Module 6 Negotiating Joint Ventures

Many of the things that apply to negotiating a Socio-Economic Participation AgreementAgreement: any explicit, signed document that is negotiated and includes mutual concessions or limitations placed on both sides. Examples are Negotiation AgreementsNegotiation Agreement: an early agreement in the mining process, likely to occur in the Exploration StageExploration Stage: the whole range of activity from searching for and developing mineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. deposits., which would outline the basis of the relationship between the Aboriginal group and the mining company and how the relationship will evolve if the mine moves forward. , Exploration Cooperation Benefit Agreements, Socio-Economic Participation AgreementsSocio-Economic Participation Agreements (SEPAs): private, confidential contracts between Aboriginal communities and resource developers, like mining companies. SEPAs specify how the communities that will be affected by the development of a resource will also benefit from that development. Many SEPAs include terms about the employment and training of Aboriginal people, compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury). payments, protection of the environment, and profit-sharing. SEPAs are often called Impact Benefits Agreements (IBAs) and Cooperation Benefit Agreements (CBAs), and other names. The Aboriginal Mining Guide calls them all SEPAs.. (SEPA) also apply to negotiating a Joint VentureJoint Venture: commonly, a business to which two or more parties contribute the essential land, capitalCapital: cash, property, equipment, services, and contracts or leases., and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.) (JV).

• You need a clear idea of the community’s vision of its future and how business developmentBusiness Development: strategies and techniques used to create and grow economic enterprises.  can serve that. (See Module 1.)
• You need a solid understanding of the business that the agreement will involve. (See Module 2.)
• You need to understand where you have 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. and how to use it in business negotiations. (See Module 3.)
• You need to prepare for negotiations by examining your long-term interests, and the range of benefits you bring to a deal and want from it. You have to make certain the other party can deliver those benefits. You have to put together a negotiating strategy and team to capture those benefits. (See Module 4.)

Yet despite these similarities, negotiating a JV also differs from negotiating a SEPA in several essential ways.

• When preparing for JV negotiations, the first task is to select a promising venture to pursue and then a likely JV partner to pursue it with.
• Because they select one another, the signatoriesSignatory: any person or organization who has signed as a signatory to a document or agreement. of JV agreements can more readily behave like partners.Their negotiations usually create a whole new company to co-ordinate that partnership. Due DiligenceDue Diligence: a financial and technical investigation to determine whether an investmentInvestment: the purchase of a financial product or other item of value with an expectation of favourable future returns. Generally, “investment” means the deliberate use of money in order to make more money. is sound. Each party to a business agreement uses Due Diligence to ascertain the actual quantity and quality of the assets which the others claim they can contribute. and the completion of a Feasibility StudyFeasibility Study: a study of a proposed project’s product or service, market, competition, organization, and finances to determine if it can make a profit. and Business PlanBusiness Plan: a document that describes the goals of a business for a specific time frame (usually 3-5 years) and the strategy to be followed to achieve these goals. Making a business plan is a 4-step process: data collection and business definition, research analysis, strategy formulation, and forecasting. may occur right during negotiations, but the order in which they occur can vary.
• The organization negotiating on behalf of the Aboriginal community will most likely be a business corporationCorporation: the most common form of business organization. It pursues set objectives and is empowered with legal rights usually only reserved for individuals, such as to sue and be sued, own property, hire employees, or loan and borrow money., like the other party(ies) to the agreement. (For simplicity, the information in this module is addressed to Aboriginal Development Corporations. In most cases nowadays, ADCs represent Aboriginal interests during JV negotiations.)
• The JV agreement is not one document, but three. A Heads of AgreementHeads of Agreement: a non-binding summary of the main issues on which the parties intend to base an agreement. clarifies the major points of each section of a Shareholder AgreementShareholder Agreement: a legally-binding document which describes the mutual obligations of the parties to a Joint Venture.. Finally, there is a Management AgreementManagement Agreement: an explanation of what the Joint Venture management should report to whom, when and how. These reports will include audits and descriptions of management performance, as well as financial matters related to compensation, performance standards, etc..
• JV agreements are usually devoted wholly to business matters and do not include social or cultural provisions.
• JV agreements do not necessarily come after SEPAs. Sometimes, a JV with one party can increase your capacity for certain types of contract, and thereby strengthen your hand when you negotiate a SEPA with a second party. (See *Case Study #3: Brewery Creek Mine, p. Intro-30.)

To illustrate important points this module uses the experiences of Kitsaki Development Corporation. Lac La Ronge Indian Band created Kitsaki in 1982 to serve as the community’s business arm. Bill Hatton, Kitsaki’s Chief Executive Officer in those early years, describes how the ADC became a pioneer of Aboriginal JVs in northern Saskatchewan.

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