RVR (ASX) Possible scenario...

Originally posted by VYR: ↑

Hi Sweetsound,

This royalty dispute is mysterious stuff.

RVR stops paying the royalties that are due monthly, I guess because they are short of cash. It seems RVR doesn't get paid for what they produce untill 90 days after they were due to pay the royalties under the royalties agreement they inherited so they ask for a change to the royalty agreement to pay 90 Days after the event.

Not sure it was a wise move to stop paying while they negotiated a new deal.

Seems the little private company TCM, which happens to be owned by a huge Indian public company which is listed on the London Stock Exchange but is maybe about to become private according to the mail, agreed in principal to change the payments to quarterly but then terminated the contract because the monthly payments weren't payed, I guess the lack of payment allowed them to cancel the contract in the absence of a formal agreement to pay on different terms.

You have to realise that the Law is not a Justice System it's a Legal System thats all about the Written Law that unfortunately rearly delivers a Just outcome.

RVR recon that the cancellation by the Indians of the royalty contract means that they don't have to pay anymore royalties after the cancellation date. I don't for one moment think the Indians are stupid. I'm pretty sure they are very shrewd in their business dealings and think that taking the opportunity to cancel the contract due to lack of payment gives them much more that the future royalties would have.

RVR have provisions in the balance sheet for payments up until the contract was terminated but on their advice they recon they are not required to pay anymore than that because the stupid Indians terminated the contract.

Silly things happen in big companies so lets hope its true that Indians stuffed up and that their Lawyers are dumb and RVR's are really smart.

If the Indian's lawyers are the smart ones then there could be more to this that the Royalties.

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When all this started, RVR was financially in a better position. Since then cash dwindled and a drawdown occurred. So if RVR lose the case, they'll be up for any missed payments and any punitive measures that the court may impose. That sort of scenario under the current circumstances is not something to look forward to so delaying that kind of decision may at least buy time till some more money is extracted from operations. Perhaps a CR - hopefully not.

Do royalty obligations apply to all mining operations in Thalanga or only to some of the mines and do they have an expiry condition? This sort of information is not something that seems readily available.