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[2015] ZASCA 77
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African Exploration Mining and Finance Corporation (Pty) Ltd and Another v Minister of Mineral Resources and Others (20058/2014) [2015] ZASCA 77 (27 May 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20058/2014
In
the matter between:
AFRICAN
EXPLORATION MINING AND FINANCE
CORPORATION
(PTY)
LTD
..............................................................................
FIRST
APPELLANT
STRATEGIC
FUEL FUND
ASSOCIATION
.................................................
SECOND
APPELLANT
and
MINISTER
OF MINERAL
RESOURCES
......................................................
FIRST
RESPONDENT
DIRECTOR-GENERAL
OF MINERAL RESOURCES
..........................
SECOND
RESPONDENT
REGIONAL
MANAGER:
MPUMALANGA
................................................
THIRD
RESPONDENT
TAVISTOCK
COLLIERIES (PTY)
LTD
...................................................
FOURTH
RESPONDENT
XSTRATA
(PTY)
LTD
.....................................................................................
FIFTH RESPONDENT
DUIKER
MINING (PTY)
LTD
........................................................................
SIXTH
RESPONDENT
Neutral
Citation:
African
Exploration v Minister of Mineral Resources
(20058/2014)
[2015] ZASCA 77
(27 May 2015)
Coram:
Lewis, Willis and
Saldulker JJA and Meyer and Gorven AJJA
Heard:
5 May 2015
Delivered:
27 May 2015
Summary:
Where
the holder of an old order mining right, under the
Mineral and
Petroleum Resources Development Act 28 of 2002
, is exercising the
right on the day before the coming into effect of the Act (1 May
2004), no one else, after its conversion, may
apply for a prospecting
right in respect of the same mineral on the same land.
ORDER
On appeal from:
Gauteng Division of the High
Court, Pretoria (Raulinga J sitting as court of first instance).
The appeal is
dismissed with costs including those of two counsel.
JUDGMENT
Lewis JA (Willis
and Saldulker JJA and Meyer and Gorven AJJA concurring)
[1]
At the core of this appeal is the question whether the decision of
the Minister of Mineral Resources to convert an old-order
mining
right to a mining right under the Mineral and Petroleum Resources
Development Act 28 of 2002 (the Act) can be impugned by
the
appellants. That in turn depends on whether the right was being
exercised before the respondent lodged its ‘application’
for conversion. On the periphery, however, there are a number of
other issues that were raised by the appellants in the court a
quo,
and these formed the basis for the decision of that court. I propose
to deal very briefly with some of the grounds on which
the decision
of the court a quo was based, the factual matrix and provisions of
the Act and Schedule II to the Act (which contains
the applicable
transitional arrangements), and then the core issue.
[2]
On 15 February 2010 the first appellant, African Exploration Mining
and Finance Corporation (Pty) Ltd (AFEX), applied to the
Minister in
terms of s 16 of the Act for a coal prospecting right in respect of
various portions of the farm Klippoortje 32 IS.
The application was
rejected by the Regional Manager of the Department of Mineral
Resources, Mpumalanga, the third respondent,
on 10 March 2010. The
basis for the rejection was that the fourth respondent, Tavistock
Collieries (Pty) Ltd (Tavistock), held
an old order coal mining right
in respect of the same (or much the same – the degree of
overlap is not important in this
appeal) land.
[3]
Some six weeks later, on 29 March 2010, the second respondent, the
Director General of the Department of Mineral Resources,
acting
as the delegate of the Minister, converted Tavistock’s old
order right into a mining right. The conversion was done
in terms of
item 7(3) of Schedule II of the Act: Tavistock had lodged its old
order mining right for conversion some three years
earlier, on 6
December 2007.
