ConCourt tackles case of ‘vanishing’ mining stake

The Constitutional Court is “grappling” with the R150 billion question over a 21.4% stake in the mineral rights of Sishen Iron Ore Company’s Sishen Mine in the Northern Cape.

The Supreme Court of Appeal (SCA) last year ruled that the controversial stake, which was previously held by ArcelorMittal, ceased to exist when the company failed to apply for the mining right to be converted as is required by the new Mineral and Petroleum Resources Development Act.

A private contract existed between Sishen Iron Ore Company and ArcelorMittal, which governed their joint mining venture.

The SCA ruling effectively made Sishen, which had successfully applied for its 78su.6% share to be converted, the sole holder of 100% of the mining rights.

But Jeremy Gauntlett, SC, appearing for the department of mineral resources, argued that it was impossible that “the 21%, in the wholesome phrase, ‘vanished into thin air’, or that it sort of migrated or clung like a barnacle on to the boat of Sishen”.

He described the fact that Sishen acquired the 21% as an unjustified “windfall”.

Gauntlett and Edmund Wessels, who appeared for ICT, say that as soon as the “witching hour” deadline for ArcelorMittal to apply for the conversion of its rights had passed, the 21% “became available for the minister to allocate thereafter”.

“It did not vaporise, it did not disappear and Sishen did not grow big in its boots and become the holder of 100% of the rights.”

Both the department and ICT are arguing that the Mineral and Petroleum Resources Development Act and the Constitution’s “transformative agenda” require that the lapsed rights “become available for reallocation in order to promote equitable access to the nation’s mineral and petroleum resources”.

Wessels has also stressed that the reallocation of the stake would not automatically favour ICT.

The 21.4% stake was controversially awarded to ICT by the department of mineral resources.

This decision became controversial when it emerged that ICT was linked to Duduzane Zuma, President Jacob Zuma’s son.

The current case before the Constitutional Court originated from Sishen’s decision to challenge Minister of Mineral Resources Susan Shabangu’s decision to award the rights to ICT.

But Wessels today said that even if ICT was successful in the Constitutional Court, it would merely be “in the queue” when it came to allocation of the stake.

Chris Loxton, SC, who appeared for Sishen, however argued that government’s idea about the awarding of the stake was contrary to the requirement of broad based economic empowerment in the act.

“The idea that a mining right could be granted to ICT where it simply participated in the output of an existing mine … would make only a few people extremely rich”.

Loxton said that when the deadline for ArcelorMittal to lodge its application to convert rights passed Sishen became the sole holder of a mining right.

“There can really be no doubt that the rights which were held in relation to mining were held by Sishen alone. The state holds no right to mine. What it has is the right to regulate mining and to confer mining rights.”

He said that minerals did not belong to the state in terms of the Mineral and Petroleum Resources Development Act and that the act merely said they were “part of the heritage of our land”.

Loxton was intensely questioned about the “vanishing” 21% stake by Deputy Chief Justice Dikgang Moseneke, Chief Justice Mogoeng Mogoeng and Justice Mbuyiseli Madlanga.

Moseneke asked if there was a “life after death for older rights that have not been converted?”

Loxton replied that Sishen clearly became the sole holder of the right and added that the scheme of the Mineral and Petroleum Resources Development Act made it impossible for such an application to be granted.

Madlanga later also asked if Sishen would then not “owe the general populace of South Africa something?”

“There is some commercial value (in the 21% stake) and because it is our heritage and because the minister holds it as a custodian, in commercial terms doesn’t your client owe us anything?”

Loxton said the situation only arose when two holders of a share of mining rights failed to convert its mining right.

“The 21% disappears because it is an election on the part of a person that held it. That’s the person who lost it.”

At the close of Loxton’s argument, Mogoeng said he was “grappling” with the submission that the 21% could just disappear and Moseneke added he was “also a victim of that grappling”.

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