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Reasons for Mining Companies Entering into Joint Venture Arrangement in Australia

Review the reasons why Mining Companies enter into joint venture arrangements in australia.

In Australia mineral resources are usually owned and governed by the state or territory where the minerals are found. Every government of both the state and territory is accountable for permitting and overseeing the licences in order to discover and manufacture specific minerals within the geographical borders (Clark & Soulsby, 2017). Licence enables the licence holders towards the exclusive rights in order to discover and specific extract of minerals inside the geographical boundaries of the license area.

Evidently Australia has the history of overseas investment in the mining projects in wide variety of natural resources together with coal, iron ore, cobalt and gold. Overseas investors form the important aspects of growth and success for the Australian mining and mineral resource projects. The study takes into account the reasons for mining companies on forming a joint venture in Australia. It takes into the account the issues that are encountered among the small and major mining firms along with the obligations of manager in joint venture.

A contractual joint venture can be defined as the unincorporated joint venture that is based on the contractual co-operations (Yan & Luo, 2016). A contractual joint venture can be considered appropriate for short-term, solitary purpose or longer venture created for the purpose of sharing cost and on circumstances where the participants undertakes the decision of retaining the flexibilities regarding their own treatment for tax expenses. Under the unincorporated joint venture, participants are bounded by the contract, characteristically a joint venture agreement for the minerals.


Mining companies that are forming a joint venture in Australian and entering into the joint venture agreement can be registered as the limited liabilities firm that are known as joint venture in Australia. an incorporated joint venture can hold the merged and jointly owned business interest as the part of the Australian company. For a mining companies a wide variety of hybrid contractual and corporate joint venture are used based on the commercial, legal and taxation requirements of the participants (Sidhu & Christie, 2015). In some of the cases, alliances are formed by the mining companies to enter in the joint venture in Australia for an informal basis in order to strengthen the equity investment in one party through other or through cross investment. Entering into the joint venture will result in arranging the issues arising out of the board representation, protection of minority rights and arrangement concerning the acquisition or disposal of the requirements.

Issues Encountered among the Junior and Major Mining Firms

Alternatively, based on the impact of taxation for a mining companies entering into the joint venture might be considered preferential to create a different joint vehicle for every jurisdiction as opposed to sole firm. A dual structure can be created by the mining entities entering joint venture in Australia where the commercial groups participants may choose to stay distinct but are associated with the contractual relations to function as the sole commercial unit. This enables the mining companies entering into the joint venture to execute their business activities through the single unit but simultaneously these entities entering the joint venture to retain their corporate structure (Schepker et al., 2014). However, these forms of joint venture structure are regularly subjected to several legal and regulatory requirements. While strictly a partnership, entities entering into the joint venture in Australia have the advantages of limited liabilities. It enables to limit the partners regarding their liability towards losses of the venture given that they do not interfere into the daily activities of the business operations. In such a manner entities entering into the joint venture are identical to the non-operator and roles operator that are regularly found in minerals and mining firms.    

Corporate joint venture can create a profound effect on the business of mining. Joint venture can be defined as the business where the commercial enterprise undertakes the decision jointly by two or more parties that retain their separate legal entities. This procedure can be conducted with ease however this does not always take place (Van der Meer-Kooistra & Kamminga, 2015). Both the small and large joint businesses that are looking forward to combine their efforts might run into the certain issues. One of the noteworthy issues faced by the small and big firms is the unequal involvement.

 An equivalent share of pay might be considered possible but it becomes extremely difficult for the both the small and large mining firms to work together and share the identical involvement and accountabilities. For instances small firms might be engaged in the working on the manufacturing procedure while the large firms are accountable for planning and application (Monios & Bergqvist, 2015). As the small firms are not directly associated with the process of production and promotion the responsibilities fall on the large firms. This ultimately creates an impact on the individual business.

One of the primary reasons where the joint venture between the small and big firms falls apart is because of the differences among those that are attempting to joint in the first instances. Differences in the opinion and style of management might create an impact on the potential firms resulting the venture agreements to fall down (Kingwell et al., 2018). Dissimilarities in temperaments might create two probable partners to part ways despite the fact that they are mutually beneficial.

