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Matu Mining Pty Ltd v Moaina [1995] PGNC 48; N1395 (8 December 1995)

Unreported National Court Decisions

N1395

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

OS 402 OF 1995
BETWEEN:
MATU MINING PTY LIMITED - Plaintiff
And:
ROBIN MOAINA - First Defendant
And:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA - Second Defendant
And
KARE-PUGA DEVELOPMENT CORPORTATION PTY LTD - Third Defendant

Waigani

Sheehan J
24 November 1995
27 November 1995
8 December 1995

DECLARATION - Mining Act 1992 - claim for declaration as to the extent of an exploration licence issued under the Mining Act.

Counsel:

Mr J Bray for the Plaintiff

Mr K Kua for the 1st & 2nd Defendant

Mr M Wilson for the 3rd Defendant

DECISION

8 December 1995

SHEEHAN J: The Plaintiff seeks a:

“Declaration that exploration licence No 1093 (Mount Kare) extends to include and includes the entirety of the land in Schedule 1 attached to the said Exploration Licence including the land the subject of Mt Kare Special Mining Lease list No 1 subject always to and limited by the provisions of Mt Kare Special Mining Lease No 1 and the prior rights of the registered holder therefore.”

This motion before the Court has been brought to establish in clear terms the extent of the rights granted by the Exploration Licence 1093 issued under the Mining Act 1992 on 29 September 1994.

The circumstances leading to the Plaintiff’s seeking declaratory relief are that the Secretary for Mining and Petrolum, the First Defendant in a letter dated 14 September 1995 to the Department of Southern Highlands had expressed the view that the Plaintiff’s exploration rights do not extend across the whole of the land described in the licence, in particular, rights to explore for minerals under the special alluvial lease held by Kare-Puga Development Corporation Pty Ltd (KDC) the Third Defendant. In furtherance of that view, the Secretary indicated in that correspondence, an intention to ensure that KDC is in fact granted the exploration and mining rights presently excluded from the SML. The relevant part of that letter, which came to the notice of the Plaintiff is as follows:

“Information Concerning Mount Kare

I write in reply to your letter of 21 August on this subject.

On 28 July, 1995, the Supreme Court handed down a decision on the appeal. The decision overturned the earlier National Court decision and declared the Mining Regulation 1993 invalid.

This decision meant that the rights to explore for hard rock minerals given to the tenement holder of the Mount Kare SML (Kare Puga Development Company), no longer existed and the exploration rights on the SML did not belong to anyone in particular.

On the basis of the Exploration Licence conditions for EL 1093 clearly stating that the area granted does not include any existing exploration licence or any other tenement whether existing or granted subsequently, Matu does not have the exploration rights either.

Clearly, the Supreme court decision has created more problems then it has solved and there is a need to:

a) grant hard rock exploration rights on SML 5 Mt Kare to the existing tenement holder; and

b) grant the exploration rights to all mineral on other SMLs which only have rights in explore for particular minerals (eg. gold, silver, copper).

A draft Amendment to the Mining Act to grant exclusive rights to KDC (existing holder of SML 5 Mount Kare) to carry out hard rock exploration is presently with the State Solicitor for approval before going to NEC.”

KDC was joined to this proceedings as an interested party. But not with standing the stated intentions of the First Defendant to grant it further exploration and mining rights, KDC in fact maintains that the SML it now holds already invests KDC with those rights.

In brief the Plaintiff says that its licence to explore for minerals extends to, and includes the whole of the land described in EL 1093. But because KDC has an SML for aluvial mining over part of the land in that licence, the rights of the Plaintiff to exploration are limited in respect of the SML to the area below it. Therefore it has the surface or alluvial and the hard rock exploration rights over the whole of the licence area, except that in the case of the area covered by the alluvial SML, it has the under lying hard rock rights of exploration only. The Third Defendant says that it does not, the 1st and 2nd Defendant represented by Counsel had indicated that it will abide the decision of the Court.

The issue before the Court then, is whether the Plaintiffs rights of exploration granted by EL 10930 include an area under SML No 1.

