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1 IMPACT OF NEW MINERAL LAWS ON EXPORTING CrMn FOR STAINLESS STEEL PRODUCTION Lecture Objective Equip the attendee with explicit knowledge on how to establish.

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Presentation on theme: "1 IMPACT OF NEW MINERAL LAWS ON EXPORTING CrMn FOR STAINLESS STEEL PRODUCTION Lecture Objective Equip the attendee with explicit knowledge on how to establish."— Presentation transcript:

1 1 IMPACT OF NEW MINERAL LAWS ON EXPORTING CrMn FOR STAINLESS STEEL PRODUCTION Lecture Objective Equip the attendee with explicit knowledge on how to establish a firm relationship as between local supplier and overseas mill / distributor which is legally binding in the face of the new minerals dispensation of RSA. Limitation: cannot impart tacit knowledge, i.e. aspects of the export / import of base minerals you do not know what you know. Sound judgment cannot be taught, it can only be experienced. Value-added by the talk - the explicit knowledge is information provided in the context of a typical CrMn. Export Contract which forms part of the knowledge management process in your business / organisation. If the attendee can link the explicit knowledge to the their tacit knowledge, the following formula obtains: EK + TK = competitive edge Note: To view in Full Screen - Right mouse click and select “Full Screen”

2 2 IMPACT OF NEW MINERAL LAWS ON EXPORTING CrMn FOR STAINLESS STEEL PRODUCTION (cont’d) A bit of a Digression How are we going to compete with the Asian Tigers who are growing @ 8%+ y/y? Answer: Thru superior innovation, i.e. improving EK & TK to produce & supply products & services the Tigers cannot make - they’ll have to buy them from you! Courtesy: Jeff Immelt - CEO GE (April 2004)

3 3 EXPORTATION OF CHROME/MANGANESE 1. INTRODUCTION 1.1The exportation of these minerals is founded on the contract for the international sale of goods 1.2The relationship established between exporter and importer is therefore a seller/purchaser relationship 1.3The exporter may do this in two possible ways: 1.3.1sell directly to an importer abroad; or 1.3.2he may build up a marketing organisation abroad and transact business through distributors, agents, branch offices or subsidiary companies. Direct sales is appropriate for single or infrequent exports to an identified importer 1.4Indirect selling takes place in the majority of medium and large scale enterprises where export trading takes place frequently

4 4 EXPORTATION OF CHROME/MANGANESE (cont’d) 1.5The objective of the exporter of minerals is usually to penetrate a new market or a particular customer 1.6The importer’s objective is to establish a fixed source of supply of minerals of a predictable quality 1.7Export merchants have established themselves as important players in export trade 1.8These merchants consist of export houses, confirming houses and merchant shippers 1.9There is no magic in these terms since they have no definite legal or commercial meaning 1.10The importer therefore has to be careful in establishing if the export house, etc. does so as a principal or as an agent of the mineral source 1.11An exporter who acts as principal makes profit on the “turn” i.e. the differencebetween the price at which the export house purchased the minerals from the source and the price when reselling them to the importer abroad

5 5 EXPORTATION OF CHROME/MANGANESE (cont’d) 1.12Where the export house acts as agent, the profit is represented by the buying commission which the importer has agreed to pay 1.13Despite the prevalence of export houses in international trade, there is no indication that direct selling is waning. In fact with the emergence of trading blocks, e.g. EU, Nepad and Nafta export trade in multinational enterprises has been on the increase. Multinationals use direct trading as opposed to intermediaries to conduct export trade 1.14There are of course other players in export trades such as bankers, finance houses, insurers, carriers and freight forwarders but they are not relevant in the context of the minerals dispensation

6 6 EXPORTATION OF CHROME/MANGANESE (cont’d) 2. THE ROLE OF GOVERNMENT IN EXPORT TRADE 2.1The South African Government sees the promotion of exports as a matter of national importance 2.2Exports have been prioritised by Government in the form of assistance provided to exporters in the following forms: 2.2.1the DTI provides extensive information services to exporters 2.2.2government has introduced an export credits guarantee system 2.2.3the exercise of control over certain aspects of exporting by means of export licences and customs regulations 2.2.4the competition laws of South Africa recognise the special importance of exports for the national economy by exempting many exclusive export agreements from the duty of notification to the Commission 2.2.5government provides the regulatory framework for all activities in mineral resources of the country, but indirectly supports export trade in these minerals by providing legislative neutrality between local and international supplies of minerals

