April 21 2008
The Bloemfontein High Court recently ruled in favour of DeBeers Consolidated Mines Ltd against the Department of Minerals and Energy (DME) in a lawsuit that could have significant implications for the mining industry. The crucial issue was whether the Mineral and Petroleum Resources Development Act (28/2002) authorized the granting of new prospecting rights for tailings dumps.(1) Given the high value of minerals contained in tailings dumps across South Africa, the case will also lead to significant adjustments to many balance sheets in the industry.
Holders of mineral rights before 2002 were required to convert (or forfeit) their old order rights to new order rights under the act. Although the legislation pre-dating the act expressly provided for mine tailings dumps rights, it did not contemplate the conversion of old order rights for tailings dumps.
De Beers had held old order prospecting rights to perform prospecting activities on tailings dumps at its Jagersfontein mine (which contained diamondiferous material), but chose not to apply to the DME for the conversion of these rights. In 2006 the DME awarded new order prospecting rights for these tailings dumps to Ataqua Mining (Pty) Ltd, a South African black economic empowerment company. De Beers filed a suit against the DME, claiming that the DME had no authority to grant such rights to Ataqua.
De Beers claimed that the tailings dumps were movable goods because the ore had long been ‘severed’ from the earth. DeBeers further claimed that the ore was not "naturally occurring" and as such could not fall under the act’s definition of ‘mineral’. De Beers contended that the legislature’s omission of an express definition of ‘tailings’ in the act was evidence that it had not intended the act to regulate tailings dumps.
The DME argued that tailings dumps were included under the definition of ‘mineral’ in the act, since the minerals in the tailings were still attached to the ore. Although the ore had been removed from the earth, the mineral was essentially unsevered and therefore still "occurring naturally on the earth", and thus the mineral rights of any tailings dump would ordinarily fall under the act and the custodianship of the state.
The court ruled in favour of De Beers and confirmed that the act targeted unsevered minerals. Since the act makes no provision for converting old order rights over tailings dumps, this proved that the legislature had no intention of regulating tailings dumps under the act. The court also held that an acceptance of the DME’s arguments would amount to expropriation and that “if the legislature intended to take away private rights in tailings dumps it would have stated so clearly and unambiguously”.
The judgment is not yet binding on courts in other provinces of South Africa, but the DME has applied for leave to appeal to the Supreme Court of Appeal, the highest civil court in South Africa.
(1) Tailings dumps are the materials left over after the process of separating the valuable fraction from the worthless fraction of ore. However, tailings dumps often contain significant percentages of minerals which may have been unobtainable with the limited technology of the past, but have now become viable resources.
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Albert C Gourley