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Ask The Experts - Is there a standard percentage given to land owners who hold the mineral rights?
October 2017 by Chris
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.
© ICMJ's Prospecting and Mining Journal, CMJ Inc.