Insights

20/02/14

WA Resources Update – February 2014

Welcome to the latest edition of WA Resources Update, your regular newsletter about key developments for the Western Australian mining sector. 


MRF update

By Emma McLeod and Hayley McNamara

The holiday season provided a great opportunity for things like the Mining Rehabilitation Fund (MRF) to slip from our minds. But now that the New Year is here, we thought it best to provide our readers with an update on what has been happening in the MRF space since we last wrote to you all.

New Guideline on the Administration of Mining Securities

In January 2014, the Western Australian Department of Mines and Petroleum (DMP) issued a draft guideline titled ‘Administration of mining securities’ (Guideline) for public comment. This Guideline describes the 3 main forms of mining security administered by the DMP – personal sureties, unconditional performance bonds and the mining rehabilitation levy, and their application.  

MRF

As you will be aware, the Mining Rehabilitation Fund Act 2012 (WA) (MRF Act), which requires certain tenement holders to contribute annually anon-refundable levy to the State proportionate to their outstanding rehabilitation, becomes compulsory as of 1 July 2014. For more information on the MRF and levy, please refer to our previous articles on this topic: Industry to fund rehabilitation on abandoned mine sites, Mining Rehabilitation Levy, Update on the Mining Rehabilitation Levy – Release of bonds, Mining Rehabilitation Fund Levy Update, and Proposed amendments to Western Australian mining legislation released for consultation. 

However, while relevant tenement holders will be required to contribute to the Mining Rehabilitation Fund, in certain circumstances, the Minister for Mines (Minister) still retains the discretion to impose an unconditional performance bond (UPB) under the Mining Act 1978 (WA) (Mining Act). This may mean that certain tenement holders will be contributing to the Mining Rehabilitation Fund and also be required to lodge a UPB.

Unconditional performance bonds

Prior to the commencement of the MRF Act, UPBs were the main form of security applied by the DMP under the Mining Act. As the implementation of the MRF Act did not result in any amendments to the Minister’s ability to impose UPBs under the Mining Act, many tenement holders have been concerned that they may be required to pay the mining rehabilitation levy and to provide a UPB.

As UPBs are imposed at the discretion of the Minister, the DMP issued a policy guideline to provide more certainty to tenement holders as to when UPBs would be imposed, but this policy has not been updated since and does not take into account the MRF or levy. Accordingly, the Guideline was released to provide guidance on how the DMP intends to impose UPBs once the MRF Act becomes compulsory on 1 July 2014.  

By way of summary, the Guideline provides that a UPB will be imposed in the following circumstances:

1. UPBs will be imposed on tenements where the DMP considers there is a high risk of rehabilitation liability reverting to the State, including where:

(a) the tenement holder has failed to lodge production reports, royalty returns, and pay in full, royalties as calculated and owing to the DMP within the prescribed time and manner;

(b) the tenement holder has been subject to an enforcement action under the Mining Act for failure to comply with environmental obligations (e.g. Direction to Modify, Stop Work Order, fine in lieu of forfeiture or forfeiture action); or

(c) the tenement holder has breached reporting or payment obligations of the MRF Act.

2. Where there are multiple risk factors or occurrences, the DMP may require UPBs for all tenements related to a specific tenement holder.

3. The type of commodity or activity will not be considered when determining whether to impose a UPB.

4. Where UPBs are imposed, the DMP will undertake a review of the bond values each year and may require a new bond(s) to be issued.

5. A tenement holder who is required to maintain a UPB may request that the obligation is removed by providing detail of the how the risk factors that led to the imposition have been mitigated.

6. The recommendation to impose UPBs will be made by the Executive Director Environment of the DMP. A tenement holder affected can seek a review by making a written submission to the Director General of the DMP.

7. From 1 July 2014, where the DMP has determined to require UPBs, the value will be determined by the use of standard area-based rates to be set out in the Mining Rehabilitation Fund Regulations 2013 (WA). These rates may be varied in particular circumstances. Any proposal to vary these rates will be approved by the Executive Director Environment. Such rates are proposed to be:

(a) $50,000 per hectare (minimum) for tailings or residue storage facility (class 1), waste dump or overburden stockpile (class 1), heap or vat leach facility, evaporation pond, dam – saline water or process liquor;

(b) $30,000 per hectare (minimum) for tailings or residue storage facility (class 2), waste dump or overburden (class 2), low grade ore stockpile (class 1), plant site, fuel storage facility, workshop, mining void (with a depth of at least 5 metres) – below ground water level, landfill site, diversion channel or drain, dam – fresh water;

(c) $18,000 per hectare (minimum) for low grade ore stockpile (class 2), sewage pond, run of mine pad, building (other than workshop) or camp site, transport or service infrastructure corridor, airstrip, mining void (with a depth of at least 5 metres) – above ground water level, laydown or hardstand area, core yard, borrow pit or shallow surface excavation (with a depth of less than 5 metres), borefield, processing equipment or stockpile associated with basic raw material extraction, land (other than land under rehabilitation or rehabilitated land) that is cleared of vegetation and is not otherwise described in the table set out in the Guideline;

(d) $2,000 per hectare (minimum) for land (other than land under rehabilitation or rehabilitated land) that has been disturbed by exploration operations; and

(e) $2,000 per hectare (minimum) for land under rehabilitation (other than land that has been disturbed by exploration operations), topsoil stockpile.

