South Africa's $26.3 million new mining fund sets stage for exploration boom 🇿🇦

South Africa's $26.3 million new mining fund sets stage for exploration boom 🇿🇦

#energy and natural resources
South Africa has introduced a groundbreaking mineral exploration fund, aiming to bolster participation from junior mining companies. This move aligns with a trend across Africa, where nations are enacting sector reforms to capitalize on the increasing global demand for minerals.

Bonface Orucho, bird story agency

South Africa is charting a new course for its mining industry, betting on local and junior miners to identify and unlock greenfield mines as the country pursues higher sector prosperity.

The country has introduced a new US$26.3 million (R500 million) mining exploration fund for local and junior miners, aiming to tap into the rising global demand for minerals.

South Africa’s minister for Mineral and Energy Resources, Gwede Mantashe, announced the operationalization of the fund at the opening of the annual Mining Indaba Conference in Cape Town on Monday, February 5.

“I am happy to announce that we have passed all the regulatory letters and approvals for the establishment of the fund, which paves the way for us to officially launch the fund,” he announced.

“It is not for big companies; it is for emerging and developing small companies that want to do exploration,” he added.

This bold initiative is poised to ignite economic growth, heralding a resurgence in revenue streams and employment opportunities within the nation's mineral-rich landscape.

The sector is already a key pillar of the country’s economy, employing close to 500000 South Africans, contributing about 7.5% towards the country’s GDP, and accounting for up to 60% of the exports by value.

However, there is an even bigger opportunity to grow the sector further, with the International Energy Agency predicting the demand for rare earth metals will grow by three-to-seven-fold by 2040.

South Africa is the world’s largest producer of some rare earth metals such as platinum and chromium and among the top producers of manganese, vanadium, gold, titanium, and cobalt, among others, according to the IEA.

According to UNECA, despite Africa hosting about one-fifth of the world's mineral reserves, the majority of the continent’s minerals remain unexplored.

South Africa’s share of global exploration activity stood at 5% in 2003, according to SA’s Department of Mineral Resources and Energy, but has now declined to below 1%, a testament to the slowdown in exploration activity.

With the escalating demand for rare earth and strategic minerals, exploration becomes paramount to unlocking new mines.

The new fund is part of the country’s ongoing efforts to close in on the underlying gaps hindering the participation of new players. Different initiatives have also been implemented recently to support and encourage the participation of new miners.

For instance, the government is implementing a new mining licensing system to enhance efficiency and transparency in the application, granting, and management of mining rights permits.

This week, the mining ministry unveiled the PMG Consortium, comprising Canada’s Pacific GeoTech Systems, the MIT Institute, and Gemini GIS and Environmental Services as the preferred bidder for implementing the new system.

The system will facilitate faster issuance of mining and prospecting rights permits in the country, where the Minerals Council estimates a backlog of more than 3,000 licenses. 

South Africa joins a growing number of countries across the continent that are showing increased interest in revamping exploration in a bid to unlock greenfield mines that could open up more robust economic value from the sector.

A 2023 report by S&P Global on ‘World Exploration Trends 2023’ shows exploration allocations on the continent increased by 11.6%, less than the global average.

Speaking at the Mining Indaba Conference, Zambia’s president, Hakainde Hichilema, revealed the launch of a national geological mapping programme in his country “to better understand its mineral resource deposits and untapped potential.”

Zambia, a frontrunner in copper production, is determined to uphold its position, especially with projections from the IEA indicating a need for an additional 9 million tons annually by 2040 to satisfy rising global demand for the metal.

In Kenya, a relatively smaller player in the continent’s minerals market, a recent geological survey has led to the discovery of large deposits of Coltan, according to the country’s mining minister.

Coltan is a highly valued mineral used in the manufacture of electronic devices such as phones and computers.

Nigeria is also taking bold steps in its mining and extractives sector, seeking to diversify the sector and reduce overreliance on oil and gas.  

According to Premium Times Nigeria, a Nigerian news platform, the government is in the process of creating a state-backed solid minerals company in a bid to develop the sector by incorporating private players in the sector.

According to industry experts, initiatives seeking to empower exploration are critical, as they will ensure the continuity of Africa’s legacy as a mining hub.

“Even as we advocate for value addition and higher revenues from the sector, we have to ensure we sustain the output, and this can only be achieved through more exploration and welcoming new players,” Mary Anne Charo, a member of Women in Mining Kenya, explains.

The 2024 Mining Indaba Conference is being held at the Cape Town International Convention Centre (CTICC) between February 5 and 8, 2024, under the theme ‘Embracing the power of positive disruption: A bold new future for African mining’.

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