Retention licence guidelines

The purpose of these guidelines is to provide advice to applicants for, and holders of, retention licences under the Mineral Resources (Sustainable Development) Act 1990 (the Act) regarding:

• general requirements for applicants;
• the standard of mineral resource identification required in a retention licence application;
• work that is required to be undertaken on a retention licence; and
• requirements for the maintenance and renewal of a retention licence.

The guidelines are intended as a guide to the implementation of the Act and the Mineral Resources (Sustainable Development) (Mineral Industries) Regulations 2019 (the Regulations) to demonstrate what is expected from proponents in relation to statutory requirements. However, these guidelines do not necessarily outline the only means by which a proponent may be taken to comply. Ultimately all licensing and compliance decisions will be made on a case-by-case basis and will be subject to the Minister's or Department Head's discretion, where relevant. Note, references to 'the Minister' and 'the Department Head' include references to any relevant delegates within the Department of Jobs, Precincts and Regions ('the department').

These guidelines should be read in conjunction with the Retention Licence Application Kit, guidelines issued by the Minister for the purposes of describing the mineral resource (section 15(1BB) of the Act), and any other relevant departmental guidelines. Additional information may also be obtained by contacting your local office of the department.

The guideline attempts to distinguish legal requirements (in the Act and Regulations) from other general guidance by using words such as 'must' and 'required'. If there is any inconsistency between these guidelines and the Act or Regulations, the Act and Regulations will prevail. If applicants or licence holders are uncertain about any of their legal obligations they may wish to seek independent legal advice.

Amendments to the Act passed in 2010 introduced a new retention licence. The amendments came into operation in February 2012. These guidelines also include some of the other significant amendments which have come into effect since then.

The retention licence is an intermediate licence between an exploration licence and a mining licence. It allows activities such as intensive exploration [1], research and other development activities required to demonstrate the economic viability of mining.

The primary purpose of a retention licence is to undertake further evaluation work on a mineral resource, which is not currently economically viable to mine, in order to establish its economic viability and lead to mining of the mineral resource. A retention licence also provides for retention of rights to a mineral resource that will be required in future to sustain the operations of an existing mine (see further section 14C of the Act which sets out the purposes of a retention licence).

Retention licences can be granted for up to 10 years and may be granted in respect of the whole or any part of land within the boundaries of a primary tenement (e.g. multiple adjoining exploration licences held by the same licensee). Retention licences may be renewed twice for up to 10 years (section 14C(3) of the Act), however a second renewal can only be given in exceptional circumstances (section 31(7) of the Act). Relinquishment requirements do not apply to retention licences.

The identification of a mineral resource is a precondition for the grant of a retention licence. The applicant is required to submit a mineralisation report, which demonstrates a mineral resource, with the licence application. The mineralisation report must be prepared by a competent person (see sections 15(1BA) to (1BG)).

Examples of circumstances where a retention licence may be granted are:

• where a mineral resource is identified, but is currently uneconomic or unmarketable, but may reasonably be expected to become so in the future;
• where a mineral resource is identified and is required to sustain the future operations of an existing mining operation;
• where a mineral resource is identified but there is a need to conduct further evaluation work. Such work may look to establish the technical and economic parameters of the resource to a minimum of an indicated status under the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves (JORC Code)[2], or an applicable alternative within the Ministerial guidelines (see Appendix 1) or allow the completion of a pre-feasibility study;

As with other licences, the grant of a retention licence will not of itself permit work to be undertaken. Before work, other than low impact exploration, can be undertaken the licensee must have:

• an approved work plan;
• entered into a rehabilitation bond;
• obtained any other necessary consents; and
• obtained public liability insurance.

(For further details refer section 43 of the Act).

The application process for retention licences is similar to that for other licences, including submitting the application (including a work program), gaining highest ranking (where there are competing applications), satisfying the fit and proper person requirement, satisfying the requirements of the Native Title Act 1993 (Cth)/ Traditional Owners Settlement Act 2010 (Vic) and advertising. As noted above, applicants should refer to the Retention Licence Application Kit and form for specific details.

As for mining and exploration licences, retention licences may be offered for tender under the Act. This is expected to be used rarely and only where a mineral resource has already been identified to the standards normally required for a retention licence.

