The Chamber of Mines (CoM) has approached the High Court for a declaratory order to provide guidance on the principles applicable to the assessment of the ownership element of the Mining Charter, particularly in respect of the continuous consequences of previous black economic-empowerment (BEE) deals.

The CoM notes in a statement that, subsequent to the March 31 announcement that the industry and the Department of Mineral Resources (DMR) would jointly seek court resolution on the matter, it has become clear that the legal mechanism available to the parties necessitates a clear applicant and respondent, with an identifiable and clear point of dispute.

“The chamber and its members fully support the transformation objectives of the Mineral and Petroleum Resources Development Act (MPRDA) and have taken meaningful steps to give effect to them. [We] remain committed to a joint resolution on the matter with the DMR, but we believe that it is in the interests of the industry and the country that this is done swiftly.

“The industry and its stakeholders need regulatory certainty in respect of continuing consequences on which basis mineral rights have been granted, and which have been disclosed to shareholders so as to ensure the sustainability of the industry,” CoM CEO Roger Baxter says.

He adds that this necessary legal process will not prevent the chamber from continuing to engage with the DMR to determine clarity in a way that meets the needs of all stakeholders.

“It is our view that this litigation does not imply a breakdown in the relationship between the chamber and the DMR.

“On the contrary, we believe this will strengthen the relationship [of] the stakeholders. The joint agreement between the DMR and the chamber regarding the need to seek clarity from the courts on the ownership element of the charter shows the maturity of the relationship,” he states.

The chamber’s concerns relate to the DMR’s intention to exclude empowerment ownership transactions post 2004, where historically disadvantaged South Africans (HDSAs) have sold their participation.

This exclusion is, according to the CoM, clearly prejudicial to mining companies and undermines the sustainability of the sector.

To ensure meaningful economic participation by HDSAs, companies enter into varied transactions that afford HDSAs the opportunity, among others, to acquire mining assets and/or shares on beneficial terms and to also realise the value of their investments by disposing of them.

In many cases where mining companies have facilitated substantial HDSA participation, HDSA shareholders have elected to exercise their rights to realise the value of their shares, with the inevitable result that HDSA-shareholding in the mining company is subsequently eroded.

“That they have been able to do so demonstrates that those HDSA shareholders obtained meaningful ownership. It also demonstrates the meeting of the objective to create a critical mass of broad-based BEE, even if this is then transferred into other areas of the economy.

“To penalise mining companies retrospectively for acting in good faith to promote meaningful HDSA economic participation is unfair,” it adds.

Further, the chamber says that it would be contrary to the objects of the MPRDA to lock HDSAs into an indefinite participation in a mining company.

“For as long as HDSA shareholders are able freely to dispose of their shares, as many of them desire to do, the fluctuation of HDSA ownership in mining companies will be inevitable.

“It is a sign that the objects of the MPRDA are being given effect to, rather than evidence of noncompliance on the part of the mining industry,” the CoM concludes.