Building trust and lowering risk through JVs and partnership arrangements

Current market conditions are making mining joint ventures (JVs) and partnerships increasingly attractive structures. Across the mining industry, there is a lack of capital, and we are seeing more mining companies establish JVs and strategic partnerships to access capital and de-risk mining projects. We expect the use of JVs and partnership structures in the mining industry to accelerate.

JVs and partnerships are inherently complex structures that involve a range of strategic considerations and offer significant potential benefits to the parties involved. When implemented properly, they can mitigate development risk, enhance supply chain capabilities, and serve as a valuable interim step toward a merger or acquisition.

Partnering on developing a project

Typically, JVs are struck between junior mining companies looking to partner with larger mining companies and/or private equity funds at key stages of development for the junior.

The main advantages for juniors include the following:

• access to capital.
• sharing the risks and liabilities of developing a project.
• creating synergies between the two companies (JVs are particularly attractive to majors when projects are close geographically or when the major wants to enter the jurisdiction of the junior).
• access to the larger company’s expertise and resources and the potential for acceleration of exploration, development, or production timelines.

Key advantages for majors include the following:

• building out their portfolio with projects that are close geographically or in new jurisdictions of interest.
• access to a team familiar with the resource and/or local communities, including First Nations communities, as well as governmental requirements.
• sharing the risks and liabilities of developing a project.
• creating a pipeline for future acquisitions.

JVs and partnerships allow companies to come together, develop projects as a team and demonstrate the long-term viability of a project. This can be a well-timed move when one company has progressed a project and achieved certain development milestones but is then faced with the need to raise significant additional capital to progress further or having to sell their interest in the project too soon. JVs and partnerships can also act as an interim step on the path to a merger or acquisition. In such situations, the parties work to further develop a project, and in doing so, they can become more familiar with the project and their counterparty, which can help prove out an investment thesis and de-risk larger merger or acquisition transactions.

JVs and partnerships provide more than just financial solutions; they are strategic tools that can help unlock value and drive sustained growth.

Shareholder approval

The potential need to obtain shareholder approval is a source of deal risk for companies in many transaction scenarios, and we see corporate boards have an increased appetite for exploring deals that are not subject to shareholder approval. Another potential benefit to JVs and partnership structures is that, in certain circumstances, they can be structured in ways that do not require shareholder approval.

Complexities in JVs and partnerships

JVs and partnerships are complex by nature. When these deals are being negotiated, it is important that they are structured carefully and with due consideration to a vast array of topics, including with respect to governance rights, roles, contributions, IP rights and exit provisions. Consideration also needs to be given to the impact the arrangement might have on future merger and acquisition (M&A) deals, either involving the parties or the project.

We are also seeing mining companies form strategic alliances with players in other sectors, such as automotive and technology. These cross-sector arrangements introduce additional complexities given the distinct business objectives, resources, expertise, and risk tolerances of the parties. As a result, these arrangements require careful structuring and often lead to bespoke agreements.

Looking ahead

JVs and partnerships provide more than just financial solutions; they are strategic tools that can help unlock value and drive sustained growth. Strong alignment between the JV partners is critical, and the structure must be carefully designed with both near-term milestones and long-term objectives in mind. As companies respond to evolving market conditions, we anticipate increased use of JVs and partnerships in Canada and throughout the global mining industry.

Linda Misetich Dann is a partner at Bennett Jones in Toronto. She practices securities and corporate law with a focus on corporate finance, mergers and acquisitions, and transactional work in the mining sector.

Jeff Taylor is a partner at Bennett Jones in Vancouver. He advises both public and private companies on a range of matters including mergers and acquisitions, public and private financing, contested transactions, and complex mining transactions.

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