Minerals Aa Finalreport July2003

Mineral Exploration
in Australia
Recommendations prepared by the

Strategic Leaders Group for the
Mineral Exploration Action Agenda
COMPETITIVE AUSTRALIA
Mineral Exploration
in Australia
Recommendations prepared by the

Strategic Leaders Group for the
7 July 2003
© Commonwealth of Australia 2003
ITR 2003/090
ISBN 0 642 72249 8
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Contents
Preface 4
Executive summary 5
Introduction 7
The Impact of Structural Change on Mineral Exploration in Australia 8
Mineral Exploration Action Agenda 10
SLG Recommendations 11
Access to Land 11
Access to Finance 14
Access to Pre-competitive Geoscience Information 20
Access to Human and Intellectual Capital 22
Mineral Exploration in Australia page 3

Preface
This paper has been prepared by the Mineral Exploration Action Agenda Secretariat on behalf of the Strategic Leaders Group (SLG). The group is
made up of:
Mr Peter Lalor (SLG Chairman) – Sons of Gwalia
Mr Ian Goddard* – Australasian Institute of Mining & Metallurgy
Dr Jim Limerick* – WA Department of Industry & Resources
Mr Tim Shanahan* – Chamber of Minerals and Energy of Western Australia Inc
Dr Neil Williams* – Geoscience Australia
Mr Dermot Coleman – Association of Mining and Exploration Companies
Mr Alan Coutts – NSW Department of Mineral Resources
Mr Tony Fawdon – Diatreme Resources Ltd
Mr Brett Fletcher – Pasminco Rosebery Mine
Mr John Hartwell – Department of Industry, Tourism & Resources
Mr Mitch Hooke – The Minerals Council of Australia
Mr Nick Sheard/Mr Cameron Switzer – MIM Exploration Pty Ltd
Mr Gary Stafford – Australian Gold Council
*These SLG Members each chaired one of the working groups
Secretariat: Commonwealth Department of Industry, Tourism & Resources.
This paper draws heavily on the research papers prepared by the four working groups: Access to Land; Access to Finance; Pre-competitive
Geoscience Information; and Access to Human and Intellectual Capital. The working groups comprised members drawn from industry,
industry representative associations and Government agencies. The report of the Ministerial Inquiry into Greenfields Exploration in Western
Australia (Bowler Inquiry) of November 2002 and reports by the Australian Bureau of Agricultural and Resource Economics (ABARE) titled
Mineral Exploration in Australia of December 2002 and Tax Incentive Options for Junior Exploration Companies of March 2003 were also useful
sources. The paper also draws on submissions to the House of Representatives Standing Committee on Industry and Resources inquiry into
any impediments to increasing investment in mineral and petroleum exploration (Prosser Inquiry). The Prosser Inquiry is likely to report in
September 2003.
Further information may be obtained from:
The Secretariat
Department of Industry, Tourism & Resources
GPO Box 9839
CANBERRA ACT 2601
exploration@industry.gov.au
page 4 Mineral Exploration in Australia

Executive summary
There has been a very significant decline in the level of mineral exploration expenditure in Australia in recent years. While the exploration
industry is cyclical, it is widely acknowledged by industry and governments that the current decline in exploration reflects structural changes
to the mining industry, changes to land access conditions and emerging gaps in pre-competitive geoscience information and human and
intellectual capital. The decline also reflects market outcomes.
The consequences of not responding to these changes are potentially serious. If the current downturn in mineral exploration is sustained,
Australia’s mineral production and exports will decline over the medium to longer term. Econometric modelling by ABARE indicates that
exploration is a significant determinant of future capital investment in the gold industry and that gold production over the next 5 years will fall, if
exploration expenditure continues to decline.
To address the decline in exploration, the Minister for Industry, Tourism & Resources, the Hon Ian Macfarlane, MP announced the Mineral
Exploration Action Agenda on 12 September 2002. A Strategic Leaders Group (SLG) of industry and government representatives was formed to
identify the priority issues and assess possible solutions. The SLG identified the priority issues impacting exploration investment in Australia as
difficult access to land and finance and increasingly inadequate geoscience data and mineral exploration research.
The SLG considered that the impact of the Native Title Act 1993 on access to land for mineral exploration has been substantial. The need to
recognise indigenous rights to land was acknowledged, but the SLG agreed that current native title processes implemented in some jurisdictions
were complex, unwieldy and costly. Decision-making processes are considered to be neither timely nor transparent. Continuing uncertainty
over legal interpretations, combined with attempts in some jurisdictions to navigate through or around the process have created an enormous
backlog of applications for exploration licences.
The SLG agreed that the most practical approach to addressing these issues would be through improving procedural aspects to land access.
The SLG made four recommendations aimed at strengthening working relationships between indigenous and mining interests to build on the
processes established in the Native Title Act 1993 and the Aboriginal Land Rights (Northern Territory) Act 1976 for mutually beneficial outcomes.
The SLG recognised that engaging all the stakeholders with interests in sustainable land use, whether they involve native title, heritage,
conservation or resource development, is a complex process, but one that needs to be tackled.
The Australian mineral exploration industry requires a constant flow of high-risk funds in the search for new ore deposits, in competition not
only with many other countries, but also with other investment opportunities in Australia. The SLG considered that unless action is undertaken,
the recent reduction in exploration expenditure (particularly greenfields exploration) is likely to continue, to the detriment of the continuing
competitiveness and sustainability of the Australian minerals industry. The SLG believed taxation policy initiatives are required to increase
access to finance for exploration, particularly for junior exploration companies who rely on the ability to raise external funds to carry out
exploration.
Industry views the ready availability of modern, high quality pre-competitive geoscience information as vital to mineral exploration. The SLG
considered that improved pre-competitive geoscience information will reduce exploration risk and encourage exploration investment and cost-
effective discovery.
The maintenance of an appropriate skills base and adequate research and development is essential to ensure that innovation continues to drive
mineral exploration in Australia. The SLG made three recommendations, namely to improve the skills base of geoscientists and explorers, retain
support and expertise in relevant educational institutions and support private sector research and development.
This report details 12 recommendations that the SLG viewed as critical to the viability of the mineral exploration industry and the long-term
sustainability of the mineral resources sector it underpins:
1. Develop regional template agreements to resolve native title and heritage issues;
2. Encourage use of the expedited procedure in the Native Title Act 1993;
3. Amend the Aboriginal Land Rights (NT) Act 1976 to facilitate the decision-making process;
4. Develop a coordinated national approach to resolve impediments to land access

5. Introduce a flow-through shares scheme;
6. Introduce a general tax deduction uplift factor for greenfields exploration expenditure;
7. Implement the full deductibility of all costs associated with Native Title requirements;
8. Undertake a major pre-competitive geoscience survey program to achieve national coverage to modern standards of basic
geoscience datasets;
9. Develop nation-wide protocols, standards and systems for internet-based access to all exploration related data;
10. Launch a “50 early-career explorer” scheme for new graduates and holders of doctorates;
11. Increase higher education funding for geoscience; and
12. Establish a deep ore discovery research and development program.
The SLG acknowledged that some of these recommendations may involve amending legislation and policies at the State, Territory or
Commonwealth level, and would require the agreement of all the major stakeholders, balancing fiscal, conservation, community, industry and
indigenous interests. The SLG believes that optimal outcomes will be achieved only if there is recognition by all stakeholders of the significance
to the nation of the current downturn in mineral exploration. At risk is the sustainability of one of Australia’s economic lynchpins - the mineral
resources industry contributes more than $40 billion in annual export earnings and 240,000 direct and indirect jobs. The current downward
trend cannot continue indefinitely if an economically sustainable mining sector is to continue to exist.
Action Agendas are a key part of the Commonwealth’s strategy to develop Australian industry through partnerships between governments
and industry to boost growth in particular industries. While the SLG was reporting to the Federal Minister for Industry, Tourism and Resources,
the Group noted that all jurisdictions and industry will need to give attention to the issues raised in this report and the recommendations.
Cooperative and urgent action is required by all parties to ensure an effective Mineral Exploration Action Agenda that facilitates the
sustainability of exploration activities, particularly those of junior companies and reverses the downward trend in mineral exploration in
Australia.

