BLM releases minerals pricing policy
What happens to your discovery?
When determining the validity of mining claims, Federal land management agencies conduct examinations of your asserted discovery to evaluate whether the mineral deposit can be removed and marketed at a profit given the production costs and the prevailing market on a given date.
An essential element in determining whether a mineral deposit is marketable is the market value of the mineral commodity. For the most part, the commodities subject to the Mining Law – gold, silver, copper, lead, zinc, etc. – have widely reported spot market prices and are traded on public exchanges. Many of these minerals, especially those with volatile prices, also are the subject of "futures" trading based on the projected future market price for the mineral. The major exchanges for mineral commodities are the London Metals Exchange, the New York Commodities Exchange (COMEX) and the Chicago Board of Trade.
BLM has never addressed the mineral pricing issue in published regulations or established a formal policy in handbooks or manuals. Instead, over the years, mineral examiners, administrative law judges, and the IBLA have followed an ad hoc approach. The methods have ranged widely, but fall into two basic categories: using the market price on a given date, or averaging the market price over several years.
This diversity of approaches to mineral pricing is not good policy. It creates uncertainty in the process – for mineral examiners, for claimants, and for others. The BLM is adopting the following Statement of Policy (summarized below) on the proper method to determine the market price of the mineral at issue. This policy relies on the prices for minerals set in the free market and avoids the speculative approaches that have reduced the reliability and authority of claim validity determinations in the past.
Basically, the BLM will use a six-year average pricing method. To determine the mineral commodity price to use on any specific marketability date, the BLM mineral examiner will begin with an average of the commodity price of the mineral for the month in which the marketability date occurred. The examiner will then average that price together with: (a) the monthly average commodity prices for each of the 36 months before the marketability date; and (b) the monthly average commodity futures prices for each of the 36 months after the marketability date. Commodities not publicly traded or covered by present and future contracts (forward sales) are not covered by this policy. In these cases, actual contract conditions will be used.
What does the new Mineral Commodity Pricing Policy accomplish?
The new policy will simplify and help expedite mining claim validity examinations for both industry and Bureau of Land Management mineral examiners. It resolves a chaotic situation where mineral examiners and the Interior Board of Land Appeals used inconsistent approaches in evaluating mineral deposits supporting mining claims. The policy improves Government service for both industry and other users of the public lands by making the claim validity examination process more predictable. It avoids cost increases for industry. Finally, the policy allows mineral examiners and industry to rely on publicly available information.
What does the new Mineral Commodity Pricing Policy require?
The new policy requires a Government Certified Mineral Examiner to:
- Obtain the price of the commodity for the current month of inquiry;
- Obtain the monthly price of the commodity for the 36 previous months;
- Obtain the future contract monthly price of the commodity for the 36 forward months; and
- Average the 73 months together to obtain the estimated commodity sales price for the present and mid-term future life of the proposed or existing mining operation.
What does the new Mineral Commodity Pricing Policy apply to?
The policy only applies to mineral commodities subject to the General Mining Law of 1872, as amended, that are publicly traded in recognized international metal exchanges and brokerages; and have established future sales contract quotations. These mineral commodities include, but are not limited to gold, silver, copper, lead, zinc, platinum, molybdenum, and palladium.
Why has BLM devised this policy?
The BLM has written this policy in order to provide a commodity pricing method that is:
- Uniform for all claims of covered minerals;
- Consistent from State to State;
- Based upon factual and readily available information; and
- Based on the Prudent Man approach for price forecasting.
BLM Certified Mineral Examiners (CMEs) examine and evaluate a mining claim(s) to determine if the mineral deposit claimed is commercially viable (valuable deposit under the General Mining Law). The process involves mapping the geology, sampling the deposit with regard to its geologic controls to confirm reserve estimates, determining the cost of mining the deposit, and determining the price to be received for the commodity produced. If the expected unit price to be received is greater than the estimated unit cost of production, the requirements for discovery under the General Mining Law have been satisfied.
The essential test is that of the Department's long standing Prudent Man Rule - is there a reasonable prospect of success in developing a valuable mine? A valuable mine must feature a mineral deposit subject to the General Mining Law that can be mined, removed, and marketed at a profit.
How does this policy differ from previous BLM policy on determining mining claim validity?
The only change in existing policy is that BLM is adopting a standard formula for estimating the price for a publicly traded mineral commodity. No other changes to BLM mineral examination policies are made.
Which activities on the public land will be affected by this policy?
Mineral examinations of lode or placer mining claims are subject to this policy. Such examinations are made when a mineral patent application is applied for; or a valid existing rights determination is made for mining claims within withdrawn lands.
Does this policy increase industry costs?
No, this policy provides a price estimating formula using publicly available past, current, and future pricing and contract sales data.
Does this new policy require me to pay any new fees?
This policy imposes no new fees.
What dates does the policy require BLM to use in determining commodity prices?
For open public lands, the date of the mineral examination is used. For public lands withdrawn from mineral entry under the General Mining Law, two dates are used - the date of withdrawal and the date of mineral examination.
How may I obtain monthly average commodity prices?
There are a number of Internet Web sites of the commodity exchanges and commodity brokers that have current prices, futures contracts quotes, and archival data of past future contact closures. Several are listed in the Federal Register notice and others are available on the Internet.
How does this new policy affect small businesses that rely on the public lands to make a living?
This policy will not affect small businesses. This policy is designed to standardize the Government's approach to mineral commodity pricing for publicly traded mineral commodities. The policy will actually make it easier for a small mining company to plan for any mineral examination of its lode or placer mining claims, as it will know in advance the Government's formula and can collect the necessary information in advance to speed up the mineral examination process.
When did this new policy go into effect?
The new policy went into effect on Thursday, July 6.
How can I comment on this policy?
You may write to Director (630), Bureau of Land Management, Administrative Record, Room 401 LS, and 1849 C STREET, NW, WASHINGTON, D.C. 20240. You may deliver comments personally or send a messenger to Room 501, 1620 L Street, NW, Washington, NW, D.C. 20036. You may send e-mail to WOComment@blm.gov. (Include "Attn: MINERAL PRICING"). For more information, contact Roger Haskins at 202-452-0355.
Edited by Bob Arguero, Managing Editor, GovCon