Enjoy Low Petrol Prices While You Can, They Will Not Last!

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GAVIN WENDT: There’s been an enormous of hype recently about the new phenomenon that
is shale oil – and if you listen only to the rhetoric emanating from the
USA from brokers, deal-makers, drilling-rig operators, company
executives and government official, you’d be led to believe that the
economics of shale oil are beyond question.

But the truth is a
somewhat different story. Sure, there has been a veritable tidal wave of
new oil produced from various US shale formations over recent years,
but the commerciality of this oil has been underwritten by a
persistently-high oil price environment over recent years (we’re talking
north of US$100 a barrel).

The return of geopolitical risk supports an oil price rebound

 

We recently reviewed the crude oil market as it relates to the persistent battle between ‘conventional’ oil producers (like OPEC) and ‘unconventional’ oil led by US shale producers.

Without high oil prices, most shale oil isn’t commercially viable.
    
The ‘race to the bottom’ since mid-2014 in terms of rival producers maintaining high output levels in order to see who will crack first in a low oil price environment, means we’re currently experiencing a period of artificially low oil prices.

However, as we’ve witnessed historically (for example during the worst of the Asian economic crisis from 1997 when oil prices fell to US$10 a barrel), a period of exceptionally low oil prices is unlikely to last for long – and results in an often rapid and violent price rebound.

There are two fundamental reasons for this.

Firstly, most conventional and unconventional oil producers require an oil price of at least $80 (and ideally closer to US$100) in order to generate margins robust enough to not only generate a profit, but also to reinvest in new oil discoveries and infrastructure.

If prices stay low, vital research and development doesn’t take place, meaning future oil supply is impacted.

Low oil prices now mean that spending to identify new oil discoveries will likely be delayed or even abandoned, disrupting the future flow of oil to market and likely leading to significant price spikes in the future.

This is a pattern that’s been repeated through many cycles within the oil industry.

The second reason oil prices won’t stay low for long is the fact that oil industry participants are wise enough to recognise that geopolitical risk is one of the biggest issues historically confronting the industry – and can flare up at any time.

The fact that so much of the world’s oil is sourced from high-risk jurisdictions means that traders and end-users will rush to buy oil at low prices, knowing that the next geopolitical episode is often not far away.

Historically, geopolitical risk has often accounted for at least 20 per cent of the total cost of crude.

Given that crude demand is highly-inelastic (not very responsive to rises and falls in price), geopolitical events can quickly tip the scales of the supply-demand equation in favour of demand.

Geopolitical risk sent crude prices skyrocketing during the Arab oil embargo during the 1970’s, whilst geopolitical events like the Arab Spring did sent crude up by US$10 to US$15 per barrel as well.

If one casts one’s your mind back to the middle of last year, oil was trading solidly above US$100 a barrel, driven by geopolitical risk concerns involving Russia-Ukraine, Iraq-Syria, Libya and the spread of Islamic fundamentalism elsewhere in the Middle East and Africa.

Fast forward to the present day and oil prices have plunged to below US$50 a barrel, but the geopolitical situation has escalated.

More recently however, market participants have become less concerned about geopolitical events.

Whenever news of a geopolitical event has hit the newswires, Brent crude has no longer rallied like it used to.

Some have attributed Brent’s lethargy to more stringent rules over what investment banks could and could not trade.

The thinking is that because investment banks couldn’t speculate as much on crude as they used to, crude itself would trade more in line with its underlying supply and demand fundamentals.

These fundamentals are soft, as a direct result of weak underlying Chinese and European demand.

In hindsight, Brent’s lethargy can also be traced to the market’s anticipation of the coming crude correction.

These fundamentals are soft, as a direct result of weak underlying Chinese and European demand.

In hindsight, Brent’s lethargy can also be traced to the market’s anticipation of the coming crude correction.

There are also reports that Saudi Arabia is actually increasing production in order to maintain market share and further pressure US shale producers.

From our perspective however, despite oil’s current ugly supply and demand picture, there is a case to be made for optimism, as I believe geopolitical risk is making a comeback.

Geopolitical troubles in Libya and Iraq continue to rage on, with little prospect of resolution in sight.

Libya is now producing less than 300,000 barrels of crude a day, versus 1.6 million barrels a day during 2011.

Given that many countries have pared their social programs due to low crude prices, the probability of another Arab Spring is also significantly higher than before.

