>>they're not even getting anything for their Antamina interest and that's in production, for cryin' out loud ..
Hard to understand, isn't it ! Could it be that the market hasn't taken the trouble to even try to understand ? It seems that most mining speculators dream of a major coming along and buying their prospect. Inmet's Antamina WAS such a case, and the majors have not yet paid the price ! Yet everybody ignores it. Hah !
In response to an enquiry on Stockwatch, I made the following posting there today. I think it's worth repeating here.
When IMN sold its 50% interest in Antamina, it was paid in cash only a little more than it had invested in the venture. (I believe the amount of the payment gave it a $5,000,000 profit.) However, the purchase agreement stipulated that Noranda and Teck would also pay Inmet 3.3% of the free cash flow of the enterprise.
As I understand it, Free Cash Flow is the amount by which revenue from the venture exceeds all expenditures by the venture. I interpret this to mean that Inmet has a 3.3% beneficial interest in Antamina, for free cash flow as defined implies all the benefits from the enterprise. Of course, Teck and Noranda will get their money back first.... FCF is what is left over after expenditures have been recovered. However, IMN does not need to wait until all debts have been repaid before it starts to receive its share of the benefits. In the on-going calculation of FCF, the amount of debt still outstanding will be deducted from the amount of expenditures made to date. Thus IMN will be a 3.3% beneficiary as soon as Teck, Noranda, et al, have recovered their equity. I need hardly point out that IMN has already "recovered its equity" when it received the initial cash from Noranda and Teck.
If this interpretation is correct, IMN will receive 3.3% of the benefits of the mine, without any of the risks, for the capital at risk has all been provided by Teck and Noranda et al. Of course, if copper stays at .65c per lb, it will a helluva long time before the others recover their equity !
I am not an accountant, nor am I qualified in any way. So please do your own due diligence. And if anyone sees any reason to dispute my interpretation, please let me know. I hold shares in IMN.
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