Vantage Goldfields SA (Pty) Ltd and Another v Arqomanzi (Pty) Ltd and Others (SCA) (unreported case no 733/2022, 27-6-2023) (Ponnan and Matojane JJA (Mocumie and Mbatha JJA and Mali AJA concurring))The recent decision by the Supreme Court of Appeal (SCA) in Vantage Goldfields SA has put an end to the argument regarding the application of s 11 of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA).
Section 11(1) of the MPRDA provides that:
‘A prospecting right or mining right or an interest in any such right, or a controlling interest in a company or close corporation, may not be ceded, transferred, let, sublet, assigned, alienated or otherwise disposed of without the written consent of the Minister, except in the case of change of controlling interest in listed companies.’
The matter involved the issue of shares in the holding company, Vantage to Macquarie. Barbrook Mines (Pty) Ltd (Barbrook) and Makonjwaan Imperial Mining Company (Pty) Ltd (MIMCO) were the holders of new order mining rights. ‘The shares in Barbrook and MIMCO were ultimately 100% held by Vantage’ (Jones Antunes and Mmatshepo Papo ‘Does section 11(1) of the MPRDA apply to an indirect change in control?’ (www.werksmans.com, accessed 2-9-2023)). ‘Vantage initially had 34 shareholders until Macquarie … acquired 98% of the shares in Vantage’ (Antunes and Papo (op cit)).
‘The court a quo held that a controlling interest is not limited to a direct controlling interest. It includes an indirect controlling interest’ (Giada Masina and Francois Sieberhagen ‘Mining rights and indirect change of control – judge settles old debate’ (www.africanmining.co.za, accessed 2-9-2023)). The Minister of Mineral Resources and Energy argued that s 11 did not restrict a direct controlling interest in a company that holds a right. The court held that s 11 is a provision, which seeks to protect and ensure that the objects of the MPRDA are achieved.
The High Court judgment was taken on appeal. The SCA had to consider whether s 11 of the MPRDA applies in instances where there is a change in the controlling interest of the ultimate mining right holder. Put differently, whether the change in control of Vantage triggered the need for ministerial consent and/or approval in terms of s 11(1) of the MPRDA in relation to the new order mining rights held by Barbrook and MIMCO.
In answering the aforesaid question, the SCA had regard to the Mogale Alloys (Pty) Ltd v Nuco Chrome Bophuthatswana (Pty) Ltd and Others 2011 (6) SA 96 (GSJ) judgment. ‘The defendant (who initially held 52% of the shares in a company) sold 33% of his shares to the plaintiff. The other three shareholders held 10%, 12% and 26% shares respectively’ (Samantha Joshua ‘Losing control’ (www.hoganlovells.com, accessed 2-9-2023)). ‘The plaintiff contested that ministerial consent was not required in the circumstances because a “controlling interest” was not transferred from the defendant to the plaintiff’ (Joshua (op cit)). ‘The court was asked to determine whether ministerial consent was required in terms of section 11 in order for the sale of the 33% shareholding to the plaintiff’ (Joshua (op cit)). The facts of Mogale overlaps with the facts in Vantage. In Mogale, the court was faced ‘with the situation where there had been a change in control of the direct holder of the mining right’ while in Vantage the court was faced ‘with the situation where the controlling interest in the mining right holder had changed ie, an indirect change of control’ (Antunes and Papo (op cit)). The court adopted a wide and purposive interpretation of s 11(1) and stated, ‘that the reference to change of control … should be given a very broad interpretation’ (Masina and Sieberhagen (op cit)). It held ‘that the minister’s consent is required before any transaction that results in a loss of control, even if another party is not gaining control’ (Masina and Sieberhagen (op cit)).
‘In interpreting section 11(1) of the MPRDA the SCA had regard to the objects of the MPRDA, section 2(a) and (b)’ (Antunes and Papo (op cit)). The SCA held that it would be absurd to confine the objects of the MPRDA when interpreting ‘s 11(1) of the MPRDA to direct changes in control of the mining right holder because such an interpretation would undermine … the … objects of the MPRDA’ (Antunes and Papo (op cit)). ‘The court therefore held that section 11(1) of the MPRDA must be interpreted to include both direct and indirect changes in control’ and can be triggered by issuing of new shares in a company (Antunes and Papo (op cit)). The SCA confirmed the court a quo’s finding by stating that the Minister’s prior consent is required in indirect change of control of the holders of mining rights. Thus, ‘the shareholders, by consent, alienated or disposed of their controlling interest in Vantage, and indirectly in the holders of the mining rights’ (Masina and Sieberhagen (op cit)).
The SCA held ‘that ministerial consent under section 11(1) of the [MPRDA] is needed for both direct and indirect changes of control of a company that holds mining rights’ (Masina and Sieberhagen (op cit)). Therefore, in terms of s 11 of the MPRDA, ‘a prospecting or mining right cannot be transferred from one company to another without the Minister of Mineral Resources and Energy’s consent’ (Masina and Sieberhagen (op cit)). ‘The SCA thus found that the change in control in Vantage triggered section 11(1) of the MPRDA in respect of the new order mining rights held by Barbrook and MIMCO’ (Antunes and Papo (op cit)). The court found that ‘it would be inconsistent with the MPRDA and its objects to exclude a change of an indirect controlling interest, especially considering the state’s responsibility to act as custodian of South Africa’s mineral resources and the objects relating to equitable access to the nation’s mineral resources and transformation’ (Masina and Sieberhagen (op cit)).
Mongezi Mpahlwa BCom (Law) LLB (UWC) is a legal practitioner and Kgabi Moeng BA LLB (Wits) is a candidate legal practitioner. Both legal practitioners work at Cliffe Dekker Hofmeyr in Johannesburg. Mr Mpahlwa was involved in the above matter.
This article was first published in De Rebus in 2023 (Oct) DR 41.
