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Consolidating mining claims is key to shareholder value
Investors in exploration companies should realize that a major mining company considering the buyout of a junior is much less likely to be interested if the land package is an unconsolidated mix of patented and unpatented mining claims. That also means that some of the more interesting projects today have been underexplored due to fragmented claim status and a lack of historical data.
“Consolidation is the key to unlocking shareholder value in a mineral land package,” notes Jerry Baughman, president of Nevada Select Royalty, a wholly owned subsidiary of
Ely Gold & Minerals (TSXV:
ELY). Jerry is a veteran geologist with over 30 years’ experience working in the United States, Mexico and South America. Nevada Select maintains one of the largest mineral databases on Nevada properties and specializes in consolidating claims and data of underexplored projects.
“If there’s little isolated parcels of third-party claims, you want to tie those up; especially before you get too far down the road. If you think you’ve got a discovery you plan to develop, the longer you take to acquire the claims, the more it’s going to cost you,” explains Baughman, referring to third-party claim owners bidding up the cost of the claims as successful nearby exploration makes them more valuable. Likewise, if the third party is a major gold producer, the cost of consolidation automatically increases.
Depending on where the claims are, differing ownership can become troublesome for exploration companies wanting to develop consolidated land packages; especially when the goal is to sell the complete package to a major mining company following value-added exploration on the properties.
“[Majors] seem to lose interest fairly quickly because if the ground is not consolidated, then they’re limited on where they can explore. The bigger companies especially don’t like to spend a lot of time and money negotiating deals with people and consolidating it themselves. And the consolidation of the historic data is also a key to increasing the value of a project,” adds Baughman.
The bottom line for investors? When doing your due diligence on a project based in the United States, check to see whether the claims on the property are sewn up into one consolidated land package, or whether there are patented or unpatented claims owned by a third party. These unconsolidated mining claims could make the difference in whether or not the property will have any exploration upside (if the company doesn’t own the claims, they can’t explore them); or, equally important, become an acquisition target for a major mining company.
