Management Contracts and Stock Interests

If the seller of a mine has decided to keep an interest or equity on the property but is not interested in actively participating in its management, there is a way in which a management contract might work to his advantage. The company settles on operating the mine for a certain fee. The fee might be a part of the profits or a fixed amount. This arrangement in most cases applies to a producing mine or to a mine that has been developed to the point of production, than to one that is still an undeveloped prospect. One other kind of agreement has to do with the prospector agreeing to take an interest in a public or private company that might be established to develop the mine. The prospector would be permitted to an interest in the property that would then be established in the agreement and could go up to a twenty five percent of the non participating share. The company that develops the prospect will usually get an interest that is in proportion to the capital that is used. For instance, an expenditure of ten million dollars would give the concern of a seventy percent interest, while a fifteen million dollar outlay will very likely entitle it to a seventy five percent share.