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Under the terms of the agreement with Base Metals (announced Dec., 18, 1997, Base Metals must advance the funds to Caledonian no later than September 30, 1998. However, we hope that the funds will be paid in several installments up until the September 30 deadline.
In my opinion there is not very much risk of Base Metals backing out; they have already advanced Caledonian A$1,500,000 (as of February 10, 1998) as part of this deal. Base Metals is raising the funds through a "tax effective" in Australia, the structure of the tax effective is similar to a limited partnership in North America. Base Metals has received sufficient subscriptions through its prospectus offering in Australia to cover its A$10,900,000 commitment to Caledonian, and is now in the process of collecting the funds.
The only real risk, in my opinion, is that the subscribers decide not to pay up. The Australian tax department has been very stringent in regulating tax effectives and has disallowed tax deductions for some tax effectives that have not been structured according to the rules. We understand that Base Metals has excellent tax advisors and structured its deal according to the rules.
Accordingly, we are relatively satisfied that Caledonian will receive its funding from Base Metals. However, we will feel a lot better when the funds are in Caledonian's bank account!
I hope that the foregoing answers your questions. You may want to review Caledonian's Web Site (www.caledonian-pacific.com) as it has been recently updated. Please let me know what you think. You will notice on the web site that we are advisors to Caledonian. As a shareholder and advisor we are big supporters of Caledonian. |
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