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13 January 2012 23:14

Lonmin loses appeal over prospecting rights: Peter Major - mining consultant, Cadiz Corporate Solutions

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Alec Hogg is a writer and broadcaster. He founded Moneyweb

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    A gap was spotted and Lonmin has lost out - for now.

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    ALEC HOGG: Well, some truth that has been going through has to do with mineral rights. Peter Major is with Cadiz. Pete, you’ve been having a look at the whole Lonmin saga. There are a few things that confuse me here. Lonmin is a platinum producer. They have by-products from the process of producing platinum with chrome, nickel, gold, copper, which clearly get produced and the sold off to bring the platinum price of production down.
        One of their directors, one Sivi Gounden, who left the company as a director in October 2009, decided to go and apply for mineral rights over the non-platinum product – in other words, that chrome, nickel, gold and copper. And, lo and behold, he’s actually won the case. What's going on here?

    PETER MAJOR: Boy, this is very different from the Kumba Iron ore saga. I know the newspaper says a similar saga occurred, but I don’t think there are any similarities here. I’ll tell you what the big differences are, though. In its complex variety of issues, I think the first issue is here’s a director who left the company and spotted a gap in his employer, and then he has taken that gap. When I read that part, Alec, it's almost like reading Steve Jobs’s book, where they got Eric Schmidt from Google on board, and next thing they know Google comes out with Android and it's so similar to the iPhone that Steven Jobs just goes berserk. He says: “Gee, how can they say this was unrelated when the chairman, managing director of Google was sitting on my board as a non-executive director, and they come out with a product just like this?” There’s got to be a similarity there.
        So I don’t know why this guy hasn’t been prosecuted criminally. And I think there’s still a chance that can happen.

    ALEC HOGG: Surely if you were in Lonmin, every director has fiduciary duties. You can't go and steal from your employer if you see that there’s a gap in there – if you are a director, a gap in what they’ve done legally – and then drive a bulldozer through it.

    PETER MAJOR: That’s right. I think that part most people seem to agree with. But then you ask how is it that Lonmin lost these mineral rights, these non-platinum rights?
        Now, before the new minerals rights act came out, private owners held most of the mineral rights, except for state-owned minerals, and the state minerals were precious metals and diamonds. They were silver, platinum, gold and diamonds. And so you had to check – all these individual right holders, sometimes they had all the mineral rights except the state rights, and sometimes they actually had the state rights as well, the precious metals.
        But when the new act came out, it meant the state had all minerals. And that kind of simplified it because then when we went and applied, we could actually tick the bottom block that asks “What minerals are you applying for?” and we would just tick “All”. That would be quite often, but sometimes the minerals department won’t let you tick all. They say, “You must specifically tell us which minerals you are looking for”. This is an oversight on Lonmin’s part, because it's only one of their small properties. You don’t know, do they just give it to a lawyer and say: “Please apply for all these rights.” Did the lawyer get sloppy, did he not tick the “All” box, did he just tick platinum instead? That was an oversight. I think that was a mistake of Lonmin’s. That’s not negligence of the DMR’s, that’s unfortunately on Lonmin’s plate.
        But ja, there are various issues here, and some parties are wrong on one, and other parties are wrong on the other, I believe.

    ALEC HOGG: It's only just starting.

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