[miningmx.com] — THE name is as South African as it gets – Ratel Gold – but it’s listed on the Toronto Stock Exchange (TSX) not the JSE and it’s operating in Nigeria, not South Africa. That sums up in a nutshell the current state of play in the global gold mining sector, as revealed at the highly successful Africa Down Under mining conference held recently in Perth.
There’s a gold mining boom taking place driven by the steadily rising gold price: but it’s happening in West Africa – not South Africa.
The ratel is, of course, the legendary tough-as-nails honey badger after which the South African Defence Force named one of its equally legendary armoured fighting vehicles.
The participants are raising funds predominantly on the TSX and the Australian Stock Exchange (ASX), not the JSE.
There are a number of reasons for that situation, one of which is growing international investor disenchantment about security of tenure of mining rights in South Africa. That’s due to the debacles at Kumba Iron Ore and Lonmin, where competing companies have been awarded prospecting rights over portions of the operating mines for which those groups had already been granted new order mining rights.
That uncertainty was front and centre at the conference, where South Africa’s Minister of Mineral Resources Susan Shabangu gave one of the keynote addresses but which did little to improve the situation. Reason was in her statement she had reviewed the Kumba and Lonmin cases and “found no evidence of maladministration or irregularity in the manner in which these two prospecting rights were granted’.
Both groups are now taking their cases to court, with Kumba claiming serious incidents of “maladministration and irregularity’.
One of the few South African gold companies that’s raised money on the ASX is Gold One International (Gold One), whose CEO Neal Froneman presented at the conference. Froneman told Miningmx sister publication, Finweek: “There’s a huge concern over the perceived hijacking of mining rights following the events of the past few months. Questions being put to me by investors are now focused on those broader issues rather than the operational specifics of my gold mines. The questions we’re fielding are all about how these developments might affect us.’
Michael Blakiston, partner at Australian legal firm Blakiston & Crabb, painted the broader picture in his presentation to the conference. Blakiston was generally positive about black economic empowerment in SA and accepted the ideological reasons for, and positive socio-economic intent of, the legislation. However, he clearly flagged concerns about empowerment “morphing into nationalisation’.
He also raised the viewpoint that “empowerment is often seen as playing the black card to take more from a project and transfer to the mining company many of the responsibilities of government’.
He described the attitude of the African National Congress Youth League (ANCYL) as “scary’ and a “huge embarrassment’ for South Africa. He also indicated it was an organisation that had to be taken seriously, commenting the mining industry would be putting itself at risk if it just “put the ANCYL into a far left radical basket’.
Blakiston added: “We as an industry need to be firm and vocal in our stance. We know what happens when you nationalise a mining industry. Look at the other countries in Africa.’
The good news is that, despite all this, some Australian juniors are still setting up new ventures in South Africa. One Australian executive said:’We’re aware of the risks, but every mining destination has its problems and, so far, our shareholders are prepared to accept them.’
The bad news is that what’s coming South Africa’s way is a trickle compared with what’s going into Ghana, Mali, Burkina Faso and other nations in West Africa.
Iron Ore
Breaking news at the conference was that ASX-listed FerrumCrescent (Ferrum) is to develop a new iron ore mine in South Africa’s Limpopo province while Universal Coal is to raise A$25m (around R160m) through a listing on the ASX to develop three coal projects in Mpumalanga.
The entrepreneur behind Ferrum should be well-known in South African mining circles. He’s Ed Nealon, the man who was one of the first Aussie miners into the country after 1994 and who developed the Kroondal platinum mine, which grew into Aquarius Platinum.
But the real action is in West Africa, where – one after the other – companies such as Gryphon Minerals, Bassari Resources, Noble Minerals, Ampella Mining, Bendigo Mining and Viking Ashanti presented their growth strategies. They clearly found a receptive audience, because in some cases the respective share prices went up between 5% and 10% in the next day’s trading – clearly on the back of their presentations.
The ultimate aim is to become the next Red Back Mining. Just 10 years ago Red Back Mining was a tiddler, owning various exploration rights in Ghana. Red Back is still a tiddler by South African gold standards. It currently produces around 180 000 oz of gold a year from two mines but has grown its exploration interests extensively throughout West Africa. In early August Canadian heavyweight Kinross agreed to buy Red Back in a deal worth $7.1bn. All South African gold producers can do is look at that and drool.