8. From 1 July 2014 when compliance with the MRF Act becomes compulsory, all tenement holders other than the exceptions listed below will have their bonds retired. Obligations for UPBs will not be removed if, at the time of the levy assessment, any of the following criteria apply:

(a) the tenement holder or controlling business entity is currently under administration, listed in liquidation, has a notice of winding up application or order, is under deed of company arrangement, scheme of arrangement under administration or deregistration; or

(b) the tenement holder has failed to lodge production reports, royalty returns, and pay in full, royalties as calculated by and owing to the DMP within the prescribed time and manner. 

Personal sureties

The Guideline also states that the DMP no longer requests the lodgement of personal sureties for newly granted tenements and that the Minister has discretion to make decisions in relation to personal sureties.

Personal sureties are, however, still required to be provided under the terms of the Mining Act and Mining Regulations 1981 (WA) for applications for and transfers of all mining tenements. Accordingly, despite the statement in the Guideline, personal sureties must be provided to the DMP in the form of Form 32 Securities in the amount of $5,000 to ensure the grant of, and to ensure the registration of any transfer of, every tenement.

Appointment of MRF panel

On 16 January 2014, the DMP published the names of the 5 experts appointed as members of the MRF panel. These members are:

1. Michael Slight, a mine engineer with experience in mine closure planning during his 36-year career;

2. Julie Hill, a chartered accountant with experience in financial management of exploration companies;

3. Charmian Barton, a lawyer advising in environmental law, planning, heritage and indigenous cultural law; 

4. John Gardner, who provided expertise for the Planning for Sustainable Mine Closure Toolkit and participated in the International Council on Mining and Metals’ restoration of legacy sites round table; and 

5. Phil Scott, who has experience in project planning and implementation, rehabilitation and mine closure costing and strategies. 

Each member has been appointed for 2 years and will provide advice to the State about the use of the MRF funds.

DMP’s MRF Guidance

The DMP has released a document titled ‘Mining Rehabilitation Fund - Guidance’ to assist those affected by the MRF.  


DMP environmental reforms

By Fionn Bowd and Stephanie Patterson

A discussion paper containing the latest suite of environmental reforms proposed by the Department of Mines and Petroleum of Western Australia (DMP) was released for public comment on 7 February 2014 with submissions due on 2 April 2014. The reforms proposed by the DMP involve further amendments to the Mining Act 1978 (WA) (Act) and are the last amendments required to implement DMP’s Reforming Environmental Regulation Program. The DMP hopes to remove duplication in the current approvals processes with these reforms.

One of the DMP’s regulatory functions is to ensure that environmental impacts associated with resource projects are minimised and that the activities of the resources industry are consistent with the principles of ecologically sustainable development. ‘Environmentally significant’ proposals are referred by the DMP to the Environmental Protection Authority (EPA). The EPA is also able to call in for assessment any proposal it believes is likely to have a significant impact on the environment.  

The reforms seem positive as they attempt to streamline the various environmental approval requirements currently imposed on mining tenement holders, however the exact nature and extent of the amendments will remain to be seen. The second phase ofconsultation will occur in mid-2014, and an exposure draft of the legislation will be released at that time.

The first stage of amendments to the Act to implement the Reforming Environmental Regulation Program was introduced into Parliament on 30 October 2013 and is currently being considered by the Upper House. 

The latest proposal builds on the October 2013 amendments and the DMP states it intends to further streamline approvals processes, reduce any remaining duplication and implement a risk-based framework for environmental regulation. 

Several of the key reforms proposed by the discussion paper include:

(a) replacing approval requirements with a notification system for “low-risk” activities;

(b) removing duplication in approvals processes between agencies and removing the need to obtain a separate native vegetation clearing permit;

(c) inserting a requirement that tenement holders maintain an environmental management system including risk identification;

(d) consolidating and extending the existing environmental obligations in the Act to include provisions to implement a risk and outcomes based approach to assessments;

(e) amending the monitoring and audit powers in the Act to ensure they are contemporary and sufficiently reflect the risk-based system being implemented; and

(f) moving standard tenement conditions into the Act and Mining Regulations 1981 (WA) and removing redundant conditions.

If you would like further information or assistance in preparing a submission, please contact us.

Submissions are due to DMP by 5pm (WST) on 2 April 2014.


DMP’s statutory penalty review

By Emma McLeod and Hayley McNamara

In October 2013, the Western Australian Department of Mines and Petroleum (DMP) engaged Marsden Jacob Associates (financial and economic consultants) to prepare a resource paper to assist in the development of a penalties policy in respect of the legislation the DMP administers. Marsden Jacob Associates’ paper titled ‘Statutory Penalties Review: Resource paper prepared for the Department of Mines and Petroleum’ is now published on the DMP’s website (Paper). The DMP has subsequently prepared a table of options for penalty changes (Options Table) and has sought public consultation on this table. 
Background

In 2010 DMP published its Enforcement and Prosecution Policy, which sets out the basis on which DMP makes enforcement decisions in respect of the various legislation that DMP manages.

Shortly after the release of the Enforcement and Prosecution Paper, in 2011, Western Australia’s Auditor General released a report titled ‘Ensuring Compliance with Conditions on Mining’ (Report). This Report concluded that:

  • the monitoring and reporting of compliance with environmental offsets was inadequate;
  • the State had only limited financial security against the risk of operators not adequately rehabilitating mines;
  • the monitoring and enforcement of environmental conditions needed significant improvement; and
  • DMP’s approach to enforcing environmental conditions was to take minimum action.

