it in Clause 34.5;

‘Unitisation Proposal’ shall have the meaning ascribed to it in Clause 31.1;

‘Upstream Training Trust’ shall mean the independent Upstream Training Trust registered under registration number IT 1289/98;

‘Vis Major Period’ shall have the meaning ascribed to it in Clause 29.3; and

‘Year’ shall mean the period of 12 (twelve) calendar months from the Effective date and each subsequent 12 (twelve) month period thereafter and the terms ‘annual,’ or ‘annually’ shall be construed accordingly.

The Production Area shall comprise the farms/Area set out on Annexure “A” hereto situated in the district/s of Ventersburg, Welkom, Odendaalsrus in the Free State Province measuring 187427,2189 (one hundred and eighty seven thousand four hundred and twenty seven comma two one eight nine) hectares in extent.

Bank Name: ABSA

Branch: Parow

Branch Code: 502110

Account name: Petroleum Agency SA

Account number: 405 103 0832

Account type: Current Account

or such other bank account as the Grantor may from time to time notify the Holder in writing, but in no event will such notice be less than 30 (thirty) days before the beginning of the applicable payment date.

The Minister or any person duly authorised by the Minister in accordance with Section 91 of the Act may, in accordance with Sections 91 and 92 of the Act, enter upon the Production Area and conduct routine inspections and exercise such related powers as are set out in the Act at all reasonable times and at their own risk and expense.

(with the HDP or State Owned Company, as the case may be, being referred to herein as the ‘Prospective Buyer’);

provided, however, that, notwithstanding the foregoing provisions of this Clause 20, if the Holder shall have divested part of its Participating Interest prior to offering to sell the Divestment Participating Interest to the Prospective Buyer pursuant to this Clause 20, then the Divestment Participating Interest shall be divided pro-rata among all of the holder(s) of a Participating Interest and the provisions of this Clause 20 shall apply pari passu with respect thereto; and further provided, always, that neither the Prospective Buyer nor any other person shall have any right pursuant to the provisions of this Clause 20 or Applicable Laws (irrespective of any change in Applicable Laws following the date of execution of the Exploration Right) to acquire more than a 10 (ten) percent Participating Interest;

If any emergency or incident arising from Production Operations causes or has the potential to cause death and/or injury to persons or damage to and/or destruction of property and/or the environment, the Holder shall to the extent practicable in the circumstances consult with the responsible Government departments and take such action as may be prescribed under Applicable Laws or where not prescribed take such prudent and necessary action in accordance with Good International Petroleum Industry Practices.

Any amendment or variation to this Production Right shall be agreed in writing between the Parties and submitted to the Minister for consent pursuant to Section 102 of the Act. Only once the Minister has consented to the amendment or variation will such amendment or variation be effective.

Any failure by either the Grantor or the Holder to exercise any of the rights that they have, whether in terms of this Production Right, the Act or the Regulations, or any lenience granted by them in terms thereof shall not constitute a waiver of such rights or a variation to the terms and conditions of this Production Right.

Subject to the Act and the Regulations, this Production Right and the Annexures attached hereto (those Annexures being and forming an integral part of this Production Right) and the Fiscal Stability Agreement contain the entire and sole agreement between the Parties and supersedes all prior negotiations, representations, understandings, agreements and communications of whatsoever nature between the Parties with respect to such Production Area, whether oral or written, express or implied.

Any provision within this Production Right which is not enforceable or which contravenes Applicable Laws shall be severed from this Production Right and be of no force or effect without prejudice to the other provisions of this Production Right which shall remain in force and effect.

If to the Grantor:

Minister of Mineral Resources

And copy to the Agency:

South African Agency for the Promotion of Petroleum Exploration and Exploitation (Proprietary) Limited

Attention: Chief Executive Officer

If to the Holder:

Tel number: +27 11 483 0677 Fax number: +27 11 483 2686

The Holder must lodge this Production Right for registration at the Mining and Petroleum Titles Registration Office within 30 (thirty) days from the Effective Date and, in the event of each renewal of this Production Right, within 30 (thirty) days of such renewal.

This Production Right shall inure to the benefit of and be binding upon the permitted successors and assigns of the Parties.

Thus done and signed at Bellville on the 20thday of September in the year 2012 in the presence of the undersigned witnesses:

Annexure A

Diagram of the Production Area

Annexure B

Production Work Programme

Annexure C

Environmental Management Programme

Annexure D

Social and Labour Plan

Annexure E

Schedule of Contributions to the Upstream Training Trust