Tesoro Del Alma News...
Tuesday, February 17, 2009
Part 2
This is Part 2 of the article that we posted yesterday.
Private Ownership of Minerals and Severance of Surface and Mineral Estates
Except in the West, most mineral rights are owned by fee (private) landowners. Even in the West, there is significant private ownership of minerals. Public land disposal statutes prior to the Stockraising Homestead Act of 1916, 43 U.S.C. ยง 299, provided for a reservation to the United States only of certain minerals or did not provide for a reservation of minerals at all. While one might expect that rights granted under statutes enacted in the early 1900s would have been resolved long ago, it was not until June 1999 that the United States Supreme Court determined that the reservation by the United States of coal in patents issued pursuant to statutes enacted in 1909 and 1910 did not include coalbed methane. Additionally, other minerals passed into private ownership under railroad land grant statutes. Although acquisition of mineral land except coal and iron land was prohibited, lands encompassed by railroad land grants sometimes were found later to contain minerals.
When selling railroad grant lands, railroads frequently made a practice of reserving the minerals. Severance of mineral ownership from the surface estate by other landowners through reservation in deeds is common as well. Ambiguities concerning mineral reservations has been the source of much litigation. The mineral estate is sometimes then further divided by conveyance into undivided fractional interests. Severed minerals are real property and usually are conveyed by mineral deed.
Obtaining Mining Rights on Private Land
Privately-owned minerals typically are leased by companies seeking to develop them, sometimes with an option to purchase. Mining leases tend to have quite a long term -- 20 years generally is the minimum. Some leases have a stated primary term and are extended by mining operations or production, while others have a fixed term and are renewable. There is no standard form of mining lease for fee property, and the terms and conditions of mining leases vary greatly. Provisions of particular importance in negotiation or review of a mining lease include:
Mineral(s) covered by the lease, those reserved by the lessor, and provisions relating to conflicting development;
Term of the lease;
Production royalties payable to lessor;
Minimum royalties, if any, payable to lessor, and crediting of minimum royalties against production royalties;
Restrictions on mining methods allowed; and
Provision that requires the lessor's consent in connection with assignment or sublease.
Surface Control
Historically, disputes between surface owners and mineral developers have been governed by the common law doctrine of "reasonable surface use." The doctrine allows a mineral owner or lessee or use a reasonable amount of the surface to develop underlying minerals, because without such access severed minerals have no value. The mineral owner's use of the surface is limited by a reasonableness standard, and does not allow damage of surface improvements through negligence or surface-intensive uses such as strip mining without compensation of the surface owner. Express provisions in the patent or deed under which the surface and mineral estates were severed may alter the mineral owner's surface use rights. Several state courts have modified the reasonable use doctrine to require that mineral developers accommodate existing surface uses, and some states have limited the common law doctrine by statute. States also have varying statutes protecting the surface owner from certain damages relating to mineral development, such as subsidence.
If a mine or related facilities are to be located on land with private surface ownership, the mineral developer typically acquires surface control by purchase or lease. Open pit operations, in particular, require use of large areas for roads, mining, stripping, disposal of waste rock, and low-grade stockpiles or heap leach operations. However, even an underground mine can require significant surface use for an ore treatment plant and other facilities needed for mine operations.
Mine Development
Mine development is a long-term, expensive undertaking, and often the company that undertakes the initial exploration is not the one that ultimately develops a mineral deposit. Following prospecting and activities such as regional reconnaissance, a spot check of promising geological situations in published literature, submittal of a proposal by a prospector or geologist, or a decision to restudy an old mine or mining district, a small area is selected for detailed exploration. A company typically seeks to secure control of mineral rights as soon as possible after an area has been selected for exploration. Various geological and geophysical exploration methods and exploration drilling then are used to determine if the ore target is present and to obtain an idea as to its size and grade.
After it becomes apparent that an ore body is present, a feasibility study (a review of costs and potential earnings of the proposed mining project) is prepared. Assuming that the feasibility study shows that an acceptable rate of return can be expected from the mine and a decision to develop the property is made, capital for the mine is generated internally by the company, obtained through outside financing, and/or obtained from another company that desires to participate in the project.
The development stage of the project typically includes further drilling to more clearly define the grade, volume and geology of the ore body. Site preparation is dependent upon the mining method to be used. Construction of a mine plant, ore treatment facilities, roads, rail spurs and other facilities needed for the particular operation also must occur before production can begin.
Mining Agreements
Many western states have statutory provisions governing the joint ownership and working of mining properties. The mining partnership, a special type of partnership, has developed in connection with mineral development. Several states establish by statute the elements of a mining partnership and the consequences of creating one. While mining partnerships often are created by written agreement, there has been substantial litigation over the creation of a mining partnership by implication.
The most common form of agreement between companies planning to jointly explore for and develop minerals is a mining joint venture -- a form of mining partnership. Such agreements provide for joint ownership by the participants of the mineral property that is the subject of the joint venture, joint operation, and an agreement to share profits and losses. Mining joint venture agreements typically are based on a model form agreement known as Form 5 (or more recently, Form 5A and Form 5A LLC) developed by the Rocky Mountain Mineral Law Foundation with substantial industry participation.
Title Examination of Mineral Properties
Most title insurance policies except minerals, and it therefore generally is not possible for a lessor or purchaser of mining property or its lender to obtain title insurance. Instead, evidence of ownership is established through an attorney's title opinion. If mining claims or federal mineral leases are involved, the title opinion is based not only on an abstract or examination of the county records where the property is located, but also the records of state office of the Bureau of Land Management.
