SUMMARY OF THE DRAFT MINERAL DEVELOPMENT BILL
Hulme Scholes
Introduction slide
My brief from the Minerals and Energy Education and Training Institute, or "MEETI" as it is more popularly known, is to provide the members of this audience with a brief and impartial overview of the Minerals Development Bill in order to facilitate understanding of the Bill to give substance to the papers to be delivered by other speakers during the course of today. More specifically, my brief from MEETI was to draw a comparison between the mineral rights regime as contemplated in the Bill and the regime which presently exists under the Minerals Act 50 of 1991, as well as a discussion of potential conflict areas in the Bill.
In discharging my brief, I will at the outset provide a summary of the mineral rights and mining law regime as envisaged by the Bill, whereafter I will compare that regime to the current situation and finally, I will identify potential conflict areas in the Bill.
I have also elected to steer away from the industry specific chapters of the Bill, namely chapter 8 entitled "Control over the possession, the trade in, processing and the export or import of diamonds and matters incidental thereto", as well as chapter 9 entitled "Petroleum exploration and production", as the discussion of those specific sections will not serve to convey an understanding of the Bill to this audience, as required by my brief.
The salient features of the Mineral Development Bill
The objectives of the Bill are, broadly speaking, to give effect to the principle of State custodianship of the nation's mineral resources, to expand opportunities for historically disadvantaged person to enter the mining and minerals industry or benefit from the exploitation of South Africa's mineral resources and to prevent the hoarding of mineral rights by ensuring that under exploited mineral rights are turned to account. [section 2].
The objective of the Act to expand opportunities for historically disadvantaged persons to enter the mining and minerals industry, is ensured by the Bill stating categorically that in considering the granting of a prospecting or mining right as anticipated by the Bill, preference must be given to historically disadvantaged persons. A historically disadvantaged person is defined in the Act as a person or a category of individuals who, before the Constitution of the Republic of South Africa Act 200 of 1993 came into operation, was disadvantaged by unfair discrimination on the basis of race. [section 3(4)]
It is clear from the Bill that the architects of the Bill are steadfast in their resolve that the mineral rights regime as anticipated by the Bill, will be implemented despite conflicting legal interpretations, as the Bill categorically states that any reasonable interpretation of the Bill which is consistent with the objects of the Bill and international law, must be preferred over any alternative interpretation which is inconsistent with the objects of the Bill and international law. Furthermore, the Bill states that insofar as common law jurisprudence with respect to mineral rights and the ownership thereof is inconsistent with the provisions of the Bill, the provisions of the Bill shall prevail. [section 4(2)]
In order to implement the objectives of the Bill and to administer the mineral rights regime as anticipated by the Bill, the State intends to reserve to itself the right to prospect and mine for all minerals, without the payment of compensation for such a reservation, to the mineral right holder. [section 5]
This is a radical departure from the common law notion of the ownership of mineral rights, namely that the holder of a mineral right may elect, as one of the "bundle" of rights which accrues to him by virtue of his ownership of the mineral right, to prospect or mine for the mineral to which he is the holder of the right, in the exercise of such an entitlement to the use and enjoyment of his mineral right. By way of analogy, the owner of a house in this country at present, may elect, in his discretion, how to exercise his right to the use and enjoyment of his house. He may therefore live in the house, lease it to a third party or sell the house as he wishes. Should legislation become applicable to home ownership in a similar manner to which the Bill in its current form will become applicable to mineral right ownership, the home owner will need to apply to the State for the right to live in his own house. The Minister of Housing, who shares an office with the Minister of Minerals and Energy, will then decide, in her discretion, whether the applicant will be entitled to live in his own house. Should the applicant in his application to live in his own house fail to comply with the objective of the Housing Act, the Minister of Housing may, in her discretion, grant or refuse to grant to the applicant, the right to live in the house which he owns. The applicant will not be compensated should his application to live in his own house be rejected and the right to live in that house be granted to an applicant who complies with the objectives of the legislation governing home living.
One may ask the question how the Minister will gain access to geological information with respect to all mineral rights within the Republic to effectively administer the mineral rights regime as contemplated by the Bill. In order to assist the Minister in obtaining such information, the Bill specifically grants to the Minister, powers to cause special investigations to establish the occurrence, nature and extent of mineral resources in respect of land. The commencement date for such an investigation, will be announced in the Government Gazette. It is furthermore interesting to note that compensation in respect of any damage caused during such an investigation, will be paid in an amount to be determined by agreement between the Minister and the owner of the land where such an investigation is carried out, by a competent court or by arbitration in accordance with the provisions of the Arbitration Act 42 of 1965.
