Every Friday, SAfm’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News & Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: A junior miner has adopted a new financing model to produce valuable base metals in the Northern Cape.
Creamer: Orion Minerals is an aspirant mining company that is listed in Sydney and listed in Johannesburg, but, believe it or not, it can't raise capital from the banks to mine sought after copper and zinc in the Northern Cape. The banks are just risk averse. Now, what Orion’s Errol Smart has done is to raise equity capital privately. Foreigners haven't come through on this occasion, but a local company called Clover Alloys has.
As a result, Orion is going to do this project in smaller bite sizes. Instead of going big and building the huge mine originally planned over four years, the company is going to build an initial small mine over one year, and then keep progressing in modular fashion. This, I think, is going to become the new pattern for junior miners, because the risk averse nature of the banks at the moment makes the number of belt and braces that they put in place for smaller miners too difficult to navigate profitably, whereas Orion now sees itself as likely to break into profit in the first 12 months, because they will mine urgently needed copper and zinc mine in Prieska in modular fashion.
Their new cornerstone investor, Clover Alloys, has already proved the value of this modular, bite-size approach in chrome mining. Orion will also use the cash generated by the first module to build the second module, and follow on in the same way when tackling the third and fourth modules. By the fourth year, they would have already sold a lot of copper, sold a lot of zinc, and they will have cash in their hands, which would not have been the case. So, it is a much better way to get into mining by junior mining, who are having to approach mining in a different way because they can't raise debt capital from the financial institutions in the way they did in the past and have to switch to the smaller but far quicker approach.
Kamwendo: A top business booster this week urged South Africa to use exploration to re-energise the South African economy.
Creamer: As you know, we are only sitting here in Johannesburg because of exploration that was done 120 years ago. Foreigners, at that stage, decided that they were going to fund exploration for diamonds and, when that worked, they then also funded exploration for gold. That is what has built the economy in which we are functioning today. Now, a company Rifle-Shot wants to repeat that performance in better ad inclusive terms that will float all boats.
They want South Africa to go into exploration mode once again, because it is such an opportunity now that critical metals are in such high global demand. In this way, they want to rebuild mining and the entire economy at the same time. When you go into exploration, you are already generating immediate economic activity. When you go into mining from successful exploration, you begin generating so much more related and non-related economic activity. We can see all the supply chains that have been developed because of mining, we realise that South Africa is sitting on an opportunity that its wonderful mineral endowment can catalyse. Rifle-Shot wants to repeat what happened more than 10 years ago and they want, once again, to use exploration as the means.
Kamwendo: Coal miner Exxaro is to build a big new solar power plant at Lephalale in Limpopo.
Creamer: With our energy crisis, it is so good to hear companies that are going to build renewable energy facilities. We see now a coal miner, Exxaro, going ahead with a 68 megawatt solar plant in Lephalale, a coal mining area. Exxaro is going to supply clean energy from sunlight to its coal mines. This is what Exxaro is going to do to all of its coal mines. Exxaro has got an energy company called Cennergi, which is already generating a lot of wind energy. Amazingly, the profit margin of this company was 80% in the last year, which shows how very profitable going into renewable energy has become. It is also very helpful to South Africa, because the people of this country need every bit of electricity that they can get, particularly clean electricity.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News & Mining Weekly.
Edited by: Creamer Media Reporter
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