SA uncertainty has miners worried says Grant Thornton

Advisory firm Grant Thornton's latest International Mining Report has painted a bleak picture of South Africa's mining industry.

It showed nationalisation debates, uncertainty over mining rights, corruption and a Mining Charter "that's failing to meet its original objectives have limited growth and expansion opportunities for the junior mining sector" were major concerns for executives.

The Grant Thornton report, entitled Turning high risk into high potential, surveyed 389 mining executives in four countries – South Africa, Australia, Canada and the UK.

It showed 57 percent of executives in South Africa felt disputed exploration rights or uncertainty around titles for their assets were a significant or moderately important issue.

"The Grant Thornton international mining survey finds that nearly half of mining executives are concerned with uncertainties around titles to assets," Mark Zastre, global industry leader mining, Grant Thornton Canada, said.

"Without clear title to your asset, you may have nothing," he added.

Corruption in South Africa was also a concern, with 41 percent of executives saying bribery and corruption was of significant concern.

"I think the percentage in South Africa is probably a little higher than I would have expected, but based on some events in the country, obviously mining executives are concerned," said Steven Kilfoil, mining advisory and corporate finance director at Grant Thornton Johannesburg.

More broadly, the survey revealed access to funding by mining companies was the leading constraint on growing their businesses, with 44 percent of executives saying it was a major factor.

Half (49 percent) of the respondents in the report indicated they would need finance for their businesses within the next two years, 26 percent 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," said Kilfoil. "Uncertainty arising from the nationalisation debate harmed the industry's 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."

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 were more positive than their counterparts in Canada, Australia and the UK.

"Being positive about the future is good news for our economy," said 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 government's plans on nationalisation."

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