Disclosure of information is furthermore facilitated by the Bill specifically providing that any person who conducts mining must within the prescribed manner keep at an address in the Republic, proper records of all mining activities and financial records in relation thereto. These records must be available for inspection by the Director General of the Department of Minerals and Energy or any officer in the service of the Department authorised by the Director General. [sections 19 to 22]
The payment of compensation for damage caused to the surface of land during prospecting or mining activities, is a recurrent theme throughout the Bill, a situation which is in stark contradiction to the point of departure in the Bill that compensation will not be paid for mineral rights to which the State has reserved to itself the right to prospect and mine.
As stated earlier, the Bill reserves to the State, the right to prospect and mine for all minerals within the Republic. The Bill accordingly sets out the criterion for application for a prospecting right or a mining right as defined in the Bill. For application for a prospecting right, the Bill provides specifically that the applicant must lodge on a prescribed form, together with the payment of a non-refundable prescribed fee, certain information, the most noteworthy of which is the following -
a plan indicating co-ordinates and boundaries of the area applied for;
an indication of the mineral and associated minerals for which the application for a prospecting right is made;
the period for which the right is required;
a detailed prospecting work programme;
proof of the applicant's technical ability and financial resources to effectively carry out prospecting activities;
identification of interested and affected parties;
details of consultation with affected and interested parties;
such additional information as may be required by the Minister. [section 26]
The Bill provides specifically that the Director: Mineral Development for the specific area where application is made for a prospecting right, shall not consider any application for a prospecting right if such an application does not comply with the objectives of the Bill. In other words, should an applicant for a prospecting right not be actively advancing participation by historically disadvantaged persons in the mining industry, the application for the prospecting right will be refused. [section 26(3)].
A procedure to object to the granting of a prospecting right is provided for in the Bill and the Bill anticipates that a notice will be displayed at the office of the Director: Mineral Development and in a public building in the district in which the land concerned in situated, calling upon any person who wishes to object to the granting of a prospecting right, to furnish his or her objections and the grounds therefor to the Director: Mineral Development within a certain period. [section 27]
The relevant Director: Mineral Development, must convene a meeting to hear the objections and to address the issues raised in the written objection.
The Minister must refuse to approve the granting of a prospecting right if, in his or her opinion, an applicant does not comply with the provisions of the Bill, which would include non-compliance with the objectives of the Bill, one of the objectives being to allow historically disadvantaged persons access to the nation's mineral wealth. The Minister must also refuse to approve the granting of a prospecting right if in his or her opinion, the granting of the prospecting right will not be in the national interest. The Bill does not define what amounts to the "national interest". This concept is, however, not foreign to the current mineral rights regime as section 24 of the Minerals Act 50 of 1991, allows for the Minister to expropriate mineral rights should such an expropriation be in the national interest. [section 31].
Prospecting rights under the Bill are issued for a period which may not exceed five years and the Director: Mineral Development, may approve of the renewal of a prospecting right for a further period not exceeding three years. The Bill specifically provides that an application for the renewal of a prospecting right, must be refused by the Minister if, in his or her opinion, the renewal thereof will result in the hoarding or lock-up of mineral resources. [section 35(2)(a)]
Logically, the difference between an application for a prospecting right and a mining right as envisaged in the Bill, is that the grantee of the mining right, will be entitled to mine for the specific mineral for which he has applied, as opposed to simply the right to prospect for a specific mineral.
The application and objection procedure for a prospecting right as opposed to a mining right is substantively similar and the short time which I have at my disposal to discuss the Bill, does not warrant an in depth analysis of the differences in the applications. It is important, however, to note that a mining right granted pursuant to the provisions of the Bill, will be valid for a period of twenty five years as opposed to a prospecting right which will only be valid for a maximum of five years.
