TerraLex Cross-Border Guide to Cross-Border Guide to Mining Rights

The mining industry in South Africa is regulated by the Mineral and Petroleum Resources Development Act, 2002 (MPRDA), the various regulations and practice directives and guidelines promulgated under the MPRDA, as well as the Mining Charter, 2018, as well as the Mine Health and Safety Act, 1996 and the National Environmental Management Act, 1998, National Environmental Waste Management Act (NEWMA), 2008, and their related subordinate legislation. These Acts and Regulations stipulate restrictions, requirements, and rules regarding the mining industry, the acquisition of mining rights and prospecting rights, and mining and prospecting operations in South Africa. The Department of Mineral Resources (now the Department of Mineral Resources and Energy) oversees the industry in accordance with the relevant legislation, but other government departments are also involved in its regulation, including the Department of Water and Sanitation and the Department of Environmental Affairs.

The Department of Mineral Resources (DMR) regulates the mining industry in South Africa, as well as the Department of Water and Sanitation (in respect of water use requirements), and the Department of Environmental Affairs.

Mining and prospecting rights in South Africa are not awarded by means of concession but are awarded under South African administrative law in terms of various provisions of the MPRDA following an application procedure administered by the DMR. Three main types of rights can be applied for. Prospecting rights permit their holder to prospect for minerals over a specified area of land. They endure for a maximum period of five years and are renewable twice. Mining rights permit their holder to mine for the relevant mineral in respect of a particular area of land and endure for a maximum period of 30 years but are renewable for further periods thereafter. A Mining Permit is effectively a “lite” mining right and relates to a much smaller area of land and endures for a limited period and is usually applied for by small and junior mining companies.

Application needs to be made for any of these rights (mining right or prospecting right or mining permit) to the DMR. The application can be submitted online via the online ‘SAMRAD System” or manually at the nearest Regional Office of the DMR in which the relevant land applied for is situated. Thereafter, the prescribed fee must be paid (which is nominal and varies according to the type of right applied for). Various specified documents and information are required to be included in any application.

If all the formal lodgment requirements are met, the DMR, through the Regional Manager of the area in respect of which the right is applied for, will accept the application. Acceptance is distinguished from granting and a formal evaluation process is undertaken after acceptance of an application to determine whether to grant a right. Once the application has been accepted, the regional manager will require, inter alia, that an environmental authorization is applied for (in terms of the relevant provisions of the National Environmental Management Act, administered) and that the applicant consults with the landowner and legal occupier of the land as well as any other interested or affected party.

A written outcome of the consultations (which form part of the environmental authorization process) must be submitted to the regional manager. The Minister of Mineral Resources and Energy will issue a mining right or prospecting right if satisfied that all of the MPRDA requirements have been met.

The following details and documents are required for an application for a mining right (different requirements apply for prospecting rights): 1. A detailed plan is required in terms of Regulation 2(2) and 2(3) of the Mineral and Petroleum Resources Development Act, 28 of 2002.

2. Detailed documents proving that the applicant has the technical ability and financial resources to undertake the proposed mining operation that are readily available and how they will be provided for. CVs of mining engineers and other professionals to be involved in the operations, consultants are generally provided to demonstrate technical ability, and a balance sheet or annual financial statements of the applicant or its parent company are usually submitted to prove access to financial resources.

3. Details of any mineral or minerals and the quantity thereof, which the applicant intends to remove and dispose of during mining operations.

4. A detailed mining work programme, the contents of which is prescribed, setting out the mining operations to be undertaken

5. A social and labour plan, detailing the applicant’s commitment to the upliftment of surrounding communities and the labour force

6. An individual applicant must attach a certified copy of his or her identity document.

7. A certified copy of the certificate of registration issued by the Companies and Intellectual Property Commission (CIPC) as well as other corporate documentation is required in respect of incorporated entities

8. A copy of resolutions authorizing individuals to apply on behalf of a company are required.

9. An approved and valid environmental authorization must be in place before the right is granted. Environmental consultants are generally appointed to undertake the environmental authorization application process. All applicants are required to apply for the necessary environmental authorisation in terms of the National Environmental Management Act (NEMA), 2008 and the National Environmental Waste Management Act (NEWMA), 2008 in respect of listed activities that have been triggered by applications in terms of the MPRDA.

10. Proof of compliance with the Mining Charter, 2018 in respect of Black Economic Empowerment is required. This includes a beneficial ownership by “previously disadvantaged South Africans (i.e. black people) in the mining operations. The current requirement for new applications is a 30% beneficial economic interest. It was previously 26%. In addition, various requirements in respect of local procurement, human resources development, and various other factors must be complied with.

The process followed is set out in 5 above. Generally, a mining right application takes between six and 24 months to process from lodgment.

The Minister of the DMR has delegated the power to grant mining rights to the Director General of the DMR and it is the DG’s office which processes the application in conjunction with the relevant regional office.

​The process to obtain a right to conduct prospecting for minerals (other than petroleum, which is governed separately under the MPRDA), is as follows. An applicant is required to make an application to the Department of Mineral Resources for a prospecting right in the prescribed manner together with various prescribed information and documentation. The applicant, if its application is accepted (as opposed to being granted), must then apply for an environmental authorization for prospecting activities to be undertaken and, in the course of doing so, must consult with interested and affected parties such as the landowner, lawful occupiers, neighbours, and competing companies with rights in the vicinity.

