Mining and Oil companies that have royalty earnings

Investment Questions and Chats Stocks
#1

Assalam alaikum
May I ask a question regarding royalty payments?

I have purchased Anglo Pacific shares. Part of their income comes from royalty revenues.

I tried to find some information about royalty revenues regarding their complaince with Sharia rulings but found very little information.

If you could kindly shed some light on this subject it would be most helpful as I also have shares in Shell which has some sort of royalty revenue when it extracts oil. May I also ask if the zakat is different on mining stocks?

#2

Wasalam

May Allah bless you.

  1. In theory revenues from royalties may be permissible depending on how the contract is structured. In the case of the company you have mentioned, they are also involved in streaming. This, in my opinion needs further investigation on the structure of the streaming contract.
    Also, looking at the balance sheet the above company, I have noticed that they have derivative instruments as assets. Derivatives are non shariah compliant contracts. Thus, profits made from this sort of investment are not halal.

  2. In regards to the Zakat on mining stocks. AAOIFI standard states that all minerals extracted from the earth or sea, is subject to 2.5% Zakat payment on its total value. The Zakat on minerals will be due every time an amount equal, or above the gold nissab is extracted from the earth.

@Mufti_Faraz_Adam may have a different opinion to the above

And Allah knows best!

#3

Dear Mufti Bilal, assalam alaikum, inshallah all is well. Thank you for kindly sharing your knowledge. May I ask that since the company has derivatives it would be the correct line of action for me to sell the shares because of the non sharia compliant element?
May I gain further from your insight about Shell, which has royalty arrangements with countries based on barrels of oil produced. Thank you most kindly.

#4

Wasalam

My advice would be to invest in certified shariah compliant companies for peace of mind. Otherwise you can keep the current shares but, you will have to give away part of the dividends you are receiving based on the proportion of the haram investment. (see this link: https://www.islamicfinanceguru.com/resources/how-to-purify-your-wealth/)

There is an excellent article on the website about how to buy halal stocks, see the link:

P.S: Shell also deals with derivatives and other securities instruments which bear interest.

#5

Dear Mufti Bilal,
Assalam alaikum
Inshallah all is well
Thank you for your answer and guidance
Regards