BOARD OF REGENTS BRIEFING PAPER

Transcription

1 BOARD OF REGENTS BRIEFING PAPER 1. Agenda Item Title: Approval of University of Nevada, Reno Transfer of Real Property Mineral and Surface Rights in Exchange for Real Property Surface Rights in Esmeralda County, Nevada 2. BACKGROUND & POLICY CONTEXT OF ISSUE: Summary Earlier this year, the University was approached in an effort to resolve two real property problems: 1. The first resulted from NSHE having entered into a twenty (20) year Lease Agreement in 1979 for Mammoth No. 3 (a mining claim) with Tonopah Divide Mining Company s predecessor in interest. NSHE owns the mineral rights to Mammoth No. 3 and a 50% interest in the surface rights. The Lease Agreement included a right to extend the lease for an additional twenty (20) years, which Tonopah Divide s predecessor exercised. The Lease allows Tonopah Divide to mine Mammoth No. 3 and requires it to pay certain royalties to NSHE. Neither the current co-owner, Lambertucci s Roma of Nevada, LLC, nor its predecessors in interest were included as a party to the lease, although it owns a 50% interest in the surface rights to Mammoth No In 1980, NSHE granted an Easement For Sewage Treatment Site and an Easement for Sewage Outfall Line to Nye County on certain properties (the Lambertucci Claims) so that Nye County could build a sewage treatment facility on approximately forty (40) acres of the approximate eight hundred (800) acre site. Pursuant to an agreement with Nye County, the Board of Regents has the first right of refusal to all effluent waters discharged from the sewage facility to be used for agriculture or some other use. In 1991, Nye County granted to the Board of Regents 1.25 acres within the Tonopah city limits. This parcel was granted in consideration of the easements NSHE granted to Nye County. NSHE sold these 1.25 acres to McDonald s Corporation for $60, in Lambertucci s Roma of Nevada claims that NSHE should not have granted the easements to Nye County without the consent of their predecessors in interest. Lambertucci s Roma of Nevada currently owns the surface rights to the eight hundred (800) acre site. A detailed history of these two transactions is included in Exhibit 1. A consultation analysis dated October 27, 2009, by Mr. Reese Perkins, a MAI, SRA Appraiser, is attached as Exhibit 2 and demonstrates the value of the 50% interest in the surface rights of the Hypatia, Monarch, and Pittsburg Claims to range from $4,950 to $6,600. Given the location of the property, the wide geographic dispersion of the comparable sales data, and the extensive travel time that would be required to complete a summary appraisal, Mr. Perkins estimated that a budget of between $6,000 and $10,000 would be required for such an appraisal, Exhibit 2, page 4. In light of the anticipated cost of a summary appraisal when compared to the price range of $4,950 to $6,600 of the consultation analysis, and in light of the fact that the cost of the summary appraisal could likely exceed the value of the property, a summary appraisal has not been undertaken. Revised: March 2007 (INVESTMENT AND FACILITIES COMMITTEE 12/03/09) Ref. IF-5, Page 1 of 26

2 Proposed Resolution The University of Nevada, Reno and Lambertucci s Roma of Nevada have negotiated a resolution of their dispute and seek to exchange property rights in exchange for mutual releases of all claims. According to the resolution, NSHE would exchange its mineral rights in the Lambertucci Claims and its mineral rights and 50% interest in the surface rights of three additional claims known as Hypatia, Monarch, and Pittsburg for Lambertucci s Roma of Nevada s 50% interest in the surface rights of Mammoth No. 3. This series of exchanges and resultant changes in ownership are summarized in Table 1. NSHE and Lambertucci s Roma of Nevada would also execute mutual releases of all claims, which would release all claims concerning Mammoth No. 3, the Nye County easements, and the McDonald s property. TABLE 1 MAMMOTH NO. 3 MINING CLAIM (20 ACRES) NSHE CURRENT OWNERSHIP NSHE POST RESOLUTION OWNERSHIP Surface Rights 50% 100% Sub-Surface Rights 100% 100% LAMBERTUCCI MINING CLAIMS (800 ACRES) Surface Rights 0% 0% Sub-Surface Rights 100% 0% HYPATIA, PITTSBURG AND MONARCH MINING CLAIMS (35 ACRES) Surface Rights 50% 0% Sub-Surface Rights 100% 0% 3. SPECIFIC ACTIONS BEING RECOMMENDED OR REQUESTED: President Milton D. Glick requests approval of the transfer of the real property mineral rights to the Lambertucci Claims and surface and mineral rights to the Hypatia, Pittsburg, and Monarch claims to Lambertucci s Roma of Nevada, LLC, in exchange for the transfer to the Board of Regents, on behalf of the University of Nevada, Reno, of a 50% interest in the surface rights of mining claim Mammoth No. 3 in Esmeralda County, Nevada. 4. IMPETUS (WHY NOW?): Issues have come to light regarding the current lease and past rents of Mammoth No. 3. Both parties wish to put these issues behind them and are ready and willing to enter into this proposed exchange of property rights. Revised: March 2007 (INVESTMENT AND FACILITIES COMMITTEE 12/03/09) Ref. IF-5, Page 2 of 26

