David Le Page and Mungo Soggot
Canadian mining interests are preparing to give Minister of Mineral and Energy Affairs Phumzile Mlambo-Ngcuka a heavy critique of the draft Bill on her visit to Canada next week.
The Prospectors and Developers Association of Canada is understood to be preparing a written submission on the Bill for the minister that will raise a number of serious concerns.
Members of the powerful association are believed to be particularly anxious about the Bill’s failure to establish a sound legal framework, including its failure to broach an appeal mechanism for mining houses affected by the minister’s exercise of her wide discretionary powers.
Such criticism will effectively undermine the government’s contention that the draft Bill is in line with legislation in jurisdictions such as Canada and Australia. Beyond the basic principle that mining rights should be vested with the state, South Africa’s draft Bill is in fact out on a limb. In Canada prospecting rights are awarded on a first-come, first-served system; South Africa’s new draft legislation allows the minister to select contenders without any objective criteria other than that applications must favour the previously disadvantaged.
Canadian mining houses say there would be no guarantees that valuable geologic information discovered by a prospecting company will not be leaked to competitors.
They have also complained that the transfer of prospecting and mining rights is subject to ministerial discretion. The Bill demands that preference be given to historically disadvantaged persons, rather than simply suggesting it it does not provide criteria that might be used to predict when prospecting rights might be granted to the historically disadvantaged and when to the advantaged.
All of which means that if a junior Canadian exploration company gets a licence to prospect and strikes it lucky it can be denied the right to mine if the minister decides so. The exploration company would therefore not necessarily be able to do what it would normally do in other jurisdictions namely sell the rights on to a mining company, or keep them itself. Nor does the draft Bill provide a mechanism for compensating exploration companies that are prevented from doing either of these two things.
Chris Jennings, the CEO of SouthernEra, a Canadian mining company with operations in South Africa, says his company and other Canadian mining houses are sympathetic to the government’s desire to promote black empowerment in the industry.
He also says the thrust of the Bill to free up mineral rights that have been sat on by major mining houses in South Africa was ideal for junior mining companies like his own. “I have to view with some suspicion the motives of the big South African mining companies in opposing parts of the Bill. My interest is in seeing as much ground freed up as possible.”
But Jennings says the government’s laudable goals should rather be encouraged through joint ventures between local black empowerment ventures and foreign mining companies.
Jennings, a former South African who is now based in Toronto, says there is concern in mining circles about sections of the Bill that gave the ministry unfettered discretionary power to strip companies of their mining exploration rights on the basis of provisions designed to promote black empowerment. He says he is also worried about the absence of any compensation on offer for companies that explore and develop mining areas, and are then blocked by the ministry from either using the rights themselves or selling them on.
He says there is particular concern about the Bill’s failure to provide ways for mining companies to appeal the minister’s decisions. “Any decision by the minister must be open to an independent review,” Jennings says.
“Effectively, they’re taking away your common property rights and assigning you rights to government property. In Canada, once you have been assigned rights by the state, you are free to re-assign, sell or mortgage those rights. In Canada, when you apply for a prospecting licence, it’s confidential and your application gets priority.”
Jennings says South Africa cannot assume that it is so attractive a prospect to foreign mining companies that they will invest here despite reservations about the regulatory regime. He says South Africa is not a particularly attractive destination for mining companies. This means, he says, that the government should do everything possible to encourage investment by foreign mining houses. “It [South Africa] is well covered by the big companies. There is little free ground available. If another country offers a more favourable rights environment, we’re going to move there.”