Lomex Corp. v. McBryde

A partition deed gave a group of mineral rights holders (defendants) mineral leasing rights to some land subject to a reservation of royalties to other property interest holders (plaintiffs). The royalty was for one-eighth of the value of the minerals mined or marketed from the land. The Lomex Corporation (defendant) gained a lease interest to mine uranium from one of the mineral rights holder’s properties. Under that lease, the mineral rights holders would have a 7 percent royalty from all yellowcake sold from the mine. Lomex used a solution mining technique that resulted in a liquid with uranium being brought to the surface. That liquid then went to a treatment plant, where the uranium was filtered out into a substance known as yellowcake. The property interest holders who had royalty interests under the partition deed learned of the lease and sued, seeking a declaratory judgment regarding their one-eighth royalty interest. The property interest holders argued that under the deed, they were entitled to one-eighth of the gross proceeds from the sale of the yellowcake. The mineral rights holders responded that if the property interest holders were entitled to a royalty, it should be based on the liquid solution produced at the mine, or, if based on the yellowcake sold, the costs in producing the yellowcake at the treatment facility should be accounted for. The trial court sided with the property interest holders, concluding that they were entitled to a one-eighth interest of the sale of yellowcake without factoring in the production costs at the treatment facility. The mineral rights holders appealed.