All it takes is for geopolitical risk to spread to a major OPEC producing country and the supply and demand picture will look much better.

The OPEC ministers themselves are aware of the geopolitical threat – the organization is considering holding an emergency meeting if crude prices continue falling.

From a demand perspective the biggest factor remains China – its economy needs to recover solidly for supply and demand to correct itself – and so far a Chinese recovery is not on the horizon.

To conclude, whilst we as motorists and consumers are enjoying the current low oil price environment, the evidence of history indicates that this situation must inevitably lead to higher prices over the long run.

Exploration for new oil fields is a hugely expensive and risky business and companies will only be incentivized to explore if the returns justify the enormous outlays.

Likewise, investment is required to maintain and revitalize production infrastructure.

I believe that the current low oil price environment will not and that after a period of price consolidation over the next few months, we will begin to see oil prices recover during H2 2015.

 

Gavin Wendt is the founder of MineLife, publisher of the MineLife Weekly Resource Report


 

This article first appeared in

Tap Oil picks up two offshore blocks in 2014 acreage raffle

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THE ROADHOUSE BOWSER: Tap Oil (ASX: TAP) has been awarded 100 per cent interest of Blocks W14-7 and W14-16 in the Barrow and Dampier sub-basins on the North West Shelf.

The two blocks were offered under the 2014 Offshore Petroleum Exploration Acreage Release.

W14-07, now Petroleum Exploration Permit WA-515-P, is located on the Rankin Platform in water depths ranging from less than 100 metres to 400 metres and covers an area of approximately 485 square kilometres (6 graticular blocks).

The permit lies between the Wheatstone gas field to the west and the Goodwyn/Perseus gas fields to the east.

W14-16, now Petroleum Exploration Permit WA-516-P, is located to the east of the Alpha
Arch on the western flank of the Barrow sub-basin and is adjacent to other Tap held acreage.

The permit is in water depths of between 50 metres to 200 metres and covers an area of approximately 160sqkm (2 graticular blocks).

The permit lies between the Griffin, Chinook/Scindian fields and the Woollybutt Oil Field.

Tap has agreed to a three year work program comprising of reprocessing open file 3D seismic or licensing existing multi-client reprocessed 3D data, Quantitative Interpretation studies and G&G studies (at an indicated estimated expenditure of approximately $0.8 million per permit).

Each three year work program runs from 6 March 2015 through to 5 March 2018.

The majority of these funds are anticipated being spent from 2016 onwards.

The optional secondary work program comprises 3D seismic acquisition in Year 4 and a well in Year 6.

Email: info@tapoil.com.au

Website: www.tapoil.com.au

Capital Mining stakes claim in Canadian medical cannabis market

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THE ROADHOUSE PHARMACY: Capital Mining (ASX: CMY) has signed a binding Heads of Agreement, under which the company claims it will become the first ASX-listed company to hold a direct stake in a licensed grower, manufacturer and distributor of medical cannabis products under Canada’s Marijuana for Medical Purposes Regulations (MMPR).

The stake is to come through an investment in Broken Coast Cannabis Ltd (BCC), a company which currently has the capacity to produce 720,000 grams of cannabis annually.

“Through the proposed investment by CMY, BCC intends to increase production to 2,000,000 grams,” Capital Mining said in its ASX announcement.

Capital Mining also advised of the signing of a second binding Heads of Agreement, under which it intends to purchase 100 per cent of Cannan Growers Inc (CGI).

The deal includes the rights to CGI’s MMPR license application and intellectual property required to make license applications throughout the world (based on the Canadian system), including Australia.

“CGI is a distributor of bulk wholesale cannabis, industrial hemp and respective bi-products and derivatives,” Capital Mining explained.

“CGI has a pipeline of initiatives in North America, South America, Europe, and Asia in anticipation of the global shift of the medicinal health, wellness and industrial cannabis industries.

“CGI intends to serve these sectors as the Quality Assured raw materials supplier for leading hemp based consumer goods companies.”

Website: www.capitalmining.com.au

What the Analysts Say

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WHAT THE ANALYSTS SAY: Interesting news and views from across the Resource Analyst universe.

Website: www.breakawayresearch.com

Company: Metallica Minerals Limited (ASX: MLM)

Metallica Minerals has a diverse portfolio of projects in Queensland.