Since the Report, DMP has sought to address the concerns raised in the Report. The introduction of theMining Rehabilitation Fund Act 2012 (WA) resolved some of the issues highlighted in the Report.

DMP is now in the process of developing an enforcement unit and reviewing licensing. The next key step is the review of the nature and structure of penalties for non-compliance with requirements in the key Acts DMP administers to address some of the other inadequacies highlighted in the Report. In conducting this review, DMP is seeking to:

  • develop an understanding of penalties in the current legislation and the extent to which they impede or support the implementation of a good and consistent regulatory environment;
  • prepare a DMP penalties policy that can be used to assess the appropriate structure and level of penalties in the future and to form a basis for future regulatory reform projects; and
  • prepare a set of recommendations to inform government of the best options for establishing an appropriate structure for penalties for future regulatory reform projects.

DMP engaged Marsden Jacob Associates to prepare the Paper to assist in this review.

Key legislation

The Paper and the Options Table focus on the following key Acts administered by the DMP:
 

  1. Mining Act 1978 (WA);
  2. Dangerous Goods Safety Act 2004 (WA);
  3. Offshore Minerals Act 2003 (WA);
  4. Petroleum Pipeline Act 1969 (WA);
  5. Petroleum and Geothermal Energy Resources Act 1967 (WA); and
  6. Petroleum (Submerged Lands) Act 1982 (WA).

Key findings

The Paper considers and discusses generally the types of penalty regimes that could be adopted by DMP, sets out the initial findings and advice on the key legislation and identifies the issues on which DMP may wish to seek input from stakeholders.  

The Paper notes that the range and design of available penalties under the various Acts must be effective in curtailing behaviour that actively interferes with the objectives of the various Acts.  

The Paper further notes that, when the State’s abundant natural resources are taken into account, and the fact that much of those resources are made available to global and multinational organisations, it seems reasonable to expect that the industry contributes to the costs of mitigating the risks of their activities.  

However, from an industry perspective, the key for DMP will be to ensure that, in making any changes to the existing penalty regimes, community expectations are adequately balanced with the need to provide certainty and security to exploration and mining companies operating in Western Australia, particularly in the difficult financial climate.

The key findings set out from Marsden Jacob Associates’ review of the current penalties regime are:

  • the Acts set out above (with one exception) do not provide DMP with a full set of potential actions;
  • some options for action are missing in a majority of the Acts; and
  • penalty treatments that could substantively assist DMP in meeting its obligations are available in some of the Acts and not others.

Accordingly, Marsden Jacob Associates’ key recommendations were:

  • risk-based approaches to penalties, which strengthen incentives for compliance with legislative objectives, are the dominant approach in managing the risk of high-consequence safety and environmental incidents;
  • corporate penalties should be high where the offences/incidents result from the corporation as a whole having an inappropriate culture towards safety and the environment; 
  • the relationship between the size of maximum fines and whether they apply to corporations should be consistent, with a proposal that existing fines for individuals be increased five-fold for employers or the holders of licenses that are not corporations, and ten-fold for corporations; 
  • consistent penalty structures across Acts will promote ease of understanding and be more efficient for both industry participants and regulators; 
  • demerit point systems should be available with provisions for elimination, rather than just time based expiry, to encourage improvement; and
  • the penalty structure should reinforce the "use it or lose it" principle that underlines granted titles for resources under the Mining Act 1978 (WA) (Mining Act). 

Proposed options

Marsden Jacob Associates recommended various options for penalties which could be included in the various Acts to resolve some of the current shortcomings. DMP has replicated these proposed options in their Options Table.

Unfortunately the Options Table does not contain much detail as to how the proposed amendments to the penalty regimes would be adopted.  Accordingly, it is difficult to address the proposal in any real detail.

However, in respect of the proposed changes to the penalty regimes under the Mining Act, there are certain proposals that are undoubtedly going to cause some concern for exploration and mining companies operating in Western Australia.

Increase in fines

One of the key recommendations proposed by DMP is a substantial increase in the fines that may be imposed by DMP across all of the Acts.

In particular, the Options Table recommends that fines for failure to meet tenement conditions under the Mining Act (including for failure to meet expenditure conditions relating to a mining tenement) be increased tenfold for corporations. In respect of a failure to meet expenditure conditions that proposal would see a potential fine of up to $100,000 for a corporation.

Third party forfeiture applications

Under the current provisions of the Mining Act, if a third party commences a forfeiture application against a corporation alleging failure to comply with the minimum expenditure requirements, any fine (of up to a maximum of $10,000) that may be imposed may be directed to be paid to the third party.  Industry will undoubtedly be concerned that raising the maximum fine may encourage “professional plainters”, being parties initiating forfeiture applications with a view to either reaching a cash settlement with the tenement holder or receiving the payment of a now substantial fine.

In the current economic climate where cash strapped exploration and mining companies may be struggling to meet expenditure requirements across a portfolio of tenements, a dramatic increase in fines would cause significant concern.

While industry has historically accepted the “use it or lose it” tenet of the Mining Act, which is largely self-regulated, the potential creation of a professional plainting industry will cause significant concern.

If DMP is to proceed with the proposal, it would be beneficial for DMP and the policy makers to consider other amendments to the third party forfeiture provisions such as significantly increasing the fee to lodge a third party forfeiture application in order to discourage applications being made without proper basis.  However, any such increase may also act as a deterrent for the industry’s ‘self-regulation’ and would therefore need to be carefully considered.  

