Road to recovery for Australia’s resources sector

By Simon Bennison, Association of Mining and Exploration Companies (AMEC)

Two months later the nation watched as the RSPT was scrapped and replaced with the equally poorly designed, ill-conceived and discriminatory Minerals Resource Rent Tax (MRRT).
An independent study conducted by the Canadian Fraser Institute indicates that the unveiling of such policies to place an extra tax on mining from July 1st, 2012 has already had a significant negative effect on Australia’s reputation.
The Fraser Institute Report is the result of a mid-year survey of 429 companies across the world, which ranked 51 mining jurisdictions on a variety of public policy factors, including the taxation regime.
Since the 2009/10 survey, the average ranking of the Australian states fell dramatically from 18th to 31st out of the 51 jurisdictions.
Similarly, the Resourcestocks magazine’s recent World Risk Survey has seen Australia’s international ranking as a desirable mining location plummet from 3rd to 26th since the 2009 survey. Not surprisingly, sovereign risk, financial risk and red tape were amongst the categories surveyed which battered Australia’s reputation the most.
There is further credible evidence that investors are wary of any extra tax on mining. The CMC Markets Share Trader Insight Survey for the six months to July 2010 revealed a 6 per cent fall in the number of traders who viewed the materials sector as the best future performer.
It is of paramount importance that the incoming government takes immediate action to remove uncertainty and restore domestic and international confidence in the Australian mineral exploration and mining sector. This can best be achieved through long term genuine tax reform measures and mineral exploration development programs.
What we have seen over the past four months is projects being put on hold and investment moving offshore in the wake of uncertainty and increased sovereign risk emanating from a poorly designed extra tax on mining. The absence of any significant initiatives for mineral exploration has further compounded the woes of the resources industry.
State Government initiatives such as the Exploration Incentive Scheme in Western Australia and the Plan for Accelerating Exploration (PACE) in South Australia are welcomed, but there must be an Exploration Tax Credit or substantial Exploration Development Program introduced at the Federal level.
Mineral exploration is an expensive and high risk venture, and without genuine development programs Australia’s share of world exploration expenditure will continue to decline. To find our mines of tomorrow we must continue to explore.
Greenfields exploration is particularly risky, and what we have been finding in recent times is that brownfields exploration is being pursued instead. The result is that we are uncovering a lot more small and mid size deposits of lower grade.
If there is any doubt about the benefits of an Exploration Tax Credit, you need only look at Canada. Since introducing an Exploration Tax Credit, Canada’s share of world exploration expenditure has continued to increase exponentially to the extent that it is now recognized as the world’s most desirable destination to explore and mine.
AMEC is looking forward to consulting the incoming Government as Australia looks to repair the damage done to the engine room of the Australian economy; our highly valued resources sector.

Miners send their message to government
WA’s resource sector, in late August, was urging the parties that ultimately form government to secure the future of the Australian resource sector and the nation’s long-term prosperity.
Chamber of Minerals and Energy of Western Australia (CME) chief executive Reg Howard-Smith said the industry had suffered in recent months, from the uncertainty created by the proposed resource rent tax.
Howard-Smith said it was crucial the new government delivered stability to the sector.
“Maintaining our industry’s international competitiveness will be critical, in ensuring continued investment,” Howard-Smith said.
He said the significant swing against Labor in Queensland and Western Australia could partly be attributed to community concerns about the impact of the proposed resource rent tax.
“A strong resource sector means a strong economy and jobs and opportunities for all – in WA alone, 330,000 people rely on the industry directly or indirectly for employment.
“We urge the parties and MPs who eventually form government to consider the adverse impact of a new tax on the sector’s long-term growth.”

Other priorities include:
Labour supply
• Strengthening skilled migration programs;
• Targeted investment in skills and training opportunities for school
leavers and the unemployed; and
• Investment and programs aimed at increasing employment
participation rates for Indigenous communities and women.

Approvals
• Removing the duplication of processes and reducing the amount of regulation by multiple authorities and regulatory agencies. This includes the re-drafting of the Environmental Protection and Biodiversity Conservation Act 1999 to simplify, streamline and reduce the duplication of processes under the Act; and
• Inclusion of social and economic assessments, in conjunction with consideration of environmental and cultural values, in federal land use planning processes, such as the current National Heritage assessment for the Kimberley region.

Climate change
• Ensuring domestic action to reduce greenhouse gas emissions is calibrated with global efforts and does not compromise the international competitiveness of Australia’s trade exposed industries.
• Promoting joint government and industry efforts to adopt new low carbon technologies.