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12 Jun 13
Are your interests in exploration permits properly secured?

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The final provisions of the Mines Legislation (Streamlining) Amendment Act 2012 (Qld) and Mining and Other Legislation Amendment Act 2013 (Qld) have now commenced, updating various pieces of existing resources legislation, including the Mineral Resources Act 1989 (Qld) (MRA). 

Significantly, the legislation change now allows for a mortgage to be registered over an exploration permit. 

Prior to this change and because mining tenements are excluded from the Personal Property Securities Act 2009 (Cth), parties trying to secure their interests against an exploration permit generally either:

  • registered their agreements by way of a  consent caveat (which was essentially as close to a mortgage over an exploration permit as you could then get), or
  • registered their agreements as a dealing against the exploration permit.

The benefit of now being able to register a mortgage (instead of a caveat) over an exploration permit is that a mortgage gives the holder an interest in the exploration permit and allows the holder to ‘step in’ and take over the exploration permit.  In comparison, a caveat (which is not a security interest in its own right) does not give the holder an interest in the exploration permit, although a caveat may prevent the registration of certain dealings (e.g. transfers or mortgages) with the tenement.

The previous practice of registering an agreement (e.g. a royalty) as a dealing against a tenement (be it an exploration permit or other tenement) arose because, although the dealing did not give rise to a security interest or stop the subsequent transfer or mortgage, the MRA had provided that an agreement registered as a dealing took priority over an agreement that was not registered.  These latest changes now make it clear that the recording of an agreement against a tenement does not give that agreement any more effect or validity than it would otherwise have.  In other words, the registration of an agreement as a dealing has limited usefulness in terms of providing the interested party with any form of security over the exploration permit.

If your interest is currently registered as a consent caveat or dealing, you should consider what other security options are now available to you to ensure your interests are properly secured.  Where your existing registration is only registered as a consent caveat or a dealing and this is intended to be security for your rights, you should seek to take a more effective form of security (i.e. a mortgage) in order to appropriately protect your interests.

Are you struggling with your banking arrangements?

Banks are becoming increasingly demanding in the information they expect from you and your business.  This comes at a time when there is already considerable pressure on maintaining revenue, cutting expenses and remaining abreast of all the changes going on in your industry as outlined above.

Mining and mining services are industries currently under the spotlight with several financial institutions.  During this period it is essential to maintain a strong working relationship with your bank.  Understanding what their expectations are and keeping them informed of any major changes in your business (either good or bad) is essential.  Not only meeting interest payments but adhering to all covenants, undertakings and reporting requirements in a timely and professional manner is vital. 

It is worth considering whether you are dealing with the right bank, and the right person within the bank, for you and your industry.  It can also be useful to determine whether the financing arrangements currently in place are the best available and suit your needs cost effectively.   Being ‘investor ready’ will enable access to a range of sources of capital not just limited to the traditional ones.

AllegiantFS is a financial advisory business owned by McCullough Robertson that can assist you in your dealings with your current banker.  AllegiantFS can review and provide guidance in all financial matters and give you the independent insight you need when dealing with your bank.
 

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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