What the Nkwe Platinum means for mining in South Africa A look at the Nkwe Platinum Judgement and its implications
Interviewer: Barry Sergeant Posted: Friday , 03 Dec 2010
Download this interview BARRY SERGEANT: I'm in Johannesburg and I'm speaking with Peter Leon, who is a partner in Webber Wentzel in Johannesburg, he at the moment is in Beijing. Peter, we were just saying about the weather there, what's it feeling like?
PETER LEON: It's pretty chilly Barry, very different from Johannesburg. At the moment I guess it's about four or five degrees Celsius.
BARRY SERGEANT: Now, you've been following this very important Constitutional Court case that was handed down in South Africa, a couple of days ago, involving Genorah and a community called the Bengwenyama. Genorah, of course, is the majority shareholder in Nkwe Platinum, which is listed in Australia and which it said it would list before the end of this year in Johannesburg, which it hasn't done yet. What is your take on the case in the broader sense, what does it mean for South African people on the ground, in prospecting and in mining?
PETER LEON: Well, what it means Barry, is the courts really emphasis this duty of consultation with landowners and indeed, in this particular case, the community is absolutely paramount. The reason that the decision came out as it did is that neither Genorah nor the Department of Mineral Resources followed the consultation requirements of the Mineral and Petroleum Resources Development Act properly. As you may know, very often in practice, the consultation is done in a very cursory fashion. What the court really said is that the grant of a prospecting right creates serious inroads into the rights of owners of property, in other words, the surface rights owners and in this case, the community in question. In view of that the consultation process needed to be detailed and it needed to be comprehensive. Effectively the court was saying that if necessary the prospecting right applicant will need to pay compensation to the owner of the surface rights or the land owner or as in this case, the community. It's an important judgment.
BARRY SERGEANT: Absolutely, the facts of the case are very interesting. It was September 2006 when Genorah acquired the prospecting rights to five properties in the eastern limb of the bushveld, they're contiguous, more or less and the two properties in this case were Nooitverwacht and Eerstegeluk, which are very much contiguous. Now, the community, the Bengwenyama, have lived there for over 100 years. So, they are very much part of the land and according to the judgment, Genorah, all it did on the one property was arrive one day and tell the iNkosi that they were going to start prospecting there and they left and that was the extent of the consultation.
PETER LEON: Yes, well, in fact it also comes out of the judgment that the iNkosi complained and there was correspondence between him and Genorah, as I recall it, which was basically that correspondence appears to have been ignored, both by Genorah and by the department.
BARRY SERGEANT: And the other thing, which is apparent for the judgment, is that although the rights were granted in September 2006, the environmental paperwork was only filed at the end of the year. How could that be?
PETER LEON: Well, that's a very interesting point Barry because in fact the court, Froneman, Judge Froneman, on behalf of the Constitutional Court and it was unanimous judgment, actually made a very strong issue of that and said, well that's nonsense, exactly as you're saying. It's illogical, you can't have a situation where the right's granted and the environmental processing and the impact assessment only takes place after the event. That is a completely illogical step, the one needs to precede the other and you can't have it the other way around. So, that's obviously given some guidance, hopefully, to the Department of Mineral Resources and to prospecting right applicants in the future.
BARRY SERGEANT: I was in conversation yesterday with Ian Shapiro, who is a director at Eversheds, one of the lawyers who represented the Bengwenyama and he uses a phrase "material irregularities". Does one gain the impression that in this particular case the process was kind of roughshod and that there was something bigger at play or is that being a little bit too suspicious?
PETER LEON: I don't know but what the court has really emphasised here is the necessity for due process and that the letter as much as the spirit of the law needs to be observed. This is our highest court and the fact is that in future you won't be able to go through this cursory consultative process or lack of consultative process that took place, as in this case.
BARRY SERGEANT: Now, of course, the Department of Mineral Resources at this point in time is busy with a review, it's not quite clear if it's an audit but certainly a review of prospecting licences. The case that we're looking at here, Genorah, in your experience, would this be the norm? Hopefully not but is this the kind of norm or would it be an exception?
