The state’s recently passed Mining Amendment Bill may aim to provide greater incentive for mineral exploration, but concerns remain that the current production boom is blinding decision makers to the decline in exploration spending.
The state’s recently passed Mining Amendment Bill may aim to provide greater incentive for mineral exploration in Western Australia, but concerns remain that the current production boom is blinding decision makers to the decline in exploration spending.
Long regarded as inhibitive to the exploration cause, the state’s mining approvals system is in the midst of a shake-up, following the successful passage of the Mining Amendment Bill 2005.
The new law is designed to reduce the backlog of mining lease applications, which currently stands at 6,500, according to the Department of Industry and Resources.
The ‘one year reversion licence application scheme’ now gives explorers the right to apply for exploration licences, rather than negotiating the log jam of mining leases. A temporary scheme, it presents mining lease applicants with a 12-month window from the date of application to apply for an exploration licence.
Under previous legislation, exploration titles had a limited term of between five and seven years, at which time it was necessary to convert the title to a mining lease. This, in turn, led to the backlog in mining lease applications.
Most mining leases issued were held purely for exploration purposes, since there was no requirement to prove an ore-body had been found in the area.
But as part of changes made last year, mining leases can now only be granted when there is a “reasonable prospect of mining taking place”, according to State Development Minister Alan Carpenter.
Association of Mining and Exploration Companies chief execu-tive Justin Walawski said the organi-sation had “breathed a sigh of relief” that the bill had now passed into law.
“We should see an immediate disappearance of the backlog of mining leases over the next 12 months,” he said.
“The other advantage is perhaps an increase in greenfields [unexplored ground] exploration.”
Notwithstanding this positive development, AMEC remains con-cerned that the mining boom generally is causing federal policy makers to ignore the fact that Australia’s position on the table of exploration expenditure continues to slide.
“There’s a real misconception out there. The boom is hiding the need for greater spending by juniors,” Mr Walawski told WA Business News.
The shortage of skilled geologists and drilling rig operators is also a result of the lack of exploration spending, he said.
“The problem is, it’s a global industry, and the people go where the investment is.”
In the past four years, Australia has fallen from first to fifth in the world’s top regions for mineral exploration, according to international organisation, Metals Economics Group.
This presents a problem, in that production at record levels is “whittling away” the nation’s reserves, according to the exploration lobby group.
For instance, the current estimate on the life of Australia’s gold reserves is put at 12.9 years, Mr Walawski said.
Figures supplied to WA Business News by Intierra Resource Intelligence Ltd for the quarterly Exploration Survey reveal that $199.6 million was spent by Australia’s listed juniors in the three months to September 30.
This dollar measure of exploration activity is higher than the $166 million in the previous quarter, although still short of the $246 million in June 1997, the biggest spend on record.
The introduction of a flow-through share scheme is once again on the table, following indications by federal Industry and Resources Minister Ian MacFarlane that he will again try to convince Treasury of its benefits.
The scheme provides investors with the opportunity to write-off part of their investment in junior exploration companies as a tax loss, acting as an incentive for investors and reducing the cost of capital to juniors.
Mr Walawski rues the fact that Canada – the nation spending the most on exploration – has a ‘super’ flow-through share scheme arrangement, giving investors the right to deduct 40 per cent of their company’s exploration expenditure.
About 60 per cent of all funds raised for exploration in the country come from flow-through shares, according to industry figures.
Mr Walawski points out that, since the introduction of the ‘super’ scheme in 2000, Canada has discovered more than 100 new deposits. Australia has reported no major discoveries during the same period.
This has also led to more locals listing on the Toronto Stock Exchange in order to take advantage of the tax incentives, according to analysts.
While major producers such as Rio Tinto and BHP Billiton had the budgets to deliver greater spending, this went mainly on shoring up their brownfields (previously explored ground) developments, Mr Walawski said.
“The model of mining companies in Australia, is that juniors are in the business of exploration and the majors are in the business of producing,” he said.
