Legal Definitions - marketability test

Marketability Test

In U.S. mining law, the Marketability Test is a crucial standard used to determine if a person can gain full ownership (a "patent") of a mining claim on federal land. It ensures that claims are made for economically viable mineral deposits, not just for speculative purposes or for minerals that are too costly to extract and sell.

To pass this test, two main conditions must be met:

• First, it must be shown that a reasonably prudent person – meaning a sensible businessperson – could realistically dig up (extract) the mineral and sell it for a profit. This considers all costs involved, from mining operations to transportation and processing.
• Second, at the exact time the mineral was discovered, there had to be a significant enough market for that mineral to make it attractive for such a prudent person to invest their time and resources.

Here are some examples to illustrate the Marketability Test:

• Example 1: Common Construction Aggregate

  Imagine a prospector discovers a vast deposit of common gravel and sand on federal land, which are used in construction. While these materials are certainly useful, the marketability test would scrutinize whether extracting and selling them from this specific location would be profitable. If the deposit is in a very remote area, requiring expensive road construction and long-distance hauling to reach potential buyers, the costs might outweigh the relatively low market price for gravel. Even though there's a general market for construction materials, if the specific costs for this claim make it impossible for a prudent businessperson to turn a profit, the claim would likely fail the marketability test.

• Example 2: High-Value Mineral in a Challenging Location

  Consider a situation where a miner finds a small but rich vein of a rare earth element, highly valued for electronics, deep within a rugged, mountainous federal forest. The mineral itself is very valuable. However, the marketability test would assess the practicalities: Can this small vein be extracted profitably given the immense costs of building access roads, establishing a mine in such difficult terrain, and transporting the ore? If the investment required is so high that even with the mineral's high price, a sensible businessperson couldn't expect to make a profit, the claim would not pass the test. The test looks beyond just the mineral's intrinsic value to its economic viability.

• Example 3: Mineral with Fluctuating Demand

  A prospector discovers a deposit of a unique type of industrial clay on federal land. At the time of discovery, this clay was in high demand due to its specific properties, which were crucial for a booming niche manufacturing industry. However, by the time the prospector applies for a patent, the manufacturing industry has shifted to a new material, and the demand for this specific clay has plummeted. The marketability test would likely fail this claim because, at the time of the patent application (or even if the market had already collapsed by the time of discovery), there is no longer a sufficient market to attract a reasonably prudent person to invest in its extraction and sale for profit. The test emphasizes the existence of a viable market at the relevant time.