Oslo 25 October 2022; A partial victory in the court of appeal with Arctic Mineral Resources AS (“AMR”) securing a unanimous judgement to the effect that garnet continues to be a landowner-owned mineral in poly-mineral deposits, with a potentially commercial deposit of state-owned minerals, and a dissenting ruling (1-2) with the minority in favour of AMR’s claim that Nordic Rutile AS (“NRU”) cannot extract or utilise garnet on properties where AMR has mineral lease agreements with landowners.
The judgement from the Borgarting court of appeal in the declaratory lawsuit filed by AMR against NRU can be summarised as follows:
- Unanimous rejection of NRU’s appeal and the Directorate of mining’s recent alteration of its interpretation of the extent of state minerals. Garnet, as a landowner-owned mineral maintains this status when coinciding in the ground together with deposits of state minerals.
- On the remaining points the court is divided into a majority and a minority (2-1).
- The majority finds that NRU may extract garnet within AMR’s mineral lease area to the extent necessary to extract rutile.
- The majority finds that an assessment according to the minerals act § 32 2. Section of whether landowner-owned minerals can be mined commercially within AMR’s mineral lease will dictate whether NRU can utilize garnet from AMR’s mineral lease area in its own project or, if commercial, AMR can demand to have such garnet handed over or to be compensated in full for its value.
- The minority gave AMR full support – NRU does not have the right to extract or utilise garnet within AMR’s mineral lease area, i.e., on the west side of the Engebo mountain
AMR has submitted documentation to the mining authorities that garnet in the deposit could have given rise to a commercial operation on a stand-alone. Thus, AMR will have a right to compensation from NRU based on the value of garnet where AMR has a lease agreement with the landowners. Based on project economics as presented by NRU to the court of appeal and analysed by AMR, such compensation will render the project of NRU non-commercial.
“AMR is not averse to the judgment seen from a purely economic point of view, as NRU will be obliged to compensate AMR for the value of garnet within AMR’s mineral lease, albeit with a likelihood of the project not being realised. AMR will appeal where the majority found against AMR. AMR’s mine plan, based on extracting and selling armour stone and industrial minerals, eliminates the need to destruct the Engebø mountain and deposit waste in the Førdefjord to utilise the resources in this deposit”, says Arnold Rørholt, Chairman of AMR.
Where does one draw the line between the mineral rights of the state and that of the landowners?
The declaratory lawsuit concerns how far the rights to the state’s minerals go relative to the landowners’ rights. NRU appealed this part of the Oslo district court’s judgment. NRU claimed that garnet, ordinarily a landowner mineral, becomes a state mineral in poly-mineral deposits that also contain a potentially commercial deposit of state mineral(s). The Court of Appeal unanimously rejected NRU’s appeal and confirmed as AMR has claimed all along, that garnet belongs to landowners everywhere in Norway, including in poly mineral deposits such as the Engebø deposit.
Does an extraction right to state minerals replace the need to enter an agreement with the respective landowner(s) when it comes to extracting garnet?
In the question of whether NRU’s extraction right to rutile (state mineral) replaces the need for an extraction right to garnet (landowner mineral) to extract garnet on properties where the landowners have signed a mineral lease agreement with AMR, the Court of Appeal divided into a majority and a minority (2-1). The majority found that it does. The minority concluded that it does not.
Does an extraction right to state minerals replace the need to enter an agreement with the respective landowner(s) when it comes to utilising garnet?
In the question of whether NRU’s extraction right to rutile (state mineral) replaces the need for an extraction right to garnet (landowner mineral) in order to utilise garnet from AMR’s mineral lease area, the majority found that it will depend on an assessment by the authorities of whether landowner’s minerals can be mined commercially on a stand-alone basis within the mineral lease area. If yes, NRU must either hand over the garnet to AMR or compensate AMR for its value. AMR has developed extensive documentation as to the commercial viability of mining garnet and armour stone within the mineral lease area. AMR has shared such documentation with the authorities and welcomes further dialogue on the assessment.
Full compensation to AMR will render NRU’s project unprofitable
The judgement from the court of appeal secures AMR compensation for the value of the garnet within its mineral lease, provided AMR can document commercial viability as per the above. It is AMRs understanding that for such compensation to satisfy § 105 of the Norwegian Constitution that AMR must be compensated for the value of all garnet AMR would have extracted in its own mine plan and that the settlement of such compensation must coincide with when AMR would have commenced extraction in its own project. Figures presented to the court show that such compensation would render NRU’s Engebø project unprofitable, with a concurring low probability of being realised. AMR’s primary objective is to establish its own much more sustainable and resource-efficient mining project. AMR will hence appeal to the Supreme Court those claims where the majority ruled in favour of NRU.
The minority concluded, completely in line with AMR claim, that NRU cannot extract or utilise garnet within AMR’s mineral lease area
The minority in the court, by judge Leirvik, states that (AMR translation):
“The decisive factor for the minority in this particular case is that it has been documented that the landowner’s minerals today have a greater value than the state’s minerals in Engebøfjellet. The minority finds that Section 32, first paragraph, second sentence, and Section 32, second paragraph of the Minerals Act in any case must be interpreted restrictively in such a situation, based on legislative drafting, which is again based on an assessment of the established content of the state’s right to minerals. Nordic cannot then extract or utilize the landowner’s minerals without having an agreement or decision on expropriation.”
AMR looks forward to having the Norwegian Supreme Court assess these issues of fundamental rights.