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MPRDA needs to make room for juniors, says law firm

10th July 2015

By: David Oliveira

Creamer Media Staff Writer

  

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The Mineral and Petroleum Resources Development Act (MPRDA) needed to differentiate between mining majors and emerging juniors in recognition of junior miners’ inability to meet certain MPRDA requirements, said South African law firm ENSafrica director Otsile Matlou while addressing delegates at the Junior Mining Indaba, which took place in Johannesburg last month.

He pointed out that all mining companies, including major and junior miners, had to comply with an average of 203 statutes when applying for an exploration right. This was particularly problematic for junior miners that, more often than not, had enough employees to conduct exploration work, but not enough to ensure compliance, Matlou added.
Major miners, meanwhile, can employ significantly more people to ensure that some employees are tasked with ensuring that an operation meets all the compliance statutes.

Matlou further noted that Zambia’s Mines and Minerals Development Act, which was signed into law in 2008, provided legal distinctions concerning the requirements of different-sized mining operations and specific rules relevant to particular stages of a mining operation.

He suggested that South Africa’s mining industry could benefit from distinguishing between emerging and mature companies, as this would enable emerging mining companies to enter the market at a level that enabled them to meet the regulatory requirements of the MPRDA in terms of their resources and capacity.

In terms of the current state of the global mining industry, Matlou noted that, during 2014, only about 70 mining initial public offerings (IPOs) were listed on stock exchanges worldwide, which was significantly lower than the number of IPOs listed during the industry highs of 2006 and 2007.

This indicated the dearth of global exploration projects under way, which, Matlou said, affected junior mining and exploration companies the most, as investments were moved from high-risk juniors to well-established majors, particularly those listed in North America.

He added that exploration was a key driver for the development of any country’s mining industry and that South Africa needed to explore more to secure an ever-shrinking portion of the investment pie, especially since the country’s mature mines were getting deeper, making mineral extraction significantly more costly.

Matlou further pointed out that South Africa was competing with a host of other resource investment destinations, many of which were more attractive to potential investors in terms of geology.

Nevertheless, he suggested that Africa would probably be the next major mining investment destination, which could provide South Africa with investment opportunities, given the country’s “relatively stable geopolitical environment”, compared with other mining destinations on the continent.

However, regulatory uncertainty remained a major hurdle for investment and Matlou called for policymakers to take a “development perspective” to provide a regulatory framework that would meet the requirements of mines that were going to be developed 20 years from now, which Matlou referred to as “mines of the future”.

He urged investment in South Africa’s underfunded Council for Geoscience, which, despite its wealth of knowledge and experience, needed to modernise and update its ageing geological database to provide potential investors with accurate and detailed information online.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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