Clinton Pavlovic

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Mining and prospecting rights expire sooner than anticipated

2015-09-01

Prospecting and mining rights in South Africa are granted in terms of the Mineral and Petroleum Resources Development Act (MPRDA) for a fixed duration. Prospecting rights are granted for a maximum period of 5 years renewable for a further single period not exceeding 3 years, and mining rights are granted for a maximum period of 30 years renewable for further 30 year periods.

In the case of the Minister of Mineral Resources vs Mawetse (SA) Mining Corporation (Pty) Ltd, the South African Supreame Court of Appeal was was asked to determine what date the duration of a right should be calculated from. The court held that the duration of rights must not be calculated from the date that the right was notarially executed, or calculated with reference to the termination dates that are contained in the right itself. The court determined that the duration of the right should be calculated from the date that the applicant for the right was informed that the right would be granted.

Application procedure

To understand the reasoning of the court, and why the decision will lead to uncertainty in practice, the procedure followed by the Department of Mineral Resources (DMR) when a company applies for a right in terms of the MPRDA should be outlined:

The DMR's practice is to calculate the duration of a right from the date of its execution, and record the expiry date calculated using this method as a clause in the in the right.

Facts and legal decision

The facts of the Mawetse case are the following:

The decision to reject Mawetse's application was taken on review. One of Mawetse's contentions was that there was no conflicting right because Dilokong's right had been granted for four years, and more than four years had already lapsed since Dilokong's application had been aproved. In response Dilokong argued that the period that its right was granted for had not started running because the right had not yet been executed, and had not become effective.

The court stated that a right is granted for a limited period and expires through the effluxion of time. To determine if a right has expired, it is necessary to determine the date that the right was granted. The court held that there are three distinct legal processes that must be distinguished from each other, namely (i) the granting of the right; (ii) the execution of the right; and (iii) the coming into effect of the right.

The court rejected the argument advanced by Dilokong that the DDG's approval had not started running because the right had not been executed and had not become effective, stating that this argument was untenable because it would mean that the area was effectively sterilised in favour of Dilokong. The court held that the period of Dilokong's prospecting right must be calculated from the date on which it was informed that its application was successful and that the right was granted, namely in July 2007.

The court held that Dilokong's prospecting right, which had been granted during July 2007, had lapsed due to its expiry, notwithstanding that the right had not been executed and that the right had not become effective.

Practical implications of the decision

This case has two important implications for mineral rights granted in terms of the MPRDA:

Citations:

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