On 10 May 2012, the Minister of Mineral Resources (the Minister) announced in her Parliamentary budget vote speech that the Department of Mineral Resources (the DMR) planned, before the end of June 2012, to commence the first round of the 'auctioning off' of prospecting and mining rights which have lapsed under section 56 of the Mineral and Petroleum Resources Development Act, 2002 (the MPRDA).

The Minister's announcement follows previous notices published in the Government Gazette on 9 May 2011 and 6 February 2012 (the 2012 Notice), in which the DMR:

• invited stakeholders to make representations on its intended restriction of the grant of new reconnaissance permissions, prospecting rights, mining rights and mining permits (Rights) over any land in respect of which Rights had lapsed under section 56 of the MPRDA; and
• advised stakeholders that, subject to certain exceptions (one such exception being the intended 'auction'), a five year restriction would be placed on the grant of any new Rights over any land in respect of which any Rights had previously lapsed under section 56 of the MPRDA.

The 2012 Notice indicates that further notices will be published in the Government Gazette, in which the DMR will identify the prospecting and mining rights which will be subject to the Minister's invitation for applications. These additional notices will also prescribe the criteria to be applied by the Minister in assessing the merits of the applications received pursuant to an invitation for applications. Somewhat confusingly, the 2012 Notice also states that the criteria to assess these applications "will be limited to the criteria provided for in the [MPRDA]".

Webber Wentzel intends to engage with the DMR as its proposed course of action may give rise to several issues, including the possibility that:

• the DMR's proposed 'auction' process may contradict the first-in-first-assessed principle enshrined in section 9 of the MPRDA (which is a general feature of international best practice);
• the process may be of concern to investors and may possibly increase uncertainty in relation to South Africa's mining sector; and
• the process may potentially prejudice mining companies whose prospecting and mining rights have been revoked in those circumstances where the DMR's internal appeals and any subsequent judicial review processes have not run their course.

For further information on this topic, please do not hesitate to contact any of the partners below.

Peter Leon | Partner
Tel: +27 11 530 5248 | peter.leon@webberwentzel.com

Jean Milner | Partner
Tel: +27 11 530 5290 | jean.milner@webberwentzel.com

Jonathan Veeran | Partner
Tel: +27 11 530 5336| jonathan.veeran@webberwentzel.com

Christopher Baird | Associate
Tel: +27 11 530 5522| christopher.baird@webberwentzel.com