Where’s the money? Funding for juniors.
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The document discusses funding challenges for junior mining exploration in Southern Africa. It notes that while global exploration budgets are rising, Southern Africa is not attracting a large share of funding due to perceived risks in the region. Specifically, investors are deterred by concerns about unstable policies, unclear legislation, and a lack of economic and political stability in some countries. However, the document also points out strengths in Southern Africa like mineral prospectivity and a track record of production, and it suggests ways the region could increase investment, such as developing financial markets and leveraging high net worth individuals.
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Where’s the money? Funding for juniors.
- 1. Where’s the money? Funding for juniors. Junior Indaba Johannesburg 4th – 5th June 2019 Junior Indaba June 2019
- 2. 2 Global exploration spend on the rise ⧫ Global exploration activity strengthening on the back of rising bulk commodity prices ⧫ Global budgets expected to increase by 5-10% in 2019 ⧫ Gold accounted for half of global exploration budgets in 2018 ⧫ SA exploration budgets have steadily declined over the past 10 years ⧫ Why isn’t Southern Africa attracting a larger share of exploration budgets? Sources: S&P Global; Stockhead Junior Indaba June 2019 Global exploration budgets are still below 2014 levels
- 3. Investors deterred by perceived risk 3 Southern Africa is becoming more attractive, however perceptions of hostile investment environments still deter investors Investment Attractiveness Index (Fraser Institute, 2018): a composite of mineral investment and policy perception factors. ⧫ Botswana is the highest ranked African country ⧫ SA and Zimbabwe’s policy rankings have improved significantly in the last year ⧫ Unclear legislation is a concern for investors ⧫ DRC and Zimbabwe policy perceptions rank in the bottom 10 globally ⧫ Africa ranks as the second least attractive region for investment globally Junior Indaba June 2019
- 4. 4 Stakeholders’ expectations Revenue Job creation Beneficiation Sustainable development Political stability Good governance Security of investment Diamond prospectivity Track record of economic production Security of tenure Tax incentives Enabling regulatory environment Economic growth Credit rating Social licence to operate Investors Explorers Governments Commercial return Junior Indaba June 2019
- 5. Value creation and risk 5Junior Indaba June 2019
- 6. Southern Africa’s competitiveness 6 STRENGTHS ♦ Highly prospective diamond region ♦ Track record of commercial production ♦ Evolved regulatory environment with strong judiciaries ♦ Mostly growing economies ♦ Improved mining attractiveness rankings WEAKNESSES ♦ Capital constrained explorers ♦ Local HNWI* not investing in local exploration ♦ Insignificant local listings of junior explorers ♦ Governments’ exploration databases ♦ Licence application processes OPPORTUNITIES ♦ Developed financial markets ♦ Juniors driving greenfields exploration ♦ HNWI*: over 40,000 in SA; over 3,000 in Botswana ♦ SA’s 12J (or equivalent) as potential flow-through schemes ♦ Crowdfunding for exploration THREATS ♦ Onerous regulatory requirements ♦ Uncertainty and complexity of mining policy ♦ Investors’ perceptions of resource nationalism ♦ Governments’ royalties and free carry expectations *HNWI = high net worth individuals with total wealth >$1M Junior Indaba June 2019
- 7. Discussion 7Junior Indaba June 2019