James Gilbertson, managing director and principal geologist – SRK Exploration Services and John Paul Hunt, senior exploration geologist and Johannesburg Branch Manager of SRK Exploration Services talk about defining which commodities to explore for, selecting jurisdictions that meet risk appetite, and understanding the minimum exploration target size significant to one’s business, and how these parameters can then be matched to an appropriate geological domain.
With the mining of gold in South Africa and Ghana becoming more difficult, where will exploration companies turn to next?
There will always be investment questions based on the (perceived) increasing maturity of particular mining districts, changes to legislative frameworks, political risk or labour disputes. These issues are not unique to established mining districts such as those in South Africa or Ghana, but they do become amplified in these regions. What these issues actually represent are the competing needs of stakeholders, which need to be properly managed; moving to new jurisdictions is in some respects only a temporary fix to these issues. What some of these new jurisdictions do offer is the opportunity to be first mover in broadly under-explored terranes (with the added lure of making world-class discoveries).
Increasing security issues in the Sahel and sub-Sahel regions has stifled activities in Mali and Burkina Faso. Cote d’Ivoire is set to pick up some of this slack with similar Birimian greenstone geology to its Ghanaian neighbour, and a fledgling mining industry that is already finding its feet with gold, manganese and nickel production.
There has been a surge of activity across the under-explored Arabian-Nubian Shield, with its demonstrated gold potential and various entry points which include Egypt, Ethiopia, Eritrea and Sudan. Despite historic gold production dating back millennia, the region is still under-explored, and offers high grade, large resource prizes.
The West Congo Craton represents another broadly underexplored geological terrane. Production in countries like Republic of Congo, Cameroon and Gabon has been restricted largely to small-scale alluvial operations but with more systematic regional exploration.
Which country or countries in Africa – taking into account the risks, the geology and the infrastructure – would you most likely invest time and money in to explore if you could do that in 2020?
The biggest risks tend to be nongeological. Any of the jurisdictions mentioned above represent perhaps the best new opportunities on the continent; whether these are taken up will depend on the provision of favourable legislative frameworks and mining codes, increased transparency and security of tenure.
Eritrea has great geological potential that has seen limited exploration. The government is coming in from the cold and is looking to show that it is open for business. They hope that the international banking community will recognise this. Egypt is in a similar situation and has already made good progress with its government delivering the right messages.
Careful area selection is key to any exploration programme. SRK itself does not invest in projects, but we advise our clients to spend time and effort in getting this selection right. The opportunity cost of getting it wrong can be significant. Our message is generally: define which commodities to explore for, select jurisdictions that meet one’s risk appetite, and understand the minimum exploration target size that is significant in one’s business. These parameters can then be matched to an appropriate geological domain.
Which regions or countries in Africa, would you regard as the most attractive in terms of geology but whose deposits are not as accessible for exploration due to infrastructure constraints, political insecurity etc. In other words which countries would you wish to explore but are not able to?
Presently, North and West Africa are becoming increasingly difficult to operate in from a security point of view and come with the additional challenge of exploring under cover. Niger and Sudan, for example, both fit into this category. The Jabel Oheir copper porphyry deposit in Sudan is an exciting new discovery and the first of its kind on the Nubian shield. The DRC also contains large metallogenic provinces which are not fully explored but are increasingly difficult to operate in – with challenges ranging from political instability to lack of infrastructure.
What challenges will exploration companies venturing into Africa have to look out for in the next three years or so?
The availability of capital for higher risk jurisdictions will always be a primary challenge, with money opting to reside in safer jurisdictions and other competing non-mining opportunities. The threat of another global recession would not bode well for the exploration industry, which has had a shaky decade. As an industry, it is important to work on improving on the rate of discovery success to improve the return on capital and make exploration a more attractive investment option. This being said, the increasing ‘cost of discovery’ is squeezing out smaller, poorly capitalised companies from making effective exploration attempts, and the future of exploration may ultimately fall back to the majors.
Access to skills is a challenge, particularly within the fields of remote sensing, machine-learning, prospectivity modelling and advanced geochemistry and geophysics. This can be mitigated by integrating specialist consultants into decision-making processes. Across Africa, there is an increased requirement for social engagement and local content. Where there is uncertainty, this can certainly be challenging. However, this may also be seen as an opportunity to build better local partnerships with host governments and communities which are serious about longterm, sustainable growth.
Security in North and West Africa is a notable concern, with increasingly targeted attacks on mining activities and personnel.
Minerals like lithium, graphite and cobalt are punted as potential money spinners for African countries like Zimbabwe. What are your thoughts and opinions? Should countries like Zimbabwe rather look at their traditional minerals like platinum and gold?
Many of these minerals tend to operate in bubbles and the exploration spend tends to be reactionary, so it is difficult to maintain the sustained investment required to identify, assess and evaluate deposits. For any country endowed with these minerals, it is of course in their interest to commoditise and exploit these resources and diversify its minerals sector as much as possible, which in turn will make it more resilient to commodity price cycles. What is required is a government focus on geological data sources, infrastructure and legislation to develop multicommodity metallogenic regions and diversify commodity risk. This would support these minerals bubbles and fast-track the economic realisation of these mineral opportunities. This requires very proactive legislation and government assistance, and we really don’t see enough of this yet.
Where do you foresee growth in terms of exploration and mining in Africa in the next three years and why?
For the reasons discussed previously, Egypt is looking to see a growth in exploration activities following positive moves by the government. Cote d’Ivoire could also see increased exploration spend as a regional growth point in West Africa.
What are the potential pitfalls for exploration companies venturing into Africa?
With the many operational challenges, exploration tends to be too slow-moving. It is important to get area selection right from the beginning and then to adopt a ‘fail fast’ approach, that is, to dispose of low potential opportunities early and focus only on the best ones. One typically needs to turn ground on hundreds of targets to find one deposit, so one cannot afford pet projects. Hand in hand with this is conducting proper technical and corporate due diligence on investment opportunities.
What new geological equipment and technology is available that will make it easier to find big deposits in Africa?
The next discoveries will be increasingly under cover so we need to adopt techniques that can help us to do this. Ionic leach geochemistry is a new technique that can help identify mineralisation at depth and under cover.
Machine-learning and Minerals Systems modelling are no doubt going to be central to much of what we do going forward. Our ability to work with and integrate large and diverse datasets and to model these in 4D is now a reality. We can provide better decision-making tools by quantifying risk and focusing on the most prospective opportunities. Nothing will replace obtaining a physical drill sample, but if we can get to that discovery intersection faster and cheaper, the overall investment case for exploration improves.
Where do you think will the next big deposit be discovered in Africa?
In a jurisdiction that promotes exploration and is favourable to long-term sustained investment in mining. Is this Cote d’Ivoire? Time will tell.
Your outlook for exploration in Africa in the next three years?
There will be slow growth with focus shifting from traditional areas such as South Africa and West Africa. Exploration across Africa will not be without its challenges but the variety and scope of opportunities across the continent will continue to provide tantalising prizes for those explorers with the tenacity to accept these challenges.