WA tenement holders with combined reporting tenements should carefully consider if expenditure meets the criteria for "aggregate exploration expenditure".

Momentarily, the Supreme Court of Western Australia resolved some of the uncertainty surrounding the "combined reporting tenements" exemption under section 102(2)(h) of the Mining Act 1988 (WA).

However, the decision in Brewer v John Francis O'Sullivan, Warden at Kalgoorlie [No 2] [2017] WASC 269 is going on appeal, adding to the uncertainty faced by WA Miners as a result of:

Background: calculating "aggregate exploration expenditure"

In late 2016, a decision of the Warden's Court in GMK Exploration Pty Ltd v Big Bell Gold Operations Pty Ltd [2016] WAMW 14 narrowed the types of expenditure that could be considered for the purpose of calculating "aggregate exploration expenditure" for the combined reporting tenements exemption in section 102(2)(h) of the Mining Act.

Historically, tenement holders have relied upon the policy guidelines issued by the Department of Mines and Petroleum, which provided that the DMP would calculate "aggregate exploration expenditure" "by adding the total expenditures reported on the relevant operations reports (Form 5) submitted for all tenements in the group excluding any monies claimed under 'Mining Activities' in those operations reports." [emphasis in the original].

In effect, the DMP's guidelines allowed for the addition of all expenditure recorded in items A and C to F in each Form 5 submitted in respect of the tenements in the combined reporting group. This effectively allowed expenditure on mining and exploration activities, aboriginal heritage surveys, annual tenement rent and rates, administration and overheads and land access and native title costs to be included in the calculation of "aggregate exploration expenditure".

These guidelines were criticised in both GMK Exploration and the earlier decision of Blackfin Pty Ltd v Mineralogy Pty Ltd [2013] WAMW 19, where the Warden went so far as to describe the guidelines as being fundamentally flawed.

The Warden in GMK Exploration ultimately concluded that the various types of expenditure identified above (with the exception of expenditure on mineral ‒ exploration activities) was to be excluded from the calculation, contrary to the DMP guidelines.

What was, and what was not, to be included in the calculation of "aggregate exploration expenditure" also arose for consideration in the Brewer case.

The Brewer case involved (amongst other things) an application for judicial review on the ground that a delegate of the Minister for Mines had made a jurisdictional error in determining to grant exemption certificates under s. 102(2)(h) in respect of two mining leases.

Interestingly, the decision in GMK Exploration was delivered after the filing and hearing of the application in Brewer but before the decision in Brewer was delivered. Given that Brewer was to be determined by the WA Supreme Court, the outcome of it was likely to provide useful guidance as to the correctness of the DMP's guidelines.

Findings in Brewer

In Brewer, the WA Supreme Court considered, amongst other things, the types of expenditure that could be taken into account in determining "aggregate exploration expenditure" for combined reporting tenements under section 102(2)(h).

The Court ultimately rejected the applicants' position that only expenditure which is attributed to mineral ‒ exploration activities could be taken into account in calculating "aggregate exploration expenditure". That is, the types of expenditure that were excluded from the calculation of "aggregate exploration expenditure" in GMK Exploration were found to be expenditure that should properly have been included.

Implications

The approach taken by the WA Supreme Court in Brewer represents a departure from the position underlying the decision in GMK Exploration.

This decision provided greater certainty in that any Warden determining an exemption application under section 102(2)(h) of the Mining Act would be bound to take into account the broader types of expenditure referred to above such as aboriginal heritage surveys, annual tenement rent and rates and overhead costs.

However, the applicants in Brewer have filed an appeal, meaning that it will be some time before tenement holders can have comfort with respect to that expenditure which is and which is not included in the calculation of "aggregate exploration expenditure". It is presently unclear whether the appeal of Brewer will relate to the construction of section 102(2)(h), or will be advanced on some other ground. In the meantime, however, the uncertainty remains.

What should tenement holders do?

Tenement holders that have combined reporting tenements and who intend to rely on the exemption contained in section 102(2)(h) of the Mining Act in the future should give careful consideration as to whether the expenditure upon which they intend to rely meets the criteria for it to be properly classified as "aggregate exploration expenditure".

Failure to do so may result in expenditure that is irrelevant for the purposes of section 102(2)(h) of the Mining Act being relied upon which, in turn, could lead to a loss of certain tenements.

Further food for thought

Tenement holders also need to be mindful of the issues that have been raised by the recent decision of the High Court in Forrest & Forrest we mentioned at the beginning of this article.

That decision casts doubt on the validity of any mining lease in Western Australia that was granted on the basis of an application that was filed without a contemporaneously lodged mineralisation report.

The holders of mining leases in WA (or applications for mining leases) should check if the mineralisation report and other documents required by section 74(1)(ca) of the Mining Act were lodged with the relevant application (and not subsequently).

If not, urgent advice should be sought as to the ways in which the risks posed by the decision in Forrest & Forrest may be ameliorated.