Limestone and Gravel Royalty Rates

Aggregate companies producing limestone or sand and gravel rely on minerals to run their business. When searching for aggregate reserves, producers look for attributes like high-quality minerology, significant local demand for the product, superior transportation linkages, and others.

The most common acquisition of rights is the fee estate. In this instance, aggregate companies purchases mining land outright and control the property indefinitely while running their sand and gravel pit operations. Another common arrangement is for the construction aggregate companies to lease the aggregate reserves. 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 regarding mineral Leased Fee interest). After mining is complete, the land is returned to the owner in an agreed-upon condition.

How to value Minerals with Crushed Stone or Gravel Royalty Rates

In all commercial real estate settings, the rental rate is highly correlated with the type of asset being leased. For example, a company renting office space in a city's central downtown district could expect to pay rents that are possibly 2-5x those of the surrounding suburbs. Therefore, in analyzing royalty rates, professional mineral appraisers measure property productivity using recognized mining industry standards.

Industry Standards for Measuring Mineral Properties

Because minerals are below the earth and not directly observable, professional standards exist to measure the property areas that are actually minable and profitable. In the United States, these industry standards are the SME (Society of Mining, Metallurgy & Exploration) Guide. Download here.

The goal of these standards has been to protect investors from being effectively duped into believing geologic assets exist when they don't. For example, the SME Guide attempts resolve this problem by providing a recognized framework to neutralize frothy expectations of the property being economically minable in its future, proposed extraction areas.

These geoscientific/risk measurements factor into appraisal settings because there is no rent roll or other means of verifying the economic units (such as rentable square feet) like typical commercial property. In fact, in a mine setting, the minerals can rarely even be viewed until they are taken out of the ground. The mineral availability is simply not something that can be assumed, or cross-checked with contracts and other typical real property data. Therefore, the SME Guide and several other mineral industry reporting standards such as the SEC SK-1300 regulations provide the pathway to mitigate investor risks.

Realizing how the valuation can be easily influenced by the geologic assumptions (for example, making an assumption that a zone of minerals is minable), industry standards such as the SME Guide, SEC regulations and many US states require the estimator to be licensed and/or accountable to a geoscience professional board. Once these factors are accounted for, royalty rates are frequently analyzed in light of the property's productivity assessment.

Sand and gravel mine

Like commercial real estate leases, a quarry lease or gravel pit lease allows the producer to occupy the property and conduct their business. The difference is that the owner is also allowed to extract minerals for an agreed-upon rate in addition to occupancy.

What are Common Limestone Royalty Rates or Gravel Royalty Rates?

Here are some examples of rates we've encountered from various locations. Overall, royalty rates are uniquely driven by the local market’s property characteristics and fundamental market behavior. Rock Associates performs mineral appraisals utilizing an extensive, nation-wide database of transactions and can authoritatively say there is no on-size-fits-all when it comes to limestone royalty rates or sand and gravel royalty rates. Leases for the same mineral can be high or low depending on various factors. Here are a few lease rates we've observed from state to state.



Royalty Rate

Granitic Alluvium



Aggregate Quarry



Aggregate Quarry



Aggregate Quarry



If you need help appraising a mine or quarry, you can get in touch through our contact page. Rock Associates offers high-quality, certified mineral appraisals for your specific needs and commonly 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 over 15 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.