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New royalties helps quantify mining firms' expropriation claims against the state - Peter Leon, Webber Wentzel Bowen
In an interview on ClassicFM @ 18:25 on 11 October 2006
[miningmx.com] -- THE revised Royalty Bill proposal poses a large conundrum for the South African government because of the raft of potential lawsuits because of the expropriation of their mineral rights in 2004, Peter Leon from legal firm Webber Wentzel Bowen said on Wednesday.
When the Minerals and Petroleum Resources Development Act came into force in May 2004 all mineral rights were expropriated and vested in the state. Before then companies owned the rights.
"That gives all the mining companies a very substantial claim for that expropriation against the government," Leon told the Classic Business Day week-nightly radio show.
"Many companies lodged notices with the government in October 2004, saying they may pursue claims against the government. The Royalty Bill aggravates those claims because effectively it helps quantify the claims that the mining companies could
bring for the expropriation of their privately owned mineral rights," he said.
The draft proposal has reduced the rates contained in the initial draft releasaed a couple of years ago but the charge remains levied on revenue rather than profits as the mining industry lobbied for. The royalty on diamonds was reduced to five percent from eight percent, and the rate on refined gold and platinum was reduced to 3% and 1.5% repsectively.
"The mining companies owned the mineral rights in 2004, those rights were expropriated and now from 2009 they are going to be paying royalties to the state on rights which they previously owned. This is a huge conundrum for the government and it's not something the Treasury could address on its own.
"The bill is still going to have to be paid because the mining companies have until May 2007 under South African law to bring expropriation claims and some of them are considering claims under international law in international
arbitration," he said.
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