7 7 EXPORTATION OF CHROME/MANGANESE (cont’d) 3. INTERNATIONAL SALE OF MINERALS 3.1From the importer’s perspective, its right in and to the minerals purchased originates from the contract for the international sale of goods 3.2The importer derives no rights from a “home contract” i.e. the contract between a mining house and an export house 3.3The importer must therefore be able to distinguish between the international sale of minerals and the supply agreement between the mining house and the export house 3.4Distinguishing however does not mean ignoring the one or the other 3.5The importer must consider a home contract because it represents an external dependency which could have an impact on the exporter’s ability to supply minerals to the importer 3.6Constraints placed on the supply of minerals by virtue of the mineral laws, the currency of the supply agreement and events of default and force majeure must be studied closely 3.7If an importer cannot do this in-house, specialist advice must be sought

8 8 3.8Contracts for the international sale of goods display a uniquely distinguishing feature from domestic sales of goods 3.9International sales are usually accompanied by company suite of ancillary contracts: contract of carriage by sea; the contract of insurance; the shipping documents which have three sub-sets: –a transportation document called a bill of lading; –a marine insurance document; and –the invoice 3.10Where a banker’s letter of credit is opened there are two further contracts between the banks firstly with the buyer and secondly with the seller. 3.11Although the suite of agreements that accompany international sales of goods have a supporting and incidental character, they are nevertheless important in that any illegalities which may vitiate the international sale agreement will have a knock-on effect on the ancillary agreements

9 9 CONTRACT CONTENT IN INTERNATIONAL SALES 1.There is no need for purposes of this talk to go into too much detail regarding the specific contents of international sales, especially payment terms such as FOB and CIF clauses and fortunately these contracts have to a certain extent standardised by international mercantile custom. 2.The country of destination does not seem to be material in terms of contract content in that international trade transactions are very similar in nature irrespective of whether the country of destination has adopted a market economy or is still governed by a socialist system. 3.Depending on the respective bargaining power of the parties, the exporter or the importer may incorporate a choice of law clause in the contract and thereby remove any uncertainty as to which system of law will govern the contract as determined by private international law. 4.Unmined minerals are however immovable property and governed by lex rei sitae. Contractual manipulation is not possible if the act amounts to a criminal offence under ius cogens. 5.The pricing clause is of course of cardinal importance in determining the export value for customs and excise purposes. In most jurisdictions, the export value is based on the FOB value and the import value on the CIF value, irrespective of the terms of delivery arranged by the parties

10 10 COMPLIANCE WITH MINERAL LAWS IN INTERNATIONAL SALES 1.The legal position seems to be that as regards prospecting, exploration and mining cannot be excluded by contract whether the sale is on the basis of ex-works (mine) or FOB 2.In terms of in Incoterms, the supplier must supply the minerals in conformity with the contract of sale, together with such evidence of conformity as may be required by the contract 3.This is a requirement irrespective of whether it is an ex- works (mine) or FOB sale 4.Non-compliance with the mineral laws could render the international sale invalid 5.Although in Incoterms of an ex-mines contracts provide that risks in and to the minerals shall pass to the purchaser (importer) as soon as the minerals have been placed at the importer’s disposal, South African Law provides that risk shall not pass until the contract of sale is perfectum. Therefore choice of law is paramount.

11 11 IMPORTERS’ MAIN CONSIDERATION IN PURCHASING MINERALS FROM SOUTH AFRICA As a general rule, it can be stated that most importers, regardless of the commodity, looks to the following factors before making its purchasing decision: 1.Safe and stable source of minerals importers usually have large capital investments tied up in equipment such as a steel mill or refinery who needs to keep large stocks of raw material on hands in order to make these assets work for them efficiently they simply cannot afford any inconsistency caused by eratic supplies a stable political and economic climate are therefore major considerations for importers of minerals other factors are good transportation and harbour systems and a government sympathetic to business and free trade adherence to GATT by the country of origin is crucial