The company is concentrating on its 66.66 per cent (reducing to 50 per cent) held Cape York heavy mineral sands (HMS) and bauxite project, where it expects to soon commence HMS concentrate production at Urquhart Point, and is carrying out exploration and delineation drilling over nearby bauxite mineralisation, adjoining Rio Tinto’s South of Embley deposit.

The other core project is the SCONI scandium-cobalt-nickel tri-metal project, located near Greenvale in North Queensland, for which JV partners are currently being sought.

With the current difficult market conditions, Metallica is following a strategy to avoid going to the equity market to fund ongoing activities (and hence not dilute shareholders) – it still has a relatively tight capital structure for an Australian junior (167 million shares) despite having been listed for over 10 years.

As part of this strategy the company has recently disposed of shareholdings in a number of companies that started life as spin-outs of Metallica – Metro Coal (ASX: MTE) and Cape Alumina (ASX: CBX).

Current HMS and bauxite activities in Cape York are focussed on assessing deposits that can be developed with relatively small capex requirements, and then can return reasonable cash flows to fund ongoing exploration, development activities and potentially returns to shareholders.

In order to fund the Cape York HMS and bauxite activities Metallica’s wholly owned subsidiary Oresome Australia entered into a JV agreement with Ozore Resources, whereby Ozore can earn 50 per cent of the tenement portfolio by contributing $7.5 million towards development of the Urquhart Point HMS project, and funding nearby bauxite drilling.

Ozore has thus far earned a 33.33 per cent interest through contributions of $5 million.

The Urquhart Point HMS project is the most advanced, with first production expected in mid-2015.

Surprisingly, this is the first deposit of its type to be developed on Cape York Peninsula. The all-up capital cost is expected to be $6.5 million, which has been fully funded by Ozore.

Site establishment works have commenced, and a modular treatment plant is being fabricated in South Africa, and is expected to be delivered to site in May/June 2015.

The project feasibility study envisages a free cash flow after capex of $7.3 million over the estimated 4.9 year, 87,000 tonnes HMS concentrate mine life, with the majority (approx. 80 per cent) in the first two years of operation.

With Metallica being free carried for the estimated $6.5 million capex, 50 per cent of the operating cash flows will be attributable to the company.

Total operating cash flows were estimated to be around $14 million in the feasibility study; however subsequent falls in rutile and zircon prices will reduce this.

At the time of the feasibility study in mid-2014 forecast average life of mine concentrate values were attractive, estimated at US$250 to $US330/tonne FOB Weipa by independent industry expert TZMI.

Website: www.breakawayresearch.com

Company: Talisman Mining (ASX: TLM)

Talisman Mining has a quality portfolio of Australian based exploration projects prospective for nickel and copper-gold mineralisation.

Recently the company completed the acquisition of the Sinclair nickel project from Glencore for total consideration of $8 million, plus a further $2 million contingent upon first nickel production.

The acquisition includes a modern 300,000 tonnes per annum processing plant, significant surface infrastructure, the existing open pit and underground workings and numerous exploration targets.

Noteworthy widths of ore grade nickel mineralisation have been identified down plunge for at least another 1km beyond the end of the existing underground development.

The potential for extensions to the Sinclair deposit are augmented by elevated EM values, known to have a high correlation to nickel mineralisation in the area.

Two nearby and largely untested nickel prospects named Skye and Stirling offer further near term exploration potential.

Both prospects display similar characteristics to that of the Sinclair deposit.

Talisman also has exposure to quality copper-gold exploration projects, the most advanced being the Springfield project, located adjacent to and along strike of Sandfire’s high-grade copper-gold Degrussa deposit.

Talisman has entered into a farm-in agreement whereby Sandfire can earn up to a 70 per cent interest in the project by spending $15 million over 5½ years.

The Sinclair Extension, Skye and Stirling prospects are likely to become Talisman’s focus in the near term, all of which can be fast-tracked into production upon exploration success.

Significant earlier stage exploration opportunities also exist within the broader 300 square kilometre tenement package, providing a quality project pipeline for the longer term.

The acquisition of Sinclair is testament to first class effort by management and it is fitting that control of the project, originally discovered by Jubilee Mines in 2005, is returned to ex-Jubilee Mines executives.

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.

The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.

PDAC showcases potential of Australian sector

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CONFERENCE CORRESPONDENT: It may have been minus 10 degrees in Toronto but the cold weather didn’t stop over 20000 mining types assembling at this year’s Prospectors & Developers Association of Canada (PDAC) Conference in Toronto.

