Potential hampered by regulatory hurdles

South Africa’s junior mining sector is growing, and can contribute even more to the country’s growth, development and transformation, with appropriate support

WARREN BEECH South Africa’s junior mining sector is growing, and can contribute even more to the country’s growth, development and transformation, with appropriate support

21st May 2021

By: Anna Moross



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The junior mining sector’s potential growth and development is being hampered by the onerous requirements of South Africa’s mining and mineral laws that make it difficult for juniors to apply for prospecting and mining rights, and secure funding to develop and operate mines, says Beech Veltman CEO Warren Beech.

“South Africa’s junior mining sector is growing, and it can contribute even more to the country’s growth, development and transformation, with appropriate support from government, the larger mining companies, and industry bodies such as Minerals Council South Africa.”

To ensure the development of this sector, the starting point is to focus on Clause 3 of the Mining Charter, adds Beech.

According to the 2018 Mining Charter, a junior miner is any mining right holder with single or multiple mining rights that has a combined yearly turnover of less than R150-million.

“Applying the criteria lumps together a vast number of stakeholders, many of whom should not be classified as junior miners and, as a result, should not be treated the same from a regulatory and compliance perspective.”

By applying the criteria, artisanal and small-scale miners (ASMs) that mine lawfully, as holders of mining rights, are also classified as junior miners, and would therefore be required to comply fully with the requirements of the mining and mineral laws, most notably the Mineral and Petroleum Resources Development Act (MPRDA) in the same way, and to the same extent as the larger mining companies.

However, this does not take into account the often unique circumstances of the smaller junior miners, including the challenges surrounding access to funding and specialist service providers, the typically smaller size of the mine, and the shorter duration of the mining operations.

Further, many ASMsdo not apply for mining rights and simply carry out the mining, illegally, because it is too costly to apply for the right to mine and comply with the mining laws once the right has been granted.

As these miners fall outside the regulatory framework, they neither benefit from the various initiatives that have been implemented to support junior mining by the Junior and Emerging Miner’s Desk, established by the Minerals Council, nor can they access funding from traditional lenders.

Beech points out extensive adverse consequences of illegal mining, including potential environmental impacts, criminal activity associated with the sale of the illegally extracted minerals, a loss of taxes and royalties, as well as health and safety risks.

While Clause 3 restricts its applicability to turnover of less than R150-million for junior mining companies, it also distinguishes between junior miners with a yearly turnover of less than R10-million and those that have a yearly turnover of between R10-million to R150-million, and establishes compliance requirements which depend on the annual turnover.

“The concessions in Clause 3 have gone a long way towards supporting the junior mining sector by exempting the qualifying junior miners from compliance with various requirements in the Mining Charter, or relaxing the compliance requirements, but until there is regulatory change, which will make it easier for junior miners to apply for and be granted prospecting or mining rights, barriers to entry will persist.”

New Criteria for Licesning

Beech maintains that, to support the growth and development of junior mining, the MPRDA needs to be amended to provide for a licensing regime that acknowledges that the same application criteria cannot apply to all miners.

Lengthy timelines for the processing of applications impact heavily on the junior sector because the junior miner can typically not access funding at the required levels until the mining right has been granted, and a streamlined application process for the junior miners would assist in overcoming this challenge.

While one of the priorities in President Cyril Ramaphosa’s Economic Reconstruction and Recovery Plan, introduced in October 2020, was “halving” turnaround times for mining and prospecting licences, Beech says these timelines are not being adhered to.

He attributes this to capacity constraints and lack of resources at government offices, including those of the Department of Mineral Resources and Energy (DMRE).

This has been exacerbated by the Covid-19 pandemic and the measures that have consequently been implemented, impacting on the timelines for the processing of applications and resulting in general caution by investors who have focused on “safe haven” minerals, such as gold and platinum-group metals, as well as copper, which are typically mined on larger scales.

“The reasons for the extended timelines are, however, not solely constraints at the DMRE – the current South African Mineral Resources Administration System is notoriously inefficient,” highlights Beech.

The system’s inadequacy often leads to disputes because rights that have been granted overlap and contain inaccuracies; there is also a general lack of access to accurate information regarding mineral rights, reserves and the status of applications, he explains.

Disputes regarding overlapping rights often take three to five years to resolve, which essentially sterilises the reserve and impacts heavily on the sector, as junior miners often do not have the resources available to take the matter to court.

The MPRDA should also be amended to provide for appropriate compliance requirements which apply to junior miners, once the mining right has been granted, taking into account factors such as the type of mineral to be mined, the duration of the mining operations, and the size of the mining operation.

Beech emphasises that “until a holistic approach is adopted, which addresses all these aspects, entrepreneurial miners will continue to face challenges and they will not be able to play the important role that they can in growth, development and transformation”.

Edited by Nadine James
Features Deputy Editor



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