"I think the company is expecting money from the lawsuit for earnings pre-07, someone at the company told me HBM thinks the contract is open to interpretation and CAA thinks it is very clear."
CAA hasn't seen the HBM books so they really don't know. HBM financials don't break things out enough to be sure how much the 777 mine is making. They have several mines and also several different refiners (eg. how much does the 777 mine sell the concentrate to the non-arms length refiner ?). I think CAA will be happy if they can just get an independent audit of HBM calcs and visibility on when / how much the NPI will pay out. Even without getting any money in the lawsuit for pre-07, CAA is vastly undervalued based on future royalties. The exploration stuff is all gravy.
I haven't seen the actual contract (I wonder if its public?) but it was negotiated in 1988, long before the mine feasibility, so I wonder how carefully they went over the details. Lawyers can argue over what the meaning of "is" is. As food for thought, here's a general comment about Net Profits Interest that someone posted on stockhouse :
"A Net Profits Royalty is similar to a Net Revenue Royalty in that certain production costs are allowed to be deducted prior to determination of the royalty payment. But, the allowable cost deductions in a Net Profits royalty may include all of the costs that can be tied to a particular mining operation, including exploration, corporate overhead, depreciation, depletion, amortization and any and all taxes. There seem to be two basic types of net profits royalties, one that is based on direct cash production costs, and one that is based on all production costs, direct and indirect and cash and non-cash, and may or may not be based on after income tax profit. In periods of high mineral prices, a net profits royalty may provide the mineral property owner with an attractive payment level because mineral production costs are usually the same regardless of the mineral's selling price. In periods of average to low mineral prices, net profits royalty payments can become quite small or disappear altogether. There are virtually no buyers for this type of royalty because of the creative accounting that the mining operator can use to depress the royalty payment amount. The distinguishing feature of a net profits royalty is that, depending upon the exact definitions in the mining lease and the actual calculations, it will very often be zero"
I don't have any expertise to interpret that pulse report.
HBM reports Q1 on May 14. Perhaps we'll get some more info then. |
