Buying Your Own Mining Claim: Let The Buyer Beware

[Reno Chris]

I am doing up a more detailed coverage of this for the ICMJ, but I want to post at least a little on this here:

I've gotten several contacts in the last month from folks who have bought claims through ebay or by other means over the internet. These are people who don't know much of anything about mining or claims or anything else. They make old weird beard on Gold Rush look like a know-it-all mining genius. They ask me for help in recovering the millions and millions of $$$$$$$$  they just know are on their claim. I've also been contacted by folks who have filed legitimate claims and had encounters with these folks who stake over their valid claims to sell them to the inexperienced.

Now don't get me wrong, it is totally legitimate to stake and then sell a mining claim. it's totally legal to stake a claim with the idea that you might sell or lease the claim to another person. No problem there. The problem is mis-leading your buyers with things that just really are not true.  Leading your buyer to believe there is valuable ore on the claim when you have no sample data to show that is simply fraud.

What they sell is more like a dream than a business - the buyer thinks something like:  ooooh! Owning my own mining claim sounds so dreamy....

Those of us who have been doing this for a while are less dreamy eyed and more practical about it.

I know most of the guys who regularly post have a reasonable level of experience. I post this to the new guys and those who lurk here to learn. Here are my iron clad rules about buying mining claims that you should always follow:

1. Take everything the seller says with a giant grain of salt - they want to make a sale and will tell you what you want to hear. Let the buyer beware!

2. Never buy a claim until you have the skills to go out and sample the claim and evaluate it for yourself. Until you have those skills, you have no business trying to buy a claim.

3. Never consider buying a claim until you have the knowledge needed to go out and stake your own claim independently and maintain it with the government in good standing. You will need this information to determine if the claim you are buying is valid or not.

4. Never, never buy a claim without first inspecting it on site and in person, and performing a full property evaluation for yourself as noted in No. 2 above.

 

Buying a claim is a business decision and should be made like a business decision, not made as a daydream to seek and hope for something good.

 

[Steve Herschbach]

I would add to the above that if you lack the mentioned expertise - hire a qualified person that does. Best insurance money you will ever spend! There are companies that will file all the appropriate paperwork each year, etc. I filed my own paperwork for decades and still managed to screw it up finally so even people that think they know how can get caught.

Arizona has a page on mining scams at http://www.azgs.az.gov/mining_scams.shtml

More from http://dnr.alaska.gov/mlw/factsht/mine_fs/investig.pdf (on Alaska mining claims but similar issues apply elsewhere):

ASK THE SELLER:

1. Is the claim State or Federal? What is the claim name and number? If it is a state claim ask for the ADL (Alaska Division of Lands) number. This is the identifying number for state records regarding the claim, and will help you research claim history, status, staking and maintenance.

2. Who is the owner of record? Claims can have more than one owner. In such cases, remember if only the interest of one owner is being transferred, you will be a partner with other owners of record.

3. Ask for a recorded copy of the claim location certificate. A recorded copy of the claim location certificate will have on it the Recording District Office stamp, date of recording, and document number or book and page number.

4. Whether Annual Labor or assessment work has been accomplished on a continuing basis; was acceptable; and has been properly recorded and filed according to State or Federal regulations. (NOTE: Again, regulations vary considerably here! Detailed information can be obtained by contacting the appropriate information source for State and Federal claims.) ***Be careful of claims offered for sale after September 1. This is the end of the annual labor year on both State and Federal claims. Assessment work must have been accomplished for any specific year prior to that date and recorded no later than November 30th for the State claims and December 30th for Federal claims. Have the seller show you a properly recorded affidavit.

5. Whether the claim is in conflict with other mineral locations. Claim conflicts do occur and often end up in court when the parties involved cannot resolve the problem themselves.

You should verify the answers to the above questions through your own research or by engaging a professional agent to help guide you through the claim purchase.

Other factors can enter into claim validity – factors that are often challenged in a court of law, especially if claim conflicts exist. These may include:

1. Whether the claim was located following the guidelines of appropriate State or Federal regulations, including: • Whether a “discovery” of a locatable mineral actually took place. The seller should be able to prove what type of discovery took place, i.e. geochemical sampling, panning, or drilling. If a visit to the location is possible, obtain permission to do your own sampling. • Whether the claim was actually staked in the field. Were posts or monuments erected and notice posted according to law? Or, was the claim “paper-staked”? • Whether the claim was properly recorded within 45 days of the date of staking in the District Recorder’s Office where it was located.

2. Whether annual labor has been done and properly recorded. Errors in the “essential facts” required on the annual labor affidavit are grounds for abandonment of the claim.

3. Whether annual rental has been paid in a timely manner. On State mining claims the rental year begins at noon on September 1 and ends at noon on September 1 of the following year. Payments must be received no later than November 30 of the same year. The penalty for failure to make a timely payment is abandonment of the location. See the Annual Rental Fact Sheet available on the Mining Section web page or at the Public Information Centers in Anchorage or Fairbanks. • NOTE: A word of caution, if the staking date of a mining claim on State land is prior to September 1 of a particular year, two annual rental payments will be required during that first year. The first is due no later than 45 days after the staking date of the location, and the second, no later than November 30.

As a buyer, there are other important concerns you should be aware of or have clarified before taking the big plunge of investing:

1. Is the seller legitimate and reputable? What is their mining, prospecting, or geological background? How can it be verified?

2. Have any valuable minerals ever been produced or found on the land? Historical and geological reports on most areas in the State are available through the State Division of Geological and Geophysical Survey or the U.S. Geological Survey. The USGS maintains the Alaska Resource Data Files (ARDF) at http://ardf.wr.usgs.gov/. The ARDF files contain descriptions of many of the mineral occurrences in Alaska, and are a good quick reference.