The Bill provides for the granting of retention permits by the Minister in instances where an applicant believes that no further prospecting or mining operations are warranted, but simultaneously, the applicant wishes to retain his prospecting right issued pursuant to the provisions of the Bill. Retention permits may only be issued in cases where the holder of a prospecting right has prospected the land to which the application relates and the existence of a potentially mineable reserve, has been established, while simultaneously, it has been determined that after thorough research, the mining of the mineral or group of minerals concerned would be uneconomical in the prevailing market conditions. [sections 49 to 59]
The Bill provides that the Minister may, by notice in the Government Gazette and in order to promote the participation of certain categories of persons in prospecting and mining activities, or to specifically promote any category of prospecting or mining activities, exempt a category of persons or prospecting or mining activities from complying with any of the normal preconditionary criterion for the granting of a prospecting right or a mining right as anticipated by the Bill. [section 62]
A prospecting right or a mining right issued pursuant to the provisions of the Bill, will not be capable of transfer, cession, assignment, lease, sub-leasing, alienation or disposal or encumbrance by mortgage, without the prior written approval of the Minister. [section 61]
Part two of the Bill entitled "Regulatory Control in respect of Environmental Management and Remediation of Environmental Damage", deals with environmental management of prospecting and mining activities pursuant to the grant of prospecting rights and mining rights as anticipated by the Bill. The environmental section of the Bill, draws heavily on the National Environmental Act with respect to environmental matters. This aspect will be discussed more specifically later on this paper.
The Bill provides for the establishment of a Minerals and Mining Development Board to advise the Minister on policy matters relating to the subject matter of the Bill. Ministerial appointees will staff the Minerals and Mining Development Board and certain persons, including members of parliament and office bearers of any party, movement, organisation or body of political nature, are excluded from being members of the Board.[sections 76 to 87]
For the mining industry, the most important provisions of the Bill are the transitional arrangements as provided for in chapter 7 of the Bill. These transitional arrangements intend to facilitate a changeover from the mineral rights regime under the Minerals Act 50 of 1991, to the regime as contemplated by the provisions of the Bill.
A prospecting permit issued pursuant to the provisions of section 6 of the Minerals Act, is for the purposes of the Bill, referred to as a "prospector's right" and a mining authorisation issued pursuant to the provisions of section 9 of the Minerals Act, is referred to as a "miner's right" for the purposes of the Bill. [section 88]
The holder of prospector's right which, as stated above, was a prospecting permit under the Minerals Act, will be granted a period of two years within which to apply to the State for a prospecting right as provided for in the Bill. [section 91(1)]
The holder of a miner's right which, as stated above, was a mining authorisation under the Minerals Act, will be granted a period of five years within which to apply for a mining right as provided for in the Bill. The effect of the Bill imposing a five year application period, means that security of tenure for a mining authorisation, whichever length of time the mining authorisation was granted for, is limited to five years or, as the Bill provides, for a period within which a decision is made to grant or refuse to grant the mining right applied for by the holder of the miner's right. [section 93]
The Bill also provides for a third category of right, namely an "old order right" which is in essence, a mineral right or mining title which exists under the Minerals Act. Logically, any prospector's right or a prospecting permit issued pursuant to the provisions of section 6 of the Minerals Act and a miner's right which is a mining authorisation issued pursuant to the provisions of section 9 of the Minerals Act, would have been granted for a specific old order right, which is the underlying mineral right or mining title for which the prospecting permit or the mining authorisation was issued.
An old order right for the purposes of the Bill, is a mineral right or mining title for which no prospecting permit or mining authorisation exists at the date upon which the Bill is promulgated as legislation.
The State intends to deal with old order rights by a general notice in the Government Gazette which will invite the holders of old order rights, which are not subject to a prospecting permit or mining authorisation, to, within a period of one year from the date of that notice, apply for a prospecting or mining right in terms of the Bill or to give written reasons why a prospecting or mining right should not be granted to another party.[section 94].
It is important to note that any old order right for which a prospecting right or a mining right has not been granted pursuant to the provisions of the Bill within the time periods stipulated for application for such a prospecting right or mining right, or for which a prospecting right or mining right has been refused, will cease to exist in respect of the land and mineral concerned. The old order right will furthermore cease to exist on the date of the granting of a prospecting right or a mining right to a successful applicant. In other words, whether or not a prospecting right or mining right is granted to an applicant, the underlying old order right, will cease to exist.
Furthermore, the Minister may, upon the cessation of an old order right or upon the giving of notice to an applicant for a prospecting right or mining right that his application has been unsuccessful, grant to any third party applicant a prospecting right or mining right, provided that the applicant has complied with the application procedure in the Bill.
