6 2/3% NPI Royalty Payments?? Analyst recommendation:"STRONG BUY"
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Callinan Mines Ltd. Symbol: CAA: TSX venture
Closing Price: $ 1.90
Callinan Reports:
Received from HudBay: Nov. 8, 2007 $ 358,000 (partial 3rd quarter 2007)
Feb. 12, 2007 $ 2,368,127 ( 4th quarter 2007)
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Total: 2007 $ 2,726,127.00
May 18, 2008 $ 2,511,239 (1st quarter 2008}
Aug. 14, 2008 $ 3,313,723 (2nd quarter 2008)
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Total 1/2 2008 $ 5,824,962
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Total: 2007-2008 todate $ 8,551,089
Total: (including 25% withheld, by agreement) $ 11,401,452.00
Withheld amount 2007 $ 908,709.00
Withheld amount 2008 $1,941,654.00
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$ 2,850,363.00
Paid by HudBay:
(per HBM financial statements) 2007 not clearly stated ...........................
including 25% withheld 2nd quarter 2008 $ 4,900,000.00
1st half 2008 ( to date) $ 9,700,000.00
Actual Amount paid including 25% withheld $ 7,766,616.00
Shortfall (2008 to date) $9,700,000 - $ 7,766,616 = ($ 1,933,384.00)
Note:
1. HudBay's term of reference is the 6 2/3% NPI royalty interest in the 777 Mine. The $.25/Ton was not specifically mentioned. Therefore is not part of the calculations. It has been paid on a regular basis.
2. Obviously, various rules and standards make accounting less than a perfect science, and therefore casts somewhat of a shadow over clear, accurate and timely disclosure.
3. For clarification of the financial relationship between HudBay and Callinan, enquiries should be directed towards HudBay. Callinan has found it necessary to launch a lawsuit against HudBay , alleging that HudBay has not paid Callinan its due over the years. HudBay ha s refused to disclose the details. The Manitoba judge has ru! led that a 'reluctant HudBay' must show Callinan 'the books.' "Disclose it all!". The corporate veil is being lifted.
4. HudBay has avoided including the possible damages from the lawsuit as a risk factor in their financial reporting.
Evaluation of Callinan:
Callinan can be evaluated as a Royalty income company or a production / exploration company with revenue, free from mining expenses, that flows to the bottom line.
On July 15, 2008, James P.W. Darcel, CFA published a detailed analysis of Callinan in which he states that Callinan Mines is a "STRONG BUY." Giving absolutely "NO VALUE" to the outcome of Callinan's lawsuit, containing possible punitive damages,he expressed the opinion that Callinan should be trading between $ 4.47 and $ 4.96 Cdn per share. He enumerated Callinan's unique advantages over similar pure exploration companies.
The cash flow mitigates downside risk while the explo ration provides the investor with rapid upside potential.
Very important :
The 6 2/3% NPI royalty interest is calculated on the highly profitable 777 Mine production, "NOT" on HudBay's total operations.
Darcel Report: www.illions.ca
Callinan web site: www.callinan.com
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