There has been a significant downturn in exploration activity in the last few years, which has had a significant impact on the analytical services sector, says State-owned minerals research organisation Mintek.

“The funding available for exploration in the past year has decreased dramatically, which has resulted in decreased demand for analytical services,” says Mintek tech- nology GM Alan McKenzie.

He says exploration is an important demand driver for analytical services, adding that the situation worsened after the recent financial recession, particularly in the last 18 months.

Recession After Effects

In a report on the general state of the mining industry worldwide, but focusing on South Africa, professional services firm Deloitte says mining companies cur- rently operating in South Africa have to make tough decisions as the world economy recovers.

The report, titled ‘Tough choices facing the South African mining industry’, states that this is mostly owing to four over- arching reasons – a lack of trust and mutual understanding between mining compa- nies and labour; government’s failure to provide basic services to communities and, subsequently, an attempt to pass this responsibility on to mining companies; irreconcilable demands by government, labour and unions; and the perceived inability of unions to improve the quality of life and working conditions of their members. Deloitte’s report states that these factors lead to wildcat strikes, which further burden the country’s recovering economy.

Dwindling Exploration Budgets

In a study that outlines trends in the mining and metals industry, in 2012, the International Council on Mining and Metals (ICMM) reports that “the current unstable eco- nomic climate globally may well lead to reduced exploration budgets”.

A section of the ICMM report, titled ‘How exploration holds the key’, states that, during the global financial crisis in 2008/9, exploration companies’ main source of funding – the stock market – could not provide the necessary funds and, as a result, their activities dwindled.

The report states that the decline in funding resulted in “fewer new deposits being found”, which, in turn, resulted in a dwindling flow of future projects. The ICMM says that, with this instability, “it will likely become increasingly difficult to maintain a steady flow of new deposits to meet the growing metals demand of the future”.

McKenzie says that the global eco- nomic downturn is continuing and this has led to projects recruiting fewer young people and job losses at many privately owned exploration labs.

“Globally, many private analytical laboratories have had to cut capacity, as there have been retrenchments in Australia, for example,” he adds.

Hopeful about the Future

McKenzie says that, for Mintek, retrenchments are not on the cards. “This is where our strength as a government entity comes in. We have to take a long-term view and continue with the development, maintenance and improvement of our facilities.”

With about 50% of its yearly budget of R450-million being supplied by government, Mintek is using this period of economic downturn to focus more on the metallurgical aspect of the analytical services division.

Business development GM Peter Craven says that Mintek has also been using this period to invest in the business develop- ment of its analytical services laboratory in the expectation of the economic climate improving.

“Not only are we not cutting back but we are also spending a lot of capital on improving our facilities. As we’ve taken a long-term view, we’re re-engineering our analytical facility so that, when the economy improves, we have new, refurbished facilities and retrained staff, which we can take advantage of,” he says.

McKenzie adds that Mintek expects demand for analytical services to increase strongly in two to three years’ time.

“This is just a cycle like many others in the industry and it will turn around in a few years,” he concludes.