There is still no word from new Mineral Resources Minister Gwede Mantashe on the promotion of a vital but still totally missing element of South Africa’s mining future – exploration.
The minerals sector can be restructured but this can only be done sustainably if exploration is included, a point which has been made repeatedly by resources luminary Dr John Bristow, who is adamant that South Africa has the geology, the people and the service providers to reinvent the mining sector.
Along with exploration promotion, Bristow is, of course, also insistent on enabling mining policy, proper transformation and education regarding the merits and the essential need for out-of-the-ground mineral commodities.
The local resources industry has not yet firmed up a vision and very little mention is made of the need for a major contribution to be made by the geology statutory body, the Council for Geoscience.
When one visits Perth and Toronto, one is struck by the monuments that exploration and consequently mining have made to those cities in the form of rows and rows of tall buildings.
Most of these have come courtesy of mining and all the mining has arisen from exploration.
The Canadians have been the best at promoting exploration, even African exploration, by their flow-through scheme, which the South African Ministry of Finance promised to install in South Africa and then reneged on its promise ignominiously.
The gazetting of what National Treasury described as a better alternative to the Canadian scheme was an abject failure, evidenced by it not being taken up by a single mining company, but gladly grasped by Cape Town finance boutiques.
We now need to test the efficacy of the new Section 12J of the Income Tax Act. Under this scheme, funds invested are zero-rated for capital gains purposes, with the effect being tax relief of R2.8-million on a R10-million investment in the tax year of initial investment – a relief of 28%.
I would like to hear what Canadian flow-through aficionados think about Section 12J, but, at face value, it could be a useful incentive to boost exploration.
There are also a growing number of companies around that see to developing the most efficient structures within the required legislation and manage processes and controls, potentially leaving resources companies to identify the investments and carry on operating as usual.
More noise needs to be made by the funding companies that are specialising in filling the junior-mining funding niche.
It appears that Section 12J facilitates the effective investment into junior exploration companies at a 28% discount, assuming they have taxable profits that they can offset.
But come on, Department of Mineral Resources, under Mantashe, let it be known what the possibilities are before we lose out on the next commodities upturn as we did on the last one.
As Bristow says, as things stand, the existing mining sector is a sunset industry, which new President Cyril Ramaphosa is determined should be a sunrise industry.
Mantashe should avoid complicating matters.