Introduction of demerit point system

Also referred to in the Options Table is DMP’s proposal that a “demerit point” system be introduced (particularly in respect of the general offences under the Mining Act).  While the Paper discusses demerit point systems in general, the Options Table does not give any indication as to how such a system would work (including as to how the expungement provisions would work) in this context. 

Directors’ liability

The Paper considers in detail the different approaches that may be adopted in relation to corporations to ensure accountability of directors.  In particular, noting that the attention of directors and leaders of corporations should be targeted for penalty provisions under legislation by imposing imprisonment, higher fines and tougher civil penalties upon directors.  

However, in respect of the Mining Act, the Options Table does not note any significant changes to the Mining Act in respect of directors’ liability.  It is not clear whether this is because DMP is already in the process of amending the Mining Act to align it with the COAG principles for directors’ liability, or whether DMP does not propose any significant changes.  

We do note, however that in the paper titled “Western Australia’s Option Paper” (Securities Options Paper) previously issued in March 2011, one of the proposed legislative amendments was to make a number of amendments to various provisions of the Mining Act – particularly in respect of the imposition of penalties. For example, the Securities Option Paper proposed amendment of the forfeiture provisions of the Mining Act to provide a power to the Minister to prevent a director of a company from holding any tenements once a mining tenement has been forfeited.  That proposed amendment has not been reflected in the Options Table.  However, directors and officers of exploration and mining companies will need to be cognisant of any changes to the penalty regimes which may increase their personal exposure as a result of the conduct of their company.  

What next?

DMP sought public comment on the Options Table prior to close of business 14 February. A final report is expected to be published setting out the options DMP will be adopting by the end of March 2014.

We will keep you updated on the status of the review in due course. 


Case notes

Defective mining lease application not fatal

By Mark Gerus and Guy Greer

Summary

The Perth Mining Warden in the recent decision Yarri & Ors v Forrest & Forrest Pty Ltd [2014] WAMW 6 found that a mining lease applicant’s failure to comply with the formal requirements of the Mining Act at the time of lodgement will not necessarily be fatal to the application. The Warden’s decision is in contrast to an earlier decision of another Mining Warden that non-compliance at the time of lodgement of a mining lease application would result in a recommendation of the refusal of that application.

Yarri Mining Pty Ltd, Quarry Park Pty Ltd and Onslow Resources Pty Ltd (collectively, the Yarri Entities) are related parties and the applicants for mining leases 08/478, 08/279 and 08/489 (the Mining Lease Applications).

The Mining Lease Applications are over the land the subject of Minderoo Pastoral Lease of which Forrest & Forrest Pty Ltd (FFPL) is the lessee. FFPL lodged objections to the Mining Lease Applications on various grounds including that the applications do not comply with the provisions of the Mining Act and/or Mining Regulations. The Mining Lease Applications and objections by FFPL were heard before Warden Wilson on 10 &11 December 2012 1  who delivered his report and recommendation to the Minister for Mines on 31 January 20142 .

The Mining Lease Applications

Section 74 of the Mining Act requires a mining lease application to be accompanied by:

  • a mining proposal; or 
  • a mineralisation report and a statement that sets out information about the likely mining operations; or
  • a resource report and a statement that sets out information about the likely mining operations. 

The key issue in the proceedings before the Warden was the failure of the Yarri Entities to accompany the Mining Lease Applications with the necessary documents as required by section 74 of the Act. After lodgement of the Mining Lease Applications, but before the hearing before the Warden, the Yarri Entities filed mineralisation reports and statements setting out information about the likely mining operations on the tenements. Therefore, the Yarri Entities filed the necessary documents pursuant to section 74 of the Act, but failed to accompany the Mining Lease Applications with these documents at the time of lodgement.

FFPL’s primary position at the hearing was that the Yarri Entities’ failure to accompany the Mining Lease Applications with the necessary documents prevented the Mining Warden from hearing the applications and making a recommendation to the Minister for Mines. That is, the Mining Act requires strict compliance with the formal requirements of the Act as they relate to mining lease applications at the time of lodgement. This strict compliance requirement is supported by the decision of another Warden in similar circumstances3.

The Warden’s findings

Warden Wilson found that the Yarri Entities’ failure to comply with the formal requirements of the Mining Act at the time of lodgement of the Mining Lease Applications was a matter that ought to be noted and brought to the Minister’s attention, but was not fatal to the applications. The Warden recommended to the Minister the grant of the Mining Lease Applications on conditions.

The Warden’s decision was premised on the position that the Warden’s role is to recommend the grant or refusal of the mining lease applications, and the decision in relation to their grant or refusal lies with the Minister. The Minister has a broad discretion in relation to determining mining lease applications, including the power to grant applications in circumstances were an applicant has failed to comply with the Mining Act or the Warden has recommended the refusal of an application. Warden Wilson found that under the Mining Act the only circumstances in which the Minister did not have power to grant a mining lease were where the land was not open for mining or where the Director, Geological Survey reports to the Minister that there is not significant mineralisation in, on or under the land of the application. As a result, non-compliance with the formal requirements of section 74 of the Mining Act at the time of lodgement of the Mining Lease Applications did not prevent the Warden making a recommendation to the
Minister in relation to the grant or refusal of those applications.