12 12 IMPORTERS’ MAIN CONSIDERATION IN PURCHASING MINERALS FROM SOUTH AFRICA (cont’d) 2.Continuity of Supplies Under this category ranks the requirement that ores and minerals must fall within certain perimeters of quality and, being a natural resource, it will be expected that there will not always be absolute uniformity in quality Consistent fall-outs from the quality perimeters will of course cause contractual problems between the parties including termination and possible damages Other motivations which are not important in the context of the Mineral Laws are: –Price –Quality –Financial stability of the supplier –Personal trust –Intermediaries

13 13 IMPORTERS’ MAIN CONSIDERATION IN PURCHASING MINERALS FROM SOUTH AFRICA (cont’d) I want to pause for a moment and deal briefly with the issue of pricing of minerals being exported from South Africa or from any country for that matter: minerals are sold as raw material and fixing their price is not a straight forward and uncomplicated one, because one is not selling by units but by weight which can vary greatly in many instances the price of raw materials is based on a number of factors, the most important of which are: weighing quality analysis loading provisions currency cover freight coverage and the like

14 14 IMPORTERS’ MAIN CONSIDERATION IN PURCHASING MINERALS FROM SOUTH AFRICA (cont’d) Compliance with the mineral laws can have a severe impact on important issues such as loading. The international sale agreement read with a carriage of goods contract will normally contain extensive provisions dealing with the loading and discharging of bulk minerals It is the custom in the trade that the seller takes care of loading of the vessel and charters the vessel whereas the importer takes care of discharging the load Where the mineral laws impact on the situation is where the exporter guarantees to the carrier a definite loading rate To use an example, where manganese ore is shipped from Port Elizabeth, a 40 000 ton vessel will ask for a minimum loading and discharge rate of 20 000 tons a day, and a 20 000 ton vessel may ask for 10 000 tons a day. Loading the vessel faster than the guaranteed rate, implies that the exporter will receive a premium payable by the carrier called “the dispatch” If the exporter however failed to load the guaranteed rate per day, the seller is charged a penalty, called “demurrage” The penalty is determined in dollar terms, and due to large quantum involved, usually lead to litigation between the exporter and the importer and usually the carrier/vessel is thrown into the mix when the parties go to court. Loading delays can be caused by non-compliance with the mineral laws

15 15 LEGAL TITLE TO MINERALS 3.OWNERSHIP AND RIGHT TO DISPOSE OF MINERALS In common law, the owner of land is entitled to all right title and interest in and to the surface rights, and what lies below and above the land. The position differs only if the mineral rights in and to the land has been separated from the surface rights by way of a notarial deed of separation. The Mineral Rights Act 1991 revived the common law rights of the holder of the rights to minerals In other words, the common law holder of the rights to minerals has full right and title to dispose of certain precious minerals The Act also repealed the vesting in the state of the right to mine and dispose off precious minerals. MPRDA (May 2004) has however made major inroads into common law rights!

16 16 LEGAL TITLE TO MINERALS As regards base minerals such as manganese and chrome, the legal position never really changed and has stayed the same since the Mining Rights Act No. 20 of 1967 – the only exception was natural oil, precious metal and precious stones A land owner or holder of a mineral lease, as the case may be, has the following competencies: –The right to enter upon the land or tailings; –To introduce workmen, plant and equipment for purposes of prospecting or mining; –To prospect and mine for such mineral; and –To dispose of the minerals thus mined [Section 5 (1) of the Minerals Act] No distinction is drawn between state land, alienated state land and private land in the mineral laws – therefore if it is state land, the state will be the common law holder of the mineral rights unless the mining rights have been granted to a third party. The state’s share of profits or royalties has been abolished The old system of proclamation of land has been replaced by a system of authorisations - now licences and permits.

17 17 CONTRACTUAL MANUPILATION OF MINERAL RIGHTS The common law rights of the owner or mineral rights holder have been stated above. These rights have been shielded from contractual manipulation in that the rights vested in the mineral right holder under Section 5(1) of the Act may not be restricted or eliminated by contract. The same position pertains under MPRDA. [Section 68(5) of the Minerals Act] It is accordingly not competent for the exporter of base minerals to pledge, bond, hypothecate or make over the mineral rights to the importer or its agent. It is however possible to pass a mortgage, collateral or surety bond over a mineral lease, such being immovable property upon registration. A mineral lease in respect of minerals situated in tailings cannot be bonded, since tailings are separate movables unless they have re-acceded to the land.

