31 March 2016

Extension of WA co-funding drilling exploration program

The Western Australian State Government (State) recently announced the thirteenth round of applications for the Co-Funded Exploration Drill Program (Program), with an additional $5 million in grants available for explorative drilling programs in the 2016 / 2017 year. To date, prior Program rounds have provided funding of approximately $23 million to explorers, miners and prospectors.

The Program is the flagship program of the State-funded Exploration Investment Scheme (EIS), which promotes and supports innovative exploration drilling projects throughout Western Australia. The Program offers up to a 50% refund for innovative explorative drilling programs, subject to caps determined by whether the project is for general multi-hole drilling, single deep-hole drilling or prospecting. The EIS has resulted in multiple significant discoveries since its inception in 2009, including the Nova nickel deposit.

The State’s move to extend funding is an important response to the current economic climate and the associated impact on mining activity in Western Australia, particularly exploration. Concerning trends such as a decline in exploration spending and a narrowed focus on brownfield funding are reflective of a lack of confidence in the resources sector during a period of volatility in commodity and currency markets. Limited private investment and capital raising opportunities for junior proponents compound the issue, making it particularly difficult for junior proponents to commit to and fund meaningful exploration programs. In announcing the Program funding extension, Mines and Petroleum Minister Bill Marmion stated “There has never been a more important time to support exploration. This innovative program favours under-explored and greenfield[s] areas, helping more than 590 projects and 450,000 metres of drilling since it began in 2009.” 

Sustained exploration is key to adopting a long-view of the commodities cycle. There is currently a strong focus on capital returns for projects in a low-growth environment, however given the finite nature of mining projects, a lack of exploration at this point in the commodities cycle may lead to a constrained future project pipeline.    

Applications for Program funding are open until 5 April 2016, and should be made via the Western Australia Department of Mines and Petroleum website.

For further information, please contact Jay Leary, Partner, or your usual Herbert Smith Freehills contact.

22 March 2016

Mining & Petroleum Law – NSW legislative changes update #2

Maximum term of exploration licences extended from 5 to 6 years

On 1 March 2016 the Mining and Petroleum Legislation Amendment (Harmonisation) Act 2015 (NSW) (Harmonisation Act) commenced by proclamation (except Schedule 2(23) which commenced on 18 December 2015). The object of the Harmonisation Act is to bring the Mining Act 1992 (NSW) (Mining Act) and the Petroleum (Onshore) Act 1991 (NSW) (Petroleum Act) into closer alignment in respect of the administration of titles, conditions, compliance and enforcement. It is the first stage in delivering a single resources act in NSW.

What has changed?  

The provisions relating to the maximum term of assessment leases and exploration licences have changed under the Mining Act. The possible term of certain mining tenements has been extended from a period not exceeding 5 years to a period not exceeding 6 years. Specifically, these changes include:

  • the term of an assessment lease may be for a period of up to 6 years (instead of 5 years previously) (section 45 Mining Act);
  • the term of an exploration licence may be for a period up to 6 years (instead of 5 years previously) (section 27 Mining Act); and
  • the renewal of an exploration licence or assessment lease may be for a period which may not on any one occasion exceed 6 years (instead of 5 years previously) (section 114 Mining Act).

Why is this important?

The changes have been made to bring the maximum term of assessment leases and exploration licences granted under the Mining Act into alignment with the provisions relating to the term of assessment leases and exploration licences granted under the Petroleum Act.

Transitional provisions

Mining proponents should note the following transitional provisions:

  • the term of existing tenements does not automatically change (for example, from 5 to 6 years); and
  • pending applications for the grant or renewal of an assessment lease or exploration licence made, but not decided, before 1 March 2016 may now be for a period of up to 6 years.

Native title implications

Holders of exploration licences and assessment leases should be careful applying for a renewal for a term longer than the original grant term. Under the Native Title Act 1993 (Cth) (Native Title Act), the renewal of an exploration licence or assessment lease for a term longer than the grant term can trigger the ‘right to negotiate’. Whilst there are exceptions to this rule (potentially where the ‘native title condition’ is imposed), proponents should seek advice before automatically applying for a renewal for a term longer than the original grant term. Non-compliance with the Native Title Act can result in the renewal (potentially) being invalid.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469, if you require additional information or your usual Herbert Smith Freehills contact.

Mining & Petroleum Law – NSW legislative changes update #1

Renewal application for exploration licences: onus to justify larger than default area shifts to applicant

On 1 March 2016 the Mining and Petroleum Legislation Amendment (Harmonisation) Act 2015 (NSW) (Harmonisation Act) commenced by proclamation (except Schedule 2(23) which commenced on 18 December 2015). The Harmonisation Act forms part of a suite of 5 Acts, the object of which is to reform the regulation of resource exploration and production in NSW.

Mining – 50% reduction of area on renewal of exploration licence

New section 114A of the Mining Act 1992 (NSW) (Mining Act) alters the power of the decision-maker in relation to renewal applications for exploration licences. Previously, the area sought to be renewed could not exceed half of the original licence area unless the decision-maker was satisfied that special circumstances existed that justified the renewal of a larger area.

Under the changes, the renewal area is set at a default size of not exceeding half the original area. The onus is put on the applicant to claim that special circumstances exist that justify granting a renewal over more than half of the original area. What amounts to special circumstances is not exhaustively described but can include consideration of any partial cancellation of the exploration licence requested by the licence holder.

Petroleum – 25% reduction of area on renewal of exploration licence

The Harmonisation Act aims to streamline administrative arrangements and bring the Mining Act and Petroleum (Onshore) Act 1991 (NSW) (Petroleum Act) into closer alignment. New section 19B of the Petroleum Act sets the default area for renewal applications not exceeding 75% of the original area granted or the previous renewal area granted. Similar to the Mining Act changes, the onus is on the applicant to claim that special circumstances exist that justify granting a renewal over an area exceeding 75%.

Why is this important?

The applicant now plays a more pivotal role in justifying the renewal of exploration licences for greater than the default area. If the applicant makes no claims of special circumstances, it is likely that the renewal will be no greater than 50% of the area for mining exploration licences and 75% for petroleum exploration licences. Particular care will need to be taken when settling renewal applications to ensure that a satisfactory and compelling description of the special circumstances is included.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469, if you require additional information or your usual Herbert Smith Freehills contact.