The recent announcement that amendments will be made to the Mineral and Petroleum Resources Development Act (MPRDA) has left several mining companies uncertain, says corporate and commercial law firm Werksmans director Morné van der Merwe.

He explains that amendments suggested to Section 11 of the Act, which provides for the transfer of mining and prospecting rights in particular, have caused some problems.

“Parties involved in the sale of prospecting and mining rights will be negatively affected by the amendments, as the disposal by a company, which holds and wishes to sell as little as a fraction of 1% interest in mining rights or prospecting rights, will require the prior written approval of the Minister, which could result in unnecessary backlogs and hampering of the bank-ability of prospecting and mining rights,” he says.

Currently, under section 11, only the disposal of a controlling interest in a company or a close corporation, which holds prospecting or mining rights, requires the consent of the Minister. The Minister’s consent is not required for disposal of an interest in a listed com-pany that holds prospecting or mining rights.

However, the suggested amendment effected by clause 8 of the Bill will require the prior written approval of the Minister for the disposal of any interest in an unlisted company or a close corporation and the prior written approval of the Minister in respect of the sale of a controlling interest in a listed company.

If a company should fail to obtain the consent of the Minister, the relevant trans- action will be considered void.

Meanwhile, Section 102 in the MPRDA currently provides that, subject to the written consent of the Minister, rights may be amended in various ways and, in particular, by extending the area or by adding minerals or a share or shares or seams, mineralised bodies or strata.

“Werksmans, which specialises in transactions in the mining sector, has also detected that there are a lot of queries in relation to reviewing procedures pertaining to the granting of rights,” Van der Merwe says.

He adds that parties are finding flaws in the process followed in adjudicating the granting of rights. This also provides a platform for opportunistic companies to challenge the granting of rights.

Mining companies and other holders of these rights are discovering that it is proving difficult to obtain a subdivision of such rights within the ambit of Section 11, and they are also trying to construct transactions to achieve this within the structure of the existing legislation, without using Section 11.

In this regard, Van der Merwe says that the Department of Mineral Rights and the registrar of mining titles are not allowing applications for subdivisions to go through, which results in anxiety among holders of these rights, as it places a large impediment in their ability to deal with their rights.

Meanwhile, the proposed Mining Royalty Act has also resulted in some cause for concern. “There should be careful consideration of the implementation of this Act, as it will add an extra financial burden on the mining industry as the country already has heavy regulatory requirements resulting in great costs involved in the mining industry,” Van der Merwe cautions.

He warns that the Act might repel investors and encourage them to look at other mining countries, which can offer better benefits and returns on investments.

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