New initiatives to assist junior explorers

Flow-through capital raising, the new JORC code and the first ever non-cash tender for coal exploration were the hot topics at the Mining 2013 Resources Convention held in Brisbane this month.

McCullough Robertson’s Resources Group attended the Convention from 23 to 25 October 2013.  It was an opportunity to review the state of the sector and discuss the challenges and opportunities ahead, particularly those facing junior explorers.  This post covers some of the key themes of the conference.

Tax credit scheme

The Federal Government has expressed its commitment to introduce an Exploration Development Incentive benefiting exploration companies.

It will introduce an incentive that will allow investors to deduct the expense of mining exploration against their taxable income, starting on 1 July 2014. 

The scheme is expected to target small exploration companies by limiting eligibility to companies with no taxable income and will be capped at $100 million over the forward estimates.

McCullough Robertson Commercial and Tax Partner Hayden Bentley shares his thoughts on this issue during Day 1 of the Convention. 

First ever non-cash tender for coal exploration

During the conference, the Queensland Minister for Natural Resources and Mines, Andrew Cripps announced the first ever non-cash tender for coal exploration.  The seven areas of land being made available for coal exploration by the Department of Natural Resources and Mines (DNRM) collectively cover more than 1,292 square kilometres in the northern Bowen Basin.

DNRM officers will assess applications for this land based on the competitiveness of the ‘work programs’ submitted by explorers, but there will be no requirement for cash bids to be made.  Interested parties have until 2.30pm on Wednesday 5 March 2014 to lodge their tender applications.

McCullough Robertson Corporate Special Counsel Warwick Walsh discusses this announcement as well as issues around accessing capital for exploration and international investment in the sector during Day 2 of the Convention. 

Corporate update - the new JORC Code

A key topic of the conference was the new JORC Code and ASX Listing Rules relating to the disclosure of reserves and resources by ASX-listed mining and oil and gas exploration and production companies that will come into effect on 1 December 2013.  More information about this issue, a well as flow-through capital raising and continuous disclosure obligations around analysts' briefings that has seen Newcrest Mining feature frequently in the news lately, is detailed in the Corporate Update presentation delivered at the conference by Corporate Partner Isaac West and Hayden Bentley.

Click here to launch our Mining 2013 Resources Convention presentation for more information.

Hayden Bentley, Isaac West, Warwick Walsh

Mining lease conditions slashed and application processing times reduced

On 17 October 2013, the NSW Resources and Energy Minister, Chris Hartcher announced significant amendments to the standard conditions for exploration licences and mining leases which will result in the removal of conditions that are already covered by obligations under the Mining Act and other mine safety legislation.

The amendments also involve the deletion of conditions relating to matters that are already regulated by other government departments, such as the Department of Planning as well as other outdated and redundant conditions.

The removal of the duplications will cut the number of conditions for future standard coal mining leases in NSW from 24 conditions to nine. The standard ‘Mining Lease Conditions (Coal) 2013’ now relate to the following limited matters:

• landholder notification following the grant or renewal of the lease
• satisfactory rehabilitation of disturbance following the completion of activities
• the preparation of approved Mining Operations Plans, an annual rehabilitation report and annual compliance report
• notification to the Department in the event of an environmental incident which breaches the mining lease, the Mining Act 1992 (NSW)or the Protection of the Environment Operations Act 1997 (NSW)
• the preparation of ‘eligible subsidence management plans’ which will dictate the level of subsidence that is permitted to be caused by underground mining operations
• optimisation of resource recovery of the minerals that are the subject of the mining lease
• the payment of a security deposit for the fulfillment of obligations under the mining lease, and
• making every reasonable attempt to enter into cooperation agreements with overlapping title holders.

The purpose of these amendments is to minimise the costs of doing business in NSW and boost investment certainty. Significant obligations which have now been deleted from the standard conditions relate to environmental harm, working requirements (i.e. minimum number of personnel), blasting, safety, prevention of soil erosion and pollution, roads and tracks, trees and vegetation and indemnities.

This means that if your mining lease is granted or renewed after 17 October 2013 you can expect significantly reduced obligations to be imposed under the new mining lease conditions. All mining leases granted or renewed prior to this date will continue to operate under the previous conditions that were issued.

Assessment timeframes reduced

The Government has also committed to reducing the times for assessing coal exploration licences and mining leases will be cut from 150 days to 95 days, while times for processing renewal applications will be reduced from 100 days to 55. These changes came into effect on 1 July 2013.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

The gateway process commences for the assessment of mining and petroleum development

On 4 October 2013, the gateway assessment process for mining and petroleum development on strategic agricultural lands came into effect through amendments to the State Environment Planning Policy (Mining, Petroleum Production and Extractive Industries) Amendment 2013 (NSW) (Mining SEPP Amendment) and the Environmental Planning and Assessment Amendment (Gateway Process for Strategic Agricultural Land) Regulation 2013 (NSW) (Gateway Regulation).

