Australia’s strong share of developing projects at stake with proposed changes

The minerals information and consulting company said that while an associated 30 per cent exploration credit is aimed to boost the attractiveness of exploration, it may not work for all companies.

Australia accounts for a significant share of worldwide exploration and an even larger share of advanced development projects. According to Metals Economics Group’s Corporate Exploration Strategies (CES), in 2009 Australia commanded 12.5 per cent of worldwide exploration budgets for nonferrous metals, down from a high of almost 18 per cent in the earlier years of the decade. Results from the field in the first four months of this year show Australia keeping track with a similar percentage of significant drilling results and new resource announcements.

The CES shows Australia’s share of exploration is ahead of the United States, at 6.5 per cent, but behind Latin America as a whole, at 26.5 per cent, Canada at 16 per cent, and Africa at 15 per cent. Exploration in Australia has been distinguished in the recent past by a greater focus on grassroots (new targets) than the worldwide average. Nevertheless, as in the rest of the world, this has been falling in Australia in recent years, from as high as 50 per cent in 2003, to just under 40 per cent in 2009. Exploration at mine sites in Australia has jumped from 22 per cent of the total in 2007 to 33 per cent last year. This makes the prospect of new discoveries in the future even more challenging.

According to MEG’s MineSearch project database, in terms of near-term new supply, Australia has 25 per cent of the iron ore projects which have made production decisions and 13 per cent of the new planned gold mines but just 4 per cent of the upcoming copper mines and none of the new nickel mines. However, if we look at those projects that have identified resources and will be approaching production decisions in the next few years, Australia plays a substantially larger role. It is currently home to 11 per cent of active late-stage copper projects, 19 per cent of late-stage gold projects, 23 per cent of late-stage nickel projects, and 37 per cent of late-stage iron ore projects. It is in deciding the fate of these projects that changes in the tax regime are likely to have the most impact, said MEG.

Looking earlier along the pipeline, Australia is in competition for exploration dollars primarily with Latin America (led by Peru and Chile), North America, and increasingly Africa. Based on this data, and recent activities in the market, those companies who can, may choose to explore where they see the best potential returns from successful finds. MEG cited Xstrata’s recent announcement about putting Australian copper exploration on hold, as an example of this.