Mining: a new lease of life
12 November 2007
15 March 2004
23 October 2006
23 October 2007
8 December 2008
19 April 1999
Think of the South Yorkshire economy and the chances are that you will have in mind the traditional industries of coal and steel.
It is widely believed that these industries were terminal casualties of the economic upheavals of the 1980s and 90s.
Certainly, one of the enduring images of that time is of striking miners presiding over the withering decline of collieries that had once provided the energy for the nation.
In fact, the UK’s coal mining sector did not die. It survived and diversified. As the spectre of dependence on foreign energy supplies begins to haunt politicians and industry, mining is suddenly back in vogue.
But mining does not just mean coal; it covers a broad spectrum of industry operating on a global scale.
Law firms in and around Sheffield grew on the back of the traditional industries. They too have diversified into other areas, including the advanced manufacturing technologies that now form the backbone of the South Yorkshire economy. But the expertise they developed over decades working in the mining sector remains. While mining lawyers may now be much fewer in number, they remain no less expert.
As the mining sector enjoys a renaissance, those same mining lawyers are beginning to take advantage of the growth in both domestic and international mining related legal work.
Rebirth of an industry
As the demand for energy increases and North Sea gas reaches its end, much has been written about the risks we face in becoming dependent on foreign energy supplies. Suddenly, the UK coal mining industry seems an attractive option, especially with the advent of increasingly sophisticated clean coal technologies to minimise the effects on the environment.
It is against this background that Hatfield Colliery has been reborn. Richard Budge – ‘King Coal’ – rescued the colliery from the liquidators in 2001. His new company Powerfuel restarted operations at Hatfield earlier this year with a view to full-scale production. The £800m scheme will include development of a clean coal power station.
Meanwhile, the largest producer of coal in the country, UK Coal, still operates five deep mines in central and northern England, with substantial reserves available to maintain an important role in meeting the nation's future energy needs. Rising commodity prices are making the economics of coal extraction viable for the first time in a generation.
Old dogs, new tricks
The lessons of the 1970s and 80s have been taken to heart. Diversification is seen as a method of protecting against another slump.
For example, UK Coal's core activity is now supplemented not only by significant property development, but also by power generation. It has obtained planning approval and a licence to extract methane for power generation at the site of the former Stillingfleet mine near Selby. It is also actively pursuing several planning applications to install wind turbines on former surface mines. In this way, it is aiming to buy security in the increasingly insecure energy market.
Diversification is not only taking place in industry. Regulators have caught the bug as well. The coal industry's regulator, The Coal Authority, has taken advantage of the recent property boom and the introduction of home information packs. It has teamed up with the British Geological Survey to provide ground stability reports for the home-buying public, giving information on all types of ground stability risks nationwide, not merely those related to mining activity.
Into the 21st century
For the UK stock markets, mining has returned to respectability and profit in the past two or three years. Long seen as a high-risk investment, the sector now provides some of the strongest share performances in the market. Lawyers in the sector have found M&A work booming.
The London Stock Exchange (LSE) is already home to many of the mining sector’s major multinationals, including BHP Billiton, Rio Tinto, Anglo-American and Antofagasta. One of the most important developments of recent times is the increasing desire of many foreign mining firms, especially those based in Russia, to seek listing in London, drawn by the UK’s combination of business-friendly regulation and ready access to investment.
In October 2005, for example, Kazakhmys plc, the copper giant from Kazakhstan, joined the FTSE 100. This was seen as part of an apparently unstoppable trend towards the globalisation of the industry. That trend is epitomised by the involvement of the Russian mining house Kuzbassrazrezugol in the rebirth of Hatfield colliery.
The global dimension
Law, like mining, has become a global business. As more UK law firms look to overseas markets, so domestic mining lawyers are expecting to find a rich seam of work by exporting their talents to the global mining industry. Skills honed in the coalfields of South Yorkshire, for example, transfer readily to the mineral fields of Africa or Russia.
Overseas companies seeking the benefits of a UK listing are increasingly regulating their activities using English law. In many areas of the world, the mining industry faces challenges such as volatile labour markets, human rights and political corruption. The choice of English law adds weight to the respectability and security that mining houses are able to promise investors.
While environmental, planning and property laws do not travel particularly well, England’s mining lawyers are able to take advantage of the prominence of English law in other disciplines.
Cross-border M&A work is already thriving and looks set to grow further. While the larger corporate transactions are usually considered the province of the magic circle, that will not necessarily remain the case, especially as more mining houses in the mid-market look for overseas partners.
Litigation and arbitration, meanwhile, fall squarely within the expertise of the old school of mining lawyers. In general, a litigation boom tends to follow a period of intense corporate activity, and that may be the case here. Similarly, the increasingly global nature of trade in the mining sector suggests that we will see a rise in multi-jurisdictional litigation arising out of operational issues.
Perhaps one of the boom areas for mining lawyers in the coming years will be corporate defence and regulatory work. Many overseas companies looking to list in London come from jurisdictions without our culture of regulation. They face the challenge of changing their methods of business to comply with a level of regulation and scrutiny with which they are not yet familiar. That is likely to be a source of work for English lawyers steeped in the culture of an already tightly-regulated industry.
Alongside the commercial and regulatory legal work carried on in the domestic mining sector, recent years have seen the growth of a whole new industry in claims work. Often vilified, some law firms have pursued mining disease and accident claims at great profit. This is likely to be a growth area in other jurisdictions, of which English law firms may look to take advantage on both sides of the fence.
The past couple of years have been kind to lawyers working in the mining sector. The current boom in the global mining industry is good news for Yorkshire’s mining lawyers and breathes new life into a long established area of law. The prominence of English law in cross-border work and the attractiveness of the LSE suggest that there will be no shortage of international work for regional experts in the sector.
Michael Wright and Paul Clarke are associates at DLA Piper