Mining Leases

Mining Leases can be complex and if badly drawn up could affect your property and possibly its value.

Here are some points to consider:

  • · Keep Mineral Leases “alive” and “up to-date” aligned with current markets.
  • · Do you own all the minerals to which the operator requires?
  • · Can the lease be assigned? If so wording needs to ensure it doesn’t fall into the wrong hands.
  • · Fees? The operator should pay all reasonable legal and surveyors costs not just a contribution. Mineral leases are not standard documents and can be complex requiring careful understanding by the right people.
  • · What are the Minerals? Is this clearly defined? This needs clarifying to unsure they fall within a saleable “Product” ie whatever is defined mineral extracted from your land should generate a Receipt. Check what minerals are defined within the planning consent?
  • · What Rights are being Granted? Underground working below a certain depth or above ground only? Any disposal should be at Market Value at the date of Sale which can be linked to Trade Indices.
  • · Term? The length of term of the lease needs to be in proportion to the financial income generated. If the lease is long this could impact on the value of surface assets due to uncertainty.

It is preferably to keep leases as short as possible which in turn encourages the operator to get on and work the minerals without delaying. The mineral owner does not want to sign a lease and then run the risk of not having the minerals worked for many years after, or indeed not at all!

  • · Break clauses? Need to be frequent eg if not worked within a certain time period.
  • · Certain Rent? It is common to have a guaranteed rent of some level for entering into the lease. It is important this is paid whether minerals are worked or not. After all the mineral owner may have fettered the title by entering into the lease and should be recompensed.
  • · Reviews? There should be a review to market value at some point. After many years there is a danger Lease becomes out of date and factors need to be addressed to avoid below market payments occurring.
  • · Indemnity? What happens if the company goes bust and the land subsides or a pollution incident occurs? Is there a Bond in place? Who picks up the cost to make good?
  • · Accounts? Transparency, proof of accuracy.
  • · Inspection? This should include the owners’s advisers to inspect + have access to plans showing workings and tonnages exploited in relation to the subject land.
  • · Insurance? A minimum amount should be stated say in excess of £10m.
  • · Restoration? As required within the approved planning consent.

Other things to consider in the event of:

  • · Insolvency? Who pick’s up the operations and completes or shuts down the working site?
  • · Forfeiture? eg if payments not met within 40 days, insolvency (who steps in?).
  • · Expert Determination? Resolving disputes needs to be done as cheaply and efficiently as possible, avoid expensive arbitration if you can.
  • · Diminution in Value of Subject Land? Is the operator to pay?
  • · Third Party Rights? Not to confer any rights on any person who are not a party to the lease.

It is important proposed lease terms are balanced and do not substantially benefit either party otherwise the chances are it will not be favourable.

The Mines (Working Facilities and Support) Act 1966 may be relied upon by a mineral operator may if it feels the scheme is being frustrated by the owner(s) refusing to co-operate however this Act needs a lot of evidence to be provided by an operator to justify the reasons to convince the Secretary of State (and the Court) that it is of national intertest to grant compulsory acquisition rights.

The operator will not want to trespass under any owner’s land with having obtained consent (see Bocardo SA v Star Energy) and so if there is no way around the owners land then they will need to deal with the owner one way or another.

Should you be approached by a mineral/gas operator it is important sound practical advice is sought to ensure you are protected and receive market payments in return for granting consent for your land to be worked or occupied.

Should you have any queries in respect of minerals, leases, and the implications of mining please do not hesitate to call David Miller of Miller & Miller for a free consultation in confidence on Tel: 0114 327 0120.