mineral rights question (lease, how much, to buy)

[johninvegas]

Hi guys,

My wife and I are looking at a piece of property in northern Nevada. The owner/realtor says that the new owner will "own" the mineral rights, but that they are currently leased out to a big mining corp. The new lease was signed in April and runs for 20 years. It basically gives the company the right to mine anything from gravel to uranium.

We have serious concerns about such a comprehensive lease, but the seller maintains that if the property had anything of value on it, the company would have already started mining operations. Yes, I realize he is trying to sell the land. He also states that it is virually impossible to buy a piece of land in Nevada where you own the mineral rights such as his land does.

My question is, if this is true, then what happens if you buy land where someone else owns the mineral rights? Who would be owning them? The state? another mining concern?

Also, given that this particular property is somewhat mountainous and probably doesn't contain any precious metals (the lease has been in effect for over 25 years) what are the chances of a mining concern coming in and doing a start-up operation?

Thanks

[NVDave]

OK, first, it is not "virtually impossible" to own a piece of land in northern NV on which you also own the mineral rights. All you have to do is get outside the railroad checkerboard parcels and you're likely to own part or all of the mineral rights.

Next thing you should know: Most of the mineral rights on deeded land that was the result of a Desert Land Entry had their oil & gas rights stripped off by Uncle Sugar in 1968.

Third, you don't specify which "big mining corporation" we're talking about here. They're not all mining for everything, and without knowing the company, we don't know the minerals in which they'd be interested.

Fourth, even when big mining companies have the rights, they'd typically buy out your surface estate if they need to mine the area.

If you can reveal the company involved, I might be able to give you more information.

[johninvegas]

Thanks for the information, the mining company is Newmont Mining. They are primarily interested in gold and copper, however, in googling information on them, I noticed that in the past, they have sub-leased rights to other mining companies who mine other minerals.

[NVDave]

Originally Posted by johninvegas

Thanks for the information, the mining company is Newmont Mining. They are primarily interested in gold and copper, however, in googling information on them, I noticed that in the past, they have sub-leased rights to other mining companies who mine other minerals.

Newmont would buy you out if they found exploitable gold on the property. Same deal for copper.

The thing that people need to understand about the big mining outfits like Newmont is this: they're in business - big business. They don't want to argue and fiddle around with someone standing in the way of a billion-dollar mine. They write a check, call it an expense and keep moving forward.

The other thing that people don't understand is this: if there's a little bit of exploitable minerals on their place, the mountain of expenses in front of any commercial exploitation mean that the miners need to find a large deposit to make it worth their while to start a mine. The startup costs for a moderately large mine will run from $500 million to over a billion$ today, permitting and bonding included. The mining company would need to find a rather lucrative deposit on your land and fully contained within your land to make it financially savvy for them to mine just your property. As it is, this is usually not the case in Nevada; you'll see deposits that fall across more than one or two sections of land. Usually both sections won't be private land, so the mining company now has to deal with BLM regs to realize the full economic potential for the mine.

What not owning the mineral rights means is that should any exploitable minerals be found, you won't make anywhere near as much off selling your land as you would have with the mineral rights in hand. When you own the mineral rights, the mining company will do one of two things: a) buy out your property AND your mineral rights or b) pay you a pro-rated portion of the profits off the mining.

When they buy out people for a lump-sum, the two parties get into a negotation over the net present value of the expected return off the mine - it becomes an issue of "how much do you want to learn about mining, or pay a geologist to discover for you?" You might end up paying a geologist thousands of dollars to do a work-up of the prospecting on your property to get into a negotiation with the mining company over "how much are the minerals on my land worth, and therefore, how much are my mineral rights worth?"

The worst potential for a property owner without the mineral rights is for some small tramp miner to come in and start poking around. Not a big company - a small, under-capitalized company poking around for a year or more can make quite the mess, leave the mess in place when they (almost inevitably) run out of money and then disappear off to the next "lucky strike."

[johninvegas]

Hi NVDave,

Okay, sounds like my wife and I are freaking out over nothing. Thanks for the info.

[dancer13]

what is the most reliable, most economical way to determine if you have significant gold on a property?
And if there is a significant amount, how would one sell that property or lease the property for its mineral rights?

[NVDave]

Originally Posted by dancer13

what is the most reliable, most economical way to determine if you have significant gold on a property?
And if there is a significant amount, how would one sell that property or lease the property for its mineral rights?

You call in a mining geologist or geology consulting company, who will take water, soil and core samples off your property and then take them to a fire assayer, who can specify how much gold/ton of earth there is on the property.

You're talking thousands of dollars.

The first best thing to do is know whether or not your property is within the "trends" of gold finds in Nevada.