Mining Mirror May 2017 - Page 42

Insight Despite South Africa’s supreme geology, it has a shortage of junior mining companies, writes Bernard Swanepoel. S outh Africa truly is ‘elephant country’ when it comes to mining. It has been endowed with some of the best ore bodies in the world and stands out as the country with the world’s deepest mines. Nearly all major mining companies in the world have its roots in South Africa. But there is a shortage of ‘dung beetles’ (junior miners) born from elephant droppings in South Africa. It is far easier to run big companies in the local business environment than small ones. To make the South African mining space favourable for junior miners, 10 regulations need to be scrapped for every one regulation that is contemplated. More than 214 pieces of legislation apply to small listed mining companies in South Africa, which implies that junior miners either break the law or go out of business. You simply cannot start a mining company in this country, as big government and big business have created a space where only they can exist. One factor that makes the small business environment challenging, is the fact that discussions about labour focuses on wages, instead of on job creation. What is more, the regulatory system is dysfunctional. [40] MINING MIRROR MAY 2017 The owners of the approximately 2 000 active prospecting permits in South Africa are not finding new ore bodies and the permits are not being circulated. If the system was functioning effectively, we would either have a great number of new miners or we would have prospecting licences changing hands. The government took mining rights away from the majors like Anglo, but is not taking them away from people who are not working the mines. So how do we eat this elephant problem we have created? One way of solving this is through regulatory certainty. However, junior miners need practical, viable certainty, as they cannot live with bad certainty like major miners can do. Where the regulator can delay something, it also has the ability to fast-track it. The trade-off between time and money is critical in the junior exploration space, as a six-month delay of a junior’s project means the end of it, while a major miner like Harmony, for example, could survive an 18-month delay in the transfer of mining rights. Exploration is undertaken on behalf of the people of a country. If the government does not incentivise people to conduct exploration here, they will naturally go and do it elsewhere. At the moment, there is no space for true exploration in South Africa — exploration is just not taking place. South Africa is now the least active country in the world when it comes to exploration. There has been no major discovery in the country in the past five to eight years — the system is not working. Exploration data should become public property when exploration licences expire. If South Africa had a national database of geological exploration information, we would not have to undertake early exploration at all. But the data that had existed in the past no longer exists for those who do not pay for it. South Africa was once one of the most explored countries in the world, but now we are falling behind. South Africa simply does not have a junior sector where the elephant droppings must produce some dung beetles. About the author Bernard Swanepoel is a former CEO of Harmony Gold and Village Main Reef. Elephant country needs dung beetles