As-extracted collateral is the term used for minerals, like oil and gas, that are offered as collateral for a loan. The borrower pledges their ownership rights in the minerals before they are extracted, and the collateral interest becomes attached to the minerals as they are extracted. It can also refer to the account that is established from the proceeds of selling these minerals.
As-extracted collateral refers to the use of oil, gas, or other minerals as security for a debt. This occurs when a debtor has a stake in the minerals before they are extracted and this stake remains attached to the minerals as they are extracted. For instance, a mining company may borrow money from a bank to finance its operations. As part of the loan agreement, the mining company pledges the minerals it extracts from the mine as collateral. In the event of a loan default, the bank can seize the minerals to recover its funds. This example demonstrates how as-extracted collateral functions. Although the minerals have not yet been extracted, they are still considered collateral because the debtor has an interest in them prior to extraction. Once the minerals are extracted, they become the debtor’s property, but the security interest remains attached to them.
As-extracted collateral refers to minerals or other natural resources that have been extracted or are in the process of being extracted from the ground.
Yes, as-extracted collateral can be used as collateral for a loan. Lenders may accept the rights to the minerals or natural resources as security for the loan.
The value of as-extracted collateral is typically determined based on factors such as the quantity, quality, and market demand for the minerals or natural resources.
In some cases, the lender may have the right to take possession of the as-extracted collateral if the borrower defaults on the loan. However, this may depend on the specific terms of the loan agreement.
Yes, there may be legal requirements that need to be met, such as obtaining the necessary permits or licenses for extracting the minerals or natural resources.
In most cases, the borrower can continue to extract the collateral while it is being used as loan collateral. However, the lender may have certain rights and restrictions outlined in the loan agreement.
If the borrower fails to repay the loan, the lender may have the right to foreclose on the as-extracted collateral and sell it to recover the outstanding debt.
The borrower may be able to sell or transfer the rights to the as-extracted collateral, but this may require the lender’s consent or may be subject to certain restrictions outlined in the loan agreement.
Yes, there may be environmental regulations and obligations that the borrower needs to comply with when extracting the minerals or natural resources. Failure to comply with these regulations may result in penalties or legal consequences.
If the borrower successfully extracts and sells the minerals or natural resources, the lender may be entitled to a portion of the profits as outlined in the loan agreement. However, this would depend on the specific terms negotiated between the lender and borrower.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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