The Australian Institute of Geoscientists says there’s little immediate turnaround in sight for a “perfect storm” of macro challenges converging on the industry.
Already facing the highest level of member unemployment in five years of surveys, AIG said the dramatic slump in on-ground dollars spent on exploration was part of a three-pronged problem for the industry.
“The mining boom is gone and the downturn is now in full swing, our members are increasingly jobless as a result and now we see confirmed officially that the exploration spend itself has suffered a dramatic decline,” AIG president Wayne Spilsbury said.
“If that isn’t symptomatic enough, adding fuel to the fire is PwC’s just released report this week showing the world's top 40 mining companies – including Australia’s major bulk commodity miners – have recorded a profit slump of 72% in just a year.”
In addition to the sombre PwC report, which also flagged a record $US57 billion ($A61.4 billion) in impairment charges for the world’s top 40 miners, recent gloom included government data tracking a 13.7% decline in the value of the resources industry over the 2012-13 year to $A114.4 billion.
The Australian Bureau of Statistics also highlighted an astounding 1860% fall in earnings for the exploration and mining support services sector over the year, as well as an 88.3% fall in profits for coal mining and a 41.4% fall in profits for metals.
Spilsbury called the figures a “reality check” on what was happening in the mining and exploration sectors.
“We do not want to see Australia’s resources sector with its economic contributions and skilled employment go the way some of our historic manufacturing sectors have or are going,” he said.
“If state and federal governments aren’t concerned enough about the resources decline to this point, then they should be – and in a hurry.”
Spilsbury said of most concern was the dramatic slump in greenfield exploration, characterising the high-risk, high-reward work as essential to finding the next Broken Hill or Olympic Dam.
“Greenfield exploration is the very heart and soul of Australia’s mining potential and the greatest future employment pathway for our geoscientists but its lifeblood has been choked and it is in need of urgent resuscitation,” Spilsbury said.
AIG applauded the introduction of the exploration development incentive as a step in the right direction and supported concerns expressed this week by the Association of Mining and Exploration Companies, which pointed to the fact that it took on average seven years to convert a discovery into an operating mine.
However, AIG said while it welcomed the proposed start next month of the EDI and the possible repeal of the carbon and mining taxes as negatives weighing down on resource investment sentiment, these factors might not be sufficient to drive a rapid turnaround.
“State governments need to seriously attack the issue of their slow and expensive regulatory systems, which divert money that could otherwise be spent productively on the ground,” Spilsbury said.
The EDI is planned to allow investors to deduct a proportion of the eligible exploration expenditure against their personal taxable income.
The program is expected to benefit from $100 million in federal monies, increasing the attractiveness of investing, particularly in cash-strapped junior explorers, which in the main generate new exploration and the potential blue sky upside from discovery.
Last week, Industry Minister Ian Macfarlane released a series of statements stressing the importance of exploration funding and deregulation as well as a reaffirming the government’s plan to scrap the mining and carbon taxes.
