Off-take agreements almost always involve some kind of funding....

Off-take agreements almost always involve some kind of funding. It can be pre-payment for certain quantity of metal purchases. It can be convertible funding, loan with low interest, loan without interest, funding for DFS,...in exchange for certain % discounts compared to spot market prices at the time of delivery.

The sole purpose of signing an off-take agreements is for the project to be funded so that it can have enough funds from all different sources including from the offtake customers to go to construction and production.

What the point of signing an offtake agreement without funding? Why would I sign an offtake and put myself in a position where I am legally bound to supply you a certain quantity of gold or whatever material in the future without getting anything back?

An off-take agreement gives the customer a secured supply of a material in the future and give the project a secure advanced funding to get the project up and running.


So, when people talk about offtake agreement they are talking about offtake+funding as one.


The pre-payment deal with Quantum was a genius deal for Quantum. Most other off-take agreements involve a certain % discount at the time of deliveries in the future. What Quantum has smartly done here is every time it pays a deposit the contract allows it to lock in the price now + 10% discount regardless of how much the price of gold in the future at the time of deliveries.

For example, QM locks in 1mil oz of gold purchase in 2024 at average REFERENCE PRICE of USD $2200. After 10% discount, it effectively paid for the gold at USD $1980. If it receives that 1mil oz of gold deliveries in 2028-2013 (5 years) and the average price of gold over that period of 5 years is USD $4000, Quantum would make 1mil oz × ($4000-$1980) ÷ 0.68 AUD/USD = AUD $3.06bil profit.


Compare that to a standard offtake agreement where the customer gets a 10% discount on the prices at the time of deliveries in the future (typically they use 3 different pricing report agencies), plus a secured right to supply from the project: 1mil oz × 10% discount on USD $4000 ÷ 0.68 AUD/USD = AUD $588mil.

Now you see the picture? It is a huge difference. That's why I have said many times Quantum is very smart with the deal. Of course that means Quantum is taking a higher risk if the project does not get into production for whatever reason or if gold price does not go much higher from USD $2200. Of course Quantum has done its home work and has strong expectation of where gold prices will be in the next 5 years, 10 years,..

Before you ask so what is left for Besra, well there is still so much benefit for Besra. Besra does not need to go through all the challenges of raising fund and the deal still allows Besra to keep at least 35% of its gold production to sell on spot market at much higher than the reference prices. Besra can also make a stunning profit if its resource is upgraded to 5mil oz, 6mil oz with more drilling now, next few years and during its production life.

Hope that help you see the picture and what's at play here for Besra and Quantum and any other off-takers.

I am tired to explain further. So, won't reply further about this matter.

Cheers.