Common Contracts
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Understanding Streaming Agreements and Royalty Agreements:June 16th, 2014
The earliest royalties involved payments to a sovereign in exchange for the right to extract minerals owned by the state. This concept was later adopted by prospectors and the owners of mineral rights, who often retained a royalty upon selling, leasing or optioning the mineral rights to another party who may develop and mine them. In addition, royalties are often used in the context of joint venture arrangements when a participant is diluted below a threshold percentage and its participating interest is converted into a royalty. Such royalties commonly include unit royalties, gross overriding royalties, net smelter return royalties and net profits interest royalties.1 Usually, royalties are payable in cash. However, some royalties (typically, precious metals royalties) provide the holder of the royalty (Royalty Holder) with the option to receive the royalty payment in minerals (that is, “in kind”).
