Mr Chairman, ladies and gentlemen, it is a great pleasure for me to be here today and I appreciate the opportunity to bring you an Australian perspective for your consideration in the repositioning of the South African Mining Industry for global competitiveness. Peter Vanderspuy has asked me to convey his regrets at not being able to address you at this symposium but he has been of considerable assistance to me in pulling together the ideas that we hope will assist you in your deliberations. The talk will describe the system of exploration and mining land tenure in Australia, its benefits and disadvantages, competing land uses and how these are dealt with by government and industry and, lastly, how Delta Gold has emerged, within 10 years, from a fledgling explorer to a company which now has a market capitalisation of over $800 million. The key issues at the exploration stage for the mining industry, anywhere in the world are:
I believe it to be a self-evident truth, that there is a direct relationship between the rate of mineral discovery and development and the type of land/mineral ownership coupled with access rights to that land and its minerals. Let me expand of those three points.
In an ideal world, once an area is deemed to be prospective, the explorationist should be able to commence exploration. Ignoring the systems of mining titles for the moment, let us consider the obstacles that may hinder exploration. The first may be that a competitor holds the ground. This may be well and good for the industry if that competitor is proceeding apace with exploration. However in Australia's island state of Tasmania, in years gone by, companies were able to hold tenements almost in perpetuity purely by virtue of the fact that within the region they owned operating mines. The result was that much of the prospective Mount Read Volcanic Belt, host to some of Australia's major volcanogenic base-metal mines dating back more than a century, was controlled by three large companies for over 30 years. Of course some exploration proceeded, but at a pace considerably below the rate that could have been achieved had the ground been opened up to a larger number of explorers bringing new approaches and a greater degree of focus to exploration of the Belt. Recognising this failing, the Tasmanian Government acted to bring its mining legislation into line with some of the more progressive mainland states of Australia. It required reductions in the size of tenements on an annual basis regardless of expenditure levels of the leaseholder, thereby freeing-up ground for other explorers. The new approach has only been in operation for few years and the effects have not yet translated into new discoveries, but I have no doubt that in time they will, because now, exploration in this area is extremely active and competitive.
Another potential impediment to exploration access is agricultural land.
In many parts of Australia farmers and miners were able to co-exist amicably. Their histories are intertwined. A look at the history of many Australia's inland settlements reveals that the miners got there first, followed by farmers and graziers who provided the primary foodstuffs for the early goldfields. The sly grog shops which are our equivalents of your shebeens, the haberdasheries, houses of ill-repute, banks, and churches lobbed in around the shafts and pits, catering to miners and farmers alike and they remain there today, providing, in mining centres, continuing support for the industry. For example, extensions to the Super-Pit at Kalgoorlie, resulting in roads, shops and dwellings being moved, passed almost unnoticed by the general population and to the satisfaction of those directly involved. Plans to mine under the Queensland town of Gympie and Charters Towers were met with almost universal equanimity, as are similar plans at Bendigo. Commercial interests generally prevail in communities with mining in their blood.
Returning however to the farmers and graziers, it would be fair to say that an uneasy truce prevails. In Australia, the most favourable legislative concession to the farming community exists in Western Australia's wheat belt, on the western edge of the extremely productive Archaean Yilgarn Block, a gold and nickel belt. In this region farmers can exercise the power of veto over exploration proposals. Whilst compensation and arbitration provisions to settle disputes are available, they may be onerous and are certainly time consuming. The net results have been a dramatic reduction in exploration effort and, obviously, a decrease in the discovery rate.
It may be appropriate at this stage to consider the second key issue 'Security of Title' and to give a brief summary of land tenure in Australia. This is an issue many Australians have taken a far greater interest in, or at least no longer take for granted, following the recent decision, know widely as "Mabo" by the Australian High Court, our equivalent of your Supreme Court. This decision overturned the pre-existing basis for ownership of land by the Crown by ruling that the concept of Australia as 'terra nullius' was invalid in that the original inhabitants, the Aboriginals had pre-existing land ownership rights. Land claimed by the Crown and subsequently dealt on to third parties as, firstly, Old Systems Titles and later as Freehold or Torrens Titles and Pastoral or Grazing Leases, remain valid and secure under the judgement. Basically a Freehold title extends to 'a cultivatable depth' unlike, say, the USA where ownership may extend to the centre of the Earth.
