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Part B: Mineral Rights - Part B-5: Development Minerals - 30. Development Minerals Exploration Licence | 30.9 Suspension of Licence

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

In the case of force majeure, the licence holder is excused from compliance with certain obligations during the reasonable duration of the event; and the term of the licence may be extended for that period. Careful attention should be given to the drafting of what is considered a force majeure event, the related notification requirement, the obligations of the licence holder to use best efforts to overcome the force majeure event as expeditiously as practicable, the determination and notification of the end of the force majeure event, whether the term of the licence is extended by the period of the force majeure event, and under what circumstances the licence may be terminated if the force majeure event continues beyond a specified time limit.

A distinction should be made between suspension of the 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 title, as well as the term, are suspended; and this may complicate the remediation of the breach that the suspension requires. 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.

A suspension of the licence may be an appropriate temporary sanction for failure of the licence holder to timely make required payments or file required reports, because both the failure to meet those obligations and the remedy are administrative events wholly within the control of the licence holder and do not require any operations at the site.

A suspension of operations may be the appropriate temporary sanction for failures to implement sufficient environmental protection measures, to implement required social obligations or to meet health, safety, security and labour standards. Under such a suspension, the licence holder maintains its mineral licence for the purpose of taking the necessary remedial action and comply its obligations, but is prohibited from conducting exploration activities until the problem issues have been resolved to the satisfaction of the regulatory entity, evidently losing productive time in its licence, which is itself the sanction.

Some mining laws provide for the suspension of operations or of the licence as a preliminary sanction to be followed by revocation of the licence if the underlying cause for the suspension is not remedied within a specified time period.

30.9 Example 1:

Article [_]

(1) The [Regulating Authority], or any person authorized by the [Regulating Authority], may, in writing, order exploration operations to be temporarily suspended on an emergency basis, regardless of whether such operations are authorized by a mineral right, until such arrangements are made that are in the [Regulating Authority]’s opinion necessary to prevent danger to life, property or the environment or to comply with this [Law][Act][Code].

(2) The [Regulating Authority] may cancel or vary the terms of any temporary suspension order.

(3) The [Administrative Reviewer] shall have the power to confirm a temporary suspension order made by the [Regulating Authority] and may not delegate this power.

(4) A temporary suspension order shall lapse after twenty one days of its issuance, unless it is confirmed, in writing, by the [Administrative Reviewer].

(5) The [Administrative Reviewer] after consultation with the [statutory advisory body] may suspend a mineral right if the holder-

(a) fails to make any of the payments required by or under this [Law][Act][Code] on the date due;

(b) fails to meet any prescribed minimum annual program of work or work expenditure requirement;

(c) grossly violates health and safety regulations or causes environmental harm;

(d) employs or makes use of child workers;

(e) fails to submit reports required by this [Law][Act][Code];

(f) contravenes any of the provisions of this [Law][Act][Code] or the conditions of his mineral right or the provisions of any other enactment relating to mines and minerals;

(g) dies and his heir or successor in title is not qualified under this [Law][Act][Code] to hold the mineral right, unless an application is received from the heir or successor within ninety days of the death to transfer the right to a third party who is so qualified and accepts all duties under the right;

(h) becomes an un-discharged bankrupt or becomes of unsound mind;

(i) makes any statement to the [Administrative Reviewer] in connection with his mineral right which he knows or ought to have known to be false;

(j) fails to substantially comply with the terms of a community development agreement when required by this [Law][Act][Code] to do so;

(k) for any reason becomes ineligible to apply for a mineral right under article [_] (on eligibility rules).

(2) The [Administrative Reviewer] shall, before suspending any mineral right give notice to the holder in such a manner as shall be prescribed and shall, in such a notice require the holder to remedy in not less than thirty calendar days any breach of the conditions of his mineral right.

(3) If the holder of a mineral right fails to remedy any failure or contravention specified in paragraphs (c), (d) and (k) of subsection (1), the [Regulating Authority] may, by notice to the holder thereof, suspend the mineral right forthwith.

(4) The powers of the [Regulating Authority] under this section shall, in relation to artisanal mining licences, be exercised by the [Regulating Authority], but need not consult the [statutory advisory board].

