The number of JSE-listed mining companies has more than halved over the past more than a decade, as fewer junior miners turn to the country’s stock exchange as a means to raise capital.
With unlisted entities contributing a growing share of SA’s metal, mineral and coal production, investors are concerned about an industry operating in the shadows.
“The vast majority of SA’s manganese and chrome production is now done by unlisted entities, with no public reporting requirements,” said mining analyst Paul Miller.
In the coal sector, a particularly environmentally sensitive industry, listed companies have gone from contributing 90% to less than half of SA’s overall output.
“The industry going dark reflects a huge lacuna in the law, not only because companies are not accountable to private shareholders, but because local mines often form a small part of a global group listed in London or New York.
“The local mine may be immaterial to them but hugely material to local communities, neighbouring towns and the agricultural industry. It’s laughable that mining companies shouldn’t all be considered public interest companies,” said Miller.
The JSE once accounted for half the world’s listed mining market capitalisation.
With 71 companies listed by December 2008, it is now home to 35 miners, half of which are secondary listings and only 27 of which still operate in SA.
The industry’s dwindling presence on the JSE reflects an inability to fill the gap left by SA’s declining gold reserves and the absorption of local mines into global mining giants.
At the heart of the problem is that the mining industry, particularly junior mining, no longer counts on the bourse as a means to raise capital and attract investment.
Attracting new listings requires a regulatory environment that encourages exploration, a highly speculative and expensive stage in the mining value chain, but the country’s share of global exploration spending has dropped consistently over the past 20 years, from 5% to less than 1% in 2023.
The latest figures from the Minerals Council SA show SA attracting $117.4m in exploration finance in 2023, compared with Canada’s $2.44bn and Australia’s $2.2bn.
The structure of the savings industry in SA has inadvertently meant that any investment in smaller companies, particularly primary capital raising, is very difficult.
— Paul Miller
mining analyst
The distinguishing feature of Canada and Australia’s exploration was that both countries incentivised exploration and mine development as well as the ecosystem supporting the stock exchange, said Miller.
“In Australia and Canada, they have a variety of incentives, including direct government grants for drilling. None of these initiatives have been pursued by the National Treasury in SA,” he said.
Miller said the finance sector’s regulatory overhaul in the 1990s produced a tax regime that continued to favour institutional funds while actively discouraging direct retail investment in companies.
“The structure of the savings industry in SA has inadvertently meant that any investment in smaller companies, particularly primary capital raising, is very difficult,” said Miller.
Within the mining industry, SA’s flagship regulation, the Mineral and Petroleum Resources Development Act (MPRDA), has also been criticised for constraining exploration spending.
“The MPRDA and consecutive mining charters are hostile to the very investors — local and foreign — likely to back speculative mining ventures,” said Miller.
“The MPRDA and charters were negotiated between incumbent big mining companies, desperate to protect their sunk capital, big government and big labour. There was no voice or advocate for exploration companies, neither were specialist mining investors — local or foreign — asked what would attract them to invest,” he said.
With the department of mineral & petroleum resources promising to review the act this year, the Minerals Council has called for more clarity on prospecting rights and a larger exploration fund to support junior miners.
The government’s new mining cadastral system, due to be launched midyear, also aims to boost exploration spending by mapping the country’s mineral rights, permits and mining licences in a publicly available database.
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