Limpopo Economic Development Agency v Klopper NO and Others

The Limpopo Economic Development Agency (LEDA) held 40% of shares in ASA Metals (Pty) Ltd (ASA), with the remaining 60% held by Eastern Asia Metal Investment Co Ltd (EAMI), a Chinese company. ASA was the sole shareholder of Dilokong Chrome Mine (Pty) Ltd (DCM). DCM held an old order mining right that was converted to a new order mining right under the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) on 20 March 2014. The conversion was granted subject to clause 17 of the mining right, which referenced a shareholders agreement dated 11 December 2006 and provided that LEDA would hold a 40% "stake in the right without an obligation to dilute", to be transferred later to SOMCO (the State-Owned Mining Company) upon notice from the Minister. Both DCM and ASA were placed under business rescue. The business rescue practitioners of DCM decided to sell the mining right to Cheetah Chrome South Africa (Pty) Ltd. LEDA launched an application seeking, inter alia, a declarator that it held a 40% stake in DCM's mining right and an interdict to prevent the sale without its consent. The high court dismissed the application.

• Whether clause 17 of DCM's mining right granted LEDA a 40% stake in the mining right itself or merely referenced LEDA's 40% shareholding in ASA
• The proper interpretation of clause 17 in light of the objects of the MPRDA, particularly sections 2(d) and (f) concerning empowerment of historically disadvantaged persons
• Whether the Minister had the power to grant a stake in a mining right to a party other than the applicant for the right
• The effect of the conversion of old order mining rights to new order mining rights under the MPRDA
• Whether business rescue practitioners could dispose of the mining right without LEDA's consent

The appeal was dismissed with costs, including the costs of two counsel. The order of the high court dismissing LEDA's application was upheld.

The binding legal principle established is that clause 17 of a mining right, when properly interpreted in context and with regard to its purpose, does not grant a shareholder of the holder's parent company a direct stake in the mining right itself where such an interpretation would be inconsistent with the text when drafting errors are corrected, would exceed the Minister's powers, and would result in an unlawful arbitrary deprivation of property. A "stake in the right" in the context of empowerment provisions relating to a shareholders agreement refers to shareholding in the holding company, not a direct interest in the mining right. The Minister has no power under the MPRDA to grant a stake in a mining right to a party other than the applicant for that right. When interpreting poorly drafted clauses, courts must identify and correct patent drafting errors evident from context to give the provision a lawful and sensible meaning.

Plasket JA made observations about the poor quality of the drafting of clause 17, noting the drafter was confused about the relationship between the various entities and the nature of shareholding in a company. He reiterated the trite principle that assets of a company belong to the company and not its shareholders, who only have a right to dividends. The majority commented that LEDA's interpretation was opportunistic, seeking to take advantage of inelegant drafting. In dissent, Mbatha JA made extensive observations about the importance of the MPRDA's empowerment objectives and the Mining Charter as a binding regulatory instrument. He observed that allowing foreign investors to acquire mining rights free from empowerment obligations would defeat the purpose of the MPRDA. He noted that the identities of the purchaser Cheetah's shareholders remained unknown and that the business rescue practitioners had changed their position from recognizing LEDA's interest to denying it. He emphasized that interpretation must promote the objects of the MPRDA and that the conversion of old order rights did not preserve the status quo but required compliance with new legislative requirements.

This case is significant for its interpretation of the conversion provisions of the MPRDA and the conditions that may be attached to converted mining rights. It clarifies that the Minister cannot arbitrarily grant stakes in mining rights to third parties beyond the applicant. It illustrates the application of modern principles of contractual interpretation to poorly drafted clauses in mining rights, emphasizing the need to correct patent drafting errors to achieve a sensible and lawful meaning. The case also addresses the interplay between mining rights, shareholding structures, and empowerment requirements under the MPRDA and Mining Charter. It demonstrates the limits of the principle that the assets of a company belong to the company and not its shareholders in the context of mineral rights regulation. The minority judgment provides important obiter on how empowerment objectives should inform interpretation of mining rights conditions.