Ask The Experts - Is there a standard percentage given to land owners who hold the mineral rights?
October 2017 by Chris Ralph
Q: Some information and advice would greatly be appreciated. My cousin and I own a tract of land that recently has been used to produce timber. In the past it was used as mining property for about 100 years and has many old ditches and mines on it that were worked from 1835 to the 1900s. It still has lots of flour gold with green and red schist with quartz in between. We have recently been contacted by a group that is interested in mining it because of its history and the fact that a few specks are always seen in each pan full all over the property. They are offering what I consider to be a low ball offer of 5% when in the past this land is recorded as producing millions. If we lease to them our growing trees will be destroyed and we shall lose revenue from our hunting lease.
What is the standard percentage given to land owners who have acquired the mineral rights? What is here is mainly lode and residual gold. It is not a well-producing placer area. The potential for the property is mainly going to be hard rock mining. This area supposedly in addition to gold has silver, has platinum group minerals, and rare earths. Thank you so much for taking the time to respond with your expertise.
A: Part of what the owner receives in a mining deal depends on where it is located and what is known about the ore at the time the deal is signed. A percentage of 5 % is reasonable (my claims are leased to a Canadian company for 3.5%), but you also need a minimum royalty, payable in advance. This amount depends on the value of the land, the size, where it is located, etc. It can range from maybe $25,000 per year minimum to $100,000 per year and more and is effectively like a land rental payment. If you have other revenue from this land that would be lost such as for timber harvest and hunting, that amount is added onto the minimum royalty, which is payable at the start of each lease year.
Beware of taking just a larger percentage and little or no minimum royalty. If you take just a percentage only, I have seen a lot of deals where guys come in, take over your land and pay nothing, claiming they have not yet produced anything (even though they are secretly producing gold). You will then find it difficult to kick them off.
Is there a reasonable and cost effective way to separate out the values?
• What's worth picking out of the pan besides gold?
Q: Could you write more about the last two methods that you mentioned—the expanding chemical mixtures and the micro blasters, how and when to use them, and when not to use them?
Any ore grading 32% silver would contain more than 9,000 ounces of silver per ton and be valued at something in the range of $150,000 per ton. Even a few tons of this type of material would be well worth shipping off to a smelter for treatment.
• A place for mining equipment "on the cheap"?
Market for scheelite concentrates?
The Bawl Mill • Legislative and Regulatory Update • Ask The Experts - Where should I get my geology degree? • Ask The Experts - How much rock shall I crush to determine the value? • Placers Directly Associated with Lode Deposits • Is It Time for a Change? New Ways to Find More Gold • MMAC Update • Silverton's Gold • Procuring Mine Owner Permission at a Mine Site • Champions Crowned at the California State Gold Panning Championships • Drywashing for Fine Gold • ICMJ Gold Prospecting and Mining Summit Postponed • Kennecott Copper Mine, Kennecott, Alaska • High Prices for Gold, Silver & Copper: What Does it Mean for Prospectors? • Melman on Gold & Silver • Mining Stock Quotes and Mineral & Metal Prices