Dec 18, 2019, 04:42 EST
Gaborone, BW, Dec 18, 2019, 04:42 /Comserve / -- This is a news article on southern African mining and diamond mining
Gaborone, Botswana: The Southern African region is alleged to have a highly prospective Archean cratons, hosting significant diamond deposits with a solid track record of economic diamond production having produced one third of global carat production in 2018 and with limited competition.
“There is high diamond exploration attractiveness in the Southern African region with Botswana as the highest ranked African country in diamond mining and exploration. Southern Africa is becoming more attractive, however perceptions of hostile investment environments still deter investors,” says James Campbell, Managing Director, Botswana Diamonds plc.
Botswana Diamonds plc is a diamond exploration and project development company that holds exploration licences in Botswana and South Africa. The company's experienced team has a successful track record of discovery. Botswana Diamonds is listed on AIM (Ticker: BOD) and on the Botswana Stock Exchange.
James Campbell says evolved regulatory environment with strong judiciaries which have the mostly growing economies and improved mining attractiveness rankings like Botswana attract most investors.
The diamond expert says Africa ranks as the second least attractive region for investment globally even though South Africa and Zimbabwe’s policy rankings have improved significantly in the past year. There is still unclear legislation in the two countries which is said to be a great concern for investors. The Democratic Republic of Congo and Zimbabwe’s policy perceptions rank in the bottom 10 globally.
Rough and polished diamond prices are said to have trended up during the first half of 2018 with macroeconomic fundamentals driving both polished and rough diamond prices to remain positive in the longer term. The forecast supply-demand shortfall will trend diamond prices generally upwards in the years ahead.
“Risk reduction investment begets investor appetite, there are no visible significant projects in the pipeline in Zimbabwe beyond Alrosa’s Luaxe and there is no evidence of exploration activities gaining momentum in the country,” says James Campbell.
He says most exploration projects are primarily funded through equity capital out of the United Kingdom (UK), Canada and Australia and there is limited production cash flow to fund exploration activities due to onerous regulatory and reporting obligations.
He says however there are alternative funding sources better suited to junior and mid-tier miners, there are investors with a higher risk appetite and they have a faster decision making than most banks.
“Besides the onerous regulatory requirements there is at times uncertainty and complexity of mining policies, license application processes, governments’ royalties and free carry expectations,” says James Campbell.
James Campbell said South Africa’s exploration funding incentive is failing mining funds designed to benefit from tax concessions in the South African Income Tax Act (2009) have emerged recently. Section 12J grants venture capital companies (VCCs) a 100 percent deduction of the amount invested in a mining company before it can generate taxable income from production. The mining company must be unlisted, or a junior listed on the AltX of Johannesburg Stock Exchange (JSE).
“Section 12J initiative was intended to boost junior exploration funding in South Africa, similarly to the Flow-through share scheme in Canada, sadly, Section 12J has not achieved the purpose it was designed for,” says James Campbell.
James Campbell says Crowd Sourced Equity Funding (CSEF), enables project owners to raise funds through secured online platforms from a large number of small investors who can own equity in emerging mining companies for as little as $500. Dedicated crowd funding platforms for mining companies have been launched in Canada and Australia and others are in development in the UK
“Regulators in Canada and the US have already adopted rules allowing the sale and purchase of securities via crowd funding portals. Lobbying is ongoing in Australia to change the legislation in support of crowd funding. The viability of crowd funding platforms in the diamond exploration space remains to be ascertained,” says James Campbell.
The diamond mining expert says economic competitiveness analysis shows that SA ranks best of the five in terms of Institute of Race Relations (IRR) (and NPV), mainly due to lower royalties. High rates of royalties in Botswana will effectively turn off marginal projects. Botswana Kalahari model would only work for a substantial deposit, subject to some fiscal change
James Campbell says diamonds are the fastest commodity to recover following the Global Financial Crisis (GFC) and are less prone to volatility than mainstream commodities and the rough diamond prices are expected to continue outperforming gold in years ahead. Diamonds are attracting interest as an investment category.
“‘Moderately optimistic’ long-term outlook shows that rough diamond supply is predictable and will be stable until 2030. The rough diamond demand is expected to grow 2-4 percent (nominal) per annum. There is continued growth of middle class sales in China and India which underpins growth forecast. The key challenges are the US-China trade war and the substitution from laboratory-grown diamonds,” says James Campbell.
Global exploration activity strengthening on the back of rising bulk commodity prices and global budgets are expected to increase by 5-10 percent in 2019. Gold accounted for half of global exploration budgets in 2018 as South Africa’s exploration budgets have steadily declined over the past 10 year.
James Campbell is Managing Director of Botswana Diamonds plc and has spent over thirty years in the diamond industry in a variety of leadership roles both in major and junior companies. He is also a Non Executive Director of Shefa Yamim ATM (a precious stones explorer in Israel, listed on the LSE).
James worked at De Beers for over twenty years; his roles included General Manager for Advanced Exploration & Resource Delivery and Nicky Oppenheimer's Personal Assistant.
Previous roles include Chief Executive Officer and President of Rockwell Diamonds Inc; Non Executive Director of Stellar Diamonds plc; Vice President - New Business for Lucara Diamond Corp, Managing Director of African Diamonds plc; Executive Deputy Chairman of West African Diamonds plc.
James holds degrees in Mining & Exploration Geology from the Royal School of Mines (Imperial College, London University) and an MBA with distinction from Durham University. He is a Fellow of the Institute of Mining, Metallurgy & Materials, South African Institute of Mining & Metallurgy and Institute of Directors of South Africa. He is also a Chartered Engineer (UK), Chartered Scientist (UK) and a Professional Natural Scientist (RSA)
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