09/10/2007 - 22:00

Turning up the heat on exploration

09/10/2007 - 22:00

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Spending on minerals exploration in Western Australia has grown strongly in the past financial year.

Spending on minerals exploration in Western Australia has grown strongly in the past financial year.

Does that mean state government efforts to improve the processing and regulation of mineral exploration activity have been a success?

The short answer is no.

The state has been saved by the extraordinary strength in commodity prices, which has prompted explorers to increase their spending in WA, despite the regulatory hassles and delays that almost inevitably arise.

This week’s cover feature provides a detailed analysis of the latest exploration data and includes interviews with a range of exploration companies, which bemoan the difficulty of doing business in their home state.

Gold exploration is still the biggest commodity sector, but the total amount being spent looking for gold has barely changed in recent years.

The increase in exploration spending has been concentrated in two boom commodities – iron ore and, to a lesser extent, nickel.

The long-term outlook for both commodities remains positive, which should ensure that explorers and miners continue looking for new deposits, or firming up the viability of existing deposits.

The danger for WA is that the state government becomes complacent.

The state, to its credit, has implemented a range of reforms flowing from the Keating review of approvals processes and the Bowler report into greenfields exploration.

It recently announced a $3.5 million increase in funding to reduce the backlog of mining tenement applications.

The backlog peaked at 18,700 applications in February, and the government’s aim is to reduce that to 5,000 applications within three years.

The increase arose partly because of last year’s amendments to the Mining Act, which allowed mining lease applications to revert to new exploration titles.

The reversion scheme addressed one problem but created another.

The government has also claimed that Regional Standard Heritage Agreements have helped explorers to address Aboriginal heritage issues more efficiently.

Other initiatives include creation of the Office of Development Approvals Coordination, headed by former Argyle Diamonds boss Brendan Hammond, and increased funding for the geological survey office, which provides airborne geophysical information.

These reforms are all encouraging steps in the right direction but they have not satisfied the mining and exploration industries.

International surveys, such as the Fraser Institute survey, indicate that WA is seen as a more difficult place to do business relative to other states and other countries.

South Australia, which has gone to great lengths to boost mining and exploration activity, is seen as the model state.

Of course, SA is coming off a very low base and had more reason to subsidise exploration activity.

Nonetheless, it has become an attractive location for many explorers, including for uranium companies, which are unable to develop mines in WA.

Internationally, WA is facing increased competition from countries in South America, Africa and to a lesser extent Asia and the former Soviet Union.

Mr Hammond, who has the ear of premier Alan Carpenter, doesn’t accept the strident criticism of the mining lobby.

He acknowledges that WA isn’t perfect but believes the state has tackled systemic problems.

He believes that, where problems have been identified, government agencies have tackled them.

Mr Hammond points, for example, to government agencies meeting agreed timelines for processing of exploration applications.

In contrast, industry players believe the agencies meet timelines only because they keep on shifting the starting point in their schedules.

They also bemoan the continuing uncertainty surrounding environmental approvals and the complexity associated with native title and Aboriginal heritage issues.

The state’s practice of purchasing pastoral leases for inclusion in the conservation estate, thereby hindering access for mineral exploration, is seen as another negative.

 

New deposits vital for the long-term

A risk for WA is that exploration spending is primarily focused on brownfields sites, where explorers are seeking to get a better understanding of existing deposits.

This is valuable for the state. As evidenced by the growth of the iron ore industry, most of the new and proposed mines are based on deposits that were discovered many years ago.

The rise in iron ore prices has made these deposits commercially viable, and the extra drilling has been needed to confirm the scale of the deposits.

However, it does leave a question mark over the industry’s long-term development.

Greenfields exploration is needed if new deposits are to be found.

It will be another 10 years, possibly 20 years, before we can accurately judge the impact of current trends in exploration spending.

The state should not rely on continued high commodity prices to provide its economic future.

It needs to focus on being competitive, not just in terms of the approvals process, but in terms of the tax regime, the provision of geoscientific data, training and skills development. All of these are critical to our long-term prosperity.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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