The recent judgment in Vantage Goldfields SA (Pty) Ltd & Another v Arqomanzi (Pty) Ltd & Others (733/2022) [2023] ZASCA 106 (27 June 2023) represents the culmination of a 4-year legal battle between Vantage Goldfields Limited (“Vantage”) and Arqomanzi Proprietary Limited (“Arqomanzi”) over control of the Barbrook and Lily gold mines in Mpumalanga.
While the history of the matter is complex, it suffices to mention that Vantage is the ultimate holding company of the Vantage group of companies, including Vantage Goldfields SA Proprietary Limited (“VGSA”). VGSA in turn holds 74% of Vantage Goldfields Proprietary Limited (“VGL”) and 42% of Makonjwaan Imperial Mining Company Proprietary Limited (“MIMCO”). VGL holds the remaining 58% of MIMCO and 100% of Barbrook Mines Proprietary Limited (“Barbrook”). An Australian company, Macquarie Metals Proprietary Limited (“Macquarie”), recently acquired 98% of Vantage.
The core of the matter relates to an ongoing dispute between Arqomanzi and Vantage regarding the business rescue proceedings of various of Vantage’s subsidiaries (“Vantage Companies”). The Vantage Companies faced financial distress after the collapse, on 5 February 2016, of the crown pillar at the Lily Mine, which claimed the lives of three workers and rendered the mine inaccessible. Consequently, MIMCO was placed in business rescue on 4 April 2016.
At one point during the business rescue proceedings, both Vantage and Arqomanzi submitted amended business rescue plans for consideration. Vantage and VGSA made submissions that their proposal was superior to Arqomanzi’s, as theirs did not require the consent of the eighth respondent, the Minister of Mineral Resources and Energy, under section 11 of the Mineral and Petroleum Resources Development Act, 28 of 2002, as amended (“MPRDA”), whereas Arqomanzi’s proposal would. As the issues raised would impact on Arqomanzi’s voting interest, when the new business rescue plans were to be voted on, Arqomanzi launched the present application under appeal.
The courts were therefore tasked with the interpretation of section 11 of the MPRDA, which directs that –
“[a] prospecting right or mining right or an interest in any such right, or a controlling interest in a company or close corporation, may not be ceded, transferred, let, sublet, assigned, alienated or otherwise disposed of without the written consent of the Minister, except in the case of change of controlling interest in listed companies.”
As identified by the SCA, the shareholders of Vantage held the controlling interest in MIMCO and Barbrook. Each of MIMCO and Barbrook holds a new order mining right. Before Macquarie acquired an interest in Vantage, 34 shareholders owned 100% of Vantage (and, therefore, the controlling interest). In 2020, to obtain funding for the implementation of the Vantage proposal, Vantage issued 98% of its shares to Macquarie. After the issuing of the shares, Macquarie became the holder of the controlling interest in Vantage, resulting in a substantial dilution of the interests held by the original 34 shareholders. The ultimate effect of the issuing by Vantage of the shares to Macquarie was, therefore, that the 34 shareholders relinquished, by consent, their controlling interest in Vantage.
While it has always been clear that a prospecting or mining right cannot be transferred from one company to another without Ministerial consent in terms of section 11 of the MPRDA, uncertainty remained regarding the interpretation of an “interest” in a mining right and a “controlling interest” in a company being “alienated or otherwise disposed of”. Put simply, was it the intention of section 11 only to refer to a change of control of a company that is the holder of a right (i.e. a direct change of control) or to include also a change of control of companies higher up the corporate chain which ultimately, but not directly, control the holder of a right (i.e. an indirect change of control).
In its analysis of section 11, the SCA referred to the case of Mogale Alloys Proprietary Limited v Nuco Chrome Bophuthatswana & Others, where the court adopted a wide and purposive interpretation. It held that where the effect of the alienation or disposal would be that the holder of the controlling interest would lose such control, then the alienation or disposal would require Ministerial consent, even if no one else acquires that controlling interest.
In the present case, the controlling interest in Vantage was held by 34 shareholders before the new shares were issued to Macquarie. The issuing of 98% of the authorised shares in Vantage to Macquarie resulted in the controlling interest being “alienated or otherwise disposed of” as contemplated in section 11 of the MPRDA. Put differently, the new issue by Vantage of shares, which formed part of its authorised but unissued share capital to Macquarie, resulted in an alienation or other disposal of such mining rights, since the ultimate owner and controller of such mining rights changed from the 34 Vantage shareholders to Macquarie. This required Ministerial consent.
In its reasoning, the court held that –
“[i]t would be an absurdity to confine the interpretation of s 11(1) of the MPRDA to direct cessions, transfers, leases, etc, since, by doing so, Ministerial consent (and therefore two of the principle objects of the MPRDA) could easily be thwarted. The interpretation contended for by the appellants is subversive of the objects of the MPRDA. Section 11(1) must accordingly be interpreted as including both direct and indirect cessions, transfers, leases, etc and a change of control by the issue of new shares in a company that controls the mining right. It follows, that the interpretation of s 11(1), which has been advanced by the appellants, was correctly rejected by the high court.”
The above ruling settles any doubt that the reference to a change of control in section 11 should be given a very broad interpretation and applies to both a direct and indirect change of control.
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