Hi all! New to this whole endeavor. I have in front of me a new lease for coal, and I'm wondering about the terms. How do I find out if there's a consortium for this property?
The lease is for 10 years with an option to extend for one year. Can I change those to like, 6 years with a 5 year extension option? We're talking about 55 acres of land here.
Tonnage royalty is 4% - is that standard these days?
Any advice is greatly appreciated!
Coal leases are far different than oil and gas leases. You may have a "bird in the hand" here so nurture it carefully. The exploration has most likely been completed so there is little risk of finding. Your coal may be adjacent to an existing mining operation so make certain you are dealing with the mine operator. Provisions in the lease that are important include the right of transport, measurement for payment of royalty, right to mix with other lessors, etc. Ten years is relatively short for a coal lease because of the very high capital cost in establishing a mine. Tonnage royalty is rarely expressed as a percentage so understand exactly what it means. Coal companies are not prone to small negotiations but have a major plan for an area and stick to it. If you are too difficult to fit into their plan, they may mine around you leaving you with an island that may not be useful in the future. Much different than oil.
Thank you for the advice. This is still tied up in probate to I've not had the chance yet to deal with coal company myself.