3. Can the seller produce proof that he has operated on the claim? Depending on the type of equipment used, permits are normally required before any type of mining operation can begin. Operators who have submitted Applications for Permits to Mine in Alaska (APMAs) for intended mining activity involving mechanized equipment can be confirmed through a State Division of Mining, Land and Water Permitting Office.

4. Be aware of what rights you have with a mining claim! A common misconception is that the buyer is actually buying the land. This is not true, unless the mining property has been patented under Federal law and the owner has title to the land. (Patents are not issued under State mining laws.) Without a patent, the seller is only transferring their interest in the mineral rights to you. Ownership of the land remains with the State, Federal, or local government. As a claim owner, you have the right to possession and extraction of the minerals; but:

a. You may not use a mining claim for purposes other than mining. Incompatible uses include residential use, placing any surface improvement on the claim without written approval; and use of the claim to pursue recreational or business interests such as hunting, fishing, trapping, guiding, or outfitting.

b. You may not restrict public access without written approval from the land manager.

c. If a third party has interest in the surface estate of a state mining claim, such as a grazing lease or surface ownership by a borough, you are required to reimburse the lessee or surface owner for damages caused by your use of the location for mining.

5. Is the claim compatible with the type of mining you intend to do? For example, if you intend to conduct suction dredging activities and the claim is located on a salmon spawning stream, be aware of the time frame restrictions as to when dredging can take place – generally from May 15 to July 15 annually. Note that on federal lands (federal mining claims), suction dredging is authorized at the discretion of the Authorized Officer.

6. Access – Are you familiar with the claim’s general location? Is there reasonably accessible? If travel “cross country” is involved, check land status along the route. Native corporation land, parks, refuges, stream crossings, area plans, type of equipment, time frame for intended travel, restrictive right-of-ways, etc., are potential problem areas. Charter flights to a “fly-in” only area can be expensive.

7. Water Rights – Are existing water rights associated with the claim? Water rights are registered with the State of Alaska and a certificate issued by the State’s Department of Natural Resources, Division of Mining, and Land & Water. Will they be transferred as part of the purchase? What is the availability of water in that particular stream during the course of a mining season?

8. What permitting requirements are there for mining activities, including transportation of equipment; exploration; or actual mining, in Alaska? It’s important to know any such activity must be fully permitted before “start-up” can begin.

9. Can mining even be conducted on your claim? In recent years, lawsuits against the State and Federal governments have restricted or stopped mining activity altogether in certain areas.

[fredmason]

All great advice...

unfortunately once someone gets the dream in their head they often refuse to be rational. That is what keeps the flimflam bastards in business.

fred

[Reno Chris]

Quote

unfortunately once someone gets the dream in their head they often refuse to be rational.

Boy, you can say that again. Its like once I try to talk a little bit about reality, I am seen as if I am personally trying to stomp on their dreams. Sorry gents, there really aint no free lunch.

The people who sell the claims have been around for years, and some are more and some less dishonest. However I've seen a big uptick in the number of these folks out there. Its like one outfit has made some good money with this technique and so competition has suddenly sprung forth. If you get a GPAA magazine, there is a big two page spread for one. I saw another that gave itself a name like it was not a business, but a government agency.  Its a game of whack-a-mole.

[Swifty]

There is still lots of good open ground where you can file or pay to have a claim filed for you, its  still out there. First learn to use a Pan, use a shovel, and sample many places, the more the better. Dig down a few layers to bedrock if possible and sample again.

There are open areas where the old timers came thru and removed all the fine gold, screening off the nuggets for us :) Down side is a few passes by a good detector operator and most of the gold is gone so you should begin checking for fine gold first! Use your shovel and pan until you find a good pay layer then Drywashers, Recirculators, or a Sluce if your near a stream will be the tools of choice, Dig and run a 3x3x3 foot area, weigh up the results and good Luck.

 

[Nuff coils]

Just my 2 cents worth. Those bastards you talked about are out there waiting for you.

It took me about an hour to get into buying the claim and 4 months getting out of and getting my money back from the claim. Usually once the flim flam men get your money they are gone. Luckily I had used a credit card and after 27 pages of documentation and 3 months of waiting, the credit company did a charge back against this guys account. That didn't of course pay for my 4 trips to county offices and 3 trips to the BLM office in Sacramento or all the paperwork  and fees for the non existent claim.

So, if you're still interested, Steve and Chris have some great advice when it comes to claims. As for myself I'll join a club that has some viable claims.

[klunker]

 Is it coincidental that this topic has come up? In the last 3 weeks I have had 3 people call and ask me how to handle claims problems. I won't go into details here but perhaps we need to start policing our own. Very touchy subject.

Steve- You have listed 9 important points to consider before getting involved with a claim. Do you intend to list the next 217?

[Underburden]

I get a kick out of reading of the $250 additional fee when purchasing an eBay paper claim. Proof positive that there is no existing claim, rather just a promise to file a claim and deed after you pay the additional $250.

I've seen it done and the stupid seller forgot to file it at the county. Buyer has been filing his annuals, looks good on the BLM Serial Register Page, but still not a valid claim.

I've also seen buyers go directly to BLM and purchase 160 acres (4-40) and guess what, still no county recording 6 months later. BLM doesn't care, they got their money.

THANK YOU TODD HOFFMAN

[DolanDave]

Good topic,

Steve, you should stick your and Chris's advice on this forum, and just forward anyone with questions to it. 

  Hate to see people get screwed out of their money. 

Dave

[IDdesertman]

Very valuable info and great advise. No doubt that they prey on the inexperienced with stars in their eyes about owning a mine without the first bit of knowledge about it.

Ebay and the internet, GPAA magazine, classified section of the ICMJ is not much different.

As always, buyer beware...