Resource exploration spending has dropped to seven-year lows with concerns cost-cutting measures may delay Australia’s next generation of mines.
New data released by the Australian Bureau of Statistics shows seasonally adjusted spending for the June quarter was down 7.5 per cent to $444 million.
Spending has not tracked this low since December 2006.
The trend estimates for metres drilled fell 4.9% in the June quarter 2014, and the current quarter estimate is 19.5% lower than the June quarter 2013 estimate.
The seasonally adjusted estimate for metres drilled fell 1.4% in the June quarter 2014.
Chief of the Association of Mining and Exploration companies, Simon Bennison, told The Australian the fall in exploration spending could have long-term effects if not enough mineral discoveries were made.
“Given the long lead time from discovery to a producing mine, these figures are extremely concerning,” Bennison said.
Bennsion said he hoped the government’s exploration development incentive would help to increase investment in the sector.
The program was launched by Federal minister for Industry Ian Macfarlane in July, and applies to junior explorers with greenfields projects.
The fund has been capped at $100 million over three years: $25 million for exploration expenditure in 2014-15; $35 million for 2015-16; and $40 million for 2016-17.
Bennison said the EDI should help to reverse the ongoing reduction in the global share of Australian greenfield exploration activities and the low number of Initial Public Offerings for mineral projects in Australia.
Until exploration picks back up, drilling companies and other firms servicing the mining industry are continuing to feel the pinch as work dries up.
The continued future of Boart Longyear is cloudy following the driller's latest negative financial results, giving less than 12 months for the company, or the market to turn around.
The company has recorded a massive fall in revenue in its latest first half results, seeing a fall of nearly US $300 million year on year.
The situation for the company is grim, with Boart Longyear CEO Richard O'Brien stating "as indicated in our most recent market updates, we feel we are at, or approaching, the bottom of the market".
Perth-based drilling contractor Swick also joined the list of depressed drillers posting a FY 2014 first-half loss of $423,000.
The company blamed the loss on cost cutting by clients and tougher competition, revealing revenue in the first half has slumped 25 per cent, down to $57 million.
Chief of Western Australia’s Chamber of Minerals and Energy, Reg Howard-Smith, has warned not to expect an improvement in the sector any time soon, ABC reported.
"I sincerely hope I'm wrong in saying that, but I suspect we might have a little bit further to go in a downward trend," he said.
"Cost of doing business and cost of capital, those things will take some time to turn around.
"Whereas in the past a small exploration company might be able to do a very successful drilling program with $2-4million, arguably these days it's double that and it's hard to raise capital."