Five important cases for mining executives from the February 2023 quarter

3 minute read  14.02.2023 David Suttner, Edward Fearis, Angus Paterson

We explore five case studies that explore recent trends in the mining sector. This article includes: Minister's powers in relation to the grant of exploration licences, Warden refuses to hear environmental objectors and Oral contracts with third parties.

In this article, we explore five important cases and perform a sweep of the Warden's Court from the last quarter, which will impact on Western Australian mining executives.

Minister's powers in relation to the grant of exploration licences clarified

In Blue Ribbon Mines Pty Ltd v Roy Hill Infrastructure Pty Ltd [2022] WASC 362, Chief Justice Quinlan determined that the Minister does not have the power to grant an exploration licence over part of a block by reason only of the remainder of the block being private land or the subject of a miscellaneous licence.

The Minister does have the power to impose:

  • "no mining" conditions (conditions which prohibit mining or exploration activities) in respect of any area overlapping a miscellaneous licence or private land or areas adjacent to the overlapping areas; and
  • conditions which prohibit certain actions unless there is consultation or consent obtained from the Minister or other parties or which require the applicant to comply with conditions imposed in the future by Minister.

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Blue Ribbon lodged an application for an exploration licence in the Hamersley Ranges. Roy Hill and certain FMG and BHP entities lodged notices of objection on the basis that the land which was the subject of the application encroached on key infrastructure such as railway and roads. Blue Ribbon and the objectors endeavoured to resolve the objections by agreeing to programming orders proposing that the Minister grant the exploration licence subject to:

  • certain areas being excised from the area the subject of the exploration licence. The proposed excisions would have resulted in the licence including parts of blocks, rather than whole blocks (in respect of those blocks overlapping the objectors' tenure); and
  • conditions or endorsements being imposed on the exploration licence prohibiting certain activity on certain areas within the exploration licence, such conditions being intended to preserve the interests of the objectors in relation to their tenures.

As a result of certain questions arising regarding the Minister's powers to grant the exploration licence in those terms, the Warden at Perth reserved four questions of law to be determined by the Supreme Court.

The Court answered the questions as follows:

  • The Minister does not have the power to grant an exploration licence over part of a block by reason of there being a miscellaneous licence over the remainder of the block.
  • The Minister does not have the power to grant an exploration licence over part of a block by reason of the remainder of the block being private land.
  • The Minister does have the power to impose conditions which prohibit mining or exploration activities (i.e. no mining conditions) upon the grant of an exploration licence in respect of any area overlapping a miscellaneous licence or private land, or areas adjacent to the overlapping areas.
  • The Minister does have the power to impose conditions which:
  • prohibit certain actions unless there is consultation or consent is obtained from the Minister or other parties, including where any consent is to be provided as part of a consultation process; or
  • require the applicant to comply with conditions imposed in the future by the Minister.

Warden refuses to hear environmental objectors and other important cases before the Warden

In Telupac Holdings Pty Ltd v Hoyer [2022] WAMW 26, Warden Cleary refused certain parties an opportunity to adduce evidence and make submissions regarding their objections to the grant of an application for exploration licences on the basis of their environmental impacts. The Warden determined the objections raised matters of environmental impacts governed by other government agencies or matters of public policy and principle. These are the responsibility of the Minister to consider. Accordingly, the proposed evidence and submissions were not matters the Warden could rule upon and therefore she could not consider them when making her recommendation. However, the Warden did indicate she would hear from the parties regarding whether a hearing is to be held in respect of the conditions to be imposed on the licences.

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In AC Minerals Pty Ltd v Cowarna Downs Pty Ltd [2022] WAMW 22, Warden McPhee confirmed that the Warden must be satisfied that an application for a mining lease complies with the jurisdictional pre-requisites under the Mining Act 1978 (WA). This includes marking out, even if it is not in issue between the parties. In this case, the Warden found that two affidavits filed by the applicant which attested that, to the best of the deponents' knowledge, information and belief, the marking out provision of the Mining Act had been complied with, was sufficient as no factual issue was raised by the objector. However, the Warden commented that similar evidence may be insufficient in cases where compliance is disputed.

The case concerned two applications for mining leases made by the same applicant over overlapping land. The land subject of the earlier application was completely contained within the larger area that was the subject of the later application.

The Warden noted that ordinarily, pursuant to section 105A of the Mining Act, an earlier application over a smaller area should be recommended for grant in its entirety and the later application should recommended for grant only in respect of the balance of the area. However, there remains a residual discretion in exceptional circumstances (e.g. fraud) to depart from a strict application of section 105A. The Warden determined that the untidiness of granting two mining leases, in terms of tenement management, did not constitute exceptional circumstances.

In Azure Minerals Ltd v D & G Geraghty Pty Ltd [2022] WAMW 27, Warden McPhee endorsed Warden's Cleary decision in True Fella that a "section 58 statement" in support of an application for an exploration licence is required to include information covering the entire five year term of the exploration licence.

In Tavanth Singh Sandhu v Tristan David Owen [2022] WAMW 24, Warden McPhee ordered the payment of security for costs by the applicant objector to the respondent tenement holder in an application for forfeiture of a mining lease. The Warden identified as most relevant an unpaid costs order arising from a previous dispute between the parties before a Warden.

Oral contracts with third parties sufficient for offsite operations

In Brosnan v O'Sullivan [2022] WASC 414, the Supreme Court determined that the requirement for written authorisation in section 118A of the Mining Act 1978 (WA) applied only to work completed on the physical land of a tenement and did not apply broadly to all work done in relation to a tenement. In this case, the requirement for written authorisation did not apply to work performed remotely by a Queensland geologist for Mr Brosnan pursuant to an oral contract.

