Mine offtake contracting, strategic alliances and the equity market

Distadio, LF; Ferguson, A

Mine offtake contracting, strategic alliances and the equity market

Distadio, LF Ferguson, A

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Publisher:: Elsevier BV
Publication Type:: Journal Article
Citation:: Journal of Commodity Markets, 2022, 27, pp. 100224
Issue Date:: 2022-09-01

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Field	Value	Language
dc.contributor.author	Distadio, LF
dc.contributor.author	Ferguson, A https://orcid.org/0000-0003-0535-0643
dc.date.accessioned	2022-12-01T00:16:13Z
dc.date.available	2022-12-01T00:16:13Z
dc.date.issued	2022-09-01
dc.identifier.citation	Journal of Commodity Markets, 2022, 27, pp. 100224
dc.identifier.issn	2405-8513
dc.identifier.uri	http://hdl.handle.net/10453/163953
dc.description.abstract	We investigate market reactions to announcements of offtake contractual agreements. Offtake deals occur where a counterparty (offtaker) commits to partially or wholly purchase output from a project in return for technical, operational or financial support. Despite being common in the mining industry internationally, there is little empirical research on this important risk management strategy. Applying cooperative arrangements theory and using an event study approach, we find project sponsors exhibit mean (median) announcement date abnormal returns of 5.87 % (3.29 %). Evidence consistent with the resource pooling and real options explanations are found along with a negative certification effect for deals with financial intermediaries. We interpret this result to be consistent with a bargaining explanation.
dc.language	en
dc.publisher	Elsevier BV
dc.relation.ispartof	Journal of Commodity Markets
dc.relation.isbasedon	10.1016/j.jcomm.2021.100224
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1402 Applied Economics
dc.title	Mine offtake contracting, strategic alliances and the equity market
dc.type	Journal Article
utslib.citation.volume	27
utslib.for	1402 Applied Economics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2022-12-01T00:16:11Z
pubs.publication-status	Published
pubs.volume	27

Abstract:

We investigate market reactions to announcements of offtake contractual agreements. Offtake deals occur where a counterparty (offtaker) commits to partially or wholly purchase output from a project in return for technical, operational or financial support. Despite being common in the mining industry internationally, there is little empirical research on this important risk management strategy. Applying cooperative arrangements theory and using an event study approach, we find project sponsors exhibit mean (median) announcement date abnormal returns of 5.87 % (3.29 %). Evidence consistent with the resource pooling and real options explanations are found along with a negative certification effect for deals with financial intermediaries. We interpret this result to be consistent with a bargaining explanation.

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http://hdl.handle.net/10453/163953