05 November 2013 | Natural Resources and Energy
This document summarises the changes to mineral legislation which have occurred since the beginning of 2013, which will have an impact on mining related operations. In this report, the Mineral & Petroleum Resources Development Act is referred to as MPRDA, the National Environmental Management Act is referred to as NEMA and the National Environmental Management : Waste Act is referred to as NEMWA.
The changes to legislation identified in this document are:
The MPRD Amendment Act was passed by Parliament in November 2008 and received Presidential assent in April 2009.
The principle reason for the MPRD Amendment Act was to capture an agreement reached between the then Department of Minerals & Energy (now the Department of Mineral Resources) and the Department of Environmental Affairs which was to the effect that all environmental matters would be regulated through one system which is NEMA. The agreement was translated into the amendment of NEMA and the MPRDA.
There was a long delay before this agreement was implemented. The MPRD Amendment Act also contained provisions which were contrary to assurances given to foreign governments. These issues were to be dealt with in the MPRD Amendment Bill and it was contemplated that the MPRD Amendment Act would only come into force on the same date that the MPRD Amendment Bill was passed.
It was therefore with surprise that, on 31 May 2013, notice was given that the MPRD Amendment Act would be brought into force on 7 June 2013. It was probably because of these commitments that on 6 June 2013, a revised proclamation was issued to the effect that certain of the provisions of the MPRD Amendment Act would not be brought into force until further notice.
A consequence of this is that the MPRD Amendment Act will be brought into force on a staggered basis. The majority of the sections came into force on 7 June 2013.
The environmental provisions of the MPRD Amendment Act will come into operation on a date 18 months after the commencement of the MPRD Amendment Act (7 June 2013) and certain other provisions will come into force on a date to be later determined.
It is contemplated that these provisions, which will come into force on a date still to be determined, will dove tail with amendments contained in the MPRD Amendment Bill.
Between 7 June 2013 and the date that the environmental provisions contained in the MPRD Amendment Bill are introduced, certain other changes to environmental related matters affecting mining will be introduced through the Environmental Laws Amendment Bill.
Under Section 11 of the MPRDA, the Minister's written consent is required for the cession, transfer or sale of a prospecting or mining right, or an interest in any such right, or the sale of a controlling interest in an unlisted company or close corporation.
In the MPRD Amendment Act, the request of the Minister is extended to include a change in the controlling interest in a listed company. It also states that any cession or transfer in contravention of Section 11 is void.
A "listed company" is not defined in the MPRD Amendment Act.
The amendments to the MPRD Amendment Act have not yet been brought into force. The proposed amendments to Section 11 relating to listed companies are unworkable and their introduction would be contrary to the undertakings given by the State that the provisions would be withdrawn.
The MPRD Amendment Bill amplifies the changes contained in the MPRD Amendment Act. It now covers not only a mining right or prospecting right but also a part of a prospecting right or a part of a mining right.
The MPRD Amendment Bill now states that the consent may be granted "subject to such conditions as the Minister may determine". This opens the door for the Minister to impose additional conditions on the holder of the mining right which goes against the underlying philosophy that the terms and conditions of all mining rights should be similar. It also provides for the possibility of an abuse of power through the grant of a wide discretion.
Currently, the criteria which may be taken into account in granting consent are limited.
Section 11(2) of the MPRDA states that consent must be granted if the person to whom the right is to be transferred is able to show that it is capable of carrying out and complying with the obligations of the right and satisfies the requirements set out in Sections 17 and 23.
These deal with objective criteria relating to health, safety, technical ability and financial resources save that in regard to a mining right, Section 23(1)(h) states that the applicant must be able to further the objects set out in Sections 2(d) and (f) relating to the Charter and the Social and Labour Plan. It is only in respect of the approval of the Social and Labour Plan that a wide discretion exists.
The MPRD Amendment Bill, in Section 2A, now provides for a transfer of the part of the prospecting or mining right. This enables application to be made to vary the right and for the person who applies for part of the mining right, to lodge an application as if he or she was applying for a prospecting or mining right, as the case may be.
A new definition of "Listed Company" has been inserted in the MPRD Amendment Bill to mean a listed company as defined in the Income Tax Act. A Listed Company defined in the Income Tax Act includes a company which is not incorporated in South Africa but incorporated in a foreign jurisdiction and which is listed on a stock exchange in a foreign jurisdiction.
