Inmet Mining Corporation (IMN-TSX) recently shared that the National Executive Council of the Government of Papua New Guinea has given its consent to the previously announced exchange of Inmet's 18 percent equity interest in Ok Tedi Mining Limited (OTML) for a 5 percent net smelter return (NSR) royalty on revenues of product from the Ok Tedi mine.
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OTML and Inmet will now proceed to settle and execute definitive documentation for the transaction. The transaction is expected to close within the next several months. The NSR will apply to proceeds from the sale of all mineral products from the Ok Tedi mine as operated under the current mine plan, less treatment charges and penalties, insurance, freight and sampling/assaying and a 2 percent royalty paid by OTML to the government of Papua New Guinea the Western Province and local landowners. For the purpose of determining proceeds under the NSR, only gains and losses from hedging and forward sales in effect as of May 18, 2009 would be included.The term of the NSR is expected to continue from closing until December 31, 2013. This end date will be adjusted to reflect any acceleration, delay, sterilization or change in cut-off grade ore that is contained in the approved pit shell and budget.At closing, Inmet will receive a payment equal to 18 percent of OTML's working capital as of the effective date. In addition, Inmet will cease to be a shareholder of OTML, will give up its representation on the Board of Directors of OTML and will have no further rights or funding obligations in respect of OTML in that capacity. As a result of the NSR transaction, Inmet will not participate economically in any proposed extension of Ok Tedi operations beyond the term of the NSR.
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