Based on the previous examples, Sumitomo and Agnico Eagle received partial carried-interest to production. Anything above the initial estimated capex is shared between the parties.
In the case of QB2, the capex increased from $4.74B US to $8.8B US. That's a $4B US cost overun, which per my calculation, increased Sumitomo's contribution by $1.35B US!
This being said, long term copper prices also increased significantly during the same period, so let's see the impact.
For this analysis, I'll use the below assumptions based on slide 27 (reserve case).
https://www.teck.com/media/QB2-Partnership-and-Sanctioning-Conference-Call.pdf
- NPV (8%) with copper at $3.75 US: $4.5B US (estimated)
- Capex: $8.8B US (estimated)
- EBITDA (First 10 years): $1.5B US with copper at $3.75 US (estimated)
Assuming Sumitomo paid $1.48B US (2022 dollars) + an additional $1B US (2022 dollars) of cost overrun, the total amount paid will be $2.48B US for a 30% interest.
That's $2.48B US total for a 30% interest (now valued at $1.35B US) or 184% of the NAV when using copper at $3.75 US.
When looking at the EBITDA ratio (first 10 years):
- $1.5B US x 30% = $500M US per year
- $2.48B US / $500M US per year = 5X the projected EBITDA when using copper at $3.75 US
Conclusion: All things being equal, the ratio's remain pretty close compared to the initial investment. However, there's more risk transferred to Sumitomo, as copper prices could return to lower LT values.
IMO.
MoneyK