3 5. BULLET POINTS TO SUPPORT REQUEST/RECOMMENDATION: This exchange would resolve potentially serious disputes with Lambertucci s Roma and Michael Lach over Mammoth No. 3 and the easements on the Lambertucci s Claims. Since 1969, when the University received the Lambertucci Claims, no entity has approached the University with any serious plan to mine the Lambertucci Claims. Dr. Jonathan Price, State Geologist and Director of the Nevada Bureau of Mines and Geology, has stated that the costs to explore the viability of mining the Lambertucci Claims would likely exceed $1,000,000, funds which the University does not have and which it would not be inclined to spend in an effort to assess the viability of profitable mining of the Lambertucci Claims. (See Exhibit 3. September 30, 2009, opinion letter from Dr. Price). Any concerns Centerra Gold has about moving forward with its exploration under the current lease, which requires it to pay certain royalties to NSHE, would be resolved through this exchange. 6. POTENTIAL ARGUMENTS AGAINST THE REQUEST/RECOMMENDATION: Someday the University might have excess funds to use to explore the viability of mining the Lambertucci Claims and, while unlikely, minerals worth mining might be found. 7. ALTERNATIVE(S) TO WHAT IS BEING REQUESTED/RECOMMENDED: Litigation of the dispute. 8. COMPLIANCE WITH BOARD POLICY: X Consistent With Current Board Policy: Title # 4 Chapter # 10 Section # 1 While the exchange of property is not explicitly addressed in Title 4, Chapter 10, Section 1, UNR believes that the Board of Regents would want to review and approve this type of transaction. Amends Current Board Policy: Title # Chapter # Section # Amends Current Procedures & Guidelines Manual: Chapter # Section # Other: Fiscal Impact: Yes No Explain: Revised: March 2007 (INVESTMENT AND FACILITIES COMMITTEE 12/03/09) Ref. IF-5, Page 3 of 26

