By Giada Masina, Partner at Webber Wentzel

The Exploration Strategy published last year contains some useful proposals to bolster mineral exploration, but also some proposals on security of tenure and transformation which may be less welcome to the industry

South Africa’s Exploration Strategy, published in April 2022, contains a number of praiseworthy suggestions to ensure that the country increases its share of global spending on minerals exploration.

However, it also contains some hints – which appear to have been largely overlooked by the industry – of possible future changes to the Mineral and Petroleum Resources Development Act (MPRDA), touching on sensitive issues such as security of tenure and transformation.

The document clearly identifies South Africa’s key attractions for minerals explorers, as well as the factors that inhibit development in the sector. Some of the strategies it identifies to attract more investment are clearly essential, such as increased mapping by the Council for Geoscience and incentivising investment for junior miners, either through direct support or by identifying projects for public/private partnerships.

The Exploration Strategy also suggests that some areas of legislation need to be amended:

1. Providing longer timelines in the MPRDA for prospecting rights, since it may take longer to prospect in complex geological settings and current timelines do not allow sufficient time to conduct a proper feasibility study in certain instances, which would impact an explorer’s ability to secure investment for a project.

2. To deal with the large number of inactive prospecting rights, which are sterilizing mineral potential, the department suggests invoking transformation legislation for the establishment of a "junior exploration fund".  The Strategy mentions an IDC-established fund and it seems that the idea is for established mining companies to be encouraged to contribute financially to it. They would somehow be recognised for this – and the funds would be utilised to support junior miners.

3. Also relating to transformation, the Strategy identifies the need for regulatory clarification, and, importantly, possible changes to legislation. We know that in the Mining Charter review application the judge made the point that the legal mechanism that should be used to achieve government’s higher ownership targets should not be a policy document, such as the Mining Charter, but rather changes to legislation.  The Strategy recommends that critical social partners be reconvened to enter into a social compact to achieve meaningful transformation.

4. Importantly, the document notes that the "first come, first served" principle has the unintended consequence of promoting mediocrity. The intention is to replace it with some sort of meritocratic system that considers national development imperatives.  This would, of course, require an amendment to the MPRDA. Such an amendment was proposed previously, and it caused quite a lot of alarm, because it would raise uncertainty about the criteria for obtaining a licence and would undoubtedly increase the potential for unethical behaviour and corruption.

5. The Strategy concluded that land planning legislation and the National Environmental Management: Protected Areas Act do not adequately consider mineral development requirements in their applications. This necessitates streamlining the requirements in various pieces of legislation to enable timeous authorisations and security of tenure for exploration permit applicants.

The Exploration Strategy also sets out the following aspects aimed at improving administrative processes and preventing the sterilization of exploration opportunities:

1. Formally invalidating prospecting rights that legally have expired and updating departmental records to ensure that those areas are not sterilized from further exploration. This would be done through government’s planned improved mining cadaster system, which is currently well behind its scheduled delivery date.

2. Also, to deal with the large number of inactive prospecting rights, the department would need to strengthen its administrative processes, reintroducing the "use it or lose it" principle.

3. In relation to the frequent issue of holders of prospecting rights encountering obstacles in accessing privately-owned land, the Strategy proposes better utilising the provisions of sections 54 and 55 of the MPRDA.  Section 54 sets out a "dispute resolution type process" which can be used when landowners refuse access to land and section 55 allows the Minister to expropriate land for the advancement of prospecting and mining.

Webber Wentzel believes the proposed changes to legislation outlined above are currently on the back burner, as the government’s current legislative priority for the mining industry is to facilitate self-generation of power. However, it would be as well for the industry to be prepared for further discussions on issues that were hotly contested in the past and may well be contested again in the future.