Long road back for SA’s junior mining sector

INEFFICIENT administration, no working mining cadastral system, and a lack of government support for the mining industry have badly hampered the development of mining projects in South Africa.

That’s according to speakers at the Junior Indaba investment conference held in Johannesburg on Tuesday at which the damage done by not having an efficient mining cadastral system was highlighted along with the negative issues linked to black economic empowerment (BEE) and the impact on projects of extended delays in permitting.

The extent of the problem created by not having a working cadastral system was laid out by Tseliso Maqubela, deputy director general for Mineral and Petroleum Regulation who said the bulk of the backlog of pending applications were for coal mining permits in Mpumalanga.

“Two thirds of what we have in the backlog are from Mpumalanga and there is no chance that many of those mining permits will be approved because they apply for someone else’s land,” he said.

Maqubela said he hoped the cadastral system would help by allowing the Department to reject such applications outright without having to go through all the administrative work as required at present.

Orion Minerals CEO Errol Smart backed this view describing the situation as “wasted time applied to processing applications that never should have seen the light of day”.

Turning to his copper projects in the Northern Cape, Smart said it had taken Orion four years to be awarded the prospecting right to a project where they had just drilled “the biggest copper intersection in this country in 50 years”.

“This project should be subject to one mining right but, in the end, it has turned into seven applications that are all being processed by the same team that are overloaded and have to do the same amount of work seven times over to get the same outcome,” he said.

Orion will shortly start to raise further funds for its copper projects at Prieska and Okiep, but the challenges the company will face were laid out by Danny Keating, CEO of Canadian listed Giyani Metals.

Keating commented that – having raised initial funds – if a junior miner came back a year later asking its backers for more money with a story saying “we have done this work but we cannot advance further because there’s no licence or no permit”, then the response is likely to be negative.

He commented the investor is going to reply: ‘I’d rather put the money into Canada or I’d rather put it in tech. I’ve got plenty other places to make money so  why should I give it to you?’

“That means you are always on the back foot,” Keating concluded

Smart also addressed what he termed the “thorny issue” of black economic empowerment commenting Orion had been “forced” to take black empowerment partners into its exploration work.

“Even though the Minister said we did not need to have to have BEE (for prospecting) the regional offices would send us a letter saying ‘you will have BEE’ underlined in bold.

“So we took the BEE on. Do you know how they are struggling to get their money? If you dilute them then you are disadvantaging them. So we have created a fund that they cannot actually reach into to fund their share.

“This is an on-going challenge and it does scare investors. As soon as you put up your organogram on what you are forced to have in South Africa for ownership of the mine guys just say ‘that’s too hard’. No-one understands,” he said.

On the macro level, Keating pointed out that it really helped junior miners if the government of the country generally supported the mining industry which he indicated is what was happening in Botswana but not in South Africa.

He commented: “In Botswana it is not so much the regulatory environment but that there is a priority in Botswana where everyone is working together to make sure that mining advances.

“That’s kind of what needs to happen here but South Africa is a big economy so it has other priorities and the government has other priorities.”