Lonmin says it is a victim of vexatious litigation

The Mining Forum of South Africa has applied to the North West High Court to have the mining licences suspended of Lonmin [JSE:LON] , as well as Eastern Platinum and Western Platinum (both controlled by Lonmin). The Forum, a not for profit organisation that seeks regulatory compliance in the mining industry, says Lonmin has shirked its Social and Labour Plan (SLP) obligations.

Chris Loxton, counsel for Lonmin, told the court in Mahikeng on Friday that the application is incompetent, vexatious and must fail. He said the case against the mining companies was so deficient, the court should grant a cost order against the two applicants, the Forum and its president, Blessings Ramoba.

All mining rights in South Africa are granted in terms of the Mineral and Petroleum Resources Development Act (MPRDA) and are subject to the fulfilment of SLPs intended to uplift surrounding communities and provide jobs and skills.

The forum argued that the three mining companies had failed to honour their SLPs spanning a period of five years, and that the minister was obliged under law to suspend their mining licenses. The Minister of Mineral Resources is also a respondent in the case.

The Forum is trying to stop the proposed R5bn takeover of Lonmin by Sibanye-Stillwater on the grounds that this would erode the group’s SLP commitments to the community. The takeover would include Lonmin’s Marikana operations, responsible for 95% of the group’s output, and the scene of the massacre of 34 striking mine workers in 2012.

The Forum argued that conditions for mine workers and the surrounding communities were atrocious, with many miners living in informal settlements. Lonmin had failed in its promise to provide schools, health facilities and other infrastructure in terms of its 2014 SLP.

Lonmin argued in its papers that while it had not spent the full amount outlined in the original SLP, this was due to radically deteriorating economic conditions. The mining group pointed to the roughly R680m over three years spent on upliftment programmes and nearly R12bn in BEE procurement as evidence of its commitment to its SLP obligations.

Loxton argued that rather than bringing its case before the North West High Court, the Forum should have sought a judicial review in terms of the Promotion of Administrative Justice Act (PAJA), which was crafted to allow members of the public to challenge decisions taken by state functionaries.

“It is entirely unclear what relief the applicants now seek. They have shifted ground as they met objections to their cause of action,” said Loxton.

“Let’s apply some logic to this,” said North West High Court Judge President Monica Leeuw, addressing Advocate Matlhaba Manala, who represented the Forum. “For Lonmin to comply with its (SLP) plan, they must be operational?”

“Yes,” replied Manala.

“How will they comply if operations are suspended?” asked Judge Leeuw.

Manala replied that the granting of Lonmin’s mining licence was conditional on it having the financial resources to conduct mining and on fulfilling its SLP.

Judge Leeuw said she would have a problem granting an order to suspend operations while at the same time obliging the companies to fulfil their SLPs.

Both Lonmin and the Minister, represented by Advocate Moses Mphaga, argued that the SLP obligations are not cast in stone, and are subject to review as economic conditions dictate.

Lonmin presented the court with a supporting affidavit from Harvey Wainer, professor at Wits University’s School of Accounting, showing that the Forum had misread Lonmin’s financial statements in arriving at its conclusion that the company had sufficient cash to implement its SLP commitments yet had ducked its obligations. Wainer’s affidavit points out that Lonmin recorded an aggregate loss of R49bn over the previous four financial years.

Judge Leeuw questioned the Forum’s legal standing to bring this case before the High Court. Manala argued that it was being brought in the public interest.

The Forum’s papers accuse the Department of Mineral Resources (DMR) of failing to act against Lonmin when it was aware of its non-compliance with its SLP commitments.

But Mphaga described the steps the DMR had taken to investigate and notify Lonmin of its SLP non-compliance. The mining company was given time extensions to comply with its obligations, and subsequently filed an amended SLP, at which point the Department then withdrew its threat to suspend Lonmin’s mining licence.

Therefore the DMR was not delinquent in discharging its legal duties with regard to Lonmin’s SLP and mining licence, argued Mphaga.

Judgment was reserved.

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