Exploration touted as growth area
The government and industry wake up to serious problems as resource deposits run out and the project pipeline dries up
Exploration is the lifeblood of any mining sector, but the problem in SA is that there is not much to speak of and it does not bode well for the industry’s future.
Many a mining company CEO speaking at the 25th Investing in African Mining Indaba in Cape Town this week noted that exploration is absolutely critical for the future of the industry, but more needs to be done to make it attractive for investors to take a chance on prospecting in SA.
In SA, with a long and illustrious history of big mining, the emphasis has typically been on major companies, to the detriment of smaller miners and exploration.
Grant Mitchell, who heads up the Minerals Council’s junior and emerging miners desk, says SA has not developed the junior and exploration mining sector, which is still in its infancy. In a number of other mining countries, it is very different.
In Canada, the Toronto Stock Exchange has 1,000 juniors listed. In Australia there are about 700, while SA’s JSE only has 10 listed junior mining companies. Canada and Australia each attract about 14% of global exploration funds, while SA only pulls in 1%, Mitchell notes. Of that, 90% is for brownfields exploration, not greenfields projects.
But change is afoot.
The government and industry are waking up to the serious problems around exploration now that known resource deposits are running out, major companies are divesting from SA and the project pipeline is running dry.
“We are starting at quite a low base — but this is definitely an environment which is a lot more conducive, and there’ sa shift in thinking in the government, in the DMR [department of mineral resources] and in the minerals council,” Mitchell says.
The council’s Tebello Chabana, says bureaucracy has deterred exploration in SA.
“If you put a whole lot of red tape on prospecting you are not going to get people putting their risk capital into the country.”
The new Mining Charter is now, at least, one piece of red tape that is gone, says Chabana.
The charter’s silence on prospecting means certain requirements, such as BEE, will not apply. “People can put down their risk capital and get 100% of the benefit — only at a mining stage do you have to comply with the BEE requirement,” Chabana says.
Mineral resources minister Gwede Mantashe conceded the BEE requirements caused a “total decline” in exploration.
Still, there’s concern that the Mining Charter’s silence on prospecting will cause confusion and frustration for prospectors dealing with provincial governments. But Mantashe insists the charter’s silence should be seen as a source of certainty for prospectors and says it is already bearing fruit.
“In the diamond sector, within three months of publishing the charter, we saw 126 new exploration projects and to me it affirmed the correctness of that position, because exploration is the life blood of mining,” Mantashe told the audience at the IHS Markit Southern African Coal Conference. “If we kill exploration there will be no growth in the sector.”
Mantashe said geological mapping being carried out by the Council for Geosciences was progressing well. Already its research into the Springbok flats area has yielded information about the vast coalfields in the area.
Ultimately, the government would like the findings from the geological mapping to inform and assist investment in SA mining and Mantashe expects it will help to speed up the pace of investment
Mitchell said that the Minerals Council’s desk is now in discussions with the Industrial Development Corporation and the Public Investment Corporation about setting up a fund for exploration, which is a government initiative.