construction of state agreements – proposal to modify

(2005) 22 ARELJ
Western Australia
Warden Calder was satisfied that RBJ had a commercial goal which it sought to achieve by
objecting to the grant of certificates of objection and in plainting the tenements for forfeiture. He
acknowledged that this commercial goal may be realised by accepting benefits (including financial
benefits) and discontinuing with the objections or plaints. Warden Calder found that none of the
various commercial alternatives were unlawful and improper when viewed in the context of the
Mining Regulations and in particular the ‘self policing provisions and objectives’ of the Mining
Act and Regulations.
Accordingly Warden Calder dismissed the argument that the objection, plaints and application to
extend the time within which the objections may be lodged, constituted an abuse of process on the
part of RBJ.
Warden Calder held that RBJ’s inadvertent failure to lodge its objection within the 21 day period
prescribed by regulation 55 was brought about by insufficient knowledge and understanding of the
mining industry.
Accordingly, Warden Calder ordered that the period ending and including the days in which the
objections were lodged was, in each case, a reasonable period in all of the circumstances for the
lodgement of those objections and granted the applications for extensions in each case.
Mineralogy Pty Ltd & Ors v The State of Western Australia & Anor [2004] WASC 275
(Supreme Court of Western Australia, CIV 2463 of 2004; 21 December 2004, Pullin J)
Construction of State agreement – proposal to significantly modify expand or otherwise vary
activities carried on in relation to an approved project – production of interim product for sale
rather than further processing not a valid proposal.
Facts and nature of the action
Mineralogy Pty Ltd (Mineralogy) and the other companies are parties to a State agreement
scheduled to and ratified by the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002
(WA). The State agreement provides for the development of iron ore projects on tenements near
Cape Preston, Western Australia by Mineralogy either alone or with other companies who are
parties to the agreement as co-proponents.
Lucas Wilk, LLB (Hons) B Comm, Senior Associate, Blake Dawson Waldron; and Sally Marsh, LLB
(Hons) BSc (Hons), Lawyer, Blake Dawson Waldron.
Recent Developments
(2005) 24 ARELJ
Mineralogy and a co-proponent obtained approval for a project to produce high grade iron ore
pellets under the State agreement. They then applied under clause 8 of the State agreement for
approval to modify, expand or vary the pellet project to produce additional iron ore concentrates
for sale rather than further processing into pellets (Concentrates Proposal). Iron ore concentrate is
an interim product in the process of producing pellets.
Clause 8 of the State agreement provides:
If Project Proponents at any time during the continuance of this Agreement desire to
significantly modify expand or otherwise vary their activities carried on pursuant to this
Agreement in relation to a Project beyond those activities specified in the approved
proposals relating to that Project they shall… [give notice to the Minister and submit
detailed proposals].
The Minister considered that he could not validly consider the Concentrates Proposal under clause
8 of the State agreement. The companies who are parties to the State agreement applied for a
declaration that the Minister was obliged to consider the ‘Concentrates Proposal’ and exercise his
powers under clause 8.
Construction of State agreements generally
Pullin J considered the principles of construction of State agreements. He made remarks consistent
with Hancock Prospecting v BHP Minerals [2003] WASC 259 to conclude that the usual
principles of construction of written contracts apply and that a State agreement is not to be
interpreted like a statute. He stated that a contract should be construed practically to give effect to
its commercial purpose and that the Court should not adopt a narrow or pedantic approach to
The State agreement
Pullin J stated that the purpose of the State agreement is to provide a framework for the
development of iron ore projects which will see value added to iron ore; being projects to produce
high grade iron ore pellets, direct reduced iron or steel, as those projects are defined in the State
agreement. The defined projects also include production of a minor amount of iron ore
concentrates for use as heavy media in the coal washing industry.
Pullin J stated that the Minister has a duty to consider proposals and the authority to approve
proposals relating to the defined projects and to approve modifications, expansions or variations of
those defined projects. The proponents are obliged to implement approved proposals for those
defined projects and, in return, the State provides concessions such as reductions in royalties and
modification of tenement expenditure requirements. The State also undertakes to assist in the
provision of infrastructure.
Clause 8 of the State agreement
In relation to clause 8, Pullin J held that a proposal to undertake activities for a purpose that is
different from the purposes of an approved and defined project does not fall within clause 8. He
(2005) 22 ARELJ
Western Australia
held that for the activities proposed to be an expansion, modification or variation of activities in
relation to the approved Project, the proposed activities must have the same purpose as the
approved project.
Pullin J’s view was that the words ‘in relation to’ in clause 8 require some connection between the
expanded activities and the approved project, but that expansions for purposes different to the
already approved project do not have any connection.
Pullin J therefore held that the Concentrates Proposal was not a valid proposal under clause 8
because the purpose for producing additional concentrates (sale) was not the same as the purposes
for which concentrates were to be produced in the approved project (further processing in to
pellets). The Minister was, therefore, under no duty to consider the Concentrates Proposal and had
no power to approve it.
In reaching his conclusion, Pullin J did not accept the plaintiffs’ submissions. One of the plaintiffs’
submissions was that the State agreement must allow products which do not fall within the defined
projects to be produced under clause 8 because the State agreement includes a royalty for iron ore
concentrates, iron ore and other minerals. Pullin J held that the inclusion of a royalty for iron ore
concentrates was specifically for iron ore concentrates produced for use as heavy media in the coal
washing industry (which falls within the defined projects). Pullin J did not consider in detail the
consequences of the State agreement including a royalty for iron ore and other minerals.
This decision may have implications for other projects in Western Australia that operate under
State agreements because clauses similar to clause 8 are found in several other State agreements in
Western Australia. The decision is under appeal.
Oil and gas exploration in New Zealand has recently been the subject of significant attention, with
the much publicised dwindling of gas reserves available from the Maui gas field in Taranaki, New
Zealand’s largest gas field which currently provides over 80 per cent of the country’s gas. The
Maui field has been New Zealand’s major source for energy supply for the last 25 years.
The New Zealand Government has recognised the need for increased levels of gas exploration and
commercial development to replace rapidly reducing gas supplies. The exploration industry has
been given some breathing space with the impending development of two other offshore Taranaki
fields, the Kupe and Pohokura gas fields, but the Government considered that more needed to be
John Steenhof, Solicitor, and Brigid McArthur, Partner, Chapman Tripp, Washington.