Planned mining reforms just scratch surface

On December 28, Prime Minister John Howard announced he wanted to make Australia's mining industry more competitive by streamlining approvals processes for projects and to reduce risk. That's all well and good. But Mr Howard is doing little to stimulate the catalyst for mining projects - the discovery of new mineral deposits.

Most mining companies will applaud Mr Howard's invitation to work with the premiers and chief ministers on the speed with which Aboriginal heritage issues are dealt with, establishing a one-stop shop for approvals and altering the occupational health and safety requirements so that there's a spreading of liability for any mine accidents.

There is no doubt that differing requirements between the states and territories with regard to these issues substantially increases the risk and expenditure requirements, particularly for junior mining companies.

But what Mr Howard ought to be focused on is that unless Australia's exploration sector becomes more attractive for investors, there will be fewer new mining projects to take advantage of these reforms.

Mineral exploration expenditure has not increased to the extent one might have expected given the five-year-old commodities boom. In 2003-04, exploration expenditure stood at $786.7 million. In 2005-06 it had risen to $1.24 billion.

But over the same period, Canadian exploration expenditure almost trebled, going from $C686.7 million ($A753.7 million) to $C1.8 billion.

In global terms, Canada now accounts for 19 per cent of exploration expenditure while Australia accounts for only 11 per cent, according to the latest forecasts released in November from Canadian consultancy Metals Economics Group. In 2003, Australia represented 15.5 per cent of global expenditure and Canada 21.5 per cent.

One of the major reasons for Canada's massive increase in exploration expenditure since 2003 is because its tax system encourages investment in exploration. The flow-through share scheme in Canada allows investors a tax break if they buy shares in exploration companies that are spending dollars in Canada.

The Australian mining industry has been unsuccessful in its efforts over the past five years to persuade the Howard Government to adopt the Canadian model. This is despite this same Government having been prepared to allow similar programs - known as managed investment schemes - to operate in the agricultural and forestry industries.

An investor in Australia who is offered the opportunity to place his or her money into a tax-effective managed investment scheme for a forest plantation, or to invest in an exploration company seeking to sink drill holes, will choose forestry in most cases.

But not only is the decline in exploration in Australia being fuelled by the Howard Government's refusal for tax incentives to encourage investment, there is also a chronic shortage of geologists and other exploration professionals in Australia, partly due to the education sector turning its back on these areas of endeavour.

As Gregory Webb, a senior geoscience academic at the Queensland University of Technology observed in November (in an On Line Opinion article), of "28 geoscience departments in Australian universities in 1990, only five independent geoscience departments remain". Australia-wide there were only 100 geology graduates in 2005, yet the mining industry's peak body, the Minerals Council of Australia, says that we will need 7,600 geologists and engineers over the next decade.