January 25, 2008

State to fight De Beers' Diamond dump victory

The legal battle between mining giant De Beers and the minerals and energy department over the control of diamond mine dumps said to contain deposits worth billions of rands may continue after the department said it might appeal against last month's ruling by the Bloemfontein High Court in favour of De Beers. De Beers had taken the department to court to stop it granting a prospecting right to empowerment company Ataqua Mining on De Beers' Jagersfontein tailings dump in Free State, where mining ceased in 1971. The judgment could mean that the Minerals and Petroleum Resources Development Act does not apply to tailings dumps.
The dispute started in 2006 when the department issued a prospecting right to Ataqua Mining under the act, to prospect for diamonds on the dumps at Jagersfontein. The act was intended to help empowerment companies to enter the mining arena. Tailings dumps are the residue of decades of mining operations. With current high commodities prices, and using modern extraction techniques, these dumps can yield more minerals at very low cost and risk. If the act does not apply to tailings dumps, it could mean that no licences would be needed to prospect or mine them. The act, introduced in 2004, made the state the custodian of all mineral assets. To secure a mining licence, companies must comply with the mining charter - which lays down minimum black ownership requirements - and submit social and environmental plans. Draft legislation that would require companies to pay royalties to the state for mining these resources is under discussion. After the court judgment, none of these requirements of the act applies to tailings dumps. The department's legal adviser, Pieter Alberts, said the department had taken legal advice on the judgment and it appeared likely it would lodge an appeal.
According to news reports, the Bloemfontein High Court had ruled in favour of De Beers. The court ruled that the act applied only to minerals in the ground, not tailings, which had already been mined. The act was silent on tailings. De Beers spokesman Tom Tweedy said De Beers welcomed the court's judgment. It had no intention of mining the Jagersfontein dump but would evaluate the size of the deposit to see what opportunities existed. There were a number of implications to the judgment and De Beers would look "at the bigger picture", Tweedy said. It was healthy that the act, which was relatively new, was being tested.
As far as empowerment partnerships were concerned, De Beers was already a blackempowered company, he said. In 2005, De Beers sold a 26% stake to the Ponahalo black empowerment consortium. Other companies taking steps to reprocess or sell dumps containing gold, uranium or diamonds include Harmony Gold, in partnership with the Pamodzi Resources Fund, DRDGold, Simmer & Jack, and its subsidiary First Uranium at Buffelsfontein. DRDGold financial manager Kobus Dissel said he had heard about the judgment but it would be prudent to get legal advice on it. About 60% to 70% of DRDGold's business was surface retreatment. Simmer & Jack said it preferred not to comment until it had studied the judgment. (Business Day, Johannesburg)

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