Australian PM Malcolm Turnbull
Photo by: Bloomberg
PERTH (miningweekly.com) – The Australian resources sector has welcomed a A$100-million investment by the federal government to encourage greenfields mineral exploration.
Prime Minister Malcolm Turnbull over the weekend announced that the government would provide tax incentives for junior exploration companies to encourage investment and risk taking, which are needed to underpin the future strength of the Australian resources sector and the economy.
Turnbull said the Junior Mineral Exploration Tax Credit (JMETC) would allow the tax losses in greenfield exploration companies to be distributed as a credit to Australian resident shareholders.
“Everything my government is doing is focused on promoting investment and driving economic activity,” he said.
“These tax incentives will encourage junior explorers to take risks and to have a go at discovering the next large-scale mineral deposit.
“We want to back enterprise. We want to turn around the greenfields minerals exploration expenditure that has declined by almost 70% over the past five years.”
Under the new A$100-million JMETC scheme, Australian resident investors of junior explorer companies will receive a tax credit where the exploration company chooses to give up a portion of their losses relating to their greenfields exploration expenditure in an income year.
The ability to immediately distribute tax credits to investors would make investing in a junior explorer more immediately attractive and encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia, the Prime Minster added.
Deputy Prime Minister and Minister for Agriculture and Water Resources and for Resources and Northern Australia Barnaby Joyce said greenfields mineral exploration acted as a catalyst for new investment opportunities and job creation while supporting local businesses in regional communities across Australia.
“Despite good prospects Australia has not had a world-class mineral discovery in more than twenty years,” Joyce said.
“This credit will make it more financially attractive for our mineral explorers to find resources in untapped regions.”
Specifically, only newly issued shares relating to capital raising for investment in new greenfields exploration activity would be eligible for these tax credits, which would help maximise the incentive for additional investment in minerals exploration.
Tax credits of up to A$100-million over four years would be made available from this financial year on a first-in, first-served basis consistent with arrangements to be administered by the Australian Taxation Office.
The Association of Mining and Exploration Companies (Amec) said the JMETC scheme was a “visionary” announcement and would be critical to investment in Australia’s resources future.
“Mineral exploration is a long-term, high-risk activity which needs scarce equity capital in a globally competitive market place,” said Amec CEO Simon Bennison.
“The credit to investors will represent 30% of the eligible greenfields 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.
"The rewards are even greater for those investors in successful exploration companies which subsequently develop a new mine.”
The Western Australian Chamber of Minerals and Energy also said that the JMETC would significantly boost investment and job creation in Western Australia, with acting CEO Kane Moyle noting that policies that advanced exploration through incentives or credits were critical in providing an incentive for resource companies to explore greenfield areas and facilitate new mineral discoveries in uncharted territories.