I shall not burden you with the current unwieldy morass of Federal legislation put in place to support the Mabo decision, or the legislative weapons being unleashed by governments of the different Australian States, fighting what they regard as creeping Federalism and an affront to States' rights to deal with land. Suffice it to say that uncertainty regarding access is an anathema to exploration and this will inevitably reduce Australia's effectiveness to explore for, and develop, new mines.
Control of all minerals in Australia resides with the Crown and is administered by State governments which exert their control by the issue of mining titles. The system clearly has its roots in English law. The community benefits from mining to the extent that, beyond job creation and capital investment, royalties on profits or production are payable to the Crown, that is, the public purse, regardless of the landowner. Old Systems Titles, dating from early days of settlement and recognising land grants by the Crown, gave the land owner rights to oil and coal. Recent legislation now provides for those rights to return to the Crown on any transfer, by sale, of an Old Systems Title. Minerals, which, due to advances in technology or by recognition of their existence were claimed by the Crown by proclamation, as recently, in New South Wales at least as least as late 1971. Compensation was not payable, except in the case of coal. In New South Wales a Coal Compensation Board determines compensation levels.
Pastoral Leases, usually 99 year leases, were granted, in various forms, by State governments in generally marginal country where economies of scale required large grazing areas. The occupiers of the land have similar rights, in regard to explorers and miners, as Freehold landholders in terms of access and land use and no mineral rights accrue to them.
Explorers, on the grant of an exploration tenement, have the right and an obligation to explore it. They are required to notify the landowner, or occupier; they are entitled to enter the land to undertake exploration but may not unduly interfere with pastoral operations. Compensation is payable for ground disturbance or 'loss of enjoyment' at rates negotiated prior to entry and determined by broad reference to the productivity of the ground affected. Failure to reach agreement, on access arrangements or compensation, between an explorer and landowner leads to a determination by a Mining Warden who will arbitrate a compromise or, failing that, set the terms to allow exploration to proceed. Other actions are, of course, available in law but rarely does any action proceed beyond the Warden's Court.
Upon a discovery proceeding to development, it is normal practice, particularly in closely settled areas, for the miner to purchase the land containing the ore body and adjoining properties as appropriate. The purchase price may range up to twice the market value depending often on prevailing farm commodity prices and the obstinacy, read "negotiating skills" of the landowner. Purchase of the land obviates the requirement to pay further compensation for removal of land from cropping/grazing use and dust and noise and also provides the miner with more flexibility in determining areas for access roads, plant and buildings. It also may allow better control for environmental protection and subsequent rehabilitation. A celebrated case in central New South Wales was finally settled a year ago, after protracted negotiations with a farmer owning land above a major copper-gold deposit failed to reach a settlement. The farmer's demands were unreasonable, compounded by eccentricity. A three or four times market value figure was finally agreed, with ostracism of the farmer by the local community, eager for new industry in the midst of rural recession, as an added spur. The farmer's recalcitrance was also subdued by a decision by the Minister of Mines to exercise his discretion to invoke a section of the New South Wales Mining Act to grant a mining lease regardless of the farmer's wishes.
Access problems also result from the declaration of National Parks, Heritage Areas, water catchment areas for new dams and so forth. As worthy as all these alternative land uses are, none can compare, in terms of economic value, particularly over a short time frame, with mining.
It is therefore essential to our industry that we be given the opportunity to explore and develop mines in areas proposed to be locked away prior to the new status quo being established. The generally relatively small area affected by a mining operation and the industry's skills at rehabilitation is something that the Australian mining industry is now energetically promoting.
An example of a compromise situation that failed to meet most of the requirements of miners, but was better than the total exclusion alternative, is provided by the East Alligator River uranium province in the Northern Territory.
The story starts in the late 60's and was coincident with the beginnings of wide-spread eco-activism. Once again, the miners led the charge into a region of undisputed natural beauty and discovered the world-class Nabarlek, Ranger, Koongarra and Jabiluka uranium deposits. The anti-uranium forces, in an effect to prevent mining, embarked on an effective campaign to have the entire area declared a National Park. The area, once the preserve of few cattle graziers, buffalo hunters and barramundi fisherman was, in the space of a few years, elevated in the national consciousness to the status of a rare jewel containing unique fauna and flora. All of this would vanish at the hands of "rapacious" miners. The Armageddon that would follow the extraction of uranium was the finely honed point of the anti-mining group's spear. The outcome was that a length of some 30 kilometres of aesthetically pleasing Kombolgie Sandstone escarpment and adjacent flatlands was proposed for a National Park. The fact that the same escarpment continued for another 100 kilometres or more was conveniently ignored. The sacred jewel lay only within the area containing the proposed uranium mines.
