of the latest corporate presentation is very clear about who pays what and I’m surprised there are so many interpretations floating around here with most of them trying to minimize the huge advantage CUU has.
There are two kinds of costs: pre-production decision costs and construction capex costs.
The construction capex costs are clear: TECK pays them 100% and then recoups CUU’s share from production, once copper starts to come out of the ground.
Now let’s look at the pre-production costs.
First 60 million are on TECK’s tab 100%.
First 140 million are on TECK’s tab 100% and the 20 million payment to CUU upon construction completion is cancelled.
First 220 million are on TECK’s tab 100% and the 20 million payment to CUU upon production decision is also cancelled.
Above 220 million, TECK has to provide a loan to CUU for their 25% share at prime + 2% rate.
For example, if pre-production decision costs amount to 300 million, TECK pays 280 million and gives us a 20 million loan at prime + 2%.
This is why TECK doesn’t want to tip their hand on CUU too early; if they were to hint SC will become a mine, someone else could come in and buy CUU and then go to TECK and say something like this:
“Hey TECK, go wild and optimize the project all you want, take your time and let me know once you spent 300 million dollars so I can pay you back 20 million or maybe I’ll take my time and pay you that money back over several more years at a low rate.
When you are ready to proceed, just go ahead and build the mine and call me for the photo op to cut the ribbon and pour the first copper. And don’t forget to send me a cheque every year for 2.5% of the net cash flow until my share of construction capex is paid off and then increase that amount to 25% of the net cash flow for a few more decades until the monster deposit is exhausted”
