Claim staking

There can be no healthy mining industry without a secure and fair system of land tenure.

A system where people determine the ownership of a carload of ore by trading gunfire until one or the other gives up is effective enough, but dangerous to the public peace. Much better are systems under which the law determines the ownership of mineral rights.

The first concern of any successful minefinder is to be assured of the benefits from his efforts. Mineral laws enable the prospector to do just that.

Although these laws vary from one country to the next, many of the same principles apply. In most countries, the intent and spirit of the law is:

– to secure for persons and companies the exclusive right to pursue development of a mineral discovery;

– to protect the public interest;

– to encourage exploration and prevent owners from tying up ground without exploring it — to use it or lose it; and

– to provide the means whereby disputes may be settled quickly and at minimum expense.

There are two widespread systems. Claim staking is a system that allows a prospector — whether an individual or a company — to establish a right to mine in a certain area. It is the usual way of establishing mining rights in countries with legal systems deriving from English common law. In some places it is done by placing physical marks or monuments on the land itself, and then reporting the act of staking to the government.

Other jurisdictions allow “map staking,” where the prospector simply applies for the right to mine an area without physically staking the ground. In either case, the prospector gets the right to the mineral resources of the land only if he is the first to apply for them.

Permit system

The other widespread system of land tenure is the permit system. In this scheme, the government controls the mineral rights and licences the prospector to explore a certain area. The permit — also called the concession, licence, or contract area, expires after a specified period; usually the prospector can renew the permit but must drop part of the area it covers. This provision ensures that the holder works continuously on exploration in order to know which parts of his contract area to keep at the next renewal. The exploration permit may also specify minimum amounts of work that must be done, or money that must be spent on the area to keep the mineral rights.

The claim system, because it allows prospectors to stake open ground without requiring applications or prior agreements, rewards companies and individuals that move quickly to pick up mining rights. The permit system’s requirement for a formal exploration agreement rewards large groups with the backing to carry out the plans.

Both the claim system and the permit system give the holder the exclusive right to explore and develop an area. To keep that right, the holder is required to perform work; if the work is not done, the ground falls open for someone else.

Usually, holders of mining property must also submit technical reports to the government as proof that the exploration work has been done. The reports are open to the public and become useful information for future prospectors.

Risky business

You don’t have to be rich or work for a large mining company to find a mine. But there is one essential ingredient for any successful mine exploration and development program — access to enough funding to see the program through to completion.

Mining is a business like any other — with one exception: the assets of a mine are non-renewable. That means that during the course of production, the primary asset that gives a mine its being is consumed. Because the assets are non-renewable and disappear with time, mining is a risky business. The risks are greatest at the beginning of the life of the enterprise, when geological information is sparse. Consequently, for the investor, this is the time when the greatest gains (and losses) can be made.

–The preceding is an excerpt from Mining Explained, published by The Northern Miner.