Net Smelter Royalty: Formula, Deductions and Calculator

A net smelter royalty (NSR), also called a net smelter return royalty, is a private contract that pays its holder a fixed percentage of the money a mine receives for its metal after agreed smelting, refining and transport costs are taken off. If a mine sells concentrate for US$10 million, those costs come to US$1.5 million and the rate is 3%, the holder is paid 3% of US$8.5 million, which is US$255,000. The mine’s own mining, milling and overhead costs are normally not deducted, so the royalty is paid even in a year when the mine makes a loss.

That is the short answer to “what does NSR mean in mining”. The rest of this page shows how the number is built, which deductions are usual and which are disputed, how NSR differs from other royalty types, what rates appear in real deals, who holds these royalties, and which clauses to read before you sign or buy one. It is written for licence and claim owners, consultants and investors, and it is information, not legal or investment advice. A calculator further down lets you test your own rate, grade and price.

What a net smelter royalty means in mining

A royalty is a right to payment from the owner of a mining project, linked to the minerals taken out or sold. Law firm Clayton Utz notes that private royalties are often granted as a finder’s fee for an exploration project, or form part of the price paid to buy a project, and are increasingly used in financing deals (Clayton Utz, August 2024). A private royalty is a contract between the miner and the holder. A statutory royalty is different: it is a charge a government places on minerals it owns, and it works like a tax. Queensland, for example, sets its statutory rates in a regulation and charges 2.5% of value on minerals with no specific rate (Queensland Revenue Office). This page is about the private contract kind.

The word “smelter” comes from the way metal ores were once sold: the mine shipped concentrate (ore that has been crushed and upgraded so it is cheaper to ship) to a smelter, which melted it and charged for the work. The smelter’s price for the metal contained, less its charges, was the “net smelter return”. Today the term covers doré (an impure gold-silver bar poured at the mine), concentrates and other products, and it simply means the sale value less the post-mine costs the contract lists.

Two facts matter more than any definition. First, there is no single legal meaning. Clayton Utz states that a net smelter return royalty does not necessarily have a generally accepted or prescribed meaning, so the deductions are whatever the two parties wrote down (Clayton Utz). Second, the NSR is the standard form: the Congressional Research Service describes net smelter return as the basis for most private royalty contracts (Congressional Research Service). Barrick calls it the primary type of royalty on its own properties (Barrick, 2025 annual report).

How a net smelter royalty is calculated, step by step

Barrick’s accounting note gives the plain version: the company pays the royalty holder the royalty percentage multiplied by the value of gold production at market prices, less third-party smelting, refining and transportation costs (Barrick, 2025 annual report). In steps:

Infographic

How an NSR payout is built in 5 steps

1. 1Gross sales valueWhat the mine is paid for the metal in its doré or concentrate.
2. 2Allowable deductionsSmelting, refining, penalties, freight and insurance, as listed in the agreement.
3. 3Net smelter returnGross value less deductions is the base.
4. 4Apply the rateA 3% NSR on US$8.5 million is US$255,000.
5. 5Pay and reportPaid on the agreed schedule with a statement and audit rights.

1. Find the gross sales value. This is what the mine is paid for the metal contained in the doré, concentrate or other product, using the price and payable percentage in its sales contract.
2. Subtract allowable deductions. Only the costs the royalty agreement names: typically smelting and refining charges, penalties for impurities, transport and insurance to the smelter or refinery.
3. The result is the net smelter return. This is the base the percentage is applied to.
4. Multiply by the royalty rate. A 2% NSR pays 2 parts in every 100 of the base.
5. Pay it on the schedule in the agreement, on whatever schedule the agreement sets, with a statement and audit rights.

The table shows one worked example with round numbers. It is an illustration, not a benchmark: real smelter terms vary by product, buyer and year.

Now test how sensitive the holder is to the deduction list. If smelting and refining charges both rise by half, they become US$1,350,000 and US$600,000, total deductions become US$2,150,000, the base falls to US$7,850,000 and the 3% royalty falls to US$235,500. That is US$19,500, or about 7.6%, less for the holder, with the same tonnes sold at the same price. This is why holders read the deduction clause first.

Gold is the easy case. Refining and freight on doré are small next to the value of the metal, so an NSR on gold pays close to the gross percentage. As an example, 10,000 ounces of gold sold at an assumed US$4,000 an ounce is US$40 million. With an assumed US$20 an ounce for refining, transport and insurance, the base is US$39.8 million and a 2% NSR pays US$796,000, which is 1.99% of gross. For scale, Kitco showed a bid of US$4,127.20 per troy ounce at 03:14 EST on 5 November 2026 (Kitco); use the day’s price, not this one, in your own calculation.

