The chairman of iron ore explorer Flinders Mines, Robert Kennedy, has called on the Federal Government to introduce a flow-through share scheme to protect junior explorers from the capital risk of their operations.
“The 2010 Federal election offers an ideal opportunity for the Government to make good on its promise to buttress junior exploration companies from some of the significant risks faced by the sector,” he said.
“Junior explorers have weathered the economic crisis much better than many expected.
“However, because these companies cannot offer their shareholders tax offsets, several emerging projects have already fallen by the wayside, taking a substantial amount of gloss off the recovery.
“The introduction of a flow-through share scheme is now not just a matter of principle, but of the utmost urgency, in order to save one of the most important industry sectors from the enduring impacts of the economic crisis.”
According to Kennedy, the scheme would address a disparity in Australian taxation law, which causes most exploration companies to miss out on tax deductions available under the Income Tax Assessment Act for high risk exploration expenditure.
“A flow through share scheme would rectify this anomaly by allowing junior explorers that cannot use the deduction to pass it through to their shareholders, who could then use it to offset their own tax liabilities,” he said.
“Such offsets make these junior explorers more attractive to investors, enhancing capital raising opportunities at the lower end of the commodities cycle.”
The proposal is currently under consideration by Treasury Secretary, Dr Ken Henry, who will shortly deliver a set of recommendations to Federal Treasurer Wayne Swan.
“Flow-through shares schemes, which formed part of the Government’s platform in the lead up to the 2007 election, have been persistently put on hold,” Kennedy said.
“It is now a make-or-break juncture for many cash-strapped junior explorers.”