18 18 MINING CHARTER FOR SA MINING INDUSTRY INTRODUCTION –The mining charter has been drafted in pursuit of a shared vision of a globally competitive mining industry –The goal is to create a mining industry which is reflective of a non-racial South Africa –Due to a perceived scarcity of skills of historically disadvantage South Africans (“HDSA’s”) it is considered that the barriers to entry into the mining sector is disproportionately high and unachievable for HDSA’s NO NATIONALISATION OF MINERAL RIGHTS –The MPRDA does not empower government to nationalise the mining industry –The mining charter recognises this limitation –Government does not trust market forces alone to remove barriers to entry and has opted for a policy of limited intervention in the industry –Government’s stated policy is to play a facilitating role in the transformation of the ownership profile of the mining industry

19 19 MINING CHARTER FOR SA MINING INDUSTRY (cont’d) –Government will however allow the market to play a key role in achieving this end –The MPRDA and the mining charter recognise that their key objectives will only be achieved once South Africa’s mining industry succeeds in the international market place where it overwhelmingly sells its product –Ownership transformation must happen in a transparent manner and for fair market value –The definition of HDSA is not as wide as it seems at first blush: It encompasses only a person, category of persons or community; Disadvantaged; By unfair discrimination; Before the 1993 RSA constitution

20 20 THE 40/10% BASE LINE ASPIRATION Ownership levels by HDSA’s are stated as “aspirations” rather than legal requirements or rules; Stakeholders in the mining industry aspire to a baseline of: –40% HDSA participation in management within 5 years; –10% of women participation within 5 years For the purposes of this lecture, the spotlight will fall only on ownership aspects as set out in the mining charter. The charter encourages greater ownership of mining industry assets by HDSA’s There is a conceptual error in the mining charter in that it is universally recognised that shareholders, including HDSA’s cannot own the assets of a mining company; At best, the mining charter can achieve “indirect ownership” of mining industry assets by HDSA’s The charter contemplates two types of involvement: active and passive involvement.

21 21 MINING CHARTER: HDSA INVOLVEMENT Active involvement includes: –HDSA controlled companies (50% plus one vote) including management control; –Strategic JV’s (25% plus one vote); –Collective investments through Esops and mining dedicated unit trusts – majority ownership to be HDSA based Passive involvement: > 0% to 100% ownership with no involvement in management A great deal of confusion exists especially with regard to what will be regarded as acceptable passive involvement The reason for the confusion is that the charter interchangeably refers to ownership of “mining assets” and the so-called “currency of measure of transformation and ownership” which could be market share as measured by attributable units of South African production controlled by HDSA’s

22 22 MINING CHARTER CRITERIA This sets a collective industry standard as opposed to an individual criterium Prediction: Mining charter will be a fertile ground for litigation and disputes The fall back position is the so-called agreement reached between Government and mining companies to achieve 26% HDSA ownership of “mining industry assets” in 10 years by each mining company : in other words individual criterium as opposed to collective criterium measured in units of production Merit of charter is that it postulates ownership reorganisation in a transparent manner and for fair value Financing these transactions will probably be the greatest challenge for the mining industry CONVERSIONS TO NEW MINING RIGHTS –The interaction between the mining charter and the MPRDA is ensured by a score card approach to applications for licence conversions –Under the MPRDA, all holders of “old order rights” are required to apply for conversion into new mining rights within a five year conversion window period, but recognising the full ten year period

23 23 MINING CHARTER - LEGAL EFFECT In this way, the mining charter is elevated almost to statutory status

24 24 IMPACT OF THE MPRDA ON OWNERSHIP TO MINERALS The Act recognises the internationally accepted right of the state to exercise sovereignty over all the mineral resources of the RSA; The Act gives effect to the principle of the State’s custodianship of the nation’s mineral resources Whereas sovereignty is a political concept, custodianship has a legal meaning; Neither custodianship, nor sovereignty has been defined in the Act; Sovereign right means a unique right possessed by a state or its agencies that enables it to carry out its official functions for the public benefit as distinguished from certain proprietary rights that it may possess like any other private person; Custodian means a person that has charge or custody of property in the sense of taking care and control of a property for inspection, preservation or security; Although ownership in and to minerals held by private individuals and companies is not vested in the state, the common law rights of holders of mineral rights have essentially been destroyed;

