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Troubles in Mineral Rights Leasing
There many potential troubles when you are involved in mineral rights leasing. This is understandable as mineral rights leasing isn’t exactly a simple transaction. There are a lot of areas to cover and be clear with. Still, even if you have given your best in the negotiations and shaping of the deal, problems and arguments may still arise in the future.
One such potential problem would certainly be concerning the legal procedures. This is not surprising since mineral rights leasing involves a lot of research, corrections, and transactions in order to be completely clear to all parties involved. In this regard, the contract or mineral rights leasing agreement is very important. The wording in the contract has to be agreed upon by all parties in order to avoid future arguments. The contract will be your basis for any activities pertaining to the lease.
This is why legal help and counsel is important in mineral rights leasing. Whatever is written in the contract should be clear and concise, and it should also be satisfactory to all parties. To prevent any misunderstandings and unfair proceedings, legal counsel for each party is critical. The negotiations might be heavy and tiring, but mineral rights leasing isn’t exactly a light decision to make when you also have to consider what the other parties want to get out of the deal.
It is also important for all the people involved in the deal to have sufficient knowledge on the transactions. You should know the terms used and the clauses of the contract and be clear on the specific details entailed in the negotiations. It is crucial to educate yourself about mineral rights leasing before going into a deal on it.
Other potential problems can arise when the mineral extraction is already underway. The main problem during this time will most probably be the damages to the land and property. These damages may not appear right away, and may take years after the operation until they surface. This is a headache to the surface and property owners. If the surface owner complains about this, you can always go back to the contract and settle the dispute. The problem will be worse if the damages appears years later though, because by this time the mining company might already be gone. There would be no one to be held responsible for the damages and the surface owner will be burdened by this.
Aquifers and the water supply should also be thought over. Usually when there is mining and mineral extraction, there would be temporary or permanent loss of water supply. The aquifers might be damaged in the extraction process and the water would drain into deeper rock units.
What is most important in the mineral rights leasing is the contract. So long as you and the other parties have clearly settled your conditions on the document, the potential troubles will be minimized. Just remember that the contract will be the basis of any misunderstandings. So from the very start, in the formulation of the contract, you should have already sought legal help and made your terms clear with the other parties concerned.
How to Borrow Money, Part 1
There are two types of financing: equity financing and debt financing.
The most frequent source of funding for a small and mid size businesses is to borrow money. Getting a loan usually is not an easy and short process.
It is always a good idea to learn as much as you can in advance about the factors that important in the decision-making process of banks and other lenders when they consider your loan application. For more detailed information you may refer to my other articles.
When looking for funding, you should consider your company’s debt-to-equity ratio, which is defined by dividing amount of borrowed money by amount of invested in the business. The lower the ratio is: more invested and less money borrowed, the easier for you will be to get financing and at more favorable terms.
The decision what financing to pursue works on case to case basis, but the general rule of tomb is: if you have a high debt to equity ratio you should seek equity financing and vice versa.
In the most cases it is impossible to get 100% financing. Institutions want to see at least 20% of equity in a business. Building equity can be achieved by investing owners cash or build it through retained earnings, but by itself does not guarantee that you get financing for a business.
Equity Financing
Equity financing means financing a business by selling ownership interests to investors or, the money is raised in exchange for a share of ownership in the business or having the right to convert other financial instruments into stock. It is the way raise funds without incurring debt, or without obligation to repay a specific amount of money at a particular time.
Equity sources can be divided into two groups: non-professional such us relatives, friends, and employees, etc. and professional that can be divided into two sub groups: Private such as Angels and Venture Capital and Institutional such as Hedge Funds and Government Assessed Sources. Most of professional groups specialize in particular industries.
Venture Capitalists may review thousands of proposals a year, but invest only in a few that have bigger prospective returns on the capital, great management team, industry growth, competitive advantage and solid exit strategies (e. g. IPO). Venture Capital firms usually passively involved in a companys management, unless business fails to perform as projected.
Many people think that Venture Capital firms finance new businesses, but in the most cases they prefer established companies with stable cash flow. If you need money for a start up look for an Angel (Private) Investors. Angels might work alone or in groups (sometimes as big as few hundred people) and usually actively involved in companys management.
Pros and cons of equity financing
Company shares give you two major rights: participation in the future companys profit-sharing and decision-making processes. The biggest drawback of equity financing is that you relinquish those rights to an outsider.
To be continued.
Yury Iofe, MBA
Universal Business Structured Solution
More educational resources by Yury Iofe:
www.ubssolution.com