Costs that come off before the royalty is paid

A typical deduction list covers charges that arise after the ore leaves the mine gate and before the metal reaches the buyer: treatment or smelting, refining, penalties for harmful elements, freight, port charges, insurance, sampling and assaying, and marketing costs. Clayton Utz describes the usual deductions as transport from the mine to the smelter and treatment, smelting and refining costs and penalties (Clayton Utz). Costs of mining, crushing and milling, site overhead, capital spending and financing are normally left out; that is what separates an NSR from a net profit royalty.

The boundary is where disputes start. In Quasar Resources v APG, a 2023 Western Australian Court of Appeal case, the contract allowed deduction of charges for smelting (excluding crushing), refining and marketing. The two sides disagreed on whether “refining” meant only the final purification step or any upgrading of an impure product. The court applied the technical meaning common in Australian mining, the narrower one. The law firm’s lesson is that if a contract lists only refining, costs of milling, beneficiation or concentrating risk being treated as not deductible, and that parties using the industry model royalty deed must amend its definition of allowable deductions if they want those costs included (Johnson Winter Slattery). Wording, not custom, decides.

When smelter charges move, so does the royalty base

Smelter charges are not fixed. For copper concentrate, the yearly benchmark that Antofagasta and a Chinese smelter agreed for 2026 is US$0 per tonne and 0 cents per pound, down from US$21.25 per tonne and 2.125 cents per pound for 2025, the lowest annual terms on record (Reuters via Mining.com, 19 December 2025). On the spot market charges went further. In October 2026, Antofagasta was paid more than US$300 a tonne to have concentrate processed: a negative treatment charge of US$310 a tonne on 10,000 tonnes from its Centinela mine, and levels in the minus US$330s on Los Pelambres material for next year (Reuters via Kitco, 16 October 2026).

For an NSR holder on a copper project, lower smelter charges mean a smaller deduction and a larger base. What a negative charge does is a drafting question. Some contracts let it add to the base; others floor each deduction at zero. If you hold or are buying a copper or other concentrate royalty, ask how the clause treats charges below zero and how it treats sales by a mine-owned smelter, where the price between affiliates should be at arm’s length. For the largest producers that sell this kind of concentrate, see our list of the largest copper producers.

NSR compared with gross, net profit and volume royalties

Clayton Utz lists four common types of private royalty, and the choice changes who carries cost risk (Clayton Utz). The table adds a real example for each from filings and releases.

Chart

Why an NSR follows the gold price

Gold price, US$ per troy ounce

The practical difference is risk. An NSR holder is paid when product is sold, whatever the mine’s operating margin. A net profit royalty holder waits until costs, and often capital and financing costs, are recovered. A gross royalty holder gets the most, because nothing is deducted, which is why a gross percentage should be lower than an NSR percentage for the same deal. Some agreements use a mix: Barrick lists modified NSR, sliding scale, gross smelter return and net value royalties among the forms on its properties (Barrick, 2025 annual report).

The NSR is also a price-linked instrument. Because it is a share of sales value, it rises and falls with the metal price. Franco-Nevada reported average gold prices of US$2,387 per ounce for 2024 and US$3,435 for 2025, and its gold revenue rose from US$706.9 million to US$1,275.8 million over that time (Franco-Nevada, 10 March 2026). Part of this revenue comes from streams and a few net-profit royalties, so it is not a pure NSR figure; for an NSR itself, the mine’s operating costs do not enter the calculation.

From tonnes to payout: what drives an NSR cheque

A royalty payment has five moving parts, and the holder controls none of them: how much ore is mined, the grade of that ore, the share of metal recovered in the plant, the metal price and the post-mine deductions. In symbols, annual payout = tonnes × grade × recovery × (price − deductions per unit) × royalty rate, after converting grade to ounces or tonnes of metal. For gold, one troy ounce is 31.1035 grams, so a grade in grams per tonne (g/t) is divided by 31.1035 to give ounces per tonne.

Take a mine that mills 500,000 tonnes a year at 2 g/t gold with 90% recovery. That is 500,000 × 2 × 0.90 ÷ 31.1035, or about 28,935 ounces. At an assumed US$4,000 an ounce and US$20 an ounce of deductions, the base is about US$115.2 million and a 2% NSR pays about US$2.3 million a year. Change the grade to 1.5 g/t and the payout falls by a quarter. That is why holders watch grade reconciliation, mill throughput and the mine plan as closely as the price. Our explainer on mining profitability covers the cost side the royalty holder does not carry.

