Ann: Claim against BRL, page-67

At the time of Escarpment initial development, domestic demand was moderate, BRl were cash poor and there was zero inkling of the future purchase of SE. I believe a rational decision was made to sell coal from initial Escarpment development into the domestic market rather than incur a nuisance large stockpile on site. They chose to pay the inflated royalty payments as provided in the SPA {sale and purchase agreement].

The SPA in addition to the US$40m payment requires a continued "royalty payment of 1.75% of gross sales revenue". This royalty payment inflates to "10% of gross sales revenue", after the 25kt trigger if the $40m has not been paid. BRL believe paying this inflated royalty at the time satisfied the SPA requirements.

I believe L+M coal, after the SE acquisition, realise that BRL having adjacent mines, Sullivans and Whareatea, can strong arm them to re-negotiate the royalty amounts. To further develop Escarpment a $40m payment is required, to continue with the inflated royalty is cost prohibited. I suggest it would be far cheaper than $40m to site prep these other mines. Whareatea supposedly has the better coal.

I believe L+M are only having a go now, as prior to the acquisition BRL had no money and their strength of argument will diminish with time.