South Africa is renowned for being a mineral treasure trove with an abundance of resources.

South Africa holds the world’s largest reported reserves of platinum group metals (PGMs). Approximately 78% of all the world’s PGMs are to be found in the country.

It is the sixth largest producer of gold and has some of the world’s largest untapped reserves of the precious metal.

More than 60% of the world’s chromite reserves are to be found in this country, together with 80% of the known manganese deposits, 40% of known reserves of vermiculite and a third of the world’s vanadium. South Africa hosts the third-largest known reserves of fluorspar and the country’s reserves of iron ore rank sixth in the world. In addition, approximately 20% of world production of uranium comes from South Africa. South Africa is the sixth-largest exporter of coal and is an important producer of nickel, zinc and copper.

The total reserves of South African minerals remain some of the world’s most valuable with an in situ estimated worth of $2.5 trillion.

It is also estimated that the central Karoo basin in South Africa may contain approximately 14 trillion cubic metres of shale gas. A moratorium on the exploration for this gas was recently lifted by the South African government.

South Africa is estimated to have the world’s fifth-largest mining sector in terms of GDP value.

In 1980 mining made up approximately 20% of South Africa’s gross domestic product. It was during these years that South Africa produced more than 70% of the world’s gold and enjoyed the benefit of a high bullion price. Since then the contribution of mining directly to the economy has declined and currently sits at approximately 5.1% of GDP. It is estimated that the mining industry’s indirect contribution to GDP is 18%.

Mining, however, accounts for a disproportionate percentage of South Africa’s exports and is the country’s largest employer.

According to customs data from 2014, minerals accounted for approximately 55 % of the R988 billion of commodities that South Africa exported.

According to figures from the Chamber of Mines, in 2013 the mining sector employed approximately 510,000 people. In addition, more than 830,000 jobs were created indirectly in industries that either supplied goods and services to the mining sector, utilised mining products for downstream value addition, or were related to the spending multiples from mining and mining employees in the economy.

It is generally accepted in the industry that, with a dependency ratio of about 10/1, approximately 13.5 million people were directly dependent to a lesser or greater degree on the jobs created by the mining sector for their subsistence.

It was the discovery of the Witwatersrand Gold Basin in 1886 which led to the development of South Africa’s world class gold mining industry, which came to dominate the global gold mining industry for over a hundred years. In fact, the Witwatersrand Gold Basin will probably remain the greatest gold field ever discovered, surpassing all others by several orders of magnitude.

In its first hundred years of production, the South African gold mining sector produced 50,055 tons of gold, accounting for some 33% of all gold ever mined.

South Africa dominated the global gold mining industry for much of the past 120 years, rising to peak production of over 1,000 tons in 1970. This accounted for 67% of global mine supply in that year. Today, the industry is in a mature phase with production having declined to 133 tons in 2014.

Some 96% of South Africa’s gold output is produced in the Witwatersrand Basin. The Witwatersrand Basin stretches along a 350km crescent from the Free State Province in the south west to the Evander gold fields in the east. Within the Witwatersrand Basin, seven major gold fields have been identified and exploited.

It was the emergence of the gold mining sector in South Africa that led to the rapid development and industrialisation of the country.

Prior to the discovery of gold, South Africa's was economy largely agricultural. Gold mining was, however, a fundamental catalyst for the development of key infrastructure such as water, roads, electricity and rail, as well as many manufacturing and service industries.

Soon after the discovery of the Witwatersrand Gold Basin, Africa’s largest stock market (now the JSE Limited) was started in 1887 specifically for funding the mining sector. Many of South Africa’s large scale parastatals such as Eskom (a power utility), Spoornet (railways and harbours), Rand Water (water utility), world-class financial services companies and institutions owe their existence to the discovery of gold and, to a lesser extent, diamond mining. In addition, a host of other companies sprang up to supply the mining industry with equipment and materials.

Many of South Africa’s gold mining companies are key players in the global gold mining industry.

The South African gold mining industry can be divided into four sub-sectors:

• large, publicly listed gold mining companies;
• companies producing gold as a by-product of other metal mining (mainly platinum group metal producers);
• tailings treatment operations, operated either by the large listed companies or by small-scale companies; and
• junior or small-scale mining.

The largest, publicly listed gold mining companies in South Africa are AngloGold Ashanti, Gold Fields, Harmony and Sibanye Gold. These four companies accounted for 108 tons (approximately 75%) of the gold produced in South Africa in 2013.

