7 things SA’s Govt can do to encourage mineral exploration and replenish the mining industry

ONCE the greatest mining country on earth, South Africa now attracts less than 1% of annual global mineral exploration spend. Ongoing mineral exploration is the only way to ultimately sustain mining’s 7% contribution to GDP.

Considering that the South African mining industry has about 15 to 20 years of significant large-scale mining left and that the global standard is that it takes in the region of 10 to 20 years to discover, develop and bring into production new large scale mines, it is clear that the country must urgently begin to build a new mine investment pipeline.

South Africa remains a treasure trove of geological history and known mineral deposits. It is, however, grossly under-explored when it comes to modern exploration models and technology. New exploration methods should be at the forefront of creating a new, transformed, technologically advanced, and successful mining and minerals industry, which can unlock new mineral deposits, attract investment and create decent employment – all measured against the highest environmental, sustainability, and governance standards.

Reviving exploration should be a priority for the country and to do so requires the following priority interventions.

Implement a globally competitive digital and transparent cadastre: Replace the SAMRAD system with a functional, online cadastre to manage applications for mineral rights and ongoing licensing obligations. Ongoing obligations must include the submission of all exploration data annually and this information must then form part of the public cadastre.

Encourage effective administration by the DMRE: Years of maladministration and litigation have destroyed trust. At the very minimum a functional DMRE, with quick processing of licence applications; the vigorous enforcement of the use-it-or-lose-it principle; the fair and objective administration of the regulations where official discretion is limited, and where administrative time limits are fixed is required.

Provide access to exploration information at no cost: Geological, geochemical, geophysical, and historical borehole information and maps must be offered to all exploration companies by the Council for Geoscience (CGS) at no cost. The state needs to invest in large geophysical data acquisition programs, through the CGS, to continuously improve the competitiveness of its data.

Reform current mineral policy, legislation, and regulations: The current MPRD Act and extra-legal Mining Charter process are no longer fit-for-purpose, being fundamentally backward looking and aimed at transforming historical assets that will soon be mined-out. Furthermore, ongoing policy uncertainty is entrenched – no potential explorer knows what will be in Charter IV or Charter V – except that a progressive trajectory of ever more onerous demands has been set.

Provide graduated mineral regulation for different scale enterprises. There must also be a recognition that small and junior exploration and mining companies require appropriate levels of regulation and that the one-size-fits-all approach is counterproductive.

Balance South Africa’s administered cost burden relative to its mining peers: All countries impose non-production related costs on mining companies.  What is important is that these costs are stable, predictable, and competitive relative to other jurisdictions. South Africa imposes high corporate taxes; mineral royalties, formal social obligation costs; compelled and complex local procurement rules; and obligatory national ownership of at least 30% rising to 51% in some commodities (BEE, employee and community ownership), with at least part being required to be free carried at the investors’ expense.  This is the major reason why South Africans can’t attract new mining investments. The government needs to take decisive action to break the trajectory of ever-increasing non-production costs by actively working to reduce these costs across the full mine value chain.

Support access to finance and capital flows: Successful junior mining countries all use tax incentives to both direct investment into mineral exploration and to develop and increase participation in public investment markets. South African needs to urgently implement a flow-through share or similar scheme that achieves both these objectives.

The South African legacy industry, with few exceptions, will be at its end within the career lifespan of existing young mine employees. A new approach is needed that balances sustaining the industry and maintaining transformation gains that have been made – and this requires the realisation that South Africa must now up its game and begin to compete for investment.

Many of these priority interventions listed above could be implemented quickly. A timeline needs to be presented and tangible action taken. Only then will we see confidence and investment begin to slowly return to the industry.

Paul Miller is a director of Amaranth.

This article was co-authored with Dr John Bristow who is a geologist with executive experience across junior exploration, development, and major mining companies, and  Regina Molloy, an international multi-commodity exploration geologist.

4 COMMENTS

  1. Well done Paul. Nailing it again.
    One thing to add. Samrad need to be replaced urgently. But it will be impossible to replace if the existing inforation is not reliable and accurate.
    You will just create another NMPS va Samrad fiasco.
    In order to ensure accurate and updated information you need to allow holders of rights to access Samrad in such a way that they themselves can update the system. It will probably just require a minor programming tweak to allow it.
    The days of trusting DMRE to issue moratoriums on applications, etc with the excuse that systems need to be updated are long gone. Dmre cannot be udate the system, its proven.
    In the event of overlaps and double granting of rights, and we know there are lots of them, it can be reported to DMRE and be resolved in a legal manner.
    This process can be governed by introducing regulations and a timeframe of 6 months in which you , as holder, have the opportunity to update your information the system and upload all documentary proof.
    It will probably not be foolproof and there will be chancers but in this way you might have reliable information within a reasonable period and you should be able to migrate to a new cadastral system.

  2. Paul Miller for national SA industry Representative to tackle these issued head on with Government. The mineral council barks but never bites.

  3. Would have thought this article will trigger losts of comments and discussions!!! It just show the interest in exploration in SA.. .or rather lack of it.
    Paul, you are clearly trying your best but with no buy in from DMR you are definitely going to fail.

  4. In my opinion the lack of exploration is not as a resultcof the MPRDA. Its actually a decent piece of legislation. It brokecup the monopoly created by the mining houses to sterilize mineral reserves in SA to keep the markets to themselves.
    The problem lies purely with DMR and political interference.
    A government official is appointed to regulate and to ensure the laws are being followed. They are not there to become involved in business. And that is where the problem is. DMR officials are blatantly involved in business and manipulate the issuing of right to their advantage.
    If you want to solve the system you need to create accountability from the top to the lowest officials. That is the only way.
    Looking at the chaos on Samrad and regional offices, I am astonished that the DA or other organisations have not demanded that the President place DMR under administration. It is probably the only way out.

Comments are closed.