The Act provides that a retention licence can be applied for on land that is not covered by another licence (within the meaning of the Act), or on land that is covered by an exploration licence or an exploration licence application or by a prospecting licence or a prospecting licence application. Where an application for a retention licence is on land that is covered by a relevant licence or application, the applicant for the retention licence must either be the holder of the licence or the applicant for the licence or has the written consent of the holder of the licence or the applicant for the licence.

The size of a retention licence is not limited to a particular area by the Act or Regulations. However, the Act does provide that the licence area is only that which the Minister considers may be required for the purpose of mining a mineral resource in the future (see section 14C(4)). The applicant must state that relevant area that would be required for this purpose and information to explain why that area is required. This would generally include demonstrating that the area of the application is commensurate with: the planned scale of mining, the size of the identified mineral resource, any likely extensions of the mineral resource and any additional area that may be required for mine infrastructure. This will be a matter of judgment in the circumstances at the time of application.

In accordance with section 26(1), the Minister may grant a licence over a smaller area than applied for.

Ministerial guidelines – description of mineral resource and economic viability

A retention licence may only be granted where a mineral resource has been identified but is not yet economically viable to mine. The applicant must describe the mineral resource in accordance with guidelines issued by the Minister (section 15(1BB) of the Act). A copy of the guidelines is provided at Appendix 1. As outlined in those guidelines, for the grant of a retention licence, a minimum of an inferred resource as defined by the JORC Code is generally required (note some limited exceptions apply).

The Ministerial Guidelines also provide what is required in relation to establishing the economic viability of the mineral resource for the purposes of a retention licence application. For details, refer Appendix 1.

Mineralisation report

An application for a retention licence must be accompanied by a mineralisation report that sets out the following exploration results in relation to the mineral resource:

• the type or types of minerals identified; and
• the location, depth, quantity and extent of the mineral or minerals; and
• the method by which that extent has been determined; and
• analytical results obtained from samples of those minerals.

Competent person to prepare mineralisation report

The Act requires that the mineralisation report must be prepared by a competent person. The definition, as prescribed in the Regulations, is generally consistent with the JORC Code definition of 'competent person', and means a person who has:

(a) (i) Membership of an organisation approved by the Department Head that is of a class approved by the Department Head. Such organisations and memberships include:

• Member of Fellow class membership of the Australasian Institute of Mining and Metallurgy;
• Member or Fellow class membership of the Australian Institute of Geoscientists;
• Membership of any other organisation and class as listed in the Victorian Government Gazette (PDF).

(ii) a minimum of five years experience which is relevant to the style of mineralisation or type of deposit and to the activity that is the subject of the report; or

(b) in the case of a report relating to a mineral deposit that is easily and readily assessed visually at the ground  surface, the Minister has determined, on a case-by-case basis, that the person has the relevant experience in mining or mineral exploration to prepare the report.

For further guidance on what might constitute relevant experience for the purposes of (a)(ii) above, refer to the JORC Code.

Where the mineral deposit 'is easily and readily assessed visually at the ground surface', as in the case of some gypsum deposits, the Minister may decide that the person does not need the same experience and professional membership as normally required in order to properly assess the mineral resource and its economic viability. The Minister may decide that lesser requirements are adequate. Gypsum proponents are encouraged to discuss this matter with the department prior to preparing the mineralisation report. Ultimately it will be up to the Minister's discretion whether an alternative standard is acceptable in the circumstances.

Applicant to survey boundaries of land

A retention licence application must also include a survey of the boundaries of the land proposed to be covered by the licence in accordance with section 15(1BH) and Division 3A of the Act.

Program of work

A retention licence application must also include a program of work. The Regulations set out the required contents of a program of work, including:

• intensive mineral exploration;
• mineral resource assessment;
• technical and economic studies related to:
  • the development of the mineral resource in accordance with the principles of sustainable development;
  • demonstrating the economic viability of the mineral resource;
• a proposed timing schedule for the work program including key milestones and proposed expenditure against each milestone; and
• demonstration that the planned scale of mining is commensurate with the efficient development of the mineral resource with consideration to its size.

If the licence is granted, the details of the work program, together with proposed expenditure under the licence, will form a key part of the licence conditions.

Retention licences can be granted for up to 10 years. The term of the licence that is granted in any particular case will reflect the length of time that is reasonably required to undertake the proposed program of work. It is expected that in most cases this would be less than 10 years.

