Our Commercial Model

Our Commercial Model

The Stages

  1.  Consortium of Manager (Virentia), Contractor, and Engineer establish an SPV* to acquire a mine site (the asset) for rehabilitation.
  2.  Engineer defines hand-back criteria (the scope) and agrees it with owners (who may include the Queensland government, Traditional Owners and other stakeholders).
  3.  Contractor prices the rehabilitation works (as a fixed price) against the agreed scope.
  4.  Insurers assess the risk of the rehabilitation works and provide an FA** and overrun insurance. The consortium pays the premium. Each consortium member to hold additional insurance for their scope of work.
  5.  Consortium acquires asset for vendor payment in excess of cost of rehabilitation works. Excess funds in SPV for contingency and profit share.
  6.  Vendor payment goes into insurer-controlled structured finance product to fund rehabilitation.
  7.  Consortium takes ownership of asset and all liabilities. Recourse to vendor removed through insurance product suite.
  8.  Consortium performs rehabilitation works. Works paid for out of structured finance product via agreed milestones. FA reduced in proportion to works completed.
  9.  Rehabilitation works complete and SPV shares any funds remaining in SPV.
  10.  Opportunity to reuse existing infrastructure and participate in final end use of site, which may be beneficial to Consortium and other stakeholders (e.g. renewable energy or property development).

*SPV, or “special purpose vehicle”, refers to a subsidiary company designed for independent ownership or management of a company. SPVs help companies securitise their assets, create joint ventures, isolate corporate assets and perform other financial transactions.

**An “FA” or “Financial Assurance” is a performance guarantee (generally in the form of an unconditional bank guarantee) provided to the Queensland Government and to be called upon to fund the rehabilitation of a mine site in the event of a corporation being unable to fulfil their rehabilitation obligations.

Our Insurance Suite

Virentia, and its insurance partners, have developed a new insurance product suite to underwrite the Virentia commercial model. The insurance suite repurposes three existing insurance products currently used in other industries and jurisdictions to mine rehabilitation:

  • a performance guarantee in the form of a surety bond (replacing the bank guarantee) to be provided to the state government as a Financial Assurance (FA), as required under legislation
  • a structured finance product to underwrite the FA and fund the rehabilitation works, and
  • overrun insurance to fund any rehabilitation cost overrun after other claims and avenues have been exhausted, removing recourse to both the previous owner of the asset and to the community for any funding shortfall.

Each project will be assessed by the underwriter for insurability prior to insurance capacity being provided.