So because the talks are still on-going, I can't help thinking we might get some sort of hybrid deal on the Option Agreement where both parties try to work together achieve the best deal for all concerned. We know CUU would prefer to have Teck as the operator because the optics of having them walk is not good. We know there is probably far more value in the District than has been proven and EE/management and we retail investors want a fair and reasonable portion of that value. We know the transferring of the Liard shares and eventual transfer back to Teck under the Option Agreement (or buy-out)creates a tax burden on CUU because the initial value is chrystalized, and that we would have to pay that tax on the transfer back when we won't receive mine proceeds for years. We know Teck is conservative and wants to manage its risk. We surmise Teck would be comfortable bringing partners in to share the acquisition CUU costs, and mine development costs like it has done in other situations. We know Teck is very concerned about its image, its balance sheet debt and and above all its share price.
So given all that, I can't see a buy-out up front. Teck and EE would probably not be able to agree on price. The market would punish Teck's share price based on CUU's BFS results. And a 75% back in is unlikely because the market would punish Teck's share price looking at a commitment to spend $350+ million on exploration and arrange financing of a mine at $3.2B and all under some sort of potential timeline. I also can't see Teck walking, because they are in the best position to buy the District cheaper than anyone else.
So that leaves a 20% or 40% back in initially. Whichever of these two options is selected, I think it will be in everyone's best interest to do drill as many metres this summer as can be completed, probably in locations selected by the guy that knows the property best and has the most to gain by selecting the locations. The EA will be done by the end of September, and the drilling will prove up the waste, probably extend Paramount to the east and at depth, and perhaps bring in some good results in three or four other potential deposit areas. Teck will have solid info to appease its shareholders and the market and to attract its partners. They will buy out our remaining share (80% or 60%) and then sell enough of the 100% ownership in the District to a partner or partners so they remain the operator, significantly reduce their cash obligation going forward and de-risk their investment while ensuring 60+ years of mine profits which includes their controlling portion of Liard's 30% profit participation off the top. CUU will be very happy with the buy-out price because of the extra value proved up with the increased resources and completed EA.
So ... I'm hoping there will be an agreement reached out of the current extended discussions to leave the Liard shares where they are for now under a revised timeline, proceed with a Teck sponsored drill program and agree on a JV/option back-in that doesn't give up any of our eventual rights to own Schaft and the Liard shares if Teck walks. If this happens, I for one will be very happy with the share value and won't mind waiting. Just the initial agreement of the back in should be enough to raise or share price, because we've always been told the big investors won't touch us until they know where Teck stands under the Option Agreement. If we have a defined percentage and a big summer drill program financed by Teck ... there will be buyers.
