When
it comes to structuring major mining contracts, the two most widely adopted
formats are measure and value' and cost-plus'. A problem with both of these
formats is the difficultly of aligning the objectives of the mining company with
those of the contractor to achieve mutually beneficial outcomes. An alternative
contractual arrangement is for the mining company to enter into an
Alliance
arrangement with the contractor, linking remuneration to mine performance across
a range of targets. These targets can change over time as operational
requirements change.

The
aims of this paper are to:

outline alternative types of mining contracts, as well as
their strengths and pitfalls;

describe the philosophy behind the Alliance contract at
Newmont Waihi Gold's Favona underground mine; and

identify some of the keys to success and pitfalls to avoid
when implementing an Alliance.