While junior and emerging miners are experiencing tough times, owing to the Covid-19 pandemic and consequent national lockdown, Minerals Council South Africa junior and emerging miners forum chairperson and board representative Errol Smart says juniors and emerging miners should stop “licking their wounds” and look for the opportunities that arise from this unprecedented set of circumstances.

“I’ve been encouraging juniors to look for the opportunities that are emerging out of the Covid-19 situation. It’s time to get back to work and seek out the positives that can be leveraged for survival,” he tells Mining Weekly.

Smart, who is also Orion Minerals CEO, says juniors should expect the virus to continue affecting lives and the economy for at least the next two years.

“We believe that this lockdown is going to continue for some time still, albeit in different phases. There will be reinfections and flare-ups, and we need to be prepared for it as an industry.”

Meanwhile, the Minerals Council has been active in helping to define healthy standard operating procedures during this time. Smart says the mining industry is fortunate in that many stringent health and safety protocols have been in place for years, leaving it well-prepared to mitigate the impact of Covid-19.

“This is one of the reasons, I believe, that the mining industry was allowed to ramp up production to 50% before most other industries,” he notes.

Exploration

One of the key opportunities emerging from the crisis, in Smart’s view, is exploration.

Although exploration has almost come to a complete halt during the lockdown, it holds immense opportunity for attracting investment into the sector and the country – investment which is needed now more than ever.

“Since exploration and feasibility study work is not as labour intensive as mining and is largely supported by work done remotely, it’s one of the sectors of the economy that could, and should, come back on stream quicker than anything else, and create many employment opportunities” he says.

Exploration depends mostly on medium- to long-term investments, unlike actively producing mines in the junior sector, which are highly dependent on constant short-term cash flow from the production and sale of minerals.

Moreover, exploration is not as reliant on steady and predictable production rates and volatile mineral price fluctuations, although it often suffers as an early cost cutting victim for mining companies in periods of market downturn.

However, even before the lockdown, severe bottlenecks and an overabundance of red tape in South Africa’s exploration permitting and licensing processes had prevented exploration activity in the country from reaching its true potential.

“If we can get the permitting and licensing smoothed out, then the sector can quickly source international financing to continue exploration. This would translate into immediate job creation,” Smart notes.

He adds that an extensive backlog of exploration licences that still need to be granted, along with a backlog of water-use licences that are even further behind than the prospecting rights, needs to be urgently addressed and cleared.

Smart says that the Minerals Council is working with government and other social partners to resolve these issues.

Construction

Another significant opportunity for the junior mining sector to exploit during the current crisis is mine construction.

Smart notes that several juniors in the country are investing large sums of capital in mine development, including the sinking of shafts, the building of plants and, generally, gearing up for production.

However, he explains that many of these remain between one and three years away from commercial production, which means that they are not reliant on cash flow or mineral sales at this stage and are, therefore, relatively unaffected by the temporarily frozen economy.

“There’s a fantastic opportunity among this group currently because construction costs are about as low as they’ve ever been. Construction steel is very cheap at the moment, while diesel is also at an historic low,” Smart enthuses, noting that all the logistics involved in mine construction is more cost effective now than it has been for many years.

“It’s the cheapest time ever to build a mine.”

The key, he says, is to be ready to yield the asset once the markets return after the pandemic has passed and the lockdowns are lifted.

He assures that the Minerals Council is actively engaging with the Department of Mineral Resources and Energy, as well as other government officials, to ensure that the bottlenecks preventing the swift approval of mine construction are removed.

“If we can get impediments and regulatory hurdles out of the way, we can source financing a lot quicker. There is no better opportunity than these kinds of mine construction projects.”

Smart adds that if the Industrial Development Corporation, for example, were to release funds for investment in mine construction projects to get them off the ground quickly, then construction could start immediately.

“This would instantly create hundreds, if not thousands, of jobs per project for the next two to three years before those mines go into active production and become reliant on selling product to sustain themselves – by which point the Covid-19 crisis should hopefully have passed.”

Moreover, money invested in such projects would directly feed the economy, as a large portion would go towards paying salaries and small-scale suppliers.

“There are many silver linings to look out for, and we encourage the junior and emerging mining sector to see the opportunities that have arisen, rather than focusing on the negatives,” Smart concludes.