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A Note Regarding the Growth of Public-Private Joint Ventures in Latin American Mining

Over the past few years, we have witnessed gathering evidence of an emerging trend in Latin America. Governments and private mining companies are entering into a new type of joint venture: the public-private partnership in mining.  This trend is most marked in the lithium industry.

As of last year, Chile requires public-private partnerships on certain salt flats, and the memorandum of understanding for the first public-private lithium joint venture has been signed.  In Argentina, provinces like Jujuy have taken minority stakes in various projects.  In Bolivia, state control is mandated, but the state has entered into joint venture-like agreements with private companies.  Moreover, across the region, government entities are expected to play a more central role in the industrialization of lithium and domestic development of its value-chain, working in association with private partners. 

This new tendency is not, however, limited to lithium. In recent years, glimpses of the same pattern have been observed across the mining industry. Private companies have entered into exploration joint ventures for gold, copper and other minerals with the likes of the state mining companies of Ecuador and Chile. Various joint ventures have also been instituted in Bolivia. Furthermore, governments in Mexico and elsewhere in the region are exploring methods of increasing state control in the mining industry.  Public involvement is also cited as a potential solution to projects and mines that have been paralyzed by opposition or controversy, from Peru to Panama.

State involvement in a mining project may have the effect of easing the obtainment of a “social license” while creating more revenue and benefits for host countries.  As mining companies gain appreciation for the advantages of such associations, and government entities seek to extend public benefits from mining, we may see more of these joint ventures and similar public-private associations in Latin America, bringing mining more in line with other economic sectors such as oil and gas.

Mining joint venture agreements between public and private entities are distinguishable in many respects from those among private parties. While governments will often show deference to private companies’ expertise in operations, the state will often retain a degree of control over the venture that would be unusual in the purely private sphere. Some joint ventures are more in the nature of concessions or service arrangements than true joint undertakings. Private parties typically face restrictions on transferring their interests that are either total, or at least go well beyond what is seen in private mining joint ventures.  More importantly, the government may have a carried interest or a partial carried interest. Lastly, the private company is unlikely to be able to dilute the government party.

Joint venture agreements amongst public and private entities are complex and involve a great deal of customization. Our firm has vast expertise in structuring joint ventures among disparate parties, including major and junior mining companies, sovereigns, automakers, private equity funds and various other providers of mining finance.



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