NEW incentives for greenfields mineral exploration will soon be available to junior mining companies after the Senate passed a bill to establish the Exploration Development Incentive, effective from 1 July 2015.
Passed last week as part of the Tax and Superannuation Laws Amendment Bill 2014, the legislation facilitates access to the Exploration Development Incentive for Australian-resident investors, entitling them to potential tax offsets and additional franking credits.
Available over three years and capped at $100 million, the incentive will enable exploration companies to convert a portion of their tax loss to exploration credits, which may be provided to shareholders to entitle them to an equivalent tax benefit.
The Bill brings into legislation some of the 22 recommendations made by the Productivity Commission Inquiry into Mineral and Energy Resource Exploration report, carried out to respond to declining exploration expenditure.
Simon Bennison, chief of the Association of Mining and Exploration Companies (AMEC), said three reports in just the last week highlighted the impact of a challenging business environment for resource industry explorers.
“In the Fraser Institute’s Annual Survey of Mining Companies for 2014, all Australian jurisdictions except for South Australia decreased on the Investment Attractiveness Index, and in 2014, 47 per cent of capital raised on the Australian Securities Exchange for mineral exploration was invested globally,” he said.
“SNL Metals & Mining’s World Exploration Trends 2015 reported a 26 per cent decrease in worldwide nonferrous metals exploration budgets in 2014, stemming from investor wariness of the junior sector and producers scaling back their exploration spending.
“Whilst there was a small increase in mineral exploration expenditure and metres drilled on new deposits in the Mineral and Petroleum Exploration, Australia December 2014 quarter results from the Australian Bureau of Statistics, there is still a long way to go to restore equity between investments on new compared with existing deposits.”
The Exploration Development Incentive has been widely welcomed as a step towards reinvigorating exploration activity in Australia.
The Incentive is predicted to underpin up to $350 million in eligible exploration expenditure, creating around $1 billion in subsequent economic activity.
