Rally to boost explorers in 2014

THE exploration industry was not at its strongest through 2013 but there are changes afoot that may bring some positive developments this year.
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PLatypus is currently exploring several prospects around Australia.

Andrew Duffy

Some of the biggest moves will come from federal and state government policy, with the movements already welcomed by some of the industry’s largest bodies.

The Chamber of Minerals and Energy in Western Australia told MiningNews.net that changes might start to pay dividends for 2014 but the sector still faced big challenges.

One of the biggest changes the CME has its eye on will come from Canberra, with the federal government’s exploration and development incentive expected to come into effect this year.

“The Abbott government has committed to an incentive which, when implemented in 2014, will allow investors to deduct a proportion of mining exploration expenditure against their taxable income,” CME WA chief Reg Howard-Smith told MiningNews.net.

The scheme will be capped at $100 million and will target small explorers by limiting eligibility to companies with no taxable income.

Similar incentives will also continue from state governments and the CME said it was good to see the WA government making its own commitments to the sector.

“During 2013 the CME welcomed the continuation of the state government’s exploration incentive scheme and the co-funded drilling program,” he said.

“This program directly assists companies in the exploration efforts and without this direct funding, many discoveries would remain in the ground.”

In other areas the Association of Mining and Exploration Companies said the Coalition’s direction towards a “one-stop shop” for environmental approvals would help lift some “burdensome and duplicative approval processes” that had plagued the sector.

AMEC has also been driving its own initiatives, leading a delegation of members to China late last year.

Howard-Smith said the industry had been showing good signs moving into 2014.

“After falling for four quarters, total mineral exploration expenditure staged a small turnaround, increasing by 3.5% in the September 2013 quarter to reach $396 million,” he said.

“It may still be too early to say but this could be a positive sign that exploration companies may have stopped cutting back and are restarting their exploration programs.”

Despite the recent lift in spending, close watchers of the industry are right to be wary, with key indicators showing sliding performance over the last 12 months.

The most recent figures from the Australian Bureau of Statistics show exploration activity and expenditure has been declining since the June quarter of 2012, with the mining states of WA and Queensland leading the fall.

Much of the decline can be attributed to factors outside government control, with overseas demand the most dominant factor.

“While the decline in exploration expenditure is likely due to the weak commodity price and high-cost environment, the CME believes every effort should be made to arrest this decline,” Howard-Smith said.

Nevertheless, exploration is regarded as a key bellwether of the mining industry.

Howard-Smith said while the sector was facing a natural downturn, supporting explorers was a crucial part of securing the wider industry’s future.

“Notwithstanding the transition underway in many major projects from construction to operational phase, particularly in bulk commodities, the future pipeline of projects relies upon increasing the current level of exploration activity,” he said.