Annotation

Drawn from Sierra Leone’s mining law (2009), this provision is designed to apply to reconnaissance, exploration or mining licences. That is appropriate insofar as there can be a risk of dangerous activity taking place under a prospecting/reconnaissance or exploration licence and there is no apparent reason to be more tolerant of any of the stated grounds for suspension based on the type of licence under which they have occurred.

This provision makes the distinction between suspension of operations pending remediation of a condition that constitutes a danger to life, property or the environment or is in non-compliance with the mining law, on the one hand, and suspension of a mineral licence as a precursor to potential cancelation of the licence in the event of non-remediation of any of the reasons listed, on the other hand. Whereas suspension of operations is not preceded by prior notice and an opportunity to remedy the cause of the suspension, prior notice and such opportunity are required in the case of suspension of the licence.

The Administrative Reviewer is the supervisory authority immediately superior to the Regulating Authority in the administrative hierarchy.

This provision represents, in general, a balanced approach to protecting the interests of the State and affected stakeholders from harm in a manner consistent with providing security of title to the licence holder. Failures to comply with specific obligations of the licence holder are sanctioned initially by suspensions of operations or rights, as the case may be, and the offending licence holder is encouraged and given the opportunity to establish compliance before action to cancel the licence is taken. Because of the breadth of some of the grounds stated for ultimate cancellation of the licence, the provision may heighten the risk of loss of title more than necessary. This could be attenuated by limiting the grounds for cancellation of the licence whilst maintaining broader grounds for temporary suspension of operations which is a costly sanction in itself.

30.9 Example 2:

Article [_]

(1) Any serious offence, as defined in the Mining Regulations, which is committed by the holder shall be penalised with the immediate suspension of work, decided on by [the Regulatory Authority], once prior notice has been given.

(2) The duration of the suspension shall be set in the regulations, according to the seriousness of the offence and its impact on the environment, and public health and safety.

(3) To remedy said serious offence, [the Regulatory Authority] may, of its own accord or at the request of the local authorities concerned, require that the holder carry out work which it deems necessary in order to protect public health, the environment, workers or neighbouring mines. Should the holder fail to perform timeously, [the Regulatory Authority] may have said work carried out by a third party, at the holder's expense.

Article [_]

(1) Should it be duly found that the required documents prescribed by the present Code have not been kept in proper order, [the Regulatory Authority] shall send a written warning to the mining operator concerned, if this failure to comply does not constitute an offence.

(2) Should the holder repeat the offence, its activities may be suspended by the [the Regulatory Authority], following the issue of a compliance notice, for a period of three months.

(3) At the end of the suspension period, [the Regulatory Authority] shall carry out an audit. If it is found that the holder is now compliant, the suspension shall be lifted. If not, it shall be renewed for a further period of three months.

(4) If the compliance notice has not had the required result by the end of the second suspension period, the holder shall be subject to a penalty, the total amount of which, in [national currency], shall be equivalent to [] [currency] per day or part thereof, until the procedural defect has been cured.

Annotation

Drawn from the DRC Mining Code (2002), these provisions represent a different approach to suspension. The first article provides for a suspension of work as a sanction for any “serious failure”. The provision delegates to the mining regulation the definition of “serious failure” and the length of the suspension, which is to be a function of the seriousness of the failure and its effect on the environment and public health and safety. The provision authorizes the Mining Administration to undertake the necessary remedial action if the licence holder fails to do so, at the licence holder’s expense.

The second article provides for suspension of operations for three months as the sanction for a repeated failure by the licence holder to maintain required documentation. In such case, a warning and opportunity to remedy is provided before the imposition of the suspension order. The suspension is extended for a second period of three months if the underlying cause is not remedied by the end of the initial suspension period; and if still not remedied at the end of the second suspension period, a fine of USD 500 per day is levied against the licence holder until the documents are properly maintained.

The suspensions do not ultimately lead to cancellation of the licence in either case. This approach represents a philosophy that a costly sanction that does not involve loss of rights is more conducive to remediation and compliance, as well as more attractive to long term investment, than a sanction that leads to cancellation of rights. However, it does involve a risk that the Mining Administration will not be able to cancel the mineral licence of a holder that repeatedly fails to remedy a serious violation but nevertheless complies with the obligations (stated elsewhere) necessary to maintain the licence in effect.