And the lowest share of African exploration spend in two decades
By Paul Miller - Director: AmaranthCX
An analysis of S&P Intelligence's global budgeted exploration spending data shows South Africa's 2020 share at US$77.4 million, down 20.5% from the US$97.4 million recorded in 2019. The last time the amount was lower than US$77.4 was in 2002 when US$68 million in exploration spending was recorded, the same year in which the MPRD Act was passed by parliament.
Source: S&P Intelligence
S&P Intelligence appears to be the only source of publicly available South Africa exploration spending data. Most advanced mining jurisdictions track and publish detailed exploration related statistics as an important leading indicator of the health of their overall mining industry. Those exploration statistics don't only reflect spending, but also operational metrics like metres drilled per month.
Here in South Africa the DMRE neither tracks nor regularly reports any exploration statistics, so there are no alternative data trends to consider. It is believed that there are between 4 500 and 5 000 granted, and therefor ostensibly active, Prospecting Rights, but without any officially published statistics it is impossible to detemine how many Prospecting Rights are actually being worked. The strong suspicion is that many are unfunded (and therefor unlawfully granted, as this is contrary to the requirements of 17.2(a) of the MPRD Act) and are thus being held dormant, with the mineral potential effectively sterilised.
There has been a 7.8% decline in overall exploration spending in Africa to US$1 010.6 million in 2020, which makes up 12.4% of S&P Intelligence's estimate of global exploration spend. South Africa has now dropped into 6th position, behind the DRC, Côte d'Ivoire, Burkina Faso, Mali and Ghana in the S&P Intelligence's ranking of African countries. Of the six top ranked African countries, only South Africa does not have an open, transparent, online mining cadastre.
South Africa's percentage share of African exploration spend continues to decline and is now at a two decade low of 7.66%, nothwithstanding Minister Mantashe's claim that Mining Charter III has brought all the policy certainty that investors need. This is just 0.95% of global exploration spend. A devastating statistic for what was once the greatest mining country on earth.
It is now abundantly clear that investors in minerals exploration have not responded positively to Minister Mantashe's rushed 2018 Mining Charter III, nor President Ramaphosa's entreaties to invest in South Africa. This suggest a more fundamental reform of South Africa's mining investment policy is required.
Minister Mantashe has announced that he believes South Africa should attract at least 5% of global exploration spend and that a new exploration strategy, devised through negotiations between the Minerals Council SA, the Council for Geoscience and the DMRE is in the works.
It will be interesting to see what kind of strategy the Minerals Council SA will be willing to endorse as the Minerals Council SA has traditionally been an extremely poor advocate for exploration, being more interested in protecting the returns on their members' sunk capital, rather than in attracting early stage investment into the industry. It is, however, rare for the Minerals Council SA to be in such a strong negotiating position, as the government needs the Minerals Council SA's endorsement for its promised exploration strategy, however the Minerals Council SA has nothing to lose (as its members basically don't invest anything in greenfields SA exploration at present anyway) by walking away from endorsing an obviously sub-optimal outcome.
It seems that a far deeper legislative and regulatory reform program, coupled with material improvements in administrative efficiency is required for there to be any improvement to South Africa's current dismal exploration performance - rather than a strategy document negotiated in secret and, like the later Mining Charters, of uncertain legal status.