Obligations of Managers within Joint Venture Agreement


Differences among the corporate culture from small firms to large firms might possess problems for the business that are looking merge their efforts and resources. This is closely associated to the differences witnessed between the partners but is applicable to the entire organization instead of the differences between those that are at the top of the corporate mining chain. The ability of combining the two firms with the cultures appears to be poles apart that requires both the small and big firms to plan at the certain level of artistry (Carnovale & Yeniyurt, 2014). Therefore, the culture differences can pose a threat to the results of joint venture.

One of the major problems occurring in the joint venture is the post venture integration that should happen. Both the small and large firm entering into the joint venture in Australia should learn to bring all the constituent elements of the firm collectively (Piaskowska et al., 2017). The subject of planning and negotiation is fairly significant and generally requires in the process of joint venture. The process of integration planning is closely associated with the cultural issues that needs the involvement of the planning in order to ascertain what the corporate culture might appear following the joint venture.

An important feature of joint venture is that it should be aligned with the specific attentions towards divergent interests and divergent contributions of the participants of the joint venture. The interest and contributions of the participants are aligned regularly (Stienstra et al., 2016). The joint venture might not be structured and the structure of joint venture can still closely bear a resemblance to the partnership model. With the absence of clear structure of management or the sufficient decision making structure, tie votes and impasses can be created. Therefore, to create this there should be a manager of the joint venture and the manager must have the decision making structure.

Concerning the obligations of the manager, it is accountable for integrating the business in order to make sure that the participants share the profits and losses in equal proportion in respect of their interest in joint venture. Additionally, the managers must make sure that the non-integrated structure of the business is maintained as well where every participant should be assigned with the specific scope of work and sharing of profit or loss related to that scope (Buckley & Casson, 2016). The combination of integrated structure and the non-integrated structure initiated by the managers enables the participants to work with the necessary act of partners relating to the share of necessary work. management control is required for more complex projects.


The manager obligation includes the promotion of management control as this would help in acting as the driving force for the participants to enter in the joint venture instead of licencing or manufacturing the arrangement. The managers on implementing the joint venture helps in reflecting the amount of control where one participants can have (Wu et al., 2017). There could be several number of management structures under the joint venture they are all essential for the managers to reflect the controlling participant management and collective management. Managers often apply the controlling participants to operate the joint venture given the joint venture operate as the subsidiary to the participant. The decisions of management undertaken by the management are undertaken by the controlling participant executives located in the joint venture.

Even though the board of directors might contain the representative of each participant serves as the formality. The managers ensure that the management executives under the joint venture are selected through the controlling participants. To safeguard from the exploitation, it is obligation of the management to ensure that the non-controlling participant uses certain safeguards (Gornall & Strebulaev, 2015). The manager of the joint venture carrying out the activities of joint venture between the shareholders is under obligation of acting in a manner that is in the best interest of the shareholders. This is regarded as the explicit statutory identification of the presence of divergent interest among the participants of joint venture.

The managers of the joint venture are required to play the role of passive investor, where the requirements of reporting permit the non-controlling participants to observe the progress of the joint venture and foresee the difficulties of the cash flow well before the crisis. The method of controlling participants is considered as the most preferred method of implementing control over the assets and business strategy in the joint venture (Sobrepere et al., 2016). As the matter of fact for managers in joint venture the method of controlling participants is only considered useful where one participants has the advantage of negotiating with strength and noticeably under the circumstances of inadequate contribution of capital.


Under the joint venture the management are under the obligation of avoiding the explicit domination of one participant over the other participant. The management is under the obligation of promoting collective management to circumvent the unequivocal domination of one participant over the other participant. Nevertheless, there could be a circumstance where it is problematic (Evans et al., 2017). This is because either of the participants might say that it is unsatisfactory method of conducting the business excluding the situations where the extraordinary participants are engaged. However, collective management can be considered as the most effective solution to the palatable participants.

