Junior mining in South Africa will finally see a new level of growth as a result of South Africa’s newly gazetted Mining Charter 3, base metals miner Orion Minerals CEO Errol Smart told Mining Weekly Online on Friday.
Junior mining, which he says has been the “bottom-feeding sector” in the mining industry, will now be able to compete on level terms with the rest of the industry, owing to an entirely different set of compliance requirements in prospecting rights.
“I believe there’s going to be new growth [in] junior mining and exploration in South Africa, particularly exploration, because now any investor can come in and spend their money, [without having to immediately worry] about involving a black economic empowerment (BEE) partner,” he elaborated.
Instead, junior miners can now focus on determining the value of a project before bringing in BEE partners.
The key to success in the sector, Smart adds, is unlocking the trust relationship in order for mining to start flourishing. “… all of a sudden you’ve got the ability to discover something and prove its value before needing to bring in a BEE partner.”
Dubbing it a “very empowering situation”, Smart believes junior mining and exploration will increase as a result.
Despite the junior mining industry being somewhat challenging, Orion Minerals has continued to explore and develop its flagship Prieska zinc/copper mine, in the Northern Cape, which is expected to start production by 2021.
Smart is hopeful that the Northern Cape project can be an example that operating in this environment “is possible”.
The project has a maiden Joint Ore Reserves Committee- (Jorc-) compliant mineral resource of about 29.4-million tonnes, including 1.1-million tonnes of contained zinc grading 3.8% and 365 000 t of contained copper grading 1.2%.
With the mining right application approval expected towards the middle of 2019, Smart told Mining Weekly Online that funding, which would be the next step, would be a combination of debt and equity, and that a number of innovative funding mechanisms were being considered.
In this regard, he explained the company’s objective was to minimise dilution as much as possible.
In turn, this provides another opportunity for South Africa, who Smart said has “got an extremely well-developed financial market”.
As an example, he notes that South Africa’s top four banks brokered commercial loans amounting to R180-billion in 2017.
“There’s a deep source of debt available, and projects like ours, which are financially very attractive, attract a large proportion of debt in South African rands, which is very important.”
Additionally, Smart noted that Orion was in the process of discussing potential early financing solutions, which would reduce the need for equity finance.
He would not be drawn on how much the company might want to raise in a capital raising, stating that this would be confirmed once the Jorc-compliant update has been completed later this month.
Further, Orion Minerals also has the Australian Export Finance Group as a potential source of finance.