September/October 2011

A mineral royalty has traditionally provided a method for an owner of a prospective mineral property to retain a share in the upside potential of that property by reserving, at the time the property is sold or optioned off, a legal right to a share of the minerals that may be produced from the property. A royalty can also provide a method for a mineral property owner to partially monetize its resource, for example, to fund exploration and development, through granting and selling a royalty. The purchaser of the royalty will assess the potential and risk of whether the property will ever achieve production or, in the case of a producing property, of the anticipated life of mine and value of the production over that period. Due to the complex economic modelling required to make such an assessment, these "created royalties" are generally structured and purchased by companies whose businesses are purchasing and holding a portfolio of royalties.

Read full article