The calculator below uses the same chain. Enter your own tonnes, grade, recovery, price, deductions and royalty rate. Prices are inputs: the figures shown are examples, not today’s price.

▶ How a coloured pixel on a map becomes tonnes, contained metal and a dollar figure, the same chain that sits under every royalty payout. · 18:55

NSR rates and buy-back terms in real deals

You will often read that NSR rates run from 1% to 5%. Filings show a wider spread, and the rate says little without the base, the share of ounces it covers, and any buy-back or step-up. The chart plots rates from recent filings and releases. Rates that sit on only part of the production, or on a legacy lease, are noted in the text.

Chart

NSR and net smelter royalty rates in recent filings

Percent of net smelter returns; each deal has its own base, share of ounces and buy-back terms

• Alturas, Chile, 0.5%. In 2025 Barrick agreed to sell the Alturas project for US$50 million up front and be granted a 0.5% NSR on gold and silver, ending after 2 million ounces of gold and gold-equivalent are produced. The buyer may repurchase the royalty within four years of closing for US$10 million. The sale closed on 7 November 2025 (Barrick, 2025 annual report).
• Yilgarn Star, Western Australia, 1.0% on 75% of ounces. Franco-Nevada bought it on 24 December 2025 for US$4.7 million plus a contingent US$1.0 million (Franco-Nevada, 10 March 2026).
• i-80 Gold, Nevada, 1.5% rising to 3.0% in 2031. A US$250 million NSR on all minerals from four properties, agreed on 12 February 2026 (Franco-Nevada, 10 March 2026).
• Ahafo South, Ghana, 2%. Newmont states that Ahafo South pays a 2% royalty on net smelter returns to Franco-Nevada on gold from areas previously owned by Moydow (Newmont, annual report on Form 10-K, 2025).
• Coffee, Yukon, 3%. When Newmont sold the Coffee gold project it kept a 3% NSR, which the buyer can repurchase for up to US$100 million (Canadian Mining Journal, 15 September 2025).
• AurMac, Yukon, 6.0%. Part of a six-royalty portfolio Franco-Nevada agreed to buy in February 2026 for about US$40.1 million; the 6.0% NSR is subject to a buydown at the operator’s election (Franco-Nevada, 10 March 2026).
• Gold Quarry, Nevada, 16.2%. Newmont states that Nevada Gold Mines pays a net smelter royalty equal to 16.2% of production on a significant part of the Gold Quarry mine under long-term leases (Newmont, 10-K, 2025). It is a legacy lease rate, not a typical new-deal rate.

Three patterns stand out. Small rates are common when a project is sold and the seller keeps a royalty as part of the price, as at Alturas and Coffee. Step-ups and step-downs are used to match the royalty to project stage, as at i-80 and Bullabulling. And buy-back rights cap the holder’s upside: if the operator can repurchase part of the royalty at a fixed price, the royalty’s value is limited by that price. For a broader look at selling an asset with royalty terms attached, see our guide on how to sell a mine.

Who holds NSR royalties, and how streams differ

Holders fall into four groups: original owners and explorers who kept a royalty when they sold a property, mining companies that keep one when they sell a non-core asset, specialist royalty and streaming companies, and private investors. Franco-Nevada reported record 2025 revenue of US$1,822.8 million and 519,106 gold equivalent ounces (GEOs) sold, with Q4 2025 revenue of US$597.3 million (Franco-Nevada, 10 March 2026). A gold equivalent ounce converts revenue from silver, platinum group metals and other metals into ounces of gold at a stated price, so a portfolio can be added up.

Chart

One royalty company’s revenue by metal, 2024 and 2025

Franco-Nevada royalty, stream and working-interest revenue, US$ million, mining assets only (oil, gas and interest income left out)

In the same results release Franco-Nevada explains that it estimates GEOs on a gross basis for NSRs, counts stream ounces before the per-ounce price it pays, and calculates GEOs for net profit interest royalties using the NPI economics (Franco-Nevada, 10 March 2026). Royalty type changes how the numbers are counted even inside one company.

A stream is a different contract. Instead of a percentage of sales, the holder buys a share of metal at a fixed or discounted price. In its January 2026 agreement on the Casa Berardi gold mine in Quebec, for example, Franco-Nevada agreed to a US$100 million stream with fixed deliveries of 6,500 ounces a year for five years, then 5.0% of gold produced from Casa Berardi and other Quebec assets (2.5% at the Heva-Hosco project), with an ongoing payment of 20% of spot price on the ounces delivered (Franco-Nevada, 10 March 2026). A royalty is paid in cash and no metal is bought. A stream front-loads cash for the operator and gives the holder metal at a discount.

