6. DO NOT FINALIZE A SEPA NEGOTIATING STRATEGY “ON SPEC”
It’s never too early to start building relationships with mining companies. There are significant benefits to cull at the Exploration StageExploration Stage: the whole range of activity from searching for and developing mineral deposits. through Joint VenturesJoint Venture: commonly, a business to which two or more parties contribute the essential land, capital, and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.), even if a mine does not go ahead. (After all, most do not.) That’s why it is wise to have an Engagement Protocol completed in advance of requests or proposals from exploration companiesExploration Company: a company whose principal activity is that of exploration.. Having the rules available will help these relationships get off on the right foot.
It is possible to decide too early on your SEPA negotiating strategy, however.
A mining company only needs to negotiate a SEPA once the Bankable Feasibility StudyBankable Feasibility Study: a comprehensive analysis of a project's economics that banks and other financial institutions can use to make investment or lending decisions. is finished. The Bankable Feasibility Study compiles all the projections that financial backers (bankers or investors) require to make their decisions about how much money to risk on the mine. In order to reassure them, the mining company wants project certaintyProject Certainty: the likelihood that a project will be able to meet its intended outcomes.. The company’s need for an agreementAgreement: any explicit, signed document that is negotiated and includes mutual concessions or limitations placed on both sides. Examples are Negotiation Agreements, Exploration Cooperation Benefit Agreements, Socio-Economic Participation Agreements. with the Aboriginal community is therefore most urgent – and the community’s leverageLeverage: strategic advantage or the power to act effectively. In negotiation, leverage is a measure of which side, at any given moment, has a greater ability to influence the other side. is therefore highest.
Prior to the completion of the Bankable Feasibility Study, it may be unwise for you to devote a lot of time and effort to finalizing a negotiating strategy. You will be spending that time and effort “on spec.” A great many crucial facts and figures about the mine will still not be available to you. If a Bankable Feasibility Study is not forthcoming, the mine will not go forward. You will probably have learned a lot, but your planning will have been wasted.