Mine or yours?

A closer look at s 5 of the Mineral and Petroleum Resources Development Act

By Felix Majoni

The concept of absolute ownership is one that is deeply entrenched in our law. Ownership entails that the holder of a thing has absolute control over that particular thing, although there are limitations imposed by law. In mining law there has always been conflict between the holder of a title deed who, in most cases, is the surface landowner and the mineral right holder who, in most cases, has the rights to access and sever the minerals beneath the surface by virtue of various licenses granted under the Mineral and Petroleum Resources Development Act 28 of 2002 (the MPRDA). 

There is a wide spectrum of cases in our jurisdiction that have dealt with these aspects, notably the recent Minister of Minerals and Energy v Agri South Africa (Centre for Applied Legal Studies as amicus curiae) [2012] 3 All SA 266 (SCA) where the court had to, inter alia, make a ruling on whether the MPRDA expropriated rights that existed prior to its coming into force as contended by Agri SA. Agri SA had argued that the MPRDA expropriated some existing rights and no provision was made for compensation; rendering the MPRDA unconstitutional for non-compliance with the provisions of s 25(2)(b) of the Constitution, which requires that any expropriation be subject to the payment of compensation. On the other hand, the minister had contended that this is not the position as item 12(1) in sch 2 of the MPRDA gives a wider ambit on the one alleging expropriation to prove it. The court then scrutinised the mining law regime, from the pre-Union legislation to the MPRDA, to come up with a favourable determination. 

One of the MPRDA provisions that the court dissected at length in the Agri SA matter was s 5. Agri SA had contended that s 5 is the main provision that allowed the minister to expropriate. It is therefore the purpose of this article to take a bird’s eye view of s 5 insofar as it allows a mineral right holder to enter the land of another to prospect, mine, explore or produce minerals, provided they have the relevant rights thereto, and leaving the surface landowner with a right to be consulted in the entire process only.

In actual fact, the surface landowner is the real owner of the minerals beneath the surface by virtue of the common law principle of cuius est solum (‘rights of the owner of immovable property extend up to the heavens and down to the centre of the earth’) (the Agri SA case at para 32) and the title deed, which is a real right in relation to that particular land compared to a mineral right, which is a limited real right by virtue of s 5(1) of the MPRDA. It is settled in our law that a real right is superior to a limited real right. Other authorities have, however, classified mineral rights as common law rights, with some even classifying mineral rights as real rights, so it becomes questionable whether there is a gap in our mining law when considering the application of 
s 5(1) to the nature of mineral rights?

Section 5 of the MPRDA qualifies the nature of a prospecting, mining and exploration right. It reads as follows:
‘5. Legal nature of prospecting right, mining right, exploration right or production right, and rights or holders thereof –
(1) A prospecting right, mining right, exploration right or production right granted in terms of this Act is a limited real right in respect of the mineral or petroleum and the land to which such rights relates.
(2) The holder of a prospecting right, mining right, exploration right or production right is entitled to the rights referred to in this section and such other rights as may be granted to, acquired by or conferred upon such holder under this Act or any other law.
(3) Subject to this Act, any holder of a prospecting right, a mining right, exploration right or production right may –
(a) enter the land to which such right relates together with his or her employees and may bring onto that land any plant, machinery or equipment and build, construct or lay down any surface, underground or under sea infrastructure which may be required for the purposes of prospecting, mining, exploration or production, as the case may be;
(b) prospect, mine, explore or produce, as the case may be, for his or her own account on or under that land for the mineral or petroleum for which such right has been granted.
(c) remove and dispose of any such mineral found during the course of prospecting, mining, exploration or production, as the case may be;
(d) subject to the National Water Act, 1998 (Act No. 36 of 1998), use water from any natural spring, lake, river or stream, situated on, or flowing through, such land or from any excavation previously made and used for prospecting, mining, exploration or production purposes or sink a well or borehole required for use relating to prospecting, mining, exploration or production on such land; and
(e) carry out any other activity incidental to prospecting, mining, exploration or production operations, which activity does not contravene the provisions of this Act.
(4) No person may prospect for or remove, mine, conduct technical co-operation operations, reconnaissance operations, explore for and produce any mineral or petroleum or commence with any work incidental thereto on any area without –
(a) an approved environmental management programme or approved environmental management plan, as the case may be;
(b) a reconnaissance permission, prospecting right, permission to remove, mining right, mining permit, retention permit, technical co-operation permit, reconnaissance permit, exploration right or production right, as the case may be; and
(c) notifying and consulting with the land owner or lawful occupier of the land in question.’

