How Much Do Mineral Rights Pay?

Mineral resources and the rights to mine and earn royalty through them are solely reserved for the government in most countries. Luckily, if you’re a mineral rights owner in the US, you can earn passive income royalties without waiting for government authorization. 

The United States, along with a few other countries, grants the ownership of mineral resources to surface owners. Meaning whoever owns the land has the rights to the minerals beneath it. 

In some cases, mineral rights have remained under families’ ownership for generations. If you own mineral rights, chances are you can earn a hefty amount or start a steady income for your family. Here’s how much mineral rights pay to clear your perspective. 

What Are Mineral Rights?

For those new to the discussion, mineral rights are potential investment commodities, just like the stock exchange. In addition, while usually, commodities trading discussions revolve around items such as fruit pulp or grains, oil and gas are also regarded as tradable commodities. 

By selling and buying mineral rights and earning various kinds of interest payments, you can earn royalties passive income. In some areas, people exchange mineral rights for various purposes, including extraction, production, and future use. 

The value of mineral rights depends on the location, mineral richness, and investment return potential of the property owned. So whether you’re planning to buy mineral rights to earn potential income in the future or already own some, you should know their value to make the right decisions. 

Can You Earn Royalties Passive Income Using Mineral Rights?

If you’re new to the concept, you might be confused about earning royalties passive income through mineral rights. We know what you’re thinking. Royalties are usually associated with books, songs, or inventions. 

However, you can earn royalties through mineral rights as well in the same way. Like a writer owns a book or a musician owns a piece of music, while other companies make money, you can sell your mineral rights to other companies. 

These companies build extraction plants or mine the minerals on your property to earn revenue. But, as the primary owner, you’ll receive a monthly or yearly royalty amount according to the clauses in your sale contract. 

The main difference between selling mineral rights properties and real estate properties is that multiple factors come into play in the former case. Meaning no two mineral rights deals can be entirely the same. 

Besides the geological evaluation, buyers will look at the potential material that can be extracted from the surface. Based on these calculations, the seller will receive royalties according to the ongoing value of oil or gas.

If you’re a mineral rights owner looking to earn royalties passive income on your property, there are various aspects you should consider. These include thorough due diligence regarding the industry, the longevity and value of the minerals under your surface, the trending uses of the particular mineral, and many other factors. 

How Much Do Mineral Rights Pay?

As mentioned, multiple factors influence royalties passive income generated through mineral rights. That’s why it is pretty challenging to provide a specific answer. 

However, mineral rights should pay either a percentage of the value of the minerals mined or a single predecided per tonne rate, according to the Mineral Resources Regulation 2013. 

Besides that, in some cases, the rate is calculated by determining the minerals’ gross value after deducting the extraction expenses. 

But the amount can be pretty hefty if you want to know how much money you’re considering using your mineral rights. Usually, you will receive an initial lease or bonus amount, after which the company can conduct exploratory activities on your property. 

After that, you will receive royalties based on a predecided contract between you and the buyer. For example, if you own 100 acres of coal-rich land and sell it to an extraction company at $3 per ton, you will receive around $4 million in royalties if the recovery rate is around 90%. 

Similarly, If a company wants to drill a well to extract natural gas, in this case, the owner will receive a 12.5% royalty according to the wellhead value of natural gas at that time. If the price is around $8 per thousand cubic feet and the well produces 2 million cubic feet of gas per day, the owner can earn a whopping $100,000 in royalties passive income in a year. 

Nevertheless, things can get complicated when minimal exploratory activities and testing are conducted in the area. In this case, the royalty amount mandated can be lower than land well-known for producing profitable minerals. 

How To Sell Mineral Rights?

Now that you know how much mineral rights pay approximately, you’re probably looking to sell yours to the highest bidder. However, you should remember that selling mineral rights and generating royalty income is not as simple as selling a car or a home. 

That’s because once you sell a car, you don’t have to live with your decision. But, on the other hand, the terms you sell your mineral rights on will affect you and the generations to come. 

You see, a buyer can have multiple reasons to purchase your rights. Usually, it is for extraction or production, but sometimes, a buyer wants to conduct neither. So instead, he purchases mineral rights for prospects of investment. 

Similarly, even extraction companies buy mineral rights of specific properties as a future reserve. 

Moreover, some people intend to refrain from investing or conducting any activity on your property after purchasing mineral rights. Instead, they merely act like ‘middlemen’ or brokers who would further sell your rights to extraction companies and give you a small percentage of the royalty they receive. 

All these factors affect the terms you will receive your royalties and the average amount received yearly or monthly. Thus, you should conduct thorough due diligence to sell your mineral rights and evaluate all the options available to get the best value. 

Conclusion

Mineral rights can pay enough royalties and passive income to help you lead a comfortable retirement. But it all depends on the deal you strike with potential buyers and the mineral-richness of your property. 

While you can hire professional consultants to help you sell your rights for the best price, their consultancy can also be quite expensive. The best way to get the best deal is by comparing multiple offers and choosing the payment plan that fits your needs.