South Africa occupies a commanding position in the global chrome industry, hosting some of the world’s largest chrome resources and remaining a major producer of chrome ore.¹ This mineral endowment has supported an extensive domestic chrome value chain extending from extraction and beneficiation to ferrochrome production and export markets.

Within this value chain, chrome wash plant operators play a critical commercial role, particularly within the junior mining sector. Chrome wash plants bridge the gap between mining and downstream processing by beneficiating run-of-mine (“ROM”) ore into a higher-grade product known as chrome concentrate. This role is particularly important for junior and emerging miners. Developing dedicated beneficiation infrastructure requires substantial capital expenditure, technical capability and ongoing operational expenditure. Access to an independently operated wash plant can therefore provide a junior miner with a route to market without requiring it to construct and operate its own processing facility. Conversely, this interdependence means that legal or operational difficulties at the wash plant can directly affect the viability of the underlying mining operation.

The Growing Regulatory Spotlight

This regulatory scrutiny is no longer theoretical. In March 2026, the North West Provincial Legislature reported that approximately 70 chrome wash plants had been inspected during the 2025/26 financial year, with approximately 30 reportedly found to be operating without environmental authorisation. The authorities had also opened criminal cases and issued pre-compliance notices against certain operators.² For junior mining businesses operating on narrow margins, regulatory intervention capable of interrupting processing can quickly become an existential commercial risk.

Water use is one of the central regulatory considerations for chrome wash plant operations. Beneficiation processes may involve the abstraction, storage, recycling or discharge of water, and operators must determine whether these activities constitute water uses contemplated in section 21 of the National Water Act 36 of 1998 (“NWA”) and, if so, ensure that they are lawfully authorised. Depending on the particular activities and circumstances, the applicable authorisation may include a water use licence or another form of lawful entitlement under the NWA.³

Poor water management presents more than just a regulatory risk. Contaminated runoff, inadequate stormwater controls and pollution of nearby water resources can lead to complaints from landowners, communities and environmental authorities. What begins as an operational issue can quickly develop into a costly legal dispute, delaying production and affecting the business’s reputation.

A fundamental question operators should ask before accepting ore is whether the material originates from a lawful source. The Mineral and Petroleum Resources Development Act 28 of 2002 (“MPRDA”) regulates the lawful extraction of mineral resources and prohibits mining without the requisite statutory authority. For a wash plant operator, this creates an important downstream risk: accepting material without establishing its provenance may expose the business to ownership disputes, regulatory scrutiny and potential criminal or commercial consequences where the material was unlawfully extracted. Supplier verification should therefore form part of the operator’s commercial due-diligence process rather than being treated merely as an administrative formality.

Environmental compliance is equally important. Depending on the nature and scale of the operation, the National Environmental Management Act 107 of 1998 (“NEMA”) may require environmental authorisation before certain activities commence.⁴ Non-compliance may expose an operator to compliance notices, directives, enforcement proceedings, suspension or interruption of operations and, where applicable, criminal liability. Beyond regulatory enforcement, environmental incidents can interrupt production, damage relationships with surrounding communities and undermine investor confidence.⁵

The current enforcement environment makes this particularly important. Recent scrutiny in the North West Province has highlighted concerns regarding unauthorised wash plants, water pollution, unlawful discharges, air pollution and land degradation.⁶ An operator should therefore establish the environmental authorisations applicable to the particular site and activities before commencing operations, rather than assuming that authorisations held by a mining right holder automatically extend to independently operated processing activities.

Commercial Agreements: The Foundation of a Sustainable Wash Plant Operation

Every chrome wash plant depends on contracts. Whether processing ore for a mining company, purchasing ROM chrome, managing a plant on behalf of an investor or sharing in the proceeds of concentrate sales, commercial agreements regulate almost every aspect of the business. When properly drafted, they provide certainty and allocate risk. When they are poorly drafted, they often become the source of costly disputes, operational disruptions and financial loss.

One of the most common arrangements is a processing agreement, under which a miner delivers ROM chrome to a wash plant for beneficiation while retaining ownership of both the ore and the final concentrate. The operator earns a processing fee, but disagreements frequently arise over recovery rates, sampling procedures, concentrate quality, payment terms and responsibility for processing losses. Without clear contractual provisions governing these issues, even minor differences in calculation can result in significant financial disputes.

Some operators instead purchase ROM chrome outright under ROM purchase agreements. While this model offers greater profit potential because the operator benefits from the sale of the final concentrate, it also transfers significantly more risk. The operator assumes ownership of the ore and, with it, the risks associated with fluctuating chrome prices, disputed ownership, poor ore quality and the possibility that the material was unlawfully mined. Comprehensive supplier due diligence is therefore essential before any purchase is concluded.