Effect of the Warden’s decision

The Warden’s findings in relation to the Mining Lease Applications are a notable shift from an earlier decision of another Warden that the Mining Act requires strict compliance with the formal requirements of mining lease applications at the time of lodgement. 

This decision may be useful for applicants for mining leases in some circumstances. If an applicant for a mining lease files the required accompanying documents late, or those documents are amended or substituted at some point after lodgement of the applications due to an error or irregularity, this decision will support an argument that the applications could continue to be heard by the Warden and determined by the Minister, and it is not necessary to mark out and lodge new applications.

Footnotes

1.  The Yarri Entities’ applications for general purpose lease 08/78 and miscellaneous licence 08/70 were heard by the Warden at the same time as the Mining Lease Applications. 
2.  Yarri & Ors v Forrest & Forrest Pty Ltd [2014] WAMW 6.
3.  Woodbine Aviation Pty Ltd v Jabiru Metals Limited [2010] WAMW 7 where it was found that non-compliance with the formal requirements of mining lease applications would result in a recommendation of refusal of the application. 

Failed claim of adverse possession of private materials

By Cassandra Hay

The unabridged version of this article was first published in Volume 32, Number 3 (December 2013) of the Australian Resources and Energy Law Journal by AMPLA Ltd in association with the Centre for Resources Energy and Environmental Law of The University of Melbourne, the Centre for Mining Energy and Natural Resources Law of the University of Western Australia and the School of Law of the University of Waikato.

Introduction

In the recent decision of Payne v Dwyer [2013] WASC 271, the Court considered whether privately-owned minerals held by Alexander Leslie Payne and Razor Holdings Pty Ltd (the Plaintiffs) had been extinguished by adverse possession of Jonathon James Dwyer (the defendant). 

Pritchard J upheld the claim of the Plaintiffs that their title to the privately-owned minerals had not been extinguished by adverse possession, and also dismissed the Defendant’s claim of adverse possession. 

Facts

The titles in question were granted before 1899, which means that all minerals in the land the subject of those titles (the Land) are owned by the owners of the land (except gold, silver and other precious metals, which were reserved to the Crown, and other certain metals and minerals reserved to a prior transferor).

In mid-1970, Mr James Payne and Mrs Adrien Payne (the registered proprietors of the Land, as tenants in common) obtained separate certificates of title for each of their undivided half shares in the Land. Mr Payne then transferred his 50% interest in the Land to Joice Investments Pty Ltd (Joice Investments), a company owned by the Defendant and the Defendant’s family, such that the Land was owned by Mrs Payne and Joice Investments.

Subsequently, Mrs Payne entered into an agreement whereby she agreed to sell her 50% interest in the Land to Joice Investments, except and reserving all minerals on or below the surface of the Land (excepting all of the previously excepted minerals) (the 1970 Agreement).

In late 1970, Mrs Payne transferred her 50% interest in the Land to Joice Investments, and in doing so excepted and reserved the minerals on or below the surface of the Land (excepting all of the previously excepted minerals). Mrs Payne was then issued a new certificate of title in respect of her reserved minerals (the Mineral Interest). Joice Investments accordingly held 50% of the minerals in the Land (excepting all of the previously excepted minerals), and Mrs Payne held the other 50% of the minerals in the Land (also excepting all of the previously excepted minerals) (i.e. the Mineral Interest).

In 2009, the Defendant became the owner of each 50% interest in the Land (excepting all of the previously excepted minerals), and in 2011, the Plaintiffs became the owner of the Mineral Interest.

From around 2002, the Defendant has been extracting and selling gravel from the Land.

Adverse possession claim

The Defendant claimed that the Limitation Act 1935 (WA) operated to give him adverse possession of the Mineral Interest, and that the Plaintiffs’ title had been extinguished.

In the view of Pritchard J, the Defendant’s claim failed for two reasons. 1

Reason 1: The Mineral Interest was not ‘in the actual possession of some person not entitled to such possession’. 2

Pritchard J found that during the relevant period, section 5 of the Limitation Act 1935 (WA) was not satisfied because the Mineral Interest was not ‘in the actual possession of some person not entitled to such possession’ (author’s emphasis added).3 As a result, the Mineral Interest has not ‘first accrued’ pursuant to section 5.4

Relevantly, Pritchard J considered the term ‘actual possession’ and whether Joice Investments was in ‘actual possession’ of the Mineral Interest. Pritchard J highlighted the distinction drawn in section 5 of theLimitation Act 1935 (WA) between ‘possession’ and ‘actual possession’.  

Pritchard J expressed the view that the physical and legal possession of the Land did not mean that Joice Investments was in ‘factual possession’ of the minerals the subject of the Mineral Interest.>5Further, Joice Investments did not separate the minerals from the rest of the earth, nor did it take any action by which it exercised ‘some control over the minerals greater than that embodied in its ownership of [the Land] itself’6.