The gateway assessment is an independent, upfront scientific assessment of the impact of new state significant mining and petroleum development on strategic agricultural land and its associated water resources.  The gateway assessment process must be undertaken before certain mining and petroleum development can proceed to full environmental assessment.

Updated strategic agricultural land maps have been included in the Mining SEPP Amendment identifying areas of biophysical strategic agricultural land and critical industry cluster land (such as viticulture in the Hunter Valley).  At this stage the gateway process applies to two million hectares of strategic agricultural land which was mapped in the Upper Hunter and New England North West regions of the state. Mapping of the remaining areas of the state is currently underway.

The Mining and Petroleum Gateway Panel (Gateway Panel), comprising independent scientific experts, has now been established to review proposed mining or petroleum development and issue gateway certificates.

This means that if you propose to lodge an application for a mining or petroleum development on specified strategic agricultural land at any point in the future, your application must be accompanied by a gateway certificate in respect of the proposed development, or a site verification certificate that certifies that the land on which the proposed development is to be carried out is not biophysical strategic agricultural land.

Site verification certificates

A site verification process has been introduced by the Government to enable proponents of mining and petroleum development, and in some circumstances landowners, to verify if land is classified as biophysical strategic agricultural land.

A proponent or landowner can apply to the Director-General of the Department of Planning and Infrastructure for a site verification certificate confirming that specified land within the area of a development is or is not biophysical strategic agricultural land.

When determining an application for a site verification certificate, the Director-General must have regard to the criteria set out in the Interim Protocol for Site Verification and Mapping of Biophysical Strategic Agricultural Land published in the NSW Government Gazette on 12 April 2013.

In addition, if a proponent identifies that the proposed project site contains land identified as strategic agricultural land in the relevant maps, the proponent can choose to challenge this status by applying to the Director-General for a site verification certificate.  The fee for the site verification certificate is $3,900.

If the Proponent is not the landowner, prior to requesting a site verification certificate, written notice must be provided to the owner of land or an advertisement must be published in a newspaper circulating in the area in which the development is to be carried out within specified time periods.

The Gateway Regulation now requires site verification certificates to be included in s149 planning certificates issued by local councils.

Gateway certificates

A gateway certificate can be issued by the Gateway Panel and is issued as an ‘unconditional certificate’ (if the proposed development meets the relevant criteria) or as a ‘conditional certificate’ (if the proposed development does not meet the relevant criteria).  A gateway certificate is valid for five years.

A conditional certificate will include recommendations of the Gateway Panel to address the proposed development’s failure to meet relevant criteria and the certificate may also recommend that further studies be undertaken.

If a gateway certificate application relates to development on land that has been identified as biophysical strategic agricultural land, the Gateway Panel must refer the application to the Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development (IES Committee) established under the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) for advice regarding the impact of the proposed development on water sources.

Changes to the environmental assessment process

Development applications for mining and petroleum projects will now have added complexity, as the gateway process introduces additional formal steps prior to (and in some circumstances during) the environmental assessment process.

If a gateway certificate has been issued for a proposed development, the Gateway Regulation requires the Director-General to address any recommendations of the Gateway Panel set out in the gateway certificate.  The Director-General must also consult with the Gateway Panel when preparing environmental assessment requirements for the proposed development, and have regard to the need for the requirements to assess any key issues raised by the Gateway Panel during the consultation process.

The Gateway Regulation also requires the Director-General to have regard to any gateway certificate recommendations of the Gateway Panel, even if the certificate is issued after a proponent has been notified of environmental assessment requirements.  The Gateway Regulation includes a provision which enables the Director-General to modify those environmental assessment requirements if it is considered necessary.

The Gateway Regulation now also require a consent authority to refer an application for development consent for a mining or petroleum development that is accompanied by a gateway certificate, to the Minister for Primary Industries for advice regarding the impact of the proposed development on water resources.  The Minister for Primary Industries when considering the impacts of a proposed development on water resources must have regard to the Aquifer Interference Policy, and particularly the minimal impact provisions.

