Licensing and streaming agreements are inherently long-term in nature and the above observations of the risks and potential of litigation apply to them. The base price of minerals commonly traded overnight, a week or a month can generally be calculated by referring to prices published on the stock markets or index providers in place. The London Metal Exchange or the COMEX in New York are examples of stock exchanges. For example, index providers and price reporting agencies are platts and metal bulletin for ferrous and non-ferrous metals, the London Bullion Market Association for Precious Metals and the newC index published by globalCOAL for coal. As a general rule, the longer a contract, the more valuable it is for both the mine (which provides a stable source of income) and the buyers (who ensure a constant source of supply). However, the longer a contract is, the more likely it is that something will go wrong during execution. As noted above, prices and other market conditions may vary. Buyers and sellers can see significant changes in operating conditions and costs, not to mention unforeseen developments and changes to legal and environmental restrictions. Very few disputes are due to cash contracts or very short-term weight loss contracts, and when they arise, they are generally of much lower and less complex value and rarely require the same level of expertise and tailored procedural tools. This chapter therefore focuses on long-term acquisition agreements and tailored agreements for mine financing.
Offtake agreements can also be complicated and implement them for a very long time. For mining companies wishing to make rapid progress in project development, the cost of this period can be an obstacle. These companies may decide to go ahead on their own and find other ways to finance projects. „We have a contract with one of the world`s largest producers and distributors of sea coal for most of the life of Phase 1. The signing of this agreement is another important step in the development of Makhado. Because of the long-term nature and relative complexity of these agreements, it is essential that the parties entering into them be assisted by specialized advisors familiar with mining law and industrial practices. There are many ways to design exemption, royalty or streaming agreements, including their price rules and possible price review clauses. As a result, the parties will face a large number of options during the negotiations and their decisions may have an impact on future disputes. It is therefore essential to ensure clear wording and proper consideration of the main provisions relating to price fixing and revision, as well as the acceptable quantity and excuses in the event of non-delivery or non-purchase of the product. It is possible for both parties to withdraw from an acquisition contract, when this usually requires negotiations and often payment of a royalty. Companies also run the risk that their taketake agreements will not be renewed once they are in production – and they generally have to ensure that their product remains in compliance with the buyer`s standards.
London-listed Contango Holdings has signed a Memorandum of Understanding with CoalZim Marketing for a 2,000-tonne-per-month contract for coal mining. On the one hand, the revision of quality sanctions can be seen as an alternative to revising the price mechanism or adjusting the prevailing price indices when the market has evolved so that products of a certain quality need a discount or premium that did not exist at the time of the contract. On the other hand, however, the adjustment of sanctions can be seen as an unauthorized backdoor method of adapting price conditions in a way that was not envisaged.