There are few hotter topics in the investment world than mineral rights. At KerNors Capital Group, we’ve been feeding our clients a steady stream of updates on this important investment strategy. And, through two articles, Investing In Mineral Rights – Part 1: Finding Out Who Owns Them and Investing In Mineral Rights – Part 2: They’re Not All The Same, we’ve given our web visitors the basics of investing in mineral rights.
In this, our third installment, we’ve asked Robert to share some of the most common questions he gets from investors:
What Are Mineral Rights?
Well, when an investor owns mineral rights, he or she may explore for, mine or produce all of the minerals lying under the property. Minerals include hydrocarbons like oil and natural gas, as well as commodities like gold, silver, copper, and their ores.
While you can see that this can include significant involvement in the exploration and extraction process, the reality for most investors is that their mineral rights entitle them to a portion of the proceeds from production (if any), in exchange for having put up a portion of the working capital.
In this sense, mineral rights are not that much different than an investment that yields a portion of the profits from a factory or other manufacturing operation.
Why Is Investing In Mineral Rights So Popular?
What does make mineral rights different than my example of investing in a factory is that there’s absolutely no question as to demand for the product. According to BP Energy Outlook 2035, worldwide energy demand will grow by over 40%, with the bulk of the growth coming from emerging economies.
That’s huge: even with conservation efforts worldwide, demand will continue to grow for more than 20 years. Few investments can promise that type of sustained growth, and that’s a big part of why investors are hot on mineral rights.
Another reason investors like this segment is that they can get involved in so many different ways.
How Can I Invest In Mineral Rights?
The simple answer is that there are lots of ways. (Legally speaking there are five different kinds of mineral rights and if you want all the details, check out the Schlumberger Oilfield Glossary). For my clients though, we work to craft an individualized strategy based on their individual goals as an investor. The approach we take assesses factors like risk, available capital, and geographical coverage.
For example, for clients with significant resources and a very specific target geography, we may recommend investment in a mineral lease.
Other clients may benefit more from a broader approach that uses investment in overriding royalties to make a cost-effective play over a larger geographic area.
Get Professional Advice
Mineral rights investing can be very profitable, but very complex. Put our 90 years of experience to work for you. Call the professionals at KerNors Capital Group today.