[4]
In March 2011 AFEX applied to the Gauteng Division of the High Court
(Raulinga J) for an order setting aside both the decision
to convert
Tavistock’s old order right taken by the Director General, and
the decision refusing its application for a prospecting
right, as
well as for other forms of relief. As will immediately be observed,
the outcome of the former application is determinative
of the latter,
for it is only if the conversion of Tavistock’s old order right
can be impugned that AFEX could conceivably
be able to apply for a
prospecting right in respect of the same land. The Strategic Fuel
Fund Association (SSF), the second appellant,
was formerly the holder
of the right to mine coal on the property. (I shall not refer to SSF
as the second appellant expressly
unless relevant to the context, but
it should be understood that when I refer to AFEX’s
contentions, the reference is to
those of SSF as well.)
[5]
The court a quo dismissed AFEX’s application, finding that it
lacked standing to bring the review; that it had failed
to exhaust
internal remedies under the Promotion of Administrative Justice Act 3
of 2000 (PAJA) (s7(2)
(c)
) and under s 96(3) of the Act,
and had also failed to apply for exemption from the requirement that
it exhaust internal remedies;
and that it had not complied with the
time limits imposed by the PAJA for instituting review proceedings.
Leave to appeal was granted
by the court a quo. The first, second and
third respondents (the State respondents) have not participated in
the appeal and abide
the decision of this court.
[6]
The court a quo also found that the application by AFEX for the right
to prospect had been made in respect of mine dumps on
the land only,
and not for prospecting
in
situ
. That finding
need not detain this court: the application form did indeed state
that the application was in respect of particular
portions of the
land and added in parentheses, after coal, ‘waste dumps’.
The argument of AFEX that this was a mistake,
and that it was clear
from the application as a whole that it was an application to
prospect for coal
in
situ
, is relevant
only if it is found that AFEX had standing to apply for a review of
the conversion of Tavistock’s old order
right in the first
place.
[7]
Because of the approach it took to the procedural points, the court a
quo did not enter into the merits of the application in
regard to
standing. As I have said, the only basis on which the review of the
decision to refuse its application for prospecting
rights on the
property could be successful was if Tavistock was not the holder of
mining rights over the same properties. And that
entails an
examination of whether the conversion of the old order rights held by
Tavistock was itself impeachable. The merits of
the decision to
convert by the Director General must thus be examined.
Factual
background and relevant provisions of the Act
[8]
Before turning to the core issue, which determines whether Tavistock
had standing to bring the application in the court a quo,
some
context is necessary. Some of the context, as well as the principles
on which the Act and Schedule II are based, are set out
in
Xstrata
South Africa (Pty) Ltd & others v SFF Association
2012 (5) SA 60
[2012] ZASCA 20
(SCA). That case involved a different
aspect of the dispute in respect of the old order rights on
Klippoortje and several of the
players are the same.
[9]
The judgment of this court sets out the purpose of the Act, the
scheme of the legislation in ensuring the transition from the
previous mining rights dispensation to the current one, the
preservation of old order mining rights in order to ensure security
of tenure and the manner in which conversion to mining rights under
the new dispensation is to take place. It is convenient at
this point
to mention that the transitional phase and the conversion process are
the subject also of the decision of the Constitutional
Court in
Minister of Mineral
Resources & others v Sishen Iron Ore Co (Pty) Ltd & another
2014 (2) SA 603
(CC)
2013 ZACC 45.
I shall not rehearse the
principles set out in these decisions save in so far as they bear
upon this appeal.
[10]
In 2001, the respondent in
Xstrata
,
SSF, entered into a notarial exchange agreement with Tavistock and
Duiker Mining (Pty) Ltd (Duiker). Tavistock is a wholly-owned
subsidiary of Duiker, which itself is a wholly owned subsidiary of
Xstrata (Pty) Ltd (Xstrata), an international mining company.
The
agreement was the product of a settlement between the parties who had
been in dispute about SSF’s storage of fuel tanks
in disused
mine shafts in Mpumalanga. Tavistock was the holder of the right to
exploit coal deposits on one of the properties where
the tanks were
stored. The presence of the containers, and leakage of oil from them,
precluded Tavistock from mining in the vicinity
of the storage pipes.