It is appropriate to examine the operative words of these instruments Taking the SML first. This Lease was granted on 27 September 1990. Its formal title is Mount Kare Special Mining Lease Number 1. It declares that the Governor General as Head of State:

“hereby grants to Mount Kare Holdings Pty Limited (hereafter called “the Lessee”, which expression shall include its successors and assigns) a SPECIAL MINING LEASE over:

(a) all deposits of Alluvial Gold (as defined hereunder) as are contained in, on, or under that piece of land, being the whole of the land described in the attached description and delineated on the plan annexed hereto and signed by me for the purpose of identification (hereinafter called “the Land”); AND

(b) all sand, gravel and coarse aggregate in, on or under such Land for use in the development of facilities and infrastructure on the said Land or for such other purposes as the Minister responsible for the Act may, from time to time, approve in writing,

WITH THE RIGHT and liberty to use the said land for the mining of such Alluvial Gold and sand, gravel and coarse aggregate, which in the case of Alluvia Gold shall be an exclusive right and the right and liberty to use the said Land for such purposes maybe necessary or desirable for, or ancillary to, such mining including, without limiting the generality of the foregoing, the construction, use and maintenance of all facilities and infrastructure contemplated by the Approved Proposal for Development, as may be varied from time to time (as defined in the Contract), as being located thereon,

TO HOLD the said Alluvial Gold, sand, gravel and coarse aggregate for a term of Ten (10) Years from the date of publication in the National Gazette of the Notice of this grant with the right to variation or renewal of this SPECIAL MINING LEASE as provided for in the Contract and the Act.”

The SML was transferred to the 3rd Defendant KDC on 10 August 1993.

The Exploration Licence EL1093 was issued by the Minister for Mining and Petrolum formally (on 29 August 1994). It is issued on Exploration Licence, Form 1 of the Mining Regulations. It stipulates a grant to the Plaintiff of:

“EXPLORATION LICENCE NO 1093 over land situated near Pogera, Enga Province and more particurarly described in Schedule 1 attached hereto as may be varied from time to time, but not including any protion of land comprising any existing. Exploration Licence or any other tenement whether existing or granted subsequently except a mining easement for which the land has not be excised, for a TERM TWO (2) from this date. For the purpose of carrying out Exploration for Minerals. In accordance with the Act and subject to...CONDITIONS.”

The land of EL 1093 totals 65 blocks and 220 square kilometres. Rent is paid in respect of all blocks. The SML is in fact situated within the Licence area.

Extensive submissions were made by Counsel for the Plaintiff and Defendant though these can only be setout in brief in this decision. Mr Bray for the Plaintiff contended that SML granted in 1990 awarded Alluvial Rights only and made no disposition of the rights exploration or mining of the hard rock which lie below the Alluvial deposits. Thus he said the State could readily entertain, and did entertain an application from the Plaintiff in 1993 to explore for minerals in the land in the licence including the hard rock under SML 1.

Mr Bray also said that by following a strict interpretation of the grant under EL 1093, the words in it exluding land comprising “any other tenement” therefore can not refer to the area of the SML since that is not a tenement which has been according to s. 2 been:

“granted or deemed to have been granted under this Act...as provided by s. 21 of the Mining Act 1992.”

Mr Wilson for 3rd Defendant however submitted SML 1 has and always has had rights to all minerals within the area of the SML. Since s. 173 (2) of the new Mining Act 1992 preserved the SML (issued under Ch 195 of the old Act) the “as though the repealed act had never been repealed” then all the rights under the old Act continue in full force today. He maintained that those rights specifically include rights to other minerals (s. 79). He also submitted as well s. 173 provides protection from any grant by the State, of further exploration rights over the SML, because s. 31 of the old Act precludes such a disposition.

I find the argument of Counsel for the Plaintiff that the SML is not a tenement unconvincing. Notwithstanding the specific nature of the “deeming” sections referred to in the 1992 Act, I find no reason to conclude that those sections are final and conclusive. It adds nothing to any argument to say that the SML is preserved only as a lease under the old Act. On the contrary I believe that the SML must be deemed to be a tenement since it is a tenement under the old Act and it has specifically been preserved by s. 173 (2). The Plaintiff’s is obliged to acknowledge the SML exists and whether it be called an alluvial lease or a “tenement” the fact remains that it has rights preserved which directly impinge on the Plaintiff claims to total exploration rights of the whole of EL 1093. However the argument as to tenement or does not solve the question before the Court. The extent of the rights under EL 1093 remain to be determined.