Even if Joice Investments was in ‘actual possession’, Pritchard J found that Joice Investments was not ‘some person not entitled to such possession’.7 That is, Joice Investments was itself entitled to possession of the minerals in the Land by virtue of its ownership of 50% of the minerals in the Land (excepting all of the previously excepted minerals).8 Pritchard J went on to explain that this did not mean Joice Investments held all of the minerals in the Land, as there was no evidence it had purported to exercise exclusive control over all of the minerals for its own benefit.9

Reason 2: Section 5 of the Limitation Act 1935 (WA) does not apply.10

The second reason is that section 5 of the Limitation Act 1935 (WA) does not apply, because the Mineral Interest was not derived from an instrument, but instead it was excepted from the transfer to Joice Investments.11

As Pritchard J explained, for section 5 to apply, the claim must be ‘in respect of an estate or interest in possession granted, appointed, or otherwise assured by any instrument’12. Importantly, Pritchard J found that the 1970 Agreement, which excepted the minerals in favour of Mrs Payne rather than reservingthem, did not therefore constitute an instrument by which Mrs Payne was granted an estate or interest in the Private Minerals.13

Pritchard J noted that in the case of a transfer, an exception is where the transferor ‘keeps back some part of that which is transferred so that it remains with the transferor'14. Quite differently, a reservation is ‘the re-grant out of the subject conveyed of something newly created and that did not previously exist’15.

In reaching a decision about whether the transfer from Mrs Payne to Joice Investments was subject to an exception or a reservation, Pritchard J did not take into account the 1970 Agreement.16 This is because the 1970 Agreement was the agreement to pass the title, rather than the transfer itself.17

The transfer stated that the minerals were ‘excepted and reserved (rather than just reserved)’.18   As Pritchard J noted at paragraph 85, citing the authorities of Chirnside v Registrar of Titles19 , Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Limited20  and McDonnell v McKinty21 : ‘The phrase “except and reserving” has been construed as constituting an exception rather than a reservation.’

Footnotes

1 At paragraph 52.
2 Above note 1.
3 Above note 1.
4 Above note 1.
5 At paragraph 66.
6 Above note 5.
7 At paragraph 70.
8 Above note 7.
9 At paragraph 71.
10 At paragraph 53. 
11 Above note 10.
12 Section 5(c), Limitation Act 1935 (WA).
13 At paragraphs 75 – 76.
14 At paragraph 77.
15 Above note 14.
16 At paragraph 84.
17 Above note 16.
18 At paragraph 85.
19 [1921] VLR 406.
20 (2002) 209 CLR 651, [40] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
21 (1847) ET 514, 524 – 525 (Blackburn CJ).

Pastoral lessees to co-exist with miners

By Amanda Macmaster and Clare Ward

The unabridged version of this article was first published in Volume 32, Number 3 (December 2013) of the Australian Resources and Energy Law Journal by AMPLA Ltd in association with the Centre for Resources Energy and Environmental Law of The University of Melbourne, the Centre for Mining Energy and Natural Resources Law of the University of Western Australia and the School of Law of the University of Waikato.

Background

Yarri Mining Pty Ltd (Yarri) is the registered holder of exploration licences located on the Minderoo Pastoral Lease (Minderoo), south of Onslow in Western Australia.  Forrest & Forrest Pty Ltd (Forrest) is the registered holder of the pastoral lease. Yarri lodged applications for mining leases 08/471 and 08/472 (Applications) pursuant to s 67 of the Mining Act 1978 (WA) (Mining Act). 

Forrest objected to the grant of the Applications on the basis of, amongst other things, non-compliance with the Act and or Mining Regulations1981 (WA) (Regulations) and injurious affection in respect of the pastoral operations of Minderoo.

On 22 January 2013 Warden Wilson recommended the grant of the Applications, subject to appropriate conditions to ensure the interests of Yarri and Forrest could co-exist on Minderoo.

The issues

Warden Wilson considered the Forrest objection, relevantly, by reference to the following issues:

  • whether the Minister must grant the Applications pursuant to ss 67(1) and 75(7) of the Act;
  • whether Yarri failed to comply with the Mining Act and Regulations;
  • the potential impact on Minderoo and its pastoral operations; and
  • public interest considerations. 

Must the Minister grant the Applications pursuant to ss 67(1) and 75(7) of the Mining Act?

Yarri submitted that, pursuant to ss 67(1) and 75(7) of the Mining Act, the Minister had no discretion, other than by the application of section 111A, to bring an end to the Applications.

Warden Wilson rejected Yarri’s argument, saying it was clear from the wording of ss 67(1) and 75(7) of the Mining Act that the Minister retains the discretion to refuse an application for a mining lease under those sections and s 111A.  

The real effect of a conversion application is to reward the effort of the applicant for the exploration or prosecting of the land, and on the discovery of minerals, the right in priority to apply for and be granted a mining lease subject to compliance with the provisions of the Mining Act and the discretion of the Minister pursuant to s 111A of the Mining Act. 1

Did Yarri fail to comply with the Act and Regulations?

Failure to notify pastoralist of Applications

On the first day of hearing, Forrest raised the issue of Yarri’s failure to serve copies of the Applications to the holder of the Minderoo pastoral lease at its “usual or last known place of abode or business” pursuant to s 118 of the Mining Act. Copies were sent to a PO Box rather than the address noted on the lease. Leave was sought, and granted, for an extension of time in which to serve the Applications on the registered address of Minderoo without affecting the hearing.

Non-compliance with marking out 

Forrest submitted that M08/472 was not pegged and trenched in accordance with the Mining Act and Regulations. That is, upon inspection some 18 months after the marking out took place, there was only faint evidence of two of the four corners being trenched and the location of a peg was not consistent with the co-ordinates provided on the application. Forrest also submitted that the timing of marking out was questionable.