PETER LEON: That's difficult to say, Barry. My experience with some of these prospecting rights cases is that the consultative process is often very rudimentary; there is a very limited consultation with interested and affected parties. Sometimes it consists of the Department of Mineral Resources putting up a notice at the local Magistrate's Court and then expecting people to read it, which obviously they don't do. I've heard of a number of cases of farmers in the Eastern Free State, where prospecting rights have been granted to African Exploration, the state owned mining company, where the farmers in question weren't consulted at all. So that's typical of what's going on. It's a problem but that's the good thing about this judgment, this is the final word judicially and everybody who practices in the mining law space is going to have to apply the principles the Genorah judgment has set out very clearly.
BARRY SERGEANT: Yes, Peter, one of the astonishing facts of this case is that if you look at the two properties concerned here, where of course Genorah has now lost the prospecting rights, there's a third adjacent property, Hoepakrantz. The three properties that is Hoepakrantz, Nooitverwacht and Eerstegeluk according to Genorah, there's 45 million ounces of platinum group metals sitting on those three properties. That's an absolutely astonishing number of ounces of metal of this kind. Surely, anybody involved in this kind of area would be absolutely careful about complying with the legislation. How is it that somebody can just, as it were, ride roughshod? Is this something, which is characterising the prospecting sector? Or is it something, which is, let's hope in this case, specific?
PETER LEON: I think it is a problem. As I say, the Genorah case is not the only one I have heard of, there have certainly been others. I think basically because the Mineral and Petroleum Resources Development Act because the consultation requirements are not spelt out in detail, I think the reality is that applicants and the regulator, the Department of Mineral Resources haven't taken these requirements very seriously. As I said, they've just been followed in a very cursory fashion. I think that's the reality. Obviously going forward, that's not going to be the reality, people are going to have to take these obligations very, very seriously because the consequences can be absolutely calamitous, as has been the case here with the company in question.
BARRY SERGEANT: One of the suggestions coming from this case that is been mentioned is the possibility of having an independent audit of prospecting and mining rights licences. We've discussed this before; I think you mentioned Chile, what is the likelihood that South Africa might get the implementation of an independent audit on this particular area. If somebody had been through these two applications, they would have very quickly seen that something was awry and it could've saved this case going through numerous courts and costing millions in legal fees and time.
PETER LEON: Yes, well, as you know, the Department of Mineral Resources is doing an audit at the moment but it's an internal audit, it's not an external audit. I think your suggestion is a very good one because in fact, unless you have a proper objective audit, these sorts of problems are going to recur. I have to say as well and I think this comes out of the department's reaction to the judgment, which I think was quite a measured one, as you know, the government are looking at amending the mining code. From what I can see from the department's response, they're indicating that these consultative requirements need to be beefed up. They're going to have a much closer look at the obligation to consult traditional communities under Section 104 of the Act, which the Constitutional Court has emphasised as well.
BARRY SERGEANT: Right and Peter just to round up, a very broad question, we've had a calamitous year in a number of senses in mining in South Africa, starting off with the ICT case. Looking at South Africa right now from the foreign investors point of view, given the latest case, which is basically the Bengwenyama versus Genorah, what do you think foreign investors or what are you finding foreign investors are thinking about investing in South Africa in the mining sphere?
PETER LEON: Well, I think people are a bit confused and perplexed by what's going on. The more I travel, the more I realise that perhaps say this about the Genorah case, Barry, is that looking at it the other way around, it's also a good decision about the rule of law, best practice, good governance in the mining space. I think it does send a very clear message to the regulator and to mining companies, as to how they conduct themselves. So from that point of view, the fact that it's emphasising all these good, positive things, that does actually, in its own way, send a positive message.
BARRY SERGEANT: That there is legal relief available and that we do have courts and judicial offices of this kind of quality, yes. It's a very important case in that sense but just to go back to what we were discussing earlier, is there anyway to expedite these cases because it seems this dispute, essentially, goes back four years and not too much has been happening on the properties in terms of building a mine.
PETER LEON: Yes, sure, that is an issue and the problem is the legal system is slow. As you know, two courts earlier, both the Supreme Court of Appeal and the High Court threw out the case, it was rejected, the application, for different reasons and I think the Constitutional Court, for the right reason, has come up with the correct decision. It's obviously regrettable that it's taken more than four years to get there. Clearly if there were, as you're suggesting, some form of independent audit of what has actually gone on in the prospecting space that would clearly give the bestest, greatest certainty and would encourage investment
BARRY SERGEANT: Good. Peter Leon in Beijing, thank you very much.
