MZILA MTHENJANE: Green shoots in search to find new mineral deposits

SA remains in the bottom half in terms of investor attractiveness in a perception survey of global mining jurisdictions.

Canada’s Fraser Institute released the annual survey a week before the Junior Indaba held on May 21-22.

It was also the week that the Minerals Council SA, with the SA Institute of Mining and Metallurgy, held its second annual webinar, “How far have we come?”, on exploration in SA.

In the webinar and at the Junior Indaba there were green shoots of optimism among the oft-repeated frustrations of faulty bureaucratic mineral rights management, poor administrative processes, and a general lack of legislative incentives in the form of tax breaks to encourage mineral exploration.

In 2022, the department of mineral resources & energy published the Exploration Implementation Plan, which reflected robust talks between the regulator, the Council for Geoscience and the Minerals Council. It identified the constraints that have kept SA’s share of global exploration spending below 1% in recent years, and the solutions to revive prospecting and to ensure the future of mining, and jobs, in SA.

In 2022, the junior mining and exploration sector was in dire straits — as characterised by The Mining Yearbook, which described the industry as being on an inevitable march to decline. Exploration spending was drying up, mines were gradually closing, no major new mineral deposits had been discovered, and the project pipeline was running on empty.

Fast-forward to 2024 and the question of how far we have come was interrogated by key sector players during the webinar and the Junior Indaba. SA’s mineral exploration sector is showing signs of life again, with the budget to search for new mineral deposits rising to the highest since 2017. Though it is a nominal figure, it is a healthy indication that the hunt is on to find new deposits.

Higher spending

According to S&P Global Market Intelligence, there has been a consistent increase in exploration budgets in SA since 2019, rising to $117m (R2.1bn) in 2023 as companies searched for platinum group metals, chrome and manganese. Base metals, gold and diamonds were the other major sources of interest.

The improvement in sentiment, as seen in higher spending, comes after several years of declining investment. However, the $117m is little more than a quarter of the 2007 peak of about $400m when SA accounted for a third of exploration spending in Africa. It now accounts for 9% of African exploration budgets.

Early-stage exploration sets the tempo for future mining operations in a country, Mark Ferguson, research director at S&P, said in the webinar. He noted that SA was not as active in green fields exploration as it should be. The establishment of a R400m exploration fund by the department and the Industrial Development Corporation (IDC) is an initiative that could change this situation.

Amid growing global demand for the metals and minerals needed for the transition to a low-carbon future, the bid to address years of underinvestment in prospecting is gaining traction. Green shoots are starting to show in the SA regulatory and mineral rights management processes.

Through interventions by the government’s Operation Vulindlela to accelerate structural reforms, the processing time for a water-use licence has been reduced to 90 days from the legislated 300 days.

At the Junior Indaba, the department announced it had signed the service level agreement with the consortium it chose in January to design and implement a new transparent and efficient mining cadastre to replace the dysfunctional SA Mineral Resources Administration System introduced in 2011.

A cadastre will improve transparency and make it easier to apply for prospecting and mining rights.

The department says it processed 2,900 applications in the 2023/24 financial year but it had received an additional 3,500 applications during that period. Two-thirds of the additional applications are for mining permits in Mpumalanga and are unlikely to be approved as many of the permit applications are on other companies’ tenements or do not meet the requirements. The department must still adjudicate each one. A fully functional cadastre would reject faulty applications the moment they are lodged, freeing up departmental resources to manage worthy applications.

Though the cadastre is a critical management tool for the department and for the prospecting and mining industry, it is just one element that needs attention to revitalise the sector.

Urgent action from the department on the Exploration Implementation Plan is among key factors that will enable a flow-through share tax scheme that would make investing in mineral prospecting attractive.

SA’s minerals supply-side issues do not differ fundamentally from 20 years ago. The investor-unfriendly legislative environment is where the most change is required. Mineral endowment alone is an insufficient reason for investment flow in a global environment in which there is intense competition for capital.

Modern environment 

If SA is to fully realise the growth opportunities of its minerals potential and enter the race for critical minerals, it needs a modern, efficient and conducive operating and regulatory environment to position itself as an investment destination of choice. The prize is a competitive and growing mining industry that benefits the whole of SA’s society.

In the Fraser Institute’s latest perception survey of the attractiveness of mining jurisdictions, just 293 responses, or 14%, were received for the survey sent to 2,045 people, presenting a credibility challenge.

On a relative basis, SA had its best showing in four years, moving out of the bottom 10 of worst jurisdictions for the first time in two years. SA ranked 62nd out of 86 jurisdictions, compared with 57 out of 62 the year before, its worst performance.

The scepticism in the domestic mining industry towards the Fraser Institute’s survey presents the Minerals Council with an opportunity to conduct its own sentiment survey among its membership, which accounts for 90% of the annual mineral production of SA.

The survey will give all members a chance to voice their views of the country as an operating and investment destination. It is also an opportunity to have a barometer of the industry that goes beyond just perceptions of a faceless few.

The Minerals Council is considering such a survey to more accurately and authoritatively reflect how its members regard the operating environment for mining in SA.

• Mthenjane is CEO of the Minerals Council SA.