The Australian Government plans to revive greenfields exploration through a new scheme.
On Saturday, the Malcolm Turnbull-led Liberal-National Coalition unveiled a $100 million initiative to secure additional investment in greenfields exploration to drive the next wave of mineral discoveries.
The Junior Mineral Exploration Tax Credit (JMETC) replaces the government’s Exploration Development Incentive (EDI) scheme, which it announced would be scrapped in May.
According to the Australian Government, the new scheme will provide tax incentives for exploration companies, encouraging the investment and risk taking needed to underpin the future of the resources industry.
Turnbull said the JMETC would allow the tax losses in greenfield exploration companies to be distributed as a credit to Australian resident shareholders.
“Everything my government is doing is focussed on promoting investment and driving economic activity,” Turnbull said.
“These tax incentives will encourage junior explorers to take risks and to have a go at discovering the next large-scale mineral deposit.
“We want to back enterprise. We want to turnaround the greenfields minerals exploration expenditure that have declined by almost 70 per cent over the past five years.”
Under the scheme, Australian resident investors of junior explorer companies will receive a tax credit where the exploration company chooses to give up a portion of their losses relating to their greenfields exploration expenditure in an income year.
The ability to immediately distribute tax credits to investors will make investing in an explorer more attractive and encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia.
Association of Mining and Exploration Companies (AMEC) chief executive officer Simon Bennison described the four-year JMETC scheme as “visionary”.
“The JMETC is a tax credit arrangement which allows mineral exploration companies (with no mining income) to renounce and pass future tax deductions (losses) to their Australian resident investors,” Bennison said.
“The JMETC is a critical investment in Australia`s future, particularly as contemporary research in relation to existing mines indicates that there will be significant reductions in production and government revenue streams as those mines reach the end of their current lives. They need to be replenished by new discoveries as soon as possible.”
Bennison said tax credits under the JMETC would be available to new raisings of capital, similar to the model used in Canada.
“The credit to investors will represent 30 per cent of the eligible greenfield mineral exploration expenditure incurred, and renounced by the company. This is an extremely attractive arrangement which should result in more investors entering the equity market,” Bennison said.
“The rewards are even greater for those investors in successful exploration companies which subsequently develop a new mine.”
The Australian Government’s announcement follows last month’s confirmation from the Western Australian Government that it plans to continue funding the state’s $10 million Exploration Incentive Scheme (EIS).
The scheme consists of several programs that promote resource exploration in WA, particularly on greenfields areas and frontier petroleum basins.
It provides refunds, up to 50 per cent, for innovative exploration drilling projects worth more than $150,000.