EXPLORATION POLICY: A RESPONSE TO THE POLICY TRANSITION GROUP ISSUES PAPER

Minerals exploration in Australia: recent trends

The pipeline of minerals resource projects for future generations in Australia appears uncertain at best based on current exploration trends. Enabling regulatory and taxation frameworks are required to drive exploration in Australia, especially for smaller, entrepreneurial operators disadvantaged by existing arrangements.

Despite a pick-up in expenditure in recent years, real mineral exploration activity (measured by metres drilled) is well down on levels recorded in the 1990s. Most of Australia’s minerals production is from deposits found 20 or more years ago. The profile of exploration expenditure shows a steady shift away from “greenfields” projects and toward “brownfields” deposits. There has also been a shift in exploration focus from the early 2000s with increased activity being directed to the bulk commodities, especially iron ore and coal, and away from gold and base metals. And across most commodities there has been a decline in discovery rates and in the average grade of exploration discoveries.

In addition, Australia’s share of global exploration expenditure has declined as other nations have adopted pro-exploration policies. Though notable vis-a-vis developing economies, Australia’s position has also slipped relative to more established competitors such as Canada where the latter’s Flow-Through Shares (FTS) scheme has provided a solid platform for longterm exploration growth.

These trends were all identified in the PTG Issues Paper released on 1 October 2010. The minerals industry considers that they point unequivocally to a suboptimal level of minerals exploration in Australia at a time of historically high mineral commodity prices.

Australia remains a prospective continent for both bulk commodities and higher value precious and base metals. It is also prospective for light and rare earth metals – metals of the “electronic economy”. Taxation measures should encourage investment in exploration for all these existing or emerging materials.

There are two key aspects that influence a mineral explorer’s decisions where to explore. The first is their perception of prospectivity and the second, especially for the junior sector, is their access to risk capital to fund their exploration activities. At a time of historically high global demand for mineral commodities, Australia may run the risk of slipping behind competitor nations that have adopted more equitable, pro-exploration policies. To maintain exploration impetus, Australia also needs to get smarter in its development and application of advanced exploration technologies to find new blind deposits and deeply buried deposits and to provide greater certainty when seeking to extend already known deposits.

The importance of an expanded mineral exploration effort in Australia was highlighted by Geoscience Australia (GA) in its most recent report on Australia’s Identified Minerals Resources 2009, released in January 2010. It noted that that there have been “very few world class discoveries in Australia over the last two decades and the inventory has been sustained largely through delineation of additional resources in known fields”. This comment underlines the importance of the need for a smarter and an expanded mineral exploration effort in Australia.

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