Joint Ventures (JVs) have been an important part of the mining industry for decades and have been instrumental to the development of many major resource projects. In recent years, JVs have taken on special significance given the restriction in availability of capital and debt finance, increased capital costs for projects, and greater complexity of mining projects in an environment of heightened commodity price volatility.
These factors manifest themselves in a few ways:
There is a de-risking taking place across the mining industry. Still, companies need to continue finding ways to grow their reserves and secure future production. Instead of all-out takeovers, many miners are collaborating through JVs. By advancing a project together, miners don’t have to assume all of the risks associated with making a full acquisition on their own. “JVs allow companies to share capital investment and project risk,” says John Gravelle, PwC’s Global Mining Leader. “They can act to fill an exploration gap in a company’s business strategy.”
The reasons to seek out a JV vary and can include:
Ideally, these arrangements feature each participant bringing particular expertise to manage specific risk elements and an allocation of capital that allows each organization to focus absolutely on what it does best.