The Australasian Institute of Mining & Metallurgy (TheAusIMM) has recently joined forces with other mining industry groups to call upon the government to introduce a flowthrough shares scheme to aid junior miners in raising the finance they need to make discoveries in the minerals sector.
AusIMM chief executive Michael Catchpole said; “the assumptions of a protracted mining boom underpinning Treasury’s long-term revenue projections would not hold true if Australia neglected the challenge of restocking its minerals reserves. The economic projections we have seen to date rely on that the rate of replacement of Australian mineral reserves, and global interest in mining them, 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.”
A prime example is the recent sharp fall of reserves rations in recent years. At the same time, Australia’s share of global exploration spending is also in decline. “It all comes back to exploration, and for this reason our number one policy priority for the May Budget is for the Government to fulfil its election promise, to put in place incentives for exploration in the form of a flow-through shares policy,” Mr Catchpole said.
The intention of flow-through shares is to solve a current anomaly in taxation legislation whereby there is a tax deduction in place for exploration expenditure, but junior exploration companies do not have the opportunity to access them. This is generally because junior exploration companies do not receive income from mining operations.
“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 flow-through 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.”
Another area that AusIMM thinks requires attention from the government is sustaining investment levels in R&D. Leading innovations in Australia have made discovery more predictable, allowed the economic processing of lower grade ore and provided low cost access to resources at depth.
“Investment decisions on areas of research today are made by multinational companies with obligations beyond Australia’s borders. In order to maintain their support of research centres of excellence here in Australia, we must maintain the best research infrastructure and offer the best incentives for investment,” said Mr Catchpole. For this reason, The AusIMM has urged that levels of support for the CSIRO Minerals Down Under Flagship and mining research centres of excellence be maintained.