Introduction
It is widely acknowledged that both the Australian and global mineral exploration industries have been through a period of very significant
decline in the level of mineral exploration expenditure. Australia alone has seen expenditure plummet from a high of $1,148.6 million in
1996–97 to $640.8 million in 2001–02.
The exploration industry has a strongly cyclical investment history and some might ascribe the current downturn merely to the effect of the
latest cycle. However, there is evidence that the current decline in mineral exploration expenditure represents structural changes in the industry,
as it responds to new policy challenges, commercial operating conditions and international commodity markets.
Many of these changes are primarily driven by market forces at the global level and while it may be neither desirable nor feasible for the
government to intervene in issues of industry structure, it is critical that any policy relevant to the exploration industry is formulated in context
of the structural changes that are taking, or have taken, place and the forces driving these changes.
The consequences of not responding to structural changes are potentially serious. If the current downturn in mineral exploration continues,
Australia’s mineral production and exports will decline over the medium to longer term. In the gold industry for example, econometric modelling
by ABARE indicated the importance of exploration to the future direction of the gold industry. It found a positive relationship between
exploration and capital investment and that exploration will be a significant determinant of production. It found that gold production over
the next 5 years will fall if gold exploration expenditure continues to decline. Econometric modelling conducted for the Ministerial Inquiry into
Greenfields Exploration in Western Australia (the Bowler Inquiry) showed that a decrease in exploration of $80 million per annum over 5 years
would have significant impact on the Western Australian economy of 2021: investment was projected to be 2.2 per cent lower, exports
2.3 per cent lower and Gross State Product 1.6 per cent lower.
At risk is the competitiveness and sustainability of Australia’s resources industry. In 2001–02, Australian mining and mineral processing
(including petroleum) accounted for 9 per cent of gross domestic production, 4.3 per cent of total employment and 24.7 per cent of new capital
expenditure. Excluding petroleum, the minerals and metals sector accounted for $43.7 billion in exports (29 per cent of Australia’s total exports)
and $4.3 billion in total tax payments. The industry’s ability to find tomorrow’s mines is vital to sustain the nation’s economic prospects.
Another important consideration is the benefit of mineral exploration to regional communities. These benefits include additional turnover in
local businesses, direct employment, financial and in-kind support for indigenous communities and local non-government organisations and a
significant contribution to the cost of running local government, particularly in Western Australia. It was estimated that for every $1 million of
exploration investment, four jobs are created in remote areas and six in Perth (Bowler Report). If these ratios were applied Australia-wide, the
$510 million decline in mineral expenditure in the four years to 2001–02 equates to a loss of about 2,000 jobs in remote areas and 3,000 jobs
in urban areas.
Mineral exploration activities also add significantly to the national scientific and sociological data base, and have resulted in Australia becoming
a world class centre of expertise in mineral exploration technology.
Mineral Exploration Expenditure in Australia 1969-70 to 2001-02

1600
1400
1200
Expenditure ($A 2000-01 millions)
1000
800
600
400
200
0
1969-70
1971-72
1973-74
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
Financial Year Ending 30 June

Source ABS Cat. 8412.0

The Impact of Structural Change on Mineral Exploration in Australia
The recent trend towards consolidation in the mineral industry in Australia has seen the number of companies reduce significantly. A few
globalised mineral resource companies now dominate the industry. The top five producers now control between 40 and 70 per cent of global
copper, diamond, gold, iron ore, nickel and zinc production (Geoscience Australia). In the previously diversified Australian gold mining industry,
for example, recent consolidation means that two thirds of production is now controlled by five companies, and nearly half comes from
12 mines.
This consolidation has contributed to reduced investment by the major mining companies on exploration in Australia. Greenfields exploration in
better-explored regions in Australia is seen as less cost-effective and higher risk in the short/medium term. In the five years to 2002, the number
of companies exploring in Australia with budgets in excess of US$10 million fell from 20 to 5. The focus of globalised companies is on extending
the lives of existing heavily capitalised operations and on more cost-effective exploration in under-explored regions.
Globally, unit production costs have fallen due to the dramatic increase of operating scales, a direct reflection of the upsizing of large mining
and metallurgical equipment, together with the advent of real-time quantitative operating systems for materials flow and in-plant monitoring.
At the same time, the higher costs of finding and developing larger deposits often inhibit the commitment of exploration expenditure by these
corporations.
Over recent years, major mining companies have been reducing in-house expenditure and shifting focussed support to a handful of junior
explorers. The decline of in-house exploration activity and personnel by the major mining companies is accompanied by reduced support for
exploration technology research and development that will adversely impact on the technical skills base for years to come.
The Australian minerals industry has always been characterised by a vibrant junior exploration sector with historically over 80 per cent
of mining companies listed on the Australian Stock Exchange falling into this category. The junior companies are critical to the continued
development of the Australian minerals industry as these junior companies accounted for over 50 per cent of significant discoveries of gold and
base metals in Australia in the period 1970–97. The junior exploration companies take the risks, are prepared to try innovative approaches to
exploration, and as such have been major contributors to the overall success of the industry.
While junior explorers have dominated the exploration sector numerically, about 80 per cent of exploration spending has traditionally been
funded by major companies. A significant proportion of the exploration expenditure by major companies was spent through junior explorers
under joint venture arrangements whereby junior explorers’ exploration concepts were transferred, along with funding equity, to major
companies.
In summary, the structural changes impacting on mineral exploration in Australia are characterised by:
■ considerable consolidation and rationalisation of ownership within the industry;
■ increased globalisation both within the resources industry and the supporting investment market;
■ difficulties accessing land due to changing regulatory factors;
■ difficulties accessing finance, particularly for junior exploration companies;
■ fewer significant commercial discoveries due to the relative ‘maturity’ of the Australian exploration environment; and
■ gradual increase in the minimum size of an economic resource, in concert with rapid escalation of discovery and assessment costs.
The implication of these structural changes is that the exploration future of the Australian minerals industry depends increasingly on the
ongoing viability of the junior exploration sector and maintenance of an adequate skills base. To the extent that the junior exploration companies
face particular policy impediments or market failures specific to their circumstances, policy actions by Government to overcome these
impediments or correct these market failures are important.
The growth in Australia’s mining industry to date has resulted from a sustained exploration effort in Australia, the highly prospective nature of
the continent and public investment through State and Federal resource agencies on aggregated geological data. It is in the national interest
that this exploration effort is maintained.

The Bowler Inquiry into Greenfields Exploration in Western Australia found an increasing trend towards near-mine exploration in both actual
expenditure and per centage terms. Brownfields operations (defined in the Bowler Report as within 5 kms from existing mining operations)
is commonly taken by resident mining businesses as a “stay in business” activity. Greenfields exploration is the seeking of new resources
anywhere, including new geological types/styles of commercial resources in known mineral fields. Greenfields exploration usually involves new
infrastructure and permit processes and is more costly to bring on line than brownfields exploration.
In Western Australia, from 1997 to 2001, greenfields exploration expenditure fell from 40 per cent to 28 per cent of the total expenditure. This
reflects the fact that speculative high risk exploration funding is fading away. However, this trend cannot be continued indefinitely if the mining
sector is to be sustained by replacing reserves with new discoveries. The long lead time for translating a greenfields discovery to a developed
mine (about 7 years), and the short life of many existing operations, means that action must be undertaken promptly to redress the situation.

The Action Agenda process was set in train in response to the challenges facing the mineral exploration sector. Action Agendas are a key
part of the Commonwealth’s strategy to develop Australian industry by boosting growth in particular sectors through partnerships between
governments and industry.
On 12 September 2002 the Minister for Industry, Tourism & Resources, the Hon Ian Macfarlane MP announced the commencement of work
on the Mineral Exploration Action Agenda and the Strategic Leaders Group was formed to lead the process. Following the first meeting on
19 November 2002, four working groups were set up to address the major issues impacting on the continued growth of the mineral exploration
sector. The working groups were as follows:
■ Access to Land
■ Access to Finance
■ Access to Pre-competitive Geoscience Information
■ Access to Human and Intellectual Capital
Each of the working groups was chaired by members of the SLG and drew their membership from industry and relevant government
organisations. The working groups spent 2 months researching the issues and developing draft recommendations. The groups drew on industry
submissions to the current Inquiry by the House of Representatives Standing Committee on Industry and Resources into any impediments to
increasing investment in mineral and petroleum exploration (the Prosser Inquiry). The groups also drew on the report of the Ministerial Inquiry
into Greenfields Exploration in WA (Bowler Inquiry) and the views of industry professionals.
Following exhaustive examination of the issues, a series of draft recommendations was brought to the SLG for discussion. At meetings on
12 March 2003 and 5 June 2003 the SLG refined those recommendations into 12 core priorities for action by government and industry. It
is the view of the SLG that a Mineral Exploration Action Agenda that addressed the problems and opportunities identified in this report and
implemented its 12 recommendations would incorporate the steps needed by governments and industry to enhance the sector’s sustainable
competitive advantages and enhance growth.
The SLG considerations coincide with the Prosser Inquiry into any impediments to increasing investment in mineral and petroleum exploration in
Australia, conducted by the House of Representatives Standing Committee on Industry and Resources. It is envisaged that the SLG and Prosser
Inquiry Reports will form the basis of the Mineral Exploration Action Agenda to be developed by the Commonwealth and the SLG in the third
quarter of 2003. The Mineral Exploration Action Agenda will comprise a suite of measures to be taken by industry, and Commonwealth, State
and Territory governments to reverse the downward trend in mineral exploration in Australia.

