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Addressing the Conflicting Concerns of Participants in a Mining Project

John F. Welborn, Sasha A. Karpov, Mining Agreements III

Small Mining Company, Inc. (“Small”) is a public company whose sole assets consist of a mining prospect and the limited but optimistic data and information Small has been able to compile on the prospect. Small does not have a consistent cash flow, has little money and has not paid a dividend in several years (at least since Mr. Small's kids started going to expensive private colleges). Its share price teeters on the brink daily and it believes that its one, elusive hope on the horizon is to find a knowledgeable, well-financed mining company to explore this mining prospect and to develop and exploit the minerals (probably the Mother Lode) which Small knows are there. The company which Small is looking for, Big Mining Company, Inc. (“Big”), must have financial resources and mining expertise, and it must have a genuine interest in the prospect.

This paper is about the legal and business relationship between Small and Big, and the risks which these parties face as they move forward with their deal.1 It is an effort at identifying some of the key issues which should be addressed when two mining companies, each coming at a mining prospect from a different perspective, decide to engage in joint exploration and, perhaps, development and exploitation of that prospect. The purpose is to explore ways that those who document the deal can help it work on the theory that it will wor