The uncertainties related to the mining and marketing of associated minerals in South Africa were recently brought to light when Lonmin, a platinum miner listed in Johannesburg, London and New York, was prohibited by the South African Department of Mineral Resources (“DMR”) from selling minerals associated with the mining of platinum group metals but not covered by its mining right. Lonmin maintained that associated minerals are inextricably linked to the ore body and that it was not feasible nor economically viable to mine them alone. Following a media outcry and meetings with Lonmin, the DMR approved Lonmin's earlier applications to amend its mining rights so as to cover these associated minerals. The DMR also confirmed that Lonmin could resume sales of associated minerals other than those falling within a small area to which another mining company holds prospecting rights.
In terms of the earlier Minerals Act of 1991 (the "Minerals Act"), a holder of a mining license was permitted to mine and sell minerals that were mined ‘out of necessity’ (associated minerals) together with the minerals covered by the license. The subsequent Minerals and Petroleum Resources Development Act, 2002 (the “MPRDA”) was silent on whether the holder of a prospecting or mining right in respect of a particular mineral is entitled to prospect or mine associated minerals. Yet with the State becoming the custodian of South Africa's mineral resources in terms of the MPRDA, there is no automatic right for mining companies to mine and sell minerals that fall outside those stipulated in their mining licenses. Mining licences can be amended by companies through a "Section 102" procedure under the MPRDA or alternatively pursuant to the conversion of their old-order rights under the Minerals Act to new-order rights under the MPRDA, a procedure which certain companies did not undertake at the time of conversion.
Following the DMR's recent actions in relation to Lonmin, it appears that the failure of mining companies to include associated minerals in their conversion applications could have material financial consequences for such companies. Since applications under the MPRDA are treated on a ‘first come, first served’ basis, it is conceivable that a third party could apply for (and be granted) such rights to associated minerals. Recent events are likely to have precipitated urgent audits by mining companies as to the scope of the mining rights granted to them under the MPRDA so as to ensure these loopholes are covered.