Generally, a company that holds a mining right (mining company) can either sell:

• the mining business as a going concern;
• the mining right as an asset on its own (a portion of a mining right could be sold, however, such a sale is excluded from the scope of this article); or
• the shares in the mining company.

If:

• the mining business is sold, the parties would enter into a sale of business transaction;
• the mining right is sold, the parties would enter into a sale of asset transaction; and
• some or all of the shares in the mining company is sold, the parties would enter into a sale of shares and claims transaction.

Should:

• The mining business be sold, while there are various factors to consider, this would generally include the transfer of employees, all related assets connected to the business, the customer and supplier contracts, and associated liabilities. The potential purchaser would need to have the appetite to step into the shoes of the exiting party.
• The mining right be sold, the asset will simply be transferred, and the purchaser may need to obtain its own other ancillary related licenses to conduct a mining business and ensure that all other requirements, such as employees, contractors, assets and surface use agreements etc., are in place.
• Some or all of the shares be sold, a purchaser will either need to negotiate purchasing 100% of the shares or be amenable to partnering with some of the existing shareholders. Further, the purchaser may negotiate board appointments and certain rights in respect of passing special and ordinary resolutions which the other shareholders would need to agree to.

When choosing a certain structure, the transaction is largely driven by some of the following considerations.

Regulatory consent

Generally regulatory consent in terms of the Mineral Petroleum Resources Development Act, 2002 (MPRDA) will need to be obtained if (i) the mining business is sold, (ii) the mining right is sold or (iii) a controlling interest in the mining company is sold.

• See our article dealing with what a controlling interest is in terms of section 11 of the MPRDA here; and
• Read our article dealing with the potential changes to the requirement under section 11 of the MPRDA here.

Where shares in the mining company are sold, any conditions imposed in terms of the relevant mining right in respect of broad-based Black economic empowerment ownership requirements, would need to be considered on a case by case basis.

Competition and tax considerations

The parties would also need to consider if the proposed transaction triggers any merger filing requirements with the Competition Commission.

The tax considerations, consequences and requirements may ultimately drive the final decision on the transaction structure.

While the above is a very brief and high level snapshot of what the key issues would be, it is important to note that the client’s overall business strategy, concerns and ultimate desired commercial outcome impact the overall transaction.