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Junior miners struggle to gain access to capital

THE fundamentals structurally were positive for the diamond sector. Picture: Reuters.

THE fundamentals structurally were positive for the diamond sector. Picture: Reuters.

Published Jun 3, 2022

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GAINING access to capital in the mining sector is difficult, but it becomes worse when you are a junior miner, according to Gem Diamonds operating officer Brandon de Bruin.

De Bruin said there needed to be focus to encourage entry to junior miners in the diamond sector.

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He was speaking on the second day of Junior Mining Indaba that took place at the Johannesburg Country Club yesterday.

The theme for this year includes a focus on the global economic and geopolitical environment and the impact on junior mining, and the regulatory environment.

De Bruin was part of a panel discussion where the subject was “The current state of the diamond sector and how junior miners are faring”. The panel included Pierre Fourie from Namakwa Diamonds, Lyndon de Meillon from Paleostone Minerals and Richard Duffy from Petra Diamonds.

Fourie said: “There needs to be a little bit of focus to encourage entry to junior (miners) and try to facilitate that from a regulatory framework, but also from a finance angle. Certainly, diamonds have a more challenging side to them, even the volatility of them, but generally on the junior mining space, its funding is difficult, so you find junior miners end up going to the niche financiers who will typically take out the flesh and then some,” he said.

He said when applying for finance in banks, houses of junior miners and everything they owned were used as collateral.

“Everything we own is always in the game,” he said.

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De Meillon said: “We asked Nelson Mandela University to do a study for us to find out why the operators in the junior mining space have decreased. There is an 80 percent decrease in junior miners. They came up with about six main reasons, which include fuel price and lack of funding. The main reason that stood out was the cost of compliance. The cost is too high.”

He said he sent the study to government officials and he was still waiting for them to contact him.

De Meillon said South Africa had probably another 100 years of resources left to mine.

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Duffy agreed and said his company was still mining diamonds in the Northern Cape region and that there was still a need for mining engineers.

“We are certainly going to be producing other metals, so I don’t think mining engineers are an endangered species.”

Fourie said the fundamentals structurally were positive for the diamond sector.

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“When you look at the supply-demand side, we know that there is limited supply coming in, new projects coming on stream,” he said.

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