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The Warden dismissed Mr Brosnan's application for forfeiture of Mining Lease 51/863 held by Mr Lapelerie on the basis that the expenditure requirements had been met. Mr Brosnan sought judicial review of this decision. Mr Brosnan contended that the Warden incorrectly included costs incurred by the engagement of a third party geologist when determining compliance with the Lease's expenditure conditions. The geologist's work was carried out pursuant to an oral agreement and consisted of analysis and processing undertaken in Queensland without any visit to the tenement.

Mr Brosnan accepted that the content of the disputed work would constitute expenditure if contracted under written agreement. However, he argued that, because the contract was oral, it did not comply with section 118A and therefore did not constitute expenditure. Accordingly, the issue in dispute was whether the requirement for written authorisation in section 118A of the Act was limited to work completed on the physical land of a tenement, or applied broadly to all work carried out in relation to a tenement.

After undertaking an analysis of section 118A and the purpose of the section, the surrounding sections of the Act, and the consequences of Mr Brosnan's interpretation, the Court held that section 118A of the Act only required written authorisation for mining on the physical land of the tenement.

The decision means costs incurred through offsite outsourced work contracted pursuant to an oral agreement is expenditure that may satisfy the tenement's expenditure conditions. Notwithstanding the Court's decision, there remain significant practical benefits to ensuring the terms of any agreement are recorded in writing.

Obligation to co-operate in joint venture earn-in agreement

In Zuleika Gold Limited Formerly Known As Dampier Gold Ltd v Vango Mining Limited [2022] WASC 357 the Supreme Court upheld Zuleika's claim that Vango Mining and its subsidiary Dampier Plutonic's actions amounted to both:

  • a breach of express and implied terms of the binding term sheet for a joint venture between the parties (BTS); and
  • a repudiation of the BTS which entitled Zuleika to terminate the BTS.

Notably, it was determined that the implied terms that were breached included terms that the parties had a duty to co-operate in progressing the joint venture. It was also determined that the parties had a duty not to prevent the fulfilment of the agreement and that the parties had a duty to do all things necessary to enable each other party, including Zuleika, to have the benefit of the agreement.

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Vango and Dampier Plutonic were the holders of a mining lease. Pursuant to the BTS, Zuleika could earn-in an interest up to 50% and form an unincorporated joint venture in respect of the tenement's development. Zuleika claimed Vango and Dampier Plutonic engaged in conduct which constituted a repudiation of the agreement as their conduct demonstrated a clear unwillingness to substantially perform the agreement.

The BTS expressly required each party do all acts and things that may be reasonably required for the other parties to effectively carry out and give effect to the terms and intentions of the BTS. It was agreed in the proceedings that the BTS included implied terms that each party had a duty not to prevent fulfilment of the BTS and that each party had a duty to do all things necessary to enable each other party to have the benefit of the BTS. The Court found the BTS also included an implied term that the parties had a duty to co-operate in progressing the joint venture. The Court found the implied terms were consistent with the scope, nature and express terms of the BTS.

The Court determined Vango and Dampier Plutonic had breached the express and implied terms of the agreement, including by:

  • preventing Zuleika from contributing to expenditure during the earn-in period; and
  • failing to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement,

and in doing so had also repudiated the agreement. In turn, the Court determined that Zuleika was entitled to terminate the BTS. The Court also determined that Zuleika had earned a joint venture interest of 4.1% under the terms of the BTS.

Dispute as to whether joint venture interests related to run-of-mine ore or refined product

In Tribune Resources Ltd v EKJV Management Pty Ltd (No 2) [2022] WASC 463, the Supreme Court rejected Tribune Resources, Rand Mining and Rand Exploration's (R&T Group) claim that EKJV Management, Northern Star Resources and Gilt-Edged Mining (Northern Star Group) failed to act in accordance with their obligations under certain agreements in relation to the East Kundana gold mining joint venture. In particular, the dispute related to the manner in which product from the mine was divided between the parties. The case turned on the meaning of the term "Minerals" in an agreement between the parties, particularly whether the term referred to the refined gold produced by the joint venture operation or the mined ore. Ultimately, following an analysis of the relevant provisions of the agreement, the Court upheld the Northern Star Group's argument that "Minerals" meant the mined ore, and therefore found in favour of the Northern Star Group.

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The R&T Group had a 49% interest in the joint venture, with the remaining interest held by Gilt-Edged Mining. EKJV Management was responsible for management of the joint venture and Northern Star Resources was responsible for management of the ore treatment facility.

Previously, the run-of-ore from the mine was refined at a single ore treatment facility. When this facility was no longer able to treat all the ore, a dispute arose between the parties regarding when the division of "Minerals" in accordance with each party's joint venture interest should occur.

The R&T Group contended that this should occur once the ore had been processed into a refined product. It contended that due to actual gold being unevenly distributed within the ore, the inevitable result of dividing the product prior to the refinement process would be that the parties would receive refined gold unequal to their interests in the joint venture. The Northern Star Group argued the contract was for the mining of the ore and not the refinement of the product, and consequently it was within its rights to take the ore before it was refined.

The central issue was the interpretation of the term "Minerals" within the agreements. Ultimately, the Court upheld the Northern Star Group's argument that "Minerals" meant the mined ore (and not the refined gold produced by the joint venture operation).

If you would like further information or detail on any of the cases listed above, please contact us.

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