Speech at AMEC Convention 2017
7 June 2017
[Check against delivery]
Can I start by recognising the service of Simon Bennison. Simon has provided a remarkable decade of leadership for your industry. A decade that has included booms, busts and regime changing blues with the Federal Government.
Simon has made a distinguished contribution to this organisation and to the Australian resources industry more broadly. His successor at the helm of AMEC will certainly have big shoes to fill.
Simon is a character and he is a character well suited to an industry that has generated plenty fo them. In his seminal history of Australian mining, The Rush That Never Ended, Geoffrey Blainey wrote that “Australia’s map is criss‑crossed with the spidery tracks of the metal seekers".[i]
Many of those tracks were made not by the large established players we often associate with the mining industry, but by lone prospectors and smaller companies seeking out new frontiers.
Individuals like James Nash who discovered gold at Gympie. He once walked nearly a thousand kilometres from Sydney to Tooloom, near the Queensland border, and walked the same distance back, his pockets empty. Despite making the find that saved the fledgling Queensland colony, James made all small amounts from the find and then lost it all in other mining investments and in a drapery shop, and from 1888 was living in the town as the government-appointed powder-magazine keeper.
Or another Queensland story from my home town of Rockhampton, where in the 1880s an employee of the Criterion Hotel, about to be sacked by the owner Fredrick Morgan for drunkeness, sucesfully received a pardon by promising to show Mr Morgan a “silver lode” not far from Rocky. Instead, they founded Mt Morgan, at its heyday the biggest gold mine in the world.
Or the more recent example of Mark Bennett from Sirius Resources who was down to his last drill program, rain was stranding the rig and 180 metres down into a 180 metre drill plan nothing had been found. The next morning they tried another ten metres and discovered a nickel and copper deposit.
Junior explorers have discovered the lion’s share of gold in Australia since the 1960s.
So if American writer Mark Twain was to return to Australia today, he might quip that a gold mine is a hole in the ground not with a liar but with a junior explorer standing on top of it!
The immense contribution of small and mid-sized firms is also borne out by economic data.
Today, small and mid-sized firms make up over 95 per cent of mining businesses in Australia.
The latest available figures show they contributed $26.7 billion to the economy in 2014–15.
They also employ about 40,000 people, paying $4.7 billion in wages each year. Many of these jobs are in regional areas which also helps to develop our country away from just the big cities.
I can assure you the Australian Government recognises the invaluable contribution of small and mid-sized players in the mining industry.
And we are committed to putting in place the right policies to encourage new exploration and create a business environment that enables you to invest, grow and be profitable.
Exploration Development Incentive
So let’s get straight to it - I would like to address the issue of the Exploration Development Incentive.
I know many of you are disappointed by the decision not to extend the operation of the scheme beyond its original trial period.
It was established in 2013 to encourage investment in greenfield mineral exploration.
The Government through my department, the Treasury and the Australian Taxation Office worked closely with the exploration industry, including AMEC, when designing the scheme.
We made it clear at the time that the incentive would be available initially for a three year trial period and that we would conduct a review before its scheduled conclusion this financial year.
An independent review of the scheme was completed in March.
The review was commissioned by my department and overseen jointly with The Treasury.
Its findings were informed by consultations with federal agencies, state and territory mining departments, industry representatives including AMEC, and individual junior explorers.
All registered participants were also contacted and encouraged to provide feedback.
The review found little evidence that the scheme was achieving its goal of encouraging greenfield exploration or increasing the flow of capital to the greenfield exploration sector.
It also noted the relatively low uptake of the incentive by junior explorers, and the 36 per cent decrease in the number of participants between the first and second years of operation.
The scheme has allowed deductions for greenfield exploration expenses against taxable income but there has been no evidence of tax credits being reinvested in exploration.
We understand that the last two years were particularly difficult years for your sector with particularly low levels of activity generally.
