Explorers need incentives, Roche

QRC chief executive Michael Roche has called on the Federal Government to introduce tax incentives for junior minerals explorers, such as a flow through share scheme.

Queensland Resources Council (QRC) chief executive Michael Roche has called on the Federal Government to introduce tax incentives for junior minerals explorers, such as a flow through share (FTS) scheme.

Reports from Australian Bureau of Statistics indicate that mineral exploration activity in Queensland fell by 38% during the 2008-09 financial year.

Over the same period, greenfield exploration investments across the state collapsed 61% to just $16.5 million, the lowest quarterly total since the 2007 March quarter.

According to Roche, the global financial crisis has increased the shortfall in new exploration activity in Queensland.

“Exploration is essential if the governments are serious about replacing a number of world-class mining operations in Queensland that are nearing their end of their commercial lives,” he said in a statement.

“Analysts agree that the supply of new investment capital is not going to improve quickly, it is urgent that exploration is stimulated through the tax system.”

Under existing taxation arrangements, junior exploration companies with little or no taxable income are unable to deduct exploration expenses immediately.

The vast majority of junior explorers do not have an alternative income stream, so their costs are pushed higher.

This results in lower levels of activity and fewer substantive new discoveries and projects.

According to Roche, a FTS scheme would allow unusable corporate tax deductions to be transferred through to a junior company’s Australian shareholders

“Eligible shareholders would then be entitled to use ‘exploration tax credits’ to offset their tax liabilities, thereby maintaining investment momentum,” he said.

“This has been demonstrated successfully in Canada for more than a decade.

In May, the QRC and nine other resource sector bodies presented the Federal Government with an economic study forecasting that 4000 new exploration jobs would be created in Queensland and Western Australia if an FTS scheme was introduced.

The report provided strong evidence that a scheme would result in increased exploration expenditure by 10 to 30%.

“The Queensland Government’s election commitment to become the greenfield exploration capital of Australia by 2020 will stay under a cloud as long as this comparatively modest form of economic stimulus is kept under covers at the Federal Treasury,” Roche said.

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