The Constitutional Court reinforces the “first come – first serve” approach in granting prospecting and mining rights

In February 2019, the Constitutional Court of South Africa handed down a precedent-setting judgement in Aquila Steel (South Africa) (Pty) Ltd v Minister of Mineral Resources and Others.[1] The case concerned a dispute arising from overlapping prospecting and mining rights granted in respect of the manganese discovered on one piece of land to two separate entities by the Department of Mineral Resources and Energy (previously the Department of Mineral Resources) (DMRE). The unlawfulness of the DMRE’s decision to double grant these rights was common cause in that such decision fell outside the purview of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). The MPRDA is clear that only one person or entity can hold a valid prospecting or mining right over a particular mineral on a sufficiently specified piece of land.[2] To ensure that no overlapping rights are granted, applications are handled by the DMRE through a system akin to queuing and tantamount to first-come-first-serve rule.[3] Here the first person to lodge a prospecting right application for a mineral is first in queue with the effect that no other prospecting right application lodged afterwards can be considered or granted until the first application has been refused.[4] In addition, a person who is granted a prospecting right over land for a particular mineral (in this case the manganese) has the sole and exclusive right to apply for (and be granted) the relevant mining right.[5]

However, despite the above settled law and practice, sometimes the DMRE erroneously grants overlapping prospecting and mining rights in respect of same mineral on the same land.[6] This phenomenon has been described by the Constitutional Court as “departmental delinquency”.[7] In the instance of overlapping rights, an aggrieved entity or person can utilise the MPRDA's internal appeal process to review the DMRE's administrative decision to issue such an overlapping right and have it set aside.[8] If still dissatisfied with the outcome of the initial internal appeal process, an unsuccessful party may then approach the High Court for relief under the Promotion of Administrative Justice Act 3 of 2000 (PAJA).[9] This is the point where complex legal arguments often start with both parties contending to convince the court that their application was the first valid application to be submitted to the DMRE and that the other parties prospecting or mining right should be set aside as being invalidly granted. We see the importance of this demonstrated in the Aquila case.

Here is a brief factual background of the Aquila case, which was first heard by the Gauteng High Court.[10]  The Ziza Ltd (sixth respondent) submitted a prospecting rights application to the DMRE on 19 April 2005.[11] Exactly a year later, on 18 April 2006, Aquila (applicant) submitted a prospecting right application in respect of the same land as that which Ziza has applied.[12] Aquila's application was then granted five months later.[13] Subsequently, on 26 February 2008, Ziza's prospecting right application was also granted (following an application in 2005).[14] At this point, there were now two prospecting rights granted over the same land (in Kuruman) for the same mineral (manganese). Interestingly, on 14 December 2010, Aquila then proceeded to lodge an application, this time for a mining right.[15] The DMRE then refused Aquila the mining right on the reasoning that Ziza’s prior application (2005) was in queue before Aquila’s (2006),[16] and that the award of prospecting right to Aquila in 2006 was purely an “administrative error”.[17] However, Ziza’s application was not without issues as well. It was common cause that Ziza's application was incomplete, lacked the prescribed coordinated map and did not fully comply with the requirements under the MPRDA relating to conversions of old order rights.[18]   

Before the High Court, Aquila argued that since Ziza's application was incomplete and non-compliant with the MPRDA, it could not be accepted by the Regional Manager and it would have been returned to Ziza. Aquila argued further that because the MPRDA required return of the application, when Aquila submitted its application there would have been no prior pending application for a prospecting right by Ziza. Therefore, Aquila's application would have been the only valid application, and consequentially the only valid prospecting right over the contested land. Ziza countered, stating that the defect in its application was not so fatal and of the nature that would automatically render its application invalid, and thus rejectable by the DMRE. It argued further that a defective application can be amended after submission to remedy any defects, without necessarily dismissing it based on the identified defect.

The High Court ruled in favour of Aquila and dismissed Ziza’s argument. The reasoning of the court was that: 1). Ziza's prospecting right application was fatally defective because it failed to strictly comply with the MPRDA; 2). the DMRE was required to return a non-compliant application to Ziza in terms of section 16(3) of the MPRDA; 3). the return of Ziza's application would mean that the application had been rejected; 4). if Ziza subsequently amended its application, then the amended application would have to be treated as a new application; and 5). it was therefore not competent for the DMRE to accept and grant Ziza's application for a prospecting right. The court accordingly set aside the DMRE's decision to accept Ziza's prospecting application and to grant Ziza a prospecting right. Ziza then appealed to the Supreme Court of Appeal (SCA).[19] The SCA reversed the High Court's decision and found in Ziza's favour. Dissatisfied by the SCA’s decision, Aquila then approached the Constitutional Court (CC), which reinstated the order of the High Court and set aside the order of the SCA.[20] The CC held that Ziza’s application “came nowhere near fulfilling the requirements”[21] and that as a result, Ziza had thwarted the purpose of the MPRDA requirements, which is to avoid overlaps.

As a consequence of this judgment, it is hoped that the DMRE will improve its safeguards against granting of overlapping/conflicting rights. This can be done by harnessing its system of managing prospecting and mining rights applications by, for example, making available to the public the notices of accepted rights on their website.

Written by Gaopalelwe Mathiba.