Australia: Tenements Update: costs savings and stamp duty

Last Updated: 4 July 2013
Article by Jennifer Anderson, Andrew White and Alan McKelvey

This month's update shares our tenement management costs savings running list, in response to client requests for cost savings ideas, and the State Revenue Legislation Amendment Bill's proposal to include exploration licenses and assessment leases as "interests in land" for stamp duty purposes and for mining information to form part of the land value for stamp duty calculation.

Costs savings running list

There are ways to reduce costs in tenement management and here are some suggestions on how to do this.

Bank guarantees returned

Bank guarantees attract holding charges. Final reports on tenements set aside in busy times may be completed, lodged and result in return of the bank guarantee security.

Revisiting tenement conditions

Especially at tenement renewal, explorers and miners should consider contacting the Department of Resources & Energy (DRE) to discuss conditions that involve costs and that have been achieved or can be modified, where appropriate. Explorers and miners should also consider whether they can make a case to the DRE for a waiver or deferral of compliance with current conditions.

While it's common to assess whether planning approval conditions with cost implications are still relevant, explorers and miners often don't undertake a review of tenement conditions, especially "special conditions", to assess potential costs savings.

Partial relinquishment

It may be worth applying for a partial relinquishment of a tenement where its value in an area is nominal relative to the compliance costs of the area it covers. Partial relinquishment requires the approval of and engagement with the DRE before an application is lodged.

Refunds following new single mining leases

Review single new tenements granted over multiple earlier titles. Explorers and miners may consider if a refund of fees paid on the earlier titles is possible, especially where they are engaged with DRE on a single new application.

Consolidation of mining leases

Miners may consider consolidating mining leases to reduce tenement management administration costs and potentially reduce annual rent payments, such as where multiple tenements in strata attract multiple annual rents but relate to the same area of land. For information on when consolidation of mining leases may make sense, see our Tenements Update: May 2013.

Group Reporting and Aggregation

If they haven't already done so, explorers and miners should engage with the DRE on Group Reporting of exploration to assist with resourcing efficiency and Aggregation to meet tenement expenditure commitments on an aggregate tenement portfolio basis, rather than compliance on a tenement by tenement basis.

Barrier coal and a neighbour's coal

While the benefit may be marginal, miners could consider capturing additional value through obtaining DRE approval to mine barrier coal (the coal within but at the tenement boundary), and on an adjoining neighbour mine's footprint as their sublessee. These may permit accessing coal otherwise out of reach and for a fraction of the costs of accessing equivalent coal elsewhere that would require a new or modified planning approval or new tenement.

Tenement management efficiencies

Explorers and miners can adopt a tenement management system that gives reminders of renewals, reporting and other compliance commitments. In addition to assurance on compliance, timely reminders can head off the extra costs that can be incurred when compliance matters need to be attended to at the last minute.

ALs can be better value than ELs

Especially where the miner or explorer owns the freehold, they should consider applying for Ministerial consent to move from an exploration licence to an assessment lease. An assessment lease may potentially be granted for a longer term than an exploration licence and an assessment lease at renewal is not subject to reduction in area by one half subject to special circumstances. Where the miner does not own the freehold, then implications of any "land acquisition" condition under an assessment lease requires evaluation.

State Revenue Legislation Amendment Bill 2013

The State Revenue Legislation Amendment Bill 2013 was introduced into the New South Wales Parliament on 29 May 2013 and proposes to amend the Duties Act 1997 (NSW) from 1 July 2013.

The Bill provides that a mining tenement in relation to land is taken to give the holder an interest in land to which it relates, including any fixtures to the land, for stamp duty purposes.

An interest in land is dutiable property and, accordingly, a transfer of an interest in land is subject to duty. An interest in land is also treated as land holding of a landholder for the purposes of landholder duty.

At present, only mining leases and mineral claims are treated as interests in land. As a result of the Bill, assessment leases, exploration licences and opal prospecting licences under the Mining Act 1992 will also be regarded as giving the holder an interest in land. Office of State Revenue informed us that mining subleases are intended to be treated as within mining leases.

Under the Bill, an interest in land does not include a carbon sequestration right within the meaning of Division 4 of Part 6 of the Conveyancing Act 1919.

The Bill further provides that the value of information obtained under mining tenements is included in the value of the interest in land. The Bill does not define "information". Customarily, mining information is separately defined in transaction documents forming parts of the mining interest assets to be transferred. The Office of State Revenue has confirmed that the objective of the Bill is for the value of that information to be taken into account as for the value of the land.

The Minister's second reading speech refers to information, including the results of investigations under an exploration licence and the Office of State Revenue has also confirmed that it includes the information from geological work completed.

Further information

We assist clients with managing their tenement portfolios in a cost efficient and strategic manner, including preparing for applications and engaging with the DRE on tenement matters. We also act on transactional matters including the tenement components of capital raisings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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