Today we have a very interesting topic to discuss and to help us get into the nuts and bolts of it we have the mineral acquisitions manager from Denver, Colorado based business Ferrari Energy. We are of course looking into the topic of mineral ownership, something which is very confusing for some people, and something which you may not know much about.
Mineral rights are the ownership of the minerals in the ground beneath a certain piece of land, and that is exactly what we are going to look into today.
Who Owns Them?
In almost every country in the world the minerals which are found below the land are owned by the government, not as many believe by the person who owns the land. In order to extract any minerals from below the ground, permission must first be granted by government. In the USA, originally the mineral rights were given to the individuals or organizations that owned the land, which is known as fee simple estate. This has changed now but that means that there are a lot of land owners out there who do have the rights to both the surface and the minerals.
Buying and Selling
When someone sells the mineral rights below their land, they will still technically have the rights to the surface, however the person buying the mineral rights can exploit the surface and destroy anything on it, in their efforts to mine what is below the surface. Most buyers are mining companies but very often these rights will also be bought up by speculators, who are looking to do nothing more than buy the rights at a lower cost, and then sell those rights on to a mining company for a higher price than they paid.
Very often we see mineral leases given out, which are bought by a mining company which wants to conduct testing in order to find out whether or not it is worth digging into the ground. These leases will be temporary and the owner of the mineral rights will be paid for leasing out the contract. If the mining company does wish to excavate the earth in order to get the minerals out, they can do this on the lease agreement rather than having to buy the rights, but that will mean that they will be paying royalties on what they found. Royalties will be built into the terms of the lease agreement and will usually have a monetary value per ton of whatever is found.
Keys Are in the Contract
The contract which is drawn up, either in the case of buyer or leasing, will not just have monetary values for the rights and the royalties, but it will also feature language which suggests how the buyer or leaser will treat the owner of the surface rights, how they will protect their way of life, and essential how to best protect the owner of the mineral rights, or the owner of the surface rights.