SA needs ‘much larger exploration fund’ to grow mining

Many emerging opportunities can help stop the decline and enable growth in SA’s mining sector. However, to achieve this the country needs to develop a better understanding of how to support mining exploration and increase funding.

This is according to mining leaders who spoke at the mining conference, the Joburg Indaba, on Wednesday.

Mzila Mthenjane, CEO of the Minerals Council SA, said the R400m exploration fund launched by the government earlier this year was a step in the right direction, but much more needed to be invested.

The Junior Mining Exploration Fund, a collaborative programme by the Industrial Development Corporation, Council for Geoscience and the mineral resources department, aims to enable junior mining enterprises to access funding for prospecting work and increase their access to mine ore bodies.

Mthenjane said he would like to see billions of rand invested in exploration, not just by the government but by local and international financial institutions.

SA’s share of global exploration spending has dropped to below 1% from a peak of 5% in 2003 and has remained stubbornly below 1% for more than a decade. In addition, most of the exploration and new project development that is taking place is being done around existing mining areas by major companies with little participation by junior miners.

The local mining sector has “already missed out on a couple of boom [cycles]” because of network inefficiencies such as load-shedding and poor rail performance. “Out of our total mineral production, about 50% relies on being transported by Transnet Freight Rail and 40% of mineral production relies on constant electricity supply,” he said.

However, said Mthenjane, if these challenges were resolved, the country was well placed to benefit from the growing demand for minerals that will be needed for the energy transition.

“The industry will need to reposition itself and [to ensure] that as network infrastructure performance improves, we can again see expansion in the industry.”

In the short term, growth would come from existing operations getting back to capacity as rail performance starts to improve, but to see real long-term growth SA needed more exploration, said Mthenjane.

Nico Muller, CEO of Impala Platinum, said SA had to create an exploration-friendly jurisdiction to attract more investment, including reducing the cost for junior miners to list on the JSE. SA had only a fraction of the number of listed junior miners in countries such as Australia and Canada.

Afrimat CEO Andries van Heerden said there were also some practical steps the mineral resources department could take to create a more conducive environment for smaller mining companies. The department too often issued section 54 notices, in terms of the Mine Health and Safety Act, for “trivial things”. He said this could be “really hurtful” for a small mining company.

erasmusd@businesslive.co.za