For the 3rd Defendant Mr Wilson submitted that that State can not derogate from its grant. That is, the State having granted a Special Mining Lease in the terms that it has, and having confirmed that grant by the protection of s. 173 of the new Act, can not thereafter grant other rights which diminish or to detract from it.

That generally, is so. This maxim is derived from Wheeldon v Burrows [1879] UKLawRpCh 204; (1879) 12 Chd 31. It is a rule of intention based on the proposition that a party can not make a disposition in land and at the same time (or subsequently) deny the grantee the concomitant rights necessary for its reasonable use without hereby giving a cause of action which leads to enforcement remedies. However the State has honoured the duty not to derogate from its grant. Section 173 is an example of that principle in action. The grant of the SML, including its attendant rights are preserved under the new Act as if there has been no repeal at all.

But the saving of the SML by virtue of s. 173, does not mean that the lease continues to run on its own under the old Act alone. By s. 173, rights created under the old Act are preserved, but preserved, by the new Act, which from the moment of its gazettal governs all mining in Papua New Guinea.

At issue is the extent of the SML. What are its attendant rights? These can be readily determined from the lease itself and the operative Mining Acts. As may be seen by its terms this lease is a Special Mining Lease for alluvial gold.

Alluvial Gold is defined in the SML as follows:

“For the purposes of this SPECIAL MINING LEASE Alluvial Gold shall have such meaning as it might be given from time to time in the Act, and to the extent that the Act does not contain such definition, or to the extent that such definition in the Act does not extend, shall also mean colluvial and alluvial gold that is located in transported material and which is not readily capable of recovery by mechanical means without ripping or blasting and which can be processed without pre-crushing, and includes all minerals which are located in association with that gold and which are unavoidably recovered or treated in the course of conducting mining.”

Webster’s dictionary defines “alluvial” as:

“soil, sand, gravel or similar detrital material deposited by running water, especially during geologic time...it occurs at places where streams issuing from mountains lose velocity and deposit their contained sediment on valley floor.”

That maybe contrasted with “hard rock” which is associated with hard, massive, underground rock formations.

Section 2 of the old Mining Act does not define alluvial mining leases but it does give a definition of “alluvial ground” as being:

“Alluvial grounds means ground containing gold or other minerals found in detritus resulting from the disintegration of alluvial deposit which constituents have been brought into their position by mechanical agencies.”

That definition is in fact upgraded by the Mining Amendment Act No 32 of 1990 which introduced division 2A to part VII of the old Act relating to the grant of Gold Mining Leases on customary land. It introduce s. 55 (a) to (h) and states:

“55(a) Interpretation in this division unless the contrary intention appears - “alluvial, colluvial or surface gold mining” means mining of free gold from unconsolidated streams, landslide, solid and or other geological depositional sedimentary environments where the primary method of gold extraction and recovering is be virtue of mechanical sorting, particulars size reduction and gravity segregation by mass.”

By s. 55(b) alluvial gold mining is reserved to traditional land owners and be s. 55 (d) an alluvial gold mining lease reserved for traditional land owners limits the depth of such lease to not more than 20 meters below the surface. [NB: In quoting from the sections of this part it is only the definition that is relevant].

Under the 1992 Mining Act s. 2:

“Alluvial means all unconsolidated rock materials, transported and deposited by stream action or gravitation action, which are cable of being freely excavated without prior ripping or blasting.”

The obvious conclusion from all these definitions must be that an alluvial gold mining is the mining or extraction of gold from the alluvial or essentially surface deposits, as contrasted with the right to extract gold from the hard rock formations which lie below.

The 3rd Defendant argues that the SML also provides for the right to other minerals is said to be contained in s. 79 of the old Act. But there can be little force in that argument. The section reads as follows:

“79. Finding of other minerals

(1) In this section ‘mineral’ includes gold.

(2) If a mineral other than a mineral which the lessee has under the lease the right to mine is found on land for the time being comprised in a special mining lease, the lessee shall, within 28 days, furnish a full report to the Minister.

(3) The Minister may, by written notice to the lessee, require the lessee to surrender within three months, or such longer period specified in the notice as he considers necessary to enable the lessee to mine from the land the mineral specified in the lease, such part of the land the subject of the lease at he considers necessary to permit the other mineral to be mined.

(4) The lessee may mark out land comprised in the lease for the purpose of an application for a mining renement for mining the other mineral and, for the purpose of any such application by the lessee, marking out shall be deemed to have been done on the date of the surrender of the special mining lease in respect of that land.