25 25 IMPACT OF THE MPRDA ON OWNERSHIP TO MINERALS (cont’d) Care and control of all mineral resources now vest in the state; The common law holder of mineral rights will only be an owner in title but will have no say in the utilisation of mineral resources, unless a permit or licence is granted to it under the Act; Any tie break between the common law and the Act is resolved in favour of the Act; This implies that a common law holder of mineral rights will not be able to maintain those rights in conflict with the MPRDA

26 26 THE NEW MINING LAWS DISPENSATION 1.OBJECTS OF THE ACT The objects of the Act are inter alia the following: –to recognise the right of the State to exercise sovereignty over al the mineral resources within the Republic. –to give effect to the principle of the State’s custodianship of the nation’s mineral resources; –to promote equitable access to the nation’s mineral resources; –to promote employment and advance the social and economic welfare of all South Africans; –to ensure that the nation’s mineral resources are developed in an orderly and ecologically sustainable manner while promoting justifiable and social economic development; –to substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral industry. “historically disadvantaged persons” means (a) any person, category of persons or community, disadvantaged by unfair discrimination before the Constitution took effect; (b) any association, a majority of whose members are persons contemplated in (a); (c) any juristic person other than an association, in which persons contemplated in (a) own and control a majority of the issued capital or members’ interest and are able to control the a majority of the members’ votes. (Section 2 - MPRDA)

27 27 THE NEW MINING LAWS DISPENSATION (cont’d) 2. CUSTODIANSHIP OF NATION’S MINERAL RESOURCES –Mineral resources are the common heritage of all the people of South Africa –State is the custodian thereof for the benefit of all South Africans –As custodian the State (acting through the Minister) may: grant, issue, refuse, control, administer and manage all permits and rights relating to mineral resources determine and levy any fee or consideration payable in terms of any relevant Act of Parliament –The Minister must ensure the sustainable development of South Africa’s mineral resources. 3. INTERPRETATION OF THE ACT –Any reasonable interpretation which is consistent with the objects of the Act must be preferred over any other interpretation which is inconsistent with such objects –In so far as the common law is inconsistent with the Act, the Act prevails

28 28 THE NEW MINING LAWS DISPENSATION (cont’d) 4. LEGAL NATURE OF RIGHTS –limited real right in respect of the mineral and land to which the right relate (Note: this is the crucial part of the Act which will lead to many legal wrangles) –holder of a prospecting right, mining right, exploration right or production right is entitled to the following rights: to enter the land to which the right relates together with its employees and any plant, machinery or equipment and build, construct or lay down any surface, underground or under sea infrastructure required to exercise its right to prospect, mine, explore or produce the mineral for which such right is granted for his own account remove and dispose of any mineral found use water subject to the National Water Act, 1988 carry out any other activity incidental to prospecting, mining, exploration or production activities –Requirements to be met before exercising rights: an approved environmental management programme (“EMP”) or approved environmental management plan a relevant permit or permission notifying and consulting with the land owner or lawful occupier of the relevant land (Note: negotiation and arbitration available in certain circumstances - Regional Manager to play decisive role)

29 29 THE NEW MINING LAWS DISPENSATION (cont’d) 5 TRANSFERABILITY AND ENCUMBRANCE OF PROSPECTING RIGHTS AND MINING RIGHTS –A prospecting or mining right or an interest in such right or a controlling interest in a company or close corporation may not be: ceded; transferred; let; sub-let; assigned; alienated; or otherwise disposed of without the written consent of the Minister, except in the case of change of controlling interest in listed companies –The consent must be granted if the cessionary, transferee, lessee, sub-lessee, assignee or the person to whom right will be alienated or disposed: is capable of carrying out and complying with the obligations and the terms and conditions of the right in question; satisfies the requirements for the granting of a prospecting or mining right –Consent is not necessary i.r.o. encumbrance by mortgage of the right or interest as security for a loan or guarantee for the purpose of funding a prospecting or mining project provided: the financial institution or bank undertakes in writing that any sale in execution or other disposal pursuant to the foreclosure of the mortgage will be subject to the consent above. –Any transfer, cession, letting, sub-letting, alienation, encumbrance by mortgage or variation of a prospecting right or mining right must be lodged for registration at the Mineral and Petroleum Titles Registration Office (“MPTRO”) within 30 days of the action.

