HudBay Minerals (HBM-T, HBMFF-O) has paid $2.4 million to Callinan Mines (CAA-V, CCNMF-O) as part of a net profit interest (NPI) and royalty agreement for a Manitoba property that sparked a contentious legal battle last March.
The payment represents 75% of the amount HudBay estimates it owes Callinan for the fourth quarter for its 6.67% NPI on the 777 copper- zinc mine, in Flin Flon. HudBay must pay the remaining 25% within 130 days of the end of the fiscal year. It plans to release its results on March 17.
The payment gives Callinan an idea of how much it will be receiving on a quarterly basis.
Under the agreement, which dates back to 1988, HudBay must pay the NPI on the mine and any other projects developed on the property once all development costs are paid off. HudBay also pays a 25-per-tonne royalty for ore milled at the site.
HudBay made its first NPI payment to Callinan during the fourth quarter for $358,000. The amount was based on an undisclosed portion of third-quarter profits, signifying that HudBay was out of the red — but left Callinan wondering how much it would receive for its next payment.
It was last March, when HudBay reported earnings of $565 million for 2006, that Callinan became suspicious about HudBay’s calculations. HudBay had failed to provide Callinan with detailed accounting statements for several years, as the agreement calls for.
Callinan filed a lawsuit with the Manitoba Queens Bench against HudBay subsidiary HudBay Mining and Smelting, demanding that an independent auditor review Hud- Bay’s books. The court case over the agreement’s fine print continues.
HudBay’s after-tax earnings for all its operations during the third quarter came to $66.5 million.
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