When Is A Mining Royalty An Interest In Land And Why Does Anyone Care?

Royalty interests form an important part of mineral ownership and mining finance. Under a royalty arrangement the operator of a mining project will pay to the royalty holder a stream of income based on the output or returns of the mining project. Oftentimes royalty interests are retained when mineral dispositions are sold to an operator for further exploration and development. Royalty agreements are so ubiquitous in mining that they have helped generate a whole new breed of financier, the royalty streaming company. Royalty interests and royalty agreements are also common in the oil and gas industry.

Over the decades, Canadian courts have had to grapple with the nature of royalty interests in general, and the specific nature of different types of royalty interests. The question often comes to light in the context of insolvency on the part of the operator or a transfer of the underlying mineral interest (whether voluntary or involuntary). If the royalty interest forms