Some, but not much, common sense prevailed and a corridor was excised from the proposed park to allow limited uranium mining to proceed. It is now an historical fact that the hysterical fiction propagated at that time led to Australia's Three-Mine Policy for uranium, an act of national altruism for which North American and African uranium miners can only murmur grateful thanks. Nabarlek was mined out, Ranger carries on with minimal environmental disturbance, attracting as many tourists as the National Park but Koongarra and the Jabiluka uranium deposit, the largest, lowest-cost deposit, remain in the ground. An uneven balance was found, but the cost to Australia's balance of payments has amounted to billions of dollars and the National park remains essentially as it was, will be, and would have been, if the mines had been able to proceed under normal circumstances. Exploration however, has virtually ceased and new discoveries are most unlikely as 'the corridor' provided for only limited strike extensions and failed to allow for new models of mineralisation outside the known belt.
The East Alligator uranium issue also saw the birth of the Aboriginal Land Rights Movement. Prior to the 1970's the north-eastern corner of the Northern Territory had been set aside as the Arnhem Land Aboriginal Reserve. Access to non-Aboriginals was by way of government-issued permits but exploration tenements could be acquired on virtually the same basis as elsewhere in the Northern Territory, an area the same size as South Africa.
Aboriginal groups traditionally related to a particular area were, to all intents and purposes, landholders. Their land titles differed in one important respect from Freehold and Leasehold tiles, in that they were not transferable, and indigenous landowners remain unable to sell or lease the land. They were granted a sort of collective-occupation title. It was determined that they would be entitled to a loyalty on minerals won from the land, a trade-off if you like, given the other restrictions. Thus, the Aboriginal people benefited directly from the Nabarlek uranium mine and subsequently sought, and won royalty rights to production from Ranger.
Other Aboriginal groups, through Federal funding, acquired pastoral properties by purchase or by land claim after protracted application periods involving determinations of tribal relationships with the land and occupancy. There are now substantial government bureaucracies at Federal and State levels to administer native titles claims. The more cynical amount us might observe that there is considerable benefit in terms of job security for those bureaucrats in limiting the access of miners to Aboriginal land thereby forestalling Aboriginal economic development. Be that as it may, the major impediments to exploration access in about 5% of the ground in which Delta Gold explores are first, State government tardiness in offering title using Aboriginal issues as a political smokescreen to score points from the Federal government; Aboriginal landowners who, because of their life style and lack of commercial background are slow to respond; and Aboriginal advisers, generally left-wing radicals, who are mistrustful of explorers' motives and who tend to seek unreasonable terms in their access agreements. Granting of title in these areas and negotiation of access agreements can take up to a year. Delta Gold's attempt to explore an area of Aboriginal land in northern South Australia has involved ten years of negotiation to gain an access agreement. Progress over the last two years has been relatively rapid and reflects increased understanding by Aboriginal groups of the economic benefits flowing from exploration and mining both from employment and royalties. Other companies have had similar experiences and in the last two years co-operative commercial ventures between mining companies and Aboriginal groups have been established at the Mount Todd and Callie gold mines in the Northern Territory.
My final points on access and security relate in part to the point made above and tie in to my third point. Reasonable costs and fees. In Australia application for exploration or mining tenements over Freehold, Leasehold or Crown Land is generally not protracted. Applications are lodged with the appropriate State Mines Department which satisfies itself as to the bona fides of the applicant, forwards copies of the application to other government departments such as Water, Environment, Heritage, Forestry and Fishing to determine conflicts and, in the vast majority of cases will offer the tenement to the applicant within 3 to 6 months. Refundable bonds to cover environmental rehabilitation are required. These range, for exploration licences, from $5,000 in Western Australia to $10,000 for Queensland and New South Wales.
The trend in Australia now is for all state governments to offer out exploration licences on a graticular system with sub-blocks defined by an area bounded by one minute of latitude and one minute of longitude; an area, depending on latitude, of about 270 to 300 hectares. Rents and fees are nominal, being $80 p.a. per sub-block in Western Australia, the Northern Territory and Queensland, $100 + $19.50 per sub-block for two years in New South Wales and $2.30 per hundred hectares in South Australia. Most states offer exploration licences titles for up to two years (six years in the Northern Territory) with the right to renew after a reduction in size of the tenement each succeeding year thereafter.
