court decision undermines validity of mineral prospecting rights  
04 March 2008

A recent groundbreaking decision in the Northern Cape High Court has led to concern about the validity of prospecting rights granted under the signature of the minerals and energy department regional managers.

Most, if not all, prospecting rights have been granted under the signature of regional managers, says commercial law firm Bell Dewar & Hall director Nic Roodt.  In a case involving investment consortium Meepo, the court declared a prospecting right granted by a regional manager null and void.

Roodt says that the judgment may have serious ramifications for the validity of prospecting and mining rights.

Prospecting and mining companies “need to review their prospecting and mining rights as a matter of the utmost urgency as each case needs to be considered on its own facts”.  Twenty-three percent of SA’s foreign exchange earnings are earned from mining activities, and up to 17% of gross domestic product (GDP) is earned directly or indirectly from mining.

Hendrik Schmidt MP, an advocate and the Democratic Alliance’s (DA’s) spokesman on minerals and energy, says the case has serious implications for the future of mining in SA.  “The DA calls on the trade and industry department to undertake a full review of all the prospecting and mining rights awarded by regional offices to determine their legal validity in light of the court case.” In the case in question, Meepo applied for a prospecting right in May 2004 under the provisions of the Mineral and Petroleum Resources Act of 2002.

Later that month, the regional manager advised the company that the application had been accepted.

In November 2004, the regional manager wrote to the deputy director-general recommending the granting of a prospecting permit to Meepo for a period of two years.

The deputy director-general was asked by the regional manager to sign a power of attorney authorising him to sign on behalf of the deputy director-general that the “prospecting right be granted to” Meepo. In January 2005, the deputy director-general signed the approval of the prospecting right and a power of attorney.  The regional manager and the company notarially executed a document, known as a “prospecting right”, which indicated that the right was to commence in March that year.

Because a certified sketch was omitted, a second “prospecting right” was notarially executed, indicat ing that the right would begin only on July 5 2005.  Roodt says it is important to note that in May 2004, the minerals and energy minister signed a document delegating her powers to the department.  In that document, the minister delegated her powers to grant a prospecting right to the deputy director-general.

The minister had expressly prohibited the deputy director-general to delegate his power to the regional manager. This meant the manager had no power to grant a prospecting right.

The court had to decide when, and as a result of whose administrative conduct, the prospecting right was granted to Meepo.  The court found that the prospecting right was granted when the notarial deed was executed by the regional manager and Meepo.

Having concluded that the prospecting right was granted by the regional manager, who was not authorised to act on behalf of either the minister or the deputy director-general, the court held that the conduct of the regional manager was outside his authority.

The right was rendered void.

Sanchia Temkin, www.businessday.co.za