from
http://www.gcap.com.au/Sep03quarter.html
Falcon™ System Agreement Extended for Base Metals
During the previous quarter, the agreement with BHP Billiton with respect to the FalconTM system was renegotiated and executed with Gravity's previously wholly-owned subsidiary, DMA. Under the terms of the new agreement, known as the Alliance and Falcon Access Agreement ("AFAA"), DMA is able to novate any excess FalconTM system capacity to Gravity. In order to ratify arrangements on the surveys already flown, and any future surveys that Gravity may carry out for base metals exploration in particular, a further agreement was entered into between Gravity and BHP Billiton, known as the FalconTM Access Agreement ("FAA").
The principal purpose of this agreement is to state the terms under which BHP Billiton may acquire all or part of Gravity's rights in a mineral discovery made through application of the FalconTM technology. The terms are more favourable to Gravity than the previous FalconTM System Deployment Agreement ("FSDA") in that they provide Gravity with the option of retaining equity in any discovery that BHP Billiton may buy into.
Under the terms of the FAA, BHP Billiton will have the right to acquire Gravity's interest up until such time as a JORC compliant inferred in-ground value of A$100 million has been identified and declared. In the event that BHP Billiton exercises this right within 60 days, then Gravity will be able to choose between two buy-out scenarios:
Scenario 1: BHP Billiton purchases 100% of Gravity's equity
A cash payment to Gravity which will be the greater of $5 million or five times historical expenditure on the project, plus
A net smelter royalty of 2% on BHP Billiton's share of future production.
Scenario 2: BHP Billiton purchases a major portion of Gravity's equity (normally 51% of the total project equity or greater)
A cash payment to Gravity which will be the greater of $5 million or three times historical expenditure on the project, plus
A gross royalty of 2% on BHP Billiton's share of future production; and
Gravity retains a percentage of equity in the project and BHP Billiton becomes the Manager.
In the event that BHP Billiton elects not to acquire a percentage of Gravity's equity in the project, then BHP Billiton will be entitled to:
A net smelter royalty of 2% on Gravity's share of any mine, or
10% of the sale proceeds should the project is sold to another party by Gravity.
GRN
gravity diamonds limited