The Minister (who has delegated the power to grant prospecting rights to the Deputy Director General of the DMR) is enjoined to grant the prospecting right if he is satisfied that the applicant has the required financial resources and technical ability to conduct the prospecting activities (and documentary proof of this forms part of the application for a prospecting right), is able to conduct the prospecting in accordance with the prospecting work programme submitted with the application, and provided that the prospecting will not result in unacceptable pollution, degradation, or damage to the environment. The latter requirement is met if an environmental authorization is issued. The environmental authorization process is conducted under the National Environmental Management Act but administered by DMR officials.

Prospecting rights are granted for up to five years and can be renewed once for up to three years. The holder of a prospecting right has the exclusive right to apply for a mining right over the relevant area for the relevant mineral while the holder’s prospecting right is in force.

The Black Economic Empowerment and local procurement requirements for prospecting rights are similar for mining rights but somewhat less onerous.

A mining right from The Department of Mineral Resources set out above is required. Holders of mining rights are subject to numerous reporting obligations and compliance obligations, failing which the MPRDA provides for cancellation or suspension of mining rights after a prescribed process is followed pursuant to any non-compliance.

The Mineral and Petroleum Resources Development Act, 28 of 2002 does not expressly provide for compensation to be paid to landowners for exploitation/production pf mineral resources exploited on the landowners property, although in most cases, an arrangement with the landowner is reached during the consultation process and a lease agreement is often concluded.

The Mineral and Petroleum Resources Royalty Act prescribes a royalty to be paid to the State in respect of the transfer of all minerals within South Africa. The royalty amount depends on the type of mineral concerned and is usually payable by the extractor (i.e. the mining right holder) on first disposal of minerals mined.

The transfer of mining rights requires the prior written consent of the Minister of Mineral Resources under Section 11(1) of the MPRDA. This applies to whole rights, interests in rights, and controlling interests in private companies which hold MPRDA rights. The Minister will grant such consent if the transferee satisfies the criteria for the grant of a right. The Minister has delegated his power to grant applications for transfers to the Director General of the DMR (in the case of mining rights) and the Deputy Director General (in the case of prospecting rights).

The National Environmental Management Protected Areas Act (No. 57 of 2003) prohibits mining and prospecting in protected areas. In addition, the MPRDA also prohibits the grant of MPRDA rights over various areas such as cemeteries and residential areas.

South Africa has an advanced system of environmental management and environmental damage is strictly regulated and policed. Effectively, the holder of a mining right will remain liable for all rehabilitation required as a result of operations and will incur penalties if this requirement or the terms of the Environmental Authorisation are breached. General considerations regarding mining and environmental matters are pollution, health, and safety of both the general public and mine workers on duty.

​All applicants of mining rights are required to apply for the necessary environmental authorisation in terms of the National Environmental Management Act (NEMA), 2008 and the National Environmental Waste Management Act (NEWMA), 2008. These authorisations are regulated by Environmental legislation but administered in the case of prospecting and mining by the DMR.

The regulations regarding the safety of dams published in terms of Section 123 (1) of the National Water Act 36 of 1998 regulates the safety of dams in South Africa. These regulations include rules on who may fix or construct a dam, and classifications of safety risks. In addition to these regulations, chapter 6 of the National Water Act 36 of 1998 deals with control measures for dams which are safety risks and responsibilities of professional persons and owners. Generally, a water use license for mining use of water will be required.

There have been several developments in the common law recently. A settlement agreement was made in an Order of Court in the Johannesburg Division of the High Court of South Africa in 2018 between various mining companies and claimants who suffered from silicosis and tuberculosis in the past, resulting in the establishment of a Trust which pays out compensation to these claimants.

The Constitutional Court has also recently held that traditional communities who occupy land owned by the State and administered by the Department of Rural Development and Land Reform in certain circumstances have a right to their consent being obtained before a mining right is granted. This is distinguishable from other landowners with whom thorough consultation is required, but not their consent.

The South African Executive has indicated a desire to make South Africa more attractive for foreign investment. Critics of the current regulatory regime have steadfastly maintained that the current process is hamstrung to a degree by onerous regulatory requirements and non-adherence to prescribed time limits in the MPRDA by the DMR. The executive’s recent statements make one hopeful that the mining sector’s regulatory regime will be given the attention it deserves, and a more investor friendly approach will be taken.

There have been positive developments lately in a longstanding dispute between the major mining companies’ representative organization (The Minerals Council of South Africa (formerly the Chamber of Mines)) and the DMR in relation to Black Economic Empowerment requirements, and the Minerals Council succeeded in having a previously proposed new version of the Mining Charter set aside in Court. The Mining Charter has recently been replaced by a new Charter which, while still onerous, is significantly less onerous that than the one previously proposed.

As things stand, many mining companies have embarked on a process of retrenchment, largely because of the current economic climate and commodities prices in some instances. This process is itself strictly regulated in the MPRDA and under South Africa’s labour legislation, and mining companies seeking to downsize are well advised to seek proper legal counsel when undertaking retrenchments.