South Africa

Regulatory Environment for Mining

The legal tenure of mineral properties within South Africa is governed by the MPRDA. The effective date on which this legislation came into effect and replaced previous applicable legislation (the Minerals Act 50, of 1991) is 1 May 2004. In terms of the MPRDA, mineral property ownership was transferred from private ownership and control to the custodianship of the State. The MPRDA outlines a set of procedures designed to transfer previous mineral property tenure (old order rights) into new mineral property tenure (new order rights). These procedures are termed ‘Transitional Provisions’ in the MPRDA. These transitional arrangements are complex and it is therefore necessary to give a brief summary of them at the outset, as some knowledge of these arrangements is necessary in order to understand the grounds by which Barberton Mines has claim to mineral rights held prior to the date of inception of the MPRDA.

In terms of the previous Minerals Act, the owner of a mineral right (or a person to whom the holder has given written consent to prospect) could apply for a Prospecting Permit to prospect the land covered by such mineral rights. On conclusion of prospecting, the holder of a Prospecting Permit is then able to apply for a Mining Authorisation. In terms of the MPRDA, the State is the custodian of all mineral rights and issues a Prospecting Right or a Mining Right to competent applicants who comply with the relevant provisions pertaining to the application for such rights.

In South Africa, it is proposed that mineral royalties will in future be legislated in terms of the Royalty Bill. In terms of this Bill, the proposed State royalties payable on the gross sales value of mineral resources from mining operations in South Africa depend on the type of minerals and differ between unrefined and refined minerals. The royalties will be tax deductible and a special relief system has been created for marginal mines. The Royalty Bill will be adopted in May 2009, royalties being payable from 1 May 2009.

In terms of the Transitional Provisions in the MPRDA, holders of old order rights (a Prospecting Permit or a Mining Authorisation), can either convert this right into a new order right or they can lodge a new application for a new order right. In each case, the holder of the old order right has an exclusive right to apply for new order rights or convert old order rights, within a defined time period from the date of inception of the MPRDA.

Time frames in which this exclusive opportunity to obtain a new order right exist and whether the old order right holder needs to ‘convert’ or ‘apply’ for a new order right, depends on the status of the old order right at the date of inception of the MPRDA. If the holder of an old order right:

– held a current prospecting or Mining Authorisation;
– held an approved Environmental Management Programme Report (“EMPR”); and
– was actively conducting such prospecting /mining operations on the date of inception of the MPRDA,

then, according to the DME, this holder is given a period of two years (in the case of a prospecting permit) or five years (in the case of a Mining Authorisation) or the remaining term of the old order permit to convert this old order right into a new order right. There is however a predominant legal view (although as yet untested) that the holder of an old order prospecting right has two years to convert, irrespective of the expiry date of the old order permit.

If however, any one of the above three points was not true on the date of inception of the MPRDA, then the holder of the old order right is deemed to be in possession of an unused old order right and had a period of one year to apply for conversion into a new order right, from the date on inception of the MPRDA. The period for lodgement of an application for a new right in respect of an unused old order right lapsed on 30 April 2005.

The difference between the ‘conversion’ process as opposed to the lodging of a new ‘application’ for a new order right is that a new application is more onerous than a conversion, in that applicants for rights to strategic minerals (of which gold is considered to be part) need to demonstrate their BEE credentials. In terms of the Mining Charter; applicants must be able to demonstrate that they are at least 26 per cent. owned and controlled by people belonging to previously disadvantaged population groups. In addition, new applicants must submit to the DME an environmental management plan or programme whereas in relation to conversions existing environmental management programmes remain in force post conversion.


