Modern Mining June 2021

REGIONAL FOCUS – SOUTHERN AFRICA

The case of exploration investment in southern Africa

to spend capital to drill, explore and turn potential endowment into resources, reserves and ultimately launch mining operations. “Without good geological data, there is no invest- ment, and without reasonable certainty around investment it is not that easy to argue for base level exploration by government. However, the first step for government is to enhance the quality of geo- logical information and accessible mapping that is provided to early stage exploration companies and mining companies so that they can make assess- ments and decide where to conduct exploration,” says Möncks. As with the industry at large, however, speculative investment in exploration is increasing into 2021 – at least in some commodities such as gold and those seen as critical metals, says James Gilbertson, MD, SRK Exploration Services. “However, 2020 exploration expenditure was down from the previous year across the board. This 2021 uptick may be less marked than in other regions of the world, though, as developed nations look to encourage investment in their own jurisdic- tions. The lack of major new discoveries in southern Africa – as with the rest of the world – is also impact- ing future pipelines,” says Gilbertson. Commenting on the state of affairs as far as exploration investment is concerned in southern Africa, Wessel Badenhorst, partner – Hogan Lovells Johannesburg, says that in the decade 2011 – 2021, there were 83 FDI projects in southern Africa (US$49,19-billion) with an average of USD592,7- million per project and some 43 762 jobs created. “Some 67 companies invested in 12 destination countries in coal, oil, gas, metals and minerals. UK is the top source country, accounting for 25% of the projects. France is the highest investment per value. South Africa is the top destination country with almost 25% of all the projects,” he says. Priority countries While exploration budgets have not yet returned to 2018 levels, says Gilbertson, the major benefac- tors of exploration expenditure in recent years have been Angola and Namibia. The two countries have leapfrogged Botswana and Zambia into the top four southern African countries. This may have been affected by the Angolan government’s promotional activities, coupled with its granting of permits, and the drop in diamond investment in Botswana. In a SWOT analysis series published by Business Monitor International, Angola’s mining sector is less

Exploration activity is fundamental to the future success of the mining industry. For mining companies, it is similar to research and development expenditure – searching for business opportunities to develop in the future, but is southern Africa attracting enough exploration investment? By Munesu Shoko .

G lobally, greenfield exploration has experienced a significant dip, with the majority of efforts cen- tred around existing projects. With this trend echoed across southern Africa, the region’s reputation on the global stage is that of a mature mining sector with limited exploration potential. Tycho Möncks, MD and Partner at Boston Consulting Group (BCG), Johannesburg, says south- ern Africa has endowment and potential endowment, but there is uncertainty in terms of the quantity, qual- ity and how accessible the endowment is. This lack of visibility and transparency with regards to ground exploration is hindering investment from early stage exploration companies and diversified miners willing

Speculative investment in exploration is increasing into 2021.

22  MODERN MINING  June 2021