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Prospecting Right Applications: The Queuing Conundrum

The laws governing mining rights in South Africa is founded on three principles: (i) the State is the custodian of all minerals; (ii) any person may apply for a right to prospect on a first come first served basis; and (iii) a use it or lose principle applies to rights. These principles ensure a system that encourages active prospecting and prevents people from holding onto rights without using them to prevent others from actively prospecting.

The application procedure is a system of queuing – the first to submit an application is in the front of the queue, and all subsequent applications form a queue behind the first which can only be considered once the first application has been rejected.

An unresolved legal question was whether a company can submit a non-compliant application as a placeholder in the queue, and then later amend the application to make sure it is compliant.

The recent Gauteng High Court decision in Aquila Steel (South Africa) Limited v the Minister of Mineral Resources and others (72248/15) promised guidance on the proper application of the principles governing the application procedure, which it indeed gave, but an important aspect of the decision mustn’t be overlooked. The laws that the court applied to come to its decision have been amended.

In this note I’ll consider if the court’s decision, and if the amendment of the the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) will affect its application.

The Courts Reasoning in the Aquila Steel Judgement

This case dealt with two conflicting prospecting rights granted over the same land for the same mineral.

On 19 April 2005 Ziza Limited (Ziza) submitted a prospecting right application. The application was, however, incomplete because it didn’t comply with the prescribed requirements – it omitted the prescribed plan showing the land over which the application applied.

On 18 April 2006 Aquila submitted prospecting right application, which was granted on 11 October 2006.

On 26 February 2008 Ziza’s prospecting right application was granted. There were now two rights granted over the same land for the same minerals.

On 14 December 2010 Aquila applied for a mining right. This application was, however, now refused by the Department of Mineral Resources (DMR) because of Ziza’s prior application that the DMR said was in queue before Aquila’s.

The court had to decide which application was first in queue and should be considered.

Aquila argued that Ziza’s application was not complete and that the defects meant it had to be rejected by the DMR – this rejection would result in the application falling out of the queue and leave Aquila’s application as next in line. Ziza counter argued that a defect in an application doesn’t mean that the application automatically fails and has to be rejected by the DMR, but that a defective application can be amended to remedy defects without losing its place in the queue.

Does a prospecting right applicant lose their place at the front of the queue if their application doesn’t comply with the formal requirements of the MPRDA? To answer this question the court applied the wording of section 16(3) of the MPRDA as it read at the time when the applications were submitted and decided:

If the application does not comply with the requirements of this section, the Regional Manager must notify the applicant in writing of the fact within 14 days of receipt of the application and return the application to the applicant.” (own emphasis).

The crux was to determine what notifying and “returning the application to the applicant” meant. Did this mean the application was rejected, or that the process was merely suspended to allow the applicant to amend the application without losing its place in the queue?

The court considered the objective of the act to prevent sterilisation of minerals. This would be hindered if the return of the application allowed the applicant to amend a defective application – the act didn’t specify any timelines that the amendment must be done, meaning that an applicant could delay the entire procedure by not amending the application (or taking years to amend as in the present case), effectively sterilising the minerals by preventing other companies from applying for prospecting rights over the land.

The court also considered the practicalities of “returning the application”. This means the DMR has no record of the application other than the day that it was received and returned. Crucially the DMR wouldn’t have records of the minerals or land that the application related to.

The court concluded that a “return” was a rejection meaning the application fell out of the queue. An applicant could amend the application but the resubmitted application must be treated as a new application and fall behind any other applications in the queue.

Ziza’s non-compliance meant that its application fell out of the queue. Aquila’s application would accordingly have to be considered because it was the next application in the queue.

Current Position under the MPRDA

The Aquila case applied the provisions of the MPRDA as they read between 2005 and 2013, the years when the decisions were taken. This means that the court’s reasoning may not apply to decisions taken after the amendment of the act.

The MPRDA was amended on 13 June 2013, and the amended provisions must be applied to any decisions taken by the DMR after this date. Section 16(3) now reads:

If the application does not comply with the requirements of this section, the Regional Manager must notify the applicant in writing of the fact within 14 days of receipt of the application.” (own emphasis).

The amendment removes the requirement to return a non-compliant application – the very requirement that the court considered when deciding the Aquila case.

Under the amended section the DMR must only notify the applicant that its application is non-compliant. The DMR still can’t accept non-compliant applications, but it now doesn’t have an obligation to return them. Does the non-return of the application change the application of the Aquila judgement and mean that there is no rejection of the application? Does this now give an applicant an opportunity to remedy its applications non-compliance without losing its place in the queue?

In my opinion the amended section 16 of the MPRDA does not change the application of the Aquila decision. The amended section doesn’t alleviate the concerns in the Aquila judgement around the sterilisation of minerals if the applicant possibly has an unlimited period to remedy its applications non-compliance.

In terms of the amended section the applicant is still notified of the non-compliance. This notification itself would be an administrative action taken by the DMR, and would be a rejection of the application in line with the Aquila judgement. The non-return of the application merely alleviates the DMR’s burden and costs associated with returning voluminous applications.

Conclusion

The Aquila judgement highlights the need for prospecting right applicants to make sure that their application complies with all the formal requirements of the MPRDA before submission.

If an application is non-compliant the DMR must reject the application. The applicant can remedy the defects, but the resubmitted application will be regarded as a new application, and fall last in the application queue.

There have been amendments to the MPRDA removing the DMR’s obligation to return the non-compliant application, but this amendment would not alter the application of the legal principles decided in the Aquila judgement.


This work by Clinton Pavlovic is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.