The higher royalty rate only applies after after the project reaches payout. My understanding of "payout" means that the project must recover all capital cost (lets say 400MM for arguments sake), all operating costs plus a Return Allowance (which I belieive is determined by the long Canada bond rate which is currently 4%).

I estimate that POD1 is generating about 25 MM / quarter or 100MM / year after operating costs. So at that rate it will take about 4 years to recover the 400MM capital costs. Allowing for a Return Allowance would stretch the payout period to 5 years.

To date (end of 2009) POD 1 has generated approx 90MM of net revenue (after operating costs). So taking that into account the payout years remaining is 3 to 4 more years - which puts it into the 2013 - 2014 range.

Please let me know if my understanding is flawed.