Paydirt: A literal gold mine - MoneySense

Paydirt: A literal gold mine

Some investors buy land for its natural resources but beware of the risks.


You don’t always have to sell your land to make a killing—some investors buy land to exploit its natural resources. Typically, when you purchase a plot of land, you’re purchasing the surface rights, which affords you the right to build on the property, but in some situations you can also purchase the rights to whatever valuable resources are located on or below the surface.

But beware: mineral and natural resource rights aren’t always on the same deed as property rights, as John Newlie, an Ontario mining prospector, found out. In 2007, Newlie bought a 77-acre lot near Englehart, Ont. “We thought the land purchase included all surface, timber and mineral rights because it was classified as a mining claim,” says Newlie (we’ve changed his name to protect his privacy). But the ink hadn’t even dried on the purchase agreement before Newlie’s lawyer uncovered a disturbing fact: the original owners had lost the mineral rights for the property decades ago, due to unpaid taxes. “Make sure you or your lawyer does a thorough search on the chain of ownership of any mineral rights,” says Newlie. “As these rights can change hands numerous times.”

Newlie found out the hard way that property and mineral rights are contained in two separate deeds in almost every province. Thankfully, mineral and natural resource transactions are a matter of public record: you just need to know which government office to go to for that information. A lawyer well-versed in this type of purchase is an invaluable resource.

You’ll also want to understand what’s included in the mineral rights. That’s because the definition of a “mineral” can vary from jurisdiction to jurisdiction—it can also vary from one mining situation to another. Finally, to profit from land purchased for its natural resources, you’ll want to consider not just the purchase price, but also the specific terms for these rights. The terms will include the specific types of minerals you intend to extract, how you’ll access the property, what steps you’ll take to prevent damage to the land and the surrounding environment, as well as the use, protection, and remediation of other natural resources, such as fresh water lakes.