			Geography Area: 1,219,912 km² Capital City: Pretoria (administrative), Cape Town (legislative), Bloemfontein (judicial), Climate: Mostly semiarid; subtropical along east coast; sunny days, cool nights
			People Nationality: South African Population: 43 997 828 Religion: Zion Christian 11.1%, Pentecostal/Charismatic 8.2%, Catholic 7.1%, Methodist 6.8%, Dutch Reformed 6.7%, Anglican 3.8%, Muslim 1.5%, other Christian 36%, other 2.3%, unspecified 1.4%, none 15.1%
			Government: Type: Republic Independence: 31 May 1910 (Union of South Africa formed from four British colonies: Cape Colony, Natal, Transvaal, and Orange Free State); 31 May 1961 (republic declared)
			Constitution: 10 December 1996; this new constitution was certified by the Constitutional Court on 4 December 1996, was signed by then President Mandela on 10 December 1996, and entered into effect on 4 February 1997; it is being implemented in phases
			Economy Statistics GDP (US$): $201.4 billion (official exchange rate) GDP growth rate: 3.5% (2006 est.) Rate of Inflation: 5% Natural resources: Gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, uranium, gem diamonds, platinum, copper, vanadium, salt, natural gas
			Regulatory Environment for Mining The legal tenure of mineral properties within South Africa is governed by the MPRDA. The effective date on which this legislation came into effect and replaced previous applicable legislation (the Minerals Act 50, of 1991) is 1 May 2004. In terms of the MPRDA, mineral property ownership was transferred from private ownership and control to the custodianship of the State. The MPRDA outlines a set of procedures designed to transfer previous mineral property tenure (old order rights) into new mineral property tenure (new order rights). These procedures are termed ‘Transitional Provisions’ in the MPRDA. These transitional arrangements are complex and it is therefore necessary to give a brief summary of them at the outset, as some knowledge of these arrangements is necessary in order to understand the grounds by which Barberton Mines has claim to mineral rights held prior to the date of inception of the MPRDA. In terms of the previous Minerals Act, the owner of a mineral right (or a person to whom the holder has given written consent to prospect) could apply for a Prospecting Permit to prospect the land covered by such mineral rights. On conclusion of prospecting, the holder of a Prospecting Permit is then able to apply for a Mining Authorisation. In terms of the MPRDA, the State is the custodian of all mineral rights and issues a Prospecting Right or a Mining Right to competent applicants who comply with the relevant provisions pertaining to the application for such rights. In South Africa, it is proposed that mineral royalties will in future be legislated in terms of the Royalty Bill. In terms of this Bill, the proposed State royalties payable on the gross sales value of mineral resources from mining operations in South Africa depend on the type of minerals and differ between unrefined and refined minerals. The royalties will be tax deductible and a special relief system has been created for marginal mines. The Royalty Bill will be adopted in May 2009, royalties being payable from 1 May 2009. In terms of the Transitional Provisions in the MPRDA, holders of old order rights (a Prospecting Permit or a Mining Authorisation), can either convert this right into a new order right or they can lodge a new application for a new order right. In each case, the holder of the old order right has an exclusive right to apply for new order rights or convert old order rights, within a defined time period from the date of inception of the MPRDA. Time frames in which this exclusive opportunity to obtain a new order right exist and whether the old order right holder needs to ‘convert’ or ‘apply’ for a new order right, depends on the status of the old order right at the date of inception of the MPRDA. If the holder of an old order right: – held a current prospecting or Mining Authorisation; – held an approved Environmental Management Programme Report (“EMPR”); and – was actively conducting such prospecting /mining operations on the date of inception of the MPRDA, then, according to the DME, this holder is given a period of two years (in the case of a prospecting permit) or five years (in the case of a Mining Authorisation) or the remaining term of the old order permit to convert this old order right into a new order right. There is however a predominant legal view (although as yet untested) that the holder of an old order prospecting right has two years to convert, irrespective of the expiry date of the old order permit. If however, any one of the above three points was not true on the date of inception of the MPRDA, then the holder of the old order right is deemed to be in possession of an unused old order right and had a period of one year to apply for conversion into a new order right, from the date on inception of the MPRDA. The period for lodgement of an application for a new right in respect of an unused old order right lapsed on 30 April 2005. The difference between the ‘conversion’ process as opposed to the lodging of a new ‘application’ for a new order right is that a new application is more onerous than a conversion, in that applicants for rights to strategic minerals (of which gold is considered to be part) need to demonstrate their BEE credentials. In terms of the Mining Charter; applicants must be able to demonstrate that they are at least 26 per cent. owned and controlled by people belonging to previously disadvantaged population groups. In addition, new applicants must submit to the DME an environmental management plan or programme whereas in relation to conversions existing environmental management programmes remain in force post conversion.