Legal frameworki Legislative overview and jurisdictional separation
Each of the states and territories has enacted its own laws relating to exploration and development of mining operations. While there has been little effort to standardise these laws, they have many common features, and generally Australia has a relatively uniform legal approach to mining. The government of each state and territory is responsible for granting and administering all tenements to explore for and produce minerals within its borders. Depending on its nature, a tenement holder is entitled to an exclusive right to explore, maintain or extract minerals within the tenement boundaries.
All the various legislative regimes have at least two common stages – exploration and mining – with some including a third retention stage, which allows a tenement holder to retain rights over a prospective area after a discovery until commercial production is feasible.
The common types of tenements are summarised below:
|Exploration licence||Retention licence||Mining lease|
|Purpose||Allows the holder to carry out exploration and assessment activities to determine potential prospectivity.||Retains and protects title over a mineral discovery where mining is currently impracticable until commercial production becomes feasible.||Allows for development and commercial extraction and disposal of minerals from the tenement area.|
|Typical term||Usually granted for an initial term of five years (with right to renew). Often subject to compulsory surrender or relinquishment requirements each year during the term.||Usually granted for an initial term of five years (with right to renew).||Varies depending on jurisdiction (e.g., 21-year initial term in Western Australia and for a variable period in Queensland, usually determined by the mine life).|
|Rights||Entry to land to carry out exploration operations.|
Extracting certain quantities of minerals for assessment.Right to apply for conversion into retention licence or mining lease.
|Entry to land to carry out appraisal (and resource maintenance) activities.Right to apply for conversion into mining lease when production becomes commercially viable.||Exclusive possession of tenement area for mining operations.|
Right to construct and operate production facilities (subject to additional approvals).Extracting commercial quantities for sale or export.
|Features||Minimum annual exploration expenditure commitments apply to ensure proper appraisal and analysis occurs.Yearly rental payments are required to keep the tenement in good standing.||Holder is required to establish nature of resource and demonstrate why production is commercially not feasible (but can subsequently become commercially feasible).Yearly rental payments are required.||Royalty obligations, payable to government based on extracted mineral.|
Yearly rental payments are required.Environmental rehabilitation bond payments.
Generally, most tenements impose conditions requiring the holder to provide the government with annual resource delineation reports, and information about operations being carried out in respect of the tenements, primarily to ensure the government is kept appraised of the activities being undertaken on the tenement and their prospectivity.iii Public reporting or disclosure requirements for mining companies
Mining companies listed on the Australian Securities Exchange (ASX) are subject to continuous disclosure requirements (imposed by the ASX Listing Rules, which each listed entity must comply with, and the Corporations Act 2001 (Cth)) in relation to both their operations and mineral resource reporting, to ensure fair and informed market participation. A range of disclosure obligations is imposed by the ASX Listing Rules, but the key principle is that any information that a reasonable person would expect to have a material effect on the price or value of the shares of the company must immediately be released to the market.
There are also disclosure requirements that are specific to mining companies. These require disclosure to be made in relation to all mining, exploration and tenement activities in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). A company must promptly report on any material changes in its mineral resources or ore reserves (as defined in the JORC Code), and this report must be prepared by a 'competent person' (who must be a member or fellow of the Australasian Institute of Mining and Metallurgy or the Australian Institute of Geoscientists, or both). The key requirements include the following:
- the maiden reporting of mineral reserves or resources (or material changes to previously reported reserve or resource estimates) must include prescribed supporting information and the 'competent person' must consent to the form of the disclosure;
- the consent of the 'competent person' is not required for subsequent disclosure of the same material;
- a listed mining company must include a mineral resource or reserve report in its annual reports, and provide quarterly reports to the market on its activities;
- a feasibility or pre-feasibility study must be carried out prior to the declaration of an ore reserve; and
- a mining company can only release production targets, financial forecasts or income-based discounted cash flow valuations if the entity has a 'reasonable basis' for the statement. The Australian Securities and Investment Commission (ASIC) has indicated that this requires (among other things) having 'reasonable grounds' for any assumptions made regarding the availability of funding (if funding is yet to be secured). The assumptions upon which the forecasts are based must be disclosed and the market must be updated if the assumptions materially change or are proven to be inaccurate.
