Court of appeal interprets the term "refining" in a royalty clause
In Quasar Resources Pty Ltd v APG Aus No 3 Pty Ltd [2023] WASCA 171, the Court of Appeal dismissed an appeal against a trial judge's decision about the meaning of the term "refining" in a royalty clause, finding that the trial judge validly relied on expert evidence in interpreting the term in a narrow manner.
The case concerned the interpretation of a royalty clause in a contract. Under the contract, APG Aus received a "net smelter royalty" from minerals mined and processed by Quasar Resources. Prior to paying the royalty to APG Aus Quasar Resources was entitled to deduct "Allowable Charges" from its gross sale proceeds. The Allowable Charges were "charges, costs and penalties, if any, for … refining". APG Aus argued that the term "refining" should be interpreted narrowly, and claimed that Quasar Resources did not incur any costs for refining. The issue was financially very significant: Quasar Resources had been claiming Allowable Charges of 60%-120% of its gross sale proceeds.
At trial, the Supreme Court heard evidence as to the use of the term "refining" in the mining industry, including from various experts. The Court determined that in the parties' contract, "refining" had a narrow meaning, being the final processing of metal bearing products by which impurities are physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product, and did not include any purification processes prior to this. The Court determined that no "refining" occurred at Quasar Resources' processing plant in Australia and therefore that Quasar Resources was not entitled to deduct the costs of these for the purposes of the calculation of its royalty.
Quasar Resources appealed this decision to the Court of Appeal. Its main argument on appeal was that the Supreme Court had fallen into error by considering evidence as to the industry meaning of the term "refining" (rather than the "ordinary" meaning of the term). However, the Court of Appeal disagreed and therefore dismissed the appeal. The Court of Appeal determined that "refining" had no ordinary meaning. Rather, the meaning of the term depended on the context in which it was used and so expert evidence was required to help determine this.
Warden determines whether competing corporate obligations can excuse non-compliance with expenditure obligations
In Bullseye Mining Limited v Wolski & Anor [2023] WAMW 47, Warden Cleary recommended to the Minister that 11 applications for exemption from expenditure requirements be granted and that five applications be refused. In making these recommendations, Warden Cleary considered the degree to which complex corporate events such as board spills and hostile takeovers can impact the ability of a tenement holder to raise capital in order to meet expenditure requirements.
Bullseye Mining, a gold exploration and gold production company, had applied for an exemption from expenditure for 16 of its tenements on the principal ground that it needed time to raise capital to conduct exploration on the tenements. Bullseye Mining alleged that it had been severely restricted in raising capital due to a series of events including:
- a hostile takeover bid;
- difficulties obtaining funding;
- numerous hostilities and attempts to assume control of the company by Bullseye Mining's major shareholder groups and other associated parties; and
- defending court proceedings.
Mr Wolski and West Australian Prospectors objected to Bullseye Mining's application. They alleged that that the accounts of Bullseye Mining showed that it had capital which exceeded the amounts Bullseye Mining did not spend on the tenements, and that the events relied upon by Bullseye Mining were a normal part of corporate life.
In determining the application, the Warden considered matters including:
- whether Bullseye Mining needed to raise capital to carry out its exploration;
- the work done on the tenements by Bullseye Mining, before, during and after the relevant expenditure years; and
- whether the corporate events relied upon restricted Bullseye Mining from raising capital.
On the evidence adduced at the trial, the Warden determined that the corporate events had restricted Bullseye Mining's ability to raise capital which was needed for the exploration activities. The Warden was also satisfied that, in relation to 11 of the 16 tenements, Bullseye Mining needed more time to raise capital to conduct exploration. The Warden therefore recommended granting exemptions in relation to these tenements. In relation to the remaining five tenements the Warden recommended refusal of the exemptions because she was not satisfied that Bullseye Mining needed time to raise capital to conduct exploration, pointing to, amongst other matters, a lack of plans for these tenements in the context of limited plans for the project as a whole.
Warden rejects application to restore tenements following repeated failures to comply with statutory requirements
In the Matter of Applications for Restoration of M 09/154 and M 09/155 by Westhaul Transport Services Pty Ltd [2023] WAMW 51, Warden Cleary recommended the rejection of an application for restoration by a tenement holder who had had its tenements forfeited for failure to comply with statutory requirements, finding that there had been a "gross lack of care" as to compliance by the tenement holder over a three-year period.
