Is The Market Stupid...?, page-97

The sentence that starts on line 7 of this excerpt of SPA looks fairly explanatory to me;

(a) Details on deferred consideration – Buller Coal Project The Company acquired Buller Coal Limited (formally L&M Coal Limited) in November 2010 and the sale and purchase agreement contained an element of deferred consideration. The deferred consideration comprised cash consideration and/or royalties on coal sold. The deferred cash consideration is made up of two payments of USD$40,000,000 (performance payments), the first being payable upon 25,000 tonnes of coal being shipped from the Buller Coal Project and the second payable upon 1 million tonnes of coal being shipped from the Buller Coal Project. The Company has the option to defer cash payment of the performance payments and elect to submit a higher royalty on coal sold from the respective permit areas. The option to pay a higher royalty rate has been assumed in the valuation and recognition of deferred consideration. This also reflects the current status of the mine on care and maintenance. The fair value of any future royalty payments is estimated using a discount rate based upon the latest New Zealand 10 year government bond rate, sales profile, and forecasted domestic coal prices. The potential undiscounted amount of all future cash payments that the Group could be required to make under these arrangements is between nil and USD$80,000,000. The deferred cash consideration is valued at each reporting date based on expected timing of the cash payment and an appropriate discount rate. Revaluations are recognised in the income statement. Payment timing The construction coal mined at Escarpment has triggered the first performance payment. This is not payable as the higher royalty election has been made and royalties have been paid in the current year. The Escarpment mine is currently on care and maintenance with low level sales expected from existing stock piles. Security Pursuant to a deed of guarantee and security the two performance payments of US$40 million included in the deferred consideration above are secured by way of a first-ranking security interest in all of Buller Coal Limited’s present and future assets (and present and future rights, title and interest in any assets). In addition to this, Buller Coal Limited has guaranteed the payment of all amounts under the Sale and Purchase Agreement with L&M Coal Holdings Limited.​