The problem is that there could be an incidence of unresolvable deadlock resulting into crisis which might halt the venture. However, the mechanism of collective management is an essential obligation in promoting mediation, casting of vote and arbitration. Based on the hands of the project developers the joint venture manager is accountable for success and failure of the project (Martinez-Blasco et al., 2015). The manager is accountable for ensuring that the project is executed in compliance with the regulations and principles along with the industry norms. Additionally, the manager might be called upon to keep the outsider updated relating to the progress of the joint venture partnership. The joint venture partners are required to have the clear understanding of the number of years the partnership is anticipated to last.

Conclusion:

On a conclusive note it can be stated that joint ventures are usually formed by the mining companies to enter in the joint venture in Australia for an informal basis in order to fortify the equity investment in one party through cross venture. Furthermore, a dual organization can be created by the mining units that are entering joint venture in Australia where the profitable set of participants may possibly decide on staying separate but are allied with the predetermined relations to function as the sole profitable unit. There could be problems of integration post joint venture due to the prevalence of cultural differences. However, a collective management can be promoted to align the venture obligations in accordance with the industry standards

Reference List:

Buckley, P. J., & Casson, M. (2016). International Joint Venture Strategy. International Business: Economics and Anthropology, Theory and Method, 106.

Carnovale, S., & Yeniyurt, S. (2014). The role of ego networks in manufacturing joint venture formations. Journal of Supply Chain Management, 50(2), 1-17.

Clark, E., & Soulsby, A. (2017, November). Perceptions of MNC management: Local parent sensemaking in international joint venture process. In Management in CEE Countries between 1996 and 2016 (pp. 279-301). Nomos Verlagsgesellschaft mbH & Co. KG.

Evans, D., Rees, M., & Edwards, R. (2017). The influence of subsidiary strategic role on manager‘s mindset. Electronic Journal of Business & Management, 2(1), 11-28.

Gornall, W., & Strebulaev, I. A. (2015). The economic impact of venture capital: Evidence from public companies.

Kingwell, R., Thomas, Q., Feldman, D., Farré, I., & Plunkett, B. (2018). Traditional farm expansion versus joint venture remote partnerships. Australian Journal of Agricultural and Resource Economics, 62(1), 21-44.

Martinez-Blasco, M., Garcia-Blandon, J., & Argiles-Bosch, J. M. (2015). Does the informational role of the annual general meeting depend on a country’s legal tradition?. Journal of Management & Governance, 19(4), 849-873.

Monios, J., & Bergqvist, R. (2015). Using a “virtual joint venture” to facilitate the adoption of intermodal transport. Supply Chain Management: An International Journal, 20(5), 534-548.

Piaskowska, D., Nadolska, A., & Barkema, H. G. (2017). Embracing complexity: Learning from minority, 50-50, and majority joint venture experience. Long Range Planning.

Schepker, D. J., Oh, W. Y., Martynov, A., & Poppo, L. (2014). The many futures of contracts: Moving beyond structure and safeguarding to coordination and adaptation. Journal of Management, 40(1), 193-225.

Sidhu, R. K., & Christie, P. (2015). Transnational higher education as a hybrid global/local space: A case study of a Malaysian-Australian joint venture. Journal of Sociology, 51(2), 299-316.

Sobrepere, X., Arino, A., & Tyler, B. B. (2016, January). How Do Managers Evaluate International Joint Venture Partners?. In Academy of Management Proceedings (Vol. 2016, No. 1, p. 11021). Academy of Management.

Stienstra, M., Martin, X., Mesquita, L. F., Reuer, J. J., & Edgar, E. (2016). When collaborative strategy turns into acquisition: Distinguishing and explaining partner acquisition versus joint venture buyout.

van der Meer-Kooistra, J., & Kamminga, P. E. (2015). Joint venture dynamics: The effects of decisions made within a parent company and the role of joint venture management control. Management Accounting Research, 26, 23-39.

Wu, J., Li, H., Zheng, H., & Xu, Y. (2017). Signaling in joint venture capital: a social network perspective. Industrial Management & Data Systems, 117(10), 2340-2363.

Yan, A., & Luo, Y. (2016). International joint ventures: Theory and practice. Routledge.

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