10 Aug 2010
The Department of Mineral Resources (DMR) is puzzled by recent statements intimating that Lonmin has lost its previously held rights in respect of associated minerals (see here). These statements are made at a time when decisions on Lonmin's applications for the inclusion of associated minerals as part of its converted mining rights are imminent. It goes without saying that Lonmin could not have lost rights which were not awarded to it or did not have in the first place.
Having noted media reports in this regard, it is important to put these matters in their proper context by analysing the current position with reference to the current and previous laws regulating the mining industry and the administrative conduct of the DMR.
Before the commencement of the Mineral and Petroleum Resources Development Act, 2002, the state primarily regulated the mining industry by way of issuing mining authorisations in the form of permits and licences in terms of the repealed Minerals Act of 1991.Armed with such authorisation, any person mining, could also mine and dispose of any other mineral which had to be mined together as of necessity (the so called associated minerals). Naturally, the holder of the right to the associated mineral had to be compensated, either by way of agreement, or through an arbitration process.
After the commencement of the MPRDA, the State became custodian of the Nation's mineral resources and the concept of mineral rights ceased to exist. As a result, no provision has been made for the prospecting or mining of associated minerals with the requisite obligation to pay compensation. Instead, the current Act provides for a separate application in terms of section 102, whereby mining companies are afforded the opportunity to apply for the inclusion of associated minerals, as well as any other minerals, in their existing mining rights.
A number of major companies realised the need to follow this procedure in addition to lodging applications for the conversion of their old order rights to new order rights.Companies which did so are now, under the new dispensation, in a position to conduct their operations as they did prior to the commencement of the MPRDA, as the State has granted them the right to mine for associated minerals. They did not lose any rights at all.
In the case of Lonmin, the company's PGM mining rights were converted between 2006 and 2008. However, unlike most other companies, Lonmin only applied for consent to mine associated minerals in terms of Section 102 in December 2009, long after the conversion was issued. Subsequently, Lonmin withdrew their Section 102 applications in respect of the area for which Keysha Investments 220 "Keysha" had already applied for prospecting rights.
Upon receipt of Lonmin's section 102 applications, the department conducted routine inspections of the mining area under application, which is a normal practice in the process of considering such applications. During such routine inspections, it was discovered that Lonmin was mining and disposing of the associated minerals in respect of which it did not have a mining right. The department therefore had no choice but to require of the company to cease its illegal activities in respect of the disposal of the associated minerals in question and issued an instruction to this effect on 3 August 2010. These Section 102 applications are currently under review and are expected to be finalised shortly.
It is now also apparent that Lonmin's appeal against the Keysha right will be resolved through a separate legal process. It is important to draw a clear distinction between the Lonmin mining areas in respect of which the DMR orders of last week were issued, as opposed to the Lonmin mining areas in respect of which Keyshawas awarded a prospecting right for associated minerals.The Lonmin-Keysha dispute ultimately led to Court proceedings, in respect of which a Court Order is currently in operation, in terms of which Lonmin has to account for its disposal of the minerals awarded to Keysha under its prospecting right.
At the time when Keysha lodged its prospecting application in respect of the so called associated minerals, no other application existed. The department therefore had no choice but to process the Keysha application in terms of the ‘first come, first served' provisions of the Act. Indeed, the department is puzzled by the fact that Lonmin chose not to apply for the inclusion of these minerals earlier. It only sought to do so once the Keysha application process was well underway. It should be noted that the Keysha area covers a relatively small portion of the total Lonmin conversions.
As a responsible regulator of the mining industry, the DMR will continue to diligently apply the provisions of the MPRDA in the interest of all stakeholders, without fear or favour. When applicants apply for prospecting and mining rights for minerals in respect of which no other persons holds such rights, the department has no choice but to process compliant applications to finality. Any conduct to the contrary will amount to a total disregard of the Constitutional right of every person to administrative action that is lawful, reasonable and procedurally fair.
The DMR rejects with contempt the reported insinuations of wrongdoing or corruption in relation to the awarding of mining or prospecting rights and also wants to state clearly that all applications are dealt with equally and fairly. Disputes between individual companies should not lead to damaging allegations of wrongdoing when such allegations have no basis in fact. Furthermore, we would welcome any information which could lead to the successful arrest and prosecution of alleged corrupt officials and urge anyone with such information to bring such matters to the attention of the relevant authorities.
Finally, the Department of Mineral Resources urges all stakeholders to clarify any misunderstandings or misconceptions before going public with wild statements which confuse investors and ultimately damages South Africa's image as a reputable mining jurisdiction.
Statement issued by Jeremy Michaels, Department of Mineral Resources, August 10 2010
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