The Industrial Development Corporation (IDC) has approved and availed R100-million in funding to assist in closing the different funding model gaps in South Africa’s exploration sector.
In collaboration with the Department of Mineral Resources and Energy (DMRE), it is working towards the establishment of a fund that will, in particular, help to overcome the funding issues experienced by this sector.
The fund is still awaiting black economic empowerment facilitator status, which the IDC is hopeful will be finalised by the second quarter of next year.
Once the fund is in place, the IDC will be involved in all stages of funding, from prefeasibility study to the bankability stage of a project.
The IDC is also aiming to increase the available funding to R300-million at a later stage, so that these funds can be used “for a variety of early-stage exploration opportunities that may exist in South Africa”, IDC mining, metals and beneficiation head Thabiso Sekano said during a webinar on December 2.
These opportunities, he added, have the potential to unlock additional opportunities, particularly in the employment and foreign exchange earnings space.
While a good initiative, change would not happen overnight, said Minerals Council South Africa junior and emerging miners' leadership forum chairperson Errol Smart, who is also the CEO of Orion Minerals.
A conducive regulatory environment would be key to creating an environment wherein explorers and investors could operate, he noted.
This is a frustration known to many in the industry, as the current environment is often characterised by talk, rather than action, and government departments working in silos to address a particular problem.
“It’s not easy when you’re dealing with the government and the DMRE, and while we have come a long way, we also need to find each other,” he said, noting that the biggest frustration was often found in the solution being known, but that “nothing is actually happening to make the solution happen”.
Once a working and conducive regulatory environment is in place, Smart is confident that investors will “have trust in investing in exploration” within South African borders, leading to “the whole game just kicking in and moving”.
Getting to this point, however, is the challenge, he stressed.
Talking to junior mining specifically, JSE origination and deals head Sam Mokorosi said junior miners in exploration, specifically, “are subject to two challenges”.
Firstly, there is a worrying trend in small cap companies (a category applicable to junior miners) delisting from stock exchanges like the JSE, which Morokosi said was the backdrop to regulatory, exploration and valuation challenges these miners experience.
“We’ve been engaging with government on some of the things that could make it easier [and] that could attract this kind of exploration,” he said, highlighting that the JSE was considering employing similar methods as the TSX, which is considered “a global leader in listing exploration companies”.
Additionally, Mokorosi said the JSE was looking at what was "within its control” in the sense of cutting red tape in the listing requirements that made "life unnecessarily difficult without adding value to the broader ecosystem”.
The JSE is also considering some of the liquidity challenges within the small cap space, with one of the options being the potential issuing of exchange-traded funds.
AmaranthCX director Paul Miller, however, stressed that the problems with mineral exploration in South Africa “need to be diagnosed correctly” in that regulations such as the Mineral and Petroleum Resources Development Act and the Mining Charter “have not worked for exploration”.
Miller referred to statistics showing South Africa accounted for 5% of 2004’s global exploration – a number that has significantly decreased to 0.76% this year.
Miller stressed that the industry’s demise was owing to a combination of “bad policy and poor administration”.
“It’s exasperating to think that we can identify the problem, but we’re not doing anything to fix it,” he said.
“The fact is, until something is actually produced, nothing is going to happen, and our minerals are going to stay in the ground,” he said, noting that, at the moment, there was no evidence that proved otherwise.
Sekano, Morokosi, Smart and Miller all participated in a webinar co-hosted by the IDC and Creamer Media.