The review did consider options to improve the scheme but found these would have benefited only a small number of participants rather than improving the scheme’s overall operation.
The decision not to extend the current scheme was based on these findings.
I had a robust discussion about this with AMEC representatives a couple of weeks ago.
And I can assure you, as I did them, that we did not make our decision lightly.
I know that you may think that this decision means the Government doesn’t value the contribution of small and mid-sized miners. Of course we do.
The respect I have for your sector is one of the reasons I am here today, in person, to speak with you.
The EDI still has a year to run in which the tax credits can be claimed. If this shows a significant reversal in the trend so far, and it show there is a large uptake of the scheme – I will be the first to argue your case.
I am also happy to continue to work with AMEC on an improved scheme to benefit junior explorers, or to consider suggestions for a revised scheme that can provide the benefits to the sector and to our nation that the EDI had tried to. The EDI in its current form had not met those objectives. Given the radical re-design options proposed by AMEC it would appear that this was your industry’s view too.
It was a Coalition Government that ultimately introduced the EDI after years of lobbying from your organisation. We did it because we support your industry. That support has not changed and we are willing to work on new ideas that can support your investments and risk taking to deliver nationwide benefits for Australia.
Just like every sector, we have to be responsible with the budget, and there is no suggestion that there are pots of money waiting to be discovered.
But our very clear focus as a Government is to balance the books and also continue to invest taxpayers’ money in a way that delivers the best return, the best economic outcomes and the best prospects for jobs.
I won’t stand here and make you promises that I can’t keep or that are unsustainable for the budget.
But I can guarantee my door is always open to work with you on this. And I am confident that we can come up with a better and more successful scheme.
Exploring for the Future
As you would all know, Australia has historically had one of the world’s most successful exploration industries but we have exhausted our easily-discoverable near-surface resources.
This means we must look elsewhere to find new deposits.
Many significant discoveries in Australian history—including Charles Rasp’s at Broken Hill and John Campbell Miles’ at Mount Isa—occurred because there were signs of mineralisation.
Prospectors found rocks on the surface which looked like they might contain particular minerals, and they decided to drill down to find out if they were right.
But minerals also exist below the surface even when there aren’t outcrops, and the Australian Government wants to ensure the latest technology is being used to locate them.
So under the $100 million Exploring for the Future program, Geoscience Australia is using aeromagnetic and seismic testing to produce a better picture of what lies far underground.
The end product will be a resources prospectus—or treasure map, if you like—covering targeted areas of northern Australia and parts of South Australia.
This will provide industry with unprecedented volumes of pre-competitive data about the potential mineral, energy and groundwater resources concealed beneath the surface.
In short, it will lessen the risk involved in exploration.
There are proven benefits to undertaking this type of work.
One notable success was a project in South Australia in the early 2000s.
Over six years, Geoscience Australia acquired and interpreted new datasets, ultimately defining a 500 kilometre belt of the eastern Gawler Craton likely to contain mineral deposits.
A junior explorer subsequently discovered large copper and gold deposits at Carrapateena, and a major company now expects to generate $22 billion in revenue from developing the site.
I expect similar success stories to come from the Exploring for the Future program.
Unlocking Australia’s hidden mineral wealth is also the goal of the UNCOVER initiative.
As you would be aware, UNCOVER is bringing together representatives from industry, government and academia to position Australia as a world leader in under cover exploration.
Geoscience Australia, CSIRO and government geological surveys are contributing their expertise, and I also thank AMEC for its involvement.
I understand the UNCOVER community is close to finalising a roadmap which seeks to deliver new major mines for Australia by tapping into mineral resources far below the earth’s surface.
I commend this initiative and look forward to the roadmap’s publication.
Geoscience Australia also publishes a guide to promote mining exploration and investment.
The guide is a one-stop shop for potential investors and includes information on topics like exploration, regulations, services, approval processes, health and safety, and communities.
Geoscience Australia has been working diligently to incorporate the most relevant and up‑to‑date information, and I am pleased to launch an updated version of the guide today.
