MODEL FOR A MODERN MAJOR GENERAL:
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MODEL FOR A MODERN MAJOR GENERAL: KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS PowerPoint PPT Presentation


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MODEL FOR A MODERN MAJOR GENERAL: KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS. Preliminary Considerations. basic business terms preliminary information. Strategic Considerations. rational timelines negotiate now vs negotiate later disclosure.

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MODEL FOR A MODERN MAJOR GENERAL: KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS

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MODEL FOR A MODERN MAJOR GENERAL:KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS


Preliminary Considerations

  • basic business terms

  • preliminary information


Strategic Considerations

  • rational

  • timelines

  • negotiate now vs negotiate later

  • disclosure


Poor Ol' Nugget - Act I, Scene 1


LOIs – Binding vs. Non-Binding

  • binding preferable where:

    • commitment

    • certainty

    • disclosure

  • non-binding preferable where:

    • flexibility

    • speed


Binding LOIs – Legal Risks

  • uncertainty

  • contract terms not fully addressed

  • reliance on common law

  • can prejudice

    • bargaining position

    • legal position/relationship


Non-Binding LOIs – Legal Risks

  • can be abandoned

  • some terms should be binding

  • casual, no legal review

  • court may find binding

  • “morally” binding


LOIs – Binding vs Non-Binding – How to Tell?

  • “test”

    • basic contract principles satisfied – did the parties agree?

    • are the “essential” terms agreed?

    • did the parties intend to be bound?

  • each case is fact specific

    • wording of LOI

    • actions of parties


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


LOIs – Drafting Considerations

speed vs. certainty

extent of representation

approvals – corporate & regulatory

termination

notice mechanics

effective date and impact on timelines


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


Moving from LOI to Option

  • remaining/outstanding due diligence issues

  • refer back to LOI best practices

  • consider representations and warranties

    • What needs to be customized

    • What needs to be covered

    • Old standards: singing the same old song


Exercise of Option/Form of JV

  • exercising the option

    • Formal approach

    • Automatic approach

  • form of JV

    • All information: vegetable, animal and mineral

    • Substantially in the form attached

    • KoKo’s list

    • Worry about it later


Poor Ol' Nugget - Act II, Scene 2


Practical Issues

  • treatment of shortfalls

  • currency risk

  • transition matters

    • into JV

    • on terminating option

  • partial surrenders and additions

  • accelerations


Best Practices

decision tree

as much ADR as you need, not as much as you can stand

transaction summary

databases

debrief and capture process


Conclusion

  • business/strategic analysis drives document

  • living documents

    • need to be flexible

    • certain

    • 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


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