The SA government is entering a crunch period over its new mining legislation - the Minerals & Petroleum Resources Development Act (MPRDA) - as mining companies increasingly resort to the courts to sort out ongoing disputes.

The contest has been a long time coming as the mining companies have opted time and again to avoid public confrontations with government no matter how blatant the aggravation.

A classic example was the attack on De Beers in parliament by Lulu Xingwana - the former deputy minister of minerals & energy. It contained numerous and blatant factual errors, but De Beers declined to comment.

The reasons for that included the industry's traditionally preferred approach - to settle matters quietly behind closed doors so as not to appear out of step with the new SA.

Mining companies were also concerned about being penalised in their dealings with the department of minerals & energy (DME) in terms of applications for new order prospecting and mining rights as well as the conversion of existing "old order" mining rights into "new order" rights.

No longer. Government is now being sued for alleged expropriation of mineral rights by the Italian investors who control much of SA's granite industry.

Legal action has also been taken against the DME by a string of companies - including Anglo Platinum, BHP Billiton and Anglo Coal - following DME decisions to reject various applications for new order prospecting rights.

A number of these actions have already been won by the mining companies with the DME settling out of court in some instances.

Ironically, mining companies are losing their patience at a time when the DME has started to respond to their concerns and has agreed to amend the MPRDA to address a number of problem areas.

The DME has also demonstrated that the new legislation works through the conversion of the old order mining rights of a number of mining groups including Gold Fields, AngloGold Ashanti, Lonmin and Aquarius Platinum.

That should have boosted confidence in the system throughout the sector; instead all eyes are on Anglo Platinum and the DME over the complex negotiations taking place about Anglo Platinum's conversion application. Anglo Platinum, Lonmin and Impala Platinum applied for conversion of their existing mining rights at about the same time, but so far only Lonmin has had its converted though platinum junior Aquarius Platinum has also been successful.

Aside from the action taken by the Italian investors, the situation has been defused to a considerable extent by government action taken last November when Chamber of Mines CEO Lazarus Zim made what has to be viewed as a landmark speech at the organisation's AGM.

Zim for the first time raised in public a string of complaints by the mining industry against the DME which had resulted in a drop in fixed investment by the SA mining companies. Prior to this few mining executives were prepared to put their grievances on the record.

Among the issues highlighted by Zim was the hot potato of the possible prescription of expropriation claims by mining companies against government.

The view of a number of influential corporate lawyers is that the companies could have lost their right to claim for compensation if they had not lodged such claims by the end of April - three years after the MPRDA came into force.

Their legal interpretation is that the date on which the loss, through alleged expropriation, occurred and claims for compensation have to be made within three years of the time of the loss taking place otherwise they will be prescribed and will fall away.

The DME has always rejected this viewpoint claiming no expropriation had taken place. But faced with the level of industry concern and determination to take steps to protect itself, new minerals & energy minister Buyelwa Sonjica took decisive steps to defuse the situation.

She announced at the Mining Indaba conference held in Cape Town at the beginning of February that the MPRDA would be amended to remove obstacles to investment in the industry.

The DME had initially proposed dealing with the prescription issue through a regulation stating companies could claim for compensation after the cut-off date in 2009, by when old order mining rights had to be converted to new order rights.

The corporate lawyers were not happy with that. Webber Wentzel Bowens partner Peter Leon, who specialises in mining regulatory issues, described this approach as "very messy" and said he would prefer an amendment to the act.

Sonjica then agreed to do precisely that but ran into a timing problem because the amendment could not be put through before the end of April, which again raised the possibility of companies acting to protect their interests because they had not seen the wording of the actual amendment.

But Sonjica reaped the benefit of the improved confidence in the mining sector when, in the last week of April, Anglo American announced it would not lodge claims for compensation and neither would its associates and subsidiaries including Anglo Platinum, Kumba Iron Ore, Anglo Coal, Anglo Base Metals, Highveld Steel, De Beers and Exxaro.

So far, so good, but the DME must still deal with the action by granite group Finstone which will be decided by arbitration in the International Centre for the Settlement of Investment Disputes (ICSID), which is part of the World Bank. The action is being brought in terms of bilateral trade treaties signed by SA with the governments of Italy, Luxembourg and Belgium which protect the rights of investors from those countries operating in SA.

Finstone is claiming Euro 260m in compensation for expropriation of mineral rights and the company alleges it was discriminated against in favour of historically disadvantaged South Africans. The case is hugely important given the implications for the MPRDA should Finstone win.

It's a measure of how conditions in the SA mining investment sector have settled down over the past few years that the Finstone action has not caused as much of an upheaval in investor sentiment as might otherwise have been expected.

Both Zim and DME director-general Sandile Nogxina have stressed the ability of their organisations to reach acceptable solutions.

More tests of that ability lie ahead. First and foremost is the proposed Royalties Bill currently being finalised by the department of finance.

Then there's the issue of windfall taxation. Executives were appalled by the suggestion of a government task team that windfall taxes could be applied generally to the mining sector.

The task team had been looking into the issue of a windfall tax on Sasol when it came up with this blanket proposal. Sasol, apparently, had been targeted because this organisation was originally set up with government funding to develop its oil-from-coal plants and its revenues had been protected through subsidies.

The department of finance agreed that the proposal to broaden the application of windfall taxes was beyond the task team's scope but did not rule out the possibility of looking at such measures in future.

Windfall taxes strike at the heart of the resources industry. Mining is frequently a high-risk, high-reward proposition where entrepreneurs effectively make large "bets" in the form of huge capital outlays. Returns on investment in mining can be volatile because of the cyclical nature of the commodity business. Windfall taxes, which cut down on the returns in the really good years, can raise the risk in the equation to the point where the entrepreneurs may consider it's not worth going ahead with certain projects.

That would go full circle to Zim's starting point - falling direct investment in the SA mining sector.