South Africa: Publication Of The Revised MPRDA Amendment Bill

The revised Mineral and Petroleum Resources Development Amendment Bill 15D – 2013 (the Bill) was passed by the National Assembly on 1 November 2016. The Bill has now been referred to the National Council of Provinces (NCOP). On 8 November 2016, the NCOP Select Committee on Land and Mineral Resources held its first hearing on the MPRDA Amendment Bill.

The Bill is the first major reform of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), which in itself constituted a fundamental reform of South African mining law. The Bill was previously passed by Parliament in 2014 and sent to the President for his assent. The President referred the Bill back to Parliament in 2015, citing various concerns that may result in the Bill not passing constitutional muster.

The most recent version of the Bill does not materially differ from the version of the Bill that was passed by Parliament in 2014. The most notable differences are that the revised Bill:

  • specifically refers to communities under the sections that deal with mineral licence application procedures, whereas the Bill passed in 2014 only referred to persons; and
  • requires the Minister to include licence conditions to promote the rights and interests of the community, whereas the Bill passed in 2014 gave the Minister a discretion to include such conditions.

We provide a brief overview of some of the amendments proposed by the Bill (in its most recent form) below.

Proposed amendments relating to mineral resources

Application procedure

The Bill proposes a reform of the application procedure for reconnaissance permissions, reconnaissance permits, prospecting rights, exploration rights, mining rights, technical co-operation permits, production rights and mining permits (Mineral and Petroleum Rights).

Under the Bill, the Minister reserves a right to periodically invite applications for Mineral and Petroleum Rights by notice in the Government Gazette. Any person may, however, request that the Minister invite applications when he/she has identified an area of land, block or blocks which are subject to a right, permit or permission in terms of the Act. In such instances, the Minister, when processing applications, must give preference to an application lodged by such persons.

Transferability and encumbrance of rights

The Bill amends section 11 of the MPRDA regarding the transferability and encumbrance of a prospecting or mining right. In terms of the MPRDA, ministerial consent is required if there is a change in the controlling interest in a mining company that holds these rights, but ministerial consent is not required for a change of controlling interest in a listed company holding such rights. However, the Bill now provides that the transferability of a prospecting right (or a part of a prospecting right), mining right (or a part of a mining right) or an interest in any such right in an unlisted company or any controlling interest in a listed company requires ministerial consent.

The Bill introduces a definition of "controlling interest" which refers to the majority of voting rights attaching to all classes of shares in a company and any interest which enables a holder to exercise any control (directly or indirectly) over the activities or assets of the business.

Local beneficiation

The Bill proposes that the Minister be required to declare certain minerals and mineral products as "designated minerals". No person may export such "designated minerals" without the written consent of the Minister (unless the person is a producer that has complied with its local beneficiation obligations).

The Bill proposes that producers of designated minerals be required to offer local beneficiators a prescribed percentage of their production. This offer must be made at mine gate price (the price of the mineral when it leaves the mining area, excluding all transportation costs and the like) or an agreed price.

It appears that the Bill, whilst requiring an offer to be made to local beneficiators, does not require the sale to actually occur. The Bill thus leaves open the opportunity for designated mineral producers to export the designated minerals if a local beneficiator has rejected a genuine bona fide offer.

Historic residue stockpiles

The Bill proposes that custodianship of minerals in historic residue deposits and residue stockpiles shall revert back to the State and that the State be entitled to invite applications for mining rights thereon.

However, the Bill proposes that all historic residue deposits and residue stockpiles currently not regulated by the MPRDA shall belong to the owners thereof for a transitional period of two years. During this transitional period, the owners may apply for an amendment to their mining works programme to include the residue stockpiles and deposits.

Proposed amendments relating to petroleum resources

Petroleum Agency of South Africa

At present, the Petroleum Agency of South Africa is responsible for:

  • promoting petroleum exploration and production; and
  • dealing with petroleum rights applications (such as reconnaissance permits, technical co-operation permits, exploration rights and production rights).

The Bill proposes to establish two new entities that will be responsible for these functions. It also proposes that the Regional Manager be established to deal with petroleum rights applications and that a public entity be established to promote petroleum exploration and production.

State participation

The Bill proposes that the State be provided with a 20% free carried interest in all new exploration and production rights. In addition to the free carried interest, the Bill contemplates that the State be entitled to a further participation interest in the form of:

  • acquisition at an agreed price, or
  • production sharing agreements, and contemplates that the State enter into a joint operating agreement with the operating petroleum company.

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