SLG Recommendations
The following outlines the recommendations from each of the working groups and the arguments for reaching such conclusions.
Access to Land
Recommendation 1 – That the Commonwealth, through the allocation of dedicated or linked support and funding to Native Title
Representative Bodies, work in partnership with industry and the States and Northern Territory to develop regional template agreements for
native title and heritage protection approvals processes that will reduce the backlog of tenement applications, improve relationships between
miners and indigenous interests and provide ongoing access to land.
Recommendation 2 – That the Commonwealth and industry promote the use of the expedited procedure included under the Native
Title Act 1993 by producing and promulgating information about the application and use of the expedited procedure, and lobbying States and
the Northern Territory for the more general application of the expedited procedure when granting low impact exploration tenements.
Recommendation 3 – That the Aboriginal Land Rights (NT) Act 1976 is amended to facilitate the application, assessment and
decision-making processes for the grant of mining and petroleum tenure, specifically by restructuring the Land Councils, delegating decision-
making authority to regional or local bodies and developing standard agreements for the grant of tenure.
Recommendation 4 – That the Commonwealth and industry work with the States and Northern Territory through the Ministerial
Council on Mineral and Petroleum Resources (MCMPR) to gather information on the procedural regimes for mineral exploration and the overlap
between Commonwealth and State/Territory legislative responsibilities and develop a coordinated approach to resolving impediments to land
access, including protocols covering mineral tenure, native title, heritage, environment and conservation estate.
Access to land for mineral exploration has been a significant constraint on exploration for many years. The grant of tenure for minerals is made
under State and Territory mining legislation, but depending on the status of the land, this grant may be affected by a range of legislative regimes
and policies adopted in each jurisdiction across Australia, and at federal level. When uncertainty arises, the attractiveness for investment
diminishes, impacting negatively on mineral exploration and development activity.
While access to land and resources is critical, the timeframe within which any decisions are made, and access is ultimately granted, is also
of significance. In relation to land access, decision-making processes that are timely, transparent and provide increased certainty are in the
interests of all stakeholders.
The land access issues, the resolution of which was identified as being of greatest importance for improving mineral exploration in Australia are:
1. Native Title
2. Aboriginal land rights
3. Indigenous heritage
4. Mineral tenure
5. Environment
6. Conservation Estate
7. Planning and infrastructure
In this context the study of issues affecting access to land highlighted the following:
■ the application of the right to negotiate procedure in the Native Title Act 1993 to exploration activity;
■ the current backlog of applications for exploration tenements in Western Australia, Queensland and the Northern Territory;

■ the lack of integration of Commonwealth and State/Territory processes which, to varying degrees depending on the issues, impact
on the mineral exploration industry; and
■ the apparent lack of resources (financial and otherwise) being made available to ensure that native title parties can effectively
participate in future act processes under the Native Title Act 1993.
Industry finds that the maze of processes which must be negotiated in order to obtain an exploration tenement is often costly and time-
consuming. Parties from every stakeholder group prefer to seek outcomes through negotiation. However, the resource-intensive nature of
negotiating agreements about native title and heritage requirements can often result in increased costs and delay. These costs (which may well
exceed the initial look and test exploration activity) are an added impost on mineral exploration companies, particularly for smaller companies
and discourage greenfields exploration.
The “expedited procedure” available under the Native Title Act 1993 for low-impact exploration obviates the need for negotiation where
there is no objection from registered native title holders or claimants. Indeed, industry is of the view that the “right to negotiate” procedure
is inappropriate for the early exploration phase and should apply only to the mine development phase, but there are diverging views on the
feasibility of correcting this apparent anomaly, ranging from legislative change through to negotiated outcomes. However, industry also
recognises the need to respect the rights of all stakeholders, and acceptance of the expedited procedure by all parties would provide a way
forward.
This so-called “disjunctive” approach postpones negotiation until there is some clarity for all parties as to what, if any, development is proposed.
Conversely, the “conjunctive” approach, which seeks to negotiate the terms of development at the exploration phase offers greater certainty to
the company that it will be able to develop a mine if its exploration is successful. It does, however, require much more effort “up front” for all
parties at a time when the resource is undiscovered and its scope and nature unknown.
The development of regional template agreements together with an increased use of the expedited procedure under the Native Title Act 1993
would go a significant way to addressing these concerns.
State-brokered regional template agreements (acceptable to the States and Territories, Native Title Representative Bodies and the mining
industry) could be used to resolve a range of issues, including facilitating ‘future act’ processes and the protection of aboriginal heritage. For
example, a regional agreement about cultural heritage protection could reduce the level of objections made by native title claimants to the grant
of exploration tenure. Also, a template Indigenous Land Use Agreement could be developed for use by industry and native title groups to provide
for the grant of exploration or mining tenements.
This proposal is based on the work of the Heritage Protection Working Group in Western Australia. The model proposed here is highly generic,
and would have to be modified for each State or Territory to take account of local approval processes and regional initiatives. However, the
model involves no change to legislation, only to policy. Implementing the model relies on the effective working of the Native Title Representative
Bodies system as well as the willingness of directly affected parties to agree.
To ensure viability of the agreements, they should be commercially sound and include input from relevant parties. These agreements should also
be tailored to properly address specific regional issues, as generic templates relating to large areas have not proven successful in stimulating
increased approvals of applications for exploration tenements.
Although Industry supports these initiatives, the SLG remains of the view that the level of funding by the Commonwealth of Native Title
Representative Bodies needs to be reviewed to ensure that adequate representation for native title parties is possible. The Commonwealth
should also ensure that skill levels and expertise are being allocated to the relevant areas. If necessary, dedicated or linked funding should be
made available by the Commonwealth to encourage the development of regional template agreements. These proposals would not only reduce
the backlog of applications, they would also improve working relationships between miners and indigenous interests.
It is acknowledged that the cost impost on industry of pursuing these agreements could be substantial. Industry has previously discussed with
the Commonwealth the possibility of providing tax relief in respect of such activities. While a longer term strategy, the SLG considers that there
is benefit in further consideration of this proposal.
The expedited procedure has, until recently, not been generally applied to low-impact exploration and prospecting tenements. Despite recent
progress on this issue in the Northern Territory and widespread application of the procedure in Western Australia, there remains an apparent

unwillingness by some States to adopt a more general application of this procedure. In addition, there appears to be a lack of understanding
amongst industry of the procedure and the sorts of tenements and activity to which it could apply.
The Commonwealth should produce and promulgate information about the application and use of the expedited procedure. This will involve
drawing upon the jurisprudence being developed by the National Native Title Tribunal in order to produce examples that explain how the
expedited procedure can be used.
Industry should lobby State and Territory governments to encourage them to use the expedited procedure when granting low impact exploration
tenements. An increased awareness amongst industry of the requirements and benefits of the expedited procedure will assist them in
encouraging State and Territory governments to rely on these provisions.
The minerals exploration industry broadly considers that the Native Title Act 1993 has impacted on access to land for mineral exploration, and
the application of the Act and in particular the Right to Negotiate have been costly for the exploration sector. However, the SLG believes any
policies developed, or decisions made, in relation to land access must balance the interests of all stakeholders with the need to provide effective
and equitable access to land and resources.
Aboriginal Land Rights Act (Northern Territory) 1976 (ALRA)

The recommendation concerning ALRA addresses the greatest impediment to increased expenditure on mineral exploration in the Northern
Territory, specifically the excessive time and cost of granting an exploration licence (EL) on Aboriginal freehold land in the Northern Territory.
Of particular concern is the cumbersome nature of the land council structure, which is causing significant delays in the processing of
applications for exploration licences.
The ALRA establishes a complex legislative framework that most stakeholders agree is not delivering the intended or required outcomes. This
ultimately has a detrimental impact on Indigenous peoples and the community as a whole.
The disparate views of the traditional owners, the Land Councils, the industry and the Territory Government are such that it is unlikely that
cooperative agreement on administrative and legislative regime changes will be reached.
The recommended action is that the Commonwealth Minister for Immigration and Multicultural and Indigenous Affairs facilitate the introduction
of administrative and legislative changes. Principally, this would involve amending the ALRA provisions requiring the full Land Council’s
ratification of the traditional owners’ decisions in relation to exploration submissions to provide that Regional Councils can ratify the decisions
of the traditional owners. This would address the structure and fund utilisation of Land Councils so as to facilitate the resolution of agreements
pursuant to ALRA for the grant of exploration licences on Aboriginal freehold land in the Northern Territory.
Environment, Heritage and Conservation Estate

