dilution, page-19

re: dilution - hardmano Hi all,

Very cunning deal made by SEY it appears.
Doesn't this mean HDR get cash they haven't spent due to the initial free carried interest??

The following is taken from the AIM addmission document.

Cheers,
xmagx

Government Participation

The Mauritania Government has the option of participating in PSC A up to a maximum of 16% from the date on which the first exclusive production authorisation is granted. From the effective date of its participation, the Mauritania Government must bear its percentage share of future petroleum costs and must reimburse the Contractor for 150% of those pro rata past petroleum costs (for exploration, appraisal, development, exploitation, separation, treatment, storage, transportation and marketing) which have not by then been recovered.

Recovery of Petroleum Costs and Production Sharing

The Contractor may freely retain each year a percentage of the total quantity of crude oil that is not used in petroleum operations or lost, for the purposes of petroleum costs recovery (any excess costs may be carried forward to be recovered the following year) (the “Contractor’s Retention for Recovery of Petroleum Costs”). Under PSC A the Contractor may retain up to 50% for these purposes. The quantity of crude oil remaining after recovery of petroleum costs is shared between the Mauritania Government and the Contractor, with the Contractor retaining a share dependent on the level of production (the “Contractor’s Share of Production”). Under PSC A this share is between 50% and 65%. Following ratification of PSC Amendment 2 this share will change in relation to petroleum extracted from depths of over 200 metres of water, in which case the Contractor’s Share of Production shall be between 50% and 70% and the Contractor’s Retention for Recovery of Petroleum Costs will be increased to 60%.

Fiscal Regime/Foreign Exchange

Net profits arising to the Contractor are subject to a direct tax (the “Direct Tax”). Under PSC A the Direct Tax is 40%. Following ratification of PSC Amendment 2, net profits arising to the Contractor with respect to the deep water portion of Block 3 shall be subject to Direct Tax of 25%. In addition, the Contractor must pay bonuses to the Director of Mines and Geology in Mauritania, the quantum of which is linked to the levels of sustained production which are achieved (the “Bonuses”). Under PSC A the Bonuses total up to US$7,010,000. The Contractor is exempt from most other taxes in Mauritania other than the Direct Tax, the surface rentals and the Bonuses. The Contractor and its subcontractors benefit from an open foreign exchange regime.