The production sharing contracts

This term describes arrangements whereby the product of the mining operation is divided between
the host government and the investor. Production sharing contracts have been employed mainly in
the oil industry but also in uranium exploration, and were the predominant contract in the 1960s and
1970s.

In the uranium field this contract model for example was used for a uranium project in Bolivia in the
mid-1970s. Parties to this agreement, were the now defunct Bolivian Atomic Energy Commission
(COBOEM), a government agency and AGIP of Italy.

The basic points of this model are as follows:

for the Exploration Phase

 definition of areas for exploration duration of exploration (8 years)

 reduction of area budget provision financing of exploration by the contractor –

for the Construction and Production Phases

 financing of mine and mill construction by contractor duration (20 years)

 production carried out by the contractor production owned by Government

production sharing: one share to contractor to refund exploration and operational costs remaining
share of production is divided between government and contractor according to the following ratios,
depending on the uranium deposit mined.

financial obligation: a tax or 3% on the share of production received by the contractor.

Here we see an arrangement, in which the role of the government is already more active than in the
traditional concession agreement discussed above.

Advantage for the government are:

 it owns the production of the mining operation, without making any investment, or taking
risks,
 it carries out the marketing for its share of production, either within the country, if there is a
need for uranium, or on foreign markets; which means the country retains the sovereignty
over its natural resources.

The disadvantages, however, include:

 the necessity to monitor and control the contractor's operational costs; if they are higher
than normal, the contractor receives a higher refund; in other words, the contractor has no
incentive for a cost efficient operation.

It can be imagined that the main advantage of this agreement type is to receive a raw material supply
without any investment or risk taking, while the contractor is obliged to do so.

Source: https://www-pub.iaea.org/MTCD/Publications/PDF/te_0468.pdf
If this model is applicable to the present day uranium situation is doubtful, as uranium companies
may not feel the need for such a high risk exposure, especially as the lack of any title or ownership on
the deposit or production is a hindrance in securing outside financing.

Source: https://resourcecontracts.org/contract/ocds-591adf-5604925962/download/pdf

CONTRAT D’AMODIATION ENTRE

LA GÉNÉRALE DES CARRIÈRES ET DES MINES S.A. ET DIVINE LAND MINING SARL

RELATIF À L'AMODIATION PARTIELLE DE DROIT D'USAGE DE LA SURFACE DE DEUX CARRES COUVERTS

PAR LE PERMIS D'EXPLOITATION 12.276 DE GÉCAMINES S.A.