The mineral rights expropriation case that two Italian granite mining companies have brought against government might be settles before the case goes to the Hague in mid-April.

Mineral resources director-general Sandile Nogxina confirms this: ‘My understanding is that we are in the process of settling the matter.'

Finstone, the owner of the two companies, registered the case with the Wolrd Bank's International Centre for Settlement of Investement Disputes in January 2007. The FM understands Finstone and the mineral resources department were scheduled to meet in December to discuss a possible settlement, but did not.

In a nutshell. Red Graniti and Marlin lodges an expropriation case against the SA government, as the Mineral & Petroleum Resources Development Act forces companies to sell a stake in their mineral rights.

The companies argue that this goes against a bilateral investment treaty between Italy and SA.

According to a source familiar with the case, the settlement would probably be based on so-called beneficiation achieved against their black ownership requirements.

It could thus be argued that government isn't making any settlement here, but rather making provisions for existing legislation. The source says it would be a first for government: ‘It has never done it for a company before.'

Finstone SA director Shaun Donnelly is reluctant to give details on a settlement. What he says, though is: ‘We have a good relationship with the department of mineral resources at this stage.' Nogxina concurs: ‘I fully agree with that. We have been engaging with them and explaining some of the things they didn't understand. We've found a common understanding of certain areas that were in dispute.'

If the settlement did go ahead, the two companies would have to sell 5% of their existing local mining operations (which have old-order mining rights, granted pre-2004), which they would do through an employee share ownership scheme. For new mining rights, Red Graniti and Marlin would then have to sell 11% of their operations to black investors, the FM has learnt. Donnelly declined to comment on this.

What would a settlement mean? Could it lead to a flood of similar expropriation claims? After all, most countries have bilateral treaties similar to the Italian one with SA.

This is unlikely. It would take a bold company to lodge another expropriation claim against government. Says Nogxina: ‘I don't want to comment on that. If there were more claims, each case would be decided on an individual basis.'

He does say, however that settling with Red Graniti and Marlin ‘will set a precedent.'

Matthew Hill