Mining researchers believe Botswana and other mining economies will benefit from a mining boom that will eclipse the glory days seen in the six years preceding the the global recession.
But beginning in September last year, the recession lowered commodity prices, dried up credit lines and eroded many companies' operating capital, resulting in the downscaling and even suspension of several mining projects.
Analysts now predict a mining boom of greater intensity in terms of exploration spending, production and profitability that will benefit several economies, including Botswana's, in the long term.
The Business Development Manager of the MSA Group, Christiaan Ndoro, says the next boom will be influenced by the current cutbacks in development spending by mining players
"In the long term, commodity prices will rise and the next mining boom will be even crazier than the last. The key for investors is to say 'next time I know when to cash in and exit.'" The MSA Group expert also cited the results of the 2008/09 Fraser Survey which showed that the anticipated shortage of commodities, due to the curtailment of development spending in the current recession, could hinder the global economy's recovery.
According to the MSA Group, the last mining boom ran from 2002 to 2008 and witnessed a 42 percent annual increase in global exploration spending, reaching US$12 billion for non-ferrous minerals, excluding uranium. Ndoro said exploration budgets for 2009 were expected to be "significantly less".
"It will be some time before exploration activity can fully recover, even after recovery in world markets. Short-term sentiment is negative, but the industry has high expectations for another boom cycle."
Although Africa has traditionally lagged behind the rest of the world in exploration expenditure, Botswana has swum against the tide due to its supportive legislative, political and economic environment.
Of the US$12 billion budgeted for exploration last year, Africa accounted for only 15 percent of this, with the lion's share going to Latin America. This is despite the fact that Africa has the bulk of the world's untapped mineral resources.
The Department is facing difficulties accurately gauging the level of exploration currently underway because many companies fail to report their activities and exploration budgets.
According to the Mines and Minerals Act, prospecting companies are required to declare their exploration budgets annually and provide information on actual expenditure and technical reports regularly.
However, the incidence of non-reportage is high. Last July, DGS had received only 60 percent of reports due from prospectors. Analysts also believe the global financial crisis will stem the incidence of speculative licence holding by some prospectors.
DGS' investigations have found that some companies hold several licences for speculative purposes only, thus hindering the full economic development of these licences by serious investors. Others hold more areas than they can explore, equally preventing benefits to the local economy.
"If you are not in the right place and yet you are enticing investors to that project, it's probably speculative," said Tsimako.
