Since 1 May 2004 the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) has been the principle piece of legislation that regulates the South African mineral and petroleum sector. This act will generally be applicable to any project that involves the any prospecting for or mining of minerals, or any exploration for or production of petroleum resources.
The MPRDA was enacted with the objectives of promoting local and rural development, ensuring equal access to minerals, and eradicating discriminatory practices in the industry, while still guaranteeing security of tenure to participants in the industry and increasing the industries international competitiveness.
One of the fundamental changes that were brought about by the MPRDA was the abolishment of the right for persons to privately own minerals and petroleum rights. The state is now the custodian of all mineral and petroleum resources and these resources are held by the state for the benefit of all South Africans (section 3(1)). To ensure security of tenure for holders of mineral and petroleum rights that were held under the previous mineral regime, these holders were granted a five year period to convert their rights to a right issued in terms of the MPRDA.
The requirement to be granted a licence
Before conducting any prospecting or mining of minerals, or exploration or production of petroleum resources, a person must first be granted a permit or right from the Department of Mineral Resources authorising the intended activity.
The MPRDA regulates minerals and petroleum as defined in the act. These terms are defined broadly but the definitions do contain exceptions.
A mineral is defined as any solid, liquid or gaseous substance occurring naturally in or on the earth or in or under water that was formed by or subjected to geological processes. Importantly, the definition of “mineral” includes sand, stone, rock, gravel, clay and soil, and all minerals in residue stockpiles or residue deposits (including dumps, debris, discard, tailings and slimes) (section 1). The definition of mineral excludes water and peat (section 1).
Petroleum is defined as any liquid, solid hydrocarbon or combustible gas existing in a natural condition in the earth’s crust. The definition excludes coal, bituminous shale, stratified deposits from which oil can be obtained by destructive, distillation, and gasses rising from marshes or other surface deposits (section 1).
The licence application procedure
Before conducting any prospecting or mining of minerals, or exploration or production of petroleum resources, a person must:
- be granted a right by the Minister of Mineral Resources authorising the intended activity in terms of the MPRDA (section 5A(b));
- be granted an environmental authorisation in terms of the National Environmental Management Act (NEMA) (section 5A(a));
- conduct consultations with all landowners and other persons that could be interested in, or affected by, the intended operations; and
- give the landowner or occupier of the land at least twenty one days’ notice of the intended activities (section 5A(c)).
The application procedure for a right is designed to ensure that the objectives of the MPRDA are promoted by ensuring that all interested and affected parties are notified of the application and that the black economic empowerment objectives in the MPRDA are also promoted.
All interested and affected parties must be notified of the pending application and are called upon to raise any objection that they may have against the application (section 10). The applicant is also required to hold consultations with the landowners and occupiers of the property and all other interested and affected parties (sections 16(4)(b), 22(4)(b) and 27(5)(a)).
Broad based black economic empowerment requirements (local participation)
The black economic empowerment objectives in the MPRDA are promoted during the application procedure. The empowerment objectives require the promotion of access to resources and the expansion of opportunities for disadvantaged persons, women and communities to enter into the mineral and petroleum industry.
Before a prospecting right, mining right, exploration right or production right is granted the minister must be satisfied that the granting of the right will substantially and meaningfully expand the opportunities for these groups (sections 17(1)(f), 23(1)(h), 80(1)(g) and 84(1)(i) as read with section 2(d)).
The empowerment requirements are expanded on in the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Metals Industry that was published in 2010. The charter has various elements that must be complied with to ensure that the project will satisfy the empowerment requirements and qualify for a licence.
Generally, in order for the empowerment objectives to be satisfied and the application to be granted a minimum of twenty six per cent of the project should be owned by historically disadvantaged South Africans, and historically disadvantaged South Africans should participate in the management of the company.
Categories of licences that can be granted in terms of the MPRDA
The following licences can be granted in terms of the MPRDA:
To prospect for minerals:
- A reconnaissance permission:
- Granted for a non-renewable period of 1 year (section 14).
- Allows only for the search of minerals by geological, geophysical and photo geological surveys or through the use of remote sensing techniques (section 5A as read with section 1).
- A prospecting right:
- Granted for a maximum period of 5 years (section 17(6)).
- Renewable for 1 further single period that can’t exceed 3 years (section 18(4)).
- Allows for prospecting by any means, including methods that disturb the surface or subsurface of the earth, whether on land, under sea or under water (section 5A read with section 1).
- Diamonds and bulk samples of other minerals that are found during the prospecting operations can only be disposed of with the consent of the minister (section 20(2)). This consent is typically granted in the form of a bulk sampling permit.
To mine for minerals
- A mining right:
- Granted for a maximum period of 30 years (section 23(6)).
- Renewable for further periods. Each further period may not exceed 30 years (section 24(4)).
- A mining permit:
- A mining permit is intended for small scale mining operations and may only be issued if (i) the mineral can be mined optimally in 2 years; and (ii) the area is 5 hectares or less.
- Granted for a maximum period of 2 years (section 27(8)(a)).
- May be renewed a maximum of 3 times. Each renewal may not be longer than 1 year (section 27(8)(b)).
To explore for petroleum
- A reconnaissance permit:
- Granted for a non-renewable period of 1 year (section 74(4)).
- Allows only for the search of petroleum by geological, geophysical and photo geological surveys or through the use of remote sensing techniques (section 5A as read with section 1).
- A technical cooperation permit:
- Granted for a non-renewable period of 1 year (section 77(4)).
- Allows the holder to conduct a technical cooperation study and grants the holder the exclusive right to later apply for an exploration right over the area (section 77(4) and section 78(1)).
- An exploration right:
- Granted for a maximum period of 3 years (section 80(5)).
- May be renewed a maximum of 3 times. Each renewal may not be longer than 2 years (section 81(5)).
To produce petroleum
- A production right:
- Granted for a maximum period of 30 years (section 84(4)).
- Renewable for further periods. Each further period may not exceed 30 years (section 85(4)).