Calculating Mining Lease Rental

History

Under previous versions of the Mining Act, the amount of rental payable for a mining lease was based on the class of lease. Leases granted for extractive minerals, known as Extractive Mineral Leases or EMLs, were charged a lesser rate than leases which authorised metallic or industrial minerals (known as Mineral Leases or MLs). Under these versions of the Act, a lease could either authorise mining for extractive minerals or other minerals (industrial or metallic) but could not authorise both.

Rental was easily calculated for leases because the rental rate was consistent with the class of lease.

2021 Legislative changes

The 2021 changes to the Act removed classes of leases, replacing them with Mining Leases. A Mining Lease can now authorise any type of mineral and can authorise the mining of different types of minerals, ie. both extractive and industrial minerals. These changes are considered to be of benefit to the sector as they increase flexibility and reduce the need for the issuing of multiple leases over the same area to recover different commodities. Through a Change in Operations application, a lease granted prior to 2021 can be varied to authorise different types of minerals (ie. both extractive and industrial minerals).

The changes do however make the setting of lease rental more complex, as one lease can include both extractive and other minerals. To date, DEM has continued to maintain the same rental schedule in the Regulations, with leases granted prior to 2021 being charged the same rental rates as they were previously.

Primary minerals rental approach

For all Mining Leases, the rental will be determined by the primary mineral type being recovered from the lease. For leases granted after 1 January 2021, this approach has already been adopted in practice. It will now be applied to leases granted prior to 2021.

This means that if a mining lease primarily produces an extractive mineral (for example, Limestone - construction materials), but produces a minor amount of an industrial mineral as a by-product (for example, Agricultural Limestone), the rental will be set at the extractive mineral rental rate.

Typically, the primary mineral is determined at the time of granting a mining lease, based on the application which specifies the primary mineral. For historic leases, DEM has reviewed royalty returns to determine the primary mineral.

This approach ensures that invoicing is reflective of the primary purpose of the lease, recognising the intent of the different rental rates. It also encourages tenement holders to recover by-products on leases that produce extractive minerals as rental will not increase where the lease continues to primarily recover extractive minerals.

Is my lease impacted?

Formalising this approach for all leases has resulted in some leases being charged more or less rental. Impacted tenement holders will be contacted directly by DEM, advising them of the impacts and when changes will be implemented. For those leases where the rent will be reduced, changes will be implemented from the next invoice. For leases where the rent will increase, changes will not be implemented until invoices issued in the 2025/2026 financial year. Changes to rental will also impact a small number of freehold landowners in the amounts they will be distributed, and DEM is endeavouring to inform those impacted by the change.

Changes to primary minerals

Where the primary mineral recovered on a lease changes to a different category of mineral (eg. from industrial to extractive), it is expected that this will result in a change of rental rates.

Tenement holders intending to change their primary mineral should contact DEM via DEM.Tenements@sa.gov.au to determine if there needs to be any changes to their lease or to an approved Program for Environment Protection and Rehabilitation (PEPR).

DEM will also audit tenement return information to ensure that the minerals being recovered on leases are consistent with the primary mineral and rental. Discrepancies will be investigated and may lead to a change in primary commodity and a change in the rental being applied to tenements.

Further information

Any questions regarding this invoicing approach can be directed to DEM.Tenements@sa.gov.au.