State Nonferrous Metallic Minerals Leasing

Since 1966, the State of Minnesota has offered leases of its nonferrous metallic mineral interests for exploration and development according to Minnesota Statutes and Rules. Primarily this is accomplished through a public competitive bid offering known as the Metallic Minerals Lease Sale. *Currently there are 406 active state nonferrous metallic minerals leases located within seven counties in the northern-half of Minnesota. There are a total of 13 companies holding state nonferrous metallic mineral leases. Targeted minerals for exploration include copper (Cu), nickel (Ni), platinum group metals (PGM - group of 6 metallic elements), titanium (Ti), and gold (Au). There has been no mining of nonferrous metals in Minnesota yet, but the Environmental Review Process is on-going for one proposal - PolyMet's NorthMet project. Furthermore, even with a state or private nonferrous metallic mineral lease a mine cannot be built until an Environmental Permit is obtained (see DNR Mineland Reclamation).

*Based on data obtained in August 13, 2012 from MN DNR Land Records database

 

School Trust and fiduciary responsibility

Permanent School Fund and School Trust Lands

The legislature intends that it is the goal of the permanent school fund (Minnesota Statutes, section 127A.31) to secure the maximum long-term economic return from the school trust lands consistent with the fiduciary responsibilities imposed by the trust relationship established in the Minnesota Constitution, with sound natural resource conservation and management principles, and with other specific policy provided in state law.

Leasing nonferrous metallic mineral interests on School Trust Lands is one process used to generate revenue for the Permanent School Fund. As of May of 2012, active nonferrous metallic minerals leases on School Trust Lands makes up 30% of all active nonferrous metallic minerals leases. A number of these leases are located on known metallic mineral deposits; Maturi deposit, Birch Lake deposit, and Mesaba deposit. The potential future revenue for the Permanent School Fund from these three deposits is in the range of $2-3 billion. These are just estimates since metal prices tend to vary over time.

The commissioner of natural resources has the authority and responsibility (Minnesota Statutes, section 84.027, subd. 18) for the administration of school trust lands.  Currently, the DNR administers approximately 2.5 million acres of school trust surface and mineral interests and an additional 1 million of acres of severed school trust mineral interests.

 

State policy

State mineral economy

The Minnesota Legislature enacted Minnesota Statutes, section 93.001 setting forth state policy to:

“provide for the diversification of the state's mineral economy through long-term support of mineral exploration, evaluation, environmental research, development, production, and commercialization.” 

Leasing and revenue

The state of Minnesota issues leases for nonferrous metallic minerals mining units pursuant to Minnesota Statutes, section 93.25; Minnesota Rules, parts 6125.0100 -.0700. MN DNR creates mining units (what is a mining unit?) to establish the state-owned lands and minerals that are available for lease in accordance with Minnesota Statutes, section 93.15. As a result of metallic mineral leasing, a portion of the state’s mineral economy is derived from nonferrous metallic mineral exploration and development. Even with a lease, a mine cannot be built until an Environmental Permit is obtained.

Purpose and policy

The state Minnesota Rules, Chapter 6132  states that the purpose and policy concerning nonferrous metallic minerals is:

Purpose

• control possible adverse environmental effects of nonferrous metallic mineral mining,
• to preserve natural resources,
• and to encourage planning of future land utilization,
• while at the same time promoting orderly development of nonferrous metallic mineral mining,
• encouragement of good mining practices,
• and recognition and identification of the beneficial aspects of nonferrous metallic mineral mining

Policy

• mining be conducted in a manner that will reduce impacts to the extent practicable,
• mitigate unavoidable impacts,
• ensure that the mining area is left in a condition that protects natural resources and minimizes to the extent practicable the need for maintenance.

Nonferrous Metallic Minerals Lease Sale

The MN DNR offers nonferrous metallic minerals leases through a public competitive bid offering (Minnesota Rules, parts 6125.0500) known as the Metallic Minerals Lease Sale. 

The metallic minerals state lease category includes elements such as copper, nickel, platinum, palladium, gold, silver, cobalt, chromium, titanium, zinc, lead, bismuth, tin, tungsten, tantalum, niobium, or rare earth elements. Some of these ores contain native gold or native copper, or oxides of chromium or titanium, but the common trait in this category is that most of the ore deposits contain sulfide minerals. Conditions and obligations within state mineral leases, environmental review, and permits are all specifically designed to mitigate the environmental impacts of exploration and/or mining of sulfide minerals.

All leases for nonferrous metallic minerals must be approved by the Executive Council (93.25, Subd. 2). The Executive Council consists of the governor, lieutenant governor, secretary of state, state auditor, and attorney general. 

 

Locations of state nonferrous metallic mineral leases

Explorers invest in locations where they believe the geologic conditions are prospective to contain undiscovered mineral deposits, based upon known mine locations with similar geologic conditions in other parts of the world.

The state has offered (see map 1 for 'ever offered for mm lease' on map symbolized as green') state leases for metallic minerals on the state mineral rights in the following 21 counties at some time since 1966: Aitkin, Beltrami, Carlton, Cass, Cook, Crow Wing, Itasca, Kanabec, Koochiching, Lake, Lake of the Woods, Marshall, Mille Lacs, Morrison, Norman, Ottertail Pine, Roseau, St. Louis, Todd, and Wilkin Counties.

Map 1 displays active state mineral leases (as of August 13, 2012) in 7 counties as shown in Table 1. Note that the map is so small that it cannot accurately show the details of the size (acreage) and shape (parcel shape and number of parcels) of each state mineral lease. That information is available in a document called the State Mining Unit Book.

