just incase someone not read this31 Oct 2016 18:55
Astor’s legal action
In September 2008, EMED Mining reached a number of agreements with Marc Rich &
Co Investment (MRI) which were subsequently novated in favour of Astor
Management. Under the agreement, EMED acquired the remaining 49% of its
subsidiary EMED Tartessus, the operating company of Proyecto Riotinto. There are
three elements to Atalaya’s relationship with Astor.
The agency agreement
Even though 100% of Atalaya’s production is already committed to three of its
cornerstone investors, Astor has an exclusive agreement to provide agency services to
the company on all concentrate sold. For the first 932,000dmt of concentrate sold,
Astor receives a base marketing fee of EUR11.25/dmt of concentrate sold, plus
additional escalating fees depending on the copper price. On the remaining balance of
1,438,000dmt, a commission of EUR22.50/dmt is payable.
Guarantee over EMED Tartessus
Atalaya Mining has provided a Parent Company Guarantee to Astor as security over
the Agency Agreement and the Deferred Consideration (described below) by way of a
pledge in favour of Astor of EMED Tartessus shares.
The Deferred Consideration
In return for MRI’s 49% of EMED Tartessus, the company issued 39.1M shares of
EMED in 2008, and agreed to pay a Deferred Consideration of EUR53M if certain
conditions are met. These conditions include the receipt of all authorization/permits
required to restart mining, and securing, and being able to draw down sufficient senior
debt finance to restart mining operations. The deferred consideration is payable over
6 or 7 years. In addition, during the Deferred Consideration period, EMED Tartessus
will pay EUR660,000/quarter (up to a total of EUR15.9M) if the copper price averages
300c/lb or more in the quarter.
The legal dispute
Atalaya Mining confirms that it is in receipt of permits from the Junta de Andalucia to
resume mining. However, the company has not entered into arrangements in
connection with a Senior Debt Facility. The company’s legal advisors are of the view
that if the restart of the Rio Tinto Project is funded solely through an equity
fundraising, then there is significant doubt concerning the legal obligation to pay the
Deferred Consideration.
On 2 November 2015, Atalaya announced that it was in receipt of a formal claim from
Astor made in the High court of Justice in London. In its claim, Astor believes that the
conditions for the Deferred Consideration have been satisfied and is seeking the first
installment of the Deferred Consideration and damages. We anticipate that the initial
court hearing will take place around mid-2016.
Our view
We assume that whichever party loses the initial hearing, the losing party will appeal,
so this may be a protracted, and potentially expensive, process. There may be the
potential for an out-of-court settlement. In our analysis we value Atalaya on the basis
of three scenarios; an Atalaya legal victory, an Astor
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