model for a modern major general: key considerations for lois and option agreements in exploration...
TRANSCRIPT
MODEL FOR A MODERN MAJOR GENERAL:
KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS
1. Preliminary Considerations
• basic business terms• preliminary information
2. Strategic Considerations
• rational• timelines• negotiate now vs negotiate later• disclosure
Poor Ol' Nugget - Act I, Scene 1
3. LOIs – Binding vs. Non-Binding
• binding preferable where:ocommitmentocertaintyodisclosure
• non-binding preferable where:o flexibilityospeed
4. Binding LOIs – Legal Risks
• uncertainty• contract terms not fully addressed• reliance on common law• can prejudiceobargaining positiono legal position/relationship
5. Non-Binding LOIs – Legal Risks
can be abandoned some terms should be bindingcasual, no legal reviewcourt may find binding“morally” binding
6. LOIs – Binding vs Non-Binding – How to Tell?
• “test”obasic contract principles satisfied – did the
parties agree?oare the “essential” terms agreed?odid the parties intend to be bound?
• each case is fact specificowording of LOIoactions of parties
7. Non-Binding LOIs – Tips
• use conditional language• don’t use imperative language• leave key terms for later agreement• include conditions• state “non-binding”• conduct of parties
Poor Ol' Nugget - Act I, Scene 2
8. LOIs – Drafting Considerations
• speed vs. certainty• extent of representation• approvals – corporate & regulatory• termination • notice mechanics• effective date and impact on timelines
9. LOI – Best Practices
• is priority timing or detail?• be wary of obligation to negotiate in “good faith”• standalone – exclusivity and confidentiality• diarize dates• check AOI for overlaps• note issues that were problematic• assess relationship/troubleshoot potential
challenges• no work on property (sorry!)
Poor Ol' Nugget - Act II, Scene 1
10. Moving from LOI to Option
• remaining/outstanding due diligence issues• refer back to LOI best practices• consider representations and warrantiesoWhat needs to be customizedoWhat needs to be coveredoOld standards: singing the same old song
11. Exercise of Option/Form of JV
• exercising the optiono Formal approacho Automatic approach
• form of JVo All information: vegetable, animal and mineralo Substantially in the form attachedo KoKo’s listoWorry about it later
Poor Ol' Nugget - Act II, Scene 2
12. Practical Issues
• treatment of shortfalls• currency risk• transition matterso into JVoon terminating option
• partial surrenders and additions• accelerations
13. Best Practices
• decision tree• as much ADR as you need, not as much as you
can stand• transaction summary• databases• debrief and capture process
14. Conclusion
• business/strategic analysis drives document• living documents
o need to be flexibleo certaino allow relationship to evolve
FINALE
Caroline ThomasChief Counsel, Exploration,
Property & Aboriginal Affairs
Vale, Base Metals
416-361-7919 (w)[email protected]
www.vale.com
Carmen L. Diges, LL.M, CFAChair National Mining
Group
Miller Thomson LLP
416-596-2117 (w)[email protected]
www.millerthomson.com