The MPRDA, covered "minerals" as defined. The definition of "minerals" included substances which occurred naturally in or on the earth and in any "residue stockpile" or "residue deposit". A "residue stockpile" was defined as any debris, discard, tailings, slimes, screening, slurry, waste rock, foundry sand, beneficiation plant waste, ash or other product derived from or incidental to a mining operation and which is stockpiled, stored or accumulated for potential re-use, or which is disposed of, by the holder of a mining right, mining permit or production right.
The definition of "residue deposit" is similar. It read:
The word "mine" in the MPRDA, when used as a verb, is any activity for the purposes of winning a "mineral". Section 5(4) of the MPRDA states that a person may not mine, ie, win a mineral as defined, without a mining right.
Residue stockpiles or tailings do not occur naturally in or on the earth. They are created unnaturally by mining operations. A residue stockpile or residue deposit, therefore, falls within the ambit of MPRDA only if it is created by the holder of a mining right or remains at the termination or expiry of a mining right.
Thus, the MPRDA did not apply to residues produced under old forms of rights or titles granted in terms of the legislation that preceded MPRDA. This was always the view of mining companies and was accepted in De Beers Consolidated Mines Limited vs Ataqua Mining Proprietary Limited & Others, a decision of the Free State High Court, handed down on 13 December 2007.
The MPRD Amendment Act amplified the definition of "residue deposit" and "residue stockpile" to include deposits or stockpiles created under an old order right.
The effect of the amendment is that residues held in terms of an unused old order right, which has not been converted, now vests in the State, as the time period for applying for conversion has lapsed.
If, however, the old residues are held in terms of used old order mining rights which are converted, then we believe the mining of the residue under the new order right is permited. At the end of the period of the mining right, however, the residue will vest in the State.
There was debate as to whether the provisions contained in the MPRD Amendment Act had retrospective effect to stockpiles or deposits created before the MPRD Amendment Act or the MPRDA itself.
The issue of beneficiation of minerals within South Africa has always been controversial. The State has long held the view that foreign mining companies have stripped South Africa of wealth by extracting minerals from South Africa and beneficiating the minerals in other jurisdictions.
Section 26 of the MPRDA dealt with beneficiation in broad terms. It empowered the Minister to initiate or prescribe incentives to promote beneficiation of minerals in South Africa. Section 26(3) stipulates that a person who beneficiates a mineral outside of South Africa which that person mines in South Africa, may only do so after written notice and in consultation with the Minister.
Beneficiation was not expressly defined in the MPRDA. The ordinary meaning of the word is the treatment of raw materials to improve its physical or chemical properties.
The MPRD Amendment Act now defines beneficiation.
The definition is split into four parts, namely the primary stage, the secondary stage, the tertiary stage and the final stage.
The primary stage involves concentrating and smelting. The secondary stage involves converting a concentrate into an intermediate product. The tertiary stage involves converting that product into a refined product suited for purchase by mineral based industries. The final stage involves the action of producing properly processed or manufactured products as fully processed or manufactured and value added products.
The MPRD Amendment Act amends Section 26 by deleting the reference to incentives which may be introduced by the Minister to promote beneficiation and instead, states that the Minister may initiate or promote beneficiation of minerals and may prescribe levels required for beneficiation.
In other words, the MPRD Amendment Act allows the Minister to stipulate what levels of beneficiation must be introduced as opposed to providing incentives to beneficiate.
The MPRD Amendment Bill takes the matter a great deal further.
The definition of "beneficiation" is amplified to include, in the final stage, transformation, value addition or downstream beneficiation of a mineral to a higher value product, over base lines to be determined by the Minister, which can either be consumed locally or exported.
Section 26 is further amended. It now states that the Minister "must" initiate beneficiation as opposed to "may" initiate beneficiation.
The Minister may now, by notice in the Government Gazette, determine the percentage per mineral as may be required for local beneficiation, after taking into consideration the national interest. The Minister may also stipulate that every producer has to offer to local beneficiators, a certain percentage of its raw mineral or mineral products.
A new definition of "designated minerals" has been added. These are minerals which the Minister designates in the Government Gazette for beneficiation purposes, as and when the need arises. Section 26 has now been amended to state that any person who intends to export a designated mineral (intended for beneficiation locally) may only do so with the Minister's written consent and subject to such conditions as the Minister may determine.
Detailed submissions on this issue have been made to Parliament.
The broad discretion which the MPRD Amendment Bill affords the Minister to set:
has been criticised because of the vagueness of the terms and the fact that there are no objective criteria to test or limit the discretionary powers. In addition, the word "economically" has been deleted from the MPRD Amendment Act so that this implies that the Minister is no longer required to consider whether beneficiation is economically feasible.
