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It is still a buyers’ market when it comes to the supply of exploration or construction services in mining, although this situation may be due for a correction.

Partner and principal consultant at SRK Consulting SA, Andrew van Zyl, is of the opinion that there are good skills available for exploration, mine planning and development – and at a reasonable cost for investors with capital. This is despite a considerable skills drain from the sector over the downturn.

Still a buyers market for project developers says SRK

Commencement of a trenching programme targeting Lithium-Cesium-Tantalum (LCT) pegmatites in Rwanda.

“Demand for these services is still lower than it should be,” said Van Zyl, emphasising that SRK has a good reputation for retaining experienced staff in its ranks for lengthy careers in what is a notoriously cyclical industry.

“However, the skills drain from the mining industry generally may make it difficult to staff new mines and operate effectively,” he warned. “This challenge is matched by a shortage of skills in the mine servicing sector; this was already evident during the previous boom years, when the quality of work done was not always of a high standard – perhaps even prejudicing the success of a number of projects.”

SRK partner and principal mining engineer Marcin Wertz agreed that cost-cutting on many mines has led to considerable thinning out of senior technical experts.

“This has meant that many mines are increasingly reliant on outside expertise – from service providers and suppliers, for instance,” said Wertz. “For consultancies like SRK, who have retained key staff over decades, we have been able to contribute quite constructively to helping provide the necessary institutional memory to keep operations optimal.”

Beyond the human resources capacity of mining, the cutbacks have also had other detrimental effects.

“While the industry has fairly effectively controlled costs, there remains a concern that this has been done at the expense of sustainability,” said Van Zyl. “Adjusting to the much lower commodity price environment has meant cutbacks in exploration and in reserve and resource replacement.”

As mining in South Africa hopes for better times, the recent decisions over the Mining Charter are expected to improve the regulatory environment. Stability in the regulations going forward will give investors more confidence in making the long term investments required in exploration and mining, according to Oliver Bayley, senior exploration geologist at SRK Exploration Services.  This would help support the goal of a home-grown junior sector.

“There is good potential for discovery and exploitation of smaller mineral deposits in South Africa that have not been worthwhile for the larger players – who have historically held much of the ground – to pursue,” he said. “However, this kind of investor is particularly sensitive to issues related to sovereign risk and tenure.”

He said SRK Exploration Services has certainly seen an uptick in enquiries for exploration work in recent months, but often the champions do not have strong mining backgrounds and have limited access to the levels of capital required.

“They also face a local investment environment in which high-risk capital is hard to find,” he said. “Ideally, an exploration company will have a portfolio of prospects they can regularly review, and from which the best options can be chosen for funding; there are not many companies of this scale in South Africa.”

He foresaw some growth in both exploration and mining ventures in the near future, which would have a beneficial effect on employment and host communities.

“While there are some opportunities in South Africa that will lead to exploration, these are limited compared to the rest of Africa,” said Bayley.

Wertz highlighted the potential role of smaller companies in reviving South Africa’s mining sector – and said regulations needed to be conducive to fund-raising, as this was a particularly high-risk segment.

“Such investment would promote wider access to the sector, and hasten the transformation that all stakeholders are seeking,” he said.

SRK continues to serve its mining and exploration clients in countries across Africa, with its West African office in Ghana, its Central African office in the Democratic Republic of Congo and its renewed focus on East Africa. Its integrated range of services extends beyond mining, geological and geotechnical work to environmental, social, water, energy and related disciplines.

Photos courtesy of SRK

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