JSS Empowerment Mining Fund to aid emerging miners
New fund aims to provide working capital to help junior mining projects get started with an average investment size of about R88m
The R1bn inaugural JSS Empowerment Mining Fund launched at the ENSafrica offices in Sandton on Thursday, boosting prospects for emergent miners.
It aims to provide working capital to help junior opencast mining projects that have reached bankable feasibility stage get started. The average investment size is about R88m.
The fund is a joint venture between boutique advisory firm Jaltech, JSE-listed construction group Stefanutti Stocks and Venture Capital Management Services, which specialises in ventures eligible for Section 12J tax relief.
"We are looking at eight projects totalling R703m ," said Jaltech cofounder and director Gaurav Nair. "What we think we have created is a vehicle for the lowest-risk investment in junior miners," he said.
Former finance minister Trevor Manuel told delegates at the launch event that South Africans were bound together and defined by mining. He said investors needed to defend the sector from being seen as a "sunset industry".
Nair said Stefanutti Stocks had a track record of helping junior miners and would invest equipment and plant.
The government has indicated that one of the biggest hurdles to the growth of small and medium-sized businesses and junior mining exploration is access to equity finance. To this end the state has implemented tax incentives for investors in venture capital companies.
"We have been working on this quite a while," said Stefanutti Stocks CEO Willie Meyburgh. The group was looking at opportunities where it could grow while helping emerging miners and contractors get off the ground.
Stefanutti Stocks had approached the Development Bank of Southern Africa and commercial banks, only to be told that projects were "too risky and too small".
The JSS Empowerment Mining Fund aims to change all this with a minimum investment holding period of five years.
Investors can gain tax relief of up to 41% by deducting 100% of the investment amount from their taxable income in the year in which the investment is made. In addition, 70% of one-off investment is counted towards the investor’s broad-based black economic empowerment scorecard.
The risk profile is one of investing in mines that have completed exploration and licensing and have material offtake agreements in place, while also having contracted construction and mining activities to Stefanutti Stocks.
The fund is targeting a pre-tax return — gross of fees — of inflation plus 10% per year. Including the rebate, this jumps to nearer inflation plus 20%.