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Gold/Mining/Energy : Precious and Base Metal Investing
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To: tyc:> who wrote (791)12/9/2001 12:01:48 PM
From: Elizabeth Andrews  Read Replies (1) of 39344
 
This is a little more complex than it looks. I think the nut of the transaction basically frees up cash from short-term investments to cash that IMN can now use.
The deductions for reclamation are a pre-tax charge and do not effect free cash flow, as the amount deducted has to be held in a trust account for that purpose. What they have probably done is bought a financial instrument that provides for the yearly reclamation amount and the derivative cost less than the amount carried as a reclamation liability. The difference they can now take into "profit" and use the cash.
Most likely, from this perspective it does not change future or free cash flow because they still have to provide for the ongoing reclamation of their producing properties. Unless of course, they bundled those expected costs into the derivative, which they do not tell you and amortized the whole thing at a lower discounted rate of present value than they originally provided for. This could create an accounting "profit".
The bottom line is they moved some cash from a trust account (short-term investment as a current asset) to cash (as a current asset) and that amount no longer has any restrictive covenants on it. You won't get clarity on this until the next balance is published.
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