THE Sydney-listed Australian junior miner Aquila Resources is considering legal action against South Africa’s Department of Mineral Resources over the granting of an “overlapping” prospecting right on one of its projects to a state-owned company.

The company concerned — Pan African Mineral Development — is jointly owned by the South African, Zambian and Zimbabwean governments.

The dispute concerns Aquila’s Gravenhage manganese ore project, which is 75km north of Kuruman in the Northern Cape.

The row shows similarities with a previous dispute between platinum mining group Lonmin and Keysha Investments.

The development is also strongly reminiscent of a dispute which received far less publicity, but took four years to resolve, between Hosken Consolidated Investments and the Department of Mineral Resources.

That started in 2008 after the department awarded a prospecting right to part of one of Hosken’s coal projects to the state-owned mining company — African Exploration Mining and Finance Corporation. The threat of legal action from Aquila comes less than a week after executive chairman Tony Poli told a media conference in Johannesburg that his experience in South Africa during the seven years that his company had operated here had been “rewarding”.

At that conference, held last Tuesday, Mr Poli mentioned the issue of the overlapping prospecting rights, but said that he was hoping to sort this out through negotiations.

But on Monday, after discussions with the department and Mineral Resources Minister Susan Shabangu, Aquila issued a statement saying, “the company now believes it is unlikely that the matter will be resolved by further discussions”.

“(Legal firm) Webber Wentzel have accordingly (on Monday) written to the minister requesting a formal decision on the grant of the Gravenhage mining right application.

“Failing a positive decision, Aquila will take all the necessary action to protect its rights, which may include an internal appeal under section 96 of the South African Minerals and Petroleum Resources Development Act (2002), an injunction and judicial review proceedings.”

Aquila’s head of country for South Africa, Mike Halliday, declined to comment on what had taken place during the meeting with Ms Shabangu to change the company’s approach so radically.

“There was a meeting with the minister. I cannot say any more than that at this stage,” he said.

Such details of the dispute as have been revealed by Aquila show similarities with two previous actions by the Department of Mineral Resources.

These were the granting of a prospecting right over part of Lonmin’s Marikana platinum mine in North West province to the empowerment company Keysha Investments in 2009, and the awarding of a prospecting right over part of Hosken’s Mbali project to African Exploration Mining and Finance Corporation during 2008, in a decision that Hosken’s chairman, Marcel Golding, described in his annual review for 2009 as “inexplicable”.

Lonmin eventually bought back for $4m the rights that had been granted to Keysha Investments. Hosken took legal action and got a judgment in its favour, which was disputed by African Exploration Mining and Finance Corporation.

That led to Mr Golding commenting in his 2011 review that, “the delay in these approvals is most frustrating and is further evidence of the significant and unnecessary difficulties which new entrants in the mining sector face”.

The judicial appeals brought by African Exploration Mining and Finance Corporation were unsuccessful and Mr Golding announced in his 2012 review that “management will now complete the remaining infrastructure with a view to starting mining operations in the latter part of 2012 or the first quarter of 2013”.

According to Aquila it has received documentation from lawyers representing Pan African Mineral Development Company, which alleges that Pan African Mineral Development Company is the holder of an overlapping prospecting right.

The Aquila statement said that “the alleged overlapping prospecting right appears, from the documentation, to have been granted to Pan African Mineral Development Company on 17 November 2011, which is over five years after a prospecting right over parts of the same areas was granted to the company’s wholly owned subsidiary.

“The alleged grant is also almost one year after the Gravenhage mining right application was accepted by the Department of Mineral Resources on 22 December 2010.”

Aquila said: “It is regrettable that Aquila now needs to consider legal action to protect the security of its tenure on the Gravenhage manganese deposit having advanced the project since 2006 in accordance with all relevant laws and Department of Mineral Resources’s requirements.”

Aquila has so far spent R150m on assessing the Gravenhage project in the 10km-long Avontuur basin about 50km from Hotazel, which will require further development capital expenditure of around R1.8bn to build a mine that would produce up to 1.5-million tonnes of ROM (run-of-mine) ore annually.

In reply to e-mailed questions, a representative of the department said: “The Department of Mineral Resources is unable to comment further on this matter at this stage, as we do not wish to pre-empt the outcome of the process”.

Business Day – BD Live – Brendan Ryan