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Part B: Mineral Rights - Part B-5: Development Minerals - 30. Development Minerals Exploration Licence | 30.13 Transfer/Assignment of Rights

Transfer and assignment of rights refers to provisions that deal with whether a licence holder may hand over, sell, rent (either in whole or in part) or in any way encumber/place a lien on the licence for the benefit of another person or entity. The ability to transfer or assign rights to an exploration licence, or ownership of the company holding the licence, and any conditions for such transfer or assignment, are key considerations in a mining law. Most exploration work is carried out by junior mining companies, usually with the goal of discovering a commercial deposit and then selling the rights to develop it – in whole or in part – to a major mining company. While transfer of exploration rights do not on their own grant the transferee the right to exploit a mineral deposit, acquisition of another company’s exploration licence covering a substantial identified deposit can place a larger mining company in a preferential or exclusive position to acquire exploitation rights for the deposit, since most regimes give the exploration licence holder a preferential or exclusive right to acquire such an exploitation licence during the term of the exploration licence, subject to meeting the requirements for issuance of the exploitation licence.

If such transfers and sales are discouraged or rendered difficult, that in turn can have a negative impact on investment in exploration, since the vast majority of investment in exploration in previously underexplored territory around the world since about 1990 has been made by or through junior mining companies that lack the capability to develop and exploit a major mineral deposit on their own and who invest with the intent of transferring their rights or shares to a major mining company if they make a substantial discovery. On the other hand, countries are entitled to verify that the transferee is an eligible person who is not disqualified from holding the licence. Accordingly, review and control over transfers and assignments to assure compliance with eligibility and capability requirements is the norm. In that sense, in most of the countries, the government has the right to refuse the authorization for the transfer, if it considers the rights of the State will be undermined.

The transfer provisions should specify that the transferee assumes all of the obligations under the licence, and also whether the transferor remains responsible or liable for obligations incurred during the transferor’s tenure.

30.13 Example 1:

Article [_]

(1) Subject to this section, an exploration licence or any interest therein or any controlling interest in the holder thereof may be transferred to any other person provided that the [Regulating Authority] grants proper authorization

(2) In the petition for the authorization, the applicant shall give to the [Regulating Authority] such details of the transferee as would be required in the case of an application for an exploration licence.

(3) Where the [Regulating Authority] is satisfied that the transferee is not disqualified under any provision of this [Law][Act][Code] from holding an exploration licence, the [Regulating Authority] shall notify the applicant of approval of the transfer of the exploration licence or an interest therein.

(4) Upon the transfer of an exploration licence, the transferee shall assume and be responsible for all rights, liabilities and duties of the transferor under the licence.

Annotation

Drawn from Botswana’s mining law (1999), this provision establishes an equilibrium between the licence holder’s right to transfer the licence and the State’s right to require that the transferee be an eligible holder. It also clarifies that the transferee assumes all of the transferor’s liabilities and duties under the licence.

This is a liberal transfer provision because:

  • It requires only the eligibility of the transferee; and
  • The mining law does not state that the transferor continues to be liable for the results of the transferor’s action or inaction during its tenure as holder of the licence

30.13 Example 2:

Article [_] Deeds of assignment

(1) Mining rights and [Permanent Quarry Operating Permits] may be the subject of a total or partial cession or assignment. Said assignment shall be final and irrevocable. In the absence of provisions to the contrary, the common law relating to assignment shall apply.

(2) Any partial assignment must comply with the provisions of Articles [_] and [_] (on the shape and location of mining areas) of the present Code.

(3) In addition, any partial assignment of an operating right or a [Permanent Quarry Operating Permit] shall be effective only from when a new mine or quarry operating right is granted.

(4) It is a prerequisite that the assignee must be a person who is eligible to request and hold the mining rights or the [Permanent Quarry Operating Permits].

(5) The deed of assignment must contain a commitment on the part of the assignee to assume all of the holder's obligations with regard to the State which arise from the mining right or [the Permanent Quarry Operating Permit] concerned.

Article [_]. The assessment of an assignment application

The assessment of an assignment application is to be done in accordance with the provisions of Article [_] (on cadastral surveys) and Article [_] (on the assessment of a subleasing application) of the present Code.

Article [_] The registration and enforceability of the deed of assignment (1) In the event of the partial assignment of a mining or quarrying right for prospecting, the Mining Cadastre shall issue a new mining or quarrying title.

(2) In the event of the partial assignment of an operating right or a [permanent quarry operating permit], the partial assignment shall be registered when the new right is granted.

(3) In order to be binding on third parties, the registration of the deed of assignment is to be done in accordance with the provisions of Article [_] (on the registration and enforceability of mortgage deeds) of the present Code.

Article [_] The transfer of a right

(1) Subject to the provisions of Article [_] (on cadastral surveys) and Article [_] (on the assessment of a subleasing application) of the present [Code][Act][Law], the technical assessment of the application file for the transfer of a mining right or a [Permanent Quarry Operating Permit] into the transferee's name is to be carried out within twenty working days of the date on which the application file was sent to the [Technical Division] by the Mining Cadastre.

(2) The technical assessment shall consist of:

a) verifying the transferee's financial ability;

b) verifying that the transferee has assumed the transferor's obligations;

c) determining, where appropriate, that any changes proposed by the transferee to the original documents which were the basis for the mining right or [Permanent Quarry Operating Permit] being granted do not alter the technical findings for the project.