The mining industry represents a disproportionately large part of the employment sector, given its relatively small share of GDP. The Chamber of Mines of South Africa, which represents the mining industry in South Africa, is the most prominent industry employers’ organisation. Founded in December 1887, the Chamber’s mandate includes monitoring, investigating, analysing and considering matters of collective interest to its members and providing advocacy services relating thereto. For members in the gold and coal sectors, the Chamber negotiates wages and conditions of employment with trade unions representing mining employees.

Members of the Chamber account for approximately 90% of South Africa’s mining and production by value and employ about the same percentage of the mining industry’s labour force.

Contrary to popular belief, it is a myth that all mine products are exported in raw form with very little beneficiation taking place in South Africa.

Nearly all of South Africa’s cement and building aggregates are made locally and 80% of the country’s steel is manufactured in South Africa from locally mined iron ore (the 20% of imported steel is made up of speciality steel products not made locally and used primarily in the motor industry). This steel is made in furnaces that are 95% powered by electricity from local coal power stations.

Approximately 30% of South Africa’s liquid fuels are produced within South Africa from locally mined coal.

Nearly all metallurgical grade chrome is beneficiated, as is approximately 30% of manganese ore.

In addition, 13% of the world’s platinum catalytic converters are made in South Africa, as are most domestic chemicals, fertilisers, waxes, polymers and plastics using locally mined minerals and coal.

The South African code for the reporting of mineral resources and mineral reserves (the SAMREC Code) sets out the classification system for reporting mineral resources and mineral reserves, required minimum standards, recommendations and guidelines for public reporting of exploration results, mineral resources and mineral reserves in South Africa. SAMREC was established in 1998 and modelled its code on the Australasian code for reporting of mineral resources and/or reserves (the JORC Code).

All public reports are prepared to inform investors or potential investors and their advisors according to the SAMREC Code. These include company annual reports, quarterly reports and other reports incorporated in the Johannesburg Stock Exchange circulars or as required by the South African Companies Act.

The development of an underground mine is a phased process with most of the phases being inter-dependent and sequence fixed.

The initial important issue is to establish the position of a possible occurrence of the mineral that is being sought after. Once this has been established, all of the legal and security of tenure matters have to be finalised with the relevant government departments in order to legitimise any exploration activity.

Exploration to confirm the occurrence of the required mineral is the next phase in the development of a mine. Various techniques are available to establish the presence of minerals and these can range from soil sampling, geophysics to invasive drilling to establish the presence and an estimated volume of the mineral. A SAMREC compliant resource may be determined at this phase.

Once the volume of mineral present has been established, a scoping study or preliminary economic estimate (“PEA”) is prepared in order to determine if the mineral occurrence will be economically viable. At this stage a number of assumptions are made. This is not a particularly expensive exercise and will determine if the project should continue to the next phase of study.

The project is now ready to go through various study stages, which become more precise and detailed in engineering design and costing as the studies progress to the next stage. The study stages are:

• Scoping study or PEA; which determines the overall size, conceptual cost and production of a possible project and may result in two or three different scenarios.
• Pre-feasibility study, which investigates the various options and methods through which the project can be brought to production, to an accuracy of 75%.
• Bankable or definitive study, which selects the best option from the pre-feasibility study and develops the chosen option to a level of up to 95% accuracy in term of capital expenditure, operating costs and engineering design.

Timeous application with regards to power, water and effluent discharge should be made to the utility companies that control these services during the abovementioned study phases.

Provision should also be made for the establishment of waste product storage, such as a tailings storage facility (TSF), waste rock dumps, evaporation ponds and a site to store and dispose of industrial wastes such as hydrocarbons, etc.

When the above studies have been completed, the final study is approved by the board of the company and the results are published. Funds are then raised, either through equity or debt financing.

Once the financing has been procured, the owner may appoint an EPM/EPCM company that will control and monitor the construction of the project.

On completion of the construction the mine will then follow a path through to full production.

Mineral resource exploitation in South Africa is regulated by both statute and common law.

The Mineral and Petroleum Resources Development Act 28 of 2002 (the “MPRDA”) is the primary legislation regulating the mineral resource industry. The MPRDA specifically directs that where there is a conflict between the MPRDA and the common law, the MPRDA will prevail. In areas where there is no conflict between the MPRDA and the common law, common law principles must be considered.