(5) A special mining lease shall contain a condition that, if a lesses fails to comply with a requirement of the Minister made under Subsections (3), the Minister may resume without compensation the area of the leased land specified in the requirement.”

At the very highest this the section gives a contingent right to apply for a mining tenement in respect of minerals other than those for which a lessee has a right to mine, a right it should be noted also preserved by the 1992 Act. In my view the only “rights” to other minerals is provided in the SML itself, where it speaks of minerals “unavoidably recovered” in the course of ordinary alluvial mining. These are far greater rights than s. 79 provides. Accordingly I am quite satisfied under that the MT Kare SML No 1, mining rights are alluvial only. There are no further rights beyond that, in particular there is no right to mine the hard rock.

The second limb of the Third Defendant’s argument against rights of the Plaintiff under EL 1093 to explore beneath the SML was, that since the SML was preserved as if the old Act never was repealed, then s. 31 of the old Act precludes the grant of any exploration licence over the tenement that it holds.

To the extent that s. 173 (3) permits an application for tenement in respect of a tenement granted under the old Act, it is inconsistent with s. 31 of the old Act. Having preserved the SML under s. 173 (2) the next subsection specifically states that:

“173(3) a person may in accordance with this act apply for a tenement in respect of part of all the land the subject of prospecting authority or lease granted under the repealed act...”

Thus the very section that preserves the Special Mining Lease, by subsection (3) specifically provides that any party, may apply for a tenement (e.g. an exploration licence) for land leased under the repealed Act.

This is the anomaly which is referred to in the Supreme Court decision SCA 483 of 1995. But the solution is offered in that decision as well. It said:

“The anomaly we have described above can only exist in respect of alluvial gold already granted to the second respondent in SML 1. There can be no anomaly in relation to any tenement which may be granted in respect of any other mineral to any other person. The second respondent KDC had no right to explore and mine any other minerals. It had no such right under the old Act and no such right at the time the new Act came into force. The second respondent simply has an equal right to apply for a tenement in respect of other minerals as any other person under s. 173 (3).

Applying this to the present case, the anomaly created by s. 173 (3) of the new Act is that two persons could be entitled to the same mineral (alluvial gold). The provision can be modified by a regulation under s. 183 (a) so that the alluvial gold granted to the second respondent in SML 1 granted to the second respondent in respect of alluvial gold should not be affected by any application under s. 173 (3).

An examiniation of the Regulation in question shows that it does not seek to protect the alluvial gold the subject of SML 1. It simply recites the saving provision and goes on and deals with exploration and mining of all other minerals for which the second respondents had no right whatsoever. That in our view is not a modification of s. 173 (3) within the meaning of s. 183 (a) of the Act. The Regulation in effect grants new rights to the second respondent that it did not have before.” (Emphasis added).

The Supreme Court also clearly stated that there was no anomaly in any party applying for the mineral rights other than those hold by the SML.

“The Regulation deals with minerals other than alluvial gold which are not the subject of any tenement under the old Act. One may ask, what is carried over from the old Act by transitional provisions under the new Act which results in an anomaly? There is none. No one had rights to other minerals including the second respondent. If they had no right to these minerals under the old Act, we cannot see how any anomaly may arise when s. 173 (3) gives a right to apply for a tenement in respect of all these minerals.”

Of course, at the time SC 483 was decided, EL 1093 had not been formally granted.

The Supreme Court also dealt with the contention that as well as the ‘inconsistency’ of grants of lease of the same land, the practical difficulties of co occupation would be insuperable.

“Counsel for the second respondent further argued that the difficult created by s. 173 (3) is that it allows applications to be made for a tenement for other minerals over the same land the subject of SML 1. The difficulty he submits relate to the occupation, possession and use of the land. That if another person is granted a tenement over other minerals over the same piece of land (SML 1), the difficulty arises as to the occupation and possession of land by the second respondent and the new tenement hold...

With respect we cannot accept the submissions... What counsel for the second respondent refers to is the practical difficulty of occupation, possession and the use of the same land. However, this is not a difficulty within the meaning of s. 183. The old Act created such a situation. For example, the land the subject of SML 1 was also the subject of prospecting authority granted under the old Act which expired at the end of 1993.

