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Limestone and Gravel Royalty Rates

Aggregate companies that produce limestone or sand and gravel rely on sources of minerals to run their business. When searching for aggregate reserves, producers look for specific attributes - commonly leasing those properties.

Can royalty rates be used to value a mining property?

Our answer: with great care.

Understanding Mineral Property

We frequently speak with property owners who've retained a geologist to quantify the volume of rock within their property. The owner anticipates applying a royalty rate to that volume, perhaps absorbing the rock over 10, 20, or more years. One confusing result is that this calculation automatically generates a positive mining value for any property containing rock. If multiple properties are analyzed, numbers can swell rapidly.

Mining companies incur significant expenses in employing geologists and engineers because:

  1. They determine what, in reality, can be mined from the property and processed into finished goods.

  2. They understand the geologic context and analyze the property in comparison to alternate deposits.

An appraisal without great care applied by geology or mining engineering professionals is not likely to be anchored in accurate property or market data. Simply stated, measuring the mineral property and its market position is a task requiring rigor and specialized knowledge.

For this reason, the mining industry has instituted standards to characterize mineral property. These requirements are designed to protect investors from numerous types of misrepresentations that may commonly occur in the minerals industry. They facilitate confidence that minerals not only occur on the property but may also be economically developed. They have been adopted across the board in many countries and even codified into US law for activities such as public stock reporting.

How to value Minerals with Crushed Stone or Gravel Royalty Rates

For typical commercial real estate, rent rates are highly correlated with the type of asset and surrounding market. For example, downtown office buildings may command rent that is 2-5x that of the surrounding suburbs. Similarly, in analyzing mineral royalty rates, professional mineral appraisers measure specific property productivity using recognized industry standards.

Industry Standards for Measuring Mineral Properties

Because minerals are below the earth and unseen, industry standards exist to measure portions of the property that are truly minable and profitable. In the United States, these industry standards are the SME (Society of Mining, Metallurgy & Exploration) Guide.

The SME Guide is depended upon by mining engineers and geologists because it provides clarity - a recognized, consistent framework for performing mining productivity analysis.

At a mine, there is no rent roll or other means of verifying the economic units (such as rentable square feet) like typical commercial property.

Therefore, geoscientific and risk measurements are used in appraisal settings because mineral availability is not something that can be assumed or cross-checked with contract data.

Mining valuations are easily influenced by geologic assumptions (for example, assuming that a zone of minerals exists, is capable of being excavated, or is even profitable to mine and process). Therefore, industry standards such as the SME Guide, SEC regulations, and many US states require the estimator to be registered and accountable, for example, to the state engineering or geologic licensing board.

Once these factors are accounted for, royalty rates are frequently analyzed in light of the property’s productivity assessment.

Sand and gravel mine

Property Rights

In many instances, aggregate companies purchase mining land outright and control the property indefinitely while running their quarry or sand and gravel operations. Another typical arrangement is for the construction aggregate companies to lease the aggregate reserves.

Like commercial real estate leases, a quarry lease or gravel pit lease allows the producer to occupy the property and conduct their business for a specific duration. The difference is that the owner is also allowed to remove minerals and change the nature of the property.

The company will retain rights to develop the property and use the minerals in its business over a set time (See our Quarry Appraisal Primer). After mining is complete, the land is returned to the owner in an agreed-upon condition.

What are Common Limestone Royalty Rates or Gravel Royalty Rates?

Overall, royalty rates are driven by unique property character and specific, localized market settings. Rock Associates performs mineral appraisals daily utilizing our own extensive, nationwide database of transactions and can authoritatively say there is no one-size-fits-all regarding limestone royalty rates or sand and gravel royalty rates. The lease rates applied to each property vary considerably, and each property is different.

Leases for the same mineral can be high or low depending on many factors. However, they can be reliably valued by experts who combine recognized forms of geologic, mining, and appraisal analysis. Here are a few examples of lease rates we’ve encountered from state to state.



Royalty Rate

Aggregate Quarry



Granitic Alluvium



Granitic Alluvium



Aggregate Quarry



Aggregate Quarry



Sand and Gravel



Aggregate Quarry



Aggregate Quarry



If you need help appraising a mine, quarry, or undeveloped property, you can get in touch through our contact page. Rock Associates provides high-quality, certified mineral appraisals for litigation, government, estate, lending, and other uses. We can also appraise other aspects of mineral property, including land, buildings, and business going concerns.

In addition to being a certified mineral appraiser and certified real estate appraiser, our firm principal, Evan Mudd, PE, holds degrees in Mining Engineering, Environmental Engineering, and an MBA with nearly 20 years of combined mining and valuation experience. He appraises minerals throughout the US for clients such as privately owned and operated quarries, NYSE publicly traded mining companies, governments, estates, investors, and banks. Let us know how to help.

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