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Australian court decision on native title claim bad news for miners… or is it?

There appear to be some questions as to what the recent decision by Australia's Federal Court in favor of the Yindjibarndi native title group against Fortescue Metals Group Ltd. will mean for the wider Australian mining industry.

In July, the court ruled that the native title group was entitled to exclusive rights over unallocated crown land occupied by Fortescue's Solomon Hub iron ore mine in Western Australia's Pilbara region. The land also includes mining leases owned by Rio Tinto and Hancock Prospecting Pty. Ltd.

The Association of Mining and Exploration Companies has raised concerns that the court ruling may have far wider national implications.

"The court appears to have substantially 'lowered the bar' for what is required for native title groups to secure exclusive possession native title which could have long-term implications for the cost-efficient development of new projects," CEO Simon Bennison said recently.

"But perhaps of more concern, the court appears to have made a number of observations about the untested 'revised native title determination' provisions in the Native Title Act. If correct, it could lead to uncertainty at a national level."

Following the handing down of the court's decision, Fortescue indicated it will probably appeal, with CEO Nev Power telling ABC Radio Perth that he thought the verdict was wrong.

"I think we are likely to appeal," he said. "It's a very unusual decision in that the judge has found exclusive native title possession on this land, which we think is unlikely to be the case. So we will be looking at it definitely and considering an appeal."

The Yindjibarndi group have reportedly vowed to launch a compensation claim against Fortescue.

Power said during last week's conference call following the release of Fortescue's second-quarter results that he believes the native title rights over the land are for ceremonial and cultural access and should exclude mineral resources.

He also reiterated that Fortescue has no commercial concerns and is not expecting any material financial impact following the court's determination.

The Chamber of Minerals and Energy of Western Australia declined to comment on the issue and the Minerals Council of Australia did not respond to requests for comment.

However, Fat Prophets analyst David Lennox said the legal case appears to be a "one-off," with Australian mining companies very aware of the fact that they are currently legally required to negotiate native title agreements before they can go ahead with projects.

"It wasn't the normal market approach, because generally mining companies do negotiate entitlements with the original landholders," he told S&P Global Market Intelligence.

"So from that perspective the FMG claim is just bringing whatever reason they had not to negotiate with the original landholders, it's just bringing it into line with standard practice."

Lennox said he is not aware of any other Australian miners that may face the same issue as Fortescue.

"There's certainly been no holding back by the industry in terms of negotiating with original landholders, that I've been aware of, that are perhaps heading down the same road as Fortescue," he said.

"As far as I'm concerned, it's probably a one-off. The industry has seen the outcome, Fortescue has to obviously negotiate a royalty with the original landowners, which is what they're all doing anyway, so why go down the legal road?"