(3) Should the transfer of a mining right or a [Permanent Quarry Operating Permit] be refused, written reasons must be given and said refusal gives the right to appeal as provided for in the provisions of Articles [_] and [_] (on appeal proceedings) of the present [Code][Act][Law].

(4) The transfer of a mining right or a [Permanent Quarry Operating Permit] shall be registered in the appropriate registry kept by the Mining Cadastre in accordance with Article [_] (on the registration and enforceability of mortgage deeds) immediately after the transferor and transferee have been notified of the decision to approve the transfer.

(5) A transfer may only take place if it relates to mining rights or [Permanent Quarry Operating Permits] which are currently valid.

Article [_] The obligations of the assignor after assignment

Notwithstanding any clause to the contrary, a transfer does not relieve the original holder of their obligations, with regard to the State, to pay the fees and charges which relate to their mining or quarrying title during the period in which they were the holder, nor does it relieve the holder of their obligations relating to environmental rehabilitation.

Article [_] Deeds of transfer

(1) Mining rights and [Permanent Quarry Operating Permits] may be transferred in whole or in part under the terms of a merger agreement and on account of death. In the absence of provisions to the contrary, the common law relating to transfers shall apply.

(2) It is a prerequisite that the person to whom the right is to be transferred must be eligible to hold mining or quarrying rights.

Article [_] Deeds of partial transfer

The partial transfer of mining rights and [Permanent Quarry Operating Permits] is to be done in compliance with the provisions of Articles [_] and [_] (on the shape and location of mining areas) of the present [Code][Act][Law].

Article [_] The registration and enforceability of deeds of transfer

In order to be binding on third parties, the registration of deeds of transfer is to be done in accordance with the provisions of Article [_] (on the registration and enforceability of mortgage deeds) and Article [_] (on the registration and enforceability of a deed of assignment) of the present [Code][Act][Law].

Article [_] A deed of transfer under the terms of a merger agreement and on account of death

The terms and procedures for the admissibility and assessment of deeds of transfer under a merger agreement and on account of death shall be those provided for deeds of assignment relating to mining rights organised under the present [Code][Act][Law].

Article [_] The obligations of the person to whom the right is transferred

Notwithstanding any clause to the contrary, the person to whom the right is transferred shall remain liable with regard to the State and third parties to fulfil all of the obligations of the original holder of the mining right or [Permanent Quarry Operating Permit].

Article [_] Option contracts

A Prospecting Licence may be the subject of an option contract. Such a contract may be freely concluded between the parties and gives the recipient the right to obtain an interest in the enjoyment of an operating right following on from a Prospecting Licence or in the total or partial alteration of it if a certain investment is realised and/or specific work is completed as part of the mining activities relating to the Prospecting Licence in question.

Article [_] The registration of option contracts

The registration of option contracts is to be done in accordance with the provisions of Article [_] (on the registration and enforceability of mortgage deeds) of the present [Code][Act][Law].

Annotation

Drawn from DRC’s mining law (2002), these articles provide a substantial amount of detail as to the treatment of various aspects and types of transfers of mineral rights. The same procedures and standards apply for transfers of exploration rights as for transfers of exploitation rights.

The first article establishes that mineral rights and quarry rights may be transferred in whole or in part; that partial transfers must conform to cadastral rules as to the size and form of licenced areas, specified in other articles; that rights can only be transferred to an eligible person, and that the agreement of transfer must contain the engagement of the transferee to assume all of the obligations of the transferor under the licence; as well as other details.

The second article refers back to other articles for the details of the review of applications for transfers of mineral rights and quarrying rights, respectively.

The third article provides that a partial transfer is only enforceable when a new licence has been issued and registered.

The fourth article establishes a time period for and the content of the technical part of the review of a request for transfer. The technical review focuses on verifying the financial capacity of the transferee, the latter’s assumption of the obligations corresponding to the licence, and the acceptability of any changes proposed by the transferee in the documents related to the licence, such as the environmental management and site rehabilitation plans. The article requires written reasons for any refusal of a request for transfer and a right to appeal any refusal. It also provides for the registration of the transfer immediately following notice of the approval of the transfer to the transferor and transferee.

The fifth article clarifies that a transfer of mineral rights does not free the transferor from any payment obligations to the State incurred prior to the transfer, nor does it extinguish the initial licence holder’s environmental rehabilitation obligations.

The sixth article establishes that mineral rights are transferrable by succession, including corporate mergers in accordance with applicable provisions of general law, provided that the successor in interest must be eligible to hold the mineral right.

The seventh, eighth and ninth articles refer to other articles whose provisions must be complied with in the case of partial transfers by succession, transfers by merger, and transfers through the estate of a deceased individual.

The tenth article establishes that the transferee becomes responsible vis à vis the State and third parties for all obligations of the transferor in respect of the transferred mineral rights, irrespective of any clause to the contrary in the agreement between the transferor and the transferee. In other words, any limitation of liability of the transferee in the agreement of transfer is only binding as between the transferor and the transferee.

The eleventh article establishes that exploration licences, specifically, may be subject to option rights, while the twelfth article provides (by cross-reference) for the registration of option rights. These final provisions are designed to promote investment in exploration through the popular forms of farm-outs and farm-ins.