MINING IN FOCUS
Resources. “Minister Mantashe has brought in ethical leadership. Suddenly
DMR provincial offices have become service providers and not police
departments and they are actually assisting junior mining companies and
giving them valuable advice. To be able to flourish and grow as a junior
mining sector we need government to function properly and we have to
overcome the trust deficit between government and the private sector and
investors,” says Smart.
Bristow is optimistic about the future and says that there are a number of
positive developments that bodes well for the future of alluvial diamond
miners in South Africa. “For one the diggers now have a much bigger,
common voice, and there has been more engagement and interest from the
DMR and from Minister Mantashe. There is also better interaction between
organisations and associations and the DMR to identify the key challenges
and set up working groups to see if we can find ways of addressing the
major challenges,” says Bristow.
Financing remains a constraint
The big constraint for all emerging and junior miners, however, remains
the financing of projects, especially is they are still in early exploration
or development stages, and despite numerous commitments made by
government and government institutions to assist, the promises are yet
to come to full fruition. Banks are reluctant to pour money into any junior
mining undertaking and would not even consider funding a greenfields
exploration project.
Mitchell says that the Minerals Council has had meetings with the Industrial
Development Corporation (IDC) and Public Investment Corporation (PIC)
about setting up a fund specifically for junior exploration companies,
but that there has, until now, not been any action. The R200-million a
year promised by government has yet to see the light and will not even
be enough to fund one company’s exploration programme to develop
a feasibility study. Junior exploration companies are critical to the South
African mining industry. What the country lacks at the moment, are new
discoveries that will elevate the state of mining in a country where it has not
been necessary for geologists to venture into unchartered waters for many
years. More than 90% of new discoveries in the world are made by juniors.
Large multinational mining companies don’t actually discover minerals but
brings it into account after buying it from juniors. What we need in South
Africa, says Smart, is a culture of exploration, and an acknowledgement and
understanding by government that they play a big part as well.
“The technology of exploration has advanced tremendously over the past 30
years and South Africa has missed the boom because nobody has actually
utilised that new technology. When we (Orion) used modern technology
in the Northern Cape, we made great discoveries,” says Smart. Orion is
advancing the Prieska zinc-copper project in the Northern Cape.
New emphasis on exploration
With a new emphasis on exploration, it is a step forward that exploration
companies are now exempt from the 26% BEE requirements, as proclaimed
in the original Mining Charter III. This paves the way for hundreds of owners
of prospecting rights to actively start doing exploration work. As far as
African Mining could establish, there are only 12 listed companies doing
exploration work in the country, which is an indication of the constrained
conditions junior miners had to operate in over the past ten years or so.
But, Mitchell, points out that the Junior and Emerging Mining Desk is getting
more and more enquiries from early stage exploration companies. “There
is an increasing interest as a result of an improved political and regulatory
environment. The interest in the past was not from exploration companies.
When we referred to juniors before, we talked about smaller producers,
like those in the coal industry. But now, for the first time, we are seeing this
interest in exploration,” says Mitchell.
Although South Africa offers immense opportunities for junior mining
companies, entrepreneurs should not enter the industry blind-folded, but
without explorers and junior miners who understand the importance of risk
and reward, and drive the discovery and development of new resources
to replace depleted reserves, South Africa’s remaining minerals treasure
trove will never be unlocked to create new wealth and meaningful black
ownership. It is a tough school and a long-term game, and not a quick fix
or an easy way to earn millions. “There is no easy solution. The successful
juniors bear the scars of their failures, learn from their failures and get up
and go again. It’s a tough game but it can be extremely rewarding. My advice
to any aspiring junior miner? Be technically astute and get it right. But learn
lessons and learn about economics,” says Smart.
Mitchell urges new miners to be realistic. “I don’t want to be negative, but
mining is tough. You have to be an entrepreneur, and entrepreneurs are a
special breed. Most people perceive mining to be a get-rich-quick game,
and that all mines are successful and hiding profits. Well, 70% of mining
companies are making losses. People shouldn’t have big expectations. Yes,
there are the one in 100 that are exceptionally profitable, and people do
make money, but then, on the other hand, more than half fail.
Khumalo says one has to be prepared for ups and downs. “There are no
shortcuts. It requires long hours and arduous work. External factors like
policy and changing economic conditions can mean the difference between
success and failure. That’s why the Minerals Council is important to lobby for
a reasonable policy and stability,” says Khumalo.
There are fantastic opportunities in South Africa for junior mining
companies. Base metals are a screaming opportunity; the country hosts
large deposits of coal, chrome, platinum and manganese, and it still has the
largest gold reserves in the world. “With a little work, more discoveries will
be made, and it will be juniors making those discoveries,” Smart concludes.
“Minister Mantashe has been vocal about junior mining and exploration and
there is definitely an understanding following some robust engagement
between the Minerals Council, the mining industry and the DMR, and there
is an understanding that junior mining is the future of mining in the country.
There has been that admission by the DMR and that is important,” says Smart.
A junior mining company re-mining old dumps in Johannesburg.
www. africanmining.co.za
African Mining Publication
African Mining
African Mining September 2019
35