Are royalties in mining companies permissible?

CategoriesTrade, Business & All Things Money [488]

I’d like to know if the nature of business of royalty mining companies (like Royal Gold and Silver Wheaton) are Shariah compliant. I’m not asking about these companies in particular, but in general if the business itself is Islamically acceptable

Basically, the royalty companies pay upfront cash to mining or prospective companies in return for royalties on future production of those companies.

In the name of Allah, the most Beneficent, the most Merciful.

Answer

One of the conditions of a valid contract is that the object or the item which is intended for sale must exist and that there is no ignorance (jahalah) in the objects genus, type and quantity. (Badaaius Sanai p.138 v.5)

Based on the information you provided in the question, the royalties which are being given is on future production of the mine and as the future production is unknown at this moment in time, therefore, such a transaction would be invalid.

However, I must stress that the aforementioned ruling is specifically for the scenario you mentioned in the question. Different scenarios may have different rulings.

Only Allah Knows Best

Mohammed Tosir Miah

Darul Ifta Birmingham

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