Call for mining to open up more

• The industry needs innovative solutions, indaba hears

More transparency was needed from the mining industry and the government, including asking what happened to the 8,000 or so mining permits that were granted about seven years ago and did not result in a single new project, Joburg Indaba chairman Bernard Swanepoel said on Thursday.

More transparency was needed from SA’s mining industry and the government, including asking what happened to the 8,000 or so mining permits that were granted about seven years ago and did not result in a single new project, Joburg Indaba chairman Bernard Swanepoel said on Thursday.

Under the “use it or lose it” principles of the Mineral and Petroleum Resources Development Act, holders of prospecting or mining permits must be active or lose their permits, in so doing opening up opportunities for others.

Warren Beech, a partner at attorneys Hogan Lovells, said applicants for mining or prospecting rights had to meet various requirements, including technical and financial.

Prospecting had to begin within 120 days of the right being granted. If it did not, the right could be suspended or revoked. Prospecting rights are granted for five years and can be extended for another three. To obtain a mining right, more extensive requirements had to be met and mining had to begin within a year of the right becoming effective, Beech said. Both prospecting and mining right holders have to submit regular progress reports to the Department of Mineral Resources.

At a participative audience discussion — including representatives from banks, mining consultants and mining companies — ahead of June’s Joburg Indaba, Swanepoel said unless local mining companies and the government found more innovative solutions, the industry would not emerge from the bottom of the commodities cycle.

Andries Rossouw, PwC’s mining industry assurance partner, said capital spending remained at historically low levels, which threatened the future growth of the industry.

Although the profitability of certain sectors, such as chrome, manganese and gold, had improved this year, average earnings before interest, tax, depreciation and amortisation (ebitda) for the platinum group metals sector was only 11%, from 8%-9% in the previous few years, Rossouw said. Ebitda should be closer to 30% to make the industry sustainable.

Cadiz Corporate Solutions director of mining Peter Major said despite SA now being far more politically attractive than 50 years ago, its annual growth had slowed to about 1% from 5% then. Only the right policies could revive SA’s mining sector.

Henk de Hoop, business development director at Rand Merchant Bank, hosted a table discussion which agreed that poor implementation of legislation and infrastructural bottlenecks were limiting SA’s ability to take advantage of rising commodities prices and record low levels of corporate debt.

Although a few large projects were under way, the future of SA’s mining industry lay in smaller projects, he said. But even a large number of smaller projects would not arrest the industry’s long-term decline.