Summary

There is currently no legislative provision preventing an applicant for a mining tenement from withdrawing the application and immediately lodging another application over the same ground. Some applicants have taken advantage of this regulatory gap to effectively reserve land without being subject to the expenditure requirements of the Mining Act 1978 (WA) (Mining Act).

But this practice, known within the mining industry as “warehousing”, seems to be at odds with the “use it or lose it” principle that underpins the Mining Act.

In a recent decision, Denton Trading Pty Ltd v Eaglefield Holdings  Pty Ltd [2013] WAMW 22, the Perth Mining Warden considered whether to recommend four exploration licence applications for grant. The Warden recommended that the Minister for Mines and Petroleum refuse the applications, because the director of the applicant company had previously lodged successive applications for the same ground, albeit in the names of other companies, in an attempt to “avoid full and proper compliance with the Mining Act”.

The decision also illustrates a willingness by the Mining Warden, when considering matters of public interest, to look behind the “corporate veil” and examine the conduct of the person controlling a company.

Contrary to Mining Act principles and the public interest

The applicant for the exploration licences was Eaglefield Holdings Pty Ltd (Eaglefield). Denton Trading Pty Ltd (Denton) objected to the applications.

Mr Fewster and his wife were the sole directors and shareholders in Eaglefield. The Warden described Mr Fewster as a qualified and experienced geologist with many years experience in the mining   industry. Mr Fewster was also the sole director and company secretary of two other companies, Sumico (WA) Pty Ltd (Sumico) and Edel Resources Pty Ltd (Edel). The Warden found that Mr Fewster effectively controlled all three companies.

Between 2007 and 2011, Eaglefield, Edel and Sumico applied for a number of exploration licences, only to later withdraw those applications, at which time another of the entities controlled by Mr Fewster  would apply for substantially the same ground (though not always exactly the same ground). In this  way, various related entities controlled by Mr Fewster retained a core area over a period of five years, and without expending any funds on the ground the subject of the applications.

Denton objected to the applications on the basis that Eaglefield had breached the ground turnover policy implicit in the Mining Act, and that the Minister should therefore refuse the applications in the public interest under section 111A(1)(c)(ii) of the Mining Act.

Mr Fewster gave evidence that his reasons for making and withdrawing successive applications were:

  • to avoid encroachment on heritage or reserve areas that were not open for mining;
  • to include additional ground which had become available for mining;
  • to change the identity of the corporate applicants as part of a structuring of Mr Fewster’s business affairs; and
  • to adjust the boundaries between the tenements because of an earlier error.

The Warden found that the reasons given by Mr Fewster did not explain why, on an annual basis, he had withdrawn applications and re-submitted similar applications (with some variations) using a related controlled entity, thereby gaining the benefit of holding core ground to the exclusion of others. The Warden found that “Mr Fewster, as a controller, on two occasions withdrew applications which were about to be granted.”

Eaglefield argued that if the practice of making successive applications was to be prohibited, that change should be introduced by amending the Mining Act after proper consultation. Eaglefield submitted that it was not in the public interest to introduce a new policy by penalising a person for conduct that was lawful at the time.

Underlying principle of the Mining Act

The Warden referred to what he considered is the primary object of the Mining Act, being “to ensure,   as far as practicable, that land which has either known potential for mining or is worthy of exploration will be made available for mining or exploration”.1 The Warden also referred to the decision of Ex Parte Devant Pty Ltd v Minister for Mines , where the Full Court of the Supreme Court held that “[a]n underlying principle of the Mining Act 1978 is to provide for ground turnover by having short terms for licences so that ground is explored and either converted to mining lease or surrendered.” 3 The Warden stated (at [11]) that the actions of the applicant must be reviewed having regard to that principle, including how those actions “impacted on the promotion of mining.”

It was noted in the Warden’s decision that the practice adopted by Mr Fewster had implications for other stakeholders. For example, the Department of Mines and Petroleum had effectively wasted its time and resources. The Warden also stated (at [27]) that “ [t]he land is tied up, preventing other interested parties from applying, and achieving a grant of the subject land for the purposes of exploration and mining”, and that the State had lost the opportunity to obtain royalties from mining that might have been conducted on the ground. The basis for this aspect of the Warden’s reasoning is unclear, since the Mining Act does not prohibit a person from applying for ground the subject of an existing application (though an existing application might act as a deterrent to others) and the Warden has not explained the basis for this assertion.

The Warden found, conversely, that the practice was of limited cost to Mr Fewster and had likely saved him approximately $500,000 in tenement rent and meeting expenditure commitments under the Mining Act. The Warden held that the practice adopted by Mr Fewster was not in the public interest, that Eaglefield had sought to avoid full and proper compliance with the Mining Act, and recommended that the Minister refuse the applications.

Implications

The Warden’s decision accords with the negative perception of this practice in the industry, and indicates that the practice will not be tolerated when tenement applications are considered by the Mining Warden. Consequently, unless an applicant has good reasons for withdrawing an application and then immediately re-applying for the same ground, the applicant risks being found to be in breach of the policy of the Mining Act, in which case the Warden will recommend to the Minister that the application be refused. It remains to be seen what other facts would sufficiently ground an objection on the basis that an applicant has breached the policy implicit in the Mining Act (having regard to the wide discretion the Warden has exercised in identifying “the underlying principle of the Mining Act”) and what actions by an applicant will breach that underlying principle.