Even though junior miners in South Africa have grown from being virtually non-existent to holding the majority of mining rights in the country, they are still inundated with challenges which make it hard for them to stay in business, says industry body the Minerals Council of South Africa.
Officials from the council briefed reporters on the sidelines of the third day of the Investing in African Mining Indaba in Cape Town on Wednesday.
Junior miners are companies that are prospecting for purposes of exploration for new deposits of resources and precious metals, and other aspects of early mining development.
Orion Minerals CEO and geologist, Errol Smart, told reporters that the economic contributions from junior miners amounted to revenues of R54.4bn and turnover of R48.7bn. Their prospects were being stifled by long-standing challenges that undermine growth and investment in the sector, he said.
"The junior mining industry earned R54bn and spent R55bn. It's a huge challenge. One thing we have been fortunate in is having Minister (Gwede) Mantashe, who understand the industry and is open to debate.
"What happened in South Africa is that in the drive for transformation has led to assets shifting from one set of hands to people who did not understand the industry. This has turned into something of a bottom feeding industry," said Smart.
The Minerals Council’s junior and emerging miners desk head, Grant Mitchell, said 18% of junior miners surveyed by the council found complying with the current regulatory environment a challenge, while 16% struggled with meeting the Mining Charter's requirements, and 14% battled to get permits and licences on time.
"Most of our members are very small companies. These are not the major companies that people often hear about. We’re making progress but we still have a long way to go. This industry has massive potential, but we have to decide that we really want to grow it," said Mitchell.
Mitchell said 23% of junior miners considered mining regulation to be an impediment to attracting investment, while 19% said labour laws impeded investment.
Of the respondents, 15% believe geo-political risks impede investment while 13% blame a lack of confidence in the industry and stakeholder hostility for impeding investment.
The Minerals Council's head of social performance, Alex Khumalo, said South Africa could not afford to ignore the needs of junior miners as they contribute much to the sector and need support.
"For a long time, we looked out for the big boys, but with time we realised that most of the 1700 mining rights out there in the country belong to junior minors and emerging miners," said Khumalo.
The survey found that while 47% of junior miners had labour costs of less than R1m, and 28% of believe the 2018 Mining Charter has done the sector more harm than good.