A year after the department of mineral resources & energy (DMRE) unveiled a plan to capture 5% of global exploration expenditure within five years, the backlog of mining, prospecting and permit applications stands at more than 5,000.
A cadastral system — an online mining rights application tool — is still not up and running despite promises by the department and the identification of a successful bidder.
Mining exploration in South Africa as a proportion of global activity has fallen from a peak of 5% in 2003 to below 1%.
As a result, the local mining sector’s contribution to GDP is down from 10% in 1993 to 7.5% in 2022, the lowest it has been in 30 years.
Minerals Council South Africa spokesperson Allan Seccombe said ramping up exploration and encouraging junior miners to get involved relied heavily on a functioning and transparent cadastral system.
He said the council had been lobbying for the DMRE to provide a modern, competitive, corruption-proof mineral rights management system.
“This needs to be coupled with a tax incentive system to encourage investors into the exploration space.”The Industrial Development Corporation (IDC) is setting up a junior exploration fund and has seed funding to get the process going, Seccombe said.
IDC spokesperson Tshepo Ramodibe said the government’s ambition is to establish a R500m exploration fund, and the IDC has been asked to structure and participate in the proposed fund.
Ramodibe said exploration costs can be onerous for a junior mining company that is looking to either start or expand its production capacity.
“The objective of this fund, among others, is to help cushion mining exploration costs for junior miners.”
In April last year, the DMRE unveiled its plan to unlock the country’s mineral potential by reviving exploration expenditure and pushing it back towards 5% of global exploration over the next three to five years. Seccombe said mining resources must continuously be replenished.
“The mining industry is one that depletes its reserves and resources and, as such, has a finite life. If the pipeline of reserves and resources is not replenished, the mining industry will diminish in importance to the economy, and as a source of jobs and export earnings.
“South Africa is rich in minerals that modern economies need as they address climate change, renewable sources of energy and technological advances.
“If South Africa does not stimulate the exploration sector it will be sidelined in the production of these and other minerals and will not realise its true potential,” Seccombe said.
If South Africa does not stimulate the exploration sector it will be sidelined in the production of these and other minerals and will not realise its true potential
— Allan Seccombe
The DMRE plan said achieving the 5% target implied an exploration budget of $900m (about R16.5bn) a year, because global spending on exploration was set to hit $18bn a year by 2025.
Apart from the contribution to GDP, achieving the target would translate to 45,000 new jobs and an extra R4.2bn for the fiscus, the plan said.
DMRE spokesperson Makhosonke Buthelezi said South Africa’s share of global exploration activity stood at 5% in 2003 but has now declined to below 1%.
“This comes at a time when the race for rare earth minerals and minerals of the future is at a critical point, thus making the strategic placement of mineral-rich countries a key focus.”
Buthelezi said increasing global market share through a cadastral system would make it easier to apply for the relevant rights.
He said exploration investment has been identified as a key barrier to greenfield exploration activities in South Africa by both established mining companies and emerging junior companies.
“Of the 39 mining companies listed on the JSE, 35 are actively trading, of which six are true exploration or development companies. By comparison there are over 2,000 listings of mining companies on the Canadian stock exchanges.”
JSE spokesperson Pheliswa Mayekiso said access to capital for mining projects was critical in reaching exploration targets.
“The basic-material sector contributes around 30% to the overall JSE market capitalisation, and mining companies raised in excess of R210bn over the past decade,” she said. “Locally and globally there has been strong investor appetite for battery metals, and by listing on the JSE you will have direct access to South Africa’s investor base. Investment in mining exploration is crucial to ensure the mining sector’s continued contribution to the South African economy.”
Mayekiso said the JSE had been part of discussions about tax incentives for junior exploration companies, which would provide significant impetus for exploration. The increased economic activity would compensate for revenue losses from the tax cuts.
Pipeline of listings
She said the JSE had a healthy pipeline of listings, some of which were companies already listed on international bourses that wanted an inward listing on the JSE.
“JSE Private Placement is also a suitable capital-raising platform, particularly for those private companies who are looking to raise capital for their exploration efforts.”
Paul Miller, a mining expert and owner of the consultancy AmaranthCX, is sceptical about the DMRE plan given the cadastral system delays and the backlog of mining rights applications. He said he originally calculated it would take 10 years to clear the backlog, but it now seemed that 16 years was a more likely timespan — “that is, if not a single additional mining permit application is made”.
“In other words, their rate of processing of the backlog is glacial.” He said the delay in obtaining an open cadastral system seemed deliberate.
“It seems to me it is malicious compliance; in other words, they have no intention of getting a new cadastral system, [even though] they have been saying there is intention. Because they could publish data of prospecting rights; they have the data, they refuse to publish it.”
Mahlatse Mononela, spokesperson for the Council for Geoscience, the custodian of South Africa’s geoscientific information, said increased exploration was key to growth.
“The South African government sees exploration to be the lifeblood of the mining industry,” he said. Apart from the industry’s direct contribution to the economy and export earnings, the search for minerals that supported sustainable energy generation, food security, health, infrastructure development and modern technologies was of strategic importance.
She said Geoscience Act regulations gazetted last year would encourage exploration. “The nature of the exploration business is medium to long term. The effect of the regulations will enhance the exploration appetite with time … We remain confident that this intervention will contribute to unlocking exploration activities in South Africa, together with a suite of interventions contemplated in the exploration strategy.”
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