The rationale behind recommendation 4 concerns the States’ and Territories’ primary responsibility for issuing exploration tenements. The
regimes and mechanisms put in place in each jurisdiction differ according to the circumstances in each State and Territory. On some issues the
State and Territory governments are looking at the development of a more consistent approach to regulation, at least at a ‘strategic principle’
level. On issues such as native title, multiple land use and environment assessment, each jurisdiction is subject to overarching Commonwealth
legislation, but Federal regimes will have different implications and applications in each jurisdiction.
Both small and large mining companies seeking exploration tenements are required to navigate a maze of procedural regimes in order to have
a mineral exploration tenement granted to them. These include (depending on the status of the land involved) the mining, heritage, planning,
conservation and environment regimes of the relevant jurisdiction, as well as Federal regimes. It is the SLG’s view that States and Territories, in
partnership with the Commonwealth, could do more to ensure that these regimes are better integrated.
Similarly, there is limited recognition that multiple and sequential land use management regimes operating in parks and reserves can protect
conservation values while allowing appropriately controlled exploration to proceed. Inconsistent multiple land use policies have inhibited
exploration planning. With varying outcomes, multiple land use arrangements have been the subject of Commonwealth consultations with
individual jurisdictions, eg through the Regional Forest Agreement process.

The immediate aim is to gather information on the various procedural regimes that a mineral explorer needs to deal with in order to gain
a tenement in a particular jurisdiction. It would be appropriate for this to be coordinated by the Commonwealth, either on a bilateral basis
or multilaterally through the Ministerial Council on Mineral and Petroleum Resources (MCMPR) which includes the mines Ministers of all
Australian jurisdictions. The information collected would be collated and made available to all relevant parties, including industry.
The intention would be to examine the interrelationships between the various regimes in each jurisdiction to identify impediments to the mineral
exploration industry and make recommendations for action. Preserving the independence of the States and Territories in these areas is essential,
whilst ensuring that all jurisdictions review their regulatory environments in order to integrate processes and procedures as effectively as
possible. Work could then be done on ensuring that the processes and procedures developed by State and Territory administrations mesh more
effectively with overarching Commonwealth processes.
The ultimate objective must be to have a system in Australia which works effectively, reflects world’s best practice and maintains the
international pre-eminence of Australia’s mining industry. A high level of consistency between the various jurisdictions is a desired outcome
from industry’s perspective.
Access to Finance
The SLG recommends that the Commonwealth Government undertake amendments to the taxation regime to address the structural changes in
the mineral industry that have led to market failures to supply adequate mineral exploration capital, particularly for greenfields exploration. From
a peak in 1996–97, mineral exploration expenditure by junior exploration and production companies has fallen by 70 per cent, compared with a
fall of about 35 per cent for larger mining companies (ABARE).
Recent changes to the investment market have a longer term structural dimension that will make it difficult for the mineral exploration industry
to raise capital and respond appropriately to a cyclical upturn. These changes include:
■ the rationalisation of exploration budgets and organisations by globalising majors (BHP-Billiton, Rio Tinto);
■ consequent re-allocation of exploration expenditure by globalised majors outside of Australia;
■ a relatively reduced minerals industry in terms of market capitalisation on the stock market, with consequent reductions in the
numbers of minerals industry analysts employed by broking firms; and
■ the reduced ability of major broking houses to invest in the Initial Public Offerings market resulting in a reduced secondary market
and reduced investor interest in Initial Public Offerings.
The principal objective of the recommendations set out below is to correct these market failures and enable the mineral exploration sector,
particularly junior exploration companies, to compete for venture capital in equity markets.
Recommendation 5 – That the Commonwealth Government introduce a flow-through shares scheme to remove the tax asymmetries
that deny companies with insufficient taxable income the full benefit of immediate deductibility of exploration expenses.
The flow-through shares scheme should have the following features:
i tax deduction uplift factor for eligible expenses of 150 per cent in the year of acquisition;
ii for capital gains tax purposes the cost base of the shares to be reduced to the extent that there is a deduction declared by the
investor;
iii to be designed in accordance with taxation principles of economic efficiency, equity and administrative simplicity, incorporating
appropriate integrity measures.
Recommendation 6 – Noting that currently all exploration expenditure is immediately deductible (at 100 per cent level), it is:
i imperative that this outright deductibility be maintained; and
ii further recommended it be enhanced to the 125 per cent level for all greenfields exploration expenditure (other than eligible flow-
through share scheme expenditure).

Recommendation 7 – That the full taxation deductibility of all costs associated with Native Title requirements be implemented.
Secondary measures, which would also meet the principal objective, include a system of tradeable tax credits, taxation rebates and a targeted
fund for greenfields exploration, based on the current Innovation Investment Fund program.
Exploration represents the first stage in the mining and minerals processing sequence and is necessary to discover minerals deposits.
Exploration expenditure is a “stay in business” feature that is unique to the minerals industry.
Moreover, because a mine is a “wasting” asset, exploration is crucial to the continued existence of the industry in the long-term. The industry
constantly requires high risk funds to be applied in the search for new ore deposits. The establishment, expansion and replacement of
operations depend on the success of this unique, costly, high risk exploration activity. To operate in a highly competitive, global market, the
industry therefore requires an overall legal and regulatory framework that provides for appropriate access to land and established rules for
environmental approvals, taxation and the utilisation of economic infrastructure.
Impediments to Capital Raising for Mineral Exploration

Impediments fall into two broad categories: impediments related to the aspects of the functioning of the capital market in Australia, and the
impact of a number of regulatory factors related to capital raising by minerals exploration companies in Australia. While the impact of the
functioning of the capital market is fundamental, regulatory factors provide evidence of impediments to the efficient level of mineral exploration
expenditure in Australia, and are amenable to policy intervention and/or correction.
Market Based Impediments

The private equity market in Australia remains relatively immature with a limited supply of risk capital to smaller businesses. The market
provides comparatively little financing for minerals companies.
There are a number of reasons for this:
■ the small size of the Australian economy, population and capital market limit opportunities for capital raising for high risk
investments such as greenfields exploration; only 2 per cent of all private equity financing in 1994–2002 was directed to mineral
exploration (ABARE);
■ the long-term nature of exploration investments - this is a significant disincentive for private equity investors and private equity
managers, particularly if remuneration is generated through performance-based fees;
■ exploration is a high-risk activity - there is a limited number of private equity managers and analysts with the necessary expertise
and experience to assess different exploration investment opportunities. This is associated with a decline in the number of financial
institutions with in-house expertise and interest in mining and a reduced involvement by stockbroking firms in the resource sector
as the sector has contracted as a proportion of the stock market; and
■ there is little stockbroker confidence that a potentially valuable resource will result in mine production, given current perceptions
relating to access to land and finance.
The Initial Public Offering market traditionally has been a significant provider of capital to the minerals exploration industry. However, recent
changes in the investment market have meant that:
■ a relatively smaller minerals industry has led to reduced trading commissions for stockbroking firms. These firms, therefore, have a
reduced incentive to employ dedicated minerals industry analysts;
■ investors will generally be unwilling to invest in Initial Public Offerings if the secondary market for the shares in which they are
investing is illiquid; and
■ small exploration companies have experienced heightened competition for limited risk capital from other high-risk industries,
including information technology, biotechnology and telecommunications.