The Warden accepted that, at the time of inspection, the marking out may not have appeared to be compliant with the Mining Act. However, due to the passage of time, forces of nature such as wind and/or rain and water may have filled in the trenches, and the pegs may have been interfered with (either deliberately or accidentally) by man, beast or other sources such that they were removed or altered from where they were originally placed.

Breach of section 74(1) – mining proposal

The Applications by Yarri were not accompanied by mining proposals. Rather, mining proposals in the form of “Low Impact Mining Operations Pro Forma” were subsequently lodged 14 days later at the request of the Mining Registrar.  

Warden Wilson held “accompanied” meant the Application and mining proposal needed to be lodged contemporaneously 2  to comply with the requirements of the Mining Act.  

However, the Minister may grant or refuse a mining lease in circumstances where the application does not comply with the provisions of the Mining Act, subject to the applicant being “a person”.

In 2011 Yarri lodged a subsequent mining proposal for the Applications. Forrest submitted that Yarri had now abandoned the pro forma mining proposal, which had the effect of negating any lodgement of a mining proposal with the Applications. This argument was rejected by Warden Wilson as the holder of a mining tenement is required to notify the Department and obtain permission for both proposed mining operations and any changes contemplated to approved mining operations. The subsequent lodgement of a new mining proposal by Yarri was consistent with this requirement. 

Compliance with Guidelines

Forrest also submitted the 2011 mining proposal did not comply with the Department’s Guidelines for proposals, with such non-compliance including a failure by Yarri to:

  • consult with the pastoral lease holder;
  • provide a flora survey report which was concluded to a level 2 report; and
  • provide sufficient detailed information, for example, in relation to the identification, evaluation and management of significant environmental impacts. 

In relation to the consultation process, Warden Wilson noted that “the prospect of any rational negotiation or consultation between Forrest and Yarri [had] long passed… [and the parties had had] ample opportunity to adequately raise their grievances…in these proceedings”.

In relation to issues relating to non-compliance with the Guidelines, Warden Wilson held that not every mining proposal will completely comply and that any such non-compliance will not be fatal to an application for a mining tenement. Further, it would be unreasonable to expect a mining proposal would not be subject to requisitions by the Department given the complexity of the requirements and circumstances that are required to be addressed. Once any necessary further information is obtained, the Department will then be in a position to inform the Minister of what conditions should be imposed on the tenement upon grant.

Impact on Minderoo and its pastoral operations

Forrest submitted the Applications would have an adverse impact upon pastoral operations in Minderoo, including as a result of:

  • overgrazing of land near the ground of the Applications due to the cattle moving to other parts of the pastoral lease; and
  • the cattle being scared away by the dewatering vehicle used for dust suppression and by noise of the mining equipment.

Forrest submitted that there should be no assumption that adequate compensation would be tendered for any adverse impact on the pastoral operations caused by mining operations and that conditions might not be adequate to protect the interests of the pastoralist.

Warden Wilson stated that a mining warden has no power to consider issues of adequacy of compensation. However, the effect, if any, of mining operations on the pastoral operations could only be definitively determined at a time after the mining operations had commenced. Further, any issues of adequacy are not relevant considerations to the hearing of the Applications.

The power to impose conditions on the grant of a mining tenement is not a proper vehicle to achieve compliance with other obligations, in the absence of compelling evidence of there being a likelihood that serious breaches will occur.   

The compensation provisions of the Mining Act insofar as they relate to pastoralists are consistent with the legislative intention that the potential for loss and damage arising from mining operations will not stand in the way of mining operations being carried out. Further, compensation is the primary means chosen by the Parliament in resolving the conflict of land use interests. 3

Warden Wilson held that any impacts to pastoral operations can be adequately addressed by conditions designed to ensure the interests of both parties could co-exist on Minderoo and the payment of compensation (if appropriate).
    
Public interest considerations

Forrest submitted that, in these circumstances, the deficiencies in the 2011 mining proposal lodged by Yarri raised significant environmental and public interest issues that were sufficient to warrant a recommendation that the Applications be refused.

Warden Wilson held, citing with approval Warden Calder’s comments in Baxter & Ors v Serpentine- Jarrahdale Ratepayers And Residents Association 4 , that an application should not be rejected on environmental grounds unless the land in dispute is of significant environmental importance and conditions would not be appropriate.  

Warden Wilson held that in this case there were no significant environmental issues that could not be dealt with by conditions.  Further, the 2011 mining proposal was not so inconsistent with the Guidelines as to be contrary to the public interest.

Footnotes

1   See Apache Northwest Pty Ltd v Pel Iron Ore Pty Ltd [2009] WAMW 23 [99].
2 See Minerology Pty Ltd v Juruma Marthudunera Native Title Claimants [2008] WAMW 3, [101]; Woodbine Aviation Pty Ltd v Jabiru Metals Ltd [2010] WAMW 17 [38].
3 FMG Chichester P/L v Rinehard & Ors, [2012] WAMW 7 [92]-[93], [100].
4 Perth Mining Warden, 8 July 1999, vol 14 no 2, 30-33.

Lifting the corporate veil on warehousing of mining tenements

By Lauren Shave and Tim O’Leary

Summary

There is currently no legislative provision preventing an applicant for a mining tenement from withdrawing the application and immediately lodging another application over the same ground. Some applicants have taken advantage of this regulatory gap to effectively reserve land without being subject to the expenditure requirements of the Mining Act 1978 (WA) (Mining Act). 

