Australia’s resources sector has been put on notice that it potentially risks loss of ownership of key assets such as mining fleets or even ore stockpiles unless it complies with new property focused Federal legislation due to come into effect in three months. Driving the warning are sector surveys showing the mining sector falsely believes the new laws – housed under the Personal Property Securities Act (PPSA) – are more an issue for banks and financiers to deal with, rather than explorers or miners.

The Act replaces more than 70 State, Territory and Commonwealth property security registers and has specific potential impacts on the resources sector for project assets sanctioned at Commonwealth level.

Speaking at a forum at the Diggers and Dealers mining conference in Kalgoorlie, Perth-based Minter Ellison Special Counsel, Ms Stephanie Rowland, said that the very complexity of joint venture agreements and other wide-ranging contractual arrangements common across mining, dictated that earlier compliance could prevent significant financial disputation.

“The new law is a total rewrite of how ownership of personal property needs to be documented and registered. This brings with it, significant new obligations on resources participants to clearly register exactly where their ownership interests lie in a project or their company,” Rowland said. “Explorers and miners that are not PPSA ready by October, run the risk of losing valuable rights to competing interests that will rank ahead of them under the new regime’s requirements.

“A recent example in New Zealand under similar laws, saw an accommodation supplier lease five units to a client, Company X, which in turn was being supported by a merchant financier. The original supplier failed to adequately register its interest in the units, yet the financier, under its arrangements with Company X, held a debenture over Company X’s assets. When Company X became insolvent, the financier, not the original supplier of the units, was deemed to have correct ownership entitlement.

“It is those very type of arrangements which dominate agreements between parties driving Australia’s exploration, mine construction and mine operating regimes – so the potential for damage or loss to a third party from non-compliance, is now sizeable.”

She said the resources sector needed to more urgently appreciate that under the implications of the PPSA, there are several items of property relevant to most mining projects which are deemed ‘personal property’ and therefore have ownership rights defined. These include for example :

• Plant and equipment
• Ore stockpiles, ore in circuit and processed ore
• Confidential data (for example seismic data) which could be a very valuable part of a Joint Venture’s property pool
• Proceeds from the above categories
• Certain contractual rights held by parties to the Joint Venture.

Rowland said that whenever a mining or joint venture or exploration party owning personal property (including lessors under lease arrangements) enabled another party to have possession of that property, that the owner MUST register its interest on the PPS Register or risk losing its interest in the property altogether.

“The definition of a security interest under the PPSA has been made intentionally broader than under existing laws and is intended to capture arrangements not previously necessarily thought to constitute a security,” Rowland said. “For miners and explorers contemplating or holding existing JVs, this could include for example, commercially sensitive information, and rights to its ownership need to be protected via proper registration on the PPS Register.”

Rowland urged miners and explorers to adopt a pro-active stance to the PPSA in preparing for it, and implementing its procedures.

This could be achieved by a comprehensive review which checked all current contracts in force; the supply terms and financing arrangements and clauses in standard contracts; identifying those assets affected and transactions that may need registration, and to come to grips with how the PPSA would apply to their exploration and mining objectives.