Pros of Joint Ventures
1) Reputation - If you started a company tomorrow exploring your backyard and called up BHP Billiton, Barrick, or assortment of industry majors, they would probably laugh in your face! It's really not that easy to JV a good deal with a major... only if the management has proven themselves and has had extensive
Better yet, projects where majors contribute $ to the juniors in exchange for portions of back-in if project reaches feasilibility is even better.
2) Vote of Confidence - Your project is high quality and recognized by industry majors to warrant a joint venture. After all - majors have mining analysts thumbing through projects after projects ... why would they pick a certain company out of 2,000 others on the TSX?
3) Profitable Dealmaking & Additional Funding!! - Who is going to complain about additional funding from majors? In our past article we discussed fundings for explorations for different sizes of companies... whereas Barrick can afford $200+ Million per YEAR on explorations, a typical TSX junior will spend at most $4-7 million per YEAR.
Better yet, the sharp dealmakers out there can even get fully carried to production and end up earning royalties and become profitable on various lease and option payments.
For example - take the following news release from our favorite here, TNR's news release about a non-core property called La Carolina
Vancouver B.C.: TNR Gold Corp. ("TNR" or the "Company") is pleased to announce that its joint venture partner, Latin America Minerals (LAT), has exercised its option to acquire 75% interest in the La Carolina Property. LAT has fulfilled the required exploration expenditures and, with the final issuance of 175,000 common shares and payment of US $75,000 to the optionors, has acquired a 75% interest in the property. A joint venture agreement between LAT and the optionors, TNR Gold Corp and Geocom Resources Inc., will be put in place in due course.What TNR has done here is pulled off a great case of value-added business deal.
You scope out a claim and secure the property title. Add some geophysical and studies (possibly light drill program) and hopefully find results that conclude there is potential for something big.
At this point another company comes along looking for project and you sell it off to them at a higher price - and keep a back-in option on it, just in case it becomes the next Pascua Lama.
In difficult times this has been a common practise for many juniors to stay afloat and juding by our markets it might become necessary again, but the shrewd dealmakers out there can still make this worthwhile to shareholders as they turn the company into a profitable project generating company. After all, this was what RAB Capital saw in TNR when it invested in a large series of private placements back in the early 2000's - a technically-capable team with smart business sense of running profitably and striking good deals that advance shareholder value.
4) Spread out risk over properties - diversification and fully carried to late exploration/production - Think about it, instead of putting all your eggs in one basket, you are able to option out properties, collect money here and there from various option payments, and if one property goes to production you might even end up with 1% Net Smelter Royalty (NSR). It's a very low-risk way to advance the company especially in tougher markets.
The Gross, or Net Smelter Return (NSR) Royalty, is characterized by royalty payments that are a fixed or variable percentage of the sales price, or gross revenue, the mining operator receives from the sale of mineral product from the property. The mining operator's gross revenue, in metal mines, is often referred to as Net Smelter Return because it is common for the mining operator to sell the mineral product in a form that requires further processing by a smelter or refinery. The Net Smelter Return is the amount of money which the smelter or refinery pays the mining operator for the mineral product and is usually based on a spot, or current price of the mineral, with deductions for the costs associated with further processing. In non-metal mines the selling price is usually 'fob mine site' because of the transportation costs involved in delivering the mineral product to the buyer.
With all those good things and more, why do some analysts and investors thumb their nose at joint ventured out juniors?
The CONS
1) Dilution of interest = less profit- You knew this was coming. Clearly if the original ownership was 100% and the property goes on to become a huge mine, you would have missed out the opportunity to capitalize (more). This happens - look at TNR Gold Corp and Minera Andes.
The fabulous Los Azules copper project that churned out 0.7% over 200+ metres was once TNR's project. 100%.
Then times got tough and it was optioned to Xstrata Copper who then ended up giving it away to Minera Andes who finally decided to bite the bullet and put some holes in the ground. This is a reality you have to live with when farming out projects. Most times though, it's either another private placement or a JV... unless the company in discussion is a hybrid producer/explorer (and profitable one that is)... there's no real other ways.
2) No control of News Release Timing - most of the times JV will have a principle operator while the other companies tag along.
Look at Hathor Explorations (HAT.v) that jumped from $0.6 to $3 on Uranium results in Canada. On the success of that tons of area plays popped up like dandelions...including Terra Ventures (TAS.v) who has a lucky minor back-in on the newsworthy drill result.
I'm talking about 10%. In this case TAS.v has been halting and resuming, copy-and-pasting Hathor news releases like clockwork. As expected, stock price has done well in the short term in close correlation. Take this recent news release "___ Partner drills ____ result"
Case in point, the flow of news release is dictated by the primary operator in this case - Hathor.
After a lengthy copy and pasting job, we see this line. 
"Terra Ventures owns a 10-per-cent carried interest in the Midwest NorthEast property.
10%? That's it? Not very good dealmaking by the management but they certainly are making the best out of it!! Keep in mind TAS.v was only at $0.20 before all this fiasco started of the "area play" uranium. (see chart)
Going by the same logic - if TNR has 25% (not just 10%!) on an inferred resource (soon) on giant MAI's Los Azules, how about a jump from $0.2 to $1?? Not too out of the question now, is it?
3) Unfavorable dealmaking - if the agreement was not aggressively pursued - one could end up worse than before the JV, which really defeats the whole point of the idea.
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