Tavistock accordingly instituted action against SFF. The litigation
between SFF and Tavistock was settled
on the basis that Tavistock’s
(and Duiker’s) rights in the areas where they could not mine
were exchanged for rights
held by SFF to exploit the coal deposits in
other areas. The exchange took the form of a notarially executed
lease agreement.
[11]
It is the terms and performance of its obligations by Tavistock under
the lease agreement that are in issue in this case, since
AFEX
asserted that Tavistock had failed to perform its obligations under
the lease, and that in the circumstances it was not exercising
its
rights before the date on which the Act came into operation –
1 May 2004. The terms of the lease are important since
the
question whether Tavistock was exercising the old order mining right
before the date when the Act came into operation is determinative
of
whether Tavistock’s mining right under the former dispensation
changed into an old order mining right under the Act, which
could in
turn be converted to a mining right in terms of item 7 of Schedule
II.
[12]
The appellants do not deny that Tavistock became the holder of the
old order right when the Act came into operation: they argue
only
that that right had ceased to exist because of non-performance of its
obligations under the lease before conversion took place.
The
provisions of item 7 of Schedule II determine when and whether a
mining right under the Minerals Act 50 of 1991 and the common
law
become an old order right, and the procedure and principles governing
the conversion of that right to a mining right under
the Act.
[13]
The definition of an old order mining right in the Schedule includes
any mining lease ‘in force immediately before the
date on which
this Act took effect and in respect of which mining operations are
being conducted’. Item 7 reads:
‘
7
Continuation of old order mining right
(1) Subject to subitems (2) and
(8), any old order mining right in force immediately before this Act
took effect continues in force
for a period not exceeding five years
from the date on which this Act took effect or the period for which
it was granted, whichever
period is the shortest, subject to the
terms and conditions under which it was granted or issued or was
deemed to have been granted
or issued.
(2) A holder of an old order
mining right must lodge the right for conversion within the period
referred to in subitem (1) at the
office of the Regional Manager in
whose region the land in question is situated together with-
(a) the prescribed particulars of
the holder;
(b) a sketch plan or diagram
depicting the mining area for which the conversion is required which
area may not be larger than the
area for which he or she holds the
old order mining right;
(c) the name of the mineral or
group of minerals for which he or she holds the old order mining
right;
(d) an affidavit verifying that
the holder is conducting mining operations on the area of the land to
which the conversion relates
and setting out the periods for which
such mining operations conducted;
(e) a statement setting out the
period for which the mining right is required substantiated by a
mining work programme;
(f) a prescribed social and
labour plan;
(g) information as to whether or
not the old order mining right is encumbered by any mortgage bond or
other right registered at
the Deeds Office or Mineral and Petroleum
Registration Office;
(h) a statement setting out the
terms and conditions which apply to the old order mining right;
(i) the original title deed in
respect of the land to which the old order mining right relates, or a
certified copy thereof;
(j) the original old order right
and the approved environmental management programme or certified
copies thereof; and
(k)
documentary proof of the manner in which, the holder of the right
will give effect the object referred to in section
2(d) and
2(f)
(3) The Minister must convert the
old order mining right into a mining right if the holder of the old
order mining right-
(a) complies with the
requirements of subitem (2);
(b) has conducted mining
operations in respect of the right in question;
(c) indicates that he or she will
continue to conduct such mining operations upon the conversion of
such right;
(d) has an approved environmental
management programme; and
(e) has paid the prescribed
conversion fee.
(3A) If the applicant does not
comply with the requirements of the subitem (2) and (3), the Regional
Manager must in writing request
the applicant to comply within 60
days of such request.
(3B) If the applicant does not
comply with subitem 3A, the Minister must refuse to convert the right
and must notify the applicant
in writing of the decision within 30
days with reasons.
(3C)
If the application relates to land occupied by the community, the
Minister may impose such conditions as are necessary to promote
the
rights and interests of the community, including conditions requiring
the participation of the community.
