Earn-ins, options and joint ventures
A partner can fund exploration in return for a share of a project rather than shares in the company. Options, earn-ins, joint ventures and carried interests are the main forms.
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Instead of selling shares in the company, an owner can give up part of a single project to a partner who pays for the work.
What it is
These are project-level deals. The partner, often a larger miner, gains a share of one project, and the owner keeps its company undiluted and keeps exposure to the project's success.
The main forms
- Option agreement: the buyer makes staged cash or share payments, and often funds exploration, to earn the right to buy the project outright.
- (or farm-in): the partner spends a set amount on the project over a set time to earn a set interest. Often staged, for example 51% for the first tranche of spending, then 70–80% for completing a study.
- : once interests are earned, the partners own the project together and fund it in proportion to their shares.
- : one party's share of costs is paid by the others, usually up to a milestone. Governments and local empowerment partners often hold carried interests.
How dilution works in a joint venture
If a partner chooses not to fund its share of a budget, its interest shrinks.
Many agreements convert a partner's interest into a small royalty once it falls below about 10%.
Common terms
| Term | What it covers |
|---|---|
| Earn-in stages | How much must be spent, by when, for each step in interest |
| Operator | Which partner runs the work, usually the one funding it |
| Management committee | How decisions are made, often voted by interest |
| Area of interest | New ground acquired nearby falls under the same deal |
| Right of first refusal | Partners can match an offer before a stake is sold to an outsider |
| Walk-away | The partner can stop funding and keep whatever interest it has earned, or nothing |
Advantages and disadvantages
| For the owner | |
|---|---|
| Advantages | No dilution of the company; a partner with money and expertise; the partner's spending tests the project |
| Disadvantages | Gives up part of the upside and often control; the partner may walk away or slow-walk the work |
Terms and ranges are indicative and vary by market, jurisdiction and project. This is educational material, not investment advice.
Key terms
Next in this track
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Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.