0,4% is No Choke…Well Actually it is!

Unlocking the potential of the junior mining sector in South Africa

At the latest budget speech, the growth of the mining and energy sector in South Africa was measured at 0,4%. While growth in general is to be applauded in the current economic circumstances, this growth could increase exponentially if the potential of the junior mining sector is unlocked and fully developed.

Investors are less enthusiastic about junior mining in South Africa due to small and junior companies having less experience than large scale miners, legislative and permitting challenges, the geopolitical climate of South Africa, as well as the lack of adequate infrastructure.

Mining and Environmental law consists of stringent and interwoven permitting procedures and approximately 28 Acts which may possibly apply to them, making it exceptionally difficult for junior miners to conduct exploration activities, legally. Continuous reporting in terms of legislative requirements are also administrative burdens for junior miners who are just starting out.

Permitting and appeals can be very time-consuming, and it may take years for a license to be granted or for an appeal decision to be made, thus delaying the commencement of operations. Typically, junior miners would need to wait for authorisation to be granted before funding can be secured.

Is the 0.4% growth enough?

When considering South Africa’s rich mineral landscape and extensive skill set in the sector, as well as the potential it holds for the mining sector, 0.4% growth appears to be minimal.

According to the Minerals Council of South Africa’s stats, in 2018, junior mining contributed R54 billion to the mining sector, which increased by 63% to R88 billion in 2022. This demonstrates the immense potential that junior mining has and the valuable contribution it makes to the country’s overall growth and creation of a more robust mining sector in South Africa.

Junior mining also employs about 10% of the South African mining industry’s workforce, contributing heavily to employment in our country. The junior mining sector has grown considerably over time and has the potential to develop even further, should the barriers to the sector be relaxed.

The latest growth statistics pave the way for junior mining to take centre stage in contributing to the overall growth and development of the mining sector. The junior mining sector should be promoted, not only to investors, but also to other prominent players within the mining sector to enable equal access to opportunities in line with the objectives of the Mineral and Petroleum Resources Development Act[1].

What can be done to relax the chokehold?

Shine a little light

The importance of junior miners in the mining industry should be emphasised. Clearly the longevity of mining is critical to the country’s economy and the continued growth of the mining sector. In this manner, investment in the sector is required in order for it to survive.

Apply successful models that work elsewhere

Certain tax incentives could be offered following the Canadian model where incentives for investment through a flow-through share system is offered, something South Africa is attempting to introduce in order to attract investment for junior miners. We are of the view that this would create a knock-on effect which would ultimately encourage funding and investments through incentives, which we can see our Government is amenable to as it has already started efforts in facilitating junior miners’ access to such financial resources through setting up a fund to aid junior miners and enable exploration. The JSE has also developed a fund-raising product appropriate for junior miners.

Work with regulators to relax…legislation

Greater support for junior miners in the form of the Junior Mining Council is a definite step in the right direction. However, legislative reform catered to junior miners and their exploration operations is much needed, in particular through the proposal of fewer regulatory hurdles or the greater relaxation of such requirements, as well as the legislated commitment to a reduction in time periods for junior miners to obtain licences (assuming all boxes have been ticked, of course). NSDV has considered the various amendments which could be made to the existing legislation in order to assist the junior mining sector and we have pro-actively marked-up these amendments in our current Acts. You’ll find dime-a-dozen experts who lambast the government but don’t build relationships that facilitate the changes we need based on operational experience with junior mining clients. We would be more than willing to discuss these with the Junior Mining Council and the regulator if it would be helpful to moving such proposed amendments along. A starting point would be amending the Regulations promulgated in terms of the MPRDA to include and recognise junior mining and their specific requirements. Changes like these to the administrative and legal requirements should result in easier access to funding and the ability for juniors to “put a spade in the ground” and start mining.

Map it out

As has been stated ad nauseum, a mineral cadastral system should be implemented as South Africa is the only SADC[2] country without a functioning cadastral system. This will enable junior miners to enter into the sector, aid in clearing the backlog of mineral rights applications, and hopefully clear the appeals.

In addition, and something to be recognised and remembered, is the fact that there are many opportunities for the future of junior mining, such as those created by the energy transition and the need to search for minerals (so called “green minerals”) to facilitate and construct renewable energy mechanisms. A functional and transparent mineral cadastral map and system will assist junior miners in identifying the locations of various minerals and the availability of prospecting rights, mining rights, and mining permits for those minerals to be applied for and easily exploited. Theses few changes could result in endless opportunities for the juniors.

Mining starts with exploration. Junior miners explore potentially mineral-rich areas and develop these on a small scale. This is often overlooked but is a very necessary function and is essential to the overall health of the mining industry. Without a growing and flourishing junior mining sector, the mining industry will flounder. I am of the view that we at NSDV can make a significant impact on the junior’s overall business through our practical approach to the sector, but within the legal realms. We all like to feel needed, and we feel needed by the juniors given our extensive value add to their business.

References:

1. Minerals Council of South Africa, “Junior and Emerging Miners” https://www.mineralscouncil.org.za/work/junior-and-emerging-miners.Accessed on 1 June 2023.

2. Halima Frost “Coal, platinum of most interest in growing junior space” 19 May 2023 in Mining Weeklyhttps://www.miningweekly.com/article/coal-platinum-of-most-interest-in-growing-junior-space-2023-05-19. Accessed on 29 June 2023.

3. Edward West “Junior mining sector needs boost to take advantage of global energy transition” 8 February 2023 in IOLhttps://www.iol.co.za/business-report/economy/junior-mining-sector-needs-boost-to-take-advantage-of-global-energy-transition-45402901-6561-4997-9d68-50cfd62fb781. Accessed on 29 June 2023.

4. Martin Creamer “Fruitful discussion underway on exploration incentivisation – Minerals Council” 1 June 2023 in Mining Weekly https://www.miningweekly.com/article/fruitful-discussion-under-way-on-exploration-incentivisation-minerals-council-2023-06-01.

5. Edward West “Junior mining sector needs boost to take advantage of global energy transition” 8 February 2023 in IOLhttps://www.iol.co.za/business-report/economy/junior-mining-sector-needs-boost-to-take-advantage-of-global-energy-transition-45402901-6561-4997-9d68-50cfd62fb781.

6. Sharyn Macnamara “Junior Mining: what will it take to develop at a faster pace in Africa”3 May 2022 in African Mining https://www.africanmining.co.za/2022/05/03/junior-mining-what-will-it-take-to-develop-at-a-faster-pace-in-africa/.

7. Anna Moross “Juniors’ potential hampered by regulatory hurdles” 21 May 2021 in Mining Weekly https://www.miningweekly.com/article/juniors-potential-hampered-by-regulatory-hurdles-2021-05-21.

8. Martin Creamer “Govt creating junior miners’ fund, boosting geoscience, legitimizing zama-zamas” 5 June 2018 in Engineering News https://www.engineeringnews.co.za/article/govt-creating-junior-miners-fund-boosting-geoscience-permitting-zama-zamas-2018-06-05.

9. Martin Creamer “New fund-raising product appropriate for junior miners, says JSE”23 September 2022 in Mining Weekly https://www.miningweekly.com/article/new-fund-raising-product-appropriate-for-junior-miners-says-jse-2022-09-23.

Edward West “Junior mining sector needs boost to take advantage of global energy transition” 8 February 2023 in IOLhttps://www.iol.co.za/business-report/economy/junior-mining-sector-needs-boost-to-take-advantage-of-global-energy-transition-45402901-6561-4997-9d68-50cfd62fb781

[1] See Section 2 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (“the MPDRA”). [2] Southern African Community Development.