Undertake Exploration or Lose Tenements

21 Aug 2019

This Wardens Courts decision handed down in Jan 2019, Leichardt Industries v Mineralogy, being an Application for Forfeiture by Leichardt Industries is a lesson on why to explore your exploration tenement. if you wish to retain it. Instead of paying lawyers’ fees attempting to retain it, like our mate Mr. Palmer did in this instance and losing 660 million tonnes of magnetite.

Mineralogy Pty Ltd., a company majority owned by Mr. Palmer, held Exploration Licence 08/2401 (Licence). The Licence had a commitment of $50K in the 2016 year and Mineralogy only spent $18K on the Licence in that year, and only $480 on exploration.  Leichardt lodged an Application for Forfeiture and the Warden said that the expenditure short fall was of sufficient gravity to recommend to the Minister to grant the forfeiture. Mineralogy argued that:

  • they had future plans for the Licence;
  • its financial incapacity during the period justified its retention of the Licence; and
  • its noncompliance was not that severe and it’s past expenditure was adequate.

However, the Warden discounted each of the reasons. In respect to the argument that past expenditure was adequate; the Warden said Mineralogy failed to meet the minimum commitment every year it held the Licence since 2013 and that very little of the expenditure was on ground exploration, despite knowing that magnetite targets existed on the Licence.

The cornerstone of the case rest on the proposition that the Licence was under expended because of CITIC Pacific failure to pay royalties resulted in Mineralogy being starved of funds.  In respect to the evidence supporting this proposition the Warden stated:

“I appreciate the Warden’s Court is not bound by the rules of evidence… nor does it mean the veracity and reliability of evidence ceases to be important…”

Leichardt argued that:

Mineralogy had not produced any admissible evidence in relation to its financial position”.

The Warden also agreed with Leichardt that Mineralogy’s witnesses also failed to provide any evidence. With the Warden stating, of one of the witnesses:

“…he has no knowledge of Mineralogy’s finances”

And of the other:

“Mr Jones was unable to give evidence as to Mineralogy’s financial position”

In essence the Warden is basically stating that you can’t make statements about a company’s finances if you have no admissible financial evidence.

Mineralogy’s WA General Manager of Operations was one of its witness and was thoroughly cross examined by the Leichardt’s lawyers – not an enviable position.  It is worth reading the case to see how witnesses are cross examined in the Wardens Court and it is best avoided.  See page 12 for the following dialogue after Mineralogy stated it was going to spend $100,000 on exploration.

Q. “Do you currently have a drill programme for it [Licence]

A “No We do not have a drill programme for that”

Q. But you would agree with me, wouldn’t you, that you currently hold no documentation in relation to any proposed exploration plan which has been committed to writing

A “Okay. Yes. We don’t hold -we hold very little – we – I have – we have notes, and that is about it…”

The Warden dismissed all Mineralogy’s arguments and recommended to the Minister the Licence be forfeited.  The lesson to be learnt from this case is this: if you want to hold ground you must do exploration.

We can assist you to understand the compliance requirements of holding an exploration licence in WA by attending our Tenement Training Courses that provide a compliance framework for managing tenure in WA. For more details have a look at our Understanding Tenement Expenditure course.