Of particular interest is s 5(3)(a) that allows a prospecting, mineral or exploration right holder to ‘enter the land to which such right relates together with his or her employees and may bring onto that land any plant, machinery or equipment and build, construct or lay down any surface, underground or under sea infrastructure which may be required for the purposes of prospecting, mining, exploration or production, as the case may be’. 

This is de facto invasion of private property, because before such right is granted, the surface landowner is merely consulted and does not have further say once the consultation process is concluded by the Department of Mineral Resources, which takes over the entire process subject to other provisions of s 5. 

Further s 5(3)(a) is just a legislative rubber stamping exercise from the pre-Union legislation that granted a mineral right holder the right to enter private property to search for minerals on the basis that the nature of mineral rights is separated from the ownership of the land. This was established by Innes CJ in Van Vuren and Others v Registrar of Deeds 1907 TS 289 at 294; a mineral right entitles the holder thereof ‘to go upon the property to which they relate to search for minerals, and, if he [the holder] finds any, to sever them and carry them away’. 

However, juxtaposing a pre-Union approach to mineral rights in a modern constitutional dispensation is a dangerous exercise as entering the property of another should not be done after a mere consultative and box-ticking process, but should be an inclusive one that is all encompassing taking cognisance of both the interests of the surface landowner and the prospective mineral rights holder.

The court in the Agri SA case also had occasion to dissect at length, among others, rights afforded to mineral rights holders insofar as old order rights are concerned and whether extinguishing these rights through the promulgation of the MPRDA, amounted to expropriation. The other critical factor considered by the court was the landowners’ only recourse before mining rights are granted, specifically s 5(4)(c), which makes it mandatory for them to be consulted before the mineral rights can be granted. 

The minister had contended that, although there was deprivation of property because all mineral rights under the 1991 Act were extinguished by the MPRDA, the MPRDA did not effect a general deprivation of existing mineral rights because the state did not acquire any rights in consequence of the MPRDA coming into operation. 

However, such an argument leaves a lacuna in our mining law insofar as mineral rights are concerned, because s 3 of the MPRDA vested all minerals under the custodianship of the minister, leaving the surface landowner with nothing; which is a clear departure from the established cuius est solum principle that entitles the surface landowner of ownership of the minerals underneath. 

Further, does s 5(1), which classifies mineral rights as limited real rights, separate the ownership of the minerals beneath the surface from the ownership of the land? This is a contradiction in terms because it was settled in Hudson v Mann and Another 1950 (4) SA 485 (T) at 488 E – F that, for as long as minerals remain in the ground, they continue to be the property of the landowner; only when the holder of the right to minerals severs them do they become movables owned by him. 

Some have argued that the effect of s 5(1) is that it classifies only prospecting rights, mining rights, exploration rights and production rights as limited real rights, but does not similarly classify reconnaissance permits or permissions, retention permits, mining permits or technical co-operation permits. However, classifying mining rights in the class of limited real rights such as quasi servitudes contradicts the position set down in Nolte v Johannesburg Consolidated Investment Co Ltd 1943 AD 295 that mining rights are real rights. It had also been previously confirmed in the Van Vuren case that mining rights are ‘real rights and their exercise may conflict with the interests of the landowner’. 

This is further confirmed by some who argue that the fact that the real rights extend to the minerals themselves is reflected in s 5(3)(c) in terms whereof the holders are entitled to remove and dispose of any mineral found during the course of prospecting, mining, exploration or production. Yet, the fact that the real right extends to the land is reflected in ss 5(3)(a), (b), (d) and (e). However, the question is: Which rights should rank superior – those of the surface landowner by virtue of being the title deed holder, or those of the mineral right holder, considering that both are real rights and that the real right nature of mineral rights extend to the land itself by virtue of ss 5(3)(a), (b), (d) and (e) of the MPRDA as mentioned above? The MPRDA should therefore reconcile s 5 to accommodate the surface landowner by including a reasonable compensation provision during the acquisition of mineral rights further to the consultative process guaranteed by s 5(4)(c).

The surface landowner is the owner of the minerals under the surface by virtue of the common law. However, some have argued that this common law principle has been further abrogated by s 4(2), which allows the MPRDA to prevail over the common law in the event of any inconsistency, despite mineral rights being classified as common law rights. It is therefore clear that s 5 supersedes the common law rights of the surface landowner in the event of any inconsistency with the mineral right holder as contemplated by s 4(2).  

