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South African Mineral Exploration 2023

What do the financial statistics say?

SA Reserve Bank Quarterly Bulletin

Statistics SA collects statistics on gross fixed capital formation and these are published regularly by the SA Reserve Bank in its Quarterly Bulletin time series. Gross fixed capital formation is the formal term for investment in expanding South Africa's productive capacity. It is often used as a proxy for long-term economic growth prospects.

There is a subset of gross fixed capital formation for "mineral exploration & evaluation" (KBP6199Y). This is the money being spent on expanding SA's future mining capacity - or rather, since mining is a depleting industry, money spent first on replacing exhausted, or mined-out, productive capacity and then on expanding the mining industry.

Bear in mind these are the government's own numbers - they are not the result of some flawed foreign survey, nor are they based on investor or mining company executive perceptions. These are cold, hard rands and cents. Here is the time series, from 1960 to 2022, indexed to 2015 rands.

2022 saw R1.907Bn invested in mineral exploration and evaluation (R1.284bn in 2015 rands). This is the second lowest year since the time series began in 1960. 2021 was the low point with just R1.683bn invested (R1.245bn in 2015 rands). For reference in 2022 that was approximately US$100m.

So on an absolute basis South Africa is very slightly off its all time low of 2021.

S&P Capital IQ

S&P Capital IQ conducts an annual survey of global mineral exploration budgets, and provides the only relative, rather than absolute statistics that can be used to compare SA's performance to the rest of Africa and the world. S&P's survey found that SA had attracted US$104m in exploration budgets for 2022 and US$117.4m for 2023. These numbers are roughly in line with the SA governments own numbers.

The survey found that SA had attracted just 0.8% of global exploration budgets in 2022 and 0.92% of global exploration budgets in 2023.

In 2019 the SA government set itself a target to attract 5% of global exploration spend within 5 years. This means that by next year SA should attract about US$636m or R12bn in annual investment to achieve the target - up from the current US$117m or R1.9bn depending on whose number you prefer.

Junior Mining Exploration Fund

Recently the Industrial Development Corporation and the Department of Mineral Resources and Energy announced the establishment of R400m fund to support exploration by junior miners. The fund, to be invested over a number of years, and as welcome as it is, will not go far to address the approximate R10bn annual deficit in investment between the current sub 1% performance and the radical improvement that would be required to attract 5% of global exploration investment.

South Africa needs a 5 to 6 fold increase on exploration spend to meet its 5% target and to return to the investment levels of 2004, the year the Mineral & Petroleum Resources Development Act (MPRDA) was promulgated and the first of multiple Mining Charters introduced. This is a radical improvement which suggest both radical policy and administrative improvements are required to attract the targeted investment.

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