Gold

The development of the junior mining and emerging mining sectors is key to growing and sustaining the mining industry.

This important sector within South Africa’s mining industry single-handedly generated R54.4 billion in revenue in 2018 and spent R55.5 billion, despite the challenging economic and commodity price environment. CHANTELLE KOTZE writes.

The Junior and Emerging Miners’ Desk, an arm within the Minerals Council South Africa, aims to provide advice and support, and to act as a resource centre for smaller Minerals Council member companies by supporting junior and emerging mining through policy lobbying and providing advice. Its purpose is to also link junior and emerging miners to networks, providing mentorship and disseminating relevant policy information.

This article first appeared in Mining Review Africa Issue 5, 2019
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Established in 2015, the Desk has been growing in numbers and now comprises 25 members (including smaller producers as well as exploration and development companies), two mining associations (the Clay Brick Association of South Africa and the South African Diamond Producers Organisation) and also contracting companies – altogether representing around 250 smaller companies.

In recent times, the Desk has also been actively supported by the Minerals Council, who has taken a stronger stance on the importance of the project pipeline that junior mining brings.

According to ASX and JSE-listed Orion Minerals CEO Errol Smart – the chairman of the Mineral Council’s Emerging Miners Leadership Forum representing about 200 junior and emerging miners on the council’ board – the global mining industry is driven by the junior sector, which is innovative, developing new technologies and making discoveries. “Without juniors, you lack the very important feedstock of new projects.”

This is what has happened in the South African mining industry, Smart notes, adding that the missing generation of juniors and explorers has caused the country’s mining sector to wane without any new Greenfield discoveries being made. This has meant that the South African industry now needs to play catch up if it plans to reach the exploration levels of its global peers.

By way of example, in 2017, South Africa accounted for only 1% of total global exploration expenditure. At the same time, Canada attracted 14% of global exploration expenditure, and Australia 14%. Of this 1% expenditure in South Africa, only 10% was on Greenfields exploration, which is the lifeblood of any successful mining industry.

This has led to a weak Greenfields exploration pipeline and a limited pipeline of new mining projects that may be developed – the absence of which is of concern for the future sustainability of South Africa’s once thriving mining sector, according to Grant Mitchell, who heads up the Junior and Emerging Miners’ Desk at the Minerals Council.

Moreover, where South Africa has lagged behind is in the number of active and contributing junior mining and exploration companies currently listed on the JSE, which amounts to 10.

In contrast, Canada has about 1 150 listed juniors  and Australia has about 700 juniors on its board – with many of them exploring for projects on the African continent.

These figures, according to Mitchell, are testament to the fact that South Africa’s junior sector has historically not been sufficiently developed nor have any venture capital incentives been developed either.

One of the projects being worked on by the Desk is the development of an incentive scheme for the junior mining sector in South Africa. Currently in draft format, the scheme document is being reviewed by law firm Fasken with the aim of creating a formal document that can be taken to government as a motivation and starting point to influence government to introduce tax incentives.

Moreover, in terms of funding, both the Industrial Development Corporation of South Africa and the Public Investment Corporation have indicated that they would like to establish government-initiated funds for prospectors and developers – however this could take up to two years, Mitchell states.

While the establishment of a government-led fund is an imperative, the need to enable venture capital companies to invest in junior and emerging miners is crucial, according to both Mitchell and Smart.

“What we need is an environment that actively encourages exploration and welcomes the risk-takers and investors that have the vision to discover new deposits, big and small and fund these during the riskiest stages of development,” adds Mitchell.

Another item on the agenda at the Desk is the establishment of a programme within the Mining Qualifications Authority specifically aimed at the junior and emerging mining sector.

Mining Charter 3 offers some reprieve

Smart, who believes that there should be a special dispensation for junior miners, has welcomed the amendments made to Mining Charter 3, which have in turn, made the mining industry for juniors less encumbered.

“Once a poorly drafted, impractical and unworkable document, which required 51% empowerment ownership of prospecting rights – arguably the riskiest segment in the project life cycle – Mining Charter 3, as gazetted in December 2018, is a substantial improvement on the previous version and has exempted the junior sector from having to comply with some of the empowerment requirements owing to cash and operating constraints,” says Smart.

“The amendments to Mining Charter 3 have now allowed willing black investors to enter the fold and invest their money into owning a portion of the project and in turn creating the much needed growth in the exploration sector,” says Smart.

In addition, Mitchell says that while the constraints on exploration in South Africa have been an important area of focus for the Desk, and while we are pleased that concessions have been made in the application of Mining Charter 3 for junior miners and explorers, more still needs to be done than just the removal of disincentives. In addition many of the members of the Desk are smaller producers who find the current regulatory environment onerous.

In closing, both Mitchell and Smart noted that while many victories have been achieved within the junior mining sector, it takes a whole suite of support to ensure the formation of a successful junior sector including geological information, tax incentives, access to money, technical skills and regulatory certainty.