Although global exploration spend in mining is increasing, South Africa, despite boasting a plethora of mineral resources, is not capitalising on this, especially compared with similarly mineral-rich African countries.
However, if constraints are addressed and certain avenues explored, the country will not lose out on this opportunity.
This was indicated by speakers during a webinar themed ‘South Africa’s Mining Outlook for 2023’ that was hosted by Engineering News & Mining Weekly earlier this month.
South Africa’s waning ability to garner global exploration spend can be attributed to several factors.
Botswana Diamonds MD James Campbell indicated that, if there was to be a vibrant exploration drive in any country, this would first and foremost be predicated on prospectivity, that is, the geology.
South Africa does boast this, and, amid new technology and new thinking, there is definitely scope for more mines to be established in the county.
However, allied to prospectivity is the need for consistency, simplicity and efficiency in terms of application of the rule of law, and “from an exploration perspective you need security of tenure”, he added.
These were major facets that speakers averred were lacking in the country.
Reiterating this point was Minerals Council South Africa board member and Orion Minerals CEO and MD Errol Smart, who pointed out that exploration “was not booming in the country”, and had actually declined, which was a reflection of the operating environment.
He also emphasised the need for a stable, predictable, user-friendly and functional regulatory regime.
The biggest shortcoming for the country, compared with other global mining jurisdictions, is a lack of a proper management system from government – a mining cadastre.
“This is nothing other than a visual spatial management system. We don’t have this in South Africa, while our neighbours have all adopted it very successfully, which has led to a lot of growth,” he added.
Smart argued that a mining cadastre would remove some of the uncertainty and ambiguity in administration and mineral rights laws, which, in turn, would eliminate situations whereby multiple parties make claims to the same mineral rights or the same area, thereby reducing conflicts, and streamline elements such as ancillary labour regulations, water and land rights.
This would also ensure transparency – a necessary element to entice exploration spend, he said.
While there is policy talk on improving the operating environment, Smart emphasised that this would be fruitful only when these improvements, and the mining cadastre, were implemented.
Campbell said exploration funds were raised mainly on the Canadian, British and Australian capital markets, on a cyclical basis. Money could also be raised in other markets, but not on the same level.
Investors from these markets consider elements such as the commodities a country hosts and the country’s risk profile, with South Africa at a competitive disadvantage in this regard.
Campbell added that, in the Fraser Institute’s 2021 yearly study of mining companies, when considering policy and mineral potential in the Investment Attractiveness Index, South Africa was in the bottom ten.
This is in contrast to some of its continental counterparts, which boast a more positive outlook.
“Essentially, we have . . . to improve our ranking on the Fraser Institute study, because this is where investors look . . . We also need to have visibility in the three main markets. Importantly too, one has to take a long-term look at which commodities they are in, because they are cyclical,” Campbell said.
South Africa must acknowledge that it did not have an appropriate operating environment that was conducive to attracting funding, and although it should garner considerable funds from international sources with its suite of minerals, it did not, Smart said.
He elaborated that there was considerable opportunity for the country to use its minerals to secure foreign direct investment and immediately fund work and create employment even before resource extraction.
“There’s a benefit to all of our stakeholders available in South Africa, if we just get this ball rolling,” he averred.
Smart said South Africa was especially lagging in greenfield exploration, as this required security of tenure, owing to the considerable capital and long-lead times characteristic of this type of exploration.
Efforts by Minerals Council South Africa to mitigate this include helping junior miners secure funding.
The council also hosts many webinars and training programmes, during which fund managers and financiers address the junior miners.
The Mandala Mining Precinct is also considering technology to assist juniors’ mining and exploration site activities.
Smart said some of the major mining companies were starting to collaborate to implement mentorship programmes and invest in junior miners – an initiative that should be bolstered.
Campbell noted that waning greenfield exploration was a global issue, owing to current risk appetite, but called for four goals to be pursued.
Firstly, legislation should be simplified.
Secondly, a comprehensive, cohesive mining school in the country would be useful to ensure that graduates have a range of expertise and can relate to other disciplines.
Thirdly, there should be a meaningful way of incentivising exploration expenditure in South Africa, where there are many high- net-worth individuals in the country who could invest in potentially high-risk and high-return assets.
In proposing the fourth goal, Campbell stressed that access to information was “absolutely key”.
Map to Success
South Africa has a very predictable and user-friendly mineral royalty and tax system, which has been stable.
However, to build on this, the next important step would be to make geoscientific data and historical data available, Smart said.
In this regard, Council for Geoscience (CGS) CEO Mosa Mabuza said “it all starts with geology”, with the council being responsible for mapping at a scale and pace relevant to current requirements, which include “[getting] the investment community excited about the country’s resources”.
Campbell also mentioned that exploration was risky, with explorers often investing their own capital in projects.
Mabuza, in turn, said that only geological data could considerably derisk prospects.
The council launched an online data portal last year, and Mabuza is encouraged that it has exceeded 40 000 hits in the past few months. Since its launch, feedback has been positive about the quality and quantity of the data, and there have been high traffic volumes to the site.
Mabuza emphasised the need for the CGS to collect the country’s geological data and serve as the custodian thereof.
Geology was neglected “for the longest time” in South Africa, with the country not investing sufficiently in geological mapping, resulting in the loss of expert geologists – to the benefit of other countries and to South Africa’s detriment.
However, Mabuza added that government was responsive to the council’s having outlined the existential threat posed by not deliberately investing in geosciences.
Consequently, considerable financial resources were being allocated to geoscience for mapping, with the council now mapping at a scale of 1:50 000 and targeting areas it believes will highlight the country’s exploration potential.
Mabuza said research investment started about five years ago as a nationwide programme, with the council ramping this up yearly, with positive results to date.
“For example, there was [much] interest around pegmatite rock that we have always known about in the Northern Cape. With the council’s mapping at this scale, we confirmed that it is much larger than we thought. This is now redirecting exploration activities, and we’re seeing quite an uptake in exploration and prospecting rights in the area.”
Mabuza hopes there will be a substantive geoscience programme in the next couple of years to help retain the country’s geologists and accommodate new graduates.
The just energy transition also presented an opportunity for South Africa, with Smart saying that most analysts indicated that there was a longer-term shortfall coming, globally, in the commodities needed for this.
With South Africa hosting many of these required commodities, it can capitalise on the shortfall by attracting new exploration investment to find new mines – should it become a more user-friendly environment.
“Clean up the corruption and the uncertainty, give people confidence in the mineral tenure and exploration money will flow in,” Smart said.
Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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