The mood of the conference was as cautious and circumspect as anywhere else at the moment with plenty of small cap Canadian companies turning all the rocks on display hoping to find some much needed funds loitering beneath.

It would appear that they will have to wait a bit longer yet.

Once upon a time the Canadians led the charge when it came to everything mining but from what I could see wandering about the conference floor it became clear the Australian miners are the trend setters and the rest are following.

The Aussies are more upbeat, more purposeful and for the 40 or 50 companies that were there waving the flag (mainly as delegates) more advanced in their projects.

The Australian booth pavilion was again a standout with Geoscience Australia and all state and territory government mines departments in attendance.

 

Gold stood out as the mineral of choice but the memo for investors was to keep a close eye on what nickel could do at the tail end of the year.

The ice and snow didn’t stop the alcohol consumption and the all-too-many receptions and parties.

The Australian reception was addressed by the Minister for Trade and Investment Andrew Robb, who praised the Aussies for their perseverance, especially in the mining services sector.

There’s hope yet for the sector to rise in 2015 was the message PDAC wanted us all to take away, and I think most of the conference delegates have.

The encouraging thing is that it all means there is plenty to think about for executives as they make a weary retreat to their warmer homeland.

Stewart McDonald is managing director of Australian resources conferencing specialists Vertical Events

 

David Busch – Argent Minerals

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ONE OFF THE WOOD: Argent Minerals managing director David Busch dropped by The Roadhouse this week to give us an update on the latest drilling campaign currently underway at the company’s Kempfield polymetallic project.

Argent Minerals’ (ASX: ARD) Kempfield polymetallic project has a JORC Code (2012)-compliant Mineral Resource of 21.8 million tonnes for 52 million ounces of silver equivalent contained metal, which the company believes provides it with a strong foundation to aggressively pursue the sizeable upside potential it has already identified at Kempfield.

Argent’s strategy for Kempfield is to focus on exploration high rich base and precious metal grades, which has led it to identify rich combined lead-zinc grades of up to 17.9 per cent immediately to the west of the existing Mineral Resource, as well as the potential for multiple additional VMS lenses and a feeder zone.

RR: David, Argent has three projects, all located in the Lachlan Orogen of New South Wales, could you just run through them for me?

DB: The Kempfield polymetallic project is the flagship, which we hold 100 per cent. It is located just southwest of Bathurst in New South Wales.

West Wyalong is the next project, in which we hold a 51 per cent interest – that’s a porphyry-copper-gold project.

Sunny Corner is the third project, it is situated just east of Kempfield, and we consider it to have the potential to produce feedstock for the Kempfield mine once we get it up and running.

 

RR: That’s an impressive portfolio, but the Kempfield, where recent drilling encountered 5 metres at 4 grams per tonne gold from 353m, is currently generating the most excitement?

DB: The project has a history of companies attempting to develop it as a pure silver play, but dedicated silver projects are hard to come by in Australia – where silver generally is a by-product of polymetallic base metal mines, and a contribution to the overall economics package.

In the vicinity, just to the west of Lens Three, is where we intersected the 17.9 per cent combined lead-zinc, which was extremely encouraging.

So the approach we have taken with Kempfield is to take a closer look at the base metals potential.

This has been vindicated by our recent drilling results that intersected a style and grade of gold mineralisation and host rock alteration, which together are indicative of a high temperature Volcanogenic Massive Sulphide (VMS) feeder zone.

RR:  In other words you could say the Kempfield project has moved on from being a primary silver mine?

DB: That’s right. We focused our attention to the west of the current Resource where we established a range of exploration vectors through lithofacies and alteration analysis, sophisticated geophysics, geochemistry, and isotope studies, and the signs have all been good – our exploration model has been based on all that research work.

We are drilling there now and the first two holes, for which we have received New South Wales Government funding, have been designed to intersect the interpreted lenses that we have identified out to the west.

 

RR: As far as that program goes it appears to be so far – all good?

DB: Well, what has happened with the first hole – AKDD178 – is that it has encountered the richest gold grades we have seen at Kempfield to date, and the context indicative of a feeder zone.

Although that means our modelling may change to some extent, it also means that the basic principal of our modelling has been verified – at least at this early stage of the drilling campaign.

That’s very exciting, because that means we have established ‘bookends’ for a potentially much larger VMS system, with the prospect of high base metal grades in between.

