Two important antitrust considerations arise in relation to mining joint ventures: these risks and costs can be magnified in mining projects, as the time lag between initial drilling and sampling activities and the start of commercial production can be a few decades or more. Overall, however, the main reasons for joint ventures in the mining sector are the need to share the risks of the project with someone else and share the costs. Form 6: Gas Offsetting Agreement Facilitates the Negotiation of Operating Agreements Can be used as an annex to the AAPL Form 610 Published in May 1990 – 3 pages (PDF) There are other funding – from royalties to streaming agreements to removal agreements. Private equity firms have also invested more actively in the sector. Yet, despite these options, many mining companies remain hungry for capital. This has led to consolidation in the sector, particularly in the gold sector, as companies look to gain the weight they need to attract financing and strengthen their performance indicators, as well as for joint ventures. In some jurisdictions, the country`s government will require a stake in the company if it allows mining operations to continue in return. For example, in Chile, Codalco typically takes a 10% stake in mining operations, which is actually an acquired stake. The interests of the other parties are diluted proportionately. Global merger control tests (in particular turnover-based thresholds) are applied to joint venture parent companies that hold and/or acquire control. In a dead-end 50/50 structure of the joint venture, both parents are considered `joint control` because the joint venture cannot make strategic operational decisions unless both parents agree.
While in a majority/minority scenario, control of majority ownership typically results from a majority decision position, the key criterion for control in the case of a minority mother will be the ability to block important strategic business decisions. While the list of relevant business strategic decisions is open in practice, accepting the budget and business plan, hiring and firing executives, and controlling capital expenditures when they are low enough to account for operational expenses are widely recognized as key examples. In the same year, Teck Resources announced the completion of its joint venture with Sumitomo Metal Mining Co to develop Quebrada Blanca 2, the expansion phase of Teck`s copper mining operations in Chile. As mining companies grapple with digital disruptions, economic sanctions, and capital constraints, better decisions become essential to move business forward. Our mining leaders show what the new frontier of change looks like for the mining sector and how your company can manage those changes. Form 3: Rocky Mountain Joint Development Agreement – Oil and Gas Designed for Use in the Rocky Mountain Region For a Joint Venture Without a Federal Field Unit Published December 1968 – 15 pages (PDF) Joint ventures (JVs) in the mining industry are on the rise. In 2019, Barrick and Newmont partnered to pool their Nevada assets to create the world`s largest gold complex. This is a classic example of companies finding synergies in the co-location of their assets.
The board of directors often sets up committees to oversee certain aspects of mining operations, in particular a technical committee and an environmental and social committee. Committees will have their own mandate and composition that normally reflects the overall representation of the Board of Directors, particularly if they have delegated authority. We understand that joint ventures may require an interdisciplinary approach, and we deliver transparently across all practice areas and jurisdictions. Since investors are likely to have a board of directors or equivalent representation in the management structures of the mining joint venture due to their equity investments, they generally have access to the ICS of competing mines, including costs, prices and other commercially sensitive information. Although the EU merger regime is capable of developing a joint venture solely on the basis of the turnover of the parent companies, it has a significant division for joint ventures that will not play an autonomous market-oriented role (the technical term is a joint venture without full function). This requirement has potentially significant consequences for mining joint ventures: therefore, it has become normal in mining joint ventures to include so-called special permit fees – which require a majority “pass” rating of 75% and supermajority license fees – which require a majority “pass” rating of 90%. Typical examples include: The parties to the joint venture must agree on a financing program for all mining operations, starting with exploratory studies, initial drilling and resource definitions, pre-feasibility studies, banking feasibility studies, and then a full construction program and related budget. Once the mine is in production, it is normal to set up an annual program and a related budget that still needs to be funded, at least in the early stages. JVAs can be complex agreements that deal with various sets of rules and procedures related to the exploration, development, construction, production, expansion, closure and even recovery of a mine.
The agreement aims to cover the life of the mining project and could therefore last for many decades. Even in cases where the joint venture does not need sophisticated agreements, some key issues are inevitably addressed in the agreement, such as. B, contributions from joint venture partners, decision-making and the status quo. As with JVAs in other sectors, exit provisions are extremely important. The combination of an increased likelihood that such disputes will be pursued by a party for economic reasons and the fact that these issues may interact with cost escalation or force majeure arguments or actions that require urgent response due to rapidly changing circumstances makes the wording clear in terms of the status quo, dispute resolution and special/super-majority consent provisions. particularly important. Any dispute shall relate mainly to the precise wording of the agreement in question and to the practical implications and timing of any remedies available to the other party. Parties are well advised to seek the assistance of an arbitration specialist at an early stage. This will help them understand how best to use the processes and remedies available, and ensure that each box is checked and a written record is created that will ultimately be as convincing as possible in court. In this way, it is highly likely that a party will convince an undisciplined partner in the joint venture to reach a reasonable commercial settlement before a large-scale dispute becomes necessary, or it ultimately succeeds in arbitration. You will benefit from our extensive experience with all types of joint ventures, including: contractual joint ventures, corporate or other limited liability joint ventures, partnerships, limited partnerships and condominium agreements.
We help you negotiate the right governance and financing structure, non-compete obligations and exit conditions to avoid future litigation. Recognizing that joint ventures are often the first point of entry into a new region, you can use our global platform to meet local legal requirements, including restrictions on foreign ownership. Are you considering strategies to accelerate project development and diversify risks in your mining project? A joint venture that pools capital and capabilities, shares financial and operational risk, and builds successful long-term strategic relationships could be the answer you`re looking for. When you work with Dentons in your joint venture, we start by understanding the business objectives of all parties. Based on this, we create a structure that achieves your commercial, tax, commercial and regulatory objectives. Investors in mining joint ventures are often engaged in trading a mine`s production, either in their own right under removal agreements and/or in their capacity as marketing or sales agent. As a result of this type of activity, there are potentially anti-competitive opportunities for the dissemination and use of ICS in relation to competing mines, which in extreme cases could facilitate and/or lead to a cartel-type infringement in the relevant market(s). .