30 30 THE NEW MINING LAWS DISPENSATION (cont’d) 6. TYPES OF PERMITS, PERMISSIONS AND RIGHTS Reconnaissance Permission –a permission to carry out any operation in connection with photogeological surveys, including remote sensing techniques, but excluding prospecting or exploration operations –can only apply if no person holds a prospecting right, mining right, mining permit or retention permit for the same mineral and land –Minister must issue permission if : applicant has access to financial resources and has technical ability to conduct the proposed reconnaissance work programme the estimated expenditure is compatible with the proposed reconnaissance operation and duration thereof; and applicant is not in contravention of the provisions of any of the provisions of the Act –If application does not comply with the above, Minister must refuse application –Reconnaissance permission is valid for 2 years –Not renewable

31 31 THE NEW MINING LAWS DISPENSATION (cont’d) Prospecting Right –Right to intentionally search for any mineral by means of any method which disturbs the surface or subsurface of the earth, including any portion under the sea or under water or in or on any residue stockpile or residue deposit, on order to establish the existence of any mineral and to determine the extent and economic value thereof –The Minister must grant prospecting right if: applicant has access to financial resources and has technical ability to conduct proposed prospecting operation optimally estimated expenditure is compatible with the proposed prospecting operation and duration thereof prospecting will not result in unacceptable pollution, ecological degradation or damage to the environment applicant has the ability to comply with the Mine Health and Safety Act,1996 applicant is not in contravention of any relevant provision of the Act –Minister must refuse prospecting right, if: application does not comply with the aforegoing the granting of such right will: –result in an exclusionary act; –prevent fair competition; or –result in concentration of the mineral resources in question under the control of the applicant

32 32 THE NEW MINING LAWS DISPENSATION (cont’d) –Minister may request applicant to give effect to the object in sec 2(d) - i.e. meaningfully expand opportunities for historically disadvantaged persons, including women –Valid for a period not exceeding 5 years –May be renewed once for a period not exceeding 3 years –Holder of a prospecting right has: exclusive right to apply for and be granted a renewal of the prospecting right i.r.o the mineral and prospecting area; exclusive right to apply for and be granted a mining right in respect of the mineral and prospecting area; the exclusive right to remove and dispose of any mineral to which the right relates and which is found during the course of prospecting –Holder of a prospecting right must: lodge right for registration at the Mining Titles Office within 30 days of the date it becomes effective of renewed; commence with prospecting activities within 120 days from the date on which right becomes effective; continuously and actively conduct prospecting operations in accordance with prospecting programme; comply with terms and conditions of prospecting right, the Act and other relevant law; comply with the requirements of the approved environmental management programme; pay prescribed prospecting fees to the State; pay the State royalties in respect of any mineral removed and disposed of during prospecting operations.

33 33 THE NEW MINING LAWS DISPENSATION (cont’d) Mining Right –Right to conduct any operation or activity for the purposes of winning any mineral on, in or under the earth, water or any residue deposit, whether by underground or open working or otherwise, including any operation or activity incidental thereto –Minister must grant mining right, if: mineral can be mined optimally in accordance with the mining work programme; applicant has access to financial resources and has the technical ability to conduct the proposed mining operation optimally; the financing plan is compatible with the intended mining operation and duration thereof; the mining will not result in unacceptable pollution, ecological degradation or damage to the environment; applicant has provided financially and otherwise for the prescribed social and labour plan; applicant has the ability to comply with the Mine Health and Safety Act; the applicant is not in contravention of any provisions of the Act; and the granting of the right will further the objects referred to in sec 2(d) and (f) of the Act and in accordance with the Mining Charter and the prescribed labour and social plan –Minister must refuse to grant mining right if above criteria are not met

