Taking 15% of AVB and AVB has to pay them $10m over 1 year as soon as there is commercial production from Pedro Branca.
Selling Pedro Branca is a good deal for Xstrata, transferring the cost of exploration to AVB but get in on AVB's other projects, keeping a $10m payout regardless of the quantum of the PB commercial production if there is one in the future.
Xstrata gets two chances but AVB needs to work twice as hard. And the board member of Xstrata will monitor the progress, they may dump in the first sign of trouble before other SH. Personally I don't like a big shareholder with nothing to lose on the board. It's a double edge sword IMO.
Also Xstrata might put pressure on AVB to focus on PB instead of RV.
JIMO DYOR
AVB Price at posting:
10.0¢ Sentiment: Hold Disclosure: Held