Where we have just drilled and intersected four grams per tonne gold is the western ‘bookend’ associated with a high temperature feeder gold zone, and the very most easterly side of Lens One is the silver/barite ‘bookend’, where we have already delineated a Resource, and in between we expect to encounter the rich base metals where we have already intersected rich grades.

We’re waiting to see the results of the rest of the drilling, but we have a higher level of confidence now, although we also realise that nothing is certain until the drill core assays tell us what is actually there.

RR: The project has managed to attract some highly-credentialed people to come and work for you?

DB: Our chief geologist, Dr Vladimir David, when he was working with Pasminco, designed the first hole that led to the discovery of the original Hera gold polymetallic deposit by the team in 2001. He is a specialist when it comes to VMS deposits.

We have also engaged Professor Ross Large of the Australian Research Council Centre for Excellence in Ore Deposits (CODES).

His first reaction after inspecting Kempfield core trays and seeing an example of the outcropping in the Causeway Zone was to compare the potential footwall mineralisation to the Que River deposit in Tasmania (3.3Mt at 13.3 per cent zinc, 7.4 per cent lead, 0.7 per cent copper, 195g/t silver, 3.3g/t gold).

RR: The obvious question is what is your next move?

DB: There will be more drilling – that’s the obvious next step. Where we drill exactly, will depend on the results of this current campaign.

As I mentioned before, the model will most likely be refined as the drilling provides a much clearer idea of what we are looking at.

We expect this campaign to do just that, particularly with the EM surveys we plan to carry out after completing the first two holes, and also, possibly, some MMR work, which is not a much-used technique, but is one that works well at Kempfield for identifying zinc and lead mineralisation.

If you have a look at where the previous owners carried out most of their drilling you see most is concentrated on in-filling the current Resource, but there was virtually no drilling done to the west, which is completely open and where we believe the real story could be told.

So far this first round of drilling is showing we could be right…very right.

Eneabba Gas to expand Perth Basin portfolio

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THE ROADHOUSE BOWSER: Eneabba Gas (ASX: ENB) has entered into a binding Heads of Agreement with Greenpower Energy (ASX: GPP) for an option to acquire 100 per cent of the issued capital of the latter’s wholly-owned subsidiary, GCC Methane.

GCC owns a 50 per cent interest in Exploration Permit 447 (EP447), located in the Perth Basin, approximately twenty kilometres to the south-east of Eneabba’s Ocean Hill project.

UIL Energy (ASX: UIL) is the remaining 50 per cent owner in EP447.

Eneabba Gas will pay a $30,000 non-refundable option payment for a 45 day exclusive period, in which time the company will complete its due diligence on the permit.

Should the company elect to exercise its option to acquire GCC (GCC’s only asset is EP447) it will pay $820,000 to Greenpower for 100 per cent of the issued capital of GCC.

EP447 covers approximately 1,108 square kilometres and includes the formerly producing Waylering Gas Field.

2D seismic coverage of the permit consists of the 2013, UIL Energy Badgingarra 2D seismic survey, heritage, 1970s data acquired by WAPET and 1990s data acquired by Discovery Petroleum.

Eneabba said its first round review of the available technical data identified a potential resource contained within the permit area.

“We have been aggressively reviewing opportunities in the Perth Basin that are early entry and provide opportunity to value add through data acquisition,” Eneabba Gas director Thomas Goh said in the company’s announcement to the Australian Securities Exchange.

“Our process of evaluation has focussed on permits that have large potential gas reserves, are close to infrastructure and can be quantifiably derisked.

“The addition to our portfolio of EP447 is consistent with our strategy of building a strong onshore domestic energy company.”

Email: admin@eneabbagas.com.au

Website: www.eneabbagas.com.au

Novogen US studies confirm drug’s cancer-kill capability

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THE ROADHOUSE PHARMACY: Novogen Limited (ASX: NRT) has claimed to have confirmed one of its lead candidate products, TRXE-009, is showing potential to become a new therapy in the fight against adult and pediatric brain cancer.

The company said its latest study looked at the ability of TRXE-009 to kill a library of patient-derived cell cultures from subjects with glioblastoma multiform (GBM).

The cells were cultured under conditions that promote cancer stem cell growth.

Novogen explained these stem-like cancer cells are believed to be responsible for chemotherapy resistance and tumor recurrence and that being able to kill the highly-resistant GBM cancer stem cells is considered to be a fundamental requirement to treating this disease.