Many wash plants operate under toll-treatment arrangements, where the operator simply processes ore owned by another party in exchange for a fixed fee. Because ownership remains with the client, the operator is generally protected from commodity price fluctuations. The commercial challenge, however, is maintaining consistent throughput. If major clients suspend mining operations or terminate their contracts, processing volumes can decline sharply while the operator continues to carry substantial fixed operating costs.

Management agreements present a different set of challenges. These arrangements are commonly used where one party owns the wash plant and another is responsible for operating it. Unless responsibilities are clearly allocated, disputes may arise over environmental compliance, health and safety obligations, maintenance, insurance, operational control and liability for regulatory breaches. Uncertainty in these areas can expose both parties to unnecessary legal and commercial risk.

In the junior mining sector, revenue-sharing agreements are also widely used. Rather than receiving a fixed processing fee, the operator shares in the proceeds generated from the sale of chrome concentrate. While this aligns the commercial interests of both parties, it also creates fertile ground for disputes over sales prices, deductions, operating costs, laboratory results and the calculation of distributable revenue. Without transparent accounting and reporting mechanisms, disagreements can quickly undermine the commercial relationship.

Regardless of the type of agreement, certain issues should never be overlooked. For junior mining companies in particular, the agreement should also address minimum and maximum throughput, responsibility for plant downtime, sampling and assay procedures, agreed recovery methodologies, reconciliation of stockpiles, responsibility for transport losses and the consequences of interruptions to mining or processing. These provisions can determine whether a project remains commercially viable when margins tighten. Contracts should clearly regulate ownership of ore and concentrate, operational control of the plant, access rights, stockpile management, pricing mechanisms, payment obligations, security arrangements, environmental responsibilities, termination procedures and dispute-resolution mechanisms.

This was illustrated in FS Mining Wash Plant (Pty) Ltd and Another v V-Flow Tech Consulting (Pty) Ltd,⁷ where a dispute over possession and operational control of a chrome wash plant resulted in urgent litigation. The Court granted a mandament van spolie, reaffirming that parties may not resort to self-help by unlawfully excluding another party from a plant, regardless of the underlying contractual dispute. The case serves as a reminder that commercial agreements should regulate not only how a business operates, but also how the parties will manage the relationship when it comes to an end.

Illegal Mining, Zama Zamas and the Risk of Unlawfully Sourced Chrome

Illegal mining has become one of the most significant challenges facing South Africa’s chrome industry. While much of the public attention focuses on illegal miners, wash plant operators face a different challenge: ensuring that unlawfully sourced chrome does not enter their facilities and, ultimately, the legitimate supply chain.

For junior operators, this problem is particularly acute where ore is sourced through intermediaries rather than directly from established mining right or permit holders. Multiple transactions between extraction and processing can obscure provenance, while attractive pricing may create commercial pressure to accept material before adequate verification has been completed. The short-term commercial benefit of securing inexpensive feedstock can therefore create significantly greater regulatory, criminal and reputational exposure downstream.

The difficulty is that illegally mined chrome does not always arrive at a wash plant in suspicious circumstances. It may pass through several traders, transporters or intermediaries before reaching the processing facility, making it increasingly difficult to verify its true origin. As a result, a wash plant may unknowingly process or purchase chrome that is subject to ownership disputes or was extracted without lawful authority.

The consequences can be severe. If the origin of the ore is questioned, operators may face regulatory investigations, ownership claims, business interruption and reputational damage. Customers, financiers and investors are also placing greater emphasis on responsible sourcing and increasingly expect operators to demonstrate that the chrome they process originates from lawful mining activities. An inability to do so can result in the loss of commercial opportunities, even where no regulatory action has been taken.

Stockpiles present a similar risk. Purchasing chrome from an existing stockpile may appear to be a commercially attractive opportunity, particularly during periods of favourable market prices. However, operators should not assume that the existence of a stockpile confirms its lawful origin. If ownership of the material is disputed or the chrome was unlawfully mined, processing or selling that material may expose the operator to avoidable legal and financial consequences.

For this reason, supplier due diligence should form part of every wash plant’s risk management strategy rather than being treated as a once-off administrative exercise. Before purchasing or processing material, operators should, where applicable, verify the supplier’s identity and corporate authority, the relevant mining right or mining permit, the location from which the material originated, ownership of the ROM or stockpile, transport documentation and the contractual chain through which the supplier acquired the material. Records should be retained so that the provenance of material can subsequently be demonstrated if challenged. Supply agreements should furthermore contain appropriate warranties regarding lawful extraction, title and authority to sell, together with indemnities and termination rights where those warranties prove incorrect.

