The Australasian Institute of Mining & Metallurgy (The AusIMM) is a representative body of professionals working in the global minerals industry.
With the introduction of the new Minerals Resource Rent Tax, Australia’s increasing reliance on tax revenues generated by the minerals sector has made it imperative that the Labour Government honours one of its key 2007 election promises – to directly support minerals exploration.
The scrapping of the exploration rebate that was one of the features of the Resources Super Profits Tax (RSPT) without any alternative measure in the revised resource rent tax to support exploration is of particular concern to the Australasian Institute of Mining and Metallurgy (The AusIMM), which represents 10,000 professionals working in the minerals industry.
In the wake of the new tax deal brokered by the current Government, The AusIMM has joined other mining industry groups to again call on the government to introduce a flowthrough shares scheme to assist smaller minerals exploration companies.
AusIMM chief executive Michael Catchpole says the next few months represent a critical period for the government to make good on its 2007 election promise to introduce a flowthrough shares scheme, and ensure Australia continues to be a leading supplier of mineral commodities for the future.
“The assumption in Treasury forecasts has been that over the next two decades minerals-related prosperity will remain a constant. However, key indicators have suggested that unless immediate action is taken to boost exploration activity, this will not be the case,” Mr Catchpole said.
Exploration is the lifeblood of the resources industry, yet over the last 10 years Australia’s share of global exploration spending has halved. Moreover, the ratio of Australia’s reserves to production has fallen sharply.
“It all comes back to exploration, and for this reason our number one policy priority is for the Government to fulfil its 2007 election promise to put in place incentives for exploration in the form of a flowthrough shares policy,” Mr Catchpole said.
A flowthrough shares scheme will improve access to finance for junior exploration companies.
Currently there is a tax deduction in place for exploration expenditure, but junior exploration companies generally do not receive income from mining operations and therefore cannot claim the deduction as they have no operating income and therefore zero tax liabilities.
“Most junior explorers have a market capitalisation of less than $30 million, and their continued existence can be tenuous. Allowing them to pass the tax deduction on to shareholders via a flowthrough shares scheme would increase their attractiveness as an investment option and improve their access to finance, keeping them in the game of looking for critical ore deposits. Since those same junior explorers carry out more than 80% of exploration activity, this is clearly in the national interest.”
A flowthrough shares scheme has been in place in Canada since 2000, and has been instrumental in maintaining Canada’s share of global exploration spending.
For this reason, along with the pivotal purpose of maintaining mining export income, the current Government committed to implementing a flowthrough share scheme in its election platform in 2007.
“The minerals industry has insulated the Australian economy from the worst effects of the GFC and with increased tax liabilities, is a major source of revenue for the Government. Exactly why investment in exploration continues to rate so low on the government’s list of spending priorities is a big question for AusIMM members and the wider industry,” Mr Catchpole said.
The AusIMM is taking its concerns to the government’s Policy Transition Group, headed by former mining industry leader and respected businessman, Don Argus and Resources Minister Martin Ferguson.