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Gold/Mining/Energy : A to Z Junior Mining Research Site -- Ignore unavailable to you. Want to Upgrade?

To: Elizabeth Andrews who wrote (417)	6/29/2002 11:48:45 PM
From: E. Charters	Read Replies (1) \| Respond to of 5423

They write up NSR's with subtle clauses in them about beneficiation, taxes, transportation, treatment, etc.. so they can subtract all sorts of costs, and it ends up being a net profit. In addition they give unrealistic low buy out clauses in them. What is a million for a royalty? If they mine 1 million ounces in 15 years, 3% of that is 15 million and the net present value of that is at least 6.25 million at 6% interest. Even at 11% NPV is 3.13 millon over 15 years. On the other side of the deal, some companies want you to pay 5%, which I think is too much especially on short life properties. You can use a figure of 5 times the royalty to get its impact on net profit. Some people use 7. EC<:-}