Royalty

A royalty is a payment a mining or oil company makes to a government or landowner for the right to extract a resource, based on production value or volume.

A royalty is the price a government or landowner charges for allowing a company to extract a resource that belongs to them, calculated either as a share of the value of what is produced or as a fixed amount per unit extracted. It is separate from ordinary corporate taxes and is charged regardless of whether the extracting company is profitable.

Royalty rates and structures vary widely by country and by resource, and they are one of the main tools a government has to capture value from its natural resources without owning or operating the mine or well itself. Royalties also exist as a private financial product: an investor can buy the right to a royalty stream from a specific mine or field in exchange for upfront financing, similar in spirit to an offtake agreement but structured as a royalty rather than a supply contract.