Recent developments in mining legislation and case law: Director Chris Stevens

RECENT DEVELOPMENTS IN
MINING LAW LEGISLATION
AND CASE LAW
CHRIS STEVENS

1. INTRODUCTION
> There have been recent important legislative developments
in mining law over the past 18 months.
> Furthermore there have been various High Court and
Constitutional Court decisions over the past 18 months
having a major bearing on various aspects of mining law.
2

2. MPRDA AMENDMENTS
> The first MPRDA amendment was promulgated on 21 April
2009 but only took effect on 7 June 2013.
> Furthermore certain sections of the first amendment were
not brought into effect such as the amendments to Sections
11, 38, 47 and 102.
> The Mineral and Petroleum Resources Development
Amendment Bill 2013 has been approved by Parliament and
has been approved by the National Council of Provinces and
is awaiting the signature of the State President.
> The new minister of Mineral Resources has referred the Bill
back to Parliament to consider the constitutionality thereof
and the desirability of splitting the oil and gas sections from
the mining sections into separate pieces of legislation.
3

3. SCRAPPING OF FIRST- COME
FIRST-SERVED APPLICATION
PROCEDURE
> The Amendment Bill has the effect of scrapping the first-come
first-served application process.
> Substituted by a process being an invitation to lodge
applications which are similar to a tender process.
> Has implications for new projects and extensions of existing
areas.
> A person can request the Minister to make an invitation and
the person requesting has the right of preference.
> International Best Practice according to World Bank reports
in 2009 is the first-come first-served application procedure in
developing countries.
4

4. DISPOSALS OF CONTROL
> Section 11 of the MPRDA will be amended by the
Amendment Bill providing that any interest in a company
holding a right cannot be transferred without ministerial
consent and a controlling interest in a listed company cannot
be disposed of without ministerial consent.
> In my view there are insurmountable problems of
interpretation in the amended Section 11.
> Section 11 will also now provide for transfers of portions of
right. This process is also fraught with difficulty.
5

5. MINERAL BENEFICIATION
> A new Section 26 providing the Minister must publish the
conditions required to ensure security of supply for local
beneficiation in the prescribed manner.
> Every producer of designated minerals must offer to local
beneficiators a prescribed percentage of its production of
minerals or mineral products in prescribed quantities,
qualities and time lines at the mine gate price or agreed
price.
> The definition of “Mine Gate Price” means the price of the
mineral or mineral product at the time the mineral leaves the
area of the mine and excludes charges such as transport and
delivery charges from the mine area or mine processing site
to the local beneficiators.
6

5. MINERAL BENEFICIATION
(CONTINUED)
> There is further provision that no person other than a
producer in respect of his own production and who has
complied with the offering to local beneficiators may export
designated minerals or mineral products without the
Minister’s prior written approval.
> The meat of the beneficiation provisions will be contained in
the Regulations which have not been published for comment.
7

6. SUNDRY ENVIRONMENTAL
ASPECTS
> Civil liability of directors has been deleted but one must bear
in mind the provisions of Section 34(7) of NEMA and 2014
NEMA Amendment Act.
> Despite the issuing of a closure certificate the holder remains
liable for any latent or residual environmental liability,
pollution, ecological damage.
> The Department is now entitled to retain any provision for
rehabilitation to the extent required and for a period
required.
8

7. MANAGEMENT OF HISTORIC
RESIDUE STOCKPILE AND
RESIDUE DEPOSITS
> Such deposits located within a mining area confers
exclusivity to amend the mining works programme in terms
of Section 102 to include such stockpiles and deposits into
the right.
> In respect of historic residue deposits and residue stockpiles
located outside the area of a mining right the owner has a
period of 2 years to apply for a mining right or mining permit
failing which such ownership lapses.
> Designated areas under Waste Act.
9

8. OFFENCES AND PENALTIES
> In the event of a breach of Sections 2, 5(a), 11 etc a person
convicted is, liable to a fine not exceeding 10% of the
persons or rights holder’s annual turnover in the Republic
and its exports from the public during the person’s preceding
financial year or to imprisonment for a period not exceeding
4 years or to both such fine and imprisonment.
> For other offences there is a potential of 5% of such annual
turnover from the previous year being imposed as a penalty.
10

9. MIXED MINERALS
> Section 102 of the MPRDA has been amended to allow for a
mixed mineral being designated as an associated mineral so
that no third party can apply therefor.
> May well assist in platinum and chrome and manganese and
iron ore and in manganese and mineral deposits.
11