[Note that subitems 3A, 3B and 3C
were inserted by an amendment to the Act in 2008.]
(4)
No terms and conditions applicable to the old order mining right
remain in force if they are contrary to any provision of the
Constitution or this Act.
(5) The holder must lodge the
right converted under subitem (3) within 90 days from the date on
which he or she received notice
of conversion at the Mineral and
Petroleum Titles Registration Office for registration and
simultaneously at the Deeds office or
the Mineral and Petroleum
Titles Registration Office for deregistration of the old order mining
right, as the case may be.
. . .
(7) Upon the conversion of the
old order mining right and the registration of the mining right into
which it was converted the old
order mining right ceases to exist.
(8)
If the holder fails to lodge the old order mining right for
conversion before the expiry of the period referred to in subitem
(1)
the old order mining right ceases to exist.’
The
nature and continuation of Tavistock’s rights
[14]
AFEX, as I have said, accepted that Tavistock’s rights under
the mining lease with SFF became old order mining rights
on 1 May
2004 when the Act took effect. SFF had granted the right to mine coal
in various seams on the properties to Tavistock,
which was a holder
of a mining licence in terms of the Minerals Act and in fact
conducted mining operations by virtue of both the
lease and the
licence prior to the date when the Act came into operation. It has
also not contended that Tavistock was not entitled
to lodge that
right for conversion into a mining right on 6 December 2007.
[15]
However, AFEX contended that Tavistock had lost its old order right
prior to conversion under item 7 of Schedule II. Its argument
is
based upon an interpretation of the notarial mineral lease between
SFF and Tavistock, which was concluded pursuant to the settlement
agreement between Tavistock and SFF. SFF recorded that it was willing
to grant to Tavistock the ‘sole and exclusive right
to search
for, mine, win, recover and for its own benefit and account dispose
of, coal in, on and under the property, together
with the further
rights’ set out in the lease. Tavistock accepted that right in
respect of ‘No 4 seam coal’ and
‘No 5 seam coal’.
The lease was to endure until the ‘No 4 seam coal and the No 5
seam coal . . . which can profitably
be exploited by [Tavistock] is
exhausted’.
[16]
AFEX argued that the provisions of clause 7.5 of the lease, which
required mining at a particular rate, had not been met by
Tavistock
in 2009. The subclause reads:
‘
The
Lessee [Tavistock] shall commence mining the coal reserves which are
the subject of the mineral lease within a period of three
years from
the date of execution hereof. Failure to do so by the Lessee shall
not constitute a breach of this mineral lease, but
the Lessee shall
be restricted in terms of this Lease to mining only the tonnages
reflected in clause 8.1 below and not the tonnages
reflected in 8.2
and 8.3 below. Furthermore, once the Lessee has commenced mining it
shall have a period of 24 months to reach
and maintain a mining rate
of 1 600 000 run of mine tons of coal per annum. Failure to do so by
the Lessee shall not constitute
a breach of this mineral lease, but
the Lessee shall be restricted in terms of this Lease to mining only
the tonnages reflected
in clause 8.1 below and not the tonnages
reflected in 8.2 and 8.3 below. In such event the Grantor [SFF] shall
itself be entitled
to such rights or be entitled to dispose of the
rights referred to in 8.2 and/or 8.3.’
[17]
Clause 8, titled ‘Consideration’, entitled Tavistock to
mine certain quantities of coal without paying any royalty
to SFF
(royalty free coal), but required it to pay royalties in respect of
the remainder. Clauses 8.1, 8.2 and 8.3 read:
'8
Consideration
As
consideration for the rights hereby granted, the Lessee shall pay to
the Grantor a royalty calculated and payable as provided
hereunder:
8.1 In
respect of the first 29 523 000 of mineable in situ tons of No 4 seam
coal reserves mined by the Lessee, in respect of the
first 6 046 000
of mineable in situ tons of No 5 seam coal reserves mined by the
Lessee and in respect of 200 000 tons of run-of-mine
No 4 seam coal
mined by the Lessee, there shall be no royalty payable. It being
recorded that in exchange for the rights to
mine this tonnage
the Lessee has ceded and assigned to the Grantor certain rights more
fully specified in the exchange agreement
to which a draft of this
lease was annexed as annexure D.
