“Iron-ore and platinum are very quiet,” according to Witley, who notes that this is likely, owing to the iron-ore supply glut (due to massive expansion a few years ago) and low demand for platinum, exacerbated by increased recycling resulting in dismal prices. “Platinum prices are so low that many platinum mines are running at a loss and are struggling to raise capital.”

He advises that one of the main problems with the platinum price is that it requires a flourishing European economy. “Platinum is widely used in catalytic converters in diesel vehicle exhaust systems, which are popular in Europe; therefore, if the European automotive sector is depressed, as a result of economic constraints, the platinum market is depressed.”

MSA does not lend much credence to the advent of platinum use in fuel cells in the near future. Witley comments that fuel cells have been bandied about for the past 20 years, becoming something of a “holy grail”. Cronwright points out that lithium technology has all but outstripped fuel cells in terms of capability and, more importantly, viability.

He further comments that there has been a slowdown in MSA’s exploration services, as very little exploration is taking place. He notes that investors are more interested in high-grade, low-cost, brownfield projects, with “companies and investors . . . looking for projects that are robust enough to be viable even in this commodities downturn”.

Cronwright adds that this mindset has the unintentional benefit of creating a bull market, or upswing. Prioritising late-stage exploration projects and/or cutting back on exploration to conserve costs eventually impacts on the supply pipeline, which will elevate commodities prices.

Funding and Investment
Van der Merwe comments that exploration activity can be tracked on a ten-year cycle, concurrently with the mining industry’s upswing. Thus, once the market is in a slump, exploration activity diminishes.

Witley notes that it makes sense to increase exploration during the downturn to capitalise once the market improves. However, exploration funding requires investment and, as Van der Merwe points out, “many investors don’t think more than a quarter of a year in advance and have little appetite for risk”.

Therefore, investors tend to invest towards the middle or end of a cycle and, as a result, the potential gains of an upswing are never fully realised.

Witley says private-equity investors seem to understand the longer-term opportunities better and are investing in mining projects at reduced prices. They are also spreading their capital across smaller projects with shallow high-grade deposits and quick turnaround times for a faster return on investment.

Another unexpected benefit of the depressed commodities market and lack of exploration is the introduction of new types of investors. Van der Merwe comments that a metal trader might invest in a project to ensure that it secures future stock. He adds that vendors have sometimes offered to fund their portion of work, such as the construction of a processing plant, if this will result in their benefiting from the mines’ operational costs, such as those pertaining to maintenance and repair work.

A potential game changer for the African mining industry is the introduction of crowd funding, specifically because of the limited availability of capital on the continent for potentially risky projects, highlights Van der Merwe.

Projects in Africa tend to be more capital-intensive than those in developed mining jurisdictions, such as Australia and Canada, he points out. This is mostly owing to political volatility, as well as a lack of infrastructure and the proliferation of community-based objectives such as building schools or employing locals. Subsequently, a project in Africa will always be a riskier undertaking, he states.

“Crowd funding will enable African projects to accept funding from all over the world, without the constraining regulations or cost of listing on a conventional stock exchange,” Van der Merwe explains, noting that this would be hugely beneficial to junior miners and African mining hopefuls.