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Court ruling on ‘once empowered, always empowered’ principle brings certainty to the mining industry

6th April 2018

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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JOHANNESBURG (miningweekly.com) – The High Court’s judgment earlier this week in support of the ‘once empowered, always empowered’ principle will provide clarity for the mining industry, which will contribute to greater investor confidence, says law firm Webber Wentzel.

The High Court on Wednesday ruled that mining right holders will be able to retain their empowerment status, even if their empowerment partners dispose of their stake in the firm.

This follows after the Chamber of Mines (CoM) brought an application seeking declaratory relief in order to obtain certainty regarding the empowerment obligations of the holders of mining rights granted in terms of the Mineral and Petroleum Resources Development Act (MPRDA).

The court considered whether or not the 26% ownership target for historically disadvantaged South African companies must be continually met following the grant of a mining right under the MPRDA.

This dispute between the CoM and the Mineral Resources Department arose as a result of instances where mining companies holding mining rights had concluded black economic empowerment (BEE) transactions. In doing so, they had achieved the 26% HDSA ownership target, but the companies had since seen their HDSA ownership levels fall below 26% as a result of HDSA participants disposing of their interests in the company.

The CoM reasoned that the MPRDA does not place a duty of continuing compliance upon the holder of a mining right. By contrast, former Mineral Resources Minister Mosebenzi Zwane took the view that such an obligation is indeed recurring, and that a failure to meet it constitutes a contravention of the charter, the terms of the mining right granted and provisions of the MPRDA.

Webber Wentzel on Friday said that the High Court’s ruling frees mining right holders from the idea that their rights might be cancelled should their empowerment partners withdraw and not be replaced.

Similarly, the judgment will remove the shackles imposed by the prevailing uncertainty and afford HDSA shareholders the ability to monetise their investments and diversify their investor portfolio and, thereby, achieve broader diversification of the economy by allowing black entrepreneurs to invest back into the mining industry or other relevant sectors, the law firm stated.

It added that, with a major point of contention between industry and the DMR having been resolved, it is hoped that the goodwill and the spirit of cooperation will return to the industry ahead of negotiations to conclude a new Mining Charter.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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