Illegal Mining as an Operational and Security Risk

Illegal mining also creates risks beyond the provenance of ore. Wash plants operating near affected mining areas may encounter theft of ROM or concentrate, trespassing, damage to infrastructure, intimidation, unlawful access to facilities and disruption of transport routes. These risks can increase security expenditure and, in serious circumstances, interrupt production entirely.

Operators should approach these challenges through lawful security and stakeholder-management structures. Access-control procedures, incident reporting, engagement with the South African Police Service and other relevant authorities, clear protocols with mining right holders and documented community-engagement mechanisms can assist in protecting operations without exposing the business to further legal risk. Informal arrangements with unlawful mining groups should be avoided, irrespective of the short-term operational pressure placed on the business.

For junior miners and processors, whose operations may depend on continuous production and limited working capital, even a relatively short interruption can have disproportionate financial consequences. Security planning should therefore form part of the project’s broader legal and operational risk framework rather than being addressed only after an incident occurs.

When the Market Turns: Managing Commodity Price Risk

Even the most efficient and compliant wash plant cannot escape one factor beyond its control: the chrome price. Commodity price volatility is an unavoidable feature of the mining industry, and its effects extend well beyond profit margins.

When chrome prices fall, mining companies often reduce production, place operations on care and maintenance or suspend mining activities altogether. For wash plant operators, this usually means lower throughput. Yet many of the costs of running a wash plant, including electricity, labour, security, maintenance and environmental compliance remain unchanged. Reduced processing volumes combined with high fixed operating costs can place significant pressure on cash flow and profitability.

Price fluctuations also affect businesses that purchase and hold ROM ore or chrome concentrate. A sudden decline in the market can reduce the value of stockpiles almost overnight, leaving operators with material worth significantly less than its purchase price while they continue to incur storage, security and environmental management costs. Decisions to stockpile material therefore require careful commercial planning rather than speculation on future prices.

Volatile markets can also place strain on contractual relationships. Suppliers may seek to renegotiate agreed prices when the market strengthens, while customers may attempt to revisit pricing arrangements when prices decline. If contracts do not contain clear pricing mechanisms, review clauses or procedures for dealing with significant market fluctuations, commercial disagreements can quickly escalate into disputes.

Where appropriate, contracts can reduce this exposure through clearly defined price-adjustment formulas, benchmark pricing mechanisms, review periods, minimum throughput obligations and carefully drafted provisions dealing with prolonged market disruption. The appropriate mechanism will depend on the commercial model, but price volatility should be addressed when the agreement is negotiated rather than after market conditions have changed.

Lower chrome prices may also expose operators to counterparty risk. Financial pressure on miners, traders and customers can result in delayed payments, reduced ore supply, contractual defaults or even insolvency. For operators that depend on a small number of suppliers or customers, the failure of a single commercial partner can have a significant impact on the sustainability of the business.

Although operators cannot control commodity prices, they can prepare for market cycles. Diversifying suppliers, maintaining disciplined cash-flow management, avoiding excessive stockpiling and negotiating commercially balanced contracts can help businesses remain resilient during periods of market uncertainty.

Market risk must also be considered alongside regulatory and trade-policy developments. Government has continued to consider interventions aimed at strengthening domestic beneficiation and the ferrochrome industry, including export-control measures and the development of a chrome ore export tax.⁸ Junior mining companies and processors should therefore monitor not only commodity prices but also policy developments capable of affecting market access, pricing and the economics of their operating models.

Disputes Arising from Chrome Wash Plants

Even well-managed wash plant operations can become exposed to disputes within the chrome industry. Operators deal with multiple stakeholders, including mining companies, contractors, traders, transporters, investors and off-takers, all of whom have different commercial interests. Where contractual obligations are unclear or expectations are not properly managed, disagreements can quickly disrupt operations and affect profitability.

Ownership disputes are among the most common. Questions frequently arise over who owns ROM ore, chrome concentrate or stockpiles, particularly where material has changed hands several times before reaching the wash plant. Processing disputes are equally common, with parties disagreeing over recovery rates, sampling procedures, concentrate quality or the quantity of saleable product recovered from the ore.

Payment disputes also arise regularly, especially under processing and revenue-sharing agreements where disagreements may develop over pricing, deductions, operating costs or the calculation of revenue payable to each party. Where these issues are not addressed clearly in the contract, commercial relationships can deteriorate rapidly.

Disputes are not always contractual. Operators may also face regulatory action arising from environmental compliance, the processing of unlawfully sourced chrome or alleged failures to comply with licence conditions. Community objections, access disputes and operational interruptions following the termination of commercial agreements have also become increasingly common within the industry.