But this practice, known within the mining industry as “warehousing”, seems to be at odds with the “use it or lose it” principle that underpins the Mining Act. 

In a recent decision, Denton Trading Pty Ltd v Eaglefield Holdings Pty Ltd [2013] WAMW 22, the Perth Mining Warden considered whether to recommend four exploration licence applications for grant. The Warden recommended that the Minister for Mines and Petroleum refuse the applications, because the director of the applicant company had previously lodged successive applications for the same ground, albeit in the names of other companies, in an attempt to “avoid full and proper compliance with the Mining Act”

The decision also illustrates a willingness by the Mining Warden, when considering matters of public interest, to look behind the “corporate veil” and examine the conduct of the person controlling a company. 

Contrary to Mining Act principles and the public interest 

The applicant for the exploration licences was Eaglefield Holdings Pty Ltd (Eaglefield). Denton Trading Pty Ltd (Denton) objected to the applications.

Mr Fewster and his wife were the sole directors and shareholders in Eaglefield. The Warden described Mr Fewster as a qualified and experienced geologist with many years experience in the mining industry. Mr Fewster was also the sole director and company secretary of two other companies, Sumico (WA) Pty Ltd (Sumico) and Edel Resources Pty Ltd (Edel). The Warden found that Mr Fewster effectively controlled all three companies. 

Between 2007 and 2011, Eaglefield, Edel and Sumico applied for a number of exploration licences, only to later withdraw those applications, at which time another of the entities controlled by Mr Fewster would apply for substantially the same ground (though not always exactly the same ground). In this way, various related entities controlled by Mr Fewster retained a core area over a period of five years, and without expending any funds on the ground the subject of the applications. 

Denton objected to the applications on the basis that Eaglefield had breached the ground turnover policy implicit in the Mining Act, and that the Minister should therefore refuse the applications in the public interest under section 111A(1)(c)(ii) of the Mining Act. 

Mr Fewster gave evidence that his reasons for making and withdrawing successive applications were: 

  • to avoid encroachment on heritage or reserve areas that were not open for mining; 
  • to include additional ground which had become available for mining;
  • to change the identity of the corporate applicants as part of a structuring of Mr Fewster’s business affairs; and
  • to adjust the boundaries between the tenements because of an earlier error.  

The Warden found that the reasons given by Mr Fewster did not explain why, on an annual basis, he had withdrawn applications and re-submitted similar applications (with some variations) using a related controlled entity, thereby gaining the benefit of holding core ground to the exclusion of others. The Warden found that “Mr Fewster, as a controller, on two occasions withdrew applications which were about to be granted.”

Eaglefield argued that if the practice of making successive applications was to be prohibited, that change should be introduced by amending the Mining Act after proper consultation. Eaglefield submitted that it was not in the public interest to introduce a new policy by penalising a person for conduct that was lawful at the time. 

Underlying principle of the Mining Act

The Warden referred to what he considered is the primary object of the Mining Act, being “to ensure, as far as practicable, that land which has either known potential for mining or is worthy of exploration will be made available for mining or exploration”.1 The Warden also referred to the decision of Ex Parte Devant Pty Ltd v Minister for Mines 2 , where the Full Court of the Supreme Court held that “[a]n underlying principle of the Mining Act 1978 is to provide for ground turnover by having short terms for licences so that ground is explored and either converted to mining lease or surrendered.” 3 The Warden stated (at [11]) that the actions of the applicant must be reviewed having regard to that principle, including how those actions “impacted on the promotion of mining.”   

It was noted in the Warden’s decision that the practice adopted by Mr Fewster had implications for other stakeholders. For example, the Department of Mines and Petroleum had effectively wasted its time and resources. The Warden also stated (at [27]) that “ [t]he land is tied up, preventing other interested parties from applying, and achieving a grant of the subject land for the purposes of exploration and mining”, and that the State had lost the opportunity to obtain royalties from mining that might have been conducted on the ground. The basis for this aspect of the Warden’s reasoning is unclear, since the Mining Act does not prohibit a person from applying for ground the subject of an existing application (though an existing application might act as a deterrent to others) and the Warden has not explained the basis for this assertion. 

The Warden found, conversely, that the practice was of limited cost to Mr Fewster and had likely saved him approximately $500,000 in tenement rent and meeting expenditure commitments under the Mining Act. The Warden held that the practice adopted by Mr Fewster was not in the public interest, that Eaglefield had sought to avoid full and proper compliance with the Mining Act, and recommended that the Minister refuse the applications. 

Implications

The Warden’s decision accords with the negative perception of this practice in the industry, and indicates that the practice will not be tolerated when tenement applications are considered by the Mining Warden. Consequently, unless an applicant has good reasons for withdrawing an application and then immediately re-applying for the same ground, the applicant risks being found to be in breach of the policy of the Mining Act, in which case the Warden will recommend to the Minister that the application be refused. It remains to be seen what other facts would sufficiently ground an objection on the basis that an applicant has breached the policy implicit in the Mining Act (having regard to the wide discretion the Warden has exercised in identifying “the underlying principle of the Mining Act”) and what actions by an applicant will breach that underlying principle.    
 

Footnotes

1 Nova Resources NL v French (1995) 12 WAR 50, per Roland J at 57
2 Ex Parte Devant Pty Ltd v Minister for Mines, Supreme Court of Western Australia (Full Court), 18 December 1996, Library No. 960722
3 Ex Parte Devant (above) per Steytler J at page 7
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