Global lawyers launch model mining code

28 July 2016 – Johannesburg: The World Initiative of Mining Lawyers (WIOML’s) has launched a mining code that it says could guide many countries in attracting investment while securing fair benefits from mineral exploitation within their borders.

“The code provides a good starting point for countries without a code in place yet,” said Andrew van Zyl partner and principal consultant at consulting engineers and scientists, SRK Consulting. Van Zyl was a

Andrew van Zyl partner and principal consultant at consulting engineers and scientists, SRK Consulting

Andrew van Zyl partner and principal consultant at consulting engineers and scientists, SRK Consulting

speaker at the recent WIOML’s conference where the code was launched. “It also provides a useful benchmark against which a country could compare its existing code.”

Some of the principles underlying the model code include fair licence allocation, work-it-or-lose-it, the right to mine, and the social licence to operate.

“Clearly, the transparent awarding of exploration licences is a key starting point for any national effort to promote mineral development,” said Van Zyl, “so this should be done on an objective basis with free and open access – although there may be circumstances under which tendering could be considered.”

Mining companies should also be given enough exploration time so there is a reasonable chance of making an economic discovery – the average period for an economic discovery is eight years – followed by a right-to-mine that is granted on objective criteria that are free of discretion, he said.

“Equally, a good mining code would ensure that explorationists make ongoing financial commitments if they want to maintain their exploration rights, or they must relinquish them so that others may gain access,” he said. “The model code also encourages the use of mechanisms for local community engagement to entrench a company’s social license to operate, and recommends that the process for environmental approval should be facilitated through clear criteria and timeframes.”

Applying a clear and reasonable mining code will go a long way to attracting investors, said Van Zyl, and should be augmented by a culture of constructive collaboration among mining stakeholders – which could gain traction while the global economy waits for commodity prices to improve.

“There is little appetite or ability right now to raise the billions of dollars needed to develop large mining projects,” he said. “But there is the time to invest much smaller amounts in the vital but neglected process of forging agreement and trust between miners, governments, communities, NGOs and other interested parties.”

Van Zyl emphasised the importance of in-depth negotiation well in advance of project implementation – especially when mining projects require complex and costly infrastructural arrangements.

“Too many projects are rushed into construction when commodity prices are buoyant, and are consequently hampered by a lack of local buy-in and insufficient clarity about each player’s respective roles, responsibilities and benefits,” he said. “In many cases, the process becomes fraught with mistrust and brinkmanship, which delays or even threatens the project altogether.”

Van Zyl argued for expert legal, financial and technical input in such discussions at an early stage, so that all parties can construct a common foundation of information, data and professional opinion – dealing with potential obstacles in a constructive but robust environment.

“Ideally, these discussions should take place well before a project design is finalised, and certainly before any funding is sought,” he said. “Financing a project will in any event generally be easier where the champion can demonstrate cooperation and consensus among stakeholders.”

This approach would also help build the groundwork for a social licence to mine by facilitating deeper engagement with local communities, the public sector and non-governmental interest groups.

Van Zyl said there was expected to be mounting pressure on mining companies to negotiate more widely and deeply before committing to projects, as competition grew for a range of scarce resources such as land, water, energy and natural assets.

“It is vital for mining companies to take the initiative in setting up these meaningful discussions, rather than waiting for governments to impose solutions that may not be as effective,” he said. “There is a danger that the industry is perceived as often being on the back foot and reacting defensively to the demands of other parties; goal-driven communication between these groups will help ease that perception.”

He added that there was plenty of depth to the technical, legal, financial and other skills in mining’s service sectors – and that these had an increasingly crucial role to play in the effectiveness of broad stakeholder discussions.

About SRK Consulting

SRK Consulting is a leader in natural resource and development solutions, providing independent technical advice and services through over 45 offices in 20 countries, on six continents. With an African presence in Cameroon, and practices in the Democratic Republic of Congo, Ghana and South Africa, the global group employs more than 1,400 professionals internationally in a range of engineering, scientific, environmental and social disciplines.

About Andrew van Zyl

Andrew van Zyl is a Partner and Principal Consultant at SRK Consulting. He holds a B Eng (Chemical) and M Com (Financial Economics) and worked in production and project roles up to 2006, when his focus shifted to strategy, business development and valuation. Andrew has spent several years as technical advisor to government committees overseeing the negotiation of mining conventions and rail and mineral terminal concessions. He has experience in valuing metals and minerals assets, including iron ore, manganese, chrome, copper, coal, gold and the platinum group metals. He has lectured in exchange rate theory and corporate valuation at the University of Johannesburg and has presented research and papers at conferences focusing on economics, mining valuation and health economics. He is a member of the working committee to rewrite the South African Mineral Valuation Code and is a member of the Institute of Directors. Email: [email protected]

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