Reform needed to keep industry competitive
GUEST CONTRIBUTOR: Association of Mining and Exploration Companies (AMEC) CEO Simon Bennison says it’s no secret that the Australian mineral exploration and mining industry is currently facing difficult times.
The industry is no longer as cost competitive as it once was with production costs continuing to rise dramatically.
Exploration and mining companies are experiencing an environment where equity investment is being lost to competitive offshore projects, (56 per cent over the past year) and as a proportion of the total metres drilled, Western Australia`s greenfields share of minerals exploration has fallen from around 34 per cent to 25 per cent since 2003.
As a result we are seeing mining companies going through a number of cost cutting exercises including retrenching staff, deferring project expansions and putting new project on hold.
Recently the University of Western Australia’s Centre for Exploration Targeting, released a paper identifying an alarming decline in the size and quality of Australia’s resource base in precious and base metals.
The paper estimates ‘that in the absence of new significant discoveries, based on current reserve and resources, about half of Australia`s non-bulk commodities mines would be exhausted between 7 and 18 years’.
AMEC believes that planning and policy reform now is critical in order to maintain and enhance WA`s position as an attractive jurisdiction for mineral exploration and mining investment.
In recognising these issues and in order to seek solutions AMEC has prepared State and Federal Policy Platforms for mineral exploration and mining.
AMEC believes the need to implement some short and longer term strategies in order to reverse the current trend in Australia`s decline in the global share of greenfields exploration is paramount.
A short term strategy at the Federal level is the immediate implementation of a mechanism that will encourage investment in greenfields minerals exploration, such as the Exploration Tax Credit model previously proposed by AMEC.
This is a hybrid of the Canadian Flow Through Shares, tax credits and Australia`s franking system.
This model was designed to specifically promote Australian greenfields exploration expenditure by providing junior exploration companies the ability to voluntarily pass ‘trapped losses’ from eligible exploration activities to their shareholders in the form of a tax credit.
At a State level, AMEC is recommending an increase in the co-funded drilling allocation in the Exploration Incentives Scheme to further stimulate much needed greenfields exploration.
Considering on average it takes about 7 years from discovery to become a producing mine, it is now time for State and Federal Governments to implement strategies to ensure there is a sufficient level of greenfields mineral exploration expenditure to find the mines of tomorrow.
by Simon Bennison
AMEC chief executive officer