Mining transactions are generally cross-border. Although many mining companies and sources of capital come from countries such as the United States, Canada or the United Kingdom, which are traditional common law jurisdictions, the mineral properties in which investment is intended may be found in other common law or civil law jurisdictions. From a legal point of view, this could lead to more challenges than anticipated. Options agreements are often applied for real estate in the exploration phase. On the one hand, the owner of the property needs funds to meet the expense requirements and carry out exploration work within a specified time frame, normally required by law. On the other hand, a mining company undertakes to meet the spending objectives and to carry out certain works in order to have the right to acquire the property or to enter into a joint venture with the owner of the land. As with licensing agreements, streaming agreements involve certain risks that need to be assessed. One of them is the possibility that production is insufficient or insufficient, which prevents the seller from delivering the volume of products as planned. Another risk is market volatility, as vibrations can affect the margins initially expected by the buyer and ultimately make production and thus streaming itself unenforceable. After the end of mining, the streaming agreement should not include too much of the mine production, or risk severely affecting the total turnover of the mine, since the sale price of electricity is by definition below the market price.
In addition, the Junior (unlike the Majors) will probably have the best trading position at the beginning of discussions with the Major or a third party willing to buy a royalty or streaming. In fact, this will probably be the only time the junior will have a bargaining leverage. When it comes to negotiating joint venture agreements with majors, such agreements should not “agree” as it may be difficult for Juniors to negotiate fairly with the majors as soon as the project progresses. Throughout the joint venture agreement or an option agreement, whether during the implementation, development or expansion phase, the last thing a junior would want for the major would be for him to be able to slow down, invest and lose interest while remaining attached to the mineral property.