Economic Aspects of Joint Ventures

Many problems have surfaced in our economy during this decade, and the mining industry has certainly had its share: huge capital outlays for environmental controls, volatile markets, double-digit inflation, inadequate capital markets, political uncertainties-plus shortages of energy, manpower, supplies, and equipment. All these and other problems have left their visible marks on the economy of our industry. Solutions are slow in coming; perhaps, in some instances, there are no right answers. However, it appears that many companies are using joint ventures to an increasing extent in efforts to reach partial solutions to some of these problems. A joint venture does present an economic alternative that should be examined-especially when trying to answer questions arising within the current economic context. The dictionary defines "venture" as an undertaking involving chance, risk, or danger. The word was originally applied to hazardous undertakings involving delivery of cargoes to distant ports and subsequent disposition of the merchandise, but it is now applied to any project of limited scope and temporary duration. When two or more entities join in such a project, it becomes a joint venture, and this is the context in which I have used the term. Joint ventures may be formed for exploration, for development of a new ore body, or for expansion of an existing operation. Each requires different approaches for negotiating and drafting the agreement governing the conduct of the joint venture.