Fruitful discussions are taking place on flow-through shares to incentivise junior mining and exploration, Minerals Council South Africa’s Junior and Emerging Miners Desk head Grant Mitchell said on Friday.

In response to Mining Weekly, Mitchell said the Minerals Council was doing a lot of work to facilitate engagements between the Johannesburg Stock Exchange and its junior, emerging and exploration members and associations.

This follows JSE origination and deals head Samuel Mokorosi telling Mining Weekly on Monday the JSE was going all out to attract junior mining and exploration companies, making it easier for companies to get on to the exchange and to remain on the exchange, while ensuring that investor protections were of the highest calibre.

Mokorosi is encouraged by the government's one-year review of its exploration strategy and its reference to the flow-through shares concept, the impending cadastral system and clarity on triple black economic empowerment to reinvigorate small-cap listings.

Minister of Mineral Resources and Energy Gwede Mantashe has set a target for South Africa to attract 3% to 5% of global exploration dollars within the next five years. Without an efficient tax incentive system and cadastral in place this will not be possible, the Minerals Council noted in an October 2020 fact sheet.

“In the Toronto Stock market, they’ve got 1 600 listed junior resource companies. On Sydney, they’ve got about 600 and on the JSE it’s about 12. Why the difference? Is it because we are wholly unattractive as a mining and listing destination? No, none of those factors.

“The factors are the Canadians have got a set of specific incentives that encourage the flow-through of venture capital funding from people from a tax perspective to invest in junior resource mining and their listing requirements are generally fairly small and they raise capital and they go and find deposits. They become a hub and they become very specialised at doing it,” outgoing Minerals Council CEO Roger Baxter said in response to Mining Weekly at this week’s post-annual general meeting media briefing.

“But even more recently announced is a $4-billion extra subsidy that Canada will provide for people looking for critical minerals, as an example,” said Baxter.

Mokorosi, encouraged by the appetite around battery-related minerals and renewable energy inputs, sees South Africa as being well placed at the right time for the green revolution that is sweeping the world.

“It’s giving me some comfort that we're seeing both private sector and government look to taking advantage of these developments,” Mokorosi added.

But South Africa’s fiscal framework still does not have the same incentives around encouraging junior resource companies to set up in South Africa or look for capital in South Africa.

“The other critical reason to bear in mind is that Canada has a well-established, well-entrenched venture capital mindset, as does Australia. In South Africa, our investment community are generally fairly conservative and favour big mutual funds. People are not going to invest R100 if they are going to lose their cotton socks in doing so, especially if their return rate is in a liquidated company.

“In South Africa, the return on a liquidated company is about 20c in the rand, whereas in a country like Canada, their liquidation and business rescue rules are quite different so you get a much higher rate of return if you go into a failed company, even if it’s a junior resource company, which is venture capital-funded.

“There are two things we need to do. First of all, fix the domestic requirements around what you need to lodge a junior company exploration permit, it must be much shorter, like 20 to 40 days. It must be on a transparent mineral cadastral system because these companies have a business model where the CEO, chief geologist and chief bottlewasher are the same person.

“They raise capital using the flow-through shares through thestock exchanges that they find t...