It is common case that the borrowings cannot be repaid for eight years, and since they have first claim on everything, it is very hard to see how a dividend can be expected within eight years or how tax on profits can be expected within eight years if it is a question of repaying borrowing and making allowance in the accounts for the extraordinarily generous write-offs there are in the 1974 Mining Taxation Act.
I have good reason to assume I am right in saying that it would be eight years at least before a dividend would be seen. Therefore, if that £9.54 million were invested—and I express this in two ways, positively and negatively —at the going rate, say, at 15 per cent, and that were compounded, at the end of eight years, one would have a figure of £29.18 million. That is expressing it in the positive sense. Express that in the negative sense—the other way around. The Minister will have to borrow this money for capital investment—this is not an investment at all, it is only a purchase, but I presume it will be classified as capital, coming under the capital budget—and pay interest on it at approximately 15 per cent, which is roughly the going rate for money now, for eight years. Compounding that interest—because, remember, he will have to pay interest in year two on the interest he paid in year one—gives you the same figure reversed, £29.18 million. What appears here as an innocent, insignificant, we are led to believe, £9.54 million ends up with a payment, assuming there are no rights issues, guarantees or anything else necessary, of £29.18 million.
That is, in fact, what the taxpayer is paying, because he has to repay the borrowing and repay the interest, and there will be interest on the interest as we go along until such time as a dividend is earned, and it is impossible, in my view, to see a dividend arriving within eight years in the particular circumstances of an undercapitalised company such as this.
There is one other figure I want to refer to briefly. I do not want to go into the personal affairs of the family, but this is blazoned over the papers for the last few days, that is, the figure which the Revenue Commissioners have put on the late Mr. Wright's estate, which, I assume, consists almost entirely of his holding of shares in Bula Ltd. When the calculation is made it is found that the Revenue Commissioners' valuation of Mr. Wright's shares in Bula Ltd. is almost identical with the calculation I made for the purpose of speaking about this valuation in my Second Stage speech.
I stated there that by doing what he was doing the Minister was, in effect, creating a post-tax amount of capitalised profit or available profit for the shareholders in Bula of a little over £29 million. That figure was pooh-poohed by the Minister. He sneered at it and when I asked him to prove how it was wrong he told me he could not be bothered with that sort of thing, that it would give the financial journalists an evening's entertainment working out how it was wrong.
It is significant that nobody worked but how it was wrong. Deputy Staunton rushed in one day to say it was wrong. That is not quite the same thing as working out that it was wrong. Deputy Staunton, unfortunately, did not give us the benefit of his calculations to disprove my figure, nor did he suggest any alternative figure for the concept on which I was speaking. We merely have the statement of the Minister and Deputy Staunton that it was wrong. There has been nothing from anybody else to state that it was wrong. However, very significantly, there is a valuation placed by the Revenue Commissioners at Dublin Castle on the holding of the late Mr. Wright which is almost entirely on all fours with my calculation of the creation of tax-free profit in respect of those shares.
I would give the calculations as follows. I do not know anything about the late Mr. Wright's affairs, but it is clear from the circumstances of this whole episode that the great bulk of his estate would have consisted of his shares in Bula Ltd., the money he was paid in respect of his land, and the contingent value of the further sum which is to be paid if and when the mine goes into production. If one accepts that his shares which are being sold to the Minister would make £1.8 million, which is my calculation of his share, 20 per cent of £9.54 million —and that was presumably the figure accepted by the Revenue Commissioners—that leaves a balance from an estate of £6 million of £4.2 million. Deducting, say, £200,000—and I think that would probably be generous— for assets that were not connected with Bula Ltd., leaves a balance of £4 million in respect of his 10 per cent holding in Bula Ltd., or his prospective 10 per cent holding when the Minister would buy up the 24 per cent and take the 25 per cent.
That values Bula, from a profit point of view, at £40 million. Ten per cent of its shares have now acquired, as a result of the Minister's action, a value of £4 million, in the view of the Revenue Commissioners. Therefore, 51 per cent of the shares acquire a value of just fractionally over £20 million; in fact, £20.23 million was the figure I gave on Second Stage. This was borne out precisely by the Revenue Commissioners. In the other case the 24 per cent sold to the Minister and the 51 per cent retained by the two blocks of existing shareholders amounts to 75 per cent. I said that the Minister, in what he had done, had put a valuation in terms of post-tax profit on those holdings of £29.8 million. I was told that I was mad in this regard. I then grossed that to give the pre-tax figure on which that would have to be based but I was told that I was mad in that regard also. At least I have the satisfaction of knowing that the Revenue Commissioners agree with my figures. I find the Commissioners a methodical group of men in matters of valuing shares. They are not a group who can be codded easily. They are extremely experienced in delving into realities. They do not skim the surfaces, as Deputy Staunton or, indeed, the Minister might do. Give or take £100,000 they bore out exactly what I said the figures were. They bore out also my assertion that the gross tax value had been created by the Minister.
I shall be interested to know whether either the Minister or Deputy Staunton will take on the Revenue Commissioners and tell them that their calculations were wrong, that their valuation of the Wrights' shares was wrong. They had a perfect yardstick. In one sense I am sorry for the Wrights. They had no escape so far as this matter was concerned. The Minister had bought 24 per cent and this immediately put an extraordinarily high price on the rest of the shares. It would be interesting to see what anybody who might wish to buy one or two per cent of the shares would be asked to pay. But the Minister or the 41 per cent group might have the right to veto anyone coming forward to purchase shares.
These, then, are a few observations I wish to make on the question of this valuation generally in the light of recent developments and even since I spoke on the Second Stage. I can go into this question in greater detail, should that be required, after I have heard what the Minister and other Deputies have to say in this regard.