In the submissions to Parliament, the point was made that the MPRD Amendment Bill introduces a potentially unlawful export licencing system which potentially contravenes:
A. Article XI, read with Article XX, of the General Agreement on Tariffs and Trade, 1994 (GATT); and
B. Article 19, read with Article 27, of the European Union - South Africa Trade, Development and Co-Operation Agreement, 1999 (TDCA),
which both prohibit the imposition of measures which limit the amount of goods that may be exported between countries.
If South Africa is found to be in breach of the GATT, the dispute settlement body of the World Trade Organisation, may make recommendations to South Africa which, if not met, may result in the suspension of concessions or other obligations owed to South Africa by affected member States under the GATT or another World Trade Organisation treaty.
The Co-Operation Council established by the TDCA, or an international arbitration panel constituted under it, may issue a binding decision requiring South Africa to implement corrective measures.
The MPRD Amendment Bill may also violate South Africa's bilateral investment treaty between South Africa and the United Kingdom which affords investors and their investments "fair and equitable treatment".
It was made clear to Parliament that this principle imposes obligations on South African public authorities to act transparently, reasonably and without ambiguity.
South Africa will also be in breach of a bilateral investment treaty where it has failed to protect investors' legitimate expectations to rely on the host State's earlier commitments in that it has not provided a predictable regulatory framework for investments. In other words, the amendments proposed by the MPRD Amendment Bill regarding the export of mineral products do not adequately protect foreign investors' legitimate expectations by creating a regulatory environment which is significantly different from that which existed at the time the investments were first made.
There are other arguments that the provisions regarding beneficiation are unconstitutional insofar as they violate South Africa's international law obligations (Section 231(2) of the Constitution provides that an international agreement binds the Republic where it has been approved by Parliament. The argument is that the agreement is not only binding on the Republic but it also has domestic effect, ie, within the country).
Finally, the further argument has been made that the MPRD Amendment Bill violates Section 25 of the Bill of Rights to the Constitution in that it constitutes an arbitrary deprivation of property. In other words, without clear rules, the deprivation cannot be procedurally fair and without adequate criteria, the deprivation is arbitrary.
These points have all been clearly made to Parliament in its deliberations on the MPRD Amendment Bill, but will need to be taken into account by mining companies should the provisions not be withdrawn.
One of the significant provisions of the MPRDA, inserted so as to prevent abuse, was that, in terms of Section 9 of the MPRDA, applications for a prospecting right or mining right received on different dates had to be dealt with in order of receipt and only if they were received on the same day, could preference be given to applications from historically disadvantaged persons.
The MPRD Amendment Act makes some wording changes to Section 9 but does not amend the substance.
The MPRD Amendment Bill now deletes Section 9 and inserts a new Section. The new Section 9 states that the Minister may, by notice in the Government Gazette, invite applications for rights in respect of an area of land and may prescribe the period within which any application may be lodged.
The MPRD Amendment Bill therefore appears to jettison the first in, first assessed system without providing for a competitive tender process.
The concept of the State inviting applications for rights in respect of a particular area only works where the State holds information about the mineral resources not commonly held by mining companies. This is felt to be inappropriate in the South African non-fuel context.
Section 9(2) of the MPRD Amendment Bill further provides that any area which has been relinquished or abandoned is not available for application until the Minister invites applications as contemplated by Section 9(1). This appears to imply that it is not possible to apply for an area which has been abandoned or relinquished by another mining company until the Minister invites applicants to make application.
In terms of Section 17 of the MPRDA, the Minister could refuse an application for a prospecting right if the grant of the right would prevent fair competition, result in the concentration of mineral resources in question under the control of the applicant or constitute an exclusionary act (being an act which impedes or prevents a person from entering the mineral industry).
The MPRD Amendment Act amends this section to stipulate that the right to refuse a prospecting right applies when the Minister believes that this will result in the concentration of mineral resources under the control of the applicant and their associated companies with the possible limitation of equitable access to mineral resources.
The reference to the prevention of fair competition has been excluded. What has been added is a concentration of mineral resources, not only in the applicant, but also the applicant's associated companies.
The MPRD Amendment Bill, on the other hand, now refers to a concentration of "rights" as opposed to a concentration of "mineral resources". Obviously, this is intended to cover rights other than mineral rights.
It is felt that it is not competent for the Department of Mineral Resources to competently deal with whether a company has an over allocation of rights relative to other companies. It is also a highly subjective issue. The matter is best dealt with by the Competition authorities.
Apart from the entitlement to refuse a prospecting right application if this results in a concentration of rights, the MPRD Amendment Bill allows the Minister to refuse a prospecting application if the applicant has submitted inaccurate, incorrect or misleading information in support of the application or on any matter required to be submitted in terms of the Act.