Regulatory Impediments
Exploration companies without current taxable income do not gain the full benefit of immediate deductibility of exploration expenses. This
reduces the net present value of exploration projects for these smaller companies and makes it more difficult for them to raise finance.
In addition, those junior exploration companies compete for risk capital against companies that have been given tax and other concessions, such
as through innovation investment funds and Division 10B and 10BA legislation for the film industry. In addition, companies can deduct research
and development expenditures at a concessional rate of 125 per cent.
Lack of access to these fiscal arrangements places investment in minerals exploration at a disadvantage compared to these other ‘high-risk’
industries, presenting an impediment to capital raising by the industry.
According to those raising capital in the market, from the proceeds of an average Initial Public Offering of about $4 million, acreage selection
and acquisition costs, pre-listing and listing costs can account for as much as $750,000 to $1 million. Operating and compliance costs can
account for up to $500,000 a year. These costs can represent a large proportion of the funds raised for exploration and limit the amount
available for exploration (reducing the return on the funds invested).
Case for Government Intervention

The underlying case for government intervention to facilitate access to finance in the mineral exploration sector depends on whether the market
is failing to deliver the appropriate investment in exploration. The case for government action, and the type of action recommended, depend on
the level of market failure and where it originates.
There are three broad causes of market failure, two of which (failure to recognise the benefits of exploration and structural issues), have been
referred to in the introduction. The third relates specifically to government generated market bias in access to finance.
Government influenced market failure

The Commonwealth Government has a range of policies and programs in place to assist aspects of the small venture capital market, including:
the Innovation Investment Fund; the Renewable Energy Equity Fund; the Pooled Development Fund; the Research and Development Start
Program; and the Research and Development Tax Concession. Many of these arrangements are of limited assistance to the junior exploration
sector that attracts a small proportion of private equity market. In addition, there is a tax incentive package available for the Australian film
industry, providing a special tax deduction under Division 10B and 10BA of the Income Tax Assessment Act 1936.
The overall impact of these policies and fiscal arrangements is a potential crowding out of investment in minerals exploration in favour of
other tax preferred investment destinations. While these programs may, individually, meet legitimate goals and correct specific market failures,
their crowding out impact may reduce mineral exploration activity below its optimal level from an economy-wide perspective, resulting in an
inefficient outcome, a regulation-induced market failure.
In addition, these policies and fiscal arrangements provide a precedent in that the Government already recognises the impediments faced by
some industries in raising external capital. Mineral exploration faces similar impediments and thus consideration of appropriate Government
responses is warranted.
The inability of companies with insufficient taxable income (junior companies) to obtain immediate deductibility of exploration expenditure
represents an impediment to those companies increasing their exploration activities. The primary effect therefore is to introduce a tax-related
distortion against companies that do not have taxable income in favour of those that do.

Recommended Options for Government Intervention
Options for government intervention are designed to stimulate an increased level of minerals exploration in Australia rather than elsewhere. If
some or all of these options were implemented, then improved access to finance would result, particularly for junior companies.
Flow-through shares – (Recommendation 5)

In effect, this arrangement provides for the explorer to forego a deduction for exploration expenses and transfer it to an investor. The outcome
of such a fiscal arrangement is that the after-tax cost of the equity investment is reduced, thereby encouraging the investment community to
increase their investment in exploration companies.
Flow-through shares have the potential to address a number of the impediments that the current taxation system imposes on minerals
exploration in Australia. These include:
■ flow-through shares provide a way to address market failures that inhibit the efficient flow of venture capital to junior exploration
companies;
■ a system of flow-through shares takes account of flow on benefits of exploration to other explorers by allowing investors to
potentially gain a tax deduction in excess of the company tax rate;
■ the introduction of flow-through shares does not raise major revenue implications for Government because this is a timing issue (in
terms of the “wash out” of tax effects);
– (in addition, this estimate of a cost to revenue should be offset by capital gains taxes that would apply to flow-through shares).
Flow-through shares, by transferring the benefit of the exploration company’s immediate deductibility of exploration expenses to individual
investors should facilitate the raising of external capital by making the shares more attractive. Flow-through shares facilitate the raising of
external capital because they provide a transfer of immediate deductibility of exploration expenses to investors who can claim them against
other income when the exploration company may not be able to do so.
Safeguards to the Proposal

It is recognised that any investment incentive must include safeguards to protect the revenue from any potential abuse whilst also
demonstrating community value in the form of increased investment in exploration.
It is important that the exploration expenditure is not inflated. The deduction to the investor in the form of transferred expenditure must meet
the definition of exploration as currently exists in Division 40, Subdivision 40H, section 40730 (4) of the Income Tax Assessment Act 1997.
Recognising that costs of an administrative nature are incurred in maintaining an entity carried on for the purpose of exploration activities, it is
further proposed that a deduction is available for these costs to the investor.
As an integrity measure it is envisaged that the entitlement would only apply to offers which are subject to the provisions of the Corporations
Law. As a further integrity measure, there would be a requirement that any offer document includes a binding undertaking by the company
to expend the funds raised on exploration activities. The verification of the actual expenditure and thus the actual deduction would be by a
registered company auditor at the conclusion of each year.
It is suggested that the proposal be subject to an independent review after four years by industry and Government to ensure the proposal is
meeting the objective of encouraging exploration activity. As part of the review process, it may be appropriate to suggest a sunset mechanism to
the extent that the proposal is not meeting its objectives.
However, it takes an average of seven years from discovery for the average gold mine to come into production and longer for a base metal mine.
Development may be delayed for decades in cases where there are adverse commercial or regulatory issues. A high level of patience and resolve
is required before a worthwhile benefit for the industry and the nation’s economy is realised. These long lead times emphasise the need for
urgent action.

Maintenance of immediate deductibility for mineral exploration and accelerated uplift for greenfields exploration at
125 per cent - (Recommendation 6)
The current position is that all exploration expenditure is immediately deductible at the 100 per cent level. It is imperative that this is
maintained. It is further recommended that deductibility for greenfields exploration be increased to 125 per cent.
Research and development expenditures may be deducted at 125 per cent, and 175 per cent in some cases. This concession recognises the
economic externalities associated with research and development and is designed to address the under-investment in activities that generate
positive externalities.
It is widely recognised that exploration activities also generate positive externalities in a similar way to applied research and development.
Allowing exploration companies to deduct exploration expenses at 125 per cent would remove a disadvantage that these companies currently
face in the competition for high risk investment capital with other small companies which have access to the range of policies and programs to
assist them to gain access to the small venture capital market (as discussed earlier). This would eliminate an asymmetry in the tax system.
It is considered that the provision should apply to all greenfields exploration, regardless of the size of the company conducting it.
As there is no generally accepted definition of “greenfields”, it is suggested that implementation of recommendation 6ii be done through
agreement between the relevant Commonwealth and State Ministers and consultation with representatives of industry. In arriving at this
definition, it is further suggested that both activity-based definitions, that is, the nature of the exploration activity, and spatially-based
definitions, that is, the distance of the exploration activity from existing mines, be considered.
Native Title costs – (Recommendation 7)

Currently, there is an anomaly whereby the deductibility of certain expenditure associated with resolving Native Title issues is not deductible
under the Uniform Capital Allowance scheme. This is the so-called “black hole” expenditure in the taxation system and has the effect of
increasing business costs. It diminishes the government’s policy of resolving Native Title issues and remains a deterrent, particularly for junior
companies, to be involved in Native Title resolution.
Secondary Measures
Secondary measures which would also meet the principal objective, include a system of tradeable tax credits, taxation rebates and a targeted
fund for greenfield exploration, based on the current Innovation Investment Fund program.
Tradeable Tax Credits

A system of trade in these tax credits would enable junior exploration companies to sell tax credits to other companies with sufficient company
income tax to utilise those deductions. Such an approach would enable junior exploration companies to gain immediate access to those tax
deductions.
Tax Rebate
A tax rebate scheme may apply to all tax deductible business expenses related to exploration or it may be restricted to qualifying exploration
expenditures. If the scheme applies to all tax deductible business expenses, eligible companies that incur a tax loss receive a cash payment from
the government equal to the company tax rate times the tax loss. If the scheme is restricted to exploration expenditures, companies that incur
a tax loss receive a cash payment from the government equal to the company tax rate times the excess of exploration expenses over other net
taxable income. To allow an appropriate assessment of eligibility to take place, payment should be received in the year immediately after the
expenses are incurred.
A rebate scheme should apply only to companies whose business activities characteristically lead to an expected and systematic series of losses
before positive cash flows are generated. A rebate scheme should not extend beyond expenses incurred in exploration activities.

