The regulatory uncertainty in the mining industry that results from frequent changes to the key mining legislation – the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill and the Mining Charter – has recently been criticised amid the perception that not all of the amendments are positive.

Law firm Hogan Lovells partner and mining head Warren Beech points out that this regu-latory uncertainty impacts significantly on investment decisions in the South African mining industry, which has been compounded by the ongoing strike by labour union the Association of Mineworkers and Construction Union.

“Investors generally endorse and support the principle of empowerment and accept empowerment as a key component of any invest- ment decision. Amendments that are aimed at improving administrative and related efficiencies are also generally welcomed. But there are substantive amendments that have been made and proposed, which are cause for concern among the investment community,” notes Beech.

The investor concerns lie in proposed amend-ments, such as a free-carry interest by the State in all new exploration and production rights for oil and gas. The perception is that, if these provisions can be included in respect of petroleum, they can easily be extended to other minerals.

Beech points out that investors require some certainty in relation to the capping of potential State interest in mining operations.

Of further concern in relation to the MPRDA Amendment Bill are the provisions relating to local beneficiation and the removal of the prin-ciple of ‘first come, first served’.

With regard to beneficiation, the definition of beneficiation is to be amended to mean the transformation, value addition or downstream beneficiation of minerals to a higher value product from the baselines, to be determined by the Minister, which can either be consumed locally or exported.

Once minerals have been designated for local beneficiation, in terms of Section 26 of the MPRDA Amendment Bill, the producer of the designated minerals must offer a prescribed percentage of its production of minerals or mineral products in prescribed quantities, qualities and timelines at the mine gate price or agreed price, to local beneficiators.

The amendments include that ‘no person other than a producer or an associated company of the producer . . . may export any designated minerals or mineral products without the Minister’s prior written approval’, which effectively means that third-party exporters may not export designated minerals without Ministerial approval.

These amendments, once passed into law may impact on the ability to make commercial decisions freely, highlights Beech.

Further, the MPRDA Amendment Bill proposes the deletion of Section 9 of the MPRDA, which provides for the ‘first come, first served’ principle in relation to application for rights, and its substitution by the provision that the Minister may by notice invite applications for rights.

This Amendment will see the Minister being granted the right to periodically invite applications by notice in the Government Gazette.

Beech says that this may have a significant detrimental impact on exploration and pros-pecting. “If there is no guarantee that a prospector may apply for a prospecting right, after carrying out expensive preparatory work, this may dissuade prospectors and their investors, from carrying out any preparatory work, in order to identify potential prospecting areas.”

Meanwhile, to a lesser extent, there is some con- cern among investors regarding the proposed amendments to the MPRDA Amendment Bill in relation to fines.