Novogen claimed all patient derived cancer cells represented in the library responded to TRXE-009 at clinically relevant doses, which it said suggests the drug hols therapeutic potential.

The studies were conducted by Drs John Boockvar and Marc Symons at the Feinstein Institute for Medical Research.

The company indicated its next step in the drug’s development would be to confirm its ability to cross the blood-brain barrier, a key filtering mechanism that effectively blocks the majority of chemotherapic drugs from reaching brain tissue.

TRXE-009 was designed to cross the blood-brain barrier and has been formulated as a proprietary drug product known as Trilexium.

Novogen declared Trilexium is anticipated to have application in the treatment of cancers both with and without brain involvement and is due to enter a Phase 1 study in early-2016.

Investigations being undertaken in conjunction with Feinstein are looking at alternative means of delivering TRXE-009 to the brain, including direct injection into the brain cancer by the process known as convection-enhanced delivery, and the use of lipid brain-targeting particles injected intravenously.

“TRXE-009 has been a drug development success story, thanks to a team led by Andrew Heaton PhD and Eleanor Ager, PhD,” Novogen Group CEO Dr Graham Kelly said in the company’s announcement to the Australian Securities Exchange.

“The TRXE-009 story started with the discovery of a compound that was highly cytotoxic against GBM brain cells that came from patients who had failed to respond to Temozolomide, the only standard of care chemotherapy for GBM; it then showed itself to be an equally effective killer of GBM cancer stem cells; it also is highly active in vitro against a range of pediatric brain cancer cells that are notoriously resistant o chemotherapy; it has been designed to cross the blood-brain barrier; it shows little toxicity against normal human brain cells (astrocytes) in vitro; in its parenteral delivery form, the Trilexium drug-product is highly active in animal models of xenografted human tumors, including GBM, and is reasonably well tolerated.

“So far it has ticked every box asked of it.

“The urgent need to find a successful treatment for devastating cancers such as primary and secondary brain cancers in adults and children is what is driving our collaboration with Feinstein to bring TRXE-009 into the clinic.”

Website: www.novogen.com

Exploration Development Incentive Scheme passes Senate

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IN THE LOBBY: This week the Australian Government has secured passage through the Senate of the Exploration Development Incentive (EDI) scheme, which supports junior and mid-sized mining companies by encouraging greenfields mineral exploration.

The EDI is available to Australian-resident investors in junior mineral exploration companies.

The scheme entitles these investors to the EDI tax offset or additional franking credits where the company in which they are a shareholder issues them an exploration credit, up to a capped amount based on the company’s exploration expenditure.

Basically, the scheme allows eligible exploration companies to convert a portion of their tax loss to exploration credits, which can be passed on to shareholders so they also receive an equivalent tax benefit.

The scheme has been a long-time favourite hobby-horse for the sectors lobbying bodies, so it was no surprise news of the Bill’s passage was received favourably.

Based on a similar scheme, which has been used in Canada – a major competitor for resource investment of the Australian sector, the scheme had been part of the package of policy promises outlined by the K Rudd-led Labor Party as it marched to electoral victory in 2007.

However, it quickly faded from view and was not seen again until the Liberals jumped on it in the lead up to the last election.

Fortunately for the industry it has turned out to be one promise the Abbott Government has been able to keep.

“CME has long sought a form of incentive that recognises the long lead times between investment, exploration and production over a number of years and the risks faced by investors in these early start-up stages,” Chamber of Minerals and Energy of Western Australia (CME) chief executive Reg Howard-Smith said.

“Notwithstanding the transition underway in many major projects from construction to the operational phase, particularly in bulk commodities, the future pipeline of projects relies upon increasing the current level of exploration activity.”

“Exploration is the lifeblood of future industry.

“It is pleasing that the Government have honoured an election commitment which could boost exploration activity, future investment and jobs growth.”

CME, along with the Association of Mining and Exploration Companies (AMEC), has worked closely with the Department of Industry over the past 18 months throughout the development process and ongoing consultation in the establishment of the EDI legislation.

AMEC CEO Simon Bennison also welcomed the passage of the bill saying the Government has recognised the need to encourage investment in mineral exploration in Australia in order to discover the mines of tomorrow and sustain the economic benefits for all Australians.

“AMEC has been the leading advocate for an exploration tax credit system,” Bennison proclaimed.

“Three reports issued in the past week highlight the need for the urgent implementation of the EDI and de-risk the market to encourage retail investors.

