A Vibrant Future or National Collapse?

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-By Aleisha Parr

The report is out – Australia’s mineral exploration remains vibrant! Or, at least so says the title of the most recent media report produced by the office of MP Martin Ferguson, Minister of Resources and Energy. The release goes on to detail the highlights of the 2011 Australian Mineral Exploration Review, just published by Geoscience Australia. The organisation prides itself on being a world leader in providing information and knowledge resources to assist government and stakeholders in making informed decisions on the exploitation of resources, the management of the environment, the safety of critical infrastructure and the resultant wellbeing of Australians, and its annual report has become the industry thermometer for many.

The review, available for download from the Geoscience Australia website (http://www.ga.gov.au), has been shown to confirm that Australian spending on exploration is continuing to increase its already high levels. Indeed, the review shows that nearly three billion dollars was invested in the 2010/2011 fiscal year alone, with expenditure increases across all jurisdictions except Victoria.

Spending was most prominent in Western Australia, which boasted an increase of twenty-eight per cent from the previous year, up to $1590 million. Queensland was next in line, with $664 million, up by fifty-two per cent; South Australia with $225 million was also up by fifty-two per cent. The Northern Territory followed, with $195 million, up by thirty-one per cent, New South Wales reported $153 million, up by seventeen per cent, and Tasmania had $37 million, for an increase of eighty per cent.

Of the total investment expenditures in Australia, WA reported the highest levels – at fifty-four per cent of the total; QLD again trailed in second with twenty-two per cent and SA rounding that out with nine per cent.

Expenditure reportedly increased for most commodities including coal (up 62 per cent to $520 million), copper (up 60 per cent to $323 million), lead, zinc and silver (up 46 per cent to $76 million), nickel and cobalt (up 33 per cent to $271 million), iron ore (up 27 per cent to $665 million, uranium (up 27 per cent to $214 million) and gold (up 13 per cent to $652 million). Existing mines accounted for the majority of expenditures, with $1914 million invested in this area, with new explorations for undiscovered mineralisations in greenfields regions accounting for $1037 million.

Minister for Resources and Energy, Martin Ferguson, said in a February 17 Media Release, “The positive exploration figures are good news and reflect the continued strength of the industry. They are a sign of confidence in our economy and demonstrate the continued interest in Australia for investment. Our natural resources, skilled workforce and balanced policy framework will go on prompting exploration on a vast scale.”

However, The Association of Mining and Exploration Companies (AMEC), is on record as saying that the Review failed to tell the “whole story”.

A February 20 report for Mining Weekly quoted AMEC CEO, Simon Bennison as saying that the Review did not analyse other factors which could influence exploration, including meters drilled and global exploration trends. “It is becoming more and more expensive to undertake drilling programmes due to a number of factors including the type of drilling and location of the drilling programme, and the increasing operating costs involved for each metre drilled,” Mr Bennison was quoted as saying.

Though the Review tallies exploration expenditure, it does not explore the relevant changes in many of the factors which affect these numbers, thereby potentially skewing the meaning of these findings to the public eye. “It is inappropriate for government agencies to keep using “˜exploration expenditure’ as the key measurement of performance. It does not acknowledge that the rate and quality of discoveries has declined in recent years and that companies are going much deeper to find targets.”

So, despite these seemingly positive results lauded by Minister Ferguson, they in fact might say nothing about the true nature of Australia’s capital investments into resource exploration. Worse yet, the findings may actually show a flaw in the natural development of the industry, which the Review does nothing to highlight.

Mr Bennison explains: “Further analysis of Australian Bureau of Statistics data shows that as a proportion of total metres drilled, the share of greenfields exploration has fallen from around 45 per cent to just over 30 per cent since 2003, while brownfields exploration has risen from 55 per cent to around 70 per cent. This shift is a result of companies actively shoring up their reserves and expanding production at brownfields sites due to increasing commodity prices over the last few years.”

This decline in greenfields exploration, Mr Bennison said, could mean that new operational mines might not be discovered, potentially threatening the long-term growth of the Australian mining industry as a whole.

“AMEC believes exploration tax credit incentives, that assist junior mining companies to raise new equity, should be encouraged and implemented to drive greenfields exploration development in the future,” he said.

Exploration tax credit incentives – the darling of AMEC’s proposed new broad policy framework which it wished to be implemented in an effort to stimulate greenfields exploration – are aimed at supporting junior exploration companies in investing in exploration expenditure throughout Australia. Through this proposed system, companies with “no accessible income” could choose to pass accumulated losses, by way of a tax credit, on to its shareholders in a method similar to the franking system.

At present, the Federal Government has made it clear that this scheme will not be pursued, much to the dismay of AMEC, which fears that a continued inefficient allocation of resources could lead to a complete market failure. The group has elevated this discussion to alarmist levels, making claim in a recent Mstand article that “Australia’s sovereign reputations as a safe place in which to invest has been severely damaged.”

So, whether you choose to interpret the 2011 Australian Mineral Exploration Review as a cautionary tale, worthy of inciting fear and forward action to remedy a potential problem in an otherwise “vibrant” industry, or you prefer to see it as a shining testament to another hard-won year of mining success in Australia, the publication clearly has a lot to say. Perhaps, as with most things, a compromise from two extremes might be the best approach – riding on the seeming success represented by the report, while continuing to delve deeper into the nuances of both what has been said in the numerical data, and what has been said between the lines.

Strategic Resources

There are 17 classified rare earth elements, many of which have strategic purposes. Rare in name only, these elements are anything but scarce as they are found all over the world. The challenge rare earth elements pose is during extraction, as they exist in low concentrations and are difficult to separate from one another.

February 27, 2020, 4:01 AM AEDT


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