The dilemma of the mining royalty: contractual or realty interest

Abstract

At common law, the legal nature of a mining royalty between private parties will decide the respective rights of payor and recipient. In some circumstances, it will also determine whether the interest of the recipient will prevail or may be lost and ignored. Industry practices, even those of long standing, that are contrary to the law will not change the law or its effect to meet such concerns. This paper looks at the development of the mining royalty between private parties in Canada and the effect of the realization by recipients that contractual royalties, as opposed to royalties that are interests in the lands or product to which they relate, can be lost in certain circumstances. Suggestions are made for some features that may assist in transforming an otherwise contractual royalty into a real property interest. Some of the concerns for both payor and recipient with respect to the implementation of such suggestions are also discussed.The article has two appendices attached. Appendix A is an extract from an article by the author discussing the concept of payment of a royalty in kind which is relevant to such suggestions. Appendix B contains some of the more lengthy explanatory notes referred to in the text of the article.