Start Date
7-12-2017 2:00 PM
End Date
7-12-2017 2:45 PM
Description
Appraisal of mineral property in the United States is unique because ours is the only country in the world that allows private ownership of mineral rights, which commonly results in split estates. It is also possible for the leasehold and/or leased fee estates for the surface rights, mineral rights, water rights, etc. to be each owned independently as partial interests in the split estates. The value of mineral property is frequently estimated using a discounted cash flow analysis (DCF). An analysis of the flow of revenue to the mining operator/leasehold, and then from the operator to the various property rights owners is essential to identifying the split estates and partial interests. An operating mine unit consists of land, orebody, equipment, and improvements, which contribute to the cash flow. A royalty is an expense to a mining operator (the leasehold estate for the mineral rights) and income to the mineral rights owner (the leased fee estate for the mineral rights). When a DCF of royalty income is analyzed, then only the value of the leased fee estate for the mineral rights is being evaluated and no value is included for any other real property rights, leasehold improvements, personal property, nor equipment.
Recommended Citation
Ross, Bradley, "Appraisal of fee simple, leasehold, and leased fee mineral rights & mining property" (2017). IAAO Annual Legal Seminar. 6.
https://researchexchange.iaao.org/legal/legal17/sessions/6
Appraisal of fee simple, leasehold, and leased fee mineral rights & mining property
Appraisal of mineral property in the United States is unique because ours is the only country in the world that allows private ownership of mineral rights, which commonly results in split estates. It is also possible for the leasehold and/or leased fee estates for the surface rights, mineral rights, water rights, etc. to be each owned independently as partial interests in the split estates. The value of mineral property is frequently estimated using a discounted cash flow analysis (DCF). An analysis of the flow of revenue to the mining operator/leasehold, and then from the operator to the various property rights owners is essential to identifying the split estates and partial interests. An operating mine unit consists of land, orebody, equipment, and improvements, which contribute to the cash flow. A royalty is an expense to a mining operator (the leasehold estate for the mineral rights) and income to the mineral rights owner (the leased fee estate for the mineral rights). When a DCF of royalty income is analyzed, then only the value of the leased fee estate for the mineral rights is being evaluated and no value is included for any other real property rights, leasehold improvements, personal property, nor equipment.