Accurate tenement expenditure recording under the Mining Act 1978 (WA): an update from the Warden's Court

In brief 5 min read

Recent proceedings before the Warden's Court of Western Australia have reinforced a long line of decisions and the nature of a tenement holder's obligations in tenement reporting; affirming the requirements for detailed and accurate reporting on expenditure, and emphasising the importance of ensuring tenement holders are truthful when reporting expenditure.

The decisions are a timely reminder of the importance of adequately resourcing the compiling, calculating and reporting expenditure functions (and the need to keep detailed records to substantiate that expenditure), as failure to do so can ultimately lead to forfeiture of tenements.

Requirements of the Form 5

The grant of a mining tenement requires a commitment to spend a prescribed amount of annual expenditure developing the tenement, as part of the broader regime in the Mining Act 1978 (WA) which requires tenement holders to exploit them. The Form 5 is used to show what expenditure has been incurred on the activities undertaken during the annual period for activities such as mineral exploration, mining activities, general prospecting or small-scale mining.¹ At the end of the reporting year, a tenement holder has 60 days to lodge its Form 5 Operation Reports for each tenement in accordance with sections 102(2) and (3) of the Mining Act, or ask for an extension of time to do so (which may or may not be granted). This may be done on a tenement-by-tenement basis or on a group of tenements, known as 'combined reporting'.

Form 5 requires that the information contained be certified by the person lodging the form to the effect that the information 'constitutes a true statement of the operation carried out by the money expended on [the] mining tenement during the reporting period specified'. Accordingly, the person executing the Form 5 must be sufficiently well-informed of the details and circumstances surrounding the expenditure reported on a tenement in order to truthfully give the certification.

The need for an effective system for recording expenditure

In the decision of Focus Minerals Ltd & Others v Allan Neville Brosnan & Others [2020] WAMW 4, a question arose regarding the reliability of the system used by the tenement manager to calculate expenditure for inclusion in the Form 5s. The system in question was accounting software which identified expenditure for each tenement based on invoices loaded onto that platform by the relevant departmental managers. However, the tenement manager did not undertake enquiries to verify expenditure, including the allocation of administration and overhead expenditure by enquiring whether the expenditure truly related to the tenements being reported on (including allocation of overhead). In addition, there was no evidence that the instructions given to people inputting information into the system was reinforced on a regular basis,² and it became clear through the evidence that the tenement manager was unaware of requirements in calculating administrative expenses.³ The Warden found that 'if the certification is to mean anything, then the tenement holder or his agent must be sufficiently well-informed as to the activities and expenditure on each tenement'⁴ and further noted that 'the mere fact a system is said to exist is insufficient to enable the tenement holder to certify that the information derived from it is true'.⁵

While there was no suggestion that relying on a system for recording expenditure can never give rise to a reasonable belief that the information is correct, that reasonable belief was not demonstrated in this case. The decision confirms that care must be taken in order to be certain that the information relied on and, in turn, the information contained in a Form 5 is true. This means the tenement holder needs to ensure that the person certifying the Form 5s has been adequately trained and resourced to be able to perform these functions within the time period prescribed by the Mining Act.

In another recent decision, MCA Nominees Pty Ltd v Nex Metals Explorations Ltd [2019] WAMW 11, it was held that details of the cost and description of each activity must be provided in the Form 5, and cannot be just a general description in broad terms with a dollar amount attributed to that general category.⁶ For example, 'Geological Activities' must provide sufficient detail of actual work undertaken, and 'Core Drilling' requires that the metres drilled and number of holes completed must be shown.⁷ Whist this does not mean every line-item expense or invoice needs to be particularised, the Warden indicated that broad activities do. These particulars are essential for the Minister to determine the amount expended was 'in mining on or in connection with mining operations,' as well as a necessary measure in order to retain tenements.⁸ The Warden also noted that the Form 5s perform another purpose, which is to inform the world at large as to the activities undertaken and money spent. This was also the case in Focus Minerals.

An interested party can obtain a copy of the front page of the operations report together with the attachment summary of mineral exploration/mining activities. This will then inform any application the interested party may wish to make for forfeiture of the tenement on the basis expenditure conditions are not being complied with. Any applicant for forfeiture is afforded priority in the event the tenement is forfeited.

Consequences of inaccurate reporting

It is an offence under regulation 32(2) of the Mining Regulations 1981 (WA) to provide information on a Form 5 where the tenement holder knows it is false or misleading. This was recently confirmed by the Warden's Court where lodgement of a Form 5 was determined to contain misleading and false information based on the facts tendered by the Applicant for forfeiture (and the absence of facts tendered by the tenement holder). This was found to be a significant factor justifying a recommendation of forfeiture,⁹ and that a monetary penalty would be insufficient in the circumstances.