posted 13 Nov 2007 in Volume 10 Issue 6

Investment in the mining industry: key considerations

By William Le Roux, director, Brink Cohen Le Roux Inc.

THE CURRENT booming gold and platinum prices are once again placing the focus on new mining investment in South Africa. Mining legislation deals predominantly with health and safety issues, prospecting and mining rights in respect of mineral deposits and socio-economic empowerment obligations.

The Mine Health and Safety Act, 1996 (‘THE MHSA)
The MHSA adopts an outcome-based approach and imposes general obligations on mining employers to ensure their employees’ health and safety. Such provisions include the obligation to:

Ensure that the mine is designed, constructed and equipped to provide conditions for safe operations and a healthy working environment; with a communication system and electrical, mechanical and other equipment necessary to achieve those conditions;
Provide and maintain a healthy and safe mining environment, as far as reasonably practicable;
Ensure that every employee complies with the requirements of the MHSA, and institute the measures necessary to secure, maintain and enhance health and safety;
Provide employees with all information, instruction, training or supervision that is necessary to enable them to perform their work safely and without risk to health;
Identify and assess any hazards and risks to health and safety to which employees may be exposed and allowing employees access to those records.

The MHSA places great emphasis on the risk assessment process by employees. Co-operation between the Mine Health and Safety Inspectorate of the Department of Minerals and Energy and various mining houses in South Africa has resulted in a reduction in the number of fatal accidents recorded.
Emphasis is placed on the creation of a culture of health and safety in the mining industry. Although the approach adopted by the Mine Health and Safety Inspectorate is an outcome-based approach, certain minimum health and safety requirements are prescribed by regulation, e.g. ventilation and thermal conditions.
The Mine Health and Safety Inspectorate is responsible for enforcing the MHSA. Inspectors visit mines on an ongoing basis and are granted extensive powers in terms of the MHSA. Their powers include the ability to enter any mine at any time without warning or notice; to examine any documents, including plans, books or records; and to seize and/or remove any article, substance, machinery or sample from any mine.
Sections 60 to 74 provide for investigations and inquiries to be conducted under the auspices of the Mine Health and Safety Inspectorate in respect of any reportable injury and/or fatal accident.
Failure to comply with any provision of the MHSA or any relevant regulation, condition, suspension, notice, order, instruction or prohibition is an offence. An administrative fine may also be imposed on the employer. If an accident results in the death of an employee, the mining company (represented by a natural person) may be criminally prosecuted, should the death have been caused through the negligent conduct of the juristic person (represented by the natural person).

The Mineral and Petroleum Resources Development Act, 2002 (‘The MPRDA’)
The MPRDA came into effect on 1 May 2004. The MPRDA vests custodianship of South Africa’s mineral rights in the State. The previous regime was based on private ownership of the mineral rights, with authorisation to mine and prospect mineral deposits being granted by the Department of Minerals and Energy.
The MPRDA provides for renewal of mining rights, the transferability and encumbrance of prospecting rights and mining rights, as well as the conversion of old order mining rights to new order mining rights.
Any substantiated mining lease, consent to mine, permission to mine, claim, license, mining authorisation or right, enforced immediately before the MPRDA took effect (1 May 2004) and in respect of which mining operations were being conducted at such time, is considered an “old order mining right”. Old order mining rights continue for a period of five years from 1 May 2004, subject to the terms and conditions under which they were granted. Holders are required to apply for their conversion into “new order rights” within a five-year period.
New order rights are not perpetual. Prospecting rights endure for a period of five years with one renewal period of up to three years. Mining rights endure for a maximum of 30 years with renewals of 30 years each. A prospecting or mining right, or an interest in any such right, or a controlling interest in a legal entity holding such a right, may not be ceded, transferred, let, sublet, assigned, alienated, or otherwise disposed of, without the written consent of the Minister of Minerals and Energy.

Broad-based Socio-economic Empowerment Charter
Mining companies are required to implement the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry (‘the Charter’). Its objectives are to promote equitable access to mineral resources to all people in South Africa; expand opportunities for historically-disadvantaged South Africans; utilise the existing skills base of historically-disadvantaged South Africans; expand the skills base of historically-disadvantaged South Africans; and promote employment and advance the social and economic welfare of the country’s mining communities.