Top mining lawyer explains why.

JOHANNESBURG - Imperial Crown Trading and its CEO Jagdish Parekh gained notoriety when the Department of Minerals and Energy (DME) awarded it an iron ore prospecting right over the operating Sishen iron ore mine. Turns out the move is illegal.

Peter Leon, a partner at Webber Wentzel and he co-leads the firm's mining, energy and natural resources practice group, explained "the situation with Kumba and ICT obviously the classic example where the application [for the same mineral] should never have been accepted, never mind granted, because the application there by ICT was for a prospecting right for iron ore and obviously the right was held by Sishen Iron Ore Company...

"By operation of law in terms of Schedule 2 of the [Mineral and Petroleum Resources Act] if an old order mining right was not converted as of the date it should've been converted, which was five years after the first of May 2004, it fell away and I think that right is just gone."

As to ICT's argument that if two applications are received by the DME on the same day the rights go to the most empowered entity, Leon explains "that's also not correct. They've got an interesting understanding of the law.

"Let me tell you what the act says, that's section 9 as I recall it... section 9.2 of the act says when the minister considers applications received on the same day, he or she must give preference to applications from historically disadvantaged persons.

"Now that on the face of it supports their case. You have to read that with section 9.1 which says that if the regional manager receives more than one application for a prospecting right and mining right or mining permit as the case may be in respect of the same mineral land, applications need to be treated in order of receipt.

"Now what I'm saying is that you can't read 9.2 without looking at 9.1... they were applying for completely different things. ICT was applying for a prospecting right and Kumba was applying for a mining right so there's no preference.

"If Kumba had been applying for a prospecting right then ICT's application would trump Kumba's... normally a mining right would take preference over a prospecting right because it's the senior of the two rights."

What Leon is saying is that Kumba applied for a senior right to ICT which means ICT's argument for why it got the right is invalid. It is also illegal to award a right for the same mineral that an operating mine produces.

Leon explained it like this in a recent Moneyweb podcast "First, in law you can't grant a prospecting right for the same mineral over an area where there is an active mine. It's prohibited by Section 16(2) of the Act."

Write to Chris Blaine: chris@moneyweb.co.za

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