By Duncan Wild on 12 December 2013

Prior the coming into effect of the Mineral and Petroleum Resources Development Act 28 of 2002 (“the MPRDA“), the Sishen Iron Ore Company (Pty) Ltd (“SIOC“) and ArcelorMittal South Africa Limited (“ArcelorMittal“) were co-holders of a mining right in respect of iron and quartzite on eight properties of twenty-one properties making up the Sishen mine.  SIOC held 78.6% and ArcelorMittal 21.4% of the right.  This right is referred to an an “old order” mining right, as it was granted under the pre-MPRDA regime. When the MPRDA came into force, ArcelorMittal and SIOC were entitled to convert their old order rights into new order mining rights under the MPRDA, as provided for in the MPRDA’s Transitional Arrangements. There was a five year period in which application needed to be made for the conversion, SIOC converted its right prior to the expiration of this period, but ArcelorMittal did not. After the expiration of the five year period, the Deputy-Director General: Mineral Regulation: Department of Mineral Resources (“Deputy D-G“) purported to grant a prospecting right in respect of iron ore in respect of seven of the eight Sishen properties to Imperial Crown Trading 289 (Pty) Ltd (“ICT“).  The basis this prospecting right was granted was the assumption by the Deputy D-G that as ArcelorMittal had not converted its portion of the mining right. The grant of this right to ICT is the subject of this case. The Constitutional Court found that SIOC could only apply for and be granted the share of the right it had previously held (78.6%), but that only SIOC could apply for the remaining shares, and therefore it was not open to the D-G to any other party. The North Gauteng High Court (“NGHC“)(in a judgment written by now Constitutional Court judge, Justice Zondo) found that SIOC had become the sole holder the of the new MPRDA mining right on the conversion of its old order right, and therefore no prospecting right could be validly granted for the same mineral on the same land. The NGHC therefore declared SIOC the sole holder of a mining right over the relevant properties, and that it was impermissible for a prospecting right to be granted in respect of the 21.4% portion of the old order right. In addition the grant to ICT was set aside. The SCA sought to answer three questions: first, what was the effect of the conversion of SIOC’s mining right; second, what was the status of this conversion; and thirdly, what happened to SIOC’s mining right when ArcelorMittal failed to apply for the conversion of its right before the deadline for conversion. The SCA examined the legislative history and intent of the MPRDA, finding that it had substantially changed the regime applicable to mining rights, stating:

With effect from 1 May 2004, when the Act commenced, all mineral and petroleum resources vested in the State, as the custodian thereof12 and (subject to the Transitional Arrangements) all mineral rights as they were known prior to that date ceased to exist. Henceforth, the Minister would grant any right necessary for the purpose of searching or prospecting for or mining any mineral. 

Importantly the MPRDA and its Transitional Arrangements did not provide for the conversion of undivided shares in a mining right held by two or more persons, but the SCA found that there was nothing to prevent this type of arrangement in the new MPRDA, and it could not have been the intent of the legislature to prevent the conversion of these types of rights without any explicit provision to this effect. In any event, in 2005 SIOC applied for a new order mining right under the MPRDA in respect of the Sishen properties. It asked for the conversion of it’s old order right, and did not qualify the application i.e. did not apply for a conversion of only it’s 78.6% share. The fact the right was qualified was, however, disclosed in the application. In the beginning of 2008, the Department of Mineral Resources informed SIOC that its application was successful and an unqualified mining right was granted. By 29 April 2009, the deadline for conversion applications, ArcelorMittal had not applied for the conversion of its portion. Between 30 April 2009 and 4 May 2009 (the exact time is disputed and was not decided by the SCA), SIOC applied for a conversion of 21.4% share on the Sishen property that had been subject to the shared right, and ICT applied for a new order prospecting right in respect of iron ore and manganese in respect of the same property. ICT’s application was granted by the Department in late 2009. Bearing the above facts in mind, the SCA therefore found that the effect of the grant of SIOC’s application for conversion was that SIOC was the sole holder a new order mining right over the relevant properties. It is a principle of administrative law that a decision is considered valid until it is set aside. Here, if ArcelorMittal and applied for conversion of its portion before 29 April 2009, it would have been open for the Minister of Mineral Resources to withdraw or amend the SIOC right to accomodate ArcelorMittal’s application. As no such application was made, this was considered no longer relevant. Further, the effect of a failure to apply to convert old order rights by the deadline was that those rights ceased to exist. After the passing of the deadline then, SIOC held was the sole holder of a mining right for the relevant area, and there was no portion left for the State to allocate to any other party.  The SCA therefore went on to hold that:

