[miningmx.com] — SOUTH Africa’s mineral resources department (DMR) is expected to approve Lonmin’s application to sell base metals “within weeks’, a government source told Miningmx today.
However, the approval will exclude a 4,400 hectare area over which an empowerment company, Keysha Investments 220, had been granted a prospecting right last year in a court action.
Sandile Nogxina, director-general of the DMR, said that in applying for conversion of seven platinum group metal (PGM) rights several years ago, Lonmin had failed to apply for the right to sell associated base metals such as nickel.
Once it had realised the omission, Lonmin through section 102 of the Minerals and Petroleum Resources Development Act (MPRDA) had retrospectively applied to sell these base metals.
Government was processing this section 102 application when it realised Lonmin had long been selling base metals instead of stockpiling them. It therefore last week slapped a ban on further sales until the application could be processed.
“This is a complete red herring,’ Nogxina told Miningmx. “The prohibition slapped on Lonmin to sell associated base metals never related to the area Keysha Investments 220 owned. That is entirely a separate matter.’ Nogxina’s department is expected to express this information to Lonmin in a meeting today.
“I don’t want to pre-empt the findings of my department, but I don’t forsee a problem. The law allows companies in terms of section 102 to retrospectively incorporate conversions over minerals for which they didn’t at first apply,’ he said.
He likened Lonmin’s public distress to the administrative error of ArcelorMittal SA to apply for a new order mining license over part of iron ore mineral holdings that subsequently reverted to the state.
“When there is a slip up by a private company, they always blame the department. Lonmin is creating the impression that it lost its rights to sell the base metals, but nothing could be further from the truth. Lonmin never had the rights’.
Nogxina added that a letter from the DMR to Lonmin was “a result of a court decision, not the application’ of Keysha Investments 220.
A statement is due from the DMR later today, Nogxina said. Lonmin had no immediate response to Nogxina’s comments.
Lonmin informed the Stock Exchange News Service last week that it had received a letter from the DMR on August 4 containing an order to stop selling base metals with immediate effect.
Lonmin said it would defend the matter in court, a development that JP Morgan believed would have a positive outcome for the platinum firm if the matter got that far.
“We’re of the layman’s opinion that any call on Lonmin’s associated minerals is most unlikely to stand up based on the fact that it’s impractical to mine and process these metals separately from the same orebody,’ Steve Shepherd and Allan Cooke, analysts for JP Morgan, said.
“We’d be most surprised if this issue came to anything. However, we’re not lawyers, so we cannot conclusively say that this is merely a storm in a teacup,’ the analysts added.
Peter Leon, a partner at Webber Wentzel, an attorney, said security of tenure was a massive issue for investors in the mining sector. “I can’t understand why the DMR didn’t disclose this earlier given what’s happened to Lonmin’s share price,” he said.
