Mining in focus
and only gets 74% of the reward, no company in its right mind
would explore. With the new Charter, where prospecting rights are
exempt from these onerous ownership requirements, it puts South
Africa back on the map, and we can compete with our African
counterparts on a level playing field.
In fact, Smart says that South Africa now becomes extremely
attractive, ironically because of the lack of exploration in the last
10 years. Operating mines in the country have been expanding
their current reserves instead of investing in new exploration to
replace those reserves. “South Africa’s geology is superb, it has
great technical skills and has the ability to very quickly turn on
great discoveries,” says Smart.
No incentives
Mantashe’s reconciliatory stance is slowly paying dividends. There
are several listed companies that have made good discoveries, and
the investment is trickling in. But as far as we could establish, there
are still only 13 new exploration companies active in South Africa.
One of these is a private investor who has put his faith in the
gold fields of the Witwatersrand Basin. Furthermore, a number of
historical sites are being revitalised, such as mines in Pilgrim’s Rest,
Barberton and on the old working on the Wits Basin.
In comparison to countries like Australia and Canada, South
Africa, and in fact Africa, lacks a culture of nurturing its own
exploration companies. South Africa has been a producer for so
long, that it seems the country has lost the urge to explore for
new deposits, which is critical for the growth and sustainability
of the mining industry. The main reason for this is that there are
absolutely no government incentives or concessions to encourage
exploration activities.
The governments of Australia and Canada offer tax incentives
for junior exploration companies based on the flow through share
model, no matter where in the world they decide to venture. It is
also much easier to list on the ASX, TSX or AIM than on the JSE,
and in fact, the few junior South African companies that do exist
have opted to rather raise money on foreign stock exchanges. But,
contrary to general perceptions, Smart says there is an appetite in
South Africa to invest in higher risk projects. “Orion recently listed
on the JSE and a large number of South Africans already own
shares in the company.
Listing stock
It is telling to look at a few stock exchanges and compare the
junior mining companies listed on their boards. There are 1 200
junior mining companies listed on the TSX in Canada, 700 on
the ASX in Australia and 70 on the SSE in Chile. There are only
10 junior mining companies in South Africa, and of the 10 only
one can be regarded as purely an exploration company. In contrast,
most of those junior mining companies in Australia and Canada,
do nothing else but explore. The big difference is that in South
Africa a company is regarded as a junior mining company when
it is already digging dirt; in the rest of the world about 75% of
juniors are explorers that don’t have any revenue stream, and are
100% reliant on equity investment from risk investors. Their only
success will come once they’ve made a discovery, proved it and
then either raise the capital to build the mine or sell it to a bigger
mining company.
Besides ownership, the time it takes to be awarded an exploration
licence has hamstrung exploration companies. In some known
cases, it took up to three years. Most countries in the world make
use of an online cadastre system. In Australia it takes a few minutes
to look at the map, identify the area where you want to explore,
and determine if that site has been allocated. The ease of getting
licensed in a country like Botswana, for example, has directly
resulted in the country becoming one of the favourite destinations
for exploration companies in Africa.
According to Charles Siwawa, CEO of the Botswana Chamber
of Mines, more than 1 000 prospecting licences have so far been
issued to entrepreneurs. “Of these 1 000 companies, the majority
are junior exploration companies,” Siwawa said at the Junior
Mining Indaba.
www.miningmirror.co.za
AUGUST 2019 MINING MIRROR [27]
AUGUST 2019 MINING MIRROR [27]