Better investment for junior mining

Good governance leads to better investment for junior mining


With commodity prices hitting historical lows, the pressure for junior miners to attract investors is mounting. A drop in demand, declining grades, increasing stakeholder expectations and a lack of funding compounds the problem. It is more important now than ever for junior miners to assiduously practice good governance. 

Junior mining companies play an important role in creating future mine supply. They find promising properties, verify the resources, stake the raw material and bring mines into production. 

Juniors are critical players in the early stages, bridging the long lag time between when a new deposit is found and when it is brought into production, however they often lack the resources to implement proper governance. There is also often no regulatory distinction between exploration, artisanal and small-scale miners, who are all subjected to the same regulatory framework as established mines. This makes their task all the more difficult. 

Juniors do not have the resources to expend on compliance in the same way that the majors do, making it critical that they exercise care in effectively implementing processes that promote good governance. Environmental and social plans are a vital part of this, and are implemented early on in project plans, to avoid significant delays and opportunity costs.

It is up to junior mines to create an enabling environment for themselves, and manage their governance as efficiently as possible to help entice investors. Simply put, good governance makes junior mines more attractive to investors.

According to Paul de Kock, IsoMetrix Founder and Director, “Good investment decisions in mining must take into consideration the principles contained in global – and country – specific reporting standards for exploration, mineral resources and mineral reserves. The Committee for Mineral Reserves International Reporting Standards (CRIRSCO) and the South African Mineral Resources Committee (SAMREC) have both stressed the importance of stakeholder engagement when considering the social and environmental impacts of a mining project.  In 2014, the IFC even published a good practice handbook for early stakeholder engagement for junior companies in the extractive industries due to the ever growing significance of the so called `social license to operate`.” 

Focus on sustainable performance

Paul explains that more recently, investors are including a strong focus on sustainability performance, including environment, health and safety (EHS) and more specifically social performance – the social license to operate.  According to an EY publication in 2015, the social license to operate is now in the top five risks facing the mining and metals industries with projects continuing to be delayed or shelved completely because of conflicting community interests, with governments increasingly backing these communities.

“The problems for juniors and start-ups is often the lack of internal capacity to take the EHS and social commitments from the feasibility and EIA studies, and convert these into meaningful active programmes that can be implemented and tracked. This often results in a gap between stated policies and objectives and what is actually going on at the site,” he adds.

Without credible, active relationships with communities and other local stakeholders, the social license to operate is rapidly eroded, creating potentially dire consequences for the project. Paul goes on to explain that “Visible performance in EHS and social sustainability (including stakeholder engagement, labour plans, socio-economic development and land access and resettlement) needs to be demonstrated from the very beginning of the project lifecycle.” 


With a good governance framework in place, junior miners are better able to demonstrate their long-term sustainability. By maintaining a social license to operate, junior miners ensure that they are in a better position for successful stakeholder engagement. This requires a responsible and patient view on project returns. In the long-term this will pay off with better access to cheaper capital, more accommodating regulators and friendlier communities.

Paul de Kock joins other leading figures from the junior mining sector to further unpack what makes a project or company investable at this week’s Junior Indaba 7-8 June 2017 at The Country Club, Johannesburg.

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Issue 42