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Taseko bets on C$1B copper project with C$15.1M Yellowhead takeover plans

Studios, Exhibitors Set To Spar Over Streaming

Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM


Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

Taseko bets on C$1B copper project with C$15.1M Yellowhead takeover plans

In proposing to buy Yellowhead Mining Inc. for C$15.1 million in shares, copper miner Taseko Mines Ltd. has tapped Yellowhead's chief asset, the Harper Creek property in British Columbia, as a key development project, one which could cost some C$1 billion to build.

Taseko said the project might be "shovel ready" after it builds the Florence copper project in Arizona that is currently undergoing a pilot study as it eyes possible construction beginning in 2020.

Harper Creek, a large low-grade copper project with modest gold and silver credits, is proposed as a 70,000-tonne-per-day mining operation with initial capital costs of about C$1 billion. Yellowhead, in a 2014 feasibility study, estimated a 28-year mine life designed around 716.2 million tonnes of reserves grading 0.26% copper, 0.029 g/t of gold and 1.18 g/t of silver.

Brian Bergot, Taseko vice president of investor relations, told S&P Global Market Intelligence that Taseko did "extensive" due diligence on the project, which has been in its sights for years. Taseko already owns about 21% of the company.

The project still requires extensive permitting.

Yellowhead had started the permitting process in 2015 but hit a snag earlier in 2018. It requested extensions on deadlines after the province asked for additional information about its plans in part related to tailings management. The request was denied.

The application process will have to begin again, Yellowhead said in a regulatory filing earlier this year, noting that the new process is expected to take at least three to four years and will incorporate new proposed federal and provincial regulatory requirements.

The province, Yellowhead said, had requested more information about tailings facilities at Harper Creek that took into consideration the Mount Polley embankment failure in 2014. The tailings disaster released millions of tonnes of waste into nearby lakes and streams and raised questions over the management and design of tailings facilities in British Columbia.

Bergot said Yellowhead, which could not be reached for comment, lacked funds and was unable to meet provincial deadlines on environmental permitting. He said Taseko would, assuming the deal closes, restart the process.

Taseko is familiar with success and failure in the permitting process in Canada, having been working for years to permit the New Prosperity gold-copper project in British Columbia. The company has twice been rejected in its application for environmental approval, most recently in 2014.

The copper project has courted controversy, especially with local First Nations who oppose it, over waste management and the potential for damage to the environment. Taseko continues to push forward with the project in order to boost environmental permitting, but still faces significant opposition to development.

Taseko expects to close the C$15.1 million all-share transaction early next year, Bergot said, with the company locking up a majority of shares in agreements in favor of the deal. It said that Matco Investments Ltd., a shareholder with a 45.5% interest in Yellowhead, entered a "hard lock up" along with its chairman, Greg Hawkins, who owns approximately 7.21% of the company.

Each Yellowhead shareholder other than Taseko is expected to receive 1.1484 Taseko shares for each Yellowhead share held, with Taseko to issue 17.3 million shares. Yellowhead plans a special meeting in January 2019 to seek shareholder approval.

How would Taseko finance Harper Creek, if it went ahead with construction? Bergot said it was too early to consider financing for a project like Harper Creek.

Taseko's market capitalization, just shy of C$200 million as of press time, makes it difficult to finance a mine through equity. But with Florence cash flow possibly adding to its pot in the early 2020s, it may be better placed.

"We'll have more options at that point," Bergot said.

Technology, Media & Telecom
Studios, Exhibitors Set To Spar Over Streaming

Dec. 14 2018 — According to an article published in Variety in November, Warner Bros. and Universal Pictures are expected to reopen conversations with exhibitors about earlier VOD releases for their films. The studios argue that an earlier on-demand release helps minimize piracy and allows them to better leverage the multimillion-dollar ad campaigns launched for their films' theatrical debuts.

Exhibitors, on the other hand, worry that a shorter theatrical window will reduce ticket sales as potential patrons opt to wait and watch films at home. Fewer ticket sales also lead to lower concession revenues -- the most profitable aspect of the exhibition business.

The article also notes that studios have an extra incentive to negotiate earlier release windows, as WarnerMedia is launching its own streaming service in 2019 while Comcast, home of Universal, is looking to expand its streaming offerings. Having their major films released on their respective services shortly after theatrical release could help drive subscriber growth.

Pushing for a film's possible VOD release just weeks after its big-screen debut could be seen as an aggressive move, but studios have been slowly shrinking their theatrical release windows over the past 20 years. In 1999, the average theatrical window was 169 days; this was just as the DVD market was beginning to explode and the VHS cassette was still a market factor. Soon, DVD became a massive source of revenue for studios and they began to release their films on home video at a quicker pace. In 2017, the average theatrical window dropped to 105 days before dipping to 99 days in 2018.

The major studios all trimmed their theatrical windows by a fair amount between 2000 and 2018, from an average of 172 days down to 94 days, a difference of more than two and a half months. Twentieth Century Fox and Universal Studios had the shortest average theatrical window at 89 days, while Walt Disney had the longest theatrical window at 107 days.

We tracked eight blockbuster films in 2018 that were released on home video less than 90 days after premiering in theaters. The shortest window belonged to "Venom" ($212.3 million domestic gross), which was released in theaters on Oct. 5 and will debut on DVD and Blu-ray just 74 days later on Dec. 18.

The motion-picture business has always been able to capitalize on new technology, from the TV to the VCR to the DVD player, to drive growth. Streaming video has become the primary source for home entertainment — just ask Netflix and its 137.1 million subscribers worldwide. If studios are launching their own services, they naturally want their own premiere content on those services. Studios may not get the rapid release window they are hoping for, but they will likely keep bringing it down slowly, as they have for the past two decades.

If you are a client then learn more about Economics of TV & Film below:

Movies make their way to your home in less than 100 days in 2018

State of Home Entertainment 2018

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Watch: Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM

Dec. 13 2018 — In our latest Power Forecast Briefing, Steve Piper discusses recent power market activity and a forecast that points to profitability for merchant generation regions of ERCOT and PJM. Both saw improved spark spreads in 2018, but ERCOT's upside appears more limited than PJM going forward. More data and market tracking tools can be found on the Market Intelligence platform’s Power Forecast subscription.

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Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.

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Technology, Media & Telecom
Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

Dec. 10 2018 — Walt Disney Co.'s pending acquisition of much of 21st Century Fox Inc. certainly raised the bar for cable network valuations — at 15.4x cash flow — and the divestiture of the regional sports networks may see another double-digit-multiple transaction with Inc. in the mix of buyers. Another deal, Nexstar Media Group Inc.'s pending acquisition of Tribune Media Co., sees stakes in three cable nets going to the buyer for single-digit multiples (6.9x).

The deal follows the collapse of Sinclair Broadcast Group Inc.'s deal to buy the company, which is now being litigated. We think that Nexstar is getting quite a deal on the cable network assets and will likely flip them for a quick profit.

When Discovery Inc. agreed to buy Scripps Networks Interactive Inc. in July 2017, the domestic cable networks were valued at $10.14 billion, or 10.5x cash flow, with Food Network (US) valued at $4.5 billion (Scripps owned 68.7%) and Cooking Channel (US) (also at 68.7%) valued at $525 million.

In the current transaction, the valuations come to $3.47 billion and $323 million, respectively. Thus, if Nexstar can get Discovery Communications to pay at least what it paid in the Scripps transaction, Nexstar may make a quick profit. Granted, minority interests typically trade at a discount. Scripps Networks Interactive, however, has tried for years to cut a deal to buy out the minority stake and it may be willing to strike a deal at a higher price to put this issue behind it.

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