Western Australia’s dominant position as the nation’s mineral exploration hub continues to fade, with current figures revealing the state’s share of national mineral exploration to be the lowest on record and no signs of a reverse to the trend.
Western Australia’s dominant position as the nation’s mineral exploration hub continues to fade, with current figures revealing the state’s share of national mineral exploration to be the lowest on record and no signs of a reverse to the trend in the near future.
While commodity prices continue their upward trajectory, the state’s exploration spending base has undergone consistent falls since the late 1990s as miners look towards more favourable overseas or interstate investments.
WA’s ability to regain exploration dominance in the near future also looks uncertain considering the continued shortage of drill rigs, drilling crews and geologists in the state.
Despite this, Western Australian companies again dominated global exploration expenditure by Australian junior miners, with figures compiled by West Perth-based Intierra Resource Intelligence for the WA Business News September quarter exploration survey revealing WA-based explorers filled eight of the top 10 spots. Their combined exploration spending was more than $31 million for the quarter.
In total, $214.2 million was spent by Australia’s listed juniors globally for the September quarter, down almost 16 per cent on June quarter’s record spending of $254.5 million, but significantly higher than the $185 million spent in the March quarter.
Even though state-based companies are flying the flag internationally, WA is still in the midst of an expenditure drought on mining sector exploration.
The proof lies in the statistics, with the Australian Bureau of Statistics June quarter figures painting a less-than-rosy picture of exploration spend in WA.
Gone are the days in the mid to late 1990s when the state was experiencing record growth in exploration expenditure. Today, WA is the only state to have experienced a reduction, with figures revealing a 2.6 per cent fall from $606 million in 2004-05 to $590.2 million in 2005-06.
Association of Mining and Exploration Companies chief executive Dr Justin Walawski said the figures confirmed that WA was the worst performing state in Australia and was behind other states in the introduction of policies to encourage and promote further mineral exploration.
“Opportunities lost in direct investment measure in the hundreds of millions and, once the multiplier effect is taken into account, opportunities lost to the state exceed $4.8 billion,” he said.
The decline in exploration expenditure has also witnessed the decline of WA’s share of national mineral exploration. Since 2001, the state’s share of mineral exploration has fallen more than 21 per cent, from 65.3 per cent to 43.7 per cent in June 2006 quarter.
“The ABS figures are a wake-up call,” Dr Walawski said. “When all other states and territories are reporting double digit and triple digit percentage increases, WA is the only state where mineral exploration has declined.”
Dr Walawski said other states had introduced policies to encourage mineral exploration and were ensuring government approval processes reflected a desire to attract mineral exploration.
One such state is South Australia, which earlier this year introduced an incentive scheme called the Plan for Accelerating Exploration (PACE), offering improved land access and co-operative exploration funding.
The scheme appears to have had a positive reaction on the state’s exploration growth with expenditure surging almost 119 per cent, from $67 million in 2004-05 June quarter to $146.5 million in 2005-06 June quarter.
While WA is still yet to implement a PACE type incentive scheme, the much-talked-about flow-through shares scheme still remains on the agenda.
Last month, the National Party’s federal conference supported a motion from Nationals’ WA president Wendy Duncan to support the flow-through proposal, putting further pressure on the federal government to adopt the scheme.
The scheme provides investors with the opportunity to write-off part of their investment in junior exploration companies as a tax loss, acting as an incentive for investors and reducing the cost of capital to juniors.
However, Dr Walawski said that, while AMEC continued to support the scheme, it would take more than just tax incentives to help bring the state back to being a mineral exploration powerhouse.
WA Resources Minister John Bowler has said the Mining Amendment Act 2005, which took effect in February this year, was a sign the government was assisting the industry by providing more attractive terms for mining lease applications.
But Mr Bowler also pointed out there would be little capacity for any hikes in exploration considering the continued shortage of drill rigs, drilling crews and geologists in the state.
It appears WA isn’t alone in experiencing a slide in exploration expenditure, with Australia recently claiming the slowest year-on-year growth in exploration budgets, according to Canadian-based Metals Economics Group.
In recent figures released earlier this month, Australia’s share of global exploration has dropped to an all-time low of 11 per cent, having been at 22.5 per cent over a decade ago.
Latin America accounted for 24 per cent of estimated exploration budgets, or $US1.71 billion, followed by Canada with 19 per cent.
Canada introduced super flow-through shares in 2000 since which time it has discovered more than 100 new deposits.
According to MEG, 43 per cent of worldwide exploration budgets were locked up in late-stage exploration, exceeding the 39 per cent of exploration in grassroots budgets and the 18 per cent spent in mine site budgets.
