A few weeks ago we wrote a piece which mentioned mineral rights in Denver, Colorado that caused many of you to write in to see what they are all about. this is something which we have never really gone into here on the site and so today we are going to break down what mineral rights are all about and how this process operates. To help us do this we have my good friend Michael on board who used to work for Ferrari Energy, who dealt with mineral acquisitions. Let’s take a look then at exactly what mineral rights are, and try to answer some of those burning questions which you may have.
Mineral Rights Explained
Simply put mineral rights are the ownership rights of resources which are found underground such as oil, gold, silver, natural gas, copper, uranium or even iron as examples. The reason why this is not considered based on who owns the land, is because most land owners have surface rights, which give the owner the chance to sell or build upon the surface of the land, not what is underneath it.
Owners of surface rights are of course able to dig into the ground to place foundations or installations, but they do not have any rights to own any minerals which may be found underneath the land.
Buying and Selling
Widely speaking the government are the owners of mineral rights of the land, or in the case where there is a royal family it is the monarch who owns these minerals. Now this is not to say that these mineral rights cannot be bought because they can, and in return for the government allowing a business or an individual to mine certain minerals, they will receive a percentage of what is found.
If you have bought property or land and you do own the mineral rights then you can sell off the rights to these minerals without having to sell the surface rights which you have. Selling to a company which specializes in extracting resources can be a profitable way to make some money from your land.
Investing in Mineral Rights
If you wish to invest in mineral rights then the best way to go about it is through a business which has already obtained the rights to a rich area of land. What many companies are now doing however is solely purchasing mineral rights and not the surface rights, because they have cutting edge technology which can extract the minerals without tearing up the land as they have done in the past. Investors must assume a high level of risk when it comes to investing in companies which have obtained mineral rights as they depend on the company being able to extract what they believe is underground, they also have to depend on the market which in the case of oil and gas is notoriously volatile.