It is interesting to note that the Bill preserves any right to use the surface of land granted or deemed to have been granted or acquired or which continues to exist or is in force in terms of the Minerals Act and in force immediately prior to the commencement of the Bill, which is a radically different consequence to that which will apply to the existing mineral rights regime which is extinguished in its entirety.
Section 98 of the Bill is noteworthy in that no transfer in respect any old order right shall be effected in the Deeds Registries Office or the Mining Titles Office after six months following the date upon which the Bill is promulgated as binding legislation. The Registrar of Deeds and the Registrar of Mining Titles will furthermore be informed to make such endorsements and such entries in the appropriate registers as he or she may deem necessary in order to give effect to the cessation of old order rights as anticipated by the provisions of the Bill. The effect of section 98 is to prohibit the transfer of old order rights after a period of six months has elapsed from the date of the commencement of the Bill as a binding Act of parliament. [section 98]
With respect to royalties payable in terms of any old order right, those royalties will continue to be paid to the person entitled thereto, or to his or her successor-in-title in accordance with the provisions of the old order right concerned until the said old order right ceases to exist as anticipated by the provisions of the Bill. The Minister may, however, exercise a discretion in certain circumstances, to decide that the consideration concerned continues to be paid to the person entitled thereto. [section 100]
I now move onto a comparison of the mineral rights regime as anticipated by the Bill, to the current mineral rights regime as administered by the Minerals Act 50 of 1991.
Comparison between the Bill and the Minerals Act 50 of 1991
As was made clear above, the Bill anticipates that the State will reserve to itself the right to prospect and mine for all minerals, whether privately owned within the Republic of South Africa or not. Applicants will need to apply directly to the State for such a right to prospect or mine for those minerals, even though they may be the registered holder of the rights to those minerals.
I have heard it argued that under prior legislation, such as the Mining Rights Act 20 of 1967, the State reserved to itself the right to prospect and mine for precious metals and precious stones and that the Bill simply reverts to that position, the argument being that the reservation of the right to the State to prospect and mine for minerals, is not new and that any objections to those provisions in the Bill, are a "storm in a tea cup".
This supposition by the pro-reservation lobby, is not entirely correct as under the Mining Rights Act 20 of 1967, which was repealed by the Minerals Act 50 of 1991, a potential miner for precious metals for example, had to first conclude a transaction with the holder of the rights to that precious metal, before he could approach a State institution known as The Mining Leases Board, for a mining lease in order to exercise his right so obtained from the common law mineral right holder, in accordance with the provisions of the mining lease. The radical difference between the right to mine for precious metals as reserved to the State in the Mining Rights Act 20 of 1967 and the reservation of the right to prospect and mine for precious metals or any other minerals, for that matter, under the Bill, is that a prospective applicant for a prospecting right or a mining right under the Bill, need not approach the common law holder of the right to the specific mineral in order to obtain the consent of such holder to apply to a similar institution such a Mining Leases Board, but the applicant simply circumvents the common law holder of the mineral right, whose rights are effectively extinguished by the Bill and approaches the State directly for such a prospecting right or mining right.
It has also been argued by those not well versed in mineral and mining law, that by the system of issuing prospecting permits and mining authorisations to applicants pursuant to the provisions of section 6 and section 9 of the Minerals Act respectively, the State has so reserved itself the right to prospect and mine for all minerals under the Minerals Act. This supposition is not correct as by the issuing of prospecting permits and mining authorisations, the State is simply controlling the manner in which the holder of the common law right to a mineral, exercises his common law right to the use and enjoyment of his property to ensure that factors such as the rehabilitation of land disturbed during prospecting and mining activities, are provided for. With respect to environmental matters, the Bill entrenches the principle of sustainable development as anticipated by the National Environmental Management Act, onto mining companies in the discharge of their rehabilitatory obligations pursuant to the granting of prospecting rights and mining rights. It is interesting to note that on 23 February 2001, regulations issued pursuant to the provisions of section 112 of the National Environmental Management Act, have imposed such a duty of sustainable development onto mining companies in the preparation of their environmental management programme reports as, we anticipate, a precursor to the all out inclusion of the basic NEMA principles in the new mineral rights regime as provided for in the Bill.
