Ann: Royalty Update, page-33

My two cents. As some have suggested, it does appear that the future royalties will be payable to 30 June 2023.

Since production commenced in Q1 FY18, RVR has realised sales of approximately $300m. A 4% royalty is $12m, less the $1.9m already paid is $10.1m remaining.

Depending which view is taken, RVR has averaged sales $21.1m per quarter since production commenced, $24.4m per quarter since legal proceedings commenced in Q3 FY19, and $31.2m per quarter so far in FY21.

Multiplying by 9, to the end of FY23, you get a range of $7.6-11.2m of future royalty payments @ 4%. In addition to the $10.1m already outstanding.

These royalties would have been owed regardless, so not having to pay them from 1 July 2023 (if this is correct) would be a great result. If the $15-20m estimate includes damages, then the royalty payments may end sooner.

The big question is how much of the $10.1m has been set aside? My guess is no more than $2m, based on the following understanding:

• $1.9m was paid for sales up to 30 June 2018
• $1.2m was put aside for sales between 1 July 2018 and 28 Dec 2018
• Notice of termination was received prior to 25 Feb 2019 announcement that legal proceedings had commenced
• Q3 FY19 sales were $32.6m, 62% of sales (1 Jan to 25 Feb) is $20.2m @ 4% royalty = $0.8m
• "Red River is confident that TCM's claim in respect of future royalty payments after the date of termination will be unsuccessful" - Royalty Update dated 25 Feb 2019
• "Royalties payable prior to the date of termination have been fully accrued in sales realisation expenses" - Every half-year and annual report since the Royalty Update

Some other points regarding Waterloo vs Liontown:

• The 4% royalty covered Far West, West 45, Waterloo and Orient
• A 1.5% royalty will be owed on Liontown
• The Liontown deposit is currently ~6 times bigger than Waterloo (4.1Mt @ 12.7% Zn Eq. vs 0.7Mt @ 19.1% Zn Eq.)
• Liontown and Waterloo are both a similar distance to Thalanga (Liontown 3km closer as the crow flies, Waterloo 5km closer by road)