SA junior and emerging miners table their challenges (Part 2) – Miners speak out and ‘call a spade a spade’

By Sharyn Macnamara

In part two of our series, junior and emerging miners share their experiences and call a ‘spade a spade’ at the Mazars and the African Mining, incorporating Mining Mirror publication round table discussion held last year.

Errol Smart, MD and CEO Orion Minerals and chair of Junior Exploration and Mining Leadership Forum at the Minerals Council, chaired the discussion. Party to the discussions were Mandy Malebe, CEO at Lethabo Exploration; Godfrey Mocwane, CEO at New Venture Mining Investment Holdings (Pty) Ltd; Botlhale Seageng, Minerals Promotion Head at the DMRE; Mantengu Group CEO, Mike Miller, Bongiwe Mbunge, lead partner in ESG Mazars and Grant Mitchell, head of Junior and Emerging Miners Desk at Minerals Council SA took part in the discussion.

Despite well-intended transformative policy in the form of the Mineral and Petroleum Resources Development Act 28 of 2002 and the Mining charter, according to the boots on the ground (and let’s face it, they are experiencing the symptomatic challenges first hand), there have been irregularities in the system and also a list of unintended consequences, caused by a “one-size fits all” mentality among other issues, which together impede growth in this explorative sector. Perhaps the most telling and blatant injustice in this story is the sad confusion in the industry – for some time now – as to what the actual definition of a junior/emerging miner is, not to mention the unfortunate neglect of this essential sector of the industry that represents the exploration drive of South Africa in that the last updated statistics describing this sector to the ‘powers that be’ are from 2003. “The last statistics, relied upon by National Treasury date back 20 years?!” stated Smart. In seeking to understand and support this sector of the industry in South Africa, the Minerals Council South Africa implemented an extensive research study² which was concluded in 2019, the question is – perhaps it is time the DMRE sought to understand this sector more deeply?

 

Regulation abuse, collusion and violence

The first miner to share her journey was Mandy Malebe, CEO of Lethabo Exploration. Lethabo Exploration is 100% South African owned; 100% black owned – and self-funded –presumably the epitome of the face of a transformed South African Mining industry that the DMRE is trying to achieve. However, Malebe said unequivocally, “Being young and being a black woman doesn’t change anything when it comes to regulatory challenges experienced daily by South African miners. Whether a company ticks the transformation box or not, it is not exempted from being plagued by the current ills of the industry. The challenges are standard and affect all.” The greatest abuse experienced by Lethabo Exploration was in fact accommodated by the DMRE. Perhaps, she noted, the DMRE on a national level is not aware of these abuses, however they are a reality at regional level. 

“We cannot shy away from speaking out about these things out of fear of what might happen. Because whether one speaks up or one keeps quiet, one suffers nonetheless!” She explained that there are certain DMRE officials at regional level aware of, if not allegedly involved in, collusion. “Violence takes place and not always on the minesite. When investigations are conducted, it all boils down to someone feeling entitled or ‘corruption insurance’. These attacks are so brazen, it comes across as if the confidence of the perpetrators is fuelled by the backing or cover from an official at the Regulator.

“We cannot have exploration companies or emerging miners being attacked because of minerals. Especially when these unsuspecting companies have financially invested in the prospecting – identifying and proving the minerals are there in the first place – and then when an official application is made to the DMRE for the mining right, suddenly an avalanche of additional applications appear out of nowhere. This is a common occurrence and even the majors have made complaints with regards this kind of activity,” said Malebe.

Is the regulator regulating?

Access to information from the DMRE is one of the greatest challenges faced in the industry currently. It has been Lethabo’s experience that after submitting an application for a prospecting right, which was rejected by the DMRE (without reasons supplied), follow ups, queries and a subsequent objection as well as an internal appeal have remained unanswered for three years; and this while the competing applicant had progressed and graduated to a mining right. The system simply does not work – delays result in redundancy of objections of those who are complying with the regulations. “We were told by the regional manager at the DMRE that the RMDEC (Regional Mining Development and Environmental Committee) works separately to the procedures of the mining and Prospecting Rights applications, as well as Objections and Internal appeals.” The theory of the Mineral and Petroleum Resources Development Act of 2002 (MPRDA) does not work in practice and regulations are not consistently, equally or transparently applied by the Regulator; and these loopholes are allegedly being exploited by those colluding within the system.

The repercussions are far reaching for all. What kind of investor invests in an unregulated environment, where the law is not upheld? This is why Lethabo Exploration had to self-fund, which speaks to one of the greatest additional challenges juniors face. SLPs also then just become tick-boxes and not the far-reaching, meaningful and impactful programmes in the community they are devised to be. “This is not a unique experience, operations such as Lethabo Exploration are held back financially with all the other struggles that we face, and we cannot live up to the promises in our SLPs,” said Malebe.

Smart added that an additional and unintended consequence of these experiences is the adversarial relationship that has developed between the mining industry and the DMRE, who should in fact be championing the industry and whose constitutional obligation it is to see optimal exploitation of the nation’s minerals.

