PAYING THE PIPER (IN ABSENTIA) SFF Association v Xstrata 2011 JDR 0407 (GSJ)

Abstract

This decision focused on the impact of the Mineral and Petroleum Resources Development Act (28 of 2002, hereinafter “MPRDA”) on an old-order mining right (based upon a mineral lease) which had been converted into a mining right in terms of the transitional arrangements of Schedule II of the MPRDA. In particular, the court held that consideration in the form of a (contractual) royalty, as provided for in the mineral lease, remains payable upon conversion of an old-order mining right by its former holder (miner) to the grantor of the common-law mining right. The outcome of the decision, namely, continued liability for contractual royalties, has far-reaching consequences for such former holders of old-order mining rights. Continued liability would result in double payment of royalties by miners. This is because under the new dispensation, statutory royalties can be imposed by the state (s 3(1)(b) of the MPRDA) and were imposed and became payable upon commencement of the Mineral and Petroleum Resources Royalty Act (28 of 2008) on 1 March 2010. From the said date, in terms of this decision, double royalties would be payable by miners. If correct, it can be taken one step further. Owing to continued receipt of contractual royalties, former holders of common-law mineral rights would not have suffered an expropriation of property by virtue of the provisions of the MPRDA for purposes of item 12(1) of Schedule II of the
MPRDA. Such expropriation would have taken place if the contractual duties to pay royalties had indeed been terminated upon cessation of old-order mining rights (as to such a possible claim, see further, Badenhorst and Mostert Mineral and Petroleum Law of South Africa 2004 (Revision service 7) 25–53). These consequences will be explained in more detail in this discussion as well as the correctness or not of the decision. I have written about the acquisition, nature, content, transfer and loss of old order rights before (see Badenhorst “The Make-up of Transitional Rights to Minerals: Something Old, Something New, Something Borrowed, Something
Blue …? 2011 4 SALJ 763–784) to which the reader is referred. This decision sheds new light on this topic.