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Canadian and American Approaches to Mining Agreements

Donald E. Wakefield, Eden M. Oliver, James E. Fordyce, Proceedings of 44th Annual Rocky Mountain Mineral Law Institute (1998)

Joint ventures are an ubiquitous feature of the mining industry, both in Canada and the United States. Canadian common law gives no statutory recognition to joint ventures; however, under Anglo-Canadian common law principles, joint ventures may be regarded as either partnerships or co-ownership associations. Each of these associations gives rise to different consequences under Canadian law and such consequences will often cause parties to prefer one over the other. This paper addresses certain differences in the laws of Canada and the United States, with reference to Form 5A and its predecessor Form 5,1 illustrating issues of which the American attorney should be aware in using these forms in Canada. Environmental law, aboriginal, tax, securities, and mining issues, as well as reporting and general business matters are discussed, with specific suggestions for drafting changes when a Canadian party is involved.

While this paper refers to the stacking of agreements where more than two parties are interested in the development of a mining property, most of the following analysis is based on a fact pattern where there are just two parties to the contract. The party earning in (farming-in) or supplying the funding will generally be referred to as the monied party and the party optioning or farming out an interest will generally be referred to as the propertied party. In our