if i were the md of rio., page-35

No probs asf,

Ignoring the fact your numbers and percentages don't add up (8.5% of 1b for instance is 85m), here is my reasoning:

- firstly, STB are negotiating with the govt here on a very large project that all parties want to go ahead. They can come to any arrangement they like, which will taken into account profit share, tax, upfront payments, etc. The point is that it is a negotiation, so the parties will eventually come to an arrangement that makes sense.

- the article you posted from some blogger named Natna or something is dangerous to take at face value as the guy clearly has no idea about economics or tax policy. If a govt invests in a project, then it is likely that they are always going to get their money back in taxes over the life of the project. All that happened in CHN's case is that they sold their interest in the project upfront and therefore brought the tax forward on the profit. The govt just collects less tax in the long run as the purchaser then has a higher cost base when it on-sells the project in future.

- if we assume that there is 38% tax in Eritrea on profits (and profits is worked out after deducting relevant expenses and royalty costs), there are 2 likely scenarios. The first is that there is a JV entity that gets taxed on the profits and then the remainder is distributed 50/50 ( which leaves STB 50% of 620, or 310). The second is that the profit is distributed 50/50 and the govt and STB are then taxed separately (which leaves STb with 38% tax on 500m or once again 310m).

- this is all very theoretical anyway becaus you don't know what other grants, concessions, tax holidays, etc the govt will allow STB to get the project up and running.

- at the end of the day, CHN received 80m in cash after tax for their project. That is a much smaller project than STB's and 80m is more than our current market cap.