Mining law to change as lawsuits rear up

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Sandile Nogxina, DME Director General

� Attorney reprises battle with DME
� SA to change Mining Act

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Mining law to change as lawsuits rear up
Allan Seccombe
Posted: Thu, 22 Mar 2007

[miningmx.com] -- THE South African government has made a critical amendment to its mining legislation in an effort to block potentially damaging lawsuits later this year alleging expropriation.

The change to the Mineral and Petroleum Resources Development Act (MPRDA) pushes the deadline for potential claims against the state by aggrieved mining companies to 30 April 2009 (plus 180 working days from the end of April this year), said minerals and energy (DME) director-general, Sandile Nogxina.

The MPRDA was out of alignment with the Prescription Act, separate legislation that rules how parties may express grievances on expropriation. It stipulates aggreived parties have three years in which to file a claim. The MPRDA was enacted in May 2004.

possibility of a flood of lawsuits

�With the misalignment there was a possibility of a flood of lawsuits before 30 April 2007,� Nogxina told journalists in Pretoria. �This alignment has dealt with that."

However, the process will not address the �266m compensation lawsuit registered in January by Luxembourg-based Finstone, the holding company controlling South Africa�s main granite producers Marlin, Kelgran and Red Graniti.

As first published in Miningmx, Finstone reckoned its mineral rights had been violated in contravention of trade treaties between their government and that of South Africa. The matter is before an international tribunal.

�I think these changes show an element of panic,� said Peter Leon, a lawyer with Webber Wentzel Bowens, the South African law firm handling the Italian companies� claim against the DME.

�If they did not do this, they were faced with the prospect of a cataclysm of claims by 30 April this year,� Leon told Miningmx.

The extended period gives the DME more time to convert mineral rights in line with the MPRDA, which has set 2009 as the first milestone in the sweeping changes for the mining industry, potentially reducing the number of lawsuits.

The MPRDA gives companies five years in which to convert their old-order mineral rights to new-order rights.

Unusually, the DME notified all stakeholders in the industry of the amendment � and made that change public -- ahead of tabling the amendment in parliament, which precedes public comment.

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A range of industry participants, ranging from the Chamber of Mines of SA, the country's largest mining union, the National Union of Mineworkers and, the junior mining companies represented by SAMDA, were present in Pretoria to see for the first time the proposed amendments, which will be tabled in parliament this week.

The changes came after talks were initiated in September 2006.

�We had to be satisfied with the content, and we are. The language used in the amendments is to our satisfaction,� said chamber president, Lazarus Zim.

However, international companies might still feel there is injustice, much like the Italian granite companies. This is owing to changes in the mining environment against provisions in treaties signed by the South African government with offshore governments.

There are an estimated 32 bilateral investment treaties, mostly with European Union states, that could be affected by the MPRDA.

Leon said the latest amendment does not affect the Italian�s legal case. �It has no impact at all,� he said.

At least six mining companies had by a legal October 2004 deadline reserved their rights to pursue lawsuits for compensation totalling $6.6bn against the government. A number of further amendments to MPRDA will be released in coming weeks, but these are generally fairly small and of a technical nature, Nogxina said.

The big amendment is a way of clearing the way for those who feel by 2009 that they have a claim to pursue it, Nogxina said.

�It is to encourage people who want to make use of the provisions of the Act. It is for those who feel that there has been expropriation of their rights to get compensation if they have to. We have got nothing to hide and we are not frustrating legitimate claims,� he said.

�The actual implementation of the law has taught us a number of lessons. At times, you prescribe certain timeframes you regard as reasonable, but when it comes to implementation you see that prescribed time frame is totally unreasonable,� he added.

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