Mali covers an area of approximately 1,241,000 km 2 in western Africa,
southwest of Algeria.

The country has a population of approximately 11.0 million and is growing at an annual rate of 2.8%. Bamako is the capital with a population of approximately 935,400.  Economic activity is largely confined to the Riverine area irrigated by the Niger River and some 80% of the labor force is engaged in farming and fishing. Industrial activity has traditionally been concentrated on processing farm commodities, primarily cotton, followed since 1996 by gold operations.

Government Organization

Mali gained its independence from France on September 22, 1960, and has a republic form of government. The Executive branch consists of the President elected by popular vote for a five-year term, the Prime Minister appointed by the President and the Cabinet appointed by the Prime Minister. The current President is Amadou Toumani Touré who was elected in May, 2002. The Legislative branch is formed of a National Assembly of 147 members elected by popular vote for a five-year term. Acts of the National Assembly are subject to review by the Constitutional Court, formally established on March 9, 1994. Mali’s legal system is based on the French civil law system and customary law.

Currency

The official monetary unit of Mali is the CFA Franc, which is fixed at the rate of approximately 655.95 CFA to one Euro. There are no restrictions on the convertibility or transfer of funds.

Mining Industry

Since 1996, foreign mining companies have increased gold mining operations in the country following the discovery of large gold deposits such as Sadiola Hill, Yatela, Morila, and Mali has become a major Sub-Saharan gold exporter with approximately $672 million in gold exports in 2003, ranking second after cotton exports. Deposits of copper, tin, bauxite, iron ore, manganese, uranium and diamonds can be found in the country but only gold and phosphate are actually mined. Total gold production has significantly increased on an annual basis and in 2002 amounted to 55.6 tons. Mali is the third largest gold producing country in Africa, behind South Africa and Ghana.

Mineral Rights in Mali

In Mali, the State owns the title to all mineral rights. The Mining Code provides for six types of authorizations and permits:

1. An exploration authorization valid for three months and renewable once for three months
    

2. A prospecting authorization valid for three years renewable once for three years
    

3. An exploration permit valid for three years renewable twice for three years each time
    

4. An exploitation permit valid for thirty years renewable indefinitely for ten years each time
    

5. A small scale mining authorization valid for four years renewable indefinitely for four years each time
    

6. An artisanal exploitation authorization valid for one year and renewable.
   
   The Mining Code provides that prior to the issuance of mineral rights, except for the artisanal exploitation authorization, a mining agreement (“Mining Convention”) must be signed by the State of Mali and the future holder of the mineral right. The Mining Convention governs the relationship of the mineral right holder and the State during the exploration and the exploitation phases. Amongst other things, the Mining Convention provides for the minimum exploration expenses to be incurred and the size of the interest of Mali in the project if the property is brought into production, which is typically 10% free carried interest and 10% paying interest. In the case of SOMIKA, the Malian government has a 20% free carried interest and 20% paying interest.
   
   Corporate Taxes and Fees
   
   Corporations holding authorizations and permits in Mali are subject to certain taxes and fees, which include the following: A fixed fee at the time the authorizations and permits are granted, renewed or transferred ranging from CFA 400,000 to CFA 2,000,000 (approximately $780 to $3,900).
   
   An annual surface fee ranging from CFA 1,000 to CFA 100,000 (approximately $1.95 to $195.00) per square kilometre.
   
   A Special Tax on Certain Goods (royalty), including gold sales, at a rate of 3% of the turnover before tax.
   
   A business profits income tax at the rate of 35%.
   
   Withholding tax of 9% on interest and 10% on dividends (paid on remittance).
   
   Value added tax (“VAT”) of 18% on operations. SOMIKA is exempt from payment of this tax from the commencement of construction until three years from commencement of production for any one or more mines developed in the permit area. Exoneration from this tax will include the expansion of the Kalana Gold Mine.
   
   Exploration and research activities are exempt from VAT and customs duties.
   
   Customs duties are exempted for the construction period and for three years after commencement of commercial production for any one or more mines.
   
   Employment taxes and social contributions are charged on a sliding scale basis and are onerous.
   
   These taxes together with other charges are summarized in the Mining Code and Financial Codes of Mali. Source: Final Prospectus May 27,2005