The mining industry is challenged by the inability to subdivide prospecting and mining rights, reports business law firm Cliffe Dekker Hofmeyr.

To subdivide rights, a holder should be able to file an application under Section 11 of the Mineral and Petroleum Resources Development Act (MPRDA) of 2002 for consent to subdivide, followed by a cession of the subdivided portion.

“The issue is that, while the MPRDA does not prohibit the subdivision of rights, no aspect of it specifically authorises the subdivision of rights either,” says Cliffe Dekker Hofmeyr sector head of mining and minerals Allan Reid.

“However, the Department of Mineral Resouces (DMR) has a different interpretation and does not apply Section 11 to the subdivision of rights,” he says.

Reid adds that rights need to be subdivided in order to support competitiveness and empowerment, and improve mineral exploitation within the country. The consequence of disallowing subdivision will be that the mining of some reserves will be rendered economically unviable.

Currently, the only workable and legally competent manner in which to achieve a subdivi-sion is for the holder of the rights to lodge a conditional abandonment of its rights to that portion of the prospecting or mining area to be trans-ferred,” explains Reid.

He adds that, simultane-ously, the transferee must apply under section 102 to have the subdivided portion added to one of its existing rights. The risk involved in this process is that, if the application of the transferee is set aside, the right is lost to both the transferor and the transferee.

Section 102 provides that the rights “may not be amended or varied (including by extension of the area covered by it or by the addition of minerals or a share or shares or seams, mineralisd bodies, or strata, which are not at the time the subject thereof) without the written consent of the Minister”.

The preferred approach would be for consents to such subdivision to be granted under the provisions of section 11. Once the DMR has granted the section 11 consent for the transfer of the rights for the subdivided portion, the provisions of section 102 can be invoked to amend and vary the prospecting or mining rights, the environ-mental management plan or programme and the pros-pecting or mining work pro-grammes, as the case may be.

“The Kumba Iron Ore case, in which iron-ore producer Kumba Iron Ore is locked in dispute with interloper Imperial Crown Trading 289, which has gained a prospecting rights foothold in the iron-ore property, has highlighted the difficulties of fragmentation of rights and the subdivision thereof. “Consequently, amendments to section 11 and other portions of the MPRDA are expected to be made by the second quarter of 2011, which will, hopefully, facilitate subdivision and bring certainty to the industry,” concludes Reid.