🕐14.03.13 - 11:27 Uhr
SA MINERS NEED CERTAINTY TO CONVERT RISKS INTO POTENTIAL - GRANT THORNTON SURVEY
Good Day
Please see a news release below highlighting core findings from Grant
Thorntons International Mining Survey specifically relating to South
African miners responses.
The findings have revealed that South African junior miners have been
negatively impacted by the mine nationalisation concerns of 2011 and 2012
with 51% of respondents revealing that nationalisation issues have directly
hampered their ability to access finance.
In addition, only 15% of junior
miners throughout South Africa believe that the Mining Charter has been
successful in transforming the industry, with specific reference to BEE
participation elements in the Charter.
Just 41% of respondents believe the
Charter has been successful "to some extent".
Should you wish to chat to Steven Kilfoil, please do not hesitate to contact
me.
Kind regards
Lianne
LIANNE OSTERBERGER
Strat Comms
Communications Advisor | Media Relations Consultant
mobile: +27 83 27 27 313
email:
News release from Grant Thornton
SA junior miners need certainty about the future to convert risks into
potential
14 March 2013
South African junior miners* say that uncertainty arising from
nationalisation debates in years past coupled with a Mining Charter thats
failing to meet its original objectives have limited growth and expansion
opportunities for the junior mining sector countrywide.
A recent survey by Grant Thornton has revealed that South African junior
miners have been negatively impacted by the mine nationalisation concerns of
2011 and 2012 with 51% of respondents revealing that nationalisation issues
have directly hampered their ability to access finance.
Nationalisation and raising finance graph.jpg
In addition, only 15% of junior miners throughout South Africa believe that
the Mining Charter has been successful in transforming the industry, with
specific reference to BEE participation elements in the Charter.
Just 41% of
respondents believe the Charter has been successful "to some extent".
This is according to Grant Thorntons International Mining Report for 2013,
entitled Turning high risk into high potential which surveyed junior
miners in four countries where mining is a priority - namely South Africa,
Australia, Canada and the UK (specifically for its large amount of mining
companies listed on AIM) .
The report highlights the difficulties facing
mining companies today and illustrates how various issues will impact mining
operations in the coming year.
More importantly, the report underscores that
there are opportunities for mining executives to leverage creative solutions
to these challenges.
The nationalisation concerns which were raised in the research were with
specific reference to challenges which junior mining organisations are
facing in terms of accessibility to finance
Half (49%) of the respondents in the report indicated they would need
finance for their businesses within the next two years, 26% of which need
funds within the next six months.
"It is vital that companies are in a position to raise finance, and this is
becoming increasingly difficult," says Steven Kilfoil, mining advisory and
corporate finance director at Grant Thornton Johannesburg.
"Uncertainty
arising from the nationalisation debate harmed the industrys ability to
raise finance and any instability going forward will have the same negative
impact.
"Thankfully the nationalisation issue has now been settled and this
stability will assist miners to access funding.
Investors need
predictability for resource exploration and development projects.
The
lesson for government is that there must be certainty on all the issues over
which it has control, including land claims."
In terms of transformation of the local mining sector and BEE participation,
Kilfoil says that the Mining Charters biggest problem is that specific
measurable targets have now been set, to the detriment of the essence of
the Mining Charter.
mining charter graph.jpg
"The Mining Charter was set to engender a spirit of transformation and
inclusion; one that will give local communities access to SAs underground
wealth.
With the introduction of targets which need to be met by mining
companies, however, the emphasis has shifted from the real spirit of the
Charter to one of simply meeting the targets and checking the boxes," he
says.
"Miners may now be more focused on achieving 26% ownership
participation by historically disadvantaged South Africans by the end of
April 2014 than on real transformation.
Once they have ticked the
compliance box, they may become complacent."
Another negative highlighted by the survey is the issue of bribery and
corruption with 40% of SA miners stating that bribery and corruption is a
significant concern, nearly double the global figure which was 23%.
SA junior miners are bullish about future growth prospects
The findings were not all doom and gloom.
After two tough years for mining
in South Africa, junior miners are optimistic about the next 12 months.
SA mining executives are in fact more positive than their counterparts in
Canada, Australia and the UK, despite expectations of significant cost
increases this year, and their responses suggest the sector can look forward
to positive growth.