In an application for a renewal of a prospecting right, the MPRD Amendment Act now stipulates that this must now be accompanied by a certificate issued by the Council for Geoscience that all prospecting information, as prescribed, has been submitted.
At a practical level, it will be very difficult to comply with this requirement.
Section 23 of the MPRD Amendment Bill now adds a further requirement for an application for the grant of a mining right. The applicant must show that it has the ability to comply with the relevant provisions of the National Water Act.
Since the National Water Act is interpreted in a manner far wider than we believe should be the case, this has potentially onerous consequences. For example, the Department of Water Affairs interprets the licencing provisions of the National Water Act to the effect that any activity within 500 metres of a wetland has a substantial impact on a wetland.
In terms of the MPRDA, a mining company applying for the conversion of its rights or for new rights, has to show that it is giving effect to the objects of the MPRDA and in particular, those objects which expand the opportunities of historically disadvantaged persons.
The MPRD Amendment Act extends the meaning of historically disadvantaged South Africans to include a "community" which is in turn defined to be a group of historically disadvantaged persons with interests or rights in a particular area. A "community" is now defined to include those people directly affected by mining on land occupied by members or part of the community.
In terms of Sections 25 and 28 of the MPRDA, the holder of a mining right must report annually on its compliance with, amongst other things, the provisions of Section 2(d) of the MPRDA. This is the requirement that the mining company expand opportunities for historically disadvantaged persons. The wider ambit of Section 2(d) must now be taken into account in the annual reports submitted. These reports must now deal with how opportunities for the surrounding communities are advanced.
The MPRD Amendment Bill proposes to further amend the definition of "community" and Section 2(d).
The definition of "community" is amended to be "a coherent, social group of persons with interests or rights in a particular area of land which the members have or exercise communally in terms of an agreement, custom or law."
The MPRD Amendment Act states, in the amendment to Section 23, that in the application for a mining right, if the application relates to land occupied by a community, the Minister of Mineral Resources (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. These words could be interpreted to include a stipulation that the community have an equity stake in the entity which is awarded the mining right.
In the MPRD Amendment Bill, the imposition of the obligation requiring the participation of the community is deleted but the Minister may, after taking into consideration the socio-economic challenges or needs of a particular area or community, direct the holder of a mining right to address those challenges or needs. The most appropriate way of addressing the challenges or needs would be in the social and labour plan.
Section 43 of the MPRDA provided that the holder of a mining right remained responsible for all environmental liability until the Minister had issued a closure certificate. Thereafter, the liability ceased.
The MPRD Amendment Act now states that a closure certificate will only be granted after each government department, charged with the administration of any law relating to matters affecting the environment, has confirmed that there has been compliance with the conditions of the environmental authorisation. Previously, only the Department of Water Affairs & Forestry had to provide this confirmation.
A new sub-section has been added to Section 43 in the MPRD Amendment Act. This requires the holder to plan for, manage and implement procedures and requirements on mine closure, as may be prescribed.
The Minister is also granted power to publish strategies to facilitate mine closure and if strategies are published, then the holder must amend the programmes, plans or environmental authorisation or submit a closure plan which is aligned with the closure strategies.
In addition, no closure certificate may be issued unless the Council for Geoscience has confirmed that all prospecting or mining records have been lodged with them including borehole, core data and core log data.
Thus, for practical purposes, it will become even more difficult to obtain a closure certificate.
The MPRD Amendment Bill takes the matter further. It states that notwithstanding that a closure certificate may be issued, the holder of the right or previous owner of the works, remains liable for any environmental liability, pollution, ecological degradation, the pumping and treatment of extraneous water and compliance with the environmental authorisation. Thus, there appears little purpose in obtaining a closure certificate.
This is a far reaching amendment as it leaves open ended an environmental liability even if all of the requirements of the environmental authorisation have been complied with and closure issued.
In a reversal to what is contained in the MPRD Amendment Act, the MPRD Amendment Bill now no longer requires certification from every government department but only the Chief Inspector of Mines and the Department of Water and Environmental Affairs.
The environmental provisions contained in the MPRD Amendment Act only come into force 18 months from the date of the commencement of the MPRD Amendment Act.
Section 5(4) of the MPRDA is deleted with immediate effect. This subsection is the subsection which states that no person may mine, inter alia, without an approved environmental management programme. A new Section 5A has been inserted which states that no person may prospect or mine without an environmental authorisation (being an environmental authorisation issued under NEMA). This section, however, only comes into effect 18 months hence.
