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Bankruptcy Problems in Mineral Agreements

Craig A. Christensen, Mining Agreements (1979)

The excitement generated by a rising market for mineral products unfortunately tends to anesthetize the caution which should proceed from the speculative nature of any such endeavor. All too often mineral exploration companies seem not to consider that property interests may often be freely conveyed, and the interest presently owned by a financially sound company may someday be conveyed to a company with fewer financial resources. Thus the mining lawyer ought not merely to ignore the problems to be encountered by a mining venture in distress. Specifically, the impact on mining ventures of federal bankruptcy law with its intensely equitable and debtor-oriented objectives ought to be considered while the venture is being structued so that future problems may at least be assessed, if not prevented. There is some immediacy to this consideration with the adoption on November 6, 1978, of the Bankruptcy Reform Act of 1978.1 This is the most comprehensive revision of the Bankruptcy Act since the Chandler Act of 1938 and indicates a 40-year cycle in the restructure of bankruptcy laws in this country.2

The frustration of a non-bankruptcy specialist in obtaining a feel for the practical problems of this field is compounded by the difficult access to decisions. Bankruptcy decisions are both selectively and unofficially reported in three general sources. These are CCH Bankruptcy La