8.2
In respect of the balance of the No 4 seam
coal reserves on the property,
namely 18
738 000 of mineable in situ tons, the Lessee shall pay to
the Grantor a royalty of 4,25% of the selling
price of the No 4
seam coal mined from the property and sold by the Lessee.
8.3
In respect of the balance of the No 5 seam coal reserves on the
property namely 7 507 000 mineable in situ tons, the Lessee
shall pay to the Grantor a royalty of 3,5% of the
selling price of the No 5 seam coal mined from the property
and
sold by the Lessee.'
[18]
Accordingly,
failure
to satisfy the obligations imposed in terms of clause 7.5 would not
constitute a breach of the mining lease, but would result
in
Tavistock's right to mine being restricted to specified tonnages
of coal and it would cease to be entitled to mine these
areas once
the coal was exhausted. The limits that would then apply were that
Tavistock would be entitled to extract the quantity
of coal specified
in clause 8.1 of the lease (the royalty free coal) and would lose the
right to extract and dispose of the royalty
coal.
[19]
AFEX argued that clause 7.5 required Tavistock to mine more than
1 600 000 tons per annum: in 2009 it mined less than
that and it
accordingly lost the right to mine royalty coal. As a result
Tavistock lost its old order right in 2009. It was therefore
not able
to convert the old order right, and the conversion effected by
the Director General was invalid.
[20]
Tavistock, on the other hand, contended that the AFEX case was based
on a misinterpretation of the effect of the Act on pre-existing
mineral rights, and a misunderstanding of the legal nature of old
order – transitional – rights. In this regard they
referred to
Xstrata
where this court, referring to item 7,
said (para 10):
‘
[T]hese
provisions do not serve to preserve common law rights. Instead, for
the period of five years specified in item 1, [that
is, item 7.1] or
such lesser period as may elapse until the conversion of the old
order right into a mining right under the Act,
they create a new
right, statutory in origin, embodying the rights previously enjoyed
under the relevant old order right, together
with an entitlement to
convert that right into a mining right under the Act.’
[21]
And in para 21 this court, referring to the same lease in issue here,
said that Tavistock’s right to mine no longer had
its origin in
the mineral lease. Instead it had acquired a statutory right –
the old order right – ‘on the same
terms and conditions
as it had hitherto enjoyed’. SFF, since it was not exercising
any rights to mine coal on the properties
at the time when the Act
came into operation, lost any residual right it might have had.
[22]
Tavistock’s old order right, after 1 May 2004, comprised the
terms of the notarial lease (the written consent), the provisions
of
the common law in so far as these were then applicable (SFF had the
common law right to mine the coal on the property), and
the terms of
the mining licence that Tavistock held in terms of s 9(1) of the
Minerals Act. Tavistock could not, however, transfer
the old order
right it acquired on 1 May 2004: only the person actually exercising
the right – conducting mining operations
– before 1 May
2004 could be the holder of an old order right. Accordingly, the last
provision of clause 7.5 of the lease
could not, after that date, be
given effect: SFF could no longer rely on its right under that clause
to mine the royalty coal itself,
or to dispose of it to a third
party, if Tavistock did not meet the rate of mining required in the
clause. The right had ceased
to exist.
[23]
Tavistock contended also that the obligations imposed on it under
clause 7.5 were contrary to the terms of the old order right
since no
one other than it could have any right to the coal on the property.