Exploration Initial Public Offering Fund
Exploration is a destination for highly specialised investment. Institutions have generally been reluctant to commit resources to assessing highly
specialised investment opportunities outside of their mainstream investments. Opportunities are likely to be small in size and, where fees are a
function of the volume of funds under management, a critical mass is required to justify the resources (fund managers) required for managing
the fund.
Therefore, support to the Initial Public Offering market would be provided via a fund that is dedicated to investing in the Initial Public Offerings
of junior exploration companies.
Support should target the shortcomings in the Initial Public Offering market:
■ current tax incentives for the provision of capital to smaller high risk companies operate primarily through the private equity market
and have limited effect on the Initial Public Offering market; and
■ the Initial Public Offering market has limited access to institutional investors.
The chief design feature of an Initial Public Offering fund should be the remuneration of the fund management firm. This has to be sufficient to
attract capable fund managers and structured so as to provide proper incentives for the managers to market the fund to institutions and do a
good job at filtering good from bad investment opportunities.
Support could be provided in the form of subsidised management fees, as well as Pooled Development Fund-type tax concessions. Eligibility
would be similar to that for an exploration venture capital fund except that the companies may be listed.
Division 10B and 10BA of the Income Tax Assessment Act – application to exploration
Divisions 10B and 10BA provide tax concessions for investors in films produced in Australia. As with other Product Rulings, deductions are
granted to individual investors on the basis that they are considered to be pursuing the business activity.
This is a flow-through tax mechanism. Suitably designed and applied to the exploration industry, this would achieve the same ends as flow-
through shares.
Conclusions
Of all of the options considered, there were three that were regarded as the most appropriate to boost exploration, particularly greenfields
exploration. Tax asymmetries and “crowding out” by Government initiatives in other investment schemes have contributed to market failures.
The significant role played by junior companies in discoveries is such that their needs were focussed on. Their reliance on the equity market
meant that investors have to be attracted to this sector.
The first recommended action by the Commonwealth Government is for the introduction of a flow-through share scheme, which addresses the
inability of companies with insufficient taxable income to benefit from immediate deductibility of exploration and related expenses. Further
incentive is proposed by applying an uplift factor of 150 per cent of eligible expenditure. Evidence from Canada suggests that this added
incentive is needed to have the desired effect. To offset any perceived undue benefit, the cost base for the acquisition of shares is reduced to
the extent there is a deduction declared by the investor for Capital Gains Tax considerations. A system of integrity measures would be instituted
as part of the administrative measures to ensure that the scheme is used for the purposes it was intended.
Because greenfields exploration is high risk endeavour, often using new techniques and concepts, an incentive is needed to increase the amount
of exploration funding devoted to this activity, which is of national importance. The recommended action is for a tax deduction uplift factor of
125 per cent of eligible greenfields exploration expenditure. This would not apply to exploration expenditure which would be the subject of a
flow though share scheme. Companies which do not intend, or are unable, to use a flow-through share scheme, would be able to gain the tax
benefit of this provision.
The inability to deduct all costs associated with Native Title requirements has the effect of increasing business costs, diminishing the
government’s policy of resolving Native Title issues and remaining a deterrent, particularly for junior companies, to be involved in Native Title
resolution. Greenfields exploration is particularly affected by this feature. The Government should remove this anomaly.

Other proposals had support but were considered to be of lesser merit to the three recommended for Government action. They included other
mechanisms to address the tax asymmetry of the non-deductibility of exploration expenditure, specifically the trading of tax credits under a
suitable administrative regime and a system of tax rebates from the Commonwealth Government. To address the market failure associated with
the Government support of investment schemes in other sectors, a targeted fund for greenfields exploration, based on the Innovation Investment
Fund program, is proposed for consideration.
Access to Pre-competitive Geoscience Information

Recommendation 8 – That in partnership with the States and Northern Territory, the Commonwealth co-fund a major pre-
competitive geoscience survey program to achieve national coverage of basic geoscience datasets to modern standards. The basic data should
be augmented by pre-competitive datasets from new cost-effective mapping technologies as appropriate. Expenditure on this program at
$25 million per annum is recommended to complete the coverage by 2014.
Recommendation 9 – That the Commonwealth, the States, Northern Territory and industry cooperatively support the development
and implementation of nation-wide protocols, standards and systems that provide for Internet-based access to, and effective storage and
archiving of, all exploration-related data, including government-generated pre-competitive geoscience datasets and industry-generated
exploration data. Increased expenditure is recommended to accelerate the on-line availability of Commonwealth spatial and other geoscience
information, and permit the development of web-based services.
Access to high quality pre-competitive geoscience information is vital for successful mineral exploration and a review of this information was
undertaken to identify the key pre-competitive geoscience information issues. The recommendations considered to be of highest priority, for the
stimulation of the minerals exploration industry are those outlined above.
In reference to Recommendation 8, the importance to exploration of modern pre-competitive fundamental geoscientific data (i.e. high quality,
digital data) has been identified. However, the present coverage across Australia is incomplete and patchy, varying considerably across
jurisdictions. In general, the coverage of basic modern information is lowest in the larger States of Western Australia and Queensland: these
States together account for nearly 75 per cent of all mineral exploration in Australia.
Modern exploration uses a multi-disciplinary approach and requires access to a wide range of data, primarily in digital form. Industry attaches
greatest importance to fundamental geophysical, geological, geochemical, mineral-occurrence and topographic data in the first instance. Basic
geological information is fundamental to the assessment of prospectivity and area selection. Continued updating of the national dataset with
new information from government surveys and investigations, university research, and from company reports submitted to the State/NT Mines
Departments, together with cohesive and integrated interpretations and assessments of subsets of the dataset are important functions of public
geoscience agencies. Unimpeded efficient access to high quality verified raw data, historical exploration reports and the latest interpretations is
essential to explorers.
In particular, industry attaches priority to the following types of pre-competitive geoscience information:
■ Geophysical data, especially high resolution aeromagnetic and radiometric data, gravity data and, in some areas, airborne gravity
gradiometry data, in digital format;
■ High quality geological maps at 1:100 000 and 1:250 000, in particular, and more detailed scales;
■ Multi-element geochemical data;
■ Stratigraphic drilling of basement areas under cover to geologically characterise regional scale anomalies and signatures in
magnetic and gravity datasets;
■ Digital topographic, cadastral, metallogenic and regolith maps at 1:100 000 and 1:250 000 in particular, and more detailed scales;
■ Other digital datasets including historical exploration data with drill hole and assay information, geochronology and hydrogeology, in
a variety of formats, with the associated metadata;

■ Indexes of available digital data and maps;
■ GIS packages of geoscience information; and
■ Reports and explanatory notes.
GIS-packages based on new airborne geophysical datasets and supplemented by stratigraphic drilling results and geochemical, geological and
metallogenic data, are needed to significantly lower the exploration risk to attract exploration investment in frontier areas.
The increasing need for continent-wide seamless datasets to enable systematic comparisons and assessments requires systematic collection
and storage of digital spatial and other data to defined standards.
An audit of the major datasets reveals majors gaps in coverage, including large areas of significant mineral potential.
Airborne Magnetic and Radiometric Surveys – Regional coverage of modern semi-detailed airborne magnetic (and gamma-ray spectrometric
data) has been shown to strongly influence mineral exploration and result in uptake of new exploration titles, both in greenfields and in
proven mineral provinces where such data did not previously exist. Regional coverage with modern airborne magnetic data of areas of high
prospectivity is seen as a key strategy in ensuring Australia retains its present competitive advantage in the quality and comprehensiveness
of modern geoscience datasets to attract exploration investment. However, the regional aeromagnetic coverage of the continent completed by
the then Bureau of Mineral Resources/Australia Geological Survey Organisation is inadequate for modern exploration. Coverage by modern
surveys flown at ≤500 m line spacing and <80 m altitude conducted by the Commonwealth and States/Northern Territory in the past 10 years
under the National Geoscience Mapping Accord and State initiatives is incomplete. Only 53 per cent of the continent is covered at this basic
specification with large areas of prospective terrains in Western Australia and Queensland especially remaining to be flown.
Rates of acquisition of new airborne geophysical data have fallen and in 2002 were less than that at the start of the National Geoscience
Mapping Accord program in 1991 and well below the average for the last 10 years of ~900,000 line km. A major boost to acquisition rates is
required to achieve complete continent-wide coverage at a basic standard of ≤500 m line spacing and 80m altitude with particular emphasis on
Western Australia and Queensland.
Geological Maps − Geological maps at 1:250,000 and 1:100,000 scale continue to be the basic geological information base, at the national and
State level. Maps older than 20 years are sub-standard because of new geological and geochronological information, advances in geological
knowledge, and deficiencies in the topographic base map due to changes in infrastructure and locational inaccuracies etc. Only 34 per cent of
the country’s 1:250 000 geological maps are less than 20 years old.
Gravity data − Gravity data provide information on the geometry and nature of bodies at depth and there is increasing demand for semi-detailed
gravity data at the province and district scale. Coverage is variable across the continent with 44 per cent of the continent covered only by the
basic 11 km station spacing. Only 22 per cent of the continent is covered by gravity data with a station spacing less than 4 km apart. A major
program is needed to meet the demands from industry for a continent-wide coverage of gravity data with 4 km station spacing or better. This
basic coverage should be supplemented by more detailed surveys over key terrains, including airborne gravity gradiometer surveys.
Geochemical Maps - Regional multi-element geochemical maps and datasets of regolith material have proved useful in both providing a
regional geochemical framework (baseline) for more detailed exploration and in identifying regional anomalies of direct interest to exploration
companies. However, there is only very limited coverage of geochemical maps and datasets, despite their value in providing direct indications of
mineralised environments, and the major portion of company exploration data still exists only in paper archives.
Innovation - Innovation is fundamental to maintaining Australia’s international competitiveness in attracting exploration investment. In addition
to extending coverage of these basic datasets, the Commonwealth and State/NT geological surveys should trial new regional mapping tools
such as airborne gravity gradiometry as they become available to assess their application to mapping and resolving geological problems at the
regional scale, especially in areas under regolith and sedimentary cover that pose a particular barrier to exploration.
Geoscientific datasets, especially geological maps and airborne geophysical surveys, also have wide application in land resource mapping and
management. Airborne radiometric surveys have proved to be a cost effective tool in soil mapping. Airborne electromagnetic (AEM) surveys are
providing important information on the distribution, storage and migration of saline water systems in the landscape and assisting in studies
of the problem of dryland salinity. Extension of the coverage of modern high quality geophysical surveys will therefore provide important
fundamental geoscientific datasets for use in agricultural and other land resource applications as well as mineral exploration.

