Letters Of Intent In Mining Transactions

INTRODUCTION In the mining industry, timing in land acquisitions can be of the essence. In order to secure promising lands, deals are often negoti- ated quickly and evidenced by letters of intent containing what the parties feel are the essential terms of the deal. In some cases, a company is willing to acquire land only if it can lock up a number of promising properties, and so a "non-binding" letter of intent is used to formalize the essential terms, while leaving the company without legal liability. Later, the letters of intent will be sent to a lawyer to prepare a formal acquisition agreement. Many times, how- ever, especially in a land acquisition rush, another company will attempt to better the deal prior to the execution of that formal agreement, and the first company will be forced to rely on the initial letter of intent, only to find out to its chagrin that it has no deal In other cases, the company holding the desired property is another mining company, and the negotiation of an option or joint venture is the only way the first company can acquire an interest in the desired land. In order to make its offer more attractive, it may have to reveal confidential or proprietary information about the property or the surrounding lands. Here, too, letters of intent are often used to formalize the essential points of the agreement. Once again, however, prior to the execution of a formal joint venture agreement, the transaction may collapse and the letter of intent prove to be only that. In this paper, the authors examine the dangers associated with the use of letters of intent and the specific provisions courts look for to find a binding contract, and consider how to increase the