1340-(218)

II SÉRIE-A — NUMERO 69

c) Financial matters:

/) Establishment of uniform and non-discriminatory costing and accounting rules and the method of selection of auditors;

ii) Apportionment of proceeds of operations;

Hi) The incentives referred to in article 13 of this annex;

d) Implementation of decisions taken pursuant to article 151, paragraph 10, and article 164, paragraph 2, d).

2 — Rules, regulations and procedures on the following items shall fully reflect the objective criteria set out below.

a) Size of areas — the Authority shall determine the appropriate size of areas for exploration which may be up to twice as large as those for exploitation in order to permit intensive exploration operations. The size of area shall be calculated to satisfy the requirements of article 8 of this annex on reservation of areas as well as stated production requirements consistent with article 151 in accordance with the terms of the contract taking into account the state of the art of technology then available for sea-bed mining and the relevant physical characteristics of the areas. Areas shall be neither smaller nor larger than are necessary to satisfy this objective;

b) Duration of operations:

i) Prospecting shall be without time-limit;

ii) Exploration should be of sufficient duration to permit a thorough survey of the specific area, the design and construction of mining equipment for the area and the design and construction of small and medium-size processing plants for the purpose of testing mining and processing systems;

Hi) The duration of exploitation should be related to the economic life of the mining project, taking into consideration such, factors as the depletion of the ore, the useful life of mining equipment and processing facilities and commercial viability. Exploitation should be of sufficient duration to permit commercial extraction of minerals of the area and should include a reasonable time period for construction of the commercial-scale mining and processing systems, during which period commercial production should not be required. The total duration of exploitation, however, should also be short enough to give the Authority an opportunity to amend the terms and conditions of the plan of work at the time it considers renewal in accordance with rules, regulations and procedures which it has adopted subsequent to approving the plan of work;

c) Performance requirements — the Authority shall require that during the exploration stage periodic expenditures be made by the operator which are reasonably related to the size of the area covered

by the plan of work and the expenditures which would be expected of a bona fide operator who intended to bring the area into commercial production within the time-limits established by the Authority. The required expenditures should not be established at a level which would discourage prospective operators with less costly technology than is prevalently in use. The Authority shall establish a maximum time interval, after the exploration stage is completed and the exploitation stage begins, to achieve commercial production. To determine this interval, the Authority should take into consideration that construction of large-scale mining and processing systems cannot be initiated until after the termination of the exploration stage and the commencement of the exploitation stage. Accordingly, the interval to bring an area into commercial production should take into account the time necessary for this construction after the completion of the exploration stage and reasonable allowance should be made for unavoidable delays in the construction schedule. Once commercial production is achieved, the Authority shall within reasonable limits and taking into consideration all relevant factors require the operator to maintain commercial productions throughout the period of the plan of work;

d) Categories of resources — in determining the category of resources in respect of which a plan of work may be approved, the Authority shall give emphasis inter alia to the following characteristics:

/) That certain resources require the use of similar mining methods; and

ii) That some resources can be developed simultaneously without undue interference between operators developing different resources in the same area.

Nothing in this subparagraph shall preclude the Authority from approving a . plan of work with respect to more than one category of resources in the same area to the same applicant;

e) Renunciation of areas — the operator shall have the rigth at any time to renounce without penalty the whole or part of his rights in the area covered by a plan of work;

f) Protection of the marine environment — rules, regulations and procedures shall be drawn up in order to secure efective protection of the marine environment from harmful effects directly resulting from activities in the Area or from shipboard processing immediately above a mine site of minerals derived from that mine site, taking into account the extent to which such harmful effects may directly result from drilling, dredging, coring and excavation and from disposal, dumping and discharge into the marine environment of sediment, wastes or other effluents;

g) Commercial production — commercial production shall be deemed to have begun if an operator engages in sustained large-scale recovery operations which yield a quantity of materials