“Restoring investor confidence and providing certainty and stability for business investment decisions are crucial to improving Australia’s international competitiveness.”

Bennison directed attention to the Canada-based Fraser Institute’s Annual Survey of Mining Companies for 2014, in which all Australian jurisdictions except for South Australia decreased on the Investment Attractiveness Index.

“Capital is extremely mobile so further damage to Australia’s reputation will see reduced investment in Australian projects and companies moving to more attractive jurisdictions,” Bennison continued.

“In 2014, 47 percent of capital raised on the Australian Securities Exchange for mineral exploration was invested globally.”

The two other reports in Bennison’s arsenal were SNL Metals & Mining’s World Exploration Trends 2015, which reported a 26 percent decrease in 2014 worldwide nonferrous metals exploration budgets.

SNL put this down to investor wariness of the junior sector and producers scaling back their exploration spending.

The Mineral and Petroleum Exploration, Australia December 2014 quarter results from the Australian Bureau of Statistics identified a small increase in mineral exploration expenditure and metres drilled on new deposits, however it also indicated there is still a long way to go to restore equity between investments on new compared with existing deposits.

“Given the long lead time from discovery to a producing mine, investment in greenfields exploration is essential,” Bennison added.

“The EDI must now be implemented urgently to stimulate the sector and provide clarity for investors.

“AMEC looks forward to continuing to work with the Australian Tax Office, Treasury and the Department of Industry and Science through the implementation of the EDI and will be holding briefing sessions for the industry.”

Human Capital essential element for Oil and Gas Companies

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CONFERENCE CALLER: The AOG Exhibition and Conference set to kick off in Perth next week and one session in particular should be mandatory attendance for Oil and Gas companies who care about the welfare of their personnel.

According Gregory Bayne, a Phycologist at Total Leader & Coach Solutions Australia, any oil and gas company which fails to properly invest time and capital in its employees has a strong chance of going under, particularly in this depressed market.

Bayne is a Human Capital specialist and will be facilitating a special FIFO Mental Health panel session at AOG 2015.

Bayne asserts that studies have shown how the proper management and care for staff can be one of the most critical elements to a company’s success – or failure.

“If an organisation does not commit enough time and money into developing their human capital the organisation will lose its competitive edge and ultimately fail,” he said.

“A study by Crook et al. (2011) reports an 80 per cent (Return on Asset) improvement by increasing the collective number of years of executive-level experience from 35.2 to 59.4 years.

“The key implication being that organisations need to not only source, invest and develop human capital, but also retain the human capital.”

Bayne believes a key factor to sustainable organisation performance is identifying the human capital unique to a specific organisation and to then develop, nurture and build the human capital in these areas.

This is particularly important for the oil and gas sector, he said, which is not only a complex sector, but is also highly competitive.

“To remain a sustainable force in the market, oil and gas organisations need to be carefully considering how they are managing their human capital to gain market strength,” he said.

“If one had to look at any of the major oil and gas organisations around the world, the ones that have the greater percentage spend on human capital on an annual basis will also be the organisations with the best performance, best shareholder value, best safety performance, and lowest turn over.”

FIFO and worker support issues are currently a hot social topic across Australia and they will also be a leading issue for discussion at the AOG Exhibition and Conference.

Day two of the Conference will feature a day long Human Capital stream, with the FIFO Mental Health Panel Session facilitated by Bayne.

Bayne said the FIFO Mental Health panel will be focusing on providing insights and comments on the challenge of managing and supporting the prevention and management of mental health in the work place from a number of different perspectives.
“This panel discussion would be one of the most important sessions to attend across the AOG conference as we are discussing an issue that is current, that is impacting individuals, teams, leaders and organisations,” Bayne said.

“While we have no doubt the session will be well attended by HR, OD and practitioners, the session is highly applicable for any person in a senior leadership role, particularly COO’s and project managers/directors.

“We hope to provoke thinking, discussion and hopefully action as a result of attending this panel discussion, and most importantly stimulate the awareness around mental health in the workplace (and perhaps challenge a few of the myths).”

Also participating in the panel discussion, which will be staged on the afternoon of Thursday March 12, will be Dr Graham Jacobs, MLA, (a member of the Parliamentary Inquiry into FIFO mental health issues), Nicole Rooke from the Chamber of Minerals and Energy of WA and Alistair Box of Total Leader and Coach Solutions.