The accounting speak commentary around onerous contracts is...

The accounting speak commentary around onerous contracts is below.

Rephrased, Core identified they were ceasing mining and went through all the contracts they had and identified any that would require payments with either no benefits or less benefits than the payment being made. I suspect the 10 year crushing services contract with CSI (MinRes) is one of these and possibly is the bulk of the provision. The offtake agreements would certainly have been reviewed. After reviewing all the contracts Core created a provision to reflect the costs that would be incurred if mining didn't restart. A provision of $27.6m was made, split as $8m within 12 months and $19.6m over 12 months away.

If Core restarts mining in Grants, some, most and possibly even all of this $27.6m provision will be reversed in the restart period creating a profit in the financial period that the restart decision is made. If Core were to decide to restart in June then the provision would be reversed before the June accounts are finalised. If Core decides to restart after finalising the accounts they report a loss in 2023/24 and when they decide to restart, the contracts re-evaluated. Most and possibly all of them are no longer onerous because services are being received. The P&L receives a one-off benefit helping the profitability in that period.

Somewhere many months back someone started to state that if Core didn't make delivery they would need to make payments for the difference between the price the offtake customer would have bought product from Core and the market price. These comments were speculation not fact because to the best of my knowledge no-one external has seen either the original offtake contracts or the amendments that Core has made to them.

Like any good speculation, there was no way at the time of proving that Core doesn't have this clause and cost so it gained some traction as an accepted position. With Core having now released the half year accounts, there is a limit to any likely offtake liability because it there was a contract clause like that, it would have been identified as an onerous contract. A provision would have been created. While a liability may exist under the offtake contracts, its estimated to be under $28 million. IMO a $28 million cost would not stop a takeover. Other factors like getting to shareholder acceptance thresholds might.