The Australian government announced this past Saturday (September 2) that it will invest AU$100 million into greenfields exploration in a bid to “drive the next wave of mineral discoveries.”
The Junior Mineral Exploration Tax Credit will replace a previous scheme called the Exploration Development Incentive, and will allow Australians investing in greenfields exploration companies to receive a tax credit where the company chooses to give up a portion of its losses related to greenfields exploration expenditure in an income year.
“These tax incentives will encourage ‘junior explorers’ to take risks and to have a go at discovering the next large-scale mineral deposit,” Prime Minister Malcolm Turnbull said in a press release. “We want to back enterprise. We want to turnaround the greenfields minerals exploration expenditure that have declined by almost 70 per cent over the past five years.”
Only newly issued shares related to capital raising for investment in new greenfields exploration will be eligible for the tax credit. The AU$100-million tax credit will be made available over four years from this financial year onward on a first-in, first-served basis.
The tax credit has been praised by Barnaby Joyce, Australia’s deputy prime minster, minister for agriculture and water resources and minister for resources and Northern Australia. “Despite good prospects Australia has not had a world-class mineral discovery in more than twenty years,” he said, adding, “[t]his credit will make it more financially attractive for our mineral explorers to find resources in untapped regions.”
Simon Bennison, CEO of Australia’s Association of Mining and Exploration Companies, described the plan as “visionary and great news for Australians,” noting, “[t]he credit to investors will represent 30% of the eligible greenfield mineral exploration expenditure incurred, and renounced by the company. This is an extremely attractive arrangement which should result in more investors entering the equity market.”
Australia is a major producer of a vast number of minerals, and holds the world’s largest economic demonstrated resources of industrial diamonds, gold, iron ore, lead, nickel, rutile, tantalum, uranium, zinc and zircon. It is also has significant economic demonstrated resources of a variety of other metals, including coal, copper, lithium, manganese, silver and tin.
The country’s major mines include the Super Pit, a massive gold mine owned by Barrick Gold (TSX:ABX,NYSE:ABX) and Newmont Mining (NYSE:NEM). BHP Billiton’s (ASX:BHP,NYSE:BHP,LSE:BLT) Olympic Dam is another key mine in Australia — it holds the world’s largest deposits of copper, gold and uranium in addition to a significant silver deposit.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.