Last week’s announcement by Australia’s Prime Minister Malcolm Turnbull to introduce the Junior Mineral Exploration Tax Credit (JMETC) is visionary and great news for Australians, according to the Association of Mining and Exploration Companies (AMEC).
The JMETC will replace the Exploration Development Incentive (EDI) and will apply for four years from the 2017/18 financial year.
AMEC’s outgoing chief executive officer Simon Bennison said, “The JMETC is a tax credit arrangement which allows mineral exploration companies (with no mining income) to renounce and pass future tax deductions (losses) to their Australian resident investors.
“The JMETC is a critical investment in Australia’s future, particularly as contemporary research in relation to existing mines indicates that there will be significant reductions in production and Government revenue streams as those mines reach the end of their current lives. They need to be replenished by new discoveries as soon as possible.
“Mineral exploration is a long-term, high-risk activity which needs scarce equity capital in a globally competitive market place.”
Simon Bennison said tax credits under the JMETC would be available to new capital raisings, more akin to the Canadian model.
“The credit to investors will represent 30% of the eligible greenfield mineral exploration expenditure incurred, and renounced by the company. This is an extremely attractive arrangement which should result in more investors entering the equity market.
“The rewards are even greater for those investors in successful exploration companies which subsequently develop a new mine.”
He said the announcement came at a time where IPOs and mineral related greenfield drilling had been at an all-time low over the past few years.
“Successful mineral exploration is needed to drive the development of the mines of tomorrow, create revenue streams and jobs, and be in the national interest. Analysts have projected that employment will decrease in the base and precious metals by up to 75% over the next 15 years if action is not taken now.
“We thank Prime Minister Turnbull, his Cabinet and numerous backbenchers who recognised that action needs to be taken now to discover the mines of tomorrow, noting also that each new mine can take 10 years before the full benefits in jobs, revenues and royalties streams are realised.
“Special acknowledgement and recognition should be given to Minister for Finance Senator Mathias Cormann for his understanding of the issues and trends, considerable foresight and support.
“AMEC looks forward to working with the Government to ensure a successful implementation.
“In the meantime, applications are still open until September 30, 2017 to access $40 million of tax credits under the existing EDI scheme. All eligible companies are encouraged to apply,” said Simon Bennison.
In a subsequent statement, AMEC’s acting CEO Graham Short said new Australian Bureau of Statistics figures showed that greenfields mineral exploration was beginning to recover but also reinforced the need for the JMETC and greater greenfields mineral exploration.
“In the June 2017 quarter, total mineral exploration rose by $107 million to $445 million, a 31% increase on last quarter’s expenditure. This growth was mirrored by proportional growth in greenfield and brownfield mineral exploration.
“The largest growth in mineral exploration expenditure was in the selected base metals sector, which rose 73% in the June quarter with increases in copper, nickel, cobalt and silver. Gold exploration rose 23%. “Metres drilled rose in original terms by 44% to 2.299 billion metres.
“Despite the positive growth, the percentage of greenfields mineral exploration of metres drilled remained fixed at 30%. Nearly 70% of mineral ‘exploration’ activity in Australia is extending existing deposits or drilling nearby an existing deposit.
“Australia needs greater greenfields mineral exploration to find the mines of tomorrow. Greenfields mineral exploration is a long-term, high-risk activity which needs to attract scarce equity capital in a globally competitive market place.
“The announcement on the weekend by the Prime Minister to replace the EDI with the JMETC will help drive increased greenfields mineral exploration by attracting much needed equity capital,” he said.