Coal seam gas development exclusion zones

The Mining SEPP Amendment also introduces additional coal seam gas development exclusion zones and buffer zones (land within two kilometres of an exclusion zone), which prohibits coal seam gas development on or under certain land.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

Proposed changes to Environment Protection Licences

In September 2013, the NSW Environment Protection Authority (EPA) released details of the proposed changes to the environmental licensing framework under the Protection of the Environment Operations (General) Regulation 2009 (NSW) (Regulation).  A new risk based licensing scheme (Scheme) is intended to come into effect from 1 January 2015.  Submissions to the EPA on the proposed introduction of the Scheme close on 1 November 2013.

Purpose of the Scheme

The Scheme is designed to provide an incentive for environmental protection licence (EPL) holders to comply with the environmental protection standards set by the EPA.  Under the Scheme, licensees assessed as having a poor environmental performance record will incur higher licence fees because they require a greater level of regulatory intervention, e.g., more intensive monitoring.  This allows for a risk assessment process that is proportionate to the level of environmental risk that the EPL holder generates which does not shift the burden of costs of such activities to the community.

The risk assessment process

The EPA will conduct a risk assessment for each EPL holder in consultation with the holder in order to determine:

• the appropriate environmental management category (A, B, C, D or E in descending order of performance), and
• the appropriate environmental risk level (1, 2, or 3 in ascending order of risk) for their activities.

The category will determine the risk of the EPL holder so that the EPA is able to ascertain the regulatory intervention required for that particular licensee.

To make this determination, the EPA will have regard to three factors:

• the day-to-day operations at the site
• the risk of pollution incidents occurring at the site, and
• the environmental management performance of the licensee.

Furthermore, the EPA will take into account the EPL holders history, including past compliance and non compliance and ways in which the EPL is trying to control or mitigate environmental risks.

Review of risk assessments

Following the initial risk assessment, the process will be repeated after a period of five years, unless:

• an environmental incident or report of non-compliance triggers a review ; or
• an EPL holder requests that the EPA review their environmental performance before that time.

Calculation of the licence administrative fee

The licence administrative fee for each EPL holder will be calculated based on their environmental management category and environmental risk level in accordance with the method set out in Schedule 1 of the Regulation.

Public availability of information

The environmental risk level for each EPL holder will be published on the EPA’s Public Register in order to provide the public with increased access to information on the environmental performance of industrial operators and facilitate greater transparency in regard to environmental assessment processes.

Implications of the proposed amendments

The proposed new scheme for assessing a licence holder’s risk will mean that licensees that rate higher on the risk assessment scale will be more heavily regulated by the EPA in addition to having increased administrative fees.  This includes increased pollutant fee units and increased fees payable for clean up notices, prevention notices and noise control notices.  This means that if your operations have a poor environmental performance record as a result of past conduct, you are likely to be impacted most significantly by these changes.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

The new Rail Infrastructure Noise Guideline

In May 2013, the NSW Environment Protection Authority (EPA) released the Rail Infrastructure Noise Guideline (RING).  The RING replaces the Interim guideline for the assessment of noise from rail infrastructure projects 2007 (NSW).  The purpose of the RING is to streamline the approval process for rail infrastructure projects and protect the wellbeing of communities from the impacts of projects likely to result in increased noise levels.

Projects subject to the RING

The RING applies at the project assessment stage to:

• new heavy, light and non-network rail lines extending beyond industrial sites
• the redevelopment of existing lines that are in use or disused, and
• land-use development that is likely to generate additional rail traffic on an existing rail network.

Mitigating noise impacts

The RING imposes specific trigger levels for cumulative rail noise on the different types of rail infrastructure projects.  All feasible and reasonable noise mitigation measures must be considered for projects that are likely to exceed the specified levels once they are operational.

Calculating noise levels

The noise trigger levels refer to noise at receiver locations in areas of residential land-use in urban, suburban and rural settings and do not include ambient noise from other locations.

For redeveloped projects the trigger levels take into account noise from existing projects and require the calculation of increases in noise only.

Key differences in the RING from the interim guideline

The EPA has made several changes to the scope of the instrument:

• light rail systems and non-network rail lines are subject to the RING
• there are no exemptions for minor works
• the trigger levels for non-rail land-use developments have been revised
• rail track owners are required to assess the magnitude of any increase in noise levels over a 15 hour day time period and a 9 hour night time period where residential development encroaches on rail lines, rather than for each hour, and
• projects which exceed the specified triggers are now required to reduce noise levels towards the trigger levels.

