Mineralogical contracts may contain two sets of physical and chemical specifications, one of which is indicative (usually called “expected” specifications) and the other “guaranteed” specifications outside which the buyer can claim price adjustments (also known as sanctions). Penalty amounts are often, but not always, negotiated and set in the treaty. In some agreements or for certain chemicals, it is up to the buyer and seller to negotiate or arbitrate compensation due to the buyer when the product delivered is outside a guaranteed specifications. Given the significant investments and expected returns in long-term reductions, royalties and streaming agreements, and the complexity of these types of contracts, litigation is inevitable. There is no doubt that arbitration, where properly used and controlled, is the most natural and popular method to solve them. Licensing agreements and streaming agreements are other forms of custom mine financing agreements. Because of the long-term nature and relative complexity of these agreements, it is essential that the parties entering into them be assisted by specialized advisors familiar with mining law and industrial practices. There are many ways to design exemption, royalty or streaming agreements, including their price rules and possible price review clauses. As a result, the parties will face a large number of options during the negotiations and their decisions may have an impact on future disputes. It is therefore essential to ensure clear wording and proper consideration of the main provisions relating to price fixing and revision, as well as the acceptable quantity and excuses in the event of non-delivery or non-purchase of the product. The quality of a delivered mineral is generally decisive for the buyer. Mineralogical contracts therefore contain agreed physical and chemical specifications. Depending on the product, the desired physical characteristics may include the size, shape, mass and fineness or surface of the particles.
When it comes to streaming agreements, the actual cost of producing a metal may be less than the purchase price of the streaming agreement – and conversely, the cost of producing a metal may be higher than the purchase price indicated in the streaming contract. This in turn can lead to disputes between the parties. In addition, and as noted above, a common reason for arbitration (although both parties are not always fully described) is the pricing formula, which may result in the contract price being significantly lower or higher than the actual market price of the product at the time of delivery.