Ministerial discretion plays a large roll in the Bill and instances of Ministerial discretion are limited under the Minerals Act, the reason being that State intervention in mining and mineral related transactions under the Minerals Act, is extremely limited and the State merely plays an administrative roll in ensuring that exploitation of mineral rights occurs within the context of the optimal utilisation and exploitation of mineral rights and that rehabilitatory obligations are discharged. Under the Bill, however, the Minister has wide discretionary powers to ensure that the objectives of the Act are complied with, a factor which the architects of the Bill have deemed necessary to include to ensure that the Minister ultimately oversees and regulates the mineral rights regime as contemplated by the Bill.
Security of tenure under the Minerals Act, is undoubtedly entrenched in a clear and concise manner and under the Minerals Act, mining titles and mineral rights which existed prior to the commencement of the Minerals Act on 1 January 1992, are preserved on the terms and conditions under which they were granted. Security of tenure is therefore easily determinable by a simple reference to documents of title for mining titles and mineral rights, which are public documents held at the Deeds Registry and the Office of the Registrar of Mining Titles in Pretoria. Although the Bill purports to provide the same degree of security of tenure, it is my submission that the Bill falls short of security of tenure as the wide discretionary powers granted to the Minister to elect to either grant or refuse to grant prospecting rights or mining rights, as referred to in the Bill, provides cold comfort for mining companies, prospective applicants for prospecting rights and mining rights to be issued pursuant to the provisions of the Bill and for investors in mining ventures. I trust that this crucial aspect of any new mineral rights regime, will enjoy further development by the architects of the Bill and those charged with the eventual transformation of the Bill from that to binding legislation.
As stated above, it would appear that the Bill affords similar protections for surface rights necessary and incidental to mining activities, as the protections provided for in the Minerals Act.
Potential areas of conflict in the Bill
Whether the provisions of the Bill dealing with the reservation of the rights to prospect and mine for all minerals in the State without the payment of any form of compensation to the holders of old order rights, is unconstitutional or not, is highly debatable.
The anti-constitutional school of thought, believes that by reserving to itself the right to prospect and mine for all minerals, the State is effectively expropriating that right, which expropriation falls within the ambit of section 25 of the Constitution, requiring the payment of compensation for expropriation of a right in property.
The school of thought which believes that the Bill does not violate the Constitution, base their views on the following -
the vesting of the right to prospect and mine in the State, does not fall within the definition of expropriation as the underlying mineral right, is not effected by such a vesting;
minerals rights are not property for the purposes of section 25 of the Constitution;
the entitlement of the State to make laws of general application to redress the wrongs of the past as entrenched in the Constitution, effectively overrides all property protection clauses in the Constitution insofar as they may relate to mineral rights and the expropriation thereof.
We can only hope that these Constitutional arguments will be settled prior to the Bill being enacted as legislation as the ensuing Constitutional and other litigation will not facilitate the implementation of the objectives of the Bill, which I believe are supported by most parties to this debate. Lawyers like myself obviously oppose resolution of this debate as at the heart of any litigation, is a holiday home for an attorney in Plettenberg Bay, despite Mr Manuel's ingenious capital gains initiative.
The procedure whereby the holders of all prospecting permits and mining authorisations, known as prospector's rights and miner's rights under the Bill, will need to reapply for a prospecting right or mining right under the Bill, has been argued to be administratively cumbersome and the already overworked and understaffed Department of Minerals and Energy, will find it difficult to deal with this increased workload. To simply increase the staff compliment of the Department of Minerals and Energy, will not resolve the issue as persons appointed to the Department need special skills and will have to be trained to be well versed in mining and mineral law.
It has been argued that the wide spread discretionary powers of the Minister, will not be subject to thorough administrative review and are open to abuse by unscrupulous government officials. The proponents of this theory, require that the Bill provide for more objective criterion in an easily identifiable manner, upon which basis the Minister will grant or refuse to grant prospecting rights or mining rights as anticipated by the Bill.
In conclusion, it is my personal view that the Draft Mineral Development Bill has already, at this preliminary stage, engineered constructive debate by all parties involved in the mining industry in South Africa and it is my honest belief that the Government and more specifically the Department of Minerals and Energy and the architects of the Bill, are committed in good faith to achieve a workable solution to ultimately exploit all minerals rights for the benefit of all South Africans.