Opinion ID: 1154750
Heading Depth: 3
Heading Rank: 4

Heading: Mining Operations.

Text: National operated the mine from the time it opened in 1956 until 1968 (first run) when operations were temporarily suspended until 1976. Immediately upon opening the mine, it became apparent that the quality of the Lea County ore was not good enough to render it marketable by itself. To produce a saleable product, National purchased higher grade ore to blend with the lower quality ore. In 1959 Freeport acquired the right to develop another ore body in Eddy County, New Mexico. The Eddy County mine contained a higher quality ore than the Lea County mine, and National began blending ores from the two mines, which extended the life of both ore deposits. Plaintiffs never owned an interest in the Eddy County mine. By 1965 most of National's production came from the Eddy County mine. Profits started to decline in 1967, however, and mining operations ceased at the Lea County mine in 1968. Prior to the suspension, National gave the royalty holders notice of discontinuing its mining operations. The plaintiffs never demanded that National surrender or assign the leases to them, and they never claimed that failure to surrender the leases constituted a default under the agreements. With the shutdown of the Lea County mine and production coming solely from the Eddy County mine, the royalty holders did not receive any royalty payments from 1969 to 1973. When the potash market began to recover in the mid-1970s, National prepared to reopen the Lea County mine. National invested an additional $1.8 million in the Lea County mine and notified the plaintiffs of reopening the mine. The mine had slight production in 1974-75, but not enough to generate a net profit. The mine reopened on a full-scale basis in 1976 and operated until February 1982 (second run). The Eddy County mine was exhausted and closed permanently in 1976. Between 1976 and the closing of the Lea County mine in 1982, National's only potash production came from the Lea County mine. Due to the unprofitable nature of the mining operation, however, the plaintiffs earned no royalties during this period. Because National had exhausted its Eddy County mine and apparently had no other source of higher grade ore to blend with the ore from the Lea County mine, National decided to high-grade the mine during the second run of production. High-grading is a mining term that entails selectively removing the richer grade ore from a mine. The effect is that the remaining mineral deposit is more expensive to retrieve and often impossible to retrieve commercially within a reasonable time period.