Implications of the RING

If you are the proponent of a rail traffic-generating development or non-network rail lines you must consider whether your development will exceed the specific noise and vibration trigger levels.  If these noise levels are likely to be exceeded when the rail project is operational, you must consider ‘feasible’ and ‘reasonable’ noise mitigation to reduce the noise impacts towards the trigger levels and address these mitigation measures in your environmental assessment.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

New Aboriginal Cultural Heritage Act proposed

Major reforms to Aboriginal cultural heritage (ACH) legislation have been proposed by the NSW Government.  A new Aboriginal Cultural Heritage Act (ACH Act) will replace Part 6 National Parks and Wildlife Act 1974 (NSW) (NPW Act) which relates to Aboriginal objects and places.  The proposed ACH Act will maintain the existing provisions relating to Aboriginal objects and places, and will incorporate new provisions relating to cultural values which are not currently recognised in the NPW Act.  The closing date for public submissions on the reforms is 14 February 2014.

The intention is to update and contemporise the existing legislation, aiming to provide clarity and certainty for Aboriginal people in NSW and to proponents.  The ACH consultation process for major developments will be streamlined and the code-based standards for assessing ACH will result in reduced delays, as there are clear time frames for consultation, development of assessment plans and finalising Project Agreements.

Streamlined process

The introduction of Local ACH Committees will supersede the current requirement for proponents to consult with multiple registered Aboriginal parties.  Each Local ACH Committee will comprise of a maximum of ten nominated people, who have an identified connection to country.  A similar process has been successfully implemented under the Aboriginal Land Rights Act 1983 (NSW), which outlines a process of identifying people who have the association with and authority to speak for Country.

If a project crosses multiple Local ACH Committee boundaries, representatives will form a Regional Project ACH Committee.  The aim is that Local and Regional Project ACH Committees will become a ‘one-stop-shop’ for projects, and will work with proponents to negotiate and agree on outcomes, on behalf of the wider Aboriginal community.

Proponents will also be assisted by the introduction of Local ACH Maps.  These will show areas of high, low and no ACH value, as well as areas where knowledge is incomplete.  Each Local ACH Committee will map where these values are within their region.

A Plan of Management for each Local ACH Map will also be developed, which will outline the specific strategies for managing each type of ACH value identified in the map.  Key ACH priorities will be identified and can be incorporated into individual Project Agreements.  Project Agreements will be negotiated between the proponent and the local ACH Committee, and will be required for certain activities in areas which have been mapped as having incomplete or high ACH values.

Dispute resolution and penalties

It is intended that the proposed ACH Act incorporate dispute resolution processes, as well as appeal processes, however these are still being developed.

Amendments to the NPW Act in 2010 introduced heavy penalties for causing harm to ACH objects and places.  Those penalties, along with the existing offence and defence provisions will be included in the new ACH Act.  New penalties have also been proposed for failure to comply with a Project Agreement and for failure to comply with consultation requirements.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

New native title claims in the Hunter Valley and Lake Macquarie

Native Title claim NC2013/002 – Lower Hunter to the Central Coast areas

On 13 May 2013, the Awabakal and Guringai People lodged the Native Title claim NC2013/002 (Claim NC2013/002) with the National Native Title Tribunal (NNTT).  The Claim NC2013/002 covers an area of approximately 3923 square kilometres, and encompasses parts of the Lower Hunter Valley, Newcastle, the Central Coast, as well as all of Lake Macquarie and its surrounds (excluding areas in which native title has been extinguished).

Claim NC2013/002 was accepted for registration in the NNTT on 13 June 2013, and was registered on the same day.  Claim NC2013/002 was publicly notified on 9 October 2013.  The Native Title Act 1993 allows persons not included in Claim NC2013/002, to apply to become a party to Claim NC2013/002 prior to 8 January 2014.

Claim NC2013/002 satisfied the registration test on 13 June 2013, giving the Awabakal and Guringai people as ‘registered native title claimants’, the right to negotiate in relation to future acts, including mining, in the claim area where native title has not previously been extinguished, if the future act process is triggered.

If you propose to carry out a future act in the area included in Claim NC2013/002, you will be required to negotiate with the Awabakal and Guringai people.  The right to negotiate process will not stop your project or development from going ahead, however it gives the native title claimants a right to have a say about the project.  This process also enables the native title claimants to negotiate an agreement, which may include compensation.

Native Title claim NC2013/006 – Upper Hunter to Newcastle areas

On 19 August 2013, Mr Scott Franks and Mr Robert Lester lodged Native Title Claim NC2013/006 on behalf of the Plains Clans of the Wonnarua People.  This claim has not yet been accepted for registration by the NNTT.

This claim encompasses an approximate area of 11,358 square kilometres including parts of the local government regions of Cessnock City Council, Dungog Shire Council, Hawkesbury City Council, Liverpool Plains Shire Council, Maitland City Council, Muswellbrook Shire Council, Singleton Shire Council and the Upper Hunter Shire Council (excluding areas in which native title has been extinguished).

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain