A fresh perspective
• A thriving junior mining sector is key to revitalising industry
The junior mining sector is crucial to the overall health and longevity of the local mining industry and makes significant contributions to the economy.
According to a report by the Minerals Council SA, the sector directly employs an estimated 33,500 to 40,300 people, with a total employment impact of 230,000 to 800,000, including indirect and induced jobs, due to the multiplier effect.
“By investing in and operationalising smaller mining opportunities, junior miners get access to resources not extracted by bigger mining companies, which creates new wealth and jobs over wider geographies and enhances broader local equity participation,” says Mike Miller, Group CEO at Mantengu Mining.
A thriving junior mining sector also brings fresh perspectives, agility and a bigger risk appetite to the sector.
“Smaller, nimbler operators can experiment and pioneer new exploration and extraction methods to discover new mineral deposits, particularly in untapped areas that larger mining companies have neglected or in African countries that pose unique risks and challenges,” says Servaas Kranhold, Head of Natural Resources at BDO Johannesburg.
This exploration supports sector growth through diversification, as junior miners
typically focus on a wider range of resources, including critical minerals such as lithium, manganese and cobalt needed for renewable energy technologies.
“Investing in junior miners can catalyse growth as they are ambitious enough to exploit new resources, despite fluctuations in the raw materials market, and they provide a high-risk, high-reward chance in the early-stage exploration and development niche,” says Dr Heinrich Jantzen, Senior Mining Advisor at Zutari.
This diversification reduces dependence on a select basket of commodities and makes the industry more resilient to price fluctuations.
“Junior miners are also open to adopting new technologies to develop more efficient mining practices during the mine establishment and extraction phases, which can help revitalise a sector that fuels economic growth and job creation,” says Kranhold.
Despite the sector’s importance, junior miners face several challenges. “The major obstacles include a lack of access to capital, delays in obtaining licences and permits, and adequate port and rail infrastructure required to export bulk commodities,” says Lili Nupen, NSDV co-founder and Head of Mining and Environmental. “The result is that junior miners looking to enter the space do not necessarily have the capital reserves to weather the preoperational phase obstacles.”
The challenges in accessing finance to fund exploration and development and bureaucratic red tape discourage investment and constrain greenfield developments.
“Most operational challenges are, directly or indirectly, attributable to the lack of scale in the junior mining sector,” says Miller. “The resultant lack of capital or balance sheet capacity, resource or life-ofmine limitations, and access to economically viable logistics solutions or reputable off-take makes investing in and managing a junior mining operation extremely difficult.”
Unlocking the full potential of the junior mining sector will require targeted support from the government and other stakeholders to streamline regulations and permitting processes and improve the infrastructure that supports the sector.
Nupen says the government can accommodate junior miners through regulatory reforms, as existing legislation currently places excessive financial and administrative burdens on junior miners.
“A flexible regulatory structure that enables junior miners to compete with larger operations would go a long way toward encouraging activity in the sector.”
Regarding the logistics problem, Nupen says the government should consider partnerships with the private sector to assist at ports and railways to improve operations and attract investment.
“The government also needs to create a platform that derisks investments to attract capital from the private sector to bolster exploration among junior miners, and policymakers should focus on optimising tax and rebate incentives to promote these investments,” adds Miller.
Junior miners can also leverage numerous innovative funding models to fund growth throughout their life cycle, says Jantzen.
“Production-based financing, where junior miners sell a right to future production to secure funding, has become an increasingly common option.”
Other creative financing strategies highlighted by Jantzen include hybrid financial instruments, such as earn-in and funding-related joint venture arrangements or convertible notes, and flowthrough shares, which are issued to taxpayers as part of an agreement in which the company agrees to incur a certain value of eligible expenses.