Mine exploration loses attraction
Updated: 05:43, Friday May 31, 2013
Mining exploration in Australia is becoming more expensive and less attractive for international investors, a productivity commission report has found.
The report, published on Friday, says easing regulation will help reduce costs and improve certainty in the sector.
‘Operating costs are rising, rates of discovery are falling and Australia is becoming relatively less attractive to international firms as an exploration destination,’ the report warns.
Exploration – the process of finding mineral-rich areas for development – represented just 0.5 per cent of Australia’s GDP in 2011/12.
But mineral extraction, which can only go ahead if exploration is successful, accounted for about nine per cent.
The productivity report said the number, size and quality of resource discoveries was declining, and the exploration sector was experiencing rising costs and lower productivity.
Greenfield exploration, focusing on incompletely explored areas, had fallen over the past decade from 40 to 30 per cent of exploration.
Meanwhile, there has been a shift towards extending mines and looking for more places to drill in resource-rich areas.
This shift in exploration has raised concerns about the sustainability of Australia’s resource extraction in the medium term, the report said.
‘While existing reserves may last many years, they may be of lower grade, in more remote locations, deeper in the ground, mixed with greater impurities and require more difficult and costly exploration and extraction techniques,’ the report said.
‘As more effort’ is needed to produce each unit of output, downward pressure will be placed on productivity.’
The fall in productivity was also reducing the competitiveness of Australia’s resource exploration and extraction industries.
The productivity commission report made a number of draft recommendations to governments and regulators to make the exploration process smoother.
One was that governments should ensure their environment-related requirements for exploration are kept to the minimum necessary to meet their policy objectives.
Governments should ensure regulations are focused on performance-based environmental outcomes rather than ‘prescriptive conditions’.
It also recommended the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 be repealed ‘once all the jurisdictional regimes are operating satisfactorily to commonwealth standards’.