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Part B: Mineral Rights - Part B-3: Large Scale Exploitation - 26. Large Scale Exploitation Licensing | 26.10 Suspension of Licence

Suspension of a licence may be a temporary sanction against a licence holder or a de facto extension of the licence term due to a force majeure event preventing the holder from conducting operations.

A distinction should be made between suspension of a mineral licence, on the one hand, and suspensions of operations, on the other hand. When the mineral licence is suspended, the rights of the holder of that licence, as well as the term, are suspended; and this may, depending on the nature of the breach, complicate the remediation of the breach that the suspension requires ( e.g., if the breach relates to operations on the mine). It also raises collateral issues to be addressed such as whether and on what conditions a third party application for the area that is subject to the suspended licence can be submitted or accepted. The suspension of operations, on the other hand, prohibits the mineral activity under the licence but does not alter the holder’s right to occupy the licenced area and undertake whatever is necessary in order to remedy the breach of an obligation; and the term of the licence continues to run. There are instances in which it is appropriate to suspend the mineral licence with an allowance for solely carrying out the activities necessary to remediate the breach. A mining law should also, where appropriate, address rules that apply to regulate the suspension of the licence or operations at the request of the licence holder.

In all cases, suspension provisions should clearly state the consequences of suspension and the procedure for the lifting of the suspension.

26.10. Example 1:

Article [_]. Suspension of Mineral Exploitation Rights

(1) Subject to sub-articles (2) and (3) of this Article, the [Regulating Authority] may suspend mineral exploitation rights partially or fully where it believes that the activity of the Licensee is likely to become an imminent danger to the local community, the environment or its employees, provided that such suspension is the only remedy under the prevailing circumstances. The [Regulating Authority] shall inform the licensee the date by which the suspension lapses and it may resume operation.

(2) Before acting under sub-article (1) of this Article, the [Regulating Authority] shall give notice in writing to the Licensee :

a) setting out the grounds for considering the suspension of the licence;

b) directing the licensee to take specified measures to remedy any contravention, breach or failure; and

c) specifying a reasonable date of not less than 5 working days, before which the licensee may, in writing, submit any matter for the [Regulating Authority] to consider.

(3) The [Regulating Authority] may lift the notice for suspension of a mineral right where :

a)the licensee complies with the notice contemplated in sub-article 2(b) of this Article by rectifying, removing, or as appropriate by mitigating the grounds for suspension, or by preventing the recurrence of such grounds within the time specified in the notice; or

b) where it accepts the reasons supplied by the licensee in accordance with sub-article 2(c) of this Article for the lifting of the suspension.

Annotation

Drawn from Ethiopia’s mining law (2010), this example provides for the Regulating Authority to suspend mining operations of a licence holder in cases where continued operation “is likely to become an imminent danger.” The provision requires prior written notice to the licence holder specifying the reasons for the suspension, the measures to be taken, and a prompt opportunity to be heard in opposition. The example also stipulates the grounds for the lifting of the suspension.

This example is geared to the prevention of harm rather than the sanctioning of any violations. It provides due process safeguards for the rights of the licence holder.

26.10. Example 2:

Article[_]: Suspension of production

(1) The holder of a mining lease shall notify the [Regulating Authority] three months in advance where the holder proposes to suspend production from the mine and shall in each case, give reasons for the suspension.

(2) Where the holder is unable to give the required notice as provided under subsection (1) for reasons beyond the holder’s control including, without limitation, market conditions and the holder suspends production from a mine, the holder shall, within fourteen day of the suspension notify the [Regulating Authority].

(3) The suspension of production shall not exceed twelve months and the holder may apply in writing to the [Regulating Authority] for extension for a period not exceeding twelve months.

(4) On receiving the notification under subsection (1) or on the [Regulating Authority] becoming aware of a suspension of production, the [Regulating Authority] shall cause the matter to be investigated and shall, subject to any relevant requirement contained in the mining lease -

(a) give approval for the suspension, or

(b) direct the holder of the mining lease to resume full production at the mine by a specified date.