With reference to Recommendation 9, the rapid adoption by both industry and governments of digital technologies has resulted in a dramatic
increase in the demand for high quality pre-competitive digital information. The Internet is the medium of choice by industry for the access and
delivery of geoscientific information. However, industry has identified difficulties in the discovery of, and gaining access to, pre-competitive
geoscience information. The information can be incomplete, fragmented and difficult to search and locate using the current information
management systems and structures. There is a need for nationwide standards for electronic geoscience information and data delivery to
minimise inefficiencies and costs incurred by the industry and other users of the information. Agreed access standards for electronically
delivered information and data need to be developed by the Commonwealth, States and Territories.
The Commonwealth, States and Territory geoscience agencies have recognised this and are working through the Chief Government Geologists’
Committee to ensure greater commonality in the types, structures and standards of data in fundamental and other geoscience datasets. This
coordinated approach to data management is being extended to include government, university and company data to maximise the benefit to
both industry and the community.
State and Territory governments, as custodians of company exploration reports, have a major role in setting nation-wide reporting standards and
ensuring the effective use of this information (assay results, drill-hole information, core logs, photographs, work programs etc) and also mine
information. Data needs to be accessible and available in standardised formats, in both primary and derivative forms.
Access to pre-competitive geoscience information needs to be improved and streamlined through greater use of Internet services via the national
Australian Government Geoscience portal that links all sources of fundamental geoscience and land and access-related information. Greater use
of web-based services and a common portal to access data and information Australia-wide will reduce delivery infrastructure costs and greatly
increase the efficiency with which mineral explorers are able to carry out their work.
The Commonwealth Spatial Data Access and Pricing Policy 2001 has removed the cost barrier to access to the Commonwealth’s fundamental
spatial datasets but additional funding is needed to: accelerate the on-line availability of Commonwealth fundamental geoscience datasets;
provide for more effective storage and archiving of geoscientific data; and to support the development and implementation of protocols and
standards that will permit interoperable web services linking the Commonwealth, States and Territories.
Access to Human and Intellectual Capital

Recommendation 10 – That the Commonwealth Government establish a ‘50 early career explorer’ scheme for new graduates and
holders of doctorates relevant to the mineral exploration industry, to be rotated between government research agencies, university research
centres, industry and small to medium enterprises. Funding of $1.5 million per annum from the Commonwealth matched by funds from the
recipient organisation, with review after five years.
Recommendation 11 – That the Commonwealth move to a funding model for higher education that gives direct recognition to the
national significance and costs of geoscience to increase the long-term viability of geoscientific education and training institutions including:
■ Raising Earth Science education to Cluster 10 to match funding for agriculture and environmental sciences and list as a National
Priority Area; and
■ Extending funding under the Higher Education Innovation Program for a further five years to support and expand existing
educational strategic alliances such as the Minerals Council of Australia’s National Geoscience Teaching Network and the National
Masters Program and link these with the proposed Collaboration and Structural Reform (CASR) Fund, due to become operative from
2005.
Recommendation 12 – That the Commonwealth establish a Deep Ore Discovery Program to support and increase public sector
investment in research and development to equip mineral explorers in Australia with the tools for exploring for a range of known and new
deposit styles through thick cover and at depth. This initiative will include developing more efficient and effective geophysical and geochemical
tools, a step-change in the cost of deep-drilling, and innovative methods for the processing, interpretation and visualisation of relevant data. To
achieve the development of this capability the Deep Ore Discovery Program is costed at $20 million per annum for seven years.

Innovation is one of the driving fundamentals of exploration. It promotes the discovery of new exploration technologies, ideas and approaches
that underpin the discovery of new mineral deposits. Innovation is driven by intellectual endeavour. Consequently, the human dimension of the
exploration industry is arguably its most valuable form of capital. Indeed, the exploration industry’s future will be shaped by the ability of people
to make a difference at all stages along the mineral deposit discovery path, from training explorers to providing research and development
solutions to key exploration problems, and to field exploration.
Recommendations 10 and 11 address an emerging failure in the training and education of high-quality graduates in the mineral exploration
industry. Over the past three years, there has been a 30 per cent drop in the number of Honours students in earth sciences and there are
indications that enrolments in Masters degrees will drop by 20 per cent from 2003–2004. Similarly, PhD completions are projected to decline
from a peak of more than 120 in 2001 to fewer than 50 in 2005. These declines have been a result of a number of factors including a lack of
coordination and reduction in earth science courses, and uncertainty about career and employment prospects within the industry.
PhD programs for exploration would benefit from close involvement with government research agencies with strong exploration research
activities (e.g. Commonwealth Scientific and Industrial Research Organisation, Geoscience Australia). It is proposed in recommendation 10
that a ‘50 early career explorer’ scheme be implemented, which would provide opportunities for up to 50 graduate and post-graduate students
to be rotated between research agencies and industry, including small to medium sized enterprises. It is estimated that the Commonwealth
contributes $1.5 million per annum to this scheme, to be matched by funds from supporting research agencies, State governments, university
centres and industry, on a contestable and competitive basis. The scheme would be overseen by the Commonwealth and extend for an initial
five years before being reviewed.
The ‘50 early career explorer’ scheme proposed in recommendation 10 is related to the Federation of Australian Scientific and Technological
Societies’ (FASTS) proposal for a ‘100 post-doc’ scheme for the science and technology sector which is designed to encourage both local and
multi-national companies working in Australia to increase their investment in research and development and boost Australia’s record in business
expenditure on research and development. However, the ‘50 early career explorer’ scheme is targeted specifically to the exploration industry.
It would lead to rotation in and out of our research agencies - a valuable achievement in itself - and be a powerful catalyst to collaboration. In
addition, it would:
■ Provide a buffer during down times in the industry so that key people would not leave the industry;
■ Encourage collaboration and relationship-building between research groups and industry that would be carried through time;
■ Cater to the needs of small and medium enterprises, which would employ the early career geoscientist at the most appropriate
times during the business cycle. Commonwealth Scientific and Industrial Research Organisation/Geoscience Australia would fund
the positions at other times;
■ Allow selected individuals to work closely with industry and small and medium-sized enterprises while at Geoscience Australia,
Commonwealth Scientific and Industrial Research Organisation, or universities; and, most importantly;
■ Provide an avenue for new generations of geoscientists to apply their knowledge to the benefit of the exploration industry and also
highlight the exciting career prospects available within the sector.
The ‘50 early career explorer’ scheme would boost the research and development effort applied to industry problems, improve the skill base and
experience of geoscientists and explorers entering the workforce, and offer the advantage of counteracting the cyclical employment demand of
the industry.
Recommendation 11 aims to increase the long-term viability of geoscientific education and training institutions. The recommendation is made
to overcome the problem that too many universities are chasing too few students, and student numbers and funding at individual universities
are too low to offer specialised courses required by the industry. Few universities in Australia today offer the depth and quality of exploration-
oriented education that was available decades ago when the current senior exploration professionals were educated.
Implementation of the recommendation would encourage and reward Australian universities for forming collaborative networks based on
complementarity and programmatic diversity. Such networks would provide the opportunity to lift the quality of both teaching and research
within the participating universities, to cater for the geographical dispersion in terms of the student population, and to allow Australia to
compete more successfully for international students. The Collaboration and Structural Reform Fund may be a suitable avenue to achieve this
outcome but these funds do not become available until 2005.

