Ann: Revenue Generation Recommences-KBL.AX, page-86

It is a possible future liability which occurs a mining is done. The difference is that it is does not have a due date. My understanding is ....

Quintana invests USD23M in KBL interest free. They have security for the $23M. The money is to be paid back from mine output and they get a percentage of future production.

Both the investment and the percentage of future production are liabilities. They reduce the value of KBL to its shareholders because they wont get full benefit from a percentage of future production. The future production cannot be precisely quantified, but estimates have been made and included in the accounts.

When the original investment is paid back the security is released. This benefits KBL because third parties would not get Mineral Hill or Sorby Hills before Quintana got their share. The security was expected to be released after about 4 years production, It means creditors have good reason to back management. Similarly third parties would find it difficult to get Mineral Hill or Sorby Hills on the cheap although I doubt efforts in this direction have stopped.

So when the haul road washed out in the recent rains, production was impacted. It meant that payments due to Quintana were reduced. Now that production has been reestablished, the payments will increase. Repayments are linked to production, not to a timescale.

It is a liability and will be paid out. However what is important to KBL now is paying their creditors and this they are doing. So current liabilities are critical. Longterm the Quintana liability ends when the Mineral Hill system is mined out. Mine life is in excess of 10 years. Currently KBL is making $1M per month after allowing for Quintana metal streaming.