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| | | | The Company's core asset is its 50% ownership of mining and mineral rights which entitle it to coal royalty receipts from the Kestrel and Crinum mines, located in Queensland, Australia (other than Crown areas). These mines are operated by Rio Tinto Coal Australia and BM Alliance Coal Operations Pty Ltd (a 50/50 joint venture between BHP Billiton and Mitsubishi), respectively. The Company originally owned the pastoral land under which parts of the Kestrel and Crinum mines in Queensland, Australia now operate. Pursuant to the provisions of applicable Queensland mining law, this land included the minerals beneath the land. The surface rights to the land were disposed of prior to the discovery of minerals on the property, however the Company retained an interest in the sub-surface mining and mineral rights. As a result, the Company, by retaining an interest in the sub-surface mining and mineral rights of such land, is entitled to certain royalties payable on the coal mined from this land pursuant to the Queensland Mineral Resources Act 1989. The Company is not entitled to a royalty on coal mined from land that does not meet the criteria specified in such Act, or from Crown areas. The royalty rate to which the Company is presently entitled is prescribed by the Queensland Mineral Resources Act Regulations. These regulations currently stipulate that the basis of calculation is a two-tiered fixed percentage of the invoiced value of the coal, without deduction for any costs pertaining to rail and road freight or any other costs incurred in relation to the sale or disposal of the coal other than port and related charges. The regulations provide that currently a 7% rate applies to the value of coal produced by a mine sold below A$100 per tonne and a higher 10% rate applies to the value of coal sold above A$100 per tonne. The Company is currently the registered proprietor of a one half interest in the sub-surface mining and mineral rights of such land and as a result is entitled to 50% of the royalty receipts relating to the sale of the coal mined from this land calculated in accordance with the Queensland Mineral Resources Act Regulations. The Kestrel and the Crinum mines also operate on Crown areas. Circa eighty percent of the output is premium coking coal for the steel making industries, mostly in Japan and the Pacific Rim. The balance of 20% is thermal coal used in power generating plants. The prices of both coking and steaming coal are denominated in US dollars and the product is shipped from the port of Gladstone in Queensland. In 2009, the Company received A$41 million attributable to the Kestrel and Crinum royalties. The strength of the covenants from Rio Tinto and BHP Billiton make the Group's coal royalty interests a world class source of revenue for shareholders. A copy of the Kestrel technical report is available at SEDAR and on this website here. | |
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