Miners hoping for exploration leg-up with Coalition

Australia’s resources sector is optimistic of the initiation of tax concessions that will give a leg up for exploration activity if the Coalition wins the election.

The Association of Mining and Exploration Companies, a body representing small resource companies, have been campaigning for a modified version of the flow-through shares scheme.

A similar scheme in Canada increased exploration findings.

Director of three junior resources companies and vice president of AMEC Mike Young said the Coalition had responded well to the modified version of the mineral exploration tax credit scheme.

“If the Coalition gets in, we think it will probably get enacted,” he said.

“We’ve had good feelings from both Treasury and the conservatives that the model we’ve got is a good one. We’ve been pushing it pretty hard, and I think the industry needs it if we’re going to succeed and keep going in Australia.”

Australia has been losing ground on global exploration funding in the last few years as companies look to other countries for projects.

As a result, funding for exploration has become scarce for junior mining companies, as they cut back to conserve cash.

Research by the University of Western Australia’s Centre for Exploration Targeting said Australia’s portion of global exploration for non-bulk commodities had almost halved from highs of 21 per cent in 2002 to 12 per cent of the global total in 2011.

In contrast, Canada’s share of global exploration spending rose from 14 per cent to 18 per cent during the same period.

The Coalition threw its support behind the flow-through shares scheme during the 2010 election campaign. While Labor took a supportive stance for the flow-through shares scheme during its 2007 and 2010 campaign, they did not introduce it.

AMEC chief executive Simon Bennison said he was pleased with the support the scheme had met, The Australian reported.

“We’ve still got some distance to run, but the preliminary documentation we’ve fed into the Coalition has certainly had a high degree of support,” he said.

“That’s not to say it’s a done deal by any stretch, a lot more had to be done in the space and we’ll be working in the next few weeks in particular to finalise the detail around it.”

However Westoz Funds Management executive director Dermot Woods said the scheme is not sufficient to lure investors back to the small end of the resources sector.

Coalition resources spokesman Ian Macfarlane did not comment on the whether the flow-through shares scheme would be a part of their election campaign, but highlighted it was part of the Coalition policy in 2010.

“Our resource policy will be announced during the campaign. I know that’s a tired, warn-out line and I apologise for being boring, but I’ve got to stick to that,” he said.

Bennison said Australia was in need of an incentive scheme even before the mining slowdown, when the resources sector was booming.

Under the flow-through shares scheme and the tax credit, tax losses amassed by small mining companies during exploration will be passed on to shareholders to offset against their income instead of staying on the companies’ balance sheets.

Young, who is originally from Canada, rorting would reduce under this scheme than the Canadian scheme, thereby assuaging one of Treasury’s fears about the scheme.

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