In August 2017, Westhaul was granted two mining leases. It used the leases to mine sand for supply to the mining industry. One of its directors, Mrs Mulcahy, was responsible for all administrative tasks for the business. She undertook these duties on a part-time basis and after hours, given her full-time employment in the aged care industry.
In November 2021, the Department advised Westhaul that it was considering forfeiting the tenements due to its failure to submit any Form 5 Operations Reports. Westhaul did not respond to this. In May 2022, the mining leases were forfeited. The Department's forfeiture action followed the Department fining Westhaul for its failure to lodge its Form 5s and under-expenditure in each year since 2017.
A year later, in May 2023, Westhaul applied for the mining leases to be restored. In determining the application, the Warden noted that no objections to the application had been lodged. Further, the Warden held that while subsequent to the application, an application for an exploration licence had been lodged over the ground covered by the mining leases, Westhaul was not obliged to serve its application on that applicant. In relation to the substance of the application for restoration, the Warden noted that Westhaul had taken steps to mitigate potential future non-compliance. However, the Warden also noted that Westhaul had failed to comply with its obligations to lodge a Form 5 on multiple occasions and had purposefully disregarded its obligations, which constituted a "gross lack of care". The Warden also considered that there were no special circumstances in favour of restoration given that Westhaul had only held the mining leases for a few years and had done very little work on them, with limited plans for future operations. Accordingly, the Warden recommended refusal of the application.
Warden refuses application for extension of time to object
In Bellavista Resources Ltd v Hamersley Iron Pty Ltd [2023] WAMW 49, Warden McPhee dismissed an application for an extension of time to object, relying predominantly on there being no proper explanation for the delay in objecting and the weak strength of the proposed objection.
Over a period of time, Bellavista had attempted to negotiate with Hamersley Iron over competing interests arising between various miscellaneous licence applications of Hamersley Iron and exploration licence applications of Bellavista. Bellavista did not file an objection to Hamersley Iron's applications while the negotiations were on foot. However, when negotiations reached a stalemate Bellavista sought to object. However, by then it was outside the time allowed for doing so.
The Warden considered the length of Bellavista's delay in seeking to object, the explanation for the delay, and the nature of the proposed objection to be the relevant factors in determining the application. The Warden found that Bellavista's delays (427 and 159 days) were lengthy and an important factor in its objections being unreasonable. Bellavista's explanation for the delay included an alleged unawareness of its ability to object, its preoccupation with exploration projects, and a claim that it was not aware of the magnitude of Hamersley Iron's proposed projects. However, on the evidence at the hearing, the Warden found that Bellavista did know that an objection could be lodged and that it could appoint lawyers to handle the matter, but simply chose not to do so. The Warden also rejected Bellavista's allegation that it was too preoccupied with exploration activities to query Hamersley's planned projects, given that Bellavista had been negotiating with Hamersley Iron in relation to the relevant issues. Finally, in relation to the nature of the proposed objection, the Warden found that a mere possibility of competing claims for the use of ground was very speculative and therefore the proposed objection was weak.
Warden grants application for extension of time to object
In Whitelaw v Scorpion Minerals Limited & Anor [2023] WAMW 58, Warden Cleary granted Scorpion Minerals and a related party (Mr Legendre) an extension of time to object to an application for a special prospecting licence. The Warden found that Scorpion Minerals had standing to object even though it was not a relevant tenement holder at the time of the application for the special prospecting licence and that the extension of time sought was reasonable in the circumstances.
Ms Whitelaw had lodged an application for a special prospecting licence over ground which was subject to an exploration licence held by Venus Metals and Mr Legendre. Approximately 18 months later, Venus Metals' interest in the exploration licence was transferred to Scorpion Minerals. Scorpion Minerals and Mr Legendre then sought to object to Ms Whitelaw's application, nearly two years out of time. Accordingly, they first required an extension of time to object.
Ms Whitelaw opposed the application for an extension of time, first arguing that as Scorpion Minerals was not the holder of the exploration licence at the time of her application for a special prospecting licence it had no right to object. The Warden rejected this argument, finding that having regard to a plain reading of the Mining Act 1978 (WA), the policies of the mining regime and natural justice, Scorpion Minerals did have standing to object. Ms Whitelaw then argued that the extension of time sought was not reasonable. However, the Warden also rejected this argument. The Warden determined that it was reasonable to grant the extension of time having regard to the merit of the proposed objection (the potential for conflict between Ms Whitelaw's special prospecting licence and Scorpion Minerals and Mr Legendre' exploration licence) and the minimal prejudice suffered by Ms Whitelaw from the delay.
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