How Mineral Rights are Valued: The Top 5 Determinant Factors
Mineral rights are becoming more and more popular as an investment opportunity. The reason for this is that, as energy production moves away from traditional sources like oil and gas, the need for minerals will continue to grow.
Mineral right buyers are a necessary part of this process, and it’s important to understand how they value mineral rights to get the best price for your property.
This blog post will discuss the top 5 determinant factors in mineral right valuation. If you want to sell mineral rights, keep reading this post.
Diving Into Mineral Rights
Mineral rights are property rights that allow the owner of a piece of land to sell or lease minerals found on their property. Mineral rights are separate from surface rights, which involve selling or using the actual land itself. You can sell mineral rights separately from surface rights if different people own them.
Types of Mineral Rights Valuation
A mineral owner selling mineral rights will not use the same methods as an insurance adjuster or necessarily seek the same price.
The 4 main types of mineral rights value are:
1) Fair Market Value
Fair market value is the price determined on the open market by parties dealing at arm’s length. It is used in purchasing, selling, and investing in mineral properties.
2) Book Value
After the project has paid off all of its obligations (assets – liabilities), project value is determined by book value. In bankruptcy, it’s the liquidation value of a firm.
3) Insurance Value
An insurance company uses the appraised value to determine the insured value in its risk assessment. An insurer may utilize the fair market value, but they are inclined to reduce it to avoid future insurance payments.
4) Appraised Value
The value of mineral rights is compared to comparable properties in the neighborhood. This assessment differs from a real estate appraiser, who values the property and may or may not incorporate surface and subsurface mineral rights.
Mineral Rights Value and The Top 5 Determinant Factors
Now that we know more about mineral rights valuation, let’s discuss the top 5 determinant factors.
Mineral rights are valued based on valuable minerals like oil, gas, and coal. The geology of a particular area is vital in determining its worth. Mineral rights owners can also consider mineral exploration companies if they want to find out more about their land’s geological potential.
Mineral resources are only valuable insofar as there is demand for them. Mineral rights owners can increase the value of their property by seeking out mineral buyers and exploring the market to determine which minerals are in high demand.
Mineral Type and Quality
The type of mineral that exists on the property will significantly impact its value. Mineral rights are valued based on both the quality and quantity of minerals found in a particular area, as well as whether or not there is an existing market for those resources.
The mineral rights value is based on the production levels of a particular area. Mineral rights owners can research existing wells and mines in their areas to understand how much product is being extracted from those sites.
The market trends will also have a significant impact on mineral rights valuation. Mineral prices tend to be volatile, so staying up-to-date with market trends is important. Mineral buyers can also keep an eye on demand and supply and other key factors that affect the value of mineral rights.
Blue Flame Minerals Values Your Mineral Rights At The Best Price
If you want to sell your mineral rights, it’s important to find a buyer who will value them fairly and offer you the best price. At Blue Flame Minerals, we pride ourselves on being mineral rights experts.
We buy mineral rights, and we’ll work with you to determine the value of your mineral rights and make sure you receive a fair market price. Contact us today.