As mentioned earlier, the principal law that regulates the mining industry is the MPRDA.

In addition, there are other important pieces of legislation that have relevance for the mining industry, specifically those relating to:

• health and safety (the Mine Health and Safety Act 29 of 1996);
• the environment (the National Environmental Management Act 107 of 1998);
• water (the National Water Act 36 of 1998);
• environmental management (the National Environmental Management: Air Quality Act 39 of 2004);
• waste (the National Environmental Management: Waste Act 10 of 2004);
• labour (the Labour Relations Act 66 of 1995 and the Employment Equity Act 55 of 1998).

The mining industry is regulated through the national and regional offices of the Department of Mineral Resources (DMR).

As the custodian of all mineral rights, only the State can authorise exploration and exploitation of mineral resources. Authority to grant these rights is exercised through the Minister of Mineral Resources.

Owners of surface rights do not hold mineral rights unless they make application to the State to become a holder of such rights.

There is a restriction on prospecting and mining in or under proclaimed townships and proclaimed national parks.

There are no restrictions in the MPRDA or in practice on a foreign party acquiring mining rights in South Africa. The State owns all mineral rights.

Any person who wishes to apply to the Minister of Mineral Resources for a right in terms of the MPRDA must lodge the application at the office of the Regional Manager in whose region the mineral of interest is situated, in the manner and with the documentation prescribed in the MPRDA together with the prescribed non-refundable application fee.

The MPRDA provides for two principal authorisations regarding to mineral rights:

• Prospecting Right – entitles the holder to enter the land concerned and actively conduct prospecting in accordance with an approved prospecting work programme, valid for an initial period of 5 years and renewable for a further period of 3 years;
• Mining Right – entitles the holder to commence with mining operations and actively conduct mining in accordance with an approved mining work programme, valid for the period specified in the right which period may not exceed 30 years. A mining right may be renewed for further periods, each of which may not exceed 30 years.

Third parties cannot obtain mining rights in the same area where rights have already been granted to another party for the same minerals. Nothing, however, precludes a third party from submitting an application for a right for a different mineral to that or those included in the holder’s existing right. Ordinarily, for example, an application for a prospecting right for coal over a third party’s gold exploration right would not be refused.

The holder of a prospecting right may:

• enter the land to which it relates;
• bring onto such land any equipment and construct any infrastructure required for its prospecting;
• prospect for its own account the mineral in respect of which the right has been granted;
• remove and dispose of any mineral found during its prospecting;
• subject to compliance with the legislation, use water found on the land;
• carry out any other activity incidental to its operations provided it does not contravene the law.

In addition the holder enjoys the exclusive right to apply for and be granted a renewal of the prospecting right and to apply for a mining right.

The holder of a mining right may:

• enter the land to which it relates;
• bring onto such land any equipment and construct any infrastructure required for its operations;
• mine for its own account the mineral in respect of which the right has been granted;
• remove and dispose of any mineral found during its operations;
• subject to compliance with the legislation, use water found on the land.

In addition the holder enjoys the exclusive right to apply for and be granted a renewal of the mining right.

Further documentation, as prescribed by the MPRDA, which has to be submitted and approved, before a Mining Right can be granted are:

• Environmental Management Plan that has to be preceded by Environmental Impact Studies of the area to be influenced by future mining;
• Consultation must be undertaken with Interested and Affected Parties and all questions and concerns addressed;
• Financial provisions for the Environmental Management liabilities and final mine closure liabilities have to be put into place including the establishment of an Environmental Trust;
• A Holder of a Mining Right may further not commence mining activities before the necessary Water Licence is obtained in terms of the National Water Act.

Holders of prospecting rights have the exclusive right to be granted a mining right for the mineral in question.

In terms of the MPRDA, the holder of a right has an obligation to ensure optimal exploitation of the mineral resource. A holder is only entitled to a mining right to the extent that they actively exploit these rights. Holders of such rights therefore have an obligation to conduct the operations continuously within the period of the right.

However, a retention permit may be issued if the holder of a mining right has completed prospecting activities and market studies have revealed that mining a mineral will be economically unviable due to prevailing market conditions.

In terms of the MPRDA, the State has the right to cancel or suspend mineral rights in specified circumstances.

These include contravening the MPRDA while conducting mining related operations, breaching any material term or condition of a mineral right, contravention of an approved environmental management programme or for submitting inaccurate or misleading information to the DMR.

