Effective private-public sector partnerships with black-owned SMEs is the key to the success of South Africa’s first junior mining project, Leeuw Mining and Exploration. The BLCF provided funding for technical expertise to start the business and ensure it complies with international environment best practice and domestic and international legal and export standards.
The Anglo Khula Mining Fund, an initiative of Anglo American and the South African government, was set up to kick start small mining ventures by providing prime rate loans and management assistance. The capital is replenished by successful ventures.
The pilot project, which paid back its loan within 12 months and at the current rate of production and prices will repay all its debt obligations in four years, resulted in five new mining applications approved by Anglo Khula in late 2006.
Mining, whether large or small, needs significant capital upfront and timely advice and decisions on licensing, surveying, environmental and safety issues. In South Africa, these risks and the isolated locations of marginal mines, mean banks invariably offer loans on very disadvantageous terms to the entrepreneurs. This despite World Bank Mining Project findings that they can be operated more profitably by junior mining companies than large ones.
Owing to delayed transfer of funds by a creditor bank, without the financial and technical support provided through BLCF, the pilot project would have shut down leading to a huge loss for the local community, already socially marginalised with high unemployment and an unskilled labour pool.
As it is, within two years the mine almost doubled its staff to 269 and contractors to 207, 85 per cent of whom are local. All have been trained in technical skills and safety standards. Skills upgrade training continues and five apprenticeships are awarded to locals each year. The mine also supports an on-site health clinic for staff and their families and provides information and testing for tuberculosis, malaria and HIV/AIDS.
Despite challenging geology, old equipment and skilled labour shortages, production has steadily increased with several long-term inland and export sales contracts in place, and the mine has become a steady income source for local enterprises.
For more information contact BLCF fund manager, the Emerging Markets Group at this address