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Mining Royalties
monitor and are less transparent. Existing property owners are, to some extent, at the mercy of the accounting practices of the mine operator. As a result, NPI is often facetiously referred to as “no payment intended.� Joint-venture agreements that initially have existing property owners as equity partners will have provisions to dilute their interest as the partner assumes more of the costs of exploring or developing the property. The NPI provision in these cases is often the sole remaining interest in the property for the existing property owner. Another term occasionally seen in mining agreements is net proceeds royalty. In most cases, it is not clear how (or if) this differs from NPI royalty.
Private Party Mineral Royalty Instruments in South Africa The instruments and rates for collecting private party mineral royalties vary significantly internationally. Private party mineral royalties are payable to owners of mineral rights when mining rights are granted over such properties. In contrast with the discussion of Canadian agreements above, the South African focus is on agreements between private property mineral rights owners and private mining companies. Very few countries, outside of those in South America, allow mineral rights ownership to be registered as private property. However, this arrangement was standard in South Africa until recently, and this section uses the South African experience, before the promulgation of the Mineral and Petroleum Resources Development Act (MPRDA)48 in April 2004, to demonstrate the differences between private party and government-owned mineral royalties. Other types of private party royalties along the lines of the Canadian examples are less common in South Africa. This stems from the traditional structure of the mining sector whereby several large mining houses controlled a large proportion of mineral production. The lack of a well-established junior mining and exploration sector, such as evidenced in Canada or Australia, retarded the development of joint-venture and farm-in type agreements, which contained NSR or NPI provisions. As the mineral sector in South Africa is transformed by internationalization, these types of private party royalties are becoming more common. When the MPRDA came into effect, private party mineral rights were the norm in areas underlain by Witwatersrand gold reefs. Historically, the state had no royalty claim to privately owned mineral rights and was excluded from the commercial deal entered into between the registered owner and the mining company that wanted to develop the minerals. The royalty arrangement decided upon for private party mineral rights could have been any of the standard methods used by states, or a combination