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Mining Contracts – Five Tips for Governments and the Rest of Us

Michael Jarvis's picture

Mining is a high stakes industry. For the growing list of countries looking to translate underground assets into tangible benefits above the ground, the ability to negotiate and implement a good deal is critical.  However, capacities to do so are often weak. A handy resource is now available to help countries. And it’s free!

Mining Contracts – How to Read and Understand Them is a new book produced through an innovative Book Sprint methodology…in just one week. It offers over 200 pages of guidance to the budding negotiator, mining operative, and civil society advocate alike.

The booksprint was organized by the International Senior Lawyers Project, OpenOil, Vale Columbia Center on Sustainable International Investment , and Revenue Watch Institute-Natural Resource Charter, with support from the World Bank Group, among others. A sister publication on oil contracts, published a year ago, has already been downloaded over 60,000 times and has had multiple print runs.

Here are just five of the messages that resonated with me, drawing on the insights of fellow authors and their 170 years of collective negotiating experience.

  1. Help is available – use it!  Getting good advice and support for negotiations and implementation of deals is worth it.  The up-front investment can pay off many times over. Plus, more facilities now offer support to governments to ensure they are able to obtain a good deal for the country (including the World Bank’s own Extractive Industries Technical Advisory Facility and Africa specific trust fund).
     
  2. Seek balance beyond just the fiscal terms.  Not only do governments need to look at the right mix of royalties and taxes, but factor in their demands in terms of shared infrastructure, and creation of local jobs and economic opportunities.  The trade-offs are ever more complex. Ensuring third party usage of a rail line might require a concession on royalty rate. But for Herbert McLeod, Adviser to the Sierra Leone government and one of the authors, getting balance is essential. Both parties to a contract need to know that “an unfair deal is an unstable deal”.
     
  3. The contract can be a vehicle for development. Yes, it is a legal document, but the contract can also form a framework to ensure that the benefits of mining are shared  - down to the subnational level. This is particularly true in contexts where the legal and regulatory frameworks are not yet in place or updated, meaning more details are specified in the contract document itself. Contracts can help determine not just revenues, but resulting jobs, environmental protections, and infrastructure legacy.
     
  4. Publish! Traditionally, mining contracts have been secret, but the authors come down firmly in favor of the growing trend towards transparency. They turn the question from “Why publish?” to “Why not publish?” They note growing evidence that  disclosure prompts greater understanding and analysis of deals, more effective monitoring of their implementation, and a stronger knowledge base to inform negotiation of future deals in the public interest.
     
  5. Yes, you can write a book in five days.  Publication of this book is proof that if you lock 14 people together for seven days, they can deliver. “Having everybody in the room is most valuable thing,” said Adam Hyde, who helped guide the process given his experience as a creator of booksprint methodology.

For more on the process read Johnny West of Open Oil’s blog on the GOXI community

In a contentious area such as mining contracts, a guidebook provides advice, but not universal agreement on everything. Nor does it offer the final word for all time.  Neither the organizer, nor contributors, could possibly agree on everything in the book.

And it will continue to be revised as a living document.

Read for yourself and feel free to add, print, re-use the material – everything is under a Creative Commons license. You can read the book, download the full PDF, or save it as an ebook at ResourceContracts.org, the global extractives contracts repository.

Related
World Bank Group Extractive Industries website

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