Sections 16, 22 and 27 of the MPRDA state that applications for a prospecting right, mining right or mining permit require the applicant to submit an environmental management plan. These provisions remain in place for the 18 month period and, thereafter, are replaced with provisions to the effect that an environmental management plan is replaced with an environmental authorisation.
By implication, therefore, it is still necessary to hold an environmental management plan, during the interim 18 month period, for conducting mining or prospecting operations.
Sections 38, 39, 40, 41 and 42 of MPRDA are repealed with immediate effect. These are the sections which deal with environmental management principles, integrated environmental management and the responsibility to remedy, the environmental management programme and the environmental management plan, consultation with State departments in the consideration of the environmental management plan, financial provision for remedying environmental damage and the management of residue stockpile and residue deposits.
A new Section 38A is to come into force in 18 months time, which states that the Minister of Mines is the responsible authority for implementing the environmental provisions in terms of NEMA as it relates to mining or activities incidental thereto, or on a prospecting or mining area.
In addition, an environmental authorisation issued by the Minister shall be a condition prior to the issuing or grant of a mining right.
A new Section 38B is to be introduced on a date to be determined by the Minister. This is the deeming provision which states that an environmental plan or environmental management programme approved under MPRDA is deemed to be an approved and an environmental authorisation issued under NEMA.
The MPRD Amendment Bill amends Section 16 to say that the applicant, for a prospecting right, must not only apply for an environmental authorisation (under NEMA) but also apply for a licence for use of water in terms of the applicable legislation.
Similar amendments are made in regard to the provisions relating to the application for a mining right and for a mining permit.
The NEMA Amendment Act was assented to by the President on 9 January 2009.
Any provision relating to prospecting or mining and related activities in the NEMA Amendment Act comes into operation 18 months after the enactment of the MPRD Amendment Act.
The transitional provisions stipulate that any environmental management plan or programme, approved in terms of the MPRDA, immediately before the date on which the NEMA Amendment Act came into operation, is regarded as having been approved in terms of NEMA, as amended by the NEMA Amendment Act.
It is assumed that the reference to the date on which the NEMA Amendment Act comes into operation is, in relation to mining, 18 months from the date of commencement of the MPRD Amendment Act.
In terms of Section 24C of the NEMA Amendment Act, the Minister of Minerals & Energy (now Mineral Resources) is identified as the competent authority responsible for granting environmental authorisations in respect of listed activities.
The Environmental Laws Amendment Bill was introduced into Parliament on 18 July 2013.
The Environmental Laws Amendment Bill changes the reference in NEMA and the NEMA Amendment Act from the Minister of Minerals & Energy to the Minister of Mineral Resources.
Provision is made for the Minister of Mineral Resources to designate a person as an environmental mineral resource inspector. This inspector will be responsible for compliance, monitoring and enforcement of NEMA as well as NEMWA.
NEMWA is amended to stipulate that the Minister of Mineral Resources is the licencing authority where a waste management activity involves residue deposits and residue stockpiles on a mining area and is responsible for the implementation of the provisions that relate to these matters.
These provisions follow the agreement reached between the Department of Environmental Affairs and the Department of Mineral Resources that one environmental system would apply, which would be NEMA and the Minister of Mineral Resources would implement environmental matters in terms of NEMA insofar as it relates to mining.
The Environmental Laws Amendment Bill provides for the deletion of the definitions of residue deposits and stockpiles under NEMA and inserts those definitions under NEMWA in order to empower the Minister of Water & Environmental Affairs to develop regulations on the environmental management and control of residue deposits and stockpiles for implementation by the Minister of Mineral Resources.
In the explanatory memorandum to the Environmental Laws Amendment Bill it is stated that, for example, if a power line is built, the Minister of Mineral Resources will be the competent authority for that portion of the power line directly related to the mine (linked to the footprint of the mine as applied for). The Minister of Mineral Resources' mandate will extend to all related environmental impact assessments and include NEMA and NEMWA insofar as environmental authorisation is required for mining and waste deposits on a mining area.
The explanatory memorandum points out that the Minister of Mineral Resources, however, will not be the licencing authority for atmospheric emission licences as this is the responsibility of municipalities and such decisions are taken after completion of the environmental impact assessment process.
The Environmental Laws Amendment Bill provides that the Minister of Water & Environmental Affairs will be the appeal authority against the decision taken by the Minister of Mineral Resources regarding environmental matters in terms of NEMA.
Initially, it was contemplated that after 3 years, the control function would move from the Department of Mineral Resources. This provision has been deleted and it is now contemplated that the control function will remain with the Department of Mineral Resources.
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