The Uranium Royalty Provision: its Evolution, Present Complexity and Future Uncertainty
Any consideration of uranium royalties must begin with Circular 5. I assume that anyone who is active in the uranium industry is familiar with this document, but for purposes of giving necessary background, I will briefly review its provisions. Furthermore, because of its effect on subsequent lease forms, repeated reference will hereafter be made to it.
Circular 5 became effective on March 1, 1951.1 Though not a royalty provision itself, it created the basis for scores of future uranium royalty clauses. By its terms the buyer, the U. S. Atomic Energy Commission (AEC), agreed to purchase any uranium-bearing and vanadium-bearing ore delivered to its depot at Monticello, Utah. The basis for the uranium price was the U3O8 contained in ore as determined by sampling and assay. The amount was a specified sum per pound of U3O8 contained in ore, such sum increasing as the percentage of U3O8 per ton increased. Thus, for each pound of U3O8 contained in ore assaying .10 percent U3O8, or two pounds per ton, the AEC paid $1.50; for each pound in ore assaying .15 percent, or three pounds per ton, the price was $2.50. “Ore” was defined merely as follows: “The term 'ore' does not include mill tailings or other mill products.” In addition to the base payment, fifty cents was paid for each pound purchased as a mine development allowance. This must be spent for urani
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