Reference is made to the announcement issued by
Unless defined otherwise, capitalized terms used herein shall have the same meanings as those defined in the Announcement. In relation thereto, the Board wishes to supplement the following information: Under the Royalty Agreement, Sunshine granted a royalty interest to BEH in exchange for an aggregate consideration of
The bitumen involved under the Royalty Agreement covered all royalty lands owned by Sunshine. Thus far, West Ells is the only project that has been put into operation.
Regarding the settlement of the royalty share of bitumen, BEH may: (i) elect to take delivery of the royalty share of bitumen; (ii) elect to appoint the Corporation as its agent, to dispose of the royalty share of bitumen on its behalf and account to BEH for the proceeds of sale, net of permitted charges (transportation fees and diluent costs); or (iii) elect to receive a royalty payment calculated as the royalty share of bitumen multiplied by a notional realized bitumen price, net of permitted charges.
In terms of accounting treatment, the royalty arrangement would be accounted for as a fair value through Profit and Loss (FVTPL) financial derivative. On initial measurement and for subsequent measurement, the Corporation will engage independent third-party valuation expert to assess the value of the financial derivative. Any fair value change would be recognized into the income statement of the Corporation.
The maximum amount of risk exposure under the Royalty Agreement to the Corporation would occur when the percentage of oil produced to be shared with BEH rises to 15% as WCS rise to
Nevertheless, based on the historical WCS price data, from the year which data is available (i.e. 1983), there was only once in 2008 (May-July) during the financial crisis that the WCS price stood at
Given that the royalty arrangement does not involve any acquisition or disposal of assets of the Corporation, acquisition or disposal of securities through allotment of share capital by subsidiary of the Corporation, formation of joint venture, entering into finance or operating lease, grant of indemnity or guarantee, provision of financial assistance by the Corporation etc., or any title change in its properties, hence, the royalty arrangement is not considered as a notifiable transaction as defined under Chapter 14 of the Rules Governing the Listing of Securities on the
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Email: investorrelations@sunshineoilsands.com
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