There are pitfalls in South Africa’s draft Royalty Bill, especially the section dealing with when mines can apply and be granted exemption from royalty payments, Michael Schottler, a lawyer from Leppan Beech Attorneys, told a mining conference on Thursday.
The provisions regarding exemptions on the payment of mining royalties are “very dodgy”, Schottler said.
“The legislation regarding the marginal mine exemptions requires a lot of work to provide clarity and certainty,” he added.
Regulations regarding marginal mine relief could see mines being granted partial or total exemption if the mineral resource is of a low grade and that fact has been independently verified.
The second grounds under which a mine can be granted exemption is when the mine is of questionable economic viability.
Schottler questioned how the government or a regulator would be able to “independently verify” that a mineral resource is of low grade or of questionable economic viability, and called for greater clarity.
“This issue hasn’t been satisfactorily dealt with, for the moment,” he added.
Another concern regarding exemption applications is that a regulator might attempt to interfere with the operations of the marginal mines and request that a particular mine reduce its costs in certain areas before granting an exemption.
“This creates a highly untenable situation where a regulator could get involved in the nuts and bolts of running a mine,” Schottler said.
The exemption clauses in the Royalty Bill could also result in marginal mines cutting out or reducing their capital projects.
“Mines need exploration and capital projects to keep running and growing,” he added. – I-Net Bridge