As noted above, work required under the conditions of the retention licence will reflect the work program that was submitted with the licence application. Each licence holder's individual expenditure and work commitments will be reflected in licence conditions, including "milestone" conditions that establish staged progress requirements. Expectations about the scale and nature of work and level of expenditure will be based on the size of the mineral resource and the likely capital expenditure on the project, assessed against benchmarks for successful developments.

For the purposes of setting "milestone" and expenditure conditions, the work program should include information on the size of the mineral resource and proposed scale of mining operations, as well as a broad estimate of capital expenditure on the project.

The work will usually fall into two broad streams, namely:

• intensive mineral exploration, such as in-fill drilling or bulk sampling, to raise the standard of mineral resource identification from an inferred resource (the standard of mineral resource identification generally required for the grant of a retention licence) to an indicated resource (the standard of mineral resource identification generally required for a mining licence). Note, this particular standard will not necessarily apply where an alternative standard as provided in the Ministerial Guidelines has been accepted for entry to the retention licence (in particular where the mineral resource has high variability). In such cases, the work under the licence would generally be to raise the resource standard to the relevant alternative standard provided in the Ministerial Guidelines for entry to a mining licence.
• mineral resource assessment and technical and economic studies related to the development of the mineral resource. For substantial projects, this stream of work will generally take the form of a pre-feasibility study, and/or possibly a full feasibility study.

The general purpose of a pre-feasibility study is to make a comparison of key alternatives with cost estimates sufficiently robust to select a preferred alternative and create a business case to support further project development. Building on this, the general purpose of a full feasibility study is to continue project development and execution planning to a point sufficient to establish the economic viability of the project and secure finance.

A retention licence holder will generally be expected to undertake a pre-feasibility study. A full feasibility study can be undertaken on a retention licence, however if a full feasibility study and Environment Effects Statement are completed, then there is an expectation that the licence holder will apply for a mining licence.

The standard, but not exclusive, considerations of pre-feasibility and full feasibility studies for a major project would normally include:

The checklist above is what the department considers would generally be relevant for pre-feasibility and full feasibility studies. However, the check list components are only a guide and may not always be applicable, particularly where only a pre-feasibility study is prepared. Strict compliance with the checklist components is not a requirement, but will be considered in a licence application assessment. Further details on the typical components of pre-feasibility and full feasibility studies are in Appendix 2.

The licence holder may be required to provide independent verification, by a suitably qualified person, that the pre-feasibility or full feasibility study has been prepared, meets accepted industry standards, and that its conclusions are reasonable based on the results of the included studies. Alternatively, the licensee may choose to provide the complete documentation of the relevant studies in-confidence to the department for the department to undertake an analysis.

For small deposits such as those previously held under a prospecting licence, a formal pre-feasibility study may not be required. However, work required on the retention licence will include any studies and analyses necessary to demonstrate that the project is economically viable. For such projects, licensees may decide to apply directly for a mining licence (provided they are able to meet the necessary application requirements for a mining licence).

Generally, a retention licence will not be granted where an indicated resource has been defined and prefeasibility study indicating economic viability has already been completed. However, in rare circumstances a retention licence could be used solely for the purpose of retaining rights to a mineral resource, and further work on the licence would not be required for some period. These circumstances would generally be limited to:

• where the retention licence application is over a mineral resource that will be required in future to sustain the operations of an existing operating mine and where an indicated resource has been established and pre-feasibility study indicating economic viability of the mine has already been completed; or
• where an indicated resource has been established and a pre-feasibility or full feasibility study has already been completed, which indicates that mining is not currently economically viable solely for reasons entirely beyond the control of the licensee or applicant, but is expected to become so in the foreseeable future. In this circumstance and as provided for in section 112A of the Act, it can be expected that the Minister will periodically require the holder of a retention licence to review the economic viability of mining.

The holder of a retention licence is required to comply with the Act, Regulations and any conditions placed on the licence (including for example, conditions reflecting the work program), carry out the work in accordance with the approved work plan and report on activities and expenditure. Failure to comply with these requirements may result in licence cancellation, non-renewal or other enforcement actions.

A licensee may seek the Minister's approval to vary the program of work and related licence conditions. Generally, a variation would not be approved which would result in lower expenditure on the licence than otherwise would have been required.

