The web site is now storing only essential cookies on your computer. If you don't allow cookies, you may not be able to use certain features of the web site including but not limited to: log in, buy products, see personalized content, switch between site cultures. It is recommended that you allow all cookies.

Junior Indaba 2024 – 21 & 22 May 2024

Junior Indaba 2024 – 21 & 22 May 2024

Wayne Burger: Moore Johannesburg

This year’s Junior Indaba, held at the Johannesburg Country Club, Auckland Park, was one that was somewhat more upbeat than in previous years.
 
Yes, there are still challenges and difficulties in the sector, but generally speaking the sector seems to be looking positive.
 
Key points raised:
 
Bureaucracy – this is an issue that plagues almost all mining jurisdictions and is (generally speaking) a particular bug-bear in the African (and South American) context. Some countries are better at managing the bureaucracy than others, with clear timelines spelt out and largely adhered to, together with legal frameworks and governmental support; making these countries more attractive to investors.
 
Botswana and Namibia are key examples of jurisdictions within Southern Africa that are being seen as friendly locations. This is because they have functional cadastral systems, they have clear and specific timelines for application and approvals of mining licences and legal support for Junior Miners – this is leading to more investment going into these countries, as they are creating a less risky environment for investors.
 
Funding – It is always a challenge to fund early-stage development, however there are mechanisms at play to aid in funding.
 
Many junior miners are listed in Australia and Canada - why is that? Retail investors are being incentivised to invest in this sector.
 
Although the definition of a Junior Miner may be different in different jurisdictions, the commonality between these two jurisdictions is that the retail investor is incentivised through tax rebates on junior mining companies.
 
Other Tax Incentives – Tax incentives are being offered to Junior Miners in a number of Southern African countries, but not in South Africa, These incentives are made up of one or more of the following: reduced corporate tax rates, greater tax deductions on capital expenditure and accelerated depreciation of capital equipment. These incentives ease the cashflow burden of the junior miners and exploration companies, leading to accelerated value creation within the host economy.
 
Risks – This is a word that is synonymous with the Junior Mining and Exploration sector.
 
Danny Keating, CEO of Giyani Metals, was quoted as saying: “You probably have lower risk going to Vegas and throwing it across the tables.” Whilst this may sound defeatist or pessimistic, there are ways to mitigate these risks.
 
Brownfields projects are heavily de-risked, as there is already a substantial amount of information available, and just because it doesn’t, or no longer fits into a major mining house’s portfolio or strategic planning, it does not mean that there is insufficient value for a junior.
 
A strong and enforceable mining law will also go a long way to mitigate risk, as well as a functioning cadastral system. The cadastral system will reduce the risk of multiple applications on one site and associated disputes, it will also very clearly (at a glance) highlight ownership and level of development of a property. A strong and enforceable mining law will assist in the management of illegal mining operations, and unscrupulous/exploitative mining practices.
 
These are all factors that aid in the reduction of risk.
 
Sector Wins:
 
Specific to South Africa, the three most notable wins within the sector over the last year are:
 
Cadastre – a Senior Level Agreement (SLA) between the Department of Mineral Resources and Energy (DMRE) and PMG Consortium has been signed. According to the DMRE the process is on track and following similar timelines to other countries for the development of a cadastral system.
 
Exploration Fund – it was announced that the Industrial Development Corporation of South Africa (IDC) has launched its initial exploration fund of ZAR 400 million. Whilst this is a rather small amount, it is a step in the right direction.
 
DMRE Processing – The DMRE has made some good progress in processing and progressing applications for mineral rights, mining permits and prospecting rights in the last financial year. Initiatives to improve internal processes and procedures are starting to bear fruit and it is believed that the development of the cadastral system will help to greatly improve the statistics.
 
With all the challenges, why look at the Junior Mining and Exploration Sector?:
 
There is unlikely to be too many Mega Discoveries of mineral deposits in the near future, making it unattractive to the majors. Junior miners however play a vital role in unlocking additional mineral wealth in the region; they require less capital to get going, they require less infrastructure to get and keep going, they are more agile and open minded, they are able to bring value to smaller deposits that would not be attractive or cost effective for a major and they create employment at a scale that is generally more focussed in the community which they operate in.
 
Summary:
 
The junior mining sector in Southern Africa is growing, but it needs help to thrive.
 
There are many challenges in front of junior miners, but these challenges seem to be reducing in scale and intensity, host countries are seeing the value in attracting this class of miner, however, there needs to be a lot more done to unlock funding for the sector, in the jurisdictions in which they operate.
 
One needs to remember that without mining, we as a human race would not exist as we do today: If it is not farmed/grown, it is mined.

Contact your local Moore firm HERE.