Excellence in specialist capabilities required for a solid education in mineral exploration can also be accomplished by concentrating resources
and research infrastructure at a restricted number of centres. There is also a need to enable the formation of regionally located, key scientific
equipment centres, accessible to all Australian Earth scientists. The capital investment in such facilities can be fully utilised only if there are
on-going funds for operation, maintenance and access, including support for visitors who wish to use the facilities. The implementation of
recommendation 11 will ensure that a critical mass of educational support and expertise is retained in Australia’s educational institutions.
Another important educational issue relates to the science curriculum in the school system. It is important that secondary school curricula,
which have a fundamental influence on career choices, should be modified to portray Earth Science as technologically advanced, highly
relevant to the modern world and socially acceptable. It is recommended that this be addressed by the Education Ministerial Council through
development of a national science curriculum that relates to the National Research Priorities.
In terms of all educational recommendations, the Strategic Leaders Group also endorses the recommendations included within the Mining
Technology Services Action Agenda, particularly recommendation 5 that seeks action to increase the awareness and attractiveness of the
mining technology services sector to graduates and minerals industry personnel, including greater involvement of the sector in existing minerals
education initiatives.
Recommendation 12 addresses a serious research and development failure that has emerged over the last six years or so as a result of the
unprecedented industry restructure. The failure is most marked in the area of research and development focusing on new exploration tools and
techniques so vital to the long term sustainability of the minerals industry. Such research and development was very successful in the past as
it involved collaborative funding arrangements between the public and private sectors, but with industry restructuring such collaboration has
become difficult. Reasons for this are:
■ Most companies no longer have the capacity to either fund or supervise internal or external research projects. In many instances,
funding for research projects now comes directly from district-level exploration budget allocations and this research effort is focused
on short-term outcomes to the detriment of medium to long-term strategic research. The majority of junior exploration companies,
traditionally focused on greenfields exploration in Australia, are unable to invest in research because their funds are barely
sufficient to meet their statutory tenement commitments. In medium to large companies, loss of skills and specialised explorers in
recent years has diminished the company’s capacity to develop or refine exploration methodologies.
■ Industry consolidation has reduced the number of potential sponsors for research and development. It has also resulted in reduced
spending on exploration-related activities, including research and development, by individual companies. Typically, spending by
merged companies is substantially lower than total spending by the premerger entities, as companies seek synergies in the face of
low commodity prices.
■ Due to the globalisation of the exploration and mining industry, decision makers are now more often than not located overseas, and
use subsidised research capabilities outside Australia, to the detriment of the Australian industry as a whole.
■ In some instances, an increased need for external earnings to support activities in universities and government research agencies
has resulted in a distortion towards short-term tactical research. In the case of Cooperative Research Centres, the need for
substantial industry cash contributions has made it difficult for small to medium enterprises and junior exploration companies to
directly participate in research programs. At universities, a marked fall in geoscience student numbers has resulted in decreases in
department-based research and development funding, with a concomitant reduction in research staffing levels, and an increasing
shift from strategic towards tactical research in order to preserve what capabilities remain.
■ Funding through the Cooperative Research Centres (Predictive Mineral Discovery CRC; CRC for Landscape Environments and
Mineral Exploration) is directed towards the completion of specific research and development initiatives, but these do not cover
the full breadth of exploration problems facing industry. Although mineral exploration research is carried out by the Commonwealth
Scientific and Industrial Research Organisation and university affiliated research centres, extra funding is needed to expedite
outcomes from priority strategic research and development areas (outlined below).
The Deep Ore Discovery Program proposed in Recommendation 12 is aimed at overcoming these difficulties.
To date, Australia has been a global leader in mineral exploration research and development via work conducted by both companies and
government agencies. Past Australian research and development has led to the discovery of ore-bodies, increased Australia’s mineral resources,

and had major impacts on the nation’s economic development. Recommendation 12 recognises that the future success of the Australian mineral
exploration industry is dependent on research and development to underpin new exploration tools, including instruments, methods, models and
targeting techniques.
The Deep Ore Discovery Program will focus on research that will provide mineral explorers with new exploration tools for the cost-effective
discovery of mineral deposits which, as a consequence of Australia’s unique geology, are now more likely to be found under cover and at depth.
Components of the Program are designed to complement the work involved in the implementation of Recommendations 8 and 9, which deal
with the collection and distribution to industry of pre-competitive geoscience datasets. Other components of the Program will improve the
understanding of geological processes that lead to the formation and modification of mineral deposits in the unique Australian environment,
thereby enabling explorers to predict the occurrence of deeply buried deposits more accurately and develop procedures for their discovery.
The key research and development priorities identified by industry for the Program are incorporated in the summary table below, grouped into
four main themes. The table includes indicative funding requirements for each of these priority areas over a seven-year period. However, there
will be a need for flexibility, as qualifying projects will be funded on a contestable basis.
Deep Ore Discovery Program Funding Total funding over Approximate % of

Research and development areas $M per year 7 year period $M funding
1) Geophysical tools to characterise subsurface features 7.50 52.50 38
2) Geochemical exploration methodologies for areas of deep

6.75 47.25 34
cover, and drilling technologies
3) Exploration models for effective targeting of buried

2.25 15.75 11
mineralisation
4) Data processing, integration, interpretation and visualisation

methods (including Geoscience Portal and Earth Science 3.50 24.50 17
Grid)
Total 20 140 100
Note: Funding estimates for each area are provided as a guide only, and represent additional funding over current funding allocations.
Universities and associated research centres and the Commonwealth Scientific and Industrial Research Organisation should be eligible to seek
support from the Program. Outcomes from the Program should be made available to industry as soon as possible, at no, or only minimal, cost.
This will ensure that all exploration companies in Australia benefit equally from the Program.
Research and development funded under the Deep Ore Discovery Program should involve new research areas that complement existing research
and development projects. The Program will need to be administered carefully to ensure it doesn’t duplicate work undertaken elsewhere
by Commonwealth agencies, the universities, Cooperative Research Centres and State/Territory organisations. The Strategic Leaders Group
recommends the Commonwealth Government establish the Deep Ore Discovery Program through the Commonwealth Departments of Education,
Science and Training, and Industry, Tourism and Resources.

Minerals Aa Finalreport July2003

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Minerals Aa Finalreport July2003

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Mineral Exploration

Recommendations prepared by the

Recommendations prepared by the

Cover designed by Corporate Communications (ITR)

Mineral Exploration in Australia page 3

Secretariat: Commonwealth Department of Industry, Tourism & Resources.

page 4 Mineral Exploration in Australia

Mineral Exploration in Australia page 5

page 6 Mineral Exploration in Australia

Mineral Exploration Expenditure in Australia 1969-70 to 2001-02

Financial Year Ending 30 June

Mineral Exploration in Australia page 7

page 8 Mineral Exploration in Australia

Mineral Exploration in Australia page 9

page 10 Mineral Exploration in Australia

Mineral Exploration in Australia page 11

page 12 Mineral Exploration in Australia

Aboriginal Land Rights Act (Northern Territory) 1976 (ALRA)

Environment, Heritage and Conservation Estate

Mineral Exploration in Australia page 13

page 14 Mineral Exploration in Australia

Impediments to Capital Raising for Mineral Exploration

Market Based Impediments

Mineral Exploration in Australia page 15

Case for Government Intervention

Government influenced market failure

page 16 Mineral Exploration in Australia

Flow-through shares – (Recommendation 5)

Safeguards to the Proposal

Mineral Exploration in Australia page 17

Native Title costs – (Recommendation 7)

Tradeable Tax Credits

page 18 Mineral Exploration in Australia

Mineral Exploration in Australia page 19

Access to Pre-competitive Geoscience Information

page 20 Mineral Exploration in Australia

Mineral Exploration in Australia page 21

Access to Human and Intellectual Capital

page 22 Mineral Exploration in Australia

Mineral Exploration in Australia page 23

page 24 Mineral Exploration in Australia

Deep Ore Discovery Program Funding Total funding over Approximate % of

1) Geophysical tools to characterise subsurface features 7.50 52.50 38

2) Geochemical exploration methodologies for areas of deep

3) Exploration models for effective targeting of buried

4) Data processing, integration, interpretation and visualisation

Total 20 140 100

Mineral Exploration in Australia page 25

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