However, the only comfort that the surface landowner has is that the holder of a prospecting, mining or exploration licence only has a limited real right in respect of the land to which the right relates by virtue of s 5(1). However, does this not conflict with the common law position that classifies a mineral right as a real right and other earlier authorities? It is therefore tempting to classify s 5(3) as a restatement of the common law, although the Act states that the Act prevails over common law in the event of any inconsistency. 

Some argue that although a holder of a prospecting, mineral or exploration right may enter the surface landowner’s territory, the MPRDA does not confer rights to enter neighbouring or other land, other than the land to which the right relates. However, insofar as use of water is concerned, s 5(3)(d) entitles a holder of a prospecting right, mining right or exploration right to ‘use water from any natural spring, lake, river or stream, situated on, or flowing through, such land or any excavation previously made and used for prospecting, mining, exploration’. It is therefore clear that the surface landowner and the mining right holder have competing interests in water use rights subject to the National Water Act. 

This is in conflict with the common law position that the surface landowner should have superior rights to those with ancillary rights, such as mining right holders unless they have servitudes. This was confirmed in Union Government (Minister of Railways and Harbours) v Marais and Others 1920 AD 240 where it was held that subterranean water not flowing in a known and defined channel, but percolating through private property, may be intercepted and appropriated by the owner and that this position may be modified by servitude. 

Section 5(4)(c) is peculiar in that the prospecting, mining and exploration right holder should notify and consult with the landowner or lawful occupier of the land in question. This has led some to conclude that, since the state is the custodian of all mineral resources, consulting with the landowner serves a limited purpose only as the state grants the mining rights anyway. However, consultation with the landowner and or the lawful occupier before giving away the mining right, as the case may be, only helps to assess whether a balance can be struck between the mining right holder and the landowner insofar as interference with the landowner’s or occupier’s rights is concerned. 

This position was settled in Bengwenyama Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and Others 2011 (4) SA 113 (CC), where the court held that the MPRDA does not impose agreements as to the outcome of consultation. It therefore should be implied that ‘notifying and consulting with’ the landowners should be a process where there has to be agreement between the mining right holders and the landowner if the landowner is to have a meaningful benefit from the entire process. 

In my view, the consultative process within the ambit of s 5 should impose obligations for an agreement to be concluded between the surface landowner and the mining right holder during the consultative process. The correct approach should therefore be ‘in consultation with’. However, notwithstanding whether consultation should be ‘in consultation with’ or ‘after consultation with’ the surface landowner, the position set down in S v Smith 2008 (1) SA 135 (T) that consultation cannot be a mere formal process and has to be a genuine and effective engagement of minds between the consulting and consulted parties, and not a more formalistic attempt to consult, should prevail if the landowners are to have a say in the entire process. 

In conclusion, ss 3 and 5 have eroded the common law principle that minerals are part of the dominium of the surface landowner. Further, it also appears that both sections follow an English law approach where separate ownership of strata of the soil under the surface is possible. Such separation was, however, never recognised in Roman Dutch law, which does not recognise the separate ownership of minerals before their extraction from the soil. 

It was also highlighted in the Agri SA case that, in general, the owners of property are free to do with it what they wish and, as a matter of common law, the right to mine vests in the owner of the land and is one of the entitlements arising from the ownership of land. Yet in our jurisdiction a sui generis type of mineral right has been created that classifies mineral rights as common law rights that do not have their origin in the common law as argued in the Agri SA case. 

Such rights originate largely from legislation that permitted personal rights obtained under contracts to be registered as rights separate from the ownership of the land to which those rights related. The state has not, however, claimed ownership of minerals separate from the ownership of the land on which they are found, but has left the ownership to remain with the landowner with the state being custodian thereof by virtue of s 3. 

However, the court argued in the Agri SA case that ownership of minerals without the right to exploit that ownership is of little value, because mere ownership of minerals in the ground was valuable only when owners could control access to their land for the purpose of prospecting and mining for minerals. The value does not lie in the person’s ownership of the land but in their being the holder of the mineral rights, so it appears the surface landowner now has inferior rights to his or her land insofar as minerals below the surface are concerned. 

It appears that this was an abrupt shift brought by the 1991 Act whereby the presence of minerals on or under the land conferred no value on the owner, unless the right to mine in respect of those minerals was also vested in the owner of the property. However, even then, the value lay not in the person’s ownership of the land but in their being the holder of the mineral rights.
• See also 2012 (July) DR 44.

Felix Majoni LLB (UZ) LLM (Commercial Law) (Unisa) PG Cert (Mining and prospecting law) (Wits) is a senior legal consultant at Cyprus Legal and Commercial Consultants in Johannesburg.