South Africa aims to 'reinvigorate' exploration, tap critical minerals

South Africa is rejuvenating its critical minerals exploration sector to boost its place in the clean energy supply chain.

The country's mining sector generated $89 billion in corporate tax and $28.45 billion in royalties in fiscal 2022, contributing 7.53% to South Africa's GDP, Gwebinkundla Qonde, special adviser to Minister of Mineral Resources and Energy Gwede Mantashe, told the Africa Down Under conference in Perth, Australia, on Sept. 7.

Yet South Africa was among the 10 least attractive countries for mining investment in the Fraser Institute's latest annual survey of miners in 2022, due to issues around power and port infrastructure, labor skills and regulatory uncertainty.

Gwebinkundla Qonde, special adviser to South Africa's mineral resources and energy minister, addresses the Africa Down Under conference in Perth, Australia, on Sept. 7. Source: Paydirt Media

The government is now "urgently" working with the industry to change that reputation, Qonde told the conference. It is facilitating exploration through a 500 million rand fund for juniors and pouring "huge amounts of money" into the Council for Geoscience to de-risk exploration. A new online cadastre system will also be up and running by the end of the year to improve permitting, Qonde said.

Qonde said the critical minerals sector "must evolve to address" the continent's key challenges including energy supply, food security, poverty, unemployment and lack of industrialization.

"South Africa has an extraordinary wealth of resources waiting to be unearthed," Qonde said, noting the country's "abundant reserves" of coal, platinum group metals, gold, diamonds and critical minerals like iron ore and manganese. "It is time to shift the focus, reinvigorate exploration efforts and rediscover the untapped potential that lies within our borders."

According to S&P Global Market Intelligence data, South Africa has the world's largest reserves and resources of both manganese and platinum, and the second-largest reserves and resources of palladium behind Russia.

Addressing energy concerns

In order to attract foreign investment in mining, "we must simultaneously guarantee infrastructure such as energy and rail," Qonde said.

The government loosened requirements for building embedded electricity generation projects: first raising the 1 megawatt threshold to 100 MW in 2021 and then removing the cap altogether in 2022. Companies pushed for the changes in response to unreliable local grids.

"Mining companies such as Gold Fields Ltd. took the opportunity to generate their own power, which resulted in 10% production growth despite the 9% decline year on year in the sector's overall production," Qonde said. The government has also observed an "upsurge in more companies investing in owned power generation capacity since these amendments."

Qonde conceded that load shedding has constrained mining output over the past two years, but the "slight improvement in the energy availability of some [Eskom Holdings SOC Ltd.] plants ... gives us hope that we are efficiently addressing this challenge."

The government will procure 10,000 MW of renewable energy, 3,000 MW of gas-to-power energy, 2,500 MW of nuclear energy and 1,230 MW of battery storage this financial year to help address the energy challenges.

Moving up the value chain

While there is very little smelting in South Africa beyond a few small operations due to energy constraints, "the world of high-energy smelting is coming to an end," Orion Minerals Ltd. CEO Errol Smart told S&P Global Commodity Insights on the Africa Down Under sidelines.

Processing critical minerals to the specifications required for end users' supply chains "is going to be the key" to the country's industry, according to Smart.

"The days of producing lumps of metal and selling it at a London Metal Exchange price [are] coming to an end, because end users, including electric vehicles, want certified product," Smart said. "It's a very specialized field, and it's going to change the outlook, particularly for junior miners, because it's bespoke and needs to be done on a smaller scale."

Orion Minerals is working on a low-energy metal vapor refining technology that separates metal powders from the metal concentrates that will be produced at its mining projects in the Northern Cape province.

A vertically integrated gigafactory being planned in South Africa to produce anodes, cathodes and lithium-ion batteries will also "create the market to drive the development of critical metals," Smart said.

There is also "massive investment" being sunk into the hydrogen economy in South Africa, driven by the likes of Anglo American PLC and Gold Fields. If successful, the projects have the potential to "change the whole value chain" of critical minerals, Smart said.

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