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31 October 2014
   
 
 
 
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On Friday, 7 June 2013, the MPRDA as amended by the Amendment Act, brought about important changes to the regulation of the South African mining industry. As can be seen from the analysis of the regulatory regime below, the Amendment Act introduced a number of significant amendments to South Africa's mineral regulatory regime.

The regulatory system created by the Amendment Act will, however, change once the proposed Amendment Bill, 2013 is brought into effect in the not-too-distant future. The mining industry is thus faced with the introduction of changes to the MPRDA which will only endure until the Amendment Bill, 2013 comes into force. (Our comments on the Amendment Bill, 2013 can be viewed by clicking here.)

The diagram at the bottom of this E-Alert describes the amendments introduced by the Amendment Act.

WHAT HAPPENED ON 7 JUNE 2013?

The Amendment Act provides for the phased enforcement of its provisions. The most pertinent provisions are discussed below:
in section i we discuss important provisions that have an immediate effect upon the Amendment Act's promulgation;
in section ii we evaluate key amendments to Schedule II of the MPRDA that have retrospective effect upon the Amendment Act's promulgation;
in section iii we investigate the forward-looking environmental provisions that will come into effect 18 months after the promulgation of the Amendment Act; and
in section iv we set out important provisions that, as a consequence of the proclamation issued by the President on 6 June 2013, have not come into force on 7 June 2013.

i. Provisions that have an immediate effect

1. Prospecting rights

Under the MPRDA, a regional manager could not accept a prospecting right application if another person held a prospecting right, mining right, mining permit or retention permit for the same mineral and land.

The Amendment Act now provides that a regional manager may no longer accept an application if he or she has already accepted, but has not yet granted or refused, a prior application for a prospecting right, mining right, mining permit or retention permit for the same mineral on the same land.

The Amendment Act also makes significant amendments to section 17 of the MPRDA, which contains the substantive requirements that need to be met when applying for a prospecting right. A new substantive requirement is inserted to provide that the Minister may only grant a prospecting right if the applicant "has given effect to the objects referred to in section 2 (d)" (the empowerment objective). The Amendment Act thus makes BEE compliance mandatory for all prospecting rights; a requirement which was previously discretionary.

In addition, section 13 of the Amendment Act amends section 17 (2) (b) of the MPRDA, and provides that the Minister must refuse to grant a prospecting right if it will:

  • result in an exclusionary act,
  • prevent fair competition, or
  • result in a concentration of the mineral resources in question under the control of the applicant.

The new subsection 17 (2) (b) repeals the first two sub-clauses as indicated and amends the last, with the result that the Minister must now refuse to grant a prospecting right if the grant of such right will "result in the concentration of the mineral resources in question under the control of the applicant and their associated companies with the possible limitation of equitable access to mineral resources". The effect of this amendment is that the Minister must, in future, refuse to grant a prospecting right not only where the applicant has a "concentration" of mineral resources, but also where this extends to the applicant's associated companies. The amendment suggests that no applicant can be granted a prospecting right if it already has a "concentration" of rights for the same mineral. The term "concentration" and the phrase "possible limitation of equitable access" are not defined and are, in our view, vague.

2. Mining rights

As with prospecting rights, a regional manager may not accept an application if he or she has accepted, but has yet to process, a prior application for the same mineral and land.

Section 23 of the MPRDA is now amended to provide that "[i]f the application relates to the land occupied by a community, the Minister may impose such conditions as are necessary to promote the rights and interests of the community, including conditions requiring the participation of the community".

The effect of this amendment is that the Minister can impose, by edict, further "conditions" on an applicant that is mining on land occupied (not necessarily owned) by a community to "promote [their] rights and interests including conditions that require the participation of the community". Such conditions will go beyond the requirements of the prescribed social and labour plan, as well as the equity divestiture requirements contained in the Mining Charter. The amendment gives no indication, and thus no limit to, as to what such participation may involve.

