New research funded by the Queensland Exploration Council (QEC) has revealed a business risk to joint venture exploration projects.
Queensland University of Technology (QUT) researchers investigated more than 1000 JV exploration projects, and discovered that bringing in a JV partner can be detrimental to a project.
Lead researcher Dr Rene Bakker said bringing in new funding through a JV can result in project termination.
"It is not always beneficial for smaller firms to bring on board a new partner, even one with deep pockets," he said.
"A new partner can upset the status quo, disrupting the balance of power and making the project more likely to fail.
"Joint ventures can be a great resource for mining firms if executed correctly.
“But, as one mining executive said, you have to be very careful who you get into bed with.”
Bakker’s research emphasised that stability is the key to a successful project, in order to provide security in an industry that can be affected by numerous factors, including legislative change and commodity downturns.
"We found successful projects were stable and this stability was maintained by factors including choosing projects widely, coming into the project with confidence, clearly defined needs at each site and patience and stamina to cope with the long lead times and high costs,” he said.
"Challenges for investors include the upfront cost of capital investment, difficulty of discovery processes, increased lead time to advance deposits and increased global competition.”
QEC chair Geoff Dickie said patience and stamina were required by investors, given the long lead times and high costs of exploration projects.
"Joint venture partners need to be able to take a long-term view even in the face of a highly volatile market," he said.
"This research gives explorers valuable insights into setting up and maintaining successful ventures."