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December 1st, 2020

Agreement In Mining

Licensing agreements may have different origins. In some cases, the licence fee is part of the purchase price of a former owner`s mineral property. It can also be akin to a search fee. In other cases, it functions as a financing mechanism, so that the underwriter pays the mining company funds for use in the development and construction of the mine. As in a project financing structure, the taker assumes part of the risk of the project, as its remuneration depends on the success of the production of the project by the mining company. However, the licence fee is not limited to capital and interest, but is generally represented by a share of production during the duration of the transaction (although restriction clauses may be negotiated). This chapter aims to address a number of important agreements in the mining sector, with an emphasis on the impact they can have on mining companies at the international level, as well as current trends, opportunities, challenges and risks of concern to the sector. This chapter presents a number of mining agreements widely used in this sector, emphasizing the specifics of each agreement inherent in mining activity. The risk element and long-term financing needs, which include exploration, development and construction until production start-up, require unique structures for the mining industry and require a comprehensive approach to mining lawyers. The main issues relating to joint venture agreements in the mining sector, options agreements and licensing and streaming agreements were discussed here.

From a junior`s perspective, the agreement on a joint venture or option agreement should set fixed periods for the most important to reach certain thresholds, such as resource definition, preparation of scoping studies, predictability and feasibility studies, and construction and production decisions. The main reason why a junior company with a promising mineral property would enter into a joint venture agreement with a major is that it needs the know-how and money of a large company. The latter may also be responsible for entering into a licensing or streaming agreement with a third party. If this is indeed the case, the later the agreement will be negotiated, the better for the juniors. The more advanced the project, the more value has been created, and the more influence the junior will have in the negotiations. The terminals are usually expressed in expense amounts, although regular payments to the property owner may be required to move from one stage to the next.

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