There would be a cash component paid by Hanlong + an agreement whereby if iron ore is sold at a price above a certain point royalties would be payable by Hanlong.
This would leave Hanlong protected in the case of low iron ore prices (save face and all that), but SDL shareholders would at least retain some exposure to the project and potentially/hopefully obtain some value in future.
The royalty stream would flow back to shareholders either via rewriting the current agreement so that Hanlong buys the assets rather than the shares and SDL remains listed (re-capitalises and undertakes exploration elsewhere until the royalties begin arriving), or if deal stays as is (shares are bought out), royalty stream is backed into a listed shell company.
This deal would allow Hanlong to rip us off up-front (in reality that is what is about to happen, if the deal goes through), but have to share the spoils if and when prices are up.
By having the revenue stream flowing back via a public company shareholders who just want out can sell and those who always wished this thing had gone to a JV, etc, can continue to hold and hopefully receive the royalty as a dividend in future.
Having written all that, I am not sure that I would trust Hanlong to honour the deal...
SDL Price at posting:
33.5¢ Sentiment: None Disclosure: Held
