A KEY mining lobby group says the current resources commodity cycle in Australia is essentially little different than those experienced previously – except for the volatility of it. Association of Mining and Exploration Companies (AMEC) chief executive Simon Bennison says Australia had been there before in terms of commodity cycles.

Addressing the Paydirt 2014 Australian Nickel Conference in Perth in October, he said, “We have gone through the cyclical nature of commodities, the China story, some say the correction we had to have, the cash shortage facing mining and exploration companies, the decline in capital investment and productivity issues.

“The key factor in the current squeeze is the volatility – but it is not an open door for government to raise extra revenue. This time around governments are struggling to manage economies in such a volatile resources market.

“Pricing and exchange rates have combined with some extraordinary decisions within government agencies concerning mining policy. Australia’s resources sector needs to be more competitive than it has ever been.

“Australia’s resources sector has a total tax rate of around 47% - and this doesn’t include royalties. Little wonder it is ranked 135 out of 190 mining jurisdictions in terms of tax competitiveness – so the consideration of the total tax framework and the need to overcome a lack of mining tax impacts at State and Federal levels, is where we need to move to.”

Simon Bennison said governments had begun moving to contribute to cost reductions in the sector – some achieving considerable inroads, but other jurisdictions doing little more than ‘moving the deck chairs’.

“On the other side of the ledger, however, are creeping sector costs being driven by reviews of royalty arrangements, a tendency by regional shires to increase rates in line with tenement costs, flaws in valuation of assets as they apply to stamp duties and government agencies thinking that their own drive for greater efficiencies meant they were justified in recovering more costs from industry.”

On Western Australia’s Mineral Royalties Review, in which AMEC is seeking to address what it sees as its inequities, Simon Bennison said the government had recognized the constraints on industry.

“However, while WA’s resources sector easily provides a fair return to the community, the problem is that the government is trying to fill holes in its budget and being opportunistic in seeking additional revenue from exploration and mining. This is despite the fact that industry is providing a fair return to the community, particularly in very difficult times.”

Evidence of the difficult times facing the industry comes with Australia’s exploration statistics. Figures from the Australian Bureau of Statistics (ABS) for the March quarter of 2014 show a consistent decline in expenditure on mineral exploration.

“The figures show a 25% decrease in expenditure and 35% decrease in metres drilled on total deposits in Australia,” Simon Bennison said.

“The level of exploration expenditure on new deposits for the March quarter, at $121 million, is lower than the post GFC March 2009 quarter of $148.8 million. This is concerning as it takes on average seven years to convert a discovery into an operating mine. This should be a wake-up call for all governments.”

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