As at December 31, 2012, Cobre Panama had committed $3.6 billion (net of spending to that date) on a 100 percent basis for the design and supply of coal-fired power plant, two SAG mills, four ball mills, and the related gearless drive, engineering and other construction activities.
Las Cruces committed $5 million for the upgrade of its safety infrastructure.
Sale of precious metal stream to Franco-Nevada Corporation (Franco-Nevada)
In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada. Under the terms of the agreement, a wholly-owned subsidiary of Franco-Nevada will provide a $1 billion deposit which will be used to fund a portion of Cobre Panama project capital costs. The deposit will become available after Inmet's funding since issuing a Full Notice to Proceed reaches $1 billion and will be provided pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions.
The amount of precious metals deliverable under the stream is indexed to the copper in concentrate produced from the entire project and approximates 86 percent of the payable precious metals attributable to Inmet's 80 percent ownership based on the current mine plan. Beyond the currently contemplated mine life, the precious metals deliverable under the stream will be based on a fixed percentage of the precious metals in concentrate.
Franco-Nevada will pay to MPSA an amount for each ounce of precious metals delivered equal to $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation) for the first 1,341,000 ounces of gold and 21,510,000 ounces of silver (approximately the first 20 years of expected deliveries) and thereafter the greater of $400 per ounce for gold and $6 per ounce for silver (subject to an adjustment for inflation) or one half of the then prevailing market price. In all cases the amount paid is not to exceed the prevailing market price per ounce of gold and silver.
Cayeli tax audit
Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In 2012 Cayeli became the subject of an audit of its 2008 to 2011 taxation years. On February 4, 2013, Cayeli received an assessment from the Turkish tax authorities adjusting the amount of withholding taxes to be remitted on dividends paid by Cayeli to its direct shareholder. The shares of Cayeli are owned by an indirect wholly-owned Spanish subsidiary of Inmet. The Turkish tax authorities have taken the position that Inmet and not the Spanish subsidiary is the beneficial owner of the dividends. The Turkish tax authorities are therefore taking the position that the withholding tax on the dividends should be the 15 percent domestic rate and not the reduced rate of 5 percent under the Turkey-Spain tax treaty. The dividends paid during the period assessed total TL 628 million. The proposed tax liability is TL 63 million (US $35 million) plus interest and penalties. Our view is that the relevant facts and circumstances support the position that Cayeli fulfilled its tax remittance obligations and Cayeli intends to vigorously dispute the assessment.
Inmet Mining Corporation
President and Chief Executive Officer
Inmet Mining Corporation
Director, Investor Relations
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