The Foreign Investment Review Board (FIRB) implemented significant legislative amendments to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (FATR) which came into effect on 1 January 2021.
Coverage of these amendments has focussed on national security and the restatement of monetary thresholds. However, a key amendment provides greater certainty to future investment into the mining and resources sector. FIRB has clarified the previous ambiguity surrounding the acquisition of exploration tenements, and in particular, whether exploration tenements were considered an interest in Australian land.
The effect of the amendments to the FATA and FATR is that the acquisition by a foreign person of:
- a mining or production tenement will likely require FIRB approval; and
- an exploration tenement will likely not require FIRB approval.
As always, consideration should be given to the changes to the mining provisions of the FATA and FATR before a ‘foreign person’ acquires any mining interest in Australia.
Mining or production tenements
The FATA defines a ‘mining or production tenement’ as:
“(a) a right (however described) under a law of the Commonwealth, a State or a Territory to recover minerals (such as coal or ore), oil or gas in Australia or from the seabed or subsoil of the offshore area, other than a right to recover minerals, oil or gas for the purposes of prospecting or exploring for minerals, oil or gas;
(b) a right that preserves a right mentioned in paragraph (a);
(c) a lease under which the lessee has a right mentioned in paragraph (a) or (b); or
(d) an interest in a right mentioned in paragraph (a) or (b) or under a lease mentioned in paragraph (c).”
Crucially, the definition specifically precludes an exploration tenement by the phrase “other than a right to recover minerals, oil or gas for the purposes of prospecting or exploring for minerals, oil or gas”.
The acquisition of a mining or production tenement reasonably likely to exceed five years in length will constitute an acquisition of Australian land, and will likely require FIRB approval. The monetary threshold is $0, unless the foreign person (and not a foreign government investor) is from certain free trade agreement partner countries (the United States of America, New Zealand or Chile), where the threshold is $1,126 million.
Exploration tenements
The FATA has introduced a new definition, where ‘exploration tenement’ is any of the following:
"(a) a right (however described) under a law of the Commonwealth, a State or a Territory to recover minerals (such as coal or ore), oil or gas in Australia or from the seabed or subsoil of the offshore area for the purposes of prospecting or exploring for minerals, oil or gas;
(b) a right that preserves a right mentioned in paragraph (a);
(c) a lease under which the lessee has a right mentioned in paragraph (a) or (b); or
(d) an interest in a right mentioned in paragraph (a) or (b) or under a lease mentioned in paragraph (c)."
The FATR has also introduced this section with the legislative reforms:
“The Act does not apply in relation to an interest in an exploration tenement if:
(a) the entity that holds or acquires the interest is a foreign person who is not a foreign government investor; and
(b) the exploration tenement is not in respect of Australian land that is national security land.”
The effect of this new sections is twofold:
- exploration tenements will generally not require FIRB approval. Previously, an exploration tenement more than five years in length required FIRB approval; and
- the value of exploration tenements will not be included (in the numerator) when working out the percentage of ‘Australian land’ when determining whether the acquisition of an Australian entity is an Australian land corporation. It should be noted the value will still be included in the denominator.
The conversion of an exploration tenement to a mining or production tenement may require FIRB approval and advice should be sought to confirm the applicability of the FATA and FATR.
Exceptions
Where the exploration tenement is also national security land or is being acquired by a foreign government investor, the acquisition of an exploration tenement will require FIRB approval.
Royalties from mining or production tenements
Legislative amendments now mean that the acquisitions of royalty interests in mining or production tenements are exempt from FIRB where there is no right to occupy the land or have control or influence over the land.
If you require further information, advice or assistance for your specific circumstances, please contact our Corporate Advisory and Governance team.