PERTH (miningweekly.com) – Federal Resources and Energy Minister Gary Gray on Tuesday cast doubts on the Association of Mining and Exploration Companies’ (Amec’s) aspirations to have a tax credit introduced for explorers.

Amec has been punting the implementation of a minerals exploration tax credit (METC) tax reform measure to provide an incentive for greenfield exploration in Australia.

The METC model was a combination of the Canadian flow-through shares model, Australia’s franking system and a tax credit.

Speaking at the Amec Convention, in Perth, Gray pointed out that Australia’s historic experience with flow-through shares had not been a positive one, adding that the overseas experience with exploration tax incentives had also proved difficult to assess.

“Advocates point to Canada’s increased share of world exploration expenditure as proof that flow-through share schemes drive additional investment in exploration.

“However, information on the effectiveness of schemes such as the Canadian one is dated, sparse and at times contradictory,” Gray told delegates.

He noted that more recent reports from Canada suggested that the junior end of the market was having a tough time raising money, regardless of the flow-through scheme.

“So, it would appear that, despite the support Canada’s tax system provides to its junior exploration sector, it is not immune from the issues currently affecting Australia – prices and costs,” he added.

The Minister said that the government’s Policy Transition Group, which was established to examine the issues of exploration and tax, had found it difficult to translate the Canadian experience to Australian conditions, as the flow-through scheme was particular to that country’s investment framework, resource prospectivity and socioeconomic circumstances.

He conceded, however, that mineral exploration was becoming more challenging, with resources becoming generally deeper and more difficult to find, adding that the government’s productivity commission had been tasked with considering the regulatory barriers to further exploration in Australia.

A final report from the commission was expected shortly.

In the meantime, Gray called on the state and territory governments to support direct exploration incentives, and to encourage exploration.