🕐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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