34 34 THE NEW MINING LAWS DISPENSATION (cont’d) –Right is valid for a period not exceeding 30 years –May be renewed for further periods not exceeding 30 years at a time –Holder of a mining right has the exclusive right to apply for and be granted a renewal of the mining right in respect of the mineral and mining area –Holder of the mining right must: lodge right for registration at the Mining Titles Office within 30 days commence with mining operations within one year actively conduct mining in accordance with the mining work programme comply with the provisions of the Act, other relevant law and the terms and conditions of the mining right comply with the requirements of the approved environmental management programme comply with the requirements of the prescribed social and labour plan pay the State royalties submit the prescribed annual report, detailing the extent of the holder’s compliance with the provisions of sec 2(d) and 2(f), the Mining Charter and the social and labour plan –Any person who intends to beneficiate any mineral mined in the RSA outside the Republic may only do so after written notice and in consultation with the Minister

35 35 THE NEW MINING LAWS DISPENSATION (cont’d) Mining Permit –Minister must issued Mining permit, if: mineral in question can be mined optimally within a period of 2 years; and the mining area in question does not exceed 1,5 hectares in extent; and the applicant has submitted the environmental management plan; and no other person holds a prospecting right, mining right, mining permit or retention permit for the same mineral and land –Holder of a mining permit: may enter land together with employees and may bring any plant, machinery or equipment onto that land and build, construct or lay down any surface or underground infrastructure required for mining purposes; use water subject to the provisions of the National Water Act, 1998 must pay State royalties; may mine for his own account on or under that mining area for the mineral to which his permit relates –Mining permit is valid for a period not exceeding 2 years –May be renewed for three periods each of which may not exceed 1 year; –May not be transferred, ceded, let, sub-let, alienated or disposed of, in any way whatsoever, but may be encumbered or mortgaged only for purposes of funding or financing the mining project with the Minister’s consent

36 36 THE NEW MINING LAWS DISPENSATION (cont’d Retention Permit –Minister may issue a retention permit if the holder of a prospecting right has: prospected on the land to which the application relates; completed the prospecting activities and a feasibility study; established the existence of a mineral reserve which has mining potential; studied the market and found that the mining of the mineral in question would be uneconomical due to prevailing market conditions; and complied with all the provisions of the Act, other relevant law and the terms and conditions of the prospecting right –A retention permit suspends the terms and conditions of the prospecting right and if prospecting right has not expired, the duration of the prospecting right runs concurrently with the retention permit –The environmental management plan approved in respect of the prospecting right remains in force as if the prospecting right has not lapsed –Valid for a period not exceeding 3 years –May be renewed once for a period not exceeding 2 years –Is not transferable

37 37 THE NEW MINING LAWS DISPENSATION (cont’d) 7. LAPSING OF RIGHT, PERMIT, PERMISSION AND LICENCE Any right, permit, permission or licence granted or issued in terms of the Act shall lapse, whenever: –it expires; –the holder thereof is deceased with no successors in title; –a company or close corporation is deregistered and no application has been made to the Minister for consent in terms of sec 11 or such consent has been refused; –the holder is liquidated or sequestrated; –it is cancelled in terms of sec 47; or –it is abandoned.

38 38 THE NEW MINING LAWS DISPENSATION (cont’d) 8. TRANSITIONAL ARRANGEMENTS –PENDING APPLICATIONS Any pending applications for a prospecting permit, mining authorisation, consent to prospect, consent to mine or permission to remove and dispose of any mineral lodged but not finalised prior to 1 May 2004 will be dealt with in terms of the new Act –OLD ORDER PROSPECTING RIGHTS Any old order prospecting right in force prior to 1 May 2004 will continue to be in force for a period of 2 years until 1 May 2006 The holder of an old order prospecting right must lodge the right for conversion within 2 years If the holder of the right fails to lodge the right for conversion before the expiry of the 2 years, the old order prospecting right ceases to exist The Minister must convert the older order prospecting right if the holder thereof: –has lodged an application that complies with all the prescribed requirements, one of which is that an affidavit must be lodged verifying that the holder was conducting or has conducted prospecting operations immediately before the Act came into operation

