19/12/2006 - 22:00

Falling share of exploration spend only negative for resources sector

19/12/2006 - 22:00

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Western Australia’s resources sector continued to grow during 2006, with record production and export figures. A declining share of national exploration spending, however, remains a key issue.

Falling share of exploration spend only negative for resources sector

Western Australia’s resources sector continued to grow during 2006, with record production and export figures. A declining share of national exploration spending, however, remains a key issue.

Western Australian Chamber of Minerals and Energy director David Parker said production in the resource industry during 2006 had grown to about $43 billion, up from $38.9 billion in 2005, with $1.7 billion royalty dividend.

“Western Australia currently has an under way or planned resource project list of $80 billion,” he told WA Business News.

Despite the surge in production, Mr Parker said there remained an imperative to encourage mining companies to pursue exploration projects in WA, in particular greenfields exploration.

“Going forward, the chamber will actively pursue greenfield exploration and encourage state government development in this,” he said.

The state’s exploration spending base has undergone further falls in 2006, as WA-based miners look towards more favourable overseas mining investments.

Association of Mining Exploration policy and public affairs manager, Ian Loftus, said figures released by the Australian Bureau of Statistics for the September quarter revealed that, despite a rise in exploration spending, WA’s share of national exploration spending had decreased from 2005 due to increased expenditure in other states.

“The third quarter 2006 figure may break a downward sliding trend [increasing from $156.3 million in Q2 to $190.2 million in Q3], but doesn’t restore WA to its position in third quarter 2005,” he said.

“Over the last three years, WA’s share of national exploration expenditure has dropped from 59.2 per cent to 47.6 per cent.”

Mr Loftus said significant increases in exploration expenditure in other states made WA look like an underperformer, particularly when WA’s share of Australia’s mining activity was factored in.

He said that, considering the royalty dividend and the focus on mining in the state, more should be done to encourage mining in WA.

“There has been more of a focus on implementing flow through shares,” he said. “But the state government still hasn’t put forward incentive schemes to encourage exploration like in other states.”

Despite this, iron ore exploration spend has increased from $136 million in 2005 to $155.6 million this year, reflecting increased demand from China.

The Australian Bureau of Agricultural and Resource Economics Australian Commodities report for the December quarter, estimated iron ore production to be 280 million tonnes in 2006.

Iron ore exports are estimated to be a record 251mt for the year, despite a cyclone season in WA’s north-west, which resulted in a 17 per cent drop in exports for the first quarter of 2006.

Another commodity to have surged ahead in exploration spend is uranium, which has risen from $10.5 million in 2003-04 to $56 million in 2005-06, reflecting nuclear power’s standing as an alternative to fossil fuels.

Meanwhile, national figures released recently by the Minerals Council of Australia 2006 Minerals Industry Survey reveal it has been a good year for mining companies, with net profits up 74 per cent to $11.8 billion and average mineral prices up 45 per cent from 2005.

Total employment increased by 19 per cent to 82,588 persons, while net cash used in investing activities was up 29 per cent to $10.1 billion.

Mineral royalties and licence fees paid to state and territory governments were up 49 per cent from 2005 to $2.1 billion.

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