Blog Post

Contract Mining Company

November 11, 2011 in Mining by Alfredo Tapia Orezzoli

The contract mining company is governed by the Chilean Mining Codex on articles 200 and subsequent. This company must be settled by an agreement subscribed by the parties involved. In the following lines you will see how it works and how it has to be established and liquidated if necessary.

 

Rules applied to the contract mining company.

Because this contract is originated by a partnership shareholders agreement, the first rules involved, are the partnership legislation common rules. The articles of the Chilean Mining Codex are applied in subsidy, and what is not ruled by the partnership and contract mining companies legislation is abide to the Legal Mining Companies legislation, as prescribed on the article 205 of the Chilean Mining Codex.

The contract mining company objective.

It can involve different activities:

a. The prospection and exploration of an exploration concession.
b. The prospection, exploration and exploitation of a mining property.
c. The benefit of the mining property. (Benefit of a mine consist on the treatment of the ore in order to obtain and seize the metal content there.)

And all other accessory activities needed for the development of a mining concession.

 

Content of the Partnership Agreement

a. The partners individualization, name, address, objective and duration of the partnership.
b. The way is it going to be administrated.
c. The company interest divided on shares (the law prescribes that it has to be separated on shares), how many, and it distribution between the partners. 
d. At least one mining concession, - it can be on process -.

 

Contract Mining Company Registration

The partnership is set up and proved by a public deed, registered on the Mining Conservative Property Register office, in the same address of the partnership contract.

This address should be the same of the mining concession that was contributed to the company.

Once the partnership public deed was registered, owners has to be index on the Shareholders Register of the same Mining Conservative office, the name of the owners indicating how many shares they own. And in the Index of Companies and Partners shall be registered the name of the company and the partners, according to the article 105 and 176 of the Chilean Mining Codex, and articles 84, 85 and 100 of it by-law.

 

Partners’ liability. (Article 202 of Chilean Mining Codex).

According to the law: “The partners in these companies shall guarantee the contributions for which they became liable under the agreement with all their property.

Payment of contributions agreed to thereafter shall be secured exclusively with undistributed benefits or products and by their shares.

The partners shall not be liable to third parties for obligations incurred by the company, unless a stipulation to the contrary has been made”. 

 

Termination of a Contract Mining Company. (Articles 199 and 203 of Chilean Mining Codex)

First of all, these companies terminate for the same causes of the Legal Mining Com
pany which are:

1. The sale, termination or voidance of all concessions, of which it is the owner; and
2. The acquisition or consolidation by one person of all shares representing its assets

And for the causes proper of the form of partnership:

1. When the term thereof or the condition thereof has expired or been fulfilled, as set forth in the agreement, and
2. By resolution of the partners, adopted in the manner set forth in the partnership agreement.

 

Liquidation of a Contract Mining Company. (Article 204 of Chilean Mining Codex)

In the event of liquidation, the company shall be liquidated by the manager, unless the partnership agreement states or the partners decide otherwise.

For said purposes, the liquidator shall comply with the rules set forth in the Code of Commerce for liquidating general partnerships.

It shall be understood that the legal existence of the company shall continue for the liquidation thereof.

As we saw previously, the Contract Mining Company, shares a lot of resemblances with the very-known partnership agreement. It is important to say that these companies are allowed to act on the market as a commercial company, which involves, setting up new firms, buying company rights, shares, stocks and all the other legal and commercial matters like any other partnership.

 

Alfredo Tapia Orezzoli, Lawyer - Prenafeta & Asociados