SOUTH African mines minister, Gwede Mantashe’s, compromise on energy in which he hopes to align the aspirations of the green lobby with miners, seems a sensible approach. The country doesn’t have a coal mining problem, it has an energy problem so the debate around solving it needs to be appropriately universal in character.
The middle way is not, however, working out quite as well in the mining sector. Without doubt, Mining Charter III is an advance on previous versions, but it falls short in critical areas which have been taken to court by the Minerals Council, as is well documented.
Mantashe has emerged as a bit of a unifying voice in the Ramaphosa Administration. But the investment sector will be less sympathetic. Similarly, the advance Mining Charter III makes in respect of junior mining is tinged with disappointment, as the Minerals Council points out.
Only junior miners with a turnover of R150m or less are exempt from the Mining Charter III provisions on transformation which involve selling equity. This excludes a host of larger, but still junior, companies, the council argues. The ceiling should be R500m in turnover.
Nonetheless, as far as junior miners are concerned, Mining Charter III looks workable. But don’t try to convince Paul Miller, a former resources banker now in private equity.
Miller, a bit of a grinch when it comes to government policy, has spent the good part of a lifetime banking mining. So when he says Mining Charter III will fail to attract the large-scale mining investment the country needs, he’s probably right (or worth listening to).
Speaking at the Junior Indaba, a mining conference fronted by Bernard Swanenpoel, who migrated from the snappy blue-chip company environs of his former haunt, Harmony Gold, to the small mining space, Miller said the challenges facing juniors were systemic. Even if the mining industry regulations could be made more investor friendly, many additional advances had to be made.
The Department of Minerals Resources (DMR) cadastre, developed at a very modest cost of R3.5m about seven years ago, is dysfunctional. Parcels of mineral-bearing property don’t turn over quickly enough falling far short of the use-it, or lose-it principle. Even Swanepoel, temperamentally indisposed to Miller’s scepticism, agrees.
World class administration at the DMR is lacking across the board, says Miller. Speaking at the conference, he cited a High Court ruling in 2017 in respect of Aquila Resources in which the presiding Judge (Tuchten) accused the department of “… a high degree of institutional incompetence”. Mantashe, has promised to fix the dysfunction at the licensing office level, closing some, and anecdotally the feedback is of some improvement. But is it enough?
No, says Miller. He went on to identify a lack of investment incentives. In Canada, the Toronto Stock Exchange can offer flow-through dividends whilst in London, there are capital gains benefits. In Australia, self-managed superannuation funds are available … There are no such tax benefits available to South Africans to invest in start-up mining, whilst the ability of investment funds to put money into juniors is structurally limited.
Two thirds of junior miners are not available to our funds.
Miller is right. Fiscally, the authorities need to throw a bone or two in order to encourage investment, but one suspects – knows – that a momentum needs to start at the grassroots level by making the resources in the ground much easier to find, section, and manage.
Reliable information is king.
Without a reliable SAMRAD system it is impossible for junior miners/ exploration companies to apply for areas. The costs are just too big to apply for rights these days.
You need certainty on availability of areas.
Clearly the Mining Charter is not the only problem – glad to see people are beginning to see more of the big picture. Exploration is crazy risky, it needs incentives not added burdens, costs and uncertainties. Growth in the mining industry will take a generation to recover – this will only happen once the pipeline has completely run dry. Like Zambia post the 1970s nationalisation. If you have more than about 10 years working life left, best to retrain, join the expat life or port your skills to a different industry
Hi David
I am not sure why Paul Miller is always quoted and allowed to make comments on exploration in SA.
1. Paul and his company do not support and invest in green fields exploration projects.
2. They only invest in brown fields projects, that is according to my understanding.
It is unfortunate that people such as Paul are allowed on platforms such as this website and Junior Indaba events to continue to criticise where he himself are not involved.
I agree that there are problems. Exploration is just not happening. Part of the problem is the unreliable SAMRAD system, lazy Gov Officials and corruption.
However, what we require now is people who can make positive remarks and at least make an attempt to promote SA. Paul is doing none of this at the moment.
There are good projects in SA and skilled people attached thereto.
How about a page promoting such projects
Hi Jack – Fair points except the notion that people should be banned from making well reasoned criticism. Surely readers can figure out for themselves whether to accept or reject a view point?
David
Hi David
Never my intention to suggest that people be banned from making comments or giving criticism.
However, I would like to see a more balanced approach as well. Surely there must be some optimists in the system as well.
Another thing. If we want to continue criticism. Why not cal a spade a spade. Do a proper research article on the impact of the disastrous SAMRAD on SA exploration. Test it yourself and give an opinion and name and shame the DMR and Officials.
For the past few years articles have been placed on miningmx about the lack of proper surety and systems, etc. Perhaps its now the time to name and shame. You have the audience. Use it.
Thanks Jack.
@Jack. Having lead a team that raised the money and took a project from 1st exploration drill hole through to a producing mine – through scoping, pre-feasibility, feasibility and which is still providing the 600 jobs that were created I think I have earned the right to an opinion. If you have a different opinion it is up to you to make it known. The Junior Indaba organizers (who are generally optimists) are always looking for speakers and panelists with a strong point of view – sadly too few SA mining folk are prepared to state theirs’ publicly.
Dear Paul. Your credentials in the banking industry as well as MD of Keaton is impressive. I acknowledge that.
And I agree with your views on the Mining Charter, etc. it is just not conducive to investment.
Junior mining and especially exploration companies are in a bad space in SA. No investment. Perter Hain confirmed it. SA went from hero to zero in 20 years. UK investors will not touch us.
So what to do? Some of us are stuck here. We need a solution.
We can continue to criticize or really do something about it.
Service delivery at DMR is non existent. The SAMRAD system is a disgrace. We should not accept such low standards.
And you are correct. Mining people are not verbal enough. We these days tend to let the lawyers do the fighting on our behalf because we are afraid of the back lashing that may come from DMR. And lets be honest, lawyers sometimes causes more harm than anything else.
I would like to see accountability in the DMR, but for that to happen you require a cleanup from the level of DDG up to the Regional Managers.
Then you need officials to respect the law and apply it without prejudice.
You need officials to stick to timeframes as for investment purposes we need surely.
I would like to see the impossible happening.
The DMR must cleanup its systems and data. All records on status of rights must be available to the public and accurate. Its our constitutional right to have access to reliable information.
To achieve the above, the DMR will need help. They cannot do it on their own.
The DMR and industry must work together.
Industry must identify and second people to work at the DMR and the DMR must trust the industry and accept all assistance. If all work together it will be possible to have a working DMR within one year.
That on its own will probably not bring the investors back, we still have issues such as Eskom to resolve, but it will be a good start.
So Paul, my reason for criticizing you previously was not because I questioned your credentials and ability. I criticized the lack of solutions being brought to the table.
We need a solution to rescue the industry and quick.
@Jack, please contact me via Linkedin and we can discuss solutions over a coffee