The Australian Institute of Geoscientists (AIG), in a statement issued in early January, charged the Australian federal government’s mining-tax-focused Policy Transition Group (PTG) with completely “missing the point” because the group had not made any recommendations that would support greenfields exploration in Australia.
“There is an extraordinary ongoing lack of appreciation or understanding of the direct link between generating growth in mining revenues, which can then be taxed to deliver higher government income, and the need to secure the foundations and growth in our resources inventory and associated employment, by ensuring ongoing minerals discovery,” the statement said.
“The PTG and the government have been lulled into thinking that the current, so-called ‘resources boom’ and flush of new resources-based floats is sustainable in the long-term. Most of these IPOs are for overseas projects. In September alone, 85% of capital raised in mining floats was for offshore projects, and the average for the last six months is nearly two-thirds of funds raised being for overseas projects. Furthermore, the balance of the IPOs are invariably for brownfields projects rather than for greenfields exploration.”
AIG pointed out that the market has failed to support the type of exploration needed to make new discoveries in Australia’s highly prospective terrains. AIG strongly believes fiscal incentives are the appropriate mechanism to address this failure.
AIG called for Australia’s federal government to promote greenfields exploration in Australia and to reduce volatility in exploration investment as part of any new mining tax regime. “AIG strongly supports an Exploration Tax Credit model, wherein tax credits, dividend imputation and flow through shares are combined to produce a targeted response to the market failure to undertake greenfields exploration,” the statement said.
The Institute urged the government to consider immediate fiscal initiatives for mineral exploration, in particular greenfields exploration, as part of any new mining tax legislation introduced this year. “The importance of mining to the Australian economy requires a long-term response that will underpin the sector, rather than opportunistic revenue raising,” the statement concluded.
The full AIG statement can be accessed at http://aig.org.au/geoscience-news/ptgignores-exploration.