Mining Act: Case Spotlight

Mining Act: Case Spotlight

Complying with expenditure conditions and making exemption applications

In the recent decision of Blackfin Pty Ltd v Mineralogy Pty Ltd [2013] WAMW 19, Warden Wilson SM refused a number of applications for exemption made by Blackfin Pty Ltd. In the course of his reasons His Honour set out a number of matters of principle that have implications for holders of mining tenements in Western Australia.

Making a commercial strategic decision to prioritise the development of certain tenements and warehouse or stockpile other tenements to be explored and exploited at a later date is not a strategy that accords with the policy of the Mining Act 1978 (WA), will not assist in obtaining an exemption from expenditure and will undermine the basis for some grounds of exemption.

The decision also highlights the need for tenement holders to keep clear and accurate records of their expenditure to be able to justify the connection between any expenditure and exploration or mining operations on the tenement in question.

Tenement holders who have tenements that are in a combined reporting group can not blindly follow the Guidelines issued by the Department of Mines and Petroleum and assume that lodgement of Form 5 Operations reports which claim aggregate expenditure that exceeds the minimum amount required will mean that they will obtain an exemption.  The expenditure incurred must be on or in connection with exploration on the combined reporting tenements and the holder must have procedures in place to ensure that they are able to prove this to the Department or Warden (as necessary).

Accordingly, tenement holders need to ensure that they and their contractors allocate expenditure to the specific tenements on which the work was carried out and provide sufficient details of the work done to show it was in connection with exploration and/or mining operations.  Where it is not possible to allocate to a specific tenement, holders of tenements need to ensure that they apportion the expenditure based upon the area of each tenement as the total area of all the tenements or have in place a reasonable, clearly understood and enunciated method to calculate and allocate the expenditure amongst the relevant tenements.

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