Exploration application turmoil
August 26, 2022Opinion
Another week in the rough and tumble of the exploration sector…. if its not hard enough wrestling environmental approvals, heritage surveys, drilling availability, exorbitant soil sampling costs, and assays that take half a year to arrive, another spanner was thrown into the exploration works this week courtesy of an over-zealous Warden’s court judgement.
Let’s set the scene: normally, one applies online for an exploration licence application, and as long as you have the readies to support a year’s drilling and the requisite balance sheet and application fee, you can submit the application knowing that you are first in the queue. Anyone can put in a competing application, but in normal circumstances, first in = best dressed. There can be objections from others who might have a competing use for the application area, such as a haul road or access easement, but the first applicant has first dibs on the ground. Then subject to execution of a native title agreement (if applicable in the area), the application will be granted within about 6 months. From there, the holder must spend a certain minimum expenditure each year of the tenement’s life, in addition to paying the annual rents and rates to hold the tenement. Tenements last for two periods of 5 years and then must be converted in part to a mining licence or surrendered at the end of the term.
Exploration of a range of tenements is not a straightforward pastime. There is data to compile & assess, programs to plan & budget, approvals to be sought, teams to mobilise, vehicles to hire, safety procedures to implement, etc and then results, reports, announcements, and so on, and all of this assuming you have an idea of what you are looking for, and where to look for it. This exercise also assumes that investors and the market are interested in the commodity that you are looking for – something in this roller coaster world of commodity booms and busts that can take you from chocolates to boiled lollies in one utterance of a Chinese premier or the pen stroke of the US Federal Reserve President.
So in this context, the exploration world was rocked this week with a Warden’s court decision effectively overturning the ‘first in best dressed’ principle on a successful objection of an unsuccessful applicant. Like Scomo throwing the Westminster convention out the window and loading himself up with multiple ministries, the Exploration Application rule book suffered the same fate.
At issue, according to the lengthy judgement, was the lack of detail in the applicant’s application as to the type of exploration to be carried out in each of the 5 years of the life of the permit and how much would be spent on each activity. What a wonderful utopian higher level that would be where explorationists have the foresight to know what, why and how the exploration program might play out over the next five years. Each geologist would need to be supplied with a standard issue crystal ball to have any hope of getting close to complying with this. Quite obviously, nobody has been entering this level of detail, so potentially thousands of applications might be at risk of being invalidated.
And further, if you happen to have entered into an agreement to acquire someone else’s application, as it the case with many IPOs and is generally how the industry generates new projects [prospectors often spend the time to research and apply for an area, then listed companies who raise exploration capital are the ones who carry out the exploration, with the risk shared with investors who can move readily from rare earth to lithium to precious metals on a daily basis], then how do you ascertain if the application was validly applied for? Or could someone else claim the tenement was deficient in its application and lob in a counter application of their own? This would cause all sorts of confusion and potentially lead to no end of legal challenges.
What of us with a live prospectus raising funds for exploration programs on tenements that might (now) be deficient? What liability might directors be unwittingly wearing for false and misleading statements about the veracity of their portfolios as a result of this ruling? And following the mining act’s legal precedent, even granted tenements could be overturned on this ruling. How far might this strike to the core of the very exploration industry that has led to massive project developments and significant wealth and prosperity for this great state of WA?
Late this week, there was rumour of a government response, and sure enough, the Mines Minister issued a press release late Thursday pouring cold water on this judgement, to the effect of Don’t worry, carry on, she’ll be right”. Thank God, we all feel so much better now, we have bureaucrats on the case, and it’s all going to work out in the end!
To be continued….
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