The Amendment Act also introduces a new section 52 (4), which provides that "[t]he holder of a mining right remains responsible for the implementation of the processes provided for in the Labour Relations Act, 1995, pertaining to the management of downscaling and retrenchment, until the Minister has issued a closure certificate to the holder concerned". Again, the potential financial implications of this amendment are troubling, as mining right holders remain liable for implementation until a closure certificate is issued, notwithstanding the fact that mining operations may have ceased.

ii. Provisions having retrospective effect

The Amendment Act introduces a very significant amendment to the conversion of old order mining rights with the amendment of Item 7 (2) (k) of Schedule II of the MPRDA. The effect is as follows:

  • the Minister is now obliged to refuse to grant the conversion of an old order mining right if the applicant does not provide "documentary proof" of its BEE and socio-economic credentials, or otherwise fails to submit correct documents when the applicant lodges the right for conversion. Such discretion to refuse conversion was not afforded to the Minister under the MPRDA;
  • the Minister is, in effect, now obliged by law to instruct a non-compliant applicant to cease mining operations once an application is refused. Security of tenure under the MPRDA is thus seriously undermined, as the Minister has no discretion to give a non-compliant applicant a further opportunity to cure its default; and
  • the obligations which the Minister may impose on applicants seeking conversion and whose rights relate to land that is occupied by a community, are identical to the obligations that may now be imposed on a new mining right applicant.

Although the deadline for lodgement of old order mining right conversions expired on 1 May 2009, Schedule II applies retrospectively. It is thus possible that applicants with pending conversion applications could well be requested to comply with these amendments, although the legality of such a retrospective request is debatable.

iii. Forward-looking environmental provisions that will come into effect 18 months after promulgation

1. Simultaneous environmental authorisation application

The Amendment Act provides that "[a]ny person who wishes to apply to the Minister for a prospecting right [mining right or mining permit] must simultaneously apply for an environmental authorisation".

Once a regional manager accepts this dual application, the applicant must now be given written notification within 14 days from the date of acceptance of the application to submit environmental reports required in terms of Chapter 5 of the National Environmental Management Act, 1998 within 60 days of the notice (in the case of a prospecting right or mining permit application) and within 180 days of the notice (in the case of a mining right application) and to consult "in the prescribed manner with the landowner, lawful occupier and any interested and affected party and include the result of the consultation in the relevant environmental reports". Environmental reports include scoping, basic assessment, environmental impact assessment reports and environmental management programmes that may need to be submitted under NEMA (read with the relevant environmental impact assessment regulations), in respect of the application for an environmental authorisation.

2. Renewal procedures

When renewing a prospecting right, mining right or retention permit, applicants are now required to submit a "report reflecting the extent of compliance with the conditions of the environmental authorisation" with the renewal application. The Minister may furthermore only grant prospecting right and mining right renewals if the applicants have complied with this requirement.

3. Responsible authority

Section 32 of the Amendment Act introduces a new section 38A into the MPRDA, which provides that the Minister is the responsible authority for implementing the environmental provisions under NEMA and that environmental authorisations are a "condition prior to the issuing of a permit or the granting of a right".

It must also be noted that all appeals in regard to the granting of an environmental authorisation will in the future be determined by the Minister of Water and Environmental Affairs. Under the Amendment Act, the Minister only retains this power for months 18 to 36 after the Amendment Act has come into force. From months 37 onwards, the Minister of Water and Environmental Affairs will be the responsible authority.

4. Implications of the new environmental provisions

All applicants for a prospecting right, mining right or mining permit must now simultaneously obtain an environmental authorisation under section 24 of NEMA (as amended by the NEMAA) as well as under the 2010 Environmental Impact Assessment Regulations.

These include, inter alia, procedures relating to public consultation, environmental impact assessments, environmental management programmes and the undertaking of specialised reports where applicable. An environmental management programme must be submitted in terms of section 24N of NEMA for all applications relating to mining activities. The new environmental requirements created by the Amendment Act are more onerous and must be met in conjunction with the requirements for the granting of any prospecting right, mining right or mining permit.

iv. Provisions which will not come into force on 7 June 2013

As a consequence of the proclamation issued by the President on 6 June 2013, the following amendments, among others, will not come into force on 7 June 2013.

1. Transferability of rights

Under section 11 of the MPRDA, the written consent of the Minister is required for the cession, transfer or on disposal of a prospecting or mining right, or an interest in such right, or a controlling interest in an unlisted company or close corporation.