Franco-Nevada said in that release that it had announced four further acquisitions after year-end. None of this is a recommendation to buy or sell any security, and holders of small private royalties should not assume a listed company will pay the same multiples. For the miners that pay the royalties, our list of the top gold mining companies ranks the largest by production.

Clauses to check in an NSR agreement

Whether you hold, grant or plan to buy a royalty, read these clauses first. Each one can change the payout by more than a point of rate.

• Definition of net smelter return. Does it say what is sold (concentrate, doré, refined metal) and at what price (actual received, a benchmark, or a deemed price)? A contract that lets the operator use an internal transfer price weakens the holder.
• List of allowable deductions. Is it a closed list? Does it name refining only, or also milling and concentrating (the Quasar issue)? Are mining, overhead, financing and capital costs expressly excluded?
• Caps on deductions. Some holders negotiate a maximum share of gross value that deductions may take, so a poor smelter contract cannot erase the royalty.
• Affiliate and toll processing. If the operator treats ore at its own plant or sells to a related smelter, how is the price and charge set?
• Area of interest. Does the royalty cover only the original claims, or ground added later within a set distance?
• Buy-back, step-up and step-down. What is the price, the time limit and who holds the option? Does the rate change after a production milestone or a date, as at i-80 (1.5% to 3.0% in 2031) or Bullabulling (2.45% to 1.63% after 4.0 million ounces)?
• Payment timing, statements and audit. How soon after sale is payment due, what is shown on the statement, and can the holder audit the books and sales contracts?
• Assignment and first refusal. Can either side transfer its interest, and does the other side have a right to match an offer?
• Termination and force majeure. Does the royalty survive a sale of the project, a joint venture, bankruptcy or a long shutdown?

Owners of early-stage ground should add one more check: whether the land can be mined at all. A royalty is worth nothing if the ground cannot be accessed. The short video below shows a survey where good rock sat under a town.

▶ A survey example of good rock that cannot be mined because of land access, and why that matters when you value a royalty. · 2:05

Registration, enforcement and who is protected

An NSR is a promise to pay, and the law decides what happens to that promise if the project changes hands or the owner fails. The answer differs by country.

In Quebec, the Court of Appeal ruled on 6 August 2013 in Anglo Pacific Group v Ernst & Young that an NSR is enforceable against third parties only if it creates a real right, as opposed to a personal right, over the mining property and the publication formalities have been met. The lawyers who wrote about it noted that customary NSR agreements registered in the Mining Register were not enforceable against third parties under civil law, and that sellers should structure agreements so the royalty is not reduced to a hollow promise of income (Langlois Lawyers, 2015). In Australia, private royalties are generally contractual rights that can be enforced against the payer, not interests in the land or minerals. Some states, such as Western Australia, allow a caveat to be registered over a contractual royalty, and in other cases a mortgage over the tenement gives the holder a registered interest (Clayton Utz).

The lesson for a seller who keeps an NSR is to ask a local mining lawyer how to register it, and to insist on security if the buyer is a thinly funded company. The lesson for a buyer of a royalty is to check the register, the chain of title and whether the royalty binds a future owner. Rules in the United States depend on the state and on whether the claims are on federal land. Do not rely on a general summary.

How buyers value an NSR and why risk matters

A royalty is worth the present value of the payments you expect, reduced for the chance they do not happen. CIM, the Canadian Institute of Mining, Metallurgy and Petroleum, recognises three approaches for mineral property: income, market and cost. The income approach uses discounted cash flows and is typically used only where a life-of-mine model exists. The market approach compares similar transactions and can be used at any stage. The cost approach, based on exploration spending, suits early-stage ground (CIM MES, CIMVal standards).

For a producing mine, a buyer builds a cash-flow model from mine plan tonnes, grade, recovery, price and deductions, then discounts it at a rate that reflects time and project risk. For an exploration-stage royalty there is no model yet. The royalty is an option on a discovery, and its value rests on the chance the ground is drilled, defined and built. Three questions move the value most:

• How likely is the project to be built, and when? A royalty on a permitted, financed mine is worth far more per percentage point than one on a target that has not been drilled.
• How long will it pay? A royalty that ends after a fixed number of ounces, like Alturas, has a defined life; one over the life of the mine does not.
• Who operates, and how well? An NSR holder has no vote on the mine plan. A good operator mines the royalty ground first; a poor one may leave it.