Private Ownership of Minerals and Severance of Surface and Mineral Estates
Except in the West, most mineral rights are owned by fee (private) landowners. Even in the West, there is significant private ownership of minerals. Public land disposal statutes prior to the Stockraising Homestead Act of 1916, 43 U.S.C. ยง 299, provided for a reservation to the United States only of certain minerals or did not provide for a reservation of minerals at all. While one might expect that rights granted under statutes enacted in the early 1900s would have been resolved long ago, it was not until June 1999 that the United States Supreme Court determined that the reservation by the United States of coal in patents issued pursuant to statutes enacted in 1909 and 1910 did not include coalbed methane. Additionally, other minerals passed into private ownership under railroad land grant statutes. Although acquisition of mineral land except coal and iron land was prohibited, lands encompassed by railroad land grants sometimes were found later to contain minerals.
When selling railroad grant lands, railroads frequently made a practice of reserving the minerals. Severance of mineral ownership from the surface estate by other landowners through reservation in deeds is common as well. Ambiguities concerning mineral reservations has been the source of much litigation. The mineral estate is sometimes then further divided by conveyance into undivided fractional interests. Severed minerals are real property and usually are conveyed by mineral deed.
Obtaining Mining Rights on Private Land
Privately-owned minerals typically are leased by companies seeking to develop them, sometimes with an option to purchase. Mining leases tend to have quite a long term -- 20 years generally is the minimum. Some leases have a stated primary term and are extended by mining operations or production, while others have a fixed term and are renewable. There is no standard form of mining lease for fee property, and the terms and conditions of mining leases vary greatly. Provisions of particular importance in negotiation or review of a mining lease include:
Mineral(s) covered by the lease, those reserved by the lessor, and provisions relating to conflicting development;
Term of the lease;
Production royalties payable to lessor;
Minimum royalties, if any, payable to lessor, and crediting of minimum royalties against production royalties;
Restrictions on mining methods allowed; and
Provision that requires the lessor's consent in connection with assignment or sublease.
Surface Control
Historically, disputes between surface owners and mineral developers have been governed by the common law doctrine of "reasonable surface use." The doctrine allows a mineral owner or lessee or use a reasonable amount of the surface to develop underlying minerals, because without such access severed minerals have no value. The mineral owner's use of the surface is limited by a reasonableness standard, and does not allow damage of surface improvements through negligence or surface-intensive uses such as strip mining without compensation of the surface owner. Express provisions in the patent or deed under which the surface and mineral estates were severed may alter the mineral owner's surface use rights. Several state courts have modified the reasonable use doctrine to require that mineral developers accommodate existing surface uses, and some states have limited the common law doctrine by statute. States also have varying statutes protecting the surface owner from certain damages relating to mineral development, such as subsidence.
If a mine or related facilities are to be located on land with private surface ownership, the mineral developer typically acquires surface control by purchase or lease. Open pit operations, in particular, require use of large areas for roads, mining, stripping, disposal of waste rock, and low-grade stockpiles or heap leach operations. However, even an underground mine can require significant surface use for an ore treatment plant and other facilities needed for mine operations.
Mine Development
Mine development is a long-term, expensive undertaking, and often the company that undertakes the initial exploration is not the one that ultimately develops a mineral deposit. Following prospecting and activities such as regional reconnaissance, a spot check of promising geological situations in published literature, submittal of a proposal by a prospector or geologist, or a decision to restudy an old mine or mining district, a small area is selected for detailed exploration. A company typically seeks to secure control of mineral rights as soon as possible after an area has been selected for exploration. Various geological and geophysical exploration methods and exploration drilling then are used to determine if the ore target is present and to obtain an idea as to its size and grade.
After it becomes apparent that an ore body is present, a feasibility study (a review of costs and potential earnings of the proposed mining project) is prepared. Assuming that the feasibility study shows that an acceptable rate of return can be expected from the mine and a decision to develop the property is made, capital for the mine is generated internally by the company, obtained through outside financing, and/or obtained from another company that desires to participate in the project.
The development stage of the project typically includes further drilling to more clearly define the grade, volume and geology of the ore body. Site preparation is dependent upon the mining method to be used. Construction of a mine plant, ore treatment facilities, roads, rail spurs and other facilities needed for the particular operation also must occur before production can begin.
Mining Agreements
Many western states have statutory provisions governing the joint ownership and working of mining properties. The mining partnership, a special type of partnership, has developed in connection with mineral development. Several states establish by statute the elements of a mining partnership and the consequences of creating one. While mining partnerships often are created by written agreement, there has been substantial litigation over the creation of a mining partnership by implication.
The most common form of agreement between companies planning to jointly explore for and develop minerals is a mining joint venture -- a form of mining partnership. Such agreements provide for joint ownership by the participants of the mineral property that is the subject of the joint venture, joint operation, and an agreement to share profits and losses. Mining joint venture agreements typically are based on a model form agreement known as Form 5 (or more recently, Form 5A and Form 5A LLC) developed by the Rocky Mountain Mineral Law Foundation with substantial industry participation.
Title Examination of Mineral Properties
Most title insurance policies except minerals, and it therefore generally is not possible for a lessor or purchaser of mining property or its lender to obtain title insurance. Instead, evidence of ownership is established through an attorney's title opinion. If mining claims or federal mineral leases are involved, the title opinion is based not only on an abstract or examination of the county records where the property is located, but also the records of state office of the Bureau of Land Management.
Labels: blm, bureau of land management, gold, government, New Mexico, nick fleming, tda-6, tesoro del alma, treasure
posted by nfleming at
7:24 AM