Table 1: List of counties with state metallic minerals leases (as of August 13, 2012)

County	Number of Leases	Percentage of Total Leases
Aitkin	84	21%
Carlton	36	9%
Itasca	21	5%
Koochiching	3	0.5%
Lake	114	28%
Mille Lacs	2	0.5%
St. Louis	146	36%
7 Total Counties	406 Leases	100%

Targeted metallic minerals for exploration

There has been exploration for copper and nickel deposits in the bedrock unit called the Duluth Complex in St. Louis and Lake Counties, since the discovery of copper and nickel mineralization there in 1948. Platinum and palladium were discovered in the Duluth Complex in 1986. Subsequent geologic research indicates that the copper and nickel and platinum and palladium tend to occur together in the known deposits in the Duluth Complex. But platinum and palladium could be found in separate deposits from the copper and nickel, based upon examples around the world. Known deposits of Titanium have been found in Oxide-bearing ultramafic intrusions of the Duluth Complex.

See the geologic map  for the location of Duluth Complex and related bedrock units associated with the Midcontinent Rift, a feature formed when tectonic forces pulled the continent apart. The Midcontinent Rift's Tamarack intrusion in Aitkin County is being actively explored and is known to host copper and nickel mineralization. In addition, explorers are looking to determine if buried intrusions from the Midcontinent Rift also occur in Kanabec and Mille Lacs counties.

There are private mineral leases in virtually all the same areas as the active state mineral leases. These are on privately owned lands, so the state does not have locations for them, except where a company discloses the lease in a public way such as on a website. There is also exploration for copper and nickel on private (not state) mineral leases in southern MN.

There has also been gold exploration in many areas of Minnesota for more than 100 years. There are many bedrock locations that contain economic quantities of gold, but so far only small tonnages have been found. One example is near the cities of Virginia and Gilbert, just north of the iron mines. Currently there is gold exploration occurring in St. Louis, Itasca, and Koochiching counties.

 

Companies with State Nonferrous Metallic Minerals Leases

Table 2: List of companies holding state metallic mineral leases (as of August 13, 2012)

Exploration Company	Number of Leases	Counties
608457 B.C. Ltd.	6	St. Louis
Agate Lake Resources, LLC	14	St. Louis
DMC USA LLC	75	Lake and St. Louis
Encampment Minerals, Inc.	108	Lake and St. Louis
Franconia Minerals Inc.	17	Lake and St. Louis
HTX Minerals Corp.	17	Aitkin and Carlton
Kennecott Exploration Company	82	Aitkin and Carlton
Lehmann Exploration Management, Inc.	34	Itasca, Koochiching, and St. Louis
Minerals Processing Corp.	23	Aitkin, Carlton, and Mille Lacs
Prime Meridian Resources, Inc.	4	St. Louis
Teck American Inc.	2	St. Louis
Twin Metals Minnesota LLC	10	Lake
Vermillion Gold LLC	14	Itasca, Koochiching, and St. Louis
Total	406	Aitkin, Carlton, Itasca, Koochiching, Lake, Mille Lacs, and St. Louis

See a map of active state nonferrous metallic minerals leases by company in the Duluth Complex and related bedrock units associated with the Midcontinent Rift (As of August 13, 2012).

 

 

State mineral interests: Defining the mineral estate, surface estate, and severed estate

As stated, the state may lease its nonferrous metallic mineral interests for mineral exploration and development according to Minnesota Statutes 93.25, Minnesota Rules 61.25.0100-.0700. Listed below are definitions and summaries of the three different estates; Mineral, Surface, and Severed.

Mineral estate

A mineral interest is an estate in real property that is referred to as the mineral estate. The mineral estate includes, among others, many different metal ores, coal, oil, natural gas, gemstones, silica sand, and dimension stone. The mineral estate consists of the following:

• the right to use as much of the surface as is reasonably necessary to access the minerals,
• the right to execute any conveyances of mineral rights,
• the right to receive bonus consideration,
• the right to receive rentals, and,
• the right to receive royalty.

The mineral estate owner has the legal right to convey any or all of these five mineral rights.

Surface estate

Like a mineral interest, the surface interest is an estate in real property. Fee simple ownership of the surface estate means that the owner enjoys all the rights that one can hold in the surface. However, the term surface estate can mean a number of different rights in the surface including the right to sell, lease, mortgage, donate, subdivide, or grant easements over the surface and the right to a stream of benefits from agricultural production and natural resource development of the surface. The rights can be granted for a period of years, a day, year, lifetime, or be inheritable.

Severed estate

A severed estate occurs when a property owner severs the mineral estate from the surface estate. Doing so, thereby creates two separate ownership interests that can be conveyed separately from one another (e.g. Owner "A" can sever the mineral estate, convey the surface estate to Owner "B" and later convey the mineral estate to Owner "C"). In Minnesota, severed mineral estate owners are required to register their mineral estate by recording a Statement of Severed Mineral Interest (Minnesota Statutes, section 93.52.) 

State law requires that the State retain the mineral rights whenever it conveys real property. Thus, a severed mineral estate is created when the State conveys real property. After a conveyance by the State a private party owns the surface estate and the State owns the mineral estate. (Minnesota Statutes, sections 16B.286, 93.01-93.04, 94.14).

 

If you have additional questions on this topic please contact:

Susan Damon, Transaction Manager
MN DNR - Division of Lands and Minerals
500 Lafayette Road 
St. Paul, Minnesota 55155-4045
tel. 651-259-5955 
fax 651-296-5939 
susan.damon@state.mn.us