Because price, grade and cost all vary, a single number is a weak guide. Analysts often run a Monte Carlo simulation, which repeats the calculation thousands of times with random draws for each input and reports a range such as a low, middle and high case. The video below explains how that range works and how it differs from the grade ranges inside one zone.

▶ How a Monte Carlo simulation turns uncertain price, grade and cost into a range of outcomes, and why one number is a weak guide. · 14:59

Tax on royalties: the Nevada example

Royalty income is taxed in ways that differ by country and often by state, so this section gives one worked example, not a rule. In Nevada, mine operators and royalty recipients both file annual statements of gross yield and net proceeds, due by 16 February for the prior calendar year. The Department of Taxation states that no costs may be deducted from the royalty portion, and that the tax rate for royalties is 5%, while the rate on net proceeds is a sliding scale between 2% and 5% (Nevada Department of Taxation, net proceeds of minerals bulletin, 2025-26). The rate and base are set by Nevada law and may change.

Income tax is a separate matter. Whether a royalty payment is ordinary income or a capital gain, whether a sale of the royalty is taxed as a disposal of a resource property, and how depletion allowances apply all depend on the holder’s country and structure. Ask a tax adviser before you sign a sale, and read the agreement’s own clause on who bears withholding tax.

Screening the ground behind a royalty

Because an NSR pays from production, the first question for a buyer or an explorer is whether the ground can produce. Satellite imagery gives an early, low-cost view of alteration patterns, structures and land use over a licence before drilling, as exploration targets that sit ahead of any resource estimate. Farmonaut offers satellite-based mineral detection reports for a licence boundary you supply; you can request a quote or contact the team with a polygon. A satellite report does not replace drilling, a resource estimate or legal title checks.

Frequently asked questions

What does NSR mean in mining?

NSR stands for net smelter return. In a royalty, it is the sale value of the metal less agreed smelting, refining and transport costs. The holder is paid a percentage of that figure, for example 3% of US$8.5 million, which is US$255,000.

What is a net smelter royalty in simple terms?

It is a share of a mine’s sales revenue, paid to someone who does not run the mine, after the post-mine selling costs are removed. The holder gets paid when metal is sold, not when the mine earns a profit.

Is a net smelter royalty the same as a net smelter return royalty?

In everyday use, yes. Both names describe the same arrangement. The exact meaning still depends on the contract, because the term does not necessarily have a generally accepted legal definition.

What is a typical NSR rate?

There is no standard rate. Recent filings show 0.5% on Alturas, 1.0% at Yilgarn Star, 2% at Ahafo South, 3% at Coffee and 6.0% at AurMac, and a legacy lease at Gold Quarry equal to 16.2% of production on part of the mine. Rate depends on project stage, the price paid, whether it covers all ounces, and whether it can be bought back.

What costs are deducted from an NSR royalty?

Usually smelting, refining, penalties, transport and insurance to the buyer. Mining, milling, overhead, capital and financing costs are normally not deducted. The agreement’s list governs, and courts read the words closely, as in the Quasar case on the meaning of refining.

What is the difference between an NSR and a gross royalty?

A gross royalty applies the percentage to sale value with no deductions. An NSR applies it after the listed post-mine costs. For the same percentage, a gross royalty pays more, so gross percentages tend to be lower than NSR percentages in comparable deals.

What is the difference between a royalty and a stream?

A royalty pays cash based on sales or profit. A stream is a right to buy a share of the metal, often at a fixed or discounted price. At Casa Berardi, the stream delivers fixed ounces for five years, then a percentage of gold produced, with the holder paying 20% of spot price on each ounce delivered.

Can an NSR be bought back?

Often, if the agreement has a buy-back clause. Boroo Pte Ltd, the buyer of Alturas, can repurchase the 0.5% NSR for US$10 million within four years of closing, and the buyer of Coffee can repurchase Newmont’s 3% NSR for up to US$100 million. Buy-back terms cap the holder’s upside.

Does the NSR holder pay any of the mine’s operating costs?

No. The holder bears only the deductions the agreement lists. That is why an NSR carries less cost risk than a working interest or a net profit royalty.

Is an NSR royalty a tax?

No. A private NSR is a contract between a miner and a holder. A government royalty on minerals it owns is statutory and works like a tax. Queensland sets its rates in a regulation, for example. Royalty income received by a holder may itself be taxed, as in Nevada’s net proceeds of minerals regime.

Does an NSR survive if the mine is sold?

It depends on how the royalty was created and registered. In Quebec, a personal-right NSR was held not enforceable against third parties in 2013. In Australia, a caveat or a mortgage over the tenement may be needed. Ask a local mining lawyer before you rely on it.