The Amendment Act introduces some significant changes to this section. Under the amended section 11, the following is prohibited without written ministerial consent:

  • the disposal of a prospecting right, mining right or any interest in such right;
  • the disposal of any interest in a close corporation or an unlisted company, which holds a prospecting right, mining right or any interest in such right; and
  • the disposal of a controlling interest in a listed company which holds a prospecting right, mining right or an interest in such right.

The amendments unfortunately do not provide for any time limit within which the Minister must grant or refuse such approval.

In addition, the Amendment Act provides that any transfer "made in contravention of" this section "is void". Consequently, the disposal of a single share in a close corporation or an unlisted company that holds a prospecting or mining right or an interest in such a right will now require the Minister's written consent, failing which the transaction under which such disposal was effected, will be void.

2. Prior environmental requirements

Section 32 of the Amendment Act also introduces section 38B into the MPRDA, which provides that environmental management plans and programmes approved under the Amendment Act (before and at the time of the coming into effect of NEMA), are deemed to have been approved and issued under NEMA.

The Minister may, however, upgrade an environmental management plan or programme to address any deficiencies. The Minister must issue an environmental authorisation if he or she is satisfied that the deficiencies have been addressed and the environmental authorisation requirements of NEMA have been met.

CONCLUSION

From 7 June 2013, the South African mining industry is faced with the introduction of significant changes to the MPRDA that will only be in operation for an interim period until the Amendment Bill comes into force. This is likely to impose further compliance and regulatory costs on the industry.

Notes:
1 Section 8 of the Amendment Act inserts a new subsection 11 (5) into the MPRDA. In addition, section 38 of the Amendment Act inserts section 47 (1) (e) into the MPRDA, which vests in the Minister the power to suspend or cancel a prospecting or mining right if the respective holder "has conducted the transactions mentioned in section 11 (1) before obtaining the necessary prior written approval of the Minister".
2 The President proclaimed in Government Gazette No. 36541 of 6 June that the following amendments will not come into force on 7 June 2013: section 11(1) as substituted by section 8(a) of the Amendment Act, section 11 (5) as added by section 8(c) of the Amendment Act, section 38B as inserted by section 32 of the Amendment Act, section 47 (1) (e) as added by section 38(d) of the Amendment Act, section 102(2) as substituted by section 72 of the Amendment Act and section 106(2) as substituted by section 76 of the Amendment Act.
3 Section 18 of the Amendment Act inserts a new subsection 22(2)(c) into the MPRDA.
4 Section 19 of the Amendment Act inserts subsection 23 (2A) into the MPRDA.
5 Section 41 of the Amendment Act.
6 By section 83 of the Amendment Act.
7 Section 14 of the Amendment Act amends section 18 (2) (c) of the MPRDA, section 20 of the Amendment Act amends section 24 (2) (b) of the MPRDA and section 29 of the Amendment Act amends section 35 (2) (a) of the MPRDA.
8 Section 14 of the Amendment Act amends section 18 (3) (c) of the MPRDA and section 20 of the Amendment Act amends section 24 (3) (d) of the MPRDA.
9 Section 38B (2) which is inserted into the MPRDA under section 32 of the Amendment Act.
10 Section 38B (3) which is inserted into the MPRDA under section 32 of the Amendment Act.

KEY
Black Economic Empowerment - BEE
Broad-Based Socio-Economic Charter for the South African Mining Industry - the Mining Charter
Cession, transfer, letting, subletting, assigning, alienation or other disposal - disposal
Department of Mineral Resources - DMR
Historically disadvantaged South Africans - HDSAs
Mineral and Petroleum Resources Development Act, 2002 - MPRDA
Mineral and Petroleum Resources Amendment Bill, 2007 - the Amendment Bill, 2007
Mineral and Petroleum Resources Development Amendment Act, 2008 - the Amendment Act
Mineral and Petroleum Resources Development Amendment Bill, 2012 - the draft Bill
Mineral and Petroleum Resources Development Amendment Bill, 2013 - the Amendment Bill, 2013
Minerals Act, 1991 - the repealed Minerals Act
Minister of Mineral Resources - the Minister
National Environmental Management Act, 1998 - NEMA
National Environmental Management Amendment Act, 2008 - NEMAA

Edited by: Creamer Media Reporter
 
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