10. OTHER SUNDRY LEGISLATIVE
PROVISIONS
> Draft Regulations have been published for public comment in
terms of the National Environmental Management Act on 31
October 2014 in terms of Gazette Number 38145.
> Comment is sought within 30 days on proposals requiring the
holder of a prospecting right or mining right to make provision
for the costs associated with environmental impact management
not only throughout the life of the mine but for so long as
necessary after its closure. This financial arrangement will need
to be made not only in regard to annual rehabilitation and
closure but also in regard to the remediation and management
of latent or residual environmental impacts which may become
known in the future.
> In terms of Government Notice 1032/2013 the Minister provided
draft regulations relating to the proposed technical aspects of
petroleum exploration and exploitation particularly in regard to
hydraulic fracturing for comment.
12

11. RECENT RULING OF THE SOUTH
AFRICAN REVENUE SERVICE
> A recent ruling has been handed down by the South African
Revenue Service that in the case of a mining contractor
mining under the auspices of that mining contract and
purchasing the ore from the holder of the mining right, such
mining contractor would be taxed as a mining company and
receive the benefits under the Income Tax Act granted to a
mining company for example in relation to capital
expenditure deductions.
> The ruling made it clear however that it was purely as an
interim measure pending the transfer of a mining right after
the obtaining of a consent in terms of Section 11 of the
MPRDA.
13

12. RECENT CASE LAW
> Dengetenge Holdings Proprietary Limited v Southern
Sphere Mining and Development & Others (CCT 39/13
[2013] ZACC 48
> there were various aspects to the Constitutional Court judgement.
Dengetenge argued that Southern Sphere had not exhausted its
internal remedies in terms of Section 96 before approaching the High
Court on review to set aside a ministerial decision taken by a
delegatee. Based on the facts the Court held that there was no
useful purpose for the High Court to insist on the exhaustion of
internal remedies and importantly held that the Minister waived the
right to have the internal remedies exhausted first before the matter
could be taken to Court as the requirement in Section 96(3) is for
the benefit of the Minister.
> Coal of Africa v Akkerland Boerdery Proprietary Limited
> This is a non-reported decision 38528/2012 of the Gauteng High
Court handed down in February 2014 granting Coal of Africa access
to continue with prospecting operations on the basis that access was
refused by the landowner.
14

12. RECENT CASE LAW (CONTINUED)
> The landowner argued that the right was not valid because it had
not yet been registered and the Court came to the view that
registration was merely an obligation after the right becomes
effective.
> Furthermore the landowner argued that the prospecting right
was granted in the face of various invalid administrative acts.
However the validity of the right had never been attacked either
through Section 96 or an administrative review. Until set aside
these administrative decisions will exist as a fact and will have
legal consequences.
> Importantly the landowner was approached for purposes of
consultation but refused to allow the consultation to take place
and frustrated Coal of Africa’s attempts to have such
consultations. The landowner cannot rely on an alleged failure to
consult in these circumstances.
15

> The landowner also attempted to argue that the applicable town
planning scheme prohibited prospecting without a rezoning and
an analysis of the scheme demonstrated that prospecting was in
fact allowed provided it did not fall within the area of a
proclaimed township.
> The landowner also argued that there was an alternative
remedy, namely Section 54 of the MPRDA. The Court held that
Section 54 deals with compensation issues and there is not an
alternative remedy to access.
> Bengwenyama Community v Genorah Resources
Proprietary Limited (case number 784/2013)
(Supreme Court of Appeal judgment)
> In this judgment handed down on 26 September 2014
competing applications for a preferent community prospecting
right was dealt with in terms of Section 104 of the MPRDA.
16

> It was held that a corporate vehicle can be used by a community
to apply for such right provided control of the company is vested
in the community. It was held that a corporate vehicle could
rightly be said to be the community for purposes of the MPRDA.
> Furthermore the lack of a present registered title was not an
impediment to a claim under Section 104 and in terms of the
definition of “community” as the community had instituted a
claim for a land restitution and that following restitution the land
would be registered in its name. Therefore the prospecting right
issued to the Respondents was set aside.
17

THANK
YOU
5 November 2014
Legal notice: Nothing in this presentation should be construed as
formal legal advice from any lawyer or this firm. Readers are
advised to consult professional legal advisors for guidance on
legislation which may affect their businesses.
© 2014 Werksmans Incorporated trading as Werksmans Attorneys.
All rights reserved.

Recent developments in mining legislation and case law: Director Chris Stevens

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