In this regard it referred to item 7(4) of Schedule
II which provides
that ‘No terms applicable to the old order right remain in
force if they are contrary to any provision
of the Constitution or
this Act’. There is some debate about whether item 7(4) applies
to old order rights or to converted
rights, given its position in the
item, which is after the provisions that deal with the process of
conversion. In
Xstrata
(para 13) Wallis JA
considered the debate but refrained from deciding it. There is no
need for me to decide it either. It is plain,
in my view, that since
the rights to royalty coal could no longer revert to SFF, the
provision that they would do so if the mining
rate to be maintained
fell below the target, was no longer enforceable. SFF had lost its
right to mine the royalty coal even if
Tavistock did not meet the
agreed target. That makes the last sentence of clause 7.5 meaningless
after 1 May 2004.
[24]
In any event, it is not necessary to determine the matter on the
basis of the fate of clause 7.5. For it has not been shown
that
Tavistock did not meet its target or was in breach of its
obligations. AFEX alleged that Tavistock started mining operations
in
2001 and had since mined all of the non-royalty coal in no 4 seam.
However, from January 2009 to the end of December of that
year, it
had mined only 760 539 run-of-mine tons of coal, which it said was
‘significantly less than the 1 600 000
ton target’.
It relied on an audit report of Xstrata mining operations prepared by
Mr A J van Zetten in April 2009.
[25]
The report contained production figures from 2001 to 2008, and made
forecasts from 2009 to 2013. The figure relied upon by
AFEX appears
in an attachment to an email dated 22 October 2009 in respect of
actual figures for the months of January to August
2009 only. There
is thus no evidence that Tavistock did not reach its target in that
year, on the assumption that it was obliged
to do so. AFEX argued
that Tavistock was in a position to state what its coal production
was, and failed to do so. In my view there
is no reason why it should
have done. Moreover, when the application was brought in 2011 not all
the coal in seam 5 had yet been
exhausted and that in seam 4 had yet
to be mined when the old order right was lodged for conversion. There
is thus no evidence
of failure to exercise the old order right such
that conversion should not have taken place.
[26]
In the circumstances, as the entire basis for AFEX’s
application to review the conversion of the old order right by the
Director General falls away, so too do he issues that impinge on the
process of conversion. The Minister (and his delegate) did
not have
the authority to refuse to convert the old order right. Item 7(3) of
Schedule II states as much: the Minister
must
convert the old
order right into a mining right if the holder complies with the
requirements of subitem 2; has conducted mining
operations in the
area in question; indicates that it will continue to do so; has an
approved environmental management plan and
has paid the prescribed
fee. The Minister does not have a discretion. And if the requirements
are not satisfied, the holder is
given an opportunity to meet them by
virtue of the subitems introduced in 2008 – 3A, 3B and 3C, set
out above. (See in this
regard M O Dale and others
South
African Mineral and Petroleum Law
(Service issue 15, December 2014, Sch II 83-84.)
[27]
Even if that were not the case, AFEX failed to pursue any appeal that
it might have had in terms of s 96 of the Act timeously,
either
against the decision to convert or the rejection of its application
for prospecting rights on the property. And given the
view that I
take, that it could not have applied successfully for a prospecting
right in land in respect of which Tavistock had
a mining right, it
had no standing to challenge the conversion. It is accordingly not
necessary to consider the argument that there
were special
circumstances that warranted exemption from the requirements of s 96.
It was thus precluded from pursuing the review
application. It is
also not necessary to consider whether AFEX met the requirements for
pursuing an appeal under the section. And
since AFEX had no standing
to bring the review, its argument that the conversion procedure was
unfair is also not relevant.
[28]
In the circumstances the appeal is dismissed with costs including
those of two counsel.
_______________________
C
H Lewis
Judge
of Appeal
APPEARANCES
For
Appellant: W H G van der Linde SC (with him A Friedman)
Instructed
by: ENSAfrica, Johannesburg
Webbers,
Bloemfontein
For
Fourth, Fifth and Sixth
Respondents:
G L Grobler SC (with him J L Gildenhuys)
Instructed
by: Norton Rose Fulbright South Africa, Sandton
Matsepes Inc,
Bloemfontein