39 39 THE NEW MINING LAWS DISPENSATION (cont’d) –has conducted prospecting operations in respect of the right in question –indicates that he / she will continue to conduct such prospecting operations upon the conversion of the right; –has an approved environmental management programme –has paid the prescribed conversion fee As a result of the definition of “holder” it appears as if the holder of the older order right will not be able to transfer of alienate the right lawfully to any third party. No terms and conditions of the older order right remain in force if they are contrary to the provisions of the Act –OLD ORDER MINING RIGHTS Old order mining rights in force prior to 1 May 2004 remain in force for a period not exceeding 5 years calculated from 1 May 2004 The holder of an old order mining right must apply for conversion thereof before 1 May 2009 “holder” in relation to an old order right,means the person to whom such right was or is deemed to have been granted or by whom it is held or is deemed to be held, or such person’s successor in title before this Act came into effect

40 40 THE NEW MINING LAWS DISPENSATION (cont’d) If the holder of the right fails to lodge the right for conversion before the expiry of the 5 years, the old order mining right ceases to exist The Minister must convert the older order mining right if the holder thereof: –has lodged an application that complies with all the prescribed requirements, one of which is that an affidavit must be lodged verifying that the holder was conducting or has conducted mining operations on the land immediately before the Act came into operation –has conducted mining operations in respect of the right in question –indicates that he / she will continue to conduct such mining operations upon the conversion of the right; –has an approved environmental management programme –has paid the prescribed conversion fee As a result of the definition of “holder” it appears that the holder of the older order right will not be able to transfer of alienate the right lawfully to any third party. No terms and conditions of the older order right remain in force if they are contrary to the provisions of the Act

41 41 THE NEW MINING LAWS DISPENSATION (cont’d) –UNUSED OLD ORDER RIGHTS Unused old order rights in force prior to 1 May 2004 remain in force for a period not exceeding one year calculated from 1 May 2004 The holder of an unused old order right has the exclusive right to apply for a prospecting right or a mining right in terms of the Act within that one year period If the holder does not apply for a prospecting or mining right within the one year period, the unused old order ceases to exist –CONSIDERATION OR ROYALTY PAYABLE Any existing consideration, contractual royalty or future consideration, including compensation payable to remedy environmental damage in terms of sec 46(1) which accrued to a community immediately before the Act took effect, continues to accrue to such community If the consideration or royalties accrued to a natural person, it may continue to accrue to that person, if: –the discontinuation thereof will cause undue hardship to the person; or –the person uses such consideration for social upliftment, upon the terms and conditions that the Minister may determine

42 42 THE NEW MINING LAWS DISPENSATION (cont’d) –The recipients must inform the Minister within 5 years from the date on which the Act took effect of their need to continue to receive such consideration or royalties and the reasons therefore PAYMENT OF CONSIDERATION –Any person who can proof that his / her property has been expropriated in terms of the Act may claim compensation from the State –The claimant must: prove the extent and nature of actual loss and damage suffered by him / her indicate the current use of the property submit proof of ownership of such property give the history of acquisition of the property and the price paid for it detail the nature of the property prove the market value of the property and the manner in which such value was determined indicate the extent of any State assistance and benefits received in respect of such property

43 43 THE NEW MINING LAWS DISPENSATION (cont’d) –In determining just and equitable compensation all relevant factors must be taken into account, including: sections 25 (2) and 25(3) of the Constitution the State’s obligation to redress the results of past racial discrimination in the allocation of and access to mineral resources the State’s obligation to bring about reforms to promote equitable access to all South Africa’s natural resources the provisions of section 25(8) of the Constitution whether any person concerned will continue to benefit from the use of the property in question –Any claim must be lodged with the Director -General

44 44 PARTING COMMENTS Holder of mineral rights and landowners have been placed at risk by the MPRDA Vigilance is required to protect vested rights Importers of mineral rights have to investigate if the exporter had obtained the necessary rights Onus is on importer to notify & consult with Minister if offshore beneficiation is intended (section 26(3)) Useful contacts & websites: –Director-General:Adv. Sandile Nogxina Tel: (012) 317 9734 –Minister of Minerals & Energy: Ms Phumzile Mlambo-Nguka - Spokesperson Mr. Kanyo Gqulu Tel: (012) 317 9086 kefilwe@mepta.pwv.gov.za http://www.dme.gov.za http://www.dme.gov.za/minerals/mining_charter.htm http://www.vanderheever.co.za


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