The appropriate remedy will depend on the nature and urgency of the dispute. Contractual claims, arbitration or mediation may be appropriate for payment and performance disputes, while urgent interdictory or possessory relief may be necessary where access to a plant, possession of equipment or continued operations are threatened. The critical point is that dispute-resolution provisions should be designed with the operational realities of the project in mind: a remedy that takes months to implement may offer little commercial protection where a plant has already ceased operating.

For wash plant operators, the cost of preventing disputes through careful planning is almost always far lower than the cost of resolving them through litigation. Strong contracts, clear governance structures and proactive communication remain some of the most effective tools for protecting business continuity and preserving valuable commercial relationships.

Practical Recommendations for Wash Plant Operators

In an industry facing increasing regulatory scrutiny, supply-chain risks and commercial pressures, the most successful wash plant operators are those that take a proactive approach to risk management rather than reacting to problems after they arise.

This starts with knowing exactly where chrome originates. Operators should implement robust supplier due-diligence processes and verify mining rights, permits and stockpile ownership before accepting ore for processing. In an environment where concerns regarding illegal chrome continue to grow, the ability to demonstrate lawful sourcing is becoming a commercial necessity rather than merely a compliance exercise.

As a minimum, an operator considering new feedstock should be able to answer five questions:

1. Who owns the material?
2. From which mining area or stockpile did it originate?
3. Under what mining right, permit or other lawful authority was it extracted?
4. Does the supplier have lawful authority to sell or deliver it?
5. Is there a documentary trail capable of proving these facts if the transaction is subsequently challenged?

If these questions cannot be answered satisfactorily, the commercial attractiveness of the transaction should not obscure the legal risk.

Equally important is the contractual framework underpinning the business. Processing agreements, toll-treatment arrangements, ROM purchase agreements and management contracts should clearly allocate risk, define responsibilities and establish practical dispute-resolution mechanisms. Many costly disputes can be avoided through careful drafting and regular review of commercial agreements.

Operators should also pay close attention to environmental and water-use compliance. Given the critical role that water plays in beneficiation, maintaining valid authorisations and implementing effective water-management systems should form part of every operator’s risk-management strategy. The same applies to dust suppression, stormwater management, waste handling and rehabilitation obligations.

Supply-chain traceability has become another key area of focus. Businesses should maintain clear records that allow them to account for the origin of all material processed at the facility. Strong traceability systems not only assist with compliance but also provide reassurance to customers, investors and financiers.

Finally, operators should recognise that market conditions can change rapidly. Conservative stockpile management, diversified supply arrangements and prudent financial planning can help businesses navigate periods of commodity-price volatility more effectively.

Ultimately, the chrome wash plant operators best positioned for long-term success will be those that recognise that legal compliance, contractual discipline and commercial risk management are integral to the profitability of the operation. For junior mining companies in particular, where capital is constrained and operational interruptions can have immediate consequences for cash flow, these considerations cannot be separated from the economics of the project.

A wash plant may sit downstream from the mining operation, but the legal risks surrounding mineral provenance, environmental authorisation, water use, contractual control, security and commodity volatility can reach across the entire project. Addressing those risks before ore reaches the plant is invariably more effective – and less expensive –  than attempting to resolve them once production has stopped or a dispute has reached court.

Authors

Tokyo Ndlela – Managing Partner

Mukovhe Marole – Candidate Attorney

References & Endnotes

1.   Department of Water and Sanitation, Classification of Significant Water Resources in the Crocodile (West), Marico, Mokolo and Matlabas Catchments: IUA Delineation Report recording that South Africa holds approximately 70% of global chrome reserves

2.   North West Provincial Legislature, “Portfolio Committee on Environment Raises Serious Concerns over Illegal Mining, Unauthorised Wash Plants and Regulatory Gaps”, 30 March 2026.

3.    North West Provincial Legislature, “North West Legislature Committee On Economic Development Calls For Urgent Action On Illegal Mining And Chrome Wash Plants”, 5 June 2026.

4.   National Environmental Management Act 107 of 1998.

5.   North West Provincial Legislature, “Portfolio Committee on Environment Raises Serious Concerns over Illegal Mining, Unauthorised Wash Plants and Regulatory Gaps”, 30 March 2026.

6.    North West Provincial Legislature, “Portfolio Committee on Environment Raises Serious Concerns over Illegal Mining, Unauthorised Wash Plants and Regulatory Gaps”, 30 March 2026.

7.    FS Mining Wash Plant (Pty) Ltd v V-Flow SA (Pty) Ltd and Another [2024] 2 All SA 849 (NWM); [2024] ZANWHC 104 (12 April 2024).

8.    South African Government, “Statement on the Cabinet Meeting of 25 June 2025”, 26 June 2025.

This article is intended for general informational purposes only and does not constitute legal advice. Legal advice should be obtained having regard to the specific facts, regulatory requirements and commercial arrangements applicable to each operation.