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R&D vital for maturing mining industry: Parry

WESTERN Mining Corporation’s executive general manager for exploration, Jack Parry, made some startling claims at the CPA Australia Resources Convention in Perth last week.

While others have been putting the view that Canada may be benefiting ahead of Australia from its recent reintroduction of flow-through investment arrangements in support of exploration companies, Mr Parry said Canada was attracting less than half the exploration investment it attracted 15 years ago.

Over the same time period, however, Australia has consistently attracted 20 per cent of all global investment expenditure on minerals exploration.

Australia also has been holding its own in worldwide terms during the recent downturn in exploration expenditure, Mr Parry said.

While worldwide spending on minerals exploration fell by 54 per cent from 1997 to 2000, minerals exploration spending in Australia dropped by 55 per cent.

Mr Parry also pointed out a significant flattening of the figures for Western world discoveries worth more than $US1 billion over the past 30 years.

This contrasted with a tripling of exploration spending during the last 20 of those years, 1980-2000.

“Exploration has become a value-destroying exercise”, Mr Parry said. “Far too much has been spent on minerals exploration, with far too little return.”

Over the past 15 years, US bonds returned 7.3 per cent, while investment in worldwide resources returned 4.8 per cent, and the return on Australian resources investments averaged 5.7 per cent.

A combination of four factors was negatively affecting mining and exploration and fiscal fixes alone would not transform fortunes, Mr Parry said.

The significant slowing of discoveries, increased competition for capital (from the information and biotechnology sectors), poor com-modity prices and poor profitably were the major issues confronting mining and exploration, both in Australia and worldwide, and each needed to be addressed.

Companies should increase their focus on creating real value, Mr Parry proposed.

This could be done by chasing mainly world-class deposits and by placing a greater premium on being first in a region, or trying new concepts, models or processing technology.

Better management also was needed, particularly in the area of assessing and turning over projects.

That is, a company that moved early on world-class deposits and was supported by disciplined decision-making would be a successful company, Mr Parry maintained.

“Some exploration has been driven by the ‘flavour of the month’. Leave the smaller deposits alone – the ones with total market sales of less than $100 million,” he said.

“Perhaps they’re OK for smaller companies, but WMC takes a different view for a larger company.”

Australia had maintained its share of the global mining and exploration cake by adopting methods such as aeromagnetic data mapping, Mr Parry maintained.

Hence Australian companies were likely to succeed in frontier territory, like the Musgrave Ranges and offshore in the developing world.

Australia also led the world within its universities in geoscience and mining and was becoming the leader in human capital in mining in the first world, Mr Parry said.

In 1999, just 2 per cent of US graduates entered the minerals sector, and for the period 1991-2000 a mere six per cent of Canadian graduates headed for the mining industry.

Australian technological software was used in over two-thirds of the world’s mines, with comparatively small companies like Mincom, Maptek, Whittle and Elphinstone leading the charge in technical innovation.

The bottom line, Mr Parry concluded, was that the Australian mining industry was still maturing, and could not afford to focus on putting capital into exploration expenditure at the expense of research and development.

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