"Being positive about the future is good news for our economy," says Steven
Kilfoil,.
"The report shows that mining executives are beginning to see
light at the end of the tunnel following a period of mine violence, strikes,
uncertainty surrounding the mineral regulatory regime and ambiguity around
governments plans on nationalisation."
The mining report revealed that SA junior miners will spend more on capital
equipment and, despite knowing that labour and energy costs will increase
significantly, they also expect to be profitable, with half (49%) of the
respondents in SA also anticipating increased revenues this year.
This is
significantly higher than in Australia (36%), Canada (31%) or the UK (21%).
In terms of future investments, nearly half (49%) of SAs junior miners
expect to increase their investment in plant and machinery over the next 12
months, compared to a global average of 42%, while two thirds of respondents
(62%) are looking forward to higher commodity prices (compared to 54%
globally).
The survey also highlighted that 44% of SA junior miners will employ more
people with a positive outlook also expected for the year ahead in terms of
salary increases across the junior mining sector.
A total of 44% of local
respondents in South Africa have responded saying they would increase
salaries by more than inflation, while 46% will offer pay rises in line with
inflation.
Kilfoil believes this optimism across South Africa is probably warranted,
although he highlights the fact that miners in general tend to be hopeful.
"Perhaps part of the reason is the innate optimism of those who choose
mining for a career, scouring the earth for chances at outsized returns on
investment despite long odds," he says.
SA was not hit as badly by the economic recession as many other mining
countries.
Kilfoil recently attended the Prospectors and Developers
Association of Canada (PDAC) annual conference in Toronto, where he says the
mood on the floor was generally pessimistic.
"Canada has approximately 1200 listed junior miners of which only about 800
are expected to survive the next 12 months," he says.
"A third of them will
disappear or be absorbed by major players.
The country therefore has a
number of economically unviable listed resource companies that were able to
raise initial funding and start drilling.
Now, however, they cannot access
any further funds."
One way to raise finance is to go to market, and thankfully the SA market is
more robust.
Johannesburg Stock Exchange requirements are far stricter than
those of other major mining countries.
"While this has to some extent stifled exploration, it has also been very
positive as investors are better protected and our exchange ensures that
assets that come to market are good assets," says Kilfoil.
"I have always been a huge proponent of exploration.
Its vital - but it
needs to be done carefully.
We dont want to end up with a situation
similar to that of Canada where there is a proliferation of smaller
companies that have raised money for exploration but are now cash-strapped."
Issues of over-regulation were also raised in the survey, by SA junior
miners.
"Too much red tape causes needless project delays, discourages investment in
the sector and dampens enthusiasm for exploration," says Kilfoil.
"In South
Africa, it takes on average nine months to process an exploration license
application while in Australia project approval times have increased from
months to years."
Access to a skilled workforce was not much of a concern to the SA junior
miners, however, and was in line with the rest of the world.
This is in
contrast to the findings of the recent Grant Thornton International Business
Report which showed that 58% of SA businesses had difficulties in recruiting
skilled workers.
"This talks to the fact that our mining industry is mature and strong, with
a significant group of people that really knows the business - and
understand how to mine," concludes Kilfoil.
Ends (1277 words)
Notes to editor
* Junior Miner - definition according to Grant Thorntons International
Mining Report 2013
Miners grouped by the primary stage of flagship asset of "greenfield
exploration," "brownfield exploration," or "pre-feasibility."
However, in terms of South Africas sample of companies surveyed, the above
"junior miner" definition also included some companies which are involved in
low-level production
Issued by Strat Comms on behalf of Grant Thornton South Africa
Lianne Osterberger 083 272 7313 /
For more information contact
Steven Kilfoil
Director: Mining Advisory and Corporate Finance
Grant Thornton Johannesburg
T +27 (0) 11 322 4530 | M +27 (0)82 567 8993
E
Pamela Grayman
Principal, Head: national marketing and business development
Grant Thornton South Africa
T +27 (0)11 322-4586 | M +27 (0)82 410-1149
E
Nico Olwagen
Regional senior manager: sub-Saharan Africa
Grant Thornton International
T +27 11 322 4593 | M +27 82 492 4281
Thabo Maleka
Marketing
Grant Thornton South Africa
T +27 11 322 4866 | M +27 79 447 5712
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