Regulation of the mining industry went backwards last year, but Australia is still well placed to compete with global miners, a new survey has found.
According to the latest survey by the Fraser Institute, Aussie miners are more pessimistic about regulation than they used to be, and bosses are increasingly wary of public backlash to their operations.
The study, which hands out a 'policy potential indicator' (PPI) for every mining province in the world, works by asking managers and key industry figures how they rate government regulation of their projects.
Judging by the results this year the sector has some catching up to do, but it's still leaps and bounds ahead of competition in sketchier parts of the world.
“The average PPI score for Australia is down slightly from 2011/2012, although there has been an increasing trend over the last five years,” the study said.
“WA is the highest ranked Australian jurisdiction with a global rank of 15 and a PPI score of 79.3.”
“Victoria showed significant improvement in both its PPI and rank, moving from 44 in 2011-12 to 24 in 2012-13 due to improvements in political stability (38%) and the legal system (16%).”
Straight to the source
While most of the bad news about the mining industry has centred on commodity prices, public backlash and government policy still weigh heavily on the minds of most miners.
The Fraser study showed a pessimistic outlook and most executives, under the protection of anonymity, didn't hold back their criticism.
One company president claimed “political and regulatory panic” was impacting the ability to move forward, and others blamed regulation for increasing exploration expenses and decision-making timeframes.
Yet another explorer in Tasmania claimed the industry was governed by “very green policies,” but there were some positive reviews amongst the gloom.
“Stable, not corrupt, has technical potential, skilled labour force, not too green, and sensitive to how mining assists remote development and usefulness of royalties,” the president of a consulting company said of the wider climate.
“You get a professional case officer to deal with your approvals and the regulators are willing to be engaged at the highest level and help, not hinder, your proposals,” the vice-president of another explorer said.
While the global exploration budget for 2012 increased significantly to $US6.2 billion last year, up from $US5.4 billion in 2011, miners were again pessimistic about future demand.
This pessimism is shared by the wider investment community, and over the last few months we have already seen some operations get scaled down, particularly in the QLD industry.
The Fraser study indicated 2013 would likely be a slower year for the exploration sector, with more companies taking a 'wait and see' approach to the volatile market.
“Only 46 per cent of respondents plan to increase their exploration budgets in 2013; down from 68 per cent in 2012 and 82 per cent in 2011,” the study said.
While expectations for gold and silver prices were quite positive, there was a lack of faith in almost every other sector.
“The investment climate is simply hinging on the back of Chinese growth, which in part is linked to European and US recovery and a return to fully functioning consumerism. Until the later occurs, there will be ongoing uncertainty in commodities,” one manager said.
“As long as the world economy is weak and uncertain, investors will not speculate in exploration ventures,” said another.
If anything the Fraser study shows Australian miners aren't the only ones watching their backs, with the downbeat attitude shared throughout most companies and jurisdictions.
But there are still some positives to take away from the survey, particularly for local companies.
Despite their problems, Australian regions continue to be some of the most highly regarded provinces in the world, and remain lightyears ahead of some of the corrupt, war torn, and unstable regions of Asia, Africa, and other parts of the world.
Efforts to use the study as a lobbying tool must also be taken into account, with one executive claiming they always forwarded the document to various government ministers.
In such a scenario it would be in the best interests of companies to play down the positives and overhype the negatives.
Outside the Fraser study not all judgements of the industry are so negative, and just last year consultancy firm Behre Dolbear rated Australia the best mining province in the world.
With the divergence of opinion as large as it's ever been companies will have to work harder in 2013 to stay on a profitable path.
And while Australia has its problems our workers and leaders are still up for the challenge.
You can read the study and check the full rankings here.