Prosser Report

HOUSE OF REPRESENTATIVES ENQUIRY RESOURCE EXPLORATION IMPEDIMENTS

The Australian Geoscience Council, together with the AusIMM, the AIG and the ASEG made written submissions to this inquiry in July 2002.

On Monday 3rd March, 2003 the Minerals Council of Australia, Geoscience Australia, The Australian Gold Council, The Australian Geoscience Council and the CSIRO Exploration and Mining Division made presentations at a Public Hearing in Canberra. The Committee interviewed David Denham and me.

The presentation by the AGC covered the following:

“The resource industries are the main export earners for Australia. Minerals and energy underpin our wealth creation, and the geosciences are needed to discover, develop and manage these resources. Our future prosperity will depend on these industries remaining healthy, innovative and competitive. Consequently, it is crucial that we have in place an environment that is conducive to efficient and effective exploration.

We identify four key areas where action is needed:

1. Venture Capital

The current taxation regime does not encourage investment in resource exploration. It needs to be reformed to provide appropriate incentives to stimulate both Australian and overseas investment in exploration here. As a first step the ATO should allow exploration activities in unexplored (greenfield) areas as a research activity for taxation purposes.

2. Land Access

On an Australia-wide basis, the ratio of exploration-title applications pending, to those granted has increased from about 1:1 in 1992 to close to 6:1 in 2001, when about 5800 applications were still in the pending queue. Furthermore, the costs involved in submitting these applications impact more heavily on junior explorers because they are unlikely to have the cash flows of the established majors.

3. Geoscience Education and Research

We need a reliable supply of high-quality geoscience graduates for the exploration industry. These can only be provided if Australia maintains world-class geoscience research and teaching facilities at its tertiary institutions and research organisations. At present there is a shortage of high-calibre graduates in some areas, due to the decrease in the number of specialist courses available. Several geoscience departments are struggling to remain financially viable, and students are uncertain about employment prospects in the industry.

In the teaching sector we recommend that: • The Commonwealth should encourage the State and Territory Governments to include Earth Science and Environmental curricula in all secondary schools; • The current model for university funding be modified to be in line with the “variable rate learning entitlement” proposal outlined in the Nelson Review (option 4), to take account of national priorities and the cost of courses; and • Collaboration within and between universities should be encouraged to improve course choice and content.

In the research sector, in the context of the National Research Priorities, we recommend that: • The Minister establish a high level Program Advisory Group to review the resource exploration research programs funded by the Commonwealth and to advise on future research directions, so that the Commonwealth investment is properly focused.

We also endorse the proposal generated by FASTS that: • The government introduces 100 new postdoctoral positions annually, funded jointly by industry and government.

These recommendations supplement those in the written submissions made last year.

4. Geoscience Information

Regional geoscience data sets obtained by GA and the State and Territory Surveys are very important for encouraging exploration and contributing to an understanding of the geology of Australia. We recommend that GA and the Surveys develop a national plan to complete the regional geophysical coverage of the onshore part of the continent over a ten-year period to encourage exploration in the poorly explored areas”.

In response to questions the following points were made:

	The issue of what is R & D, and what is not, is very important. In AusIndustry the IR&D Board looks at three main elements in a project in assessing whether or not it qualifies as an R&D activity. These are :
	“The identification of a problem with significant technical uncertainty that cannot be resolved on the basis of publicly available knowledge in that particular field of technology;
	Originality in the generation of new or different ideas or concepts leading to possible solutions to the problem; and
	A program of experimentation including testing or trials for the purpose of discovering something unknown, or testing a principle or proposed solution to the technical uncertainty.”

However, as AusIndustry point out: “The eligibility of R&D activities is determined by the IR&D Board and should not be confused with eligible expenditure, which is determined by the ATO.”

It seems that there may be a case for deep “Greenfield” boreholes and other activities in areas where nothing is known to be eligible for R&D concessions, but if this is carried out by an exploration company it could make an interesting test case.

The ATO argument is that there is no new knowledge generated in routine exploration for commercial purposes. There is no technical risk. For exploration to be classed as R&D there has to be an element of novelty and the resolution of scientific and/or technological uncertainty. This argument should be challenged by the Industry.

	International corporations will be making decisions on a global basis, the challenge is for Australia to be an attractive alternative for exploration expenditure. Governments have a role in this beyond just getting the macro economic settings right and leaving it up to the market. We do not have a perfect market and therefore Governments have a role to ensure that we are the most attractive option by addressing access to land, access to finance, access to Geoscience Data and access to skills and intellectual capital.
	The Committee were keen to know what would be needed in terms of funds to complete the regional geophysical coverage of the onshore part of the Australian continent, and also what could be done to streamline the land access process.
	An analysis of 1996 Census Data with the 2001 Data shows that there has been up to a 60% fall in employment of Geoscientists in exploration and thus the skills base is diminishing and there is a fear that it may be lost.
	There is a great opportunity for Australia to become the source for mining services and skills for the global industry.
	The challenge for the Minerals Industry is to ensure that Geoscientists are attracted to the industry as a career option.

The full proceedings of the hearings will soon be available on the Hansard website.

Don Larkin Secretary/Treasurer AGC

Last Updated 13-Apr-2003