(5) Approval of suspension may be given subject to conditions that the [Regulating Authority] may on the advice of the [Commission] determine.

Article [ ]: Suspension of a mineral right

(1) The [Regulating Authority] on the recommendation of the [Advisory Body] may suspend or cancel a mineral right if the holder,

(a) fails to make payment on the due date, whether due to the Republic or another person, required by or under this [Act][Code][Law],

(b) becomes insolvent or bankrupt, enters into an agreement or scheme of composition with the holder’s creditors, or takes advantage of an enactment for the benefit of its debtors or goes into liquidation, except as part of a scheme for an arrangement or amalgamation,

(c) makes a statement to the [Regulating Authority] in connection with the mineral right which the holder knows or ought to have known to be materially false, or

(d) for a reason, becomes ineligible to apply for a mineral right under this [Act][Code][Law].

(2) The [Regulating Authority] shall, before suspending or cancelling a mineral right under subsection (1), give notice to the holder and shall in the notice, require the holder to remedy a breach of the condition of the mineral right within a reasonable period, being not less than one hundred and twenty days in the case of a mining lease or restricted mining lease or sixty days in the case of another mineral right and what the breach cannot be remedied, to show cause to the reasonable satisfaction of the [Regulating Authority] why the mineral right should not be suspended or cancelled.

(3) On cancellation of a mineral right under this section, the right of the holder shall cease but without prejudice to the liabilities or obligations incurred by another person in relation to the mineral right prior to the date of the cancellation.

Article [_]: Suspension or cancellation of mining lease

(1) Without limiting the scope of the preceding section, the [Regulating Authority] may on the recommendation of the [Advisory Body] suspend or cancel a mining lease if the holder has failed other than for good cause, for a period of two years or more, to carry out any or a material part of the holder’s programme or mineral operations.

(2) The [Regulating Authority] shall before suspending or cancelling a mining lease give notice to the holder and shall in the notice, require the holder to remedy the breach within a reasonable period, being not less than one hundred and twenty days, and where the breach cannot be remedied, to show cause to the reasonable satisfaction of the [Regulating Authority] why the mining lease or restricted mining lease should not be suspended or cancelled.

(3) A dispute between the [Regulating Authority] and a holder of mining lease in respect of a matter arising under subsection (2) shall be referred for resolution under section [_] (on dispute resolution).

Annotation

Drawn from Ghana’s mining law (2006), this example includes provisions for both a voluntary suspension of production by the licence holder and the mandatory suspension of the licence by the Regulating Authority.

The first section in the example requires the licence holder to give prior notice of any suspension of production to the Regulating Authority, which will investigate the causes of the suspension of production and either approve or require resumption of full production by a certain date. Voluntary suspensions are limited to a duration of 12 months, which may possibly be extended for another 12 months. The Regulating Authority may attach conditions to its approval of a suspension.

This provision only applies in the case of regimes that require the licensee to operate at a certain level of production, which some countries require in order to assure a revenue stream from the exploitation of the mineral resource, rather than allowing the licence holder to operate freely based solely on corporate strategy. The example recognizes that market conditions or other factors beyond the licence holder’s control may require a suspension of production at times.

The second and third sections in the example set out the grounds and procedures for mandatory suspensions or cancellations of all mineral rights and mining leases (i.e., large scale exploitation licences), respectively. Those sections give the Regulating Authority the latitude to decide whether to impose a suspension of the licence or to cancel the licence in any particular circumstance. Ideally, where a failure of compliance can be corrected by the licence holder, temporary suspension should be the sanction rather than cancellation. The implementing regulations should clarify in what circumstances suspension will be imposed and in which circumstances an exploitation licence will be cancelled. There is also a need to clarify in the regulations the procedure for lifting a suspension of the licence.