The guide is available online through the Australia Minerals website.
Australia Minerals and Austrade are also promoting our minerals industry at the world’s largest mining and exploration events in countries like Canada, China, Japan, Korea and India.
Creating A Positive Business Environment
Tax and Regulatory Reform
The Australian Government has introduced a range of other policies to create the best possible environment for companies of all sizes to invest, grow and be profitable.
For example, we are reducing the tax burden for small and medium-sized businesses.
We have cut the corporate tax rate for businesses with turnover of less than $10 million to 27.5 per cent, and we want to reduce the tax rate on all companies to 25 per cent by 2026–27.
We’ve also reduced the regulatory burden on businesses by cutting $5.8 billion in red tape.
We’ve expanded export opportunities through free trade agreements with China, Korea and Japan.
This is a massive opportunity for growth given that Australia’s resources and energy exports are forecast to reach an all-time high of $215 billion in 2016–17 and 2017–18.[ii]
China alone purchases around 40 per cent of our resources and energy exports, and our trade agreement has ended tariffs on alumina, zinc, nickel, copper, coking coal and thermal coal.
We are now focused on delivering trade opportunities with India, and there are encouraging signs with India recently overtaking China as our largest export market for metallurgical coal.
We are also supporting our resources sector to maintain its strong reputation for innovation.
Earlier this year, I visited the Northparkes copper and gold mine in central New South Wales.
It provides jobs for 300 people and is the world’s first fully automated block cave mine.
It operates continuously 24/7, delivering optimal production with greater safety and less cost.
It exemplifies the innovation that underpins the global competitiveness of our resources sector.
As part of the $250 million Industry Growth Centres initiative, the Australian Government has launched two centres to further drive innovation and productivity in the resources sector.
The Oil, Gas and Energy Resources Growth Centre, which is known as National Energy Resources Australia, or NERA, is focused on the oil, gas, coal and uranium sectors.
It is based in Perth and covers the full range of industry activities from exploration to development, construction to drilling, and production to decommissioning.
NERA released a Sector Competitiveness Plan earlier this year which is a ten‑year strategy to increase the competitiveness and sustainability of the energy resources sector.
The Australian Government has also launched a Mining Equipment, Technology and Services Growth Centre, known as METS Ignited, which is based in Brisbane.
Australia has a world-class METS sector that provides the resources industry with cutting‑edge technology.
METS Ignited launched a Sector Competitiveness Plan late last year that will help invigorate Australia’s position as a global hub for mining innovation.
The CSIRO also recently worked with METS Ignited to develop a roadmap which highlights the vital role of the METS sector in addressing global mining challenges.[iii]
The roadmap encourages METS companies to capitalise on the opportunity to develop and commercialise the equipment and services that are needed for exploration.
It also points to the growing demand for rare earth elements like lithium and graphite that is being fueled by the adoption of modern electronics and renewable energy technologies.
Junior explorers have been responsible for many discoveries of rare earth elements in Australia, and I am pleased we are emerging as a global supplier of these metals.
When Australians think of mining, they often think of BHP and Rio, big trucks and big capital.
But small and medium-sized businesses are the lifeblood of the resources industry.
I started by commenting on the romance of some of the individual stories of small explorers. The author Anthony Trollope summed it up well:
That a thing in itself so rich, so capable of immediately producing all that men most desire, should lie buried in the dirt beneath their feet, loose among the worthless pebbles of the rivers, mixed at haphazard with the deep clumsy lumbering rocks, overcomes the imagination of the unconscious thinker, and takes possession of his heart and brain.
That romance is still there even if the capital requirements of new finds is a little higher than pick or shovel these days. The Australian Government is committed to working with you to find more wealth for our nation within the “lumbering rocks” both through our direct investments in mapping Australia’s geology and supporting your investments through a competitive taxation and investment system.
I look forward to working with you on this endeavour.