Some very interesting points are being made lately.
Excellent reality-check
@Dazedandconfused makes about the $100 mil economics of the finds to date, easily justifying Tecks $12 mil expenditure for at least 4 years of exploration to entitle them to 51% of the project. ($10mil exploration and pay AZS $500k pa. over the next 4 years). Until then though, they are entitled to precisely 0% of the resource. They seem committed to the spend.
For more detail on the agreement, see
http://azureminerals.com.au/wp-content/uploads/2016/12/1629682-1.pdf
and
http://azureminerals.com.au/wp-cont...-Acquire-Alacran-Copper-Project-from-Teck.pdf
So $12mil overall to earn a lazy $51mil current value as their share of the known resource, if they find nothing more. And to 65% of the project value of $34 mil by spending a further $6.5 mil ($4mil exploration and a $1.5 mil cash payment) to AZS.
When the agreement was signed, Teck were too squeezed financially to consider any wastage of exploration funds. They could change strategy at any time just as they were expected to not be interested in the Ag and Au. I recall signalling they might diversify because they were focused on the wrong commodities previously which led to their problems. (Apparently HC wiped the slate clean with the new year and you can't find posts from way back.)
If at any point Teck thinks it's got a huge Cu find it could ask AZS to set aside the back-in agreement and settle for a lump sum. We might not be desperate enough to take what they're offering and be prepared to wait them out. I don't think they will be wanting to avoid finding Cu, but if we're not actively involved in the engine room, they might not have much of a clue. They didn't before. I think AZS has an advisory role.
Cu drill results will be an indicator though of which way this goes in terms of Teck buying out AZS; I don't see the reverse happening, for AZS to have to stump up the balance to Teck within 4 years. Because Teck own nada of the resource until the 4 years is out and the spending targets are met. We have 4 years minimum free-carried to see how this shapes up.
If Teck don't want to develop a mine jointly (which we could finance from our revenue from Oposura) then they must pay us out for our remaining share of the known resource. $35 mil at worst.
Teck will come under pressure internally to make Alacran a producer and get it off the books as an undeveloped asset, so it's a case of which is the bigger pressure.
A significant Cu find would change everything of course.
$500k per year payment for 4 years is meanwhile useful in this early stage with Oposura.
It's easy to dismiss Oposura at first glance. Yet the size of the deposit isn't a problem when you look at the economics of the project in entireity. Ditto capex. Ditto opex.
Lenders and investors want to know how quickly and likely the project is to stack up as a big money earner, relatively quickly. The money flow is there for anyone to work out for themselves. Dilution is a sensitive issue as we've just come off the back of a consolidation, but ultimately it's a bit of a furphy if you look at the economics involved with Oposura.
As a LT investor the difficult past is behind us, it's the future I'm interested in.
