A research report, commissioned by the Junior and Emerging Miners’ Desk of the Minerals Council South Africa, has found that junior miners, including small-scale and micro miners, hold up to 80% of the mining licences in South Africa.
The research indicates that the Department of Mineral Resources and Energy has issued about 1 490 mining licences covering a variety of commodities, with only 20% of these allocated to major mining companies.
The juniors, despite holding the majority of mining licences, deliver only about 8% of the total revenue generated by the South African mining industry, the report said.
The junior miners are still struggling to progress beyond exploration to project development, owing to a number of challenges, including a restrictive regulatory environment and lack of capital funding.
The research report, finalised this month, is among the first major empirical studies into the South African junior mining sector, its economic contribution, as well as the perceived challenges that smaller mining companies face, the Minerals Council said this week.
The report, compiled by Hermanus Kriel, provides insights into the junior mining sector based on the outcomes in two parts, the first of which was based on a desktop study to estimate the size of the sector in South Africa, as well as its economic impact.
The second part focussed on a survey of the 25 junior mining members of the Minerals Council’s Junior and Emerging Miners’ Desk.
According to the report, there is no single definition of junior mining companies in South Africa as various stakeholders use different definitions, causing confusion in the market.
While it described some of the definitions as being “outdated”, the report suggested that the definition proposed by the Minerals Council was “the most useful” and that it be adopted as the standard.
Meanwhile, the junior mining sector employs between 33 500 and 40 300 people directly, and probably as many again through fixed-term contract. This, the report said, is between 7.5% and 9.5% of permanent jobs in South Africa.
Keeping the country’s rocketing unemployment figure in mind, the report indicated that junior mining creates between 230 000 jobs on a conservative estimate, and 800 000 jobs on the upper end of the estimate.
Therefore, the council believes the sector could “greatly bolster” the call by President Cyril Ramaphosa, in January, to create 275 000 jobs a year.
The report outlined that, during the survey of junior miners, the sector confirmed that job creation was an important part of their purpose.
Although the research included in the report does not have a definitive figure for the number of junior mining companies in South Africa, it estimated that junior miners, with multiple licences and established corporate structures, hold an estimated 685 mining licences in 414 companies.
Small-scale miners, with single licences that are operational, hold an estimated 467 mining licences in 463 companies, while micro miners, with single licences in operational start-up, hold an estimated 341 mining licences in 341 companies.
The report further stated that, according to Statistics South Africa, the economic impact that these companies have within the mining sector stands at a capital expenditure of over R2.7-billion, or 4.1% of the total mining industry; while generating revenue of almost R55-billion a year.
Expenditure for these companies, however, accrues to almost R56-billion.
Additionally, junior miners were said to have spent R3.7-billion on capital goods in 2018, which is 4% of the capital spend in the mining industry.
Junior miners contribute between 3% and 5% of total taxes paid in the mining industry.
Survey respondents touted job and wealth creation, the spearheading of new technology introduction in mining, as well as the use of mineral resources too small for major mining houses’ overhead structures, as some of their greatest assets.
About 53% of respondents had said they aspire to operate at least one mine, while 68% of respondents said they were focussed on supplying their products back into the South African economy.
With regard to commodity attractiveness, respondents indicated that coal, precious metals and industrial metals were the most attractive for success in the junior mining sector.
However, the survey also highlighted that the regulatory environment was not “conducive for success” and that a lack of funding was also a major impediment.
Respondents also indicated that obtaining a mining licence was the single biggest obstacle to progress and said that it was also “the most time-consuming aspect”. However, the report noted that it was unclear if the delay was caused by junior miners’ inability to comply with the department’s requirements or if the delays were owing to inefficiencies therein.
Of the 17 participants in the survey, 47% were small companies with revenues below R5-million a year, and salary bills below R1-million a year.