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Interesting that the official video of the presentation is yet to materialise. I wonder if CB is regretting saying, essentially, the 2MT is in the bag....
Exactly, really cheap mining - a typical all in cost is just $3-4k per ton.
@cyberiachas
"...so this is a relatively "easy" one to mine - at even $8000 per tonne that's $16 billion dollars in the ground or $533 million gross per annum over 30 YEARS..."
At the evening with CB - he said "this shallow porphyry on it's side wasn't really mining - he said it's digging a hole - muck removal on a big scale..."
Most of the dirt is pay dirt as well according to Jeremy Reid, with a stripping ratio of circa 4.3:1
IMO ATB Shorn
I'm not sure 2mt plus contained copper is that marginal, especially as was pointed out at the meeting, the porphry in the open pit is lying on its SIDE and NEAR the surface - most porphrys are upright therefore more expensive to get at.
so this is a relatively "easy" one to mine - at even $8000 per tonne thats $16 billion dollars in the ground or $533 million gross per annum over 30 YEARS.
I'm sure a big reason the buyout was inserted was that on the offchance Prospect did find a whale, AA wouldn't want the embarrassment of BHP /Rio whoever making an eventual fortune out of it. I think this might still be a reason why they will be willing to pay now good $ to get their hands on it.
Imagine if the SE got bigger and footrot too after a sale and it went to another player - oops
Not sure, don't forget AA had realistic (from their viewpoint) reasons to expect us never to reach the buyback clause conditions. They thought they were probably selling us a 'high probability dud'. They probably thought: Lets just let them insert an 80% only buyback, after all it won't happen anyway. Even if they get 2MT contained copper it will be marginal and there are other better options for us to mine. I don't think AA even vaguely considered the possibility that they were selling one of the biggest potential copper mines in the world for a song. Colin/prospect played a blinder.
I dont believe the 20% is valued the same. It will be what we are happy to accept. 2mt is still not massive for aa, they could pass if they have other irons in the fire that we are unaware of.
Steve - Agree with your comments, just found it hard to imagine the drafting of the agreement would have been dictated by/in favour of XTR/Prospect versus the multi-billion mining major. I think I was envisaging a 100% sale not falling under the buy-back agreement thus extendable to third parties. However, almost treating it as two transactions makes more sense from both sides. Once/if Anglo activate the purchase of the 80% under the agreement, it’s unlikely a third party would want the remaining 20% in isolation anyway, so logical that also goes to AA. However, once it gets to that point I’d argue that the 20% just goes for the same value as the 80%, as it would be hard to objectively value differently once both parties had agreed on the ‘fair’ independent valuation for the first 80% (particularly as external interest in 20% at that stage is likely to be muted).
Montyfino - I’m aware XTR are keen to prove this up. I don’t think AA, the £40b market cap mining company are going to be ‘caught off guard’ or ‘get in a panic’ over an asset for which they have a buy-back agreement in place, nor do we need them to. There’s plenty of scope for a deal to be done which satisfies both parties mutually and substantially.
Chris
I think Steve hit the nail on the head there!
My understanding is AA have the right to claim there 80% on independent fair value and we wouldn't be able to decline that, however the 20% we have is where we can make the difference by offering it up elsewhere (which they likely wouldn't want)
Giving then the option to be a bit more generous with their offer or decline it as it stands
Think this was mentioned a week or 2 back. We are keen to prove this up. Maybe Colin wants to catch aa off guard and hope they are not in a postion to buy then we are on the open market. Or we declare we are going to mine, that would get them in a panic. This deal is not in our favour so its seem its crap or get of the pot aa.
Joeman1 - I really find it hard to imagine XRE could veto the independent expert valuation on the 80%... the 20% is another matter.
I'd have thought that it would work like arbitration, there would be a mechanism for selecting the expert and once that was agreed, the decision would be binding. Time will tell I guess... first need to get the 2mt of Cu confirmed!
Steve,
I'd imagine if we reject the independent expert value, there will be a clause that we need to pay for the subsequent independent experts and other associated fees and there is probably a set timeframe for us to get this alternative report done by.
As you say, it seems doubtful that this wouldn't be tied up in the small print but it sounded like Colin, having read the small print was happy with the protection the agreement offered Xtract.
CB has said before that XTR does not have to accept the fair market valuation by an independent expert if it goes down that path. That has always struck me as odd because it seems unlikely AA would have a buy-back clause that wasn't binding. I am now thinking that CB may be planning on using the 20% XTR can retain, as a bargaining chip that effectively gives him a veto over the whole deal.
If during negotiation CB confirmed XTR didn't want to retain the remaining 20% and he would sell to the highest bidder, then that would seriously sour the deal from AA's perspective because they wouldn't want to get in bed with a rival. In those circumstances I would imagine AA would take an all or nothing position, which gives CB a nice bargaining chip i.e. XTR accept the fair valuation for the 80% but ask for a premium on the 20% so AA can secure the lot.
I suspect AA didn't come up with the idea of an 80% buyback and it was the ProspectOre guys who wanted it. May actually give us some leverage.
Hi all
Quick question to clarify the particulars of the buy-back.
We know that the 80% buy-back mechanism is triggered if a) 2m tons contained CuEq is identified, or b) there is a decision to mine. It would appear that any kind of JV with XTR maintaining a 20% stake in Racecourse wouldn’t be favoured by either AA or XTR. However, a proposal to purchase 100% would supersede the original buy-back mechanism, therefore opening up to bids from third parties?
1) Could we assume that AA would somehow be front of the queue if we were talking 100% sale and somehow exclude third party bids (even if not explicitly mentioned in the limited buy-back verbiage in the presentations)?
2) Isn’t it a little strange that AA would have drafted terms based on 80% with no provision for 100%, if it is indeed the case that an offer for 100% would allow others to the negotiating table?
Personally, I find it hard to believe AA wouldn’t somehow be in the driving seat if we were talking 100%, even if it was just first refusal to purchase at the independent valuation price without tendering to third parties.
Welcome any thoughts!
Chris