Crafting The Next Generation Of NSR Agreements In Quebec

It is not uncommon for mining property transactions to include the payment of a royalty as part of the vendor's consideration, such as a Net Smelter Return (NSR), through which the holder typically receives a percentage of the value of production or net proceeds earned by the grantor from a smelter or refinery. 

The Quebec Court of Appeal's Aug. 6, 2013 judgment in the matter of Anglo Pacific Group PLC v. Ernst & Young Inc. provided important guidance to holders of NSRs in mining projects in Quebec. It also highlighted that customary NSR agreements registered in the Mining Register were not enforceable against third parties under the civil law of Quebec. 

Sellers in post-Anglo Pacific transactions of Quebec mining properties should pay close attention to the drafting of any NSR agreements and obtain professional advice to limit the risk that their royalty becomes only a hollow promise of income. There are often ways to structure mining property transactions