Junior mining projects in SA can benefit from tax deductions
22 January 2019
Junior mining projects in South Africa are able to benefit from a significant tax incentive in the form of a tax deduction for the full amount of the investment into an approved Section 12J Venture Capital Company
The incentive is subject to a number of conditions, such as a lock up period for holding the shares of five years.
We have observed an increase in activity in this sector and that Venture Capital Funds are now being set up to focus exclusively on projects in the junior mining sector.
This is evidenced in an article in Mining Weekly on 16 July 2018, where they mentioned that the newly established CCP 12J Mining Fund is going all out to raise R750-million for co-investment in ancillary project opportunities on existing mine sites.
Their investment targets include tailings retreatment projects, mine dump retreatment projects and brownfield expansions, with mining companies standing to benefit from co-investment in sustaining capital projects. If a tailings dump contains minerals mined before 2004 it is possible that these minerals can be extracted without being subject to the MPRDA and the sales of the minerals will no attract royalties either.
The section 12J investment incentive has provided a significant capital injection for junior mining projects and we expect that this incentive will continue to attract investor attention in 2019 and that this will assist in creating positive investor sentiment towards junior mining projects in South Africa.
Junior Miners can chat to BDO at the 121 Investment Meeting and Mining Indaba Conference in February 2019.
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