Picture: BLOOMBERG/NADINE HUTTON
Picture: BLOOMBERG/NADINE HUTTON

The Constitutional Court gave the department of mineral resources (DMR) a stinging rebuke for its flawed handling of a disputed right claimed by Aquila Steel, and ordered that the company be allowed to mine, in a judgment with broad consequences.

The court found on Friday in Aquila’s favour in a matter that pitted the Australian company against the department and the interests of the governments of SA, Zimbabwe and Zambia in a fight for a large, valuable manganese deposit in the Northern Cape that started more than a decade ago.

In a judgment heavy with criticism of the department’s handling of the dispute that has gone through the high court and Supreme Court of Appeal, justice Edwin Cameron ordered mining rights to be granted to Aquila, which spent R157m to find a resource of more than 140-million tons of manganese worth billions of rand.

Within that resource, Aquila had outlined a reserve of 20-million tons it wanted to mine, he said. “But it cannot. Not so long as it is stuck in the glue of departmental delinquency,” Cameron said. In a complex matter dating back to 2005, there has been a dispute over the ownership of prospecting rights between Aquila and
Pan African Mineral Development Company, a private company owned by the governments of Zambia, Zimbabwe and SA.

Pan African was set up in 2007 to take over and manage the mineral assets owned by ZiZa, a company owned by the three governments.

“The department not only botched, but egregiously botched, coincident prospecting and mining rights applications [made by] ZiZa and Aquila to its Northern Cape office between April 2005 and December 2011,” Cameron said.

“This led to overlapping and double grants in which this litigation has its genesis,” he said.

The department had erred in accepting ZiZa’s prospecting application made under a provision in the Mineral and Petroleum Resources Development Act (MPRDA). This allowed holders of old-order rights to convert those to new-order rights within a year from the promulgation of the act in 2004 which vested ownership of all minerals in the state.

“I concluded that ZiZa’s prospecting right was wrongly awarded because of its woefully deficient application,” Cameron said. He described ZiZa’s maps and prospecting plans as “shabby” and “amateurish”, with no proof that it had the money to conduct any such work.

The minister used the excuse that a prospecting right awarded to ZiZa meant Aquila could not be issued a mining right over the same property, but Cameron found the department had seriously erred in not rejecting the deeply flawed application from ZiZa.

“The legally null award of the prospecting right to ZiZa does not enjoy a zombie afterlife to thwart the legal conclusion that a mining right could validly be granted to Aquila,” Cameron said, ordering the mining right to be granted to Aquila.

In a separate judgment, judge J Theron agreed with the judgment made by Cameron, with seven other judges concurring, but disagreed about the granting of mining rights. Theron argued that it should be a ministerial function to decide the issuance of mining rights and associated requirements.

“It is noteworthy that the Constitutional Court awarded the … mining right to Aquila rather than remitting it to the minister, effectively substituting the court’s decision for his. This is an exceptional remedy in administrative law and an indication of how poorly the court considered the DMR’s conduct in the matter,” said Peter Leon from Herbert Smith Freehills.

The department said it “respects the judgment, and will study it to assess the impact thereof”.

While the judgment dealt with the immediate concerns of Aquila, it went deeper to rule on the way old-order mining rights should be processed by the department and the statutory duties of officials in the department in handling prospecting and mining right applications.

Turning to mining legislation and how old-order rights should be handled, Cameron said while the holders of those rights had a year of exclusivity up to end-April 2005 to apply for new-order rights, once that year was over others could then apply.

If the application made by the old-order right holder was defective in terms of the regulations and returned by the department, the next applicant in line moved to the front of the queue.

It meant old-order rights holders could not hold onto mineral rights indefinitely and sterilise mineral wealth for others and the country, Cameron said.

“The continued existence of the old-order right until grant or refusal of the new-order right does not exempt the old-order rights-holder from compliance with the requirements of the MPRDA. Nor does it permit the regional manager to accept applications that do not comply with the statute,” he said.

Correction: February 18 2019

In an earlier version of this story, we referred to the holders of the rights having a year of exclusivity up to end-April 2015, that should have been up to end-April 2005.

seccombea@businesslive.co.za