Australian Mineral Explorers in Desperate Hunt to Raise Capital
Press Release: Thursday 20th April 2000
More than 60 geologists gathered to listen to Mr. Ross Louthean and other
mining industry identities discuss new and innovative ways of raising
capital for mineral exploration to sustain the future of the Australian
mining industry.
The Australian Bureau of Statistics (ABS) data for the December quarter 1999
confirms the continuing decline in mineral exploration expenditure which is>
at its lowest level since June 1993.
The trend estimate for mineral exploration expenditure fell $4m to $170m
during the December quarter of 1999 – this was 23% lower than the estimate
of $220m for the same quarter of 1998.
Mineral exploration expenditure has now fallen for the tenth successive
quarter and has almost halved in the past three years. Whilst expenditure
on base metal exploration has recently increased, the continuing decline in
gold exploration has contributed to an overall decline in mineral
exploration expenditure.
Drilling companies have reported some increase in activity with the recent
rise in some commodity prices, but nearly all work relates to mine site or
near mine site (“brownfields”) activity, with little or no new (“greenfields”) activity. The ABS data show that the trend estimate for
the number of metres drilled declined to 1.5 million metres in the December
quarter 1999, 14% lower than the September quarter, 47% lower than the
December quarter 1998, and the lowest level since the March quarter 1993.
Analytical laboratories describe business as “flat” with declining prices
and volumes contributing to lower profit margins and reduced employment
opportunities. Some rationalisation in this sector of the industry appears
likely.
Consulting/contract geologists report little or no work being available and
with limited employment opportunities, the departure of both recent
graduates and experienced personnel from the exploration/mining industry is
a source of major concern.
Land access difficulties due to Native Title uncertainties is a major
current concern for the industry. This uncertainty has severe long term
implications for the development of future resource projects.
The majority of large resource companies appear to have abandoned regional
greenfields exploration, adopting a policy of merging with other companies
and/or acquiring or farming in on small company discoveries. Small resource
companies continue to be starved of funds for exploration as venture capital
continues to flow in to the more trendy “dot.com” internet and technology
stocks. The greenfields exploration so necessary to ensure the future of
the mining industry continues to show little or no activity.
Some of the recent announcements of large resource project developments,
e.g. iron ore and nickel projects in WA, mask the current exploration
expenditure crisis and potentially give a false picture of the industry as
they have evolved from exploration successes which were initiated several
decades ago. The majority of mining operations, both current and planned,
have exploration lead in times of 5-10 years or longer and with the current
downturn in exploration activity the long-term health of the mining industry
is under threat.
The meeting of geologists and mining industry identities discussed ways in
which capital could be raised to fund junior exploration efforts. The 'Flow
Through Shares' scheme was the brainchild of Australians and ignored by our
government was adopted by the Canadian government has been successful in
raising more than $4billion worth of financing for their industry. The same
frustration with our politicians can been seen with regard to the 125% tax
concession for R&D which specifically excludes mineral exploration.
An innovative but complex tax-effective scheme was discussed by Mr Ian
Walker of the Ankatell Exploration Joint Venture which has a submission
before the tax commissioner. The scheme is similar to those used for tree
farming projects.
There is also the prospect of new venture capital funds specific to the
mining industry based on the success of the Lion Selection Trust and others
could also grow to provide advanced projects with capital. This would be
enhanced if the major mining companies would be the source of such funds.
Low commodity prices, land access uncertainties, poor stock market
sentiment, inability to raise venture capital, and lack of tax incentives
for exploration have all contributed to the current decline in mineral
exploration activity. After almost three years of exploration recession the
warning bells for the future viability of the resources industry are ringing
loudly. If the industry is to maintain its status as the major earner of
export income for the country some incentives to arrest the flight of
capital and a sensible resolution of land access issues are urgently
required.
John Williams - AGSEAN Chairman
Keith Wells - AGSEAN Vice Chairman
agsean.freeservers.com
Postal: PO BOX 1447 WEST PERTH WA 6872 AUSTRALIA
Office: 6/79 Colin St West Perth
Ph:(08)94851200 Fx:(08)94851500
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