The resources boom is masking a collapse in investment in Australian mineral exploration, writes Russell Trood

AUSTRALIA faces the prospect of a serious decline in its standard of living if it is unable to resurrect minerals exploration in the mining industry.

A far-reaching consequence of the reduction in exploration could see the end of the mining industry in Australia within 25 years.

In real terms, mineral exploration throughout Australia is at its lowest level in almost 30 years.

This country's share of expenditure on global exploration has dropped to 12.6 per cent, its lowest percentage in 20 years and a 30 per cent reduction from its 19 per cent historical average.

Such statistics reflect a substantial downturn in activity.

Mining companies in Australia are not fully exploiting our immense potential reserves.

This country remains largely underexplored. Why?

At present Australia benefits from a global mining boom, but the real exploration dollars are being spent in places such as Canada and South America, where mining companies can obtain the greatest return.

We are not attracting the same sort of investments, despite having the world's largest reserves in zinc, lead, nickel and uranium, and being within the top six countries for resources in gold and copper.

Northwest Queensland is ranked as one of Australia's most prospective mineral exploration provinces, and has the richest lead and zinc deposits in the world.

But Queensland will only be able to mine bauxite and coal by 2030 unless exploration for base metals and gold is accelerated.

Part of the problem is that mining companies in Australia are focused on brownfield mining (known resources) to meet the current demands. rather than taking advantage of record high commodity prices to undertake riskier and more expensive ventures in the unexplored greenfield sites.

Since Canada introduced its Super Flow-Through shares scheme in 2000, where tax deductions are transferred to the investors, exploration expenditure has increased from $367 million to $1.684 billion, 64 per cent more than that spent in Australia.

Australia is consistently ranked in the world's top three for its standard of living, but what people fail to realise is that much of our wealth stems from our mining industry.

Billions of dollars in royalties from the mining of minerals are injected into the Australian economy each and every year. But for how much longer?

It takes 10 to 15 years for a mine to become operational, and if the mining industry is to be sustained, major discoveries need to be found soon.

Australia is living off the life of existing mines found 20 years ago. Governments should not be lulled by the mining industry's current robust position. They should be looking to its long-term future.

This means investigating avenues that will provide the industry with genuine incentives to discover new deposits to replace existing mines and ensure Australia's future prosperity.

I believe incentives such as flowthrough shares and the provision of geoscientitic information should be considered and would go a long way towards encouraging increased investment in the minerals industry.

Mining is often ignored by governments and voters alike, but the apathy would disappear if Australia's royalties "treasure chest" vanished.

A much weakened economy would result and lead to a dramatic reduction in the Australian standard of living. By then it may be too late ...

Source: Courier Mail