The new Act allows different tenements to be granted over the same piece of land. Under Part V Div 4 Subdiv. B of the new Act, applications can be made in respect of land where there is an existing tenement. Section 60 (3) provides for consultation between respective tenement holders so as to use the same land without interrupting the other.”

Counsel for the 3rd Defendant also contended decided cases preclude any right in law to issue grants or leases over the same land. The short answer is, the Mining Act specifically provides for just that possibility.

But even if the obvious interpretation of the instrument of grant of the SML, the exploration licence the statutes themselves or SC 483 was not enough, the facts and the evidence of the positions taken by the parties put before the Supreme Court and this Court, show that from the initial grant of the SML onwards, the clear intention was that the SML was an alluvial or surface lease only and that the hard rock rights for that area and for the surrounding area remained open to application.

At the time of granting of the SML, Parliament had already passed the Mining Amendment Act 32 of 1990 in July of that year making provision for alluvial gold mining to be reserved for customary land owners. It was in that climate that the Mount Kare SML was granted.

Likewise the purported transfer of further rights by the unlawful use of transitional regulations clearly shows the Department of Mines, the regulatory authority itself was very much aware of the limits of the alluvial lease.

The Supreme Court in SC 483 emphatically declared that purported grant to be unlawful. Indeed that decision effectively traversed and decided all the issues raised in the hearing of this motion. It is stated:

“Matu Mining Pty Limited (herinafter referred to as ‘the Appellant’) applied for an exploration license in accordance with s. 173 (3) and other provisions of the new Act which regulate application for an exploration license. The land over which the exploration license was applied for is designated as El 1093. This is a larger area of land which includes all of the land the subject of SML. There were two other applicant, Amadio Pty Ltd and Mount Kare Joint Venture Pty Ltd Pursuant to s. 100 (2) of the new Act. Priority of the said application were determined by a ballot conducted by the Registrar of Tenements. Priority was granted to the appellant in accordance with the ballot. On 8 December 1993, the Mining Warden commenced hearing in respect of the appellant’s application for the said exploration licence.

...on 10 December 1993, the Mining (Transitional Provisions) Regulation 1993 (hereinafter referred to as ‘the Regulation’) was made by the Head of State and came into force in accordance with the provisions of s. 183 of the new Act.

This Regulation effectively changed the nature of the second respondent’s (KDC) right in the following manner, that in addition to the rights saved in s. 173 (2) of the new Act, the Regulation granted “exclusive right to explore for and mine minerals in and under the land the subject of SML.” This included all minerals. The second respondent had no such rights before and in a flash under the Regulation, it had the exclusive right to explore and mine other minerals on land the subject of SML.

This effectively made the application for an exploration license under the new Act by the appellant pointless because any such license which might be granted under the new Act in respect of the land the subject of SML is made subject to the Regulation (ss. s. 1(b)).” (emphasis added)

It is very difficult to understand how the Secretary the First Defendant could have come to the conclusion that the Supreme Court decision raised difficulties that could only be overcome by legislation in favour of the 3rd Defendant. That decision is in fact in clear and unequivocal terms. But even had there been some difficulty in understanding the ruling it seems totally inappropriate for the authority charged with the regulation of Mining in PNG to be seen to promote the interest of one party against another without affording any opportunity to make representation in opposition and indeed compelling application to the Court once again. In doing so the Secretary could well lay himself open to charges that his conduct is in conflict with his duties as Director and chairman of the Mining Advisory Board.

As has been shown the limited “anomaly” under s. 173 (3) does not arise in respect of the Mount Kare SML No 1. There is no inconsistency in the grant of EL 1093 to the Plaintiff. The licence specifically provides that the exploration rights accorded to the Plaintiff cover the whole of the land within the designated area but shall not include any existing tenement. That is only saying the exploration rights cover the whole of the area excluding the alluvial SML which the 3rd Defendant holds. This is specifically the declaration that the Plaintiff seeks; the right to explore the whole of the land designated in the schedule to the licence, but without in any way interfering with the right of the 3rd Defendant under its SML to mine alluvial gold. There is no doubt that the Plaintiff is entitled to such a declaration.

Lawyer for the Plaintiff: Pato Lawyers

Lawyer for 1st & 2nd Defendants: Fiocco Posman & Kua

Lawyer for the 3rd Defendant: Warner Shand