Section 56(d) of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (MPRDA) states that any rights granted in terms of the MPRDA (i.e., a mining right) automatically lapse when the holder of the right is either liquidated or sequestrated, unless the exceptions referred to in section 11(3) apply.
The automatic lapsing of mining rights poses a significant challenge in insolvency proceedings, in that many strategies are adopted and/or attempted to prevent liquidating or sequestrating the holder of the rights. These strategies are often aimed more at preserving the existence of the mining right, and its intrinsic value, rather than restoring the overall financial health of the holder thereof.
Under the current legislative framework, when the holder of a mining right is liquidated or sequestrated, that right ceases to exist. It cannot be preserved, sold or transferred to benefit the insolvent estate. As a result, creditors are unable to recover any value from what may very well be the holder’s most valuable asset. However, the proposed amendment to section 56 introduces a significant shift from the prevailing framework.
In May 2025, the Department of Mineral Resources and Energy published a draft bill to amend the MPRDA. One of the mooted amendments is the proposed insertion of a section 56(2) which reads that in the event that the holder of a mining right is liquidated and finally deregistered or sequestrated, the right, permit, permission or licence must fall within the holder’s insolvent estate and may be sold and transferred to a third party. However, the proposed amendment is not without limitation as it is subject to the prior written consent of the Minister of Mineral Resources and Energy in terms of section 11(1).
This amendment represents a move towards aligning the MPRDA with general insolvency law principles, where assets of an insolvent estate are realised for the benefit of creditors. By allowing mining rights to fall within the insolvent estate rather than lapse upon the liquidation or sequestration of the holder, the proposed amendment empowers liquidators to preserve and potentially realise value by selling these rights. This could unlock considerable value for creditors and allow for a more equitable and commercially viable winding-up process.
While the amendment is aimed at promoting higher returns to creditors of insolvent estates, in practice, its success will be highly dependent on the efficiency and transparency of the ministerial consent process. Delays in obtaining the requisite section 11(1) consent to dispose of the mining right could discourage potential purchasers, frustrate creditors and complicate the winding-up process. Additionally, in the event that the Minister does not consent to the disposal of the mining right, the realisable value of the insolvent estate would be reduced and, in turn, adversely affect the very creditors the amendment seeks to protect.
In conclusion, the proposed amendment to section 56 represents a welcome change, moving away from value destruction by the automatic lapsing of mining rights and towards value preservation to the benefit of creditors. However, the continued need for ministerial consent under section 11, while recognised to be an important principle in order to ensure alignment with the objects of the MPRDA, may significantly limit its intended effect unless accompanied by administrative reform to ensure timely and fair decision-making.
