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> Natural gas is what Stefano Marani and Nick Mitchell had on their minds when they bought gas rights on this 87,000-hectare piece of land in the Free State pro

• lazide 5y ago
  Often the resources can be unproven (so a gamble) or uneconomic to extract (so net negative economically), combined with some degree of other liability like taxes, security issues, bad infrastructure that needs replacing, etc. That can change if it turns out the actual resources are more valuable, easier to extract, or the liabilities can be resolved with significant investment. Sometimes people throw millions at things too, and don’t really break even. We can’t really see their books here, so we don’t know.
• Turing_Machine 5y ago
  > How can someone sell the gas rights for just $1...Is there a tax involved when someone extracts resources? I don't know anything about South African law, but in my home (Alaska) these rights are typically put up for public auction, and yes, there is a further "severance tax" levied on any production that may eventually occur. The (relatively low) auction price is just to lock in exclusivity, generally for a limited length of time. One reason that the initial leases are low is that the actual amount of gas or oil on the property is generally unknown until you get out there and start drilling holes, or at least doing some seismic mapping. If you find oil or gas and wind up producing it, you then have to pay taxes on that, but if there's nothing there, you haven't wasted your money. Not all states have a severance tax, though.