4 EXHIBIT 1 Background Information As the result of certain bequests of mining claims in Esmeralda County, Nevada, by Claudio Savino Pellanda in 1958 and by Domenico Lambertucci in 1969, the Board of Regents has a 100% ownership interest in the mineral rights of Mammoth No. 3 and a 50% ownership interest in the surface rights of Mammoth No. 3. In 1979, the Board of Regents, on behalf of the University of Nevada, Reno, and Everett Berg dba Falcon Exploration Co. (Falcon), entered into a Lease Agreement for Mammoth No. 3. The Lease was for twenty (20) years. Falcon had the right under the Lease to extend the Lease for an additional twenty (20) years. The Lease required Falcon to make minimum royalty payments of $ per year and royalties based upon 5% of net smelter returns for all ore removed from the property. In 1986, Falcon assigned its rights under the Lease to Tonopah Divide Mining Company (Tonopah Divide). In 1999, Tonopah Divide exercised its right to renew the Lease for an additional twenty (20) years. The Lease is currently in effect on Mammoth No. 3. Centerra Gold, under a contract with Tonopah Divide, is exploring development of mining Mammoth No. 3. Although the predecessors in interest of Lambertucci s Roma of Nevada, LLC (Lambertucci s Roma), held a 50% interest in the surface rights of Mammoth No. 3, neither Lambertucci s Roma nor its predecessors in interest were included in the Lease. Tonopah Divide or its predecessor has made annual royalty payments (rent) to the University of Nevada, Reno since As the result of certain other bequests of mining claims in Esmeralda County, Nevada by Domenico Lambertucci in 1969, the Board of Regents has a 100% ownership interest in the mineral rights of certain other patented lode mining claims (the Lambertucci Claims). In 1980, the Board of Regents on behalf of the University of Nevada, Reno granted an Easement for Sewage Treatment Site and an Easement For Sewage Outfall Line to Nye County on the Lambertucci Claims so that Nye County could build a sewage treatment facility on approximately forty (40) acres of the approximate eight hundred (800) acres of the Lambertucci Claims. The Easement for Sewage Treatment Site included a 300 foot buffer zone around the site. Pursuant to an agreement with Nye County, the Board of Regents has the first right of refusal to all effluent waters discharged from the sewage facility to be used for agriculture or some other use. In 1980 an appraisal of the 40 acre site, the 2 acre easement for the outfall line and the 50-acre buffer zone valued the property at $54, In 1991, Nye County granted to the Board of Regents 1.25 acres within the Tonopah city limits. This parcel was granted in consideration of the easements the Board had granted to Nye County. The Board of Regents sold this 1.25 acres to McDonald s Corporation for $60, in In 1995, the Board of Regents quitclaimed to the predecessors of Lambertucci s Roma (Mr. Lambertucci s sisters) the surface rights of the real property known as the Lambertucci Claims. In 2009, the District Court for Nye County found that the heirs of the Lambertucci sisters had assigned their interests in the real property that the Lambertucci sisters had received from Domenico Lambertucci to Lambertucci s Roma, including the real property interests that the Board of Regents had quitclaimed to the Lambertucci sisters in (INVESTMENT AND FACILITIES COMMITTEE 12/03/09) Ref. IF-5, Page 4 of 26

5 In 2009, Michael Lach and Lambertucci s Roma approached the University of Nevada, Reno regarding the Lease Agreement currently in effect on Mammoth No. 3 and the sewage treatment facility and related easements on the Lambertucci Claims. Lach and Lambertucci s Roma claim that the Board should not have entered into the Lease with Falcon/Tonopah Divide or extended that Lease and that the Board should not have granted easements to Nye County for the sewage treatment facility and outfall line on the Lambertucci Claims without the consent and/or participation of their predecessors in interest. The University of Nevada, Reno and Lambertucci s Roma and Michael Lach have negotiated a resolution of their dispute and seek to exchange property rights in exchange for mutual releases of all claims. Dr. Jonathan G. Price, State Geologist and Director of the Nevada Bureau of Mines and Geology has provided an opinion concerning the value of the mineral rights in the Lambertucci Claims and in Mammoth No. 3. Dr. Price has opined that it would likely take drilling and several (12 or so) months to obtain permits, to drill, assay, and evaluate the results of the Mammoth No. 3 and Lambertucci Claims and that costs for such exploration work could easily exceed $1 million. Dr. Price has also opined that, given available information, the value of Mammoth No. 3 claim is likely to be considerably more than that of the Lambertucci Claims. The Mammoth No. 3 Claim is within an area currently under active exploration. An October 27, 2009, consultation analysis by Mr. Reese Perkins, MAI, SRA and Nevada Certified General Appraiser, identified the potential price range of the 50% interest in the surface rights of the Hypatia, Monarch, and Pittsburg Claims to be $4,950 to $6,600. Under the proposed resolution, NSHE will exchange its mineral rights in the Lambertucci Claims and its interests (50% in surface rights; 100% in mineral rights) in the Hypatia, Monarch, and Pittsburg claims for Lambertucci s Roma of Nevada, LLC s 50% interest in the surface rights of Mammoth No. 3 and the parties will release all claims against each other. (INVESTMENT AND FACILITIES COMMITTEE 12/03/09) Ref. IF-5, Page 5 of 26

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