On 5 November 2012, the Western Australian Parliament passed the Mining Rehabilitation Fund Act 2012 (WA) (MRF Act). The MRF Act substantially reforms the State’s mining securities regime by introducing a Mining Rehabilitation Fund (MRF) to address issues with the long-standing system for financing the rehabilitation of abandoned mine sites, which is based on mining security bonds.

Implications of the MRF Act – What does it mean for you?

Existing projects

  • The introduction of the MRF does not alter a tenement holder’s rehabilitation and closure obligations under the Mining Act 1978 (Mining Act).
  • As with the existing bonds-based regime, the MRF will be drawn on in circumstances where tenement holders have not fulfilled their environmental obligations. However, unlike the existing regime, the MRF will essentially cross-collateralise the rehabilitation obligations of all tenement holders that are required to contribute to the MRF.
  • Until implementing regulations are adopted, the proposed means of transitioning existing mining tenements from the current bonds-based system to the MRF remains unclear. In addition, the posting of environmental security bonds can still be required by the Department of Mines and Petroleum (DMP) in accordance with the Mining Act, in particular for high-risk projects.
  • Tenements that are the subject of State Agreement tenure are excluded from the ambit of the MRF Act.

New projects

  • The introduction of the MRF will remove the carrying cost of security bonds, which will be of particular importance during preliminary phases where projects remain cash-flow negative.
  • For junior miners involved in smaller projects, the MRF Act may significantly reduce balance sheet pressure during the initial development of a project.

Background

The Western Australian Government has recently estimated that its current financial exposure for rehabilitating abandoned mines exceeds $100 million and will only increase as more sites are abandoned over the next decade. On this basis, the Government argues that the current system, by which an applicant for a mining lease lodges a security for compliance with the conditions of that mining lease, fails to sufficiently cover the costs of rehabilitating abandoned mines.

In response, following the publication of a Discussion Paper in December 2010 and subsequent public consultation, the Government has adopted a mining security fidelity fund system. Under this system, holders of “mining authorisations” will now pay a levy into the MRF, established under the MRF Act.

What is the MRF?

The MRF is a special purpose account under the Financial Management Act 2006 (WA) and will secure ongoing funding for the State to rehabilitate abandoned mine sites in WA and fund the cost of administration.

The MRF will have two categories of fund money – principal and interest – which may be used for differing purposes. Principal amounts include amounts paid in the form of levies or penalties and may only be used to fund the rehabilitation of abandoned mine sites and any affected land relating to those sites. Interest earned may be used for broader purposes, including administrative costs and costs involved in enforcing the MRF Act.

Who contributes to the MRF?

It is anticipated that from 1 July 2013, holders of “mining authorisations” (Holders) will pay a mining rehabilitation levy in respect of each authorisation held. A mining authorisation is:

  • a mining tenement unless it is granted, or held, pursuant to a Government agreement;
  • a mining tenement granted, or held, pursuant to a Government agreement, if the mining tenement is prescribed or of a class prescribed;
  • a mineral lease granted under a Government agreement, if the mineral lease is prescribed or of a class prescribed;
  • a mining tenement referred to in section 5(2)(a) of the Mining Act, if the mining tenement is prescribed or of a class prescribed; or
  • a right of occupancy referred to in section 5(2)(b) of the Mining Act, if the right of occupancy is prescribed or of a class prescribed.

The levy payable by each Holder will be determined by the Chief Executive Officer of the Department of Mines and Petroleum (CEO) having regard to information that must be provided by that Holder to the CEO for assessment purposes. Based on the number of hectares of disturbed land in each “mining authorisation”, an assessment will be made using the approximate cost per hectare to rehabilitate the disturbed land. The levy will then be charged annually at a set percentage, which is currently expected to be 1% of the closure liability estimate.

After the assessment has been made by the CEO, the Holder will be provided with an assessment notice specifying, among other things, the levy amount and the day on which the levy amount is payable (being a day not less than 30 days after the date of the notice).

The CEO may reassess (by increasing or decreasing) the levy amount by issuing a reassessment notice to the Holder at any time within two years of the original assessment. If the reassessment causes the levy to increase, the Holder will be liable to pay the difference between the amount due over that period under the reassessment and that paid in accordance with the original assessment.

What obligations do persons have under the MRF Act?

Levy payment

The Holder is subject to a penalty for any levy amount unpaid after the due date (likely to be simple interest, not compounding). This penalty is calculated by applying a prescribed rate to the levy amount from the due date.

This penalty may be waived by the CEO if the CEO considers that there are good reasons for doing so.

Disclosure

The MRF Act also imposes certain disclosure requirements on Holders.

Assessment information

As stated above, each Holder must, on or before a prescribed date each year, give to the CEO information for the purposes of assessment in a form and manner approved by the CEO. Failure to provide this information could result in a penalty of $20,000.

Aside from this penalty, if the Holder does not provide the CEO with assessment information or if the CEO is not satisfied with the adequacy or reliability of the information provided, the CEO may make an assessment on the basis of the CEO’s estimate of the levy amount.

Providing false or misleading information to the CEO could also result in a penalty of $20,000.

Other information and records

The CEO may also direct a person to provide certain information, answer a question put to that person or produce (and examine and make a copy of) a record in the person’s custody or under the person’s control for the purposes of the administration and enforcement of Part 4 of the MRF Act.

A failure to comply with a direction from the CEO without a reasonable excuse could result in a penalty of $20,000.

What rights do persons have under the MRF Act?

Objections

A person may object to an assessment notice or reassessment notice:

  • on the ground that the person is not liable to pay the levy amount to which the notice relates;
  • on the ground that there is an error in the assessment or reassessment of the levy amount; or
  • on a prescribed ground.

The CEO must consider and determine an objection within 28 days after the day on which it is made.

For those considering making an objection, it is worth noting that the CEO may determine the objection by increasing the levy amount to be paid. Further, a person’s liability to pay a levy amount or penalty amount is not affected by the making of an objection.

SAT

A person who is dissatisfied with a decision of the CEO on an objection may apply to the State Administrative Tribunal for a review of the decision.