The Minister may not, however, suspend or cancel the right before he/she has given written notice to the holder of the mineral right, indicating the intention to suspend or cancel the mineral right and giving reasons. The holder must also be given a reason or opportunity to show why the right should not be suspended or cancelled.

In order to give effect to section 24 of the South African Constitution:

1. by ensuring that the nation’s mineral resources are developed in an orderly and ecologically sustainable manner;
2. while promoting justifiable social and economic development;
3. substantially and meaningfully expanding opportunities for historically disadvantaged persons;

A ‘Mining Charter’ was developed collaboratively by government and the mining industry, following the enactment of the MPRDA, and is intended to bring about widespread socio-economic transformation in South Africa’s mining industry.

Transformation, as envisaged by the Mining Charter, is an imperative for mining companies active in the South African mining sector. For purposes of compliance with the requirements of the MPRDA and the Charter, a 26% ownership comprising of Historic Disadvantaged People is a requirement for the granting of a prospecting and mining right.

As a further step in the transformation, a Mining Scorecard was published to assist in the assessment of companies’ applications for Mining Rights. It sets out a number of transformation criteria as a pre-requisite for being granted a Mining Right.

The nine broad criteria are the following:

• Human resource development
• Employment equity
• Migrant labour
• Mine community and rural development
• Housing and living conditions
• Procurement

  These first six criteria have to be fully substantiated in a Social and Labour Plan.

• Ownership and joint ventures
• Beneficiation
• Reporting, which has, in addition to internal and external auditing, to be done on a regular annual basis.

The holder of a Mining Right remains responsible for any environmental liability, pollution or ecological degradation, and the management thereof, until the Minister of Minerals has issued a Closure Certificate in respect of the operation concerned.

Mining companies across all sectors have a long history of operating profitably in South Africa.

One of the earliest mining industries to emerge was coal.

Commercial coal mining in South African commenced in the Eastern Cape Province as far back as 1864. Commercial coal mining in the KwaZulu-Natal Province and near the Witwatersrand gold fields commenced in the late 1880s, following the discovery of gold on the Witwatersrand in 1886. The growth of the coal mining industry was like so many of the minerals, closely linked to the economic development of the country. So, for example, the Evander coal fields were developed to support the oil-from-coal industry in the area, other coalfields to support the establishment of the nearby iron and steel industry and many other minerals such as manganese, chromium, vanadium and platinum. Power stations were erected on the coalfields to supply energy to these developing industries and to the growing urban population in the country. In addition to meeting local needs, coal mining companies began to develop an export market, making South Africa a major international supplier of coal.

The country’s coal production is dominated by large multinationals such as Anglo American, BHP Billiton and Glencore, together with local companies such as Exxaro.

It is not only coal that has a long history of successful exploitation in South Africa. As you will see below, many other sectors of the mining industry illustrate South Africa’s desirability as a destination for major mining houses.

• The Venetia Diamond Mine in Limpopo province is operated by De Beers Consolidated Mines. Mine construction started in 1990 and in 1992 the mine opened as South Africa’s largest diamond producer at 4Mct of diamond. In 1998 a redesign of the pit extended the life of mine. The mine is scheduled to commence as an underground mining project mode in 2021 to push life of mine to 2042. The mine has the potential to yield 96Mct
• The Palabora Copper Mine started as an open-pit operation in 1964 and was originally jointly owned by Rio Tinto & Anglo American. The mine is now majority owned by a consortium led by parastatal Industrial Development Corporation of South Africa Limited and China’s Hebei Iron & Steel Group. In 2002 the mine converted to underground operations. The mine has a life of mine of 20 years a rate of 135,000t/y and proven reserves in excess of 200 million tonnes at 0.7% copper.
• The TauTona gold mine owned by AngloGold Ashanti commenced production in 1962. With shafts at depths up to 3.8km below surface, TauTona is one of the deepest mines in the world and still hosts an impressive measured and indicated resource base of 8,6Moz gold.
• There are many other major gold mines still operating after many decades in production, including the Kloof mine operated by Sibanye Gold where mining commenced in 1939, Driefontein (1952) and South Deep gold mine (1961) owned by Goldfields, Great Noligwa Gold Mine (1972) and the Mponeng gold mine operated by AngloGold Ashanti since 1981.

South Africa remains an attractive destination for mining companies, with the most-advanced economy on the African continent.