Minimum expenditures required by the various Mines Department varies but on average the first year's commitment on a 10,000 hectare exploration licence of say 40 to 50 sub-blocks, would be around $25,000, increasing each year. Failure to meet work commitments or expenditure levels on tenements may result in cancellation or non-renewal, through Ministerial discretion applies in most States to allow variation for exceptional circumstances.
Mining Leases for development are, by nature smaller, but similar provisions apply with more stringent environmental and safety conditions and, of course, negotiated royalty levels, except in Western Australia where no royalty is payable on gold production. I shall spare you a blow-by-blow account of the approaches in the seven States and Territories to Mining and Development Leases, or for that matter, the many intermediate forms of mining titles available, save to stress that by-and-large, the system works well.
An important aspect of mining titles throughout Australia is the compulsory reporting of work programs and budgets, with 6 monthly progress reports and detailed annual reports required. These reports remain confidential until after expiry or relinquishment of the title and then go onto the publically accessible Open File. Explorers and miners do not have to re-invent the wheel when they acquire a pre-worked property. The data base grows with each year of work, to the benefit of the industry.
So, in general terms, I believe the various Australian States have developed a workable approach. Those states, which, due to perceived lower prospectively have lower exploration expenditure, tend to offer inducements such as longer terms, lower charges, lower expenditure commitments and promises of assistance for required infrastructure such as road, rail and power.
The competent, active and aggressive explorer is rewarded by being favourably regarded in a situation where competing applications, lodged simultaneously, are to be adjudicated or where smaller than the compulsory reduction in tenements size are sought. The non-performer is punished by cancellation of its tenements or demands to demonstrate its financial viability and technical competence prior to being granted a new title.
The Australian system is a continuously evolving one and worthy of serious study by South Africa if changes to your current regulations are contemplated. South Africa is in a position where, if changes are to be made, it will be able to critically review the benefits and handicaps implicit in the various Australian Mining Acts as well as those operating in Europe and the Americas. A mining industry will thrive where it can obtain ready access to the ground. There should be inducements to explore, with penalties for holding ground in limbo.
Most importantly, and implied by, but not stated in what I have said so far, is stability in legislation and amplifies what I have outlined in relation to security of tenure.
Mining companies will not invest in exploration or development if political changes are likely to result in major shifts in the ground rules. A detailed study of the Chilean copper industry during the period of nationalisation under Allende in the early 70's, followed by the lack of investor confidence during the Pinochet regime, compared with the recent rush of funds, following full democracy would be a useful exercise.
The lost opportunities and malaise of the 70's compared with the vigour of Chile's copper industry today, is testimony to the benefits of a balanced approach. In Australia today, the uncertainty generated by the Native Title Act 1993 the legislative follow-up to the High Courts "Mabo" ruling, has led to an exodus of exploration dollars flowing out of Australia and into South America, South East Asia and Africa.
My advice to you is that ground rules be set that encourage exploration and mining, that will attract foreign investments, and that those ground rules remain firmly in place, save where, through slow evolution, they can be recast to provide further encouragement. Australia's record over the last ten years on these issues leaves a lot to be desired and in most cases the undulating and tilted playing field can be sheeted home to Federal government political expediency driven largely by the pressures of the Green Movement. I have alluded to this broadly, but let's consider some more examples and detail those already raised.
The three-mine policy for uranium was a compromise solution and once Nabarlek was exhausted it became a de facto two-mine policy. Ranger was already established and Western Mining Corporation had discovered Olympic Dam, a very large multi-commodity deposit of Cu-U-Au-Ag in South Australia.
South Australia, an economic basket-case, was ruled by the Labor Party, which also held government federally. The decision to allow Olympic Dam to proceed was pragmatic in the sense that it is a world class deposit, but the exclusion of all other uranium deposits and the fact that Olympic Dam lay in South Australia reeked of political expediency. Similar examples may be cited at Fraser Island off the Queensland coast where sand mining, comparable to that at Richards Bay, was deemed to environmentally unacceptable, but by a government of the opposite political persuasion which would normally be regarded as pro-mining. The Australian sand-mining industry has an enviable environmental record. One story, perhaps apocryphal, tells of some green activists, extolling the virtues of a patch of dense scrub and promising to defend it to the death, being suitably deflated to find it was a rehabilitated mine area. The Coronation Hill Au-Pt-Pd deposit in the Northern Territory was put on hold, without compensation, on a determination that the deposit occurred within a site regarded as being sacred to Aboriginals. The fact that the deposit had been mined in the less-politically correct 1950's without giant serpents emerging from the ground and wreaking havoc, was ignored by all and sundry. We were treated to yet another display of tears from a Prime Minister pandering to the voters of Sydney and Melbourne and a small group of vocal Aboriginal activists, who opposed the genuine wish of the traditional Aboriginal owners, that mining proceed. Political expediency prevailed.
