Sitting Pretty The only company that's made any money off the Roche Bay property is: its current 50.1% majority owner, Roche Bay plc. Since 2007, AEI has paid Roche Bay plc $1.7 million in cash and 12 million AEI shares.
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The cash will continue flowing: $275 K in December of this year, and $1 million a year beginning next year until the mine stops producing (these minimum payments are due whether the mine goes into production or not). If AEI defaults on any of these payments, then Roche Bay plc takes the property back.
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The majority of Roche Bay plc's 12 million AEI shares have been sold, but subsidiaries still hold 4.6 million AEI shares as of March, 2011. In its annual report Roche Bay plc says it will continue to sell shares to pay its operating costs. It's hard for the stock price to rise with such a large block of shares constantly on the ask.
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And the jewel in the crown, a 6% gross overriding royalty on concentrate production, and a $35 million half-buyout. This is the most generous royalty that's been negotiated in the mining sector in the last 10 years. Would you rather be in Roche Bay plc's position: no responsibility for capex, guaranteed minimum $1 million annual payments, and a monster 6% royalty, or in AEI's position: no cash, difficulty procuring additional investment, onerous annual "rent" payments, and the possibility of losing the property if they fall behind on payments? The answer's obvious.