 

Inclusivity irony and lack of access land

Godfrey Mocwane, CEO at New Venture Mining Investment Holdings (Pty) Ltd, a veteran mining entrepreneur with decades of experience in the mining space, spoke of his disillusionment with the way things have panned out since the MPRDA was enacted in 2002. At the time he was an operations manager for Glencore (then Xstrata Plc), and he immediately started planning his resignation for the new and exciting prospect of being a mine-owner in a what was a thriving explorative industry in those days.

Mocwane noted that his first disappointment came when he realised the irony inherent in the fact that inclusivity is promised to previously disadvantaged entrepreneurs in sections 2D and 2F of the MPRDA, which is in direct conflict with the required proof of financial competency when applying for prospecting right (PR) of which the Prospecting Activities (Programme) cost R2-million or more over a five-year period. This amount is required to be in the entrepreneur’s bank account as cash before s/he applies for the Prospecting Right. “What previously disadvantaged individual can come up with that kind of cash at the start of the application for a PR?” he asked rhetorically. After approaching the Industrial Development Corporation (IDC) at the time when risk-averse local bank loans proved to be a non-starter, he realised that funding would become a major hurdle in the development of his independent business plan – investors wanted a 50%+ shareholding, while off-taker investments from the Italians (for granite) and the Chinese (for chrome and coal) would mean he did not get to manage his dream operation in the brass tacks business of mining – “At the time, the Chinese and Italians did not want any more of my involvement in the mining operation (Drilling, blasting and loading and hauling) as they used their own resources for all else,” – once again defeating the object of inclusivity.

Over and above this, part of this first blow of disillusionment was the reality that most of the mineral rights were already allocated to the majors in 2004. The small batches of mineralised land located within and in-between these majors, which had been left unattended, were the next route to market for Mocwane (and no doubt more of his peers), but again dreams were dashed when the size of the mineralised land available was not amenable to an IDC loan – at the time Mocwane had managed to apply for and be granted ten prospecting rights for granite (dimension stone), coal and platinum opportunities. Only eight years down the line did Mocwane’s dream prospecting right in the form of 9 000 hectares of possible magnetite, iron-ore and vanadium come to fruition.

Impractical timelines

Again, more struggles were ahead in the form of ‘time’ – which industry understands, off the bat, ‘waits for no one’: Mocwane described enduring impossible timelines of up to two years for prospecting rights to be approved by the DMRE without access to substantial information; fighting private ownership in courts; finding that community negotiations for sign off required by the ACT before prospecting can even take place, can take the better part of three years – starting off a base of up to 10% free shares in some instances causing the loss of the prospecting right due to the inability to fine-tune agreements within the five-year prospecting period stipulated by the Act – the impracticality and unrealistic requirements of the Act being the major impediment to the pie-in-the-sky-promised inclusivity.

With far more than a decade of toil and patience down the line, when Mocwane finally got a shot at mining in the true sense of the word, – based on the “one size fits all” and blanket approach in the latest regulation/directive released by the DMRE (Mine Health and Safety Inspectorate) on mining equipment Pedestrian Detection Systems (PDS). “And this, despite our previous risk assessment and mitigating actions in line with the requirements of the MH&S Act. The waiting period to apply for and, if lucky, get an exemption from the new regulation which insists on PDS systems being installed in all mining mobile equipment – for the right reasons – for an operation is between 14 and 21 days of down time. What small operation, in fact what operation at all can afford that?” Mocwane asked.

Smart summed it up – “And, therein lies the fundamental irony – mineral rights were initially nationalised in the enactment of the MDPRA to make these opportunities accessible to all. The system – the Act, the processes and the Regulator – have however not lived up to this promise.”

Since the round table discussions in November 2023, the DMRE – finally after years of critique –announced that the tender had been awarded for a South African cadastre system, which the industry has lobbied for over five years. This will be instrumental in managing the country’s exploration activities in an auditable, transparent and efficient way and in creating the right environment for investment. The IDC too, in partnership with the DMRE, announced a R400-million Junior Mining exploration fund to be deployed in tranches of R100-million; R150-million and R150-million in May, August and November, respectively in 2024.³ These two solutions will go a long way to resolve some of the experiences shared at the round table meeting but again the industry waits with bated breath, hoping that these solutions are implemented as soon as possible. Considering no prospecting or mining rights were issued by the DMRE in 2023 and the massive backlog of over 2 500 applications, the goal of one year to start implementing it, seems too ambitious.

Watch this space for a response from the DMRE and some positive solutions with a difference suggested by the miners at the round table discussion, Mazars and a South African investor with a unique differentiator.

References

1. https://www.africanmining.co.za/2024/05/01/sa-junior-and-emerging-miners-table-their-challenges-the-status-quo-part-1/
2. https://www.africanmining.co.za/2022/05/03/junior-mining-what-will-it-take-to-develop-at-a-faster-pace-in-africa/

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