Australia had, for many years, benefited from having a tax–free gold industry. The introduction of this tax in 1991, whilst swelling the government's coffers for the good of all, also had the effect of closing marginal operations and reducing the level of exploration. At the end of the day, the industry simply shouldered the additional burden and got on with the job, but at the cost of lost opportunities and a reduction of jobs within the industry.
Governments should be steadfast, set the ground rules to apply equally to all, and not pander to vocal minorities until the weight of their arguments makes them vocal majorities. The examples just quoted represent pitfalls to be avoided, and their impact on the industry as a whole, has simply made us, the miners, more guarded in our approach. In general terms, however, the environment for exploration and development in Australia is still one of the most attractive in the world.
It is an environment that can, and has, allowed companies like Delta Gold to grow and prosper. Delta was able to grow from a base of just twenty exploration project areas, acquired with minimum fuss and bother over prospective ground, in competition with other explorers, because ready and secure access to exploration titles was possible. Much of the ground had been covered by previous explorers, but the regulations required that they either continue exploration, or relinquish the ground.
The key element is that land tenure was, and is, not static. The ground containing the Granny Smith gold deposit in Western Australia had had two owners in two years. When Delta acquired it in 1983 it had probably had five 'owners' over the previous ten years.
Exploration and development proceeded on exploration tenements and conversion to titles granting a right to mine, was expedited efficiently by the Mines Department. The rest is history, with over 150,000 ounces of gold being produced each year and ongoing exploration results indicating that Granny Smith and its satellite deposits will continue producing into the new millennium.
Even more instructive in terms of the limitations that can be imposed by archaic mining titles, is the Kanowna Mining Centre, only 20 kilometres from Kalgoorlie. The Kanowna Mining Centre contains the 4 million ounce Kanowna Belle deposit. The Kanowna area lay idle through the various mining booms since World War 1, because of fossil titles. A plethora of pocket-handkerchief-sized Gold Mining Leases averaging about 8 hectares in size provided an irregular patchwork of titles covering previously mined gold deposits. Under the Mining Act of 1904, these titles could remain in force in perpetuity with increasingly complex ownership developing over time from partnerships, extended families, bankruptcy settlements and deceased estates.
The facilities existed under more recent legislation for these leases to be consolidated into larger, more workable titles by any company or individual that could recognise the potential of the area and was prepared to take the trouble. The task was difficult, but rendered less onerous because the minerals title system had evolved to assist the explorers and miners, not obstruct them.
Delta consolidated the ground over a number of years, commenced exploration and ultimately discovered Kanowna Belle, under thin soil cover only two kilometres west of the old Kanowna town site. Further consolidations of leases took place, Notice of Intent to Mine, including environmental impact studies was submitted and approvals were granted within ten weeks. The system is transparent and efficient, guidelines relating to safety and the environment are exposed to public scrutiny and the result is a relatively large mine that will produce, each year, between 150,000 and 170,000 ounces of gold over a mine life of at least 25 years. Only 45 months elapsed between the discovery drill holes and the first gold pour.
The lessons are clear. The Australian systems are not perfect but South Africa now has the golden opportunity to select the most efficient and appropriate regulations from the various Australian Mining Acts to reinvigorate what is already one of the strongest mining industries in the world. In terms of prospectivity and potential, South Africa is blessed with enviable geology containing the world's greatest gold and platinum provinces, enormous diamond resources, as well as substantial coal, base-metals, uranium and industrial minerals. The world is watching with interest as you negotiate spectacular changes to your political system and the global mining community is watching for investment, exploration and mining opportunities in the new South Africa. I have described, in what is of necessity a broad overview, Australia's experience. I hope that those of you with responsibilities for creating a new order for South Africa's mining industry will critically review the existing system in light of the benefits and pitfalls I have highlighted for you.
Thank you very much.