Replace EC with doug AK dollars. Sounds a bit humorous, but that is called the buy-sell agreement. You don't want to replace the chief engineer with the secret formula for printing gold bricks from sawdust as you might find it a tad expensive to get a replacement from the grt. unwashed.
Generally a buy-sell would apply to the joint venture agreement and not to Wildcat. You do the deal with Wildcat on the 50-50 basis assuming Wildcat speaks with one voice. This can be ascertained by looking at shareholder's agreements and lists and getting third party guarantees. For instance the lawyer who put Wildcat together is beyond arm's length to me and could state this. But in fact any deal signed by the president, myself, binds Wildcat, and one does not have to worry about debt or disagreement within Wildcat.
But to buy Wildcat out, you have to make an offers such that if Wildcat refuses to get bought it out, it must buy you out for the same amount you so offered. So your offer must be accompanied by a promissory note or it is meaningless. This is also referred to as the "forced sale." One would think one could get clever and offer 100 million dollars, but remember, one has to have a cheque that is good, if one is the offering party. No such obligation binds the offeree. This would have to be negotiated under the terms of the JV agreement according to a third party assessment of what the deal is worth. A clause could state that no offer could exceed the NPV of the non-owned per cent of the feasibility, since it is assured that neither party could come up with that sort of cash and would have to be given time to pay. If you think about it, that payment has to be discounted throughout of the life of the project at interest rates that equal the return of the project, so a buy out is not that attractive unless you are certain there is more ore there than the feasibility states. In addition, a buyout clause may state that a forensic auditing of the worth must be conducted by the buyer in order that he know the maximum. and thus the NPV of that worth, and that the cost of the audit must be born by the buyor. An example of what a buyout would be worth, is, if the IRR is compounded 30% for 5 years of ore to payback, with 30 million net total cash flows by the feasibility, the total NPV would be 14.6 million. 50% of that is 7.3 million. So that would be the buyout of that hypothetical amount. So if you offer to buyout, you must pony up, say, 7.3 million, but if that is refused, you must accept the same over the life of the project.
I would not entertain a buy-out until a feasibility that was bankable was returned by an engineer of reputation such as was certified by the IEEE or the exchange. This would take drilling, and assessment of feasible ore, which could take one million dollars or more. It is also difficult to buy Wildcat out, as it possesses an underlying option that must be honoured by the buying party. A clause would probably state that no buyout could proceed at less than the NPV of the established value of Wildcat's percentage of the deal which can only be established by a bankable feasibility study. Of course no JV group has the cash for a buyout necessarily from both sides simultaneously, so one side or the other, lacking the cash, must accept payment over the life of the project, as you assume the cash to buyout is generated by the project. I also would not think a buyout was fair if it did not reflect new ore that could be found later and made good on. Thus to be fair, a certain net profit, or equivlalent calculated percent off the top on new ore would be paid as well -- as the new ore found is mined.
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