JOHANNESBURG (miningweekly.com) – The South Australian Chamber of Mines and Energy (Sacome) on Monday said that implementing tax credit policies, upgrading infrastructure and adjusting the Petroleum Resource Rent Tax (PRRT) would enable Australian junior miners to better navigate the difficult resources environment and boost their development.
“With recent downtrends in mineral exploration expenditure, softening commodity prices and extremely constrained capital markets, junior resources companies are facing tremendous challenges right now to develop their deposits into economical projects,” Sacome CEO Jason Kuchel said.
The implementation of an exploration tax credit policy, such as a flow-through shares scheme, would encourage much needed investment and start-up capital required by juniors for crucial mining and energy projects.
Kuchel explained in a statement that allowing the junior companies — which were unable to access tax deductions as they accrued, owing to a lack of income — to issue shares with deductions ‘flowing through’ to investors, would provide investors with greater incentive to invest in junior mining groups.
“The junior resources sector is absolutely vital - many people do not realise it’s the engine room needed to find the resources upon which our economy is so dependent,” he said, adding that exploration expenditure in Australia continued its decline. The country accounted for 17% of global exploration expenditure in 2010 – a fall from the 21% recorded in 1996.
Sacome also called for the “urgent resolution” of South Australia’s infrastructure woes and changes to the PRRT.
“The two major infrastructure issues holding back substantial development in this state are the need for a multi-user deep-water port and the upgrade of electricity transmission networks along the Eyre Peninsula,” Kuchel said.
He noted that the government should facilitate funding agreements from organisations such as Infrastructure Australia and the Export Finance and Insurance Corporation to stimulate infrastructure development “where the market has failed to deliver a solution”.
Further, Sacome believed that the low-profit offset mechanism, which was currently used in the Minerals Resource Tax Rent to shelter junior miners with low profits from the effects of this tax, should also be translated into the PRRT for junior oil and gas companies.
The PRRT required the inclusion of contiguous licences, so that exploration expenses were eligible for deduction against production revenue, as well as a low-profit offset for profits below A$50-million.