The government released The Road to Discovery: the Minerals Exploration Action Agenda, on Friday to address a steep 37% decline in minerals exploration since 1996-97.
Acting MCA chief executive Dr Kevin Tuckwell said the decline in exploration spending was a global phenomonen, except for Canada, which had successfully introduced a flow through share scheme and related fiscal measures.
Tuckwell said the MCA was pleased the government had agreed to consider the introduction of a flow through shares scheme and warned a here and now attitude to exploration was needed to keep the minerals industry alive.
"Exploration is a critical strategic issue for the Australian minerals industry," he said.
"That a decision on the entire package of measures to revitalise minerals exploration investment remains outstanding creates investor uncertainty and erodes confidence.
"If this policy vacuum continues there is a real prospect in 20 to 25 years there will by only one remaining major base metal mine in Australia – Olympic Dam in South Australia."
The Road to Discovery includes joint industry and government commitments to address access to land, access to finance, the quality and availability of onshore pre-competitive geoscience data and maintenance of a world class pool of professionals for the industry.
Global trends have shown exploration expenditure falling from a peak of US$5.1 million in 1997 to US$1,9 million in 2002 before recovering to US$2.4 million in 2003, according to estimates by the Metals Economics Group.
Australia followed global suit, with exploration expenditure falling sharply from nearly $1.2 billion in 1996-97 to $640.8 million in 2001-02, representing a 20 year low in real terms before recovering to $732.5 million in 2002-03, according to the Australian Bureau of Statistics.
The action agenda identified the government may have contributed to the problem of raising funds for minerals exploration through a number of programs assisting parts of the small venture capital market but which were of limited assistance to junior exploration companies.
"The result is the potential crowding out of minerals exploration investment, resulting in sub-optimal levels of exploration to an extent that has been characterised by some as government influenced market failure," the report read.
Market rationalisation and the hollowing out of middle sized firms had resulted in a funding shortfall for Australian projects, according to the report.
The number of companies in Australia with exploration budgets in excess of US$10 million had dropped 75% over the past six years to five, limiting the opportunities for funding from, or joint venture arrangements with companies with major exploration budgets.
Key recommendations of the agenda, including the flow through shares scheme, maintenance of immediate deductibility of exploration expenditure and its enhancement to 125% for greenfields exploration and full taxation deductibility of costs associated with native title requirements will be considered and implemented by industry members.
The industry led group will be chaired by Newmont managing director John Dow and includes MCA chief executive Mitch Hooke.
Australia's Mining Monthly.
