Ann: General Security Agreement, page-290

It essentially means that the previous purchase option upon pre established payouts/performance milestones is now replaced with a JV.

Things to highlight:
- tso’s subsidiary remain holding the lionshare of the el zorro project 70:30
- whenever required, through its sub, tso has the ability to raise more share interests in the el zorro project
- when share interests are raised, the parties (tso’s sub and the minority holders in Chile) are provided the option to purchase the newly raised interests in proportion to their existing jv. For example, they’ve recently raised an extra 100 shares ($7.6m aud), tso has the initial option to subscribe for 70% of that ($5.32m aud) to acquire 70 of the 100 newly raised interests. The Chilean minority holders also has the initial option to acquire the remaining 30 newly raised shares via subscription; however, if they do not elect for this, tso’s sub can acquire those newly raised interests, in turn effectively increasing tso’s overall interests in the el zorro project (from the wording of the ann, it appears tso’s sub has the intention to do so this time around).

From a financial standpoint, tso’s sub would call for a raise in interests later down the track only when they are inclined to at least subscribe for 70:30 proportion, otherwise they risk diluting their share of profits.

This change in structure effectively requires the Chilean minority holder to ‘upkeep’ their 30% interest in el zorro. If they do not, they run the risk of diminishing their interests through dilution.
Since the functional currency for the el zorro project appears to be in Chilean pesos (which has been devalued against aud over the past 2-3 yrs), there maybe an increasing exchange rate risk for the Chilean minority holder in the longer term.

Happy to hear thoughts of others.