Accordingly, whether or not SIOC’s old order mining right was correctly converted on 5 May 2008, SIOC, as a matter of law, became the sole holder of the mining right in terms of the MPRDA in respect of iron ore on the Table I and Table II properties when AMSA failed to convert its undivided share in the old order mining right in respect of the Table I properties before the five year period expired on 30 April 2009.

The SCA therefore answered its three questions as follows: on the grant of its application for conversion, SIOC became the sole holder of a right respect of the relevant property; secondly, even if the grant to SIOC was incorrect, it is considered valid until challenged, but given the finding on the third question, it is not necessary to consider this point; and thirdly, when ArcelorMittal failed to apply to convert its portion of the right by the deadline, such right as it had ceased to exist, and SIOC became to sole holder of a mining right over the relevant properties. The Constitutional Court agreed with the orders of the SCA and NGHC in part and disagreed in part.  The Court disagreed that SIOC became the holder of the entire right in respect of the relevant property, but found that the only right it could not apply for or have converted more than its own old order right.  Therefore the right that was converted did not consist of the share previously held by AMSA.  This portion of the decision is written by Justice Jafta (Mogoeng CJ, Moseneke DCJ, Madlanga J, Mhlantla AJ, Nkabinde J, Skweyiya J and Van der Westhuizen J, that is all the sitting judges except Cameron J and Froneman J). The Court went on to find though, that no party, other than SIOC was entitled to apply for the remaining share of the right, and it was not permissible for the Department of Mineral Resources to award that share to any other party. This portion of the decision was written by Moseneke DCJ and concurred in by Mogoeng CJ, Cameron J, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Skweyiya J and Van der Westhuizen J i.e. all the sitting judges. It is worth noting that the form of the judgment is unusual in that two different judges effectively addressed separate parts of the decision, but all the judges agreed in the order of the Court. In addition, Moseneke DCJ states in his judgment (in which all the judges of the Court concurred) that he agrees with Jafta J’s interpretation of the MPRDA, in particular the transitional provision of that Act, as well as his conclusion that only the portion of the right held by SIOC could be converted i.e. the 78.6% share). In addition, Jafta J states in his judgment that once the question of what has been converted has been decided the question is whether SIOC’s review challenge should have succeeded, and he states “In this regard I agree with the Deputy Chief Justice that the refusal by the Director-General must be set aside and I concur in the order made by him”. The order is therefore unamiously agreed by all the judges. As Justices Cameron and Froneman did not write to explain why they agree with Moseneke DCJ’s judgment (which  agrees with Jafta J’s conclusions) it is not clear what aspects of Jafta J’s judgment they disagree with). The order states that the NGHC and SCA orders are set aside and replaced with an order that states:

1. SIOC’s old order right did not include AMSA’s rights;
2. that the old order right reverted to the State under the MPRDA in its capacity as custodian of the right;
3. the refusal of the D-G to grant SIOC a mining right in respect of minerals that were the subject of AMSA’s old order right is set aside;
4. SIOC is the only party competent to apply for and be granted the mining right in question; and
5. the D-G is ordered to allow SIOC to apply for the remaining portion of the right within three months of the order.

Download the judgment here.