The 30-year mining right – Misnomer or mischief?
South AfricaWithout Prejudice
The Mineral and Petroleum Resources Act 28 of 2002, as amended (the MPRDA), provides that the state, as custodian of the nation’s mineral resources, may not grant a mining right for more than 30 years. Although the mining right holder has the exclusive right to apply for the renewal of the mining right at its end, it appears that the MPRDA compels the state to renew the mining right for up to another 30-year period, if the holder is compliant with mineral legislation and the conditions of the right.
If the renewal of the right after its expiry is an exclusive right, which may not be refused when there is compliance, why then is there a statutory time limit placed on the state’s power to grant the mining right? Why should the custodian of the mineral resources not be allowed to grant a mining right for longer than 30 years? Would a 50-year mining right be so offensive that the state had to limit its own powers to grant such a long mining right? And, if it were so offensive, what is the evil it aims to expel?
Most mining operations have a life-of-mine (anticipated length of the mining operations) in excess of 30 years. Although the average length of a gold mining project on the Witwatersrand is about 25 years, gold mines have been operating for far longer than that. In respect of platinum (a relative new entrant into the commodity market), Modikwa Platinum Mine in Limpopo has an anticipated life of mine in excess of 65 years. That mine would just about reach its peak operating production levels when its current mining right runs out.
It is in respect of long-term mining operations where the statutory limitation of 30 years makes no sense. And, where the mining operations are anticipated to last well less than 30 years, the state would grant a mining right for the anticipated life of mine and the concept of the 30-year limitation does not arise.
Section 23(6) provides that a mining right is –
“…subject to the [MPRDA], any relevant law, the terms and conditions stated in the right and the prescribed terms and is valid for the period stipulated in the right, which period may not exceed 30 years.”
Section 25(1) provides that –
“…the holder of a mining right has … the exclusive right to apply for and be granted a renewal of the mining right in respect of the minerals and mining area in question.” (emphasis added)
Section 24(3) provides that the Minister must grant the renewal of the mining right if the holder is compliant with the terms of the mining right; is not in contravention of any provisions of the MPRDA; complies with the mine works programme, the social and labour plan, and the environmental management plan approved in respect of that mining right.
The provisions of section 24(3) are preemptory and it would most likely be an irrational decision and consequently a reviewable irregularity if the minister were to disallow the renewal of the mining right where the holder can demonstrate full compliance at the time of applying for the renewal.
Would this then mean that the state, as regulator tasked with ensuring compliance with the litany of statutory and regulatory prescripts as well as the conditions of the mining right, must wait until the end of the mining right to gauge compliance to decide on whether the mining right in the hands of the holder is allowed to come to an end or to be renewed? Of course it does not.
On the contrary, the Department of Mineral Resources (DMR) as the state agency under the auspices of the Minister of Minerals tasked with ensuring compliance by mining right holders, has a continuous duty to measure compliance. It does so through the mechanisms of monthly and annual reports submitted to it by mining right holders, scheduled and ad hoc inspections, presidential audits and adjudication of complaints received from stakeholders or members of the public.
The DMR has sections 93 and 47 of the MPRDA as statutory tools in its armour. Section 93 allows the DMR to issue notices to a mining right holder to remedy non-compliance and also affords the DMR the right to instruct mines to cease operations until the non-compliance is remedied. Section 47 allows the DMR to revoke the mining right all together where the holder flaunts its compliance obligations. The revocation of mining rights must of course be preceded by administrative justice and an opportunity to the right holder to make representations as to why its right should not be revoked.
It follows that if the DMR were going to refuse to renew a mining right on the grounds of non-compliance, this would probably not come as a surprise to the right holder as it would have already received section 93 notices, or even notice under section 47 to make representations as to why the right should not have been revoked at some point in time on the grounds of non-compliance.
So why even have the statutory time limitation to the right?
If it were intended to give the DMR some residual power to allow for the reverting of the mining right to the state upon the expiry thereof, this makes even less sense. First, the MPRDA does not state that the DMR has the right to refuse the renewal of the mining right on any other ground than non-compliance. Second, if the intention were for mining rights to revert to the state upon their expiry, why not draft the section to say that the right reverts to the state upon expiry and thereafter the right is open to application by all and sundry, including the erstwhile mining right holder?
The answer to the preceding question is obvious – it would lead to large scale uncertainty and would discourage long-term mining investment. Mining companies think decades ahead. No sensible businessman would sink a vertical or decline shaft over a few years, see the first ounce of production some years down the line and at that point start repaying his financiers and shareholders, only then to lose the investment at the end of an arbitrary time period written into the MPRDA.
When considering the intention of the MPRDA, it was certainly not introduced to bring uncertainty in the mining industry. If the state wanted to overhaul the mining industry in a radical way, the MPRDA would have read noticeably differently. The MPRDA creates a platform for gradual, but definite transformation of the industry to encourage new entrants into an established industry and to discourage the old guard from hording mineral reserves for its long-term control.
In this sense the 30-year limitation is a misnomer. There is no 30-year limitation to a mining right holder who remains compliant with the conditions of its mining right. It is in this light a provision of no substance and meaningless.
However, what it does achieve is to shroud the renewal application in mystery, to introduce an air of uncertainty and to create the illusion of power to refuse the renewal, when none is there. It all amounts to a little mischief, which may discourage the timid and apprehensive investor from committing to long-term investment exploitation of minerals in South Africa, when direct foreign investment is acutely needed.