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.

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.

Increased capacity at port of Port Hedland

The Pilbara Port Authority announced earlier this month that it will be increasing its capacity at the port of Port Hedland by 16% over the next 3 years. This will see the port’s capacity increase from 495,000,000 tonnes to 577,000,000 tonnes per year. This has come following the port’s record throughput in 2014-15 of 446,921,901 tonnes. This increase will be allocated to the D class capacity, meaning it will be available to all applicants. The PPA has paired with OMC International, an independent maritime engineering company, to develop and implement what the PPA is calling the ‘Tidal Model.’ This model is based on OMC’s Dynamic Under Keel Clearance model which it first implemented at the port in 1996.

This model increases operational efficiencies by measuring real time swell and tide data as well as vessel’s own stability requirements to determine accurate allowances for squat and wave response. This allows increased loading of ships as well as increased throughput each day at the port. OMC’s estimations indicate that this will amount to around $1.1 billion extra revenue being generated by the port. The system is also said to facilitate improved safety and risk management procedures by allowing for increased manoeuvrability of ships in a carefully monitored way. This increase in capacity has been welcomed by companies such as Fortescue Metals Group Ltd and BHP Billiton Ltd who are both seeking to increase their capacity at the port over the next few years.

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

UNCITRAL Transparency Rules applied for the first time in investor-State arbitration

In September 2014, BSG Resources Limited initiated an international arbitration proceeding against the Republic of Guinea arising out of an alleged expropriation of its investment in the mining sector in the country.  

The multinational mining company started its operations in Guinea in 2006 and in 2013 it was granted mining licenses to explore and exploit mines at the ‎Simandou and Zogota sites. The dispute involves the alleged rescission of the company's mining licenses due to accusations of corruption by the new Government in Guinea.

The arbitration is being administered by the International Centre for Settlement of Investment Disputes (ICSID) in Washington D.C. The case stands out for being the first publicly available ICSID case where the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration were voluntarily opted-in by the parties to the arbitration.

Click here to read more.

Parliamentary Inquiry Report into FIFO and other long distance commuting work practices in regional Queensland released

On 9 October 2015 the Infrastructure, Planning and Natural Resources Committee released its “Parliamentary Inquiry report into FIFO and other long distance commuting work practices in regional Queensland” (Parliamentary Inquiry Report). Earlier this month, on 1 October 2015, the Government appointed FIFO Panel made its “FIFO Review Report” (Review Report) publicly available, after being provided to the Minister of State Development at the end of July 2015. Both reports form part of the Queensland Government’s FIFO Review, which aims to introduce choice for employees working at mines located near a resource town or regional community to live near their workplace.

Key recommendations

Both Reports recommend legislative reform to prescribe that a social impact assessment process be undertaken for major projects. If this recommendation is implemented it would likely involve the amendment of the State Development and Public Works Organisation Act 1971 (Qld) or the Environmental Protection Act 1994 (Qld). These pieces of legislation set out and facilitate approval processes for resource projects in Queensland.

The Review Report recommends that the Environmental Protection Act 1994 (Qld) be amended to require resource proponents to prepare appropriate workforce, procurement and accommodation plans for proposed resource activities as part of their environmental approval process. It further recommends monitoring and enforcement measures be put in place to ensure compliance with approved workforce, procurement and accommodation plans for new resource activities.

The Parliamentary Inquiry Report recommends that the government consider making changes to anti-discrimination legislation to prevent local workers in regional or mining towns being discriminated against on the basis of where they live for work. The Parliamentary Inquiry Report emphasises that workers should have a genuine choice of where they live for work. It also makes recommendations in relation to the minimum standards for the provision of substantial temporary and permanent accommodation for FIFO workers, such as room design and access to health services and recreational areas and that the standards advise against the practice of ‘motelling’ or ‘hot-bedding’..

Implications

Neither Report recommends any form of retrospective action to place limits on existing FIFO workforces. As such, current resource projects with FIFO workforces should not be impacted by changes flowing from the recommendations in the Reports.

The Parliamentary Inquiry Report recognises that some resource operations require total FIFO workforces due to their remoteness or during construction; indicating that future resource projects in remote areas with 100% FIFO workforces may still be acceptable.

Government response to these Reports is expected in early 2016. This may be followed by the introduction of new laws and regulations in regards to FIFO and non-resident workforces.

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

Update - Innovative Resources Tenures Framework, Queensland

On 12 October 2015, Herbert Smith Freehills attended the Queensland Department of Natural Resources & Mines workshop on the Innovative Resources Tenures Framework in Brisbane.
The purpose of the workshop was to discuss the Policy Position Paper, which was released in August 2015.  Submissions in response to the Policy Position Paper close on 30 October 2015.

Key information

The five key pieces of information we took away from the session were:

1. The new tenure framework will decrease the types of tenure available to proponents from 20 to 5, being: 
• Information Authorities,
• Exploration Authorities,
• Development Authorities,
• Production Authorities, and 
• Infrastructure Authorities. 


This is intended to create a less complex system which will be simpler to regulate with respect to overlapping areas.


2. For exploration authorities, there will be no maximum area size but parties will be required to provide justification for the size of the area applied for.
3. Default relinquishment will be 50%.  However, there will be potential for reduced or deferred relinquishment based on the performance of the proponent.
4. Feedback received by the Department indicates that the systems for production authorities and infrastructure authorities work well and there will be minimal changes to how these are regulated.
5. Companies will be required to review their native title agreements to ensure native title processes are not triggered under the proposed changes.

Next steps

There will be further consultation and opportunities for feedback as the reforms progress through the following stages:

• a regulatory impact statement due to be released in early 2016,
• the consultation Bill which will be introduced to Parliament (no timing given), and
• the Parliamentary Committee process during the passage of the Bill.

Timing

The Department indicated that it is hopeful that the transitional arrangements for exploration authorities will be prepared in late 2015, with full implementation of the reforms to be completed by the end of 2017.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469 or Cassandra Duffy, Solicitor +61 7 3258 6456 if you require additional information or your usual Herbert Smith Freehills contact.