The popular Junior Indaba, held in Johannesburg earlier this month, highlighted once again that South Africa is losing ground on the exploration and junior mining front – with exploration being discouraged by a range of factors.
Unlike many other jurisdictions, it appeared that South Africa did not actively promote its mineral deposit endowment – perhaps in part due to the country’s historic dominance in mineral production. The country has for over a decade attracted less than 1% of global exploration investment annually.
According to principal exploration geologist at SRK Exploration Services, John Paul Hunt, there were currently few projects in the pipeline to replace the country’s aging mines – many of which were approaching the end of mine life. Hunt explained that exploration in the country was historically conducted by large, well-resourced mining houses – but that this role was now left to junior companies.
“Unfortunately, a common theme at the Junior Indaba is how ill-equipped South Africa is to support and nurture the smaller exploration and mining companies,” he said. “This year’s event indicated that the country has made little concrete progress in improving conditions for exploration companies in particular.”
Part of the challenge was related to the raising of capital through the local bourse. He noted that the number of mining companies and explorers on the Johannesburg Stock Exchange had dropped from 121 in 1995 to 40 today – of which only about a dozen are juniors. By comparison, the Toronto Stock Exchange has about 1,600 mining companies, and the Australian Stock Exchange has about 600.
“The South African investment community is not really familiar with the space that juniors occupy,” he said. “Being mainly institutional investors, they are also restricted from participating in the more speculative, higher risk investments like mineral exploration. This means we need extra effort to attract a different class of investors to reinvigorate our mining sector.”
He said the regulators had a role to play in making the country a more favourable jurisdiction for exploration spend. Other challenges highlighted at the Junior Indaba were the continued uncertainty, inefficiency, and long lead times in the permitting process. Hunt said the event emphasised again that juniors needed to move quickly and cost-effectively when identifying and pursuing mineral targets.
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