Mining rights and required licences and permitsi Title
The default legal position in Australia is that all title to minerals is vested in the state or territory in which they are located. The overwhelming majority of land available (and prospective) for mining activity is Crown land or public reserves. Mining activities on Crown land or public reserves are regulated by the general mining legislation and controlled by the Department of Mines of each respective state or territory, which is responsible for administering and granting tenements to interested parties to carry out mining activities. The granting of a tenement provides the holder with authorisation from the relevant state or territory to carry out exploration or mining activities in that area. While the state or territory remains the legal owner of the minerals, a tenement holder is entitled to exclusive possession of a tenement area (for mining purposes) and the right to sell and realise value from minerals extracted from a tenement, subject to the payment of a royalty to the government.ii Surface and mining rights
Tenement holders' rights to carry out mining activities on the land surface usually depend upon the particular mining operations in question, but typically include rights to access water and public roads, to construct buildings, plants, roads and railways, and to conduct primary treatment operations and other ancillary acts.
If a tenement holder seeks to engage in these activities on private land, there is an obligation to consult the private landowner and agree access compensation. Consultation usually commences after wider exploration activities are completed (including detailed geological and geophysical surveys), leading to an access agreement or arrangement being entered into to enable the pursuit of an application and grant of a mining tenement. Generally, mining tenements will not be granted over privately held land unless some form of access or compensation arrangement has been agreed (and if there is a failure to agree such, there is provision for arrangements to be determined by court process).iii Additional permits and licences
There are numerous other permits and licences required at each stage of the mining cycle in Australia. The major permits and licences applicable for most mining developments include environmental permits, planning and development approvals, health and safety permits, and rights to use water, electricity and other utilities.
A key issue for many miners currently is the volume of government approvals required to commission mining projects and the duplication of these approvals sometimes required by state and Commonwealth regulators. The federal coalition government plans to address this issue by seeking to eliminate duplication and streamline approvals as much as possible to attempt to assist the mining industry with developing new projects. The federal Productivity Commission is currently holding an inquiry into reforming regulations affecting the resources sector and assessing best practice project approval processes. The draft report (released in March 2020) makes a number of recommendations with themes of reducing time frames for decisions, reducing complexity and adopting a risk-based approach to regulations where possible. The final report to government is due in November 2020, with the federal government's response to follow. At the same time, the key federal environment legislation (the Environment Protection and Biodiversity Conservation Act 1999) is also being reviewed with a view to removing duplication between state and federal approvals.
As an illustration of the regulatory issues facing miners, in 2014 the Gina Rinehart-led Hancock Prospecting commissioned the Roy Hill iron ore project, located in the Pilbara region of Western Australia. The project (a 55 million tonne per annum greenfield iron ore project) required an estimated 4,000 separate government approvals to reach the final commissioning and construction phase.
In July 2019, the Western Australia Environmental Protection Authority (EPA) granted BHP a Strategic Proposal approval covering its future Pilbara iron ore operations for the next 50–100 years. While individual components of the Strategic Proposal may require further EPA approvals, it is expected to reduce the environmental approval time for future operations by 50 per cent. Herbert Smith Freehills advised BHP on obtaining this 'Strategic Proposal' approval.
The issue of 'Scope 3' emissions (i.e., indirect carbon emissions through supply chains and end users) was the subject of consideration in New South Wales and Western Australia during 2019. In February 2019, a development consent for a new open-cut metallurgical coal mine was refused by the New South Wales Land and Environment Court, with the court noting the impact use of the mine's production would have on climate change as a relevant consideration.
In March 2019, the Western Australia EPA directed that all emissions-intensive projects should be carbon neutral (for direct emissions) and that 'Scope 3' emissions should be considered when assessing approvals. However, the EPA's direction was promptly withdrawn following consultation between industry, parliamentarians and the EPA (the guidance now provides that proponents may be asked to provide estimates of 'Scope 3' emissions and how they are likely to change over the life of the proposal, to inform the assessment process).iv Closure and remediation of mining projects
The mining laws in most states and territories require mining lease holders to provide a rehabilitation bond to the Department of Mines, which is returned to the holder once the mined land is fully rehabilitated. Additionally, most regimes require a mining lease holder to put in place a detailed rehabilitation plan, which generally requires complete costings of full rehabilitation activities to be submitted to the Department of Mines and regular updates if the scope of operations changes. Mining regulators in Australia are vigilant in their assessment and clarification of rehabilitation plans, and have the power to require changes or adjustments, as well as call for additional funds to be added to the rehabilitation bond if they deem it insufficient to repair the land in question after mining ceases. Mine rehabilitation has also become an increasing focus as a number of projects reach the end of their intended mining life and have been sold to smaller companies for a nominal consideration and assumption of rehabilitation obligations.