As indicated above, the primary purpose of a retention licence is to establish the economic viability of mining the mineral resource. Generally, if a full feasibility study has been completed that demonstrates economic viability and an indicated or measured resource (or relevant alternative standard) has been established, the holder of a retention licence will be expected to apply for a mining licence, The Minister can periodically require the holder of a retention licence to review the economic viability of mining. If, as a result, the Minister is satisfied that mining is viable the licensee may be asked to show cause why a mining licence has not been applied for over all or part of the retention licence area.

Further, circumstances in which the Minister may require the holder of a retention licence to show cause as to why their licence should not be cancelled or why their renewal application should not be refused may include where the licence holder:

• has not met milestone conditions; or
• has finished the pre-feasibility or full feasibility study but the project is found to be not economically viable.

If any such circumstances apply the holder of the retention licence would be at risk of their retention licence not being renewed or the licence otherwise being cancelled in accordance with the Act. These guidelines do not limit the circumstances in which the Minister may make such a decision (see further sections 31 and 38 of the Act). Any decision to not renew a licence or cancel a licence would be at the discretion of the Minister taking into account the relevant circumstances.

In limited circumstances the holder of a retention licence may have their licence renewed for the purposes of undertaking any further work required towards applying for a mining licence, including establishing the economic viability of the resource even though the work program may have already been completed and a pre-feasibility study has established an indicated or measured resource (or relevant alternative standard). The work program would need to be revised accordingly and the licence holder would need to demonstrate how that program of work would support a decision to mine. As with the initial grant term, the term of the licence renewal will reflect the length of time that is reasonably required to undertake the proposed program of work. There is an expectation that the work would be completed within the renewal term.

Retention licences can be granted for up to 10 years and may be renewed twice for up to 10 years on each renewal, but a second renewal can only be given in exceptional circumstances. Renewal should not be considered as automatic or as a right. Renewal applications will be considered on the basis of progress that has been made on establishing the economic viability of mining and the work program that is proposed to establish viability. Generally, renewal would only be considered where an indicated resource (or an acceptable alternative standard) had been established over at least part of the licence area and substantial progress had been made on preparation of a pre-feasibility study.

It should not be assumed that the licence area under a renewal will necessarily remain the same – the area may be reduced depending on what the further studies show about the area of the identified mineral resource or the economically-exploitable portion of the resource.

The Act does not define exceptional circumstances. Whether particular circumstances are considered 'exceptional' for the purposes of the Act, will be determined by the Minister on a case-by-case basis. However it is expected that exceptional circumstances would generally be limited to those circumstances which:

• are beyond the control of the licensee; and
• the licensee could not reasonably be expected to anticipate or manage within the necessary timeframes; and
• have significantly and directly affected the progress of work on the licence.

A person claiming exceptional circumstances should bring those circumstances to the department's attention when those circumstances are first encountered (and not delay until the renewal application is made). Circumstances relating to failure to fund a project or being unable to secure approvals to undertake work will not normally be regarded as exceptional circumstances.

The Act provides for the transfer of a retention licence in particular circumstances and subject to the Minister's approval (see section 33 of the Act). Once the instrument of transfer is approved by the Minister and registered, the transfer effectively attaches to the transferee all rights and obligations under the licence (see section 33(4)). It should be expected that in most cases, the licence conditions and other requirements under the licence will not subsequently be altered at transfer.

Reporting requirements are provided by the Regulations. Licensees will be required to provide an annual activity and expenditure report and a technical report (see Regulation 57 of the Regulations) in relation to any exploration and other retention licence activities undertaken under the licence. Requirements include reporting expenditure on office studies, rehabilitation, exploration, drilling, and development studies.

Licence holders will also be required to report on intensive mineral exploration, mineral resource assessment, technical and economic studies (e.g. pre-feasibility studies) undertaken and key milestones under the work program (see Regulations 54 and 55). This should include a description and a summary of the findings of the pre-feasibility study and any other technical and economic studies.

The licence holder may also be required to provide independent verification, by a suitably qualified person, that the completed pre-feasibility study meets accepted industry standards. Alternatively, the licensee may choose to provide the full documentation of the relevant studies in-confidence to the department for the department to undertake an analysis. The conditions of the licence may also include requirements for the licence holder to report against particular work program commitments and milestones.

Ministerial guidelines for description of a mineral resource

Typical components of pre-feasibility and full feasibility studies