PERTH (miningweekly.com) – The federal government on Wednesday officially launched the Exploration Development Incentive (EDI) to support junior exploration companies conducting greenfield exploration.

In its recent budget, the government set aside A$100-million to fund the EDI.

“We need a strong junior sector to search for the next generation of Australia’s mineral deposits. But junior exploration companies find it increasingly difficult to attract capital via capital markets,” Industry Minister Ian Macfarlane said at the second day of the Association of Mining and Exploration Companies (Amec) Convention.

Macfarlane said that to sustain the sector’s economic contribution over the medium term, additional investment in exploration was needed to discover and develop high-quality resources, with the Minister pointing out that most of Australia’s major discoveries were made over 20 years ago.

He stated that exploration for new mineral discoveries has reached a 10-year low.

The EDI would assist junior explorers in raising capital from private sector investors through a refundable tax offset.

While the legislation was still being finalised, Macfarlane said that greenfield exploration that would be eligible for the tax offset would be limited to onshore mineral exploration and would include expenditure on geological mapping, geophysical surveys, and the systematic search for areas containing minerals, as well as drilling operations.

The Minister noted that petroleum and quarry materials would not be eligible for the EDI, telling Mining Weekly Online that those sectors currently had enough investment in greenfield exploration to not require government assistance.

The EDI would only be available for disclosing entities with no taxable income, and which have not started resource production.

The EDI’s A$100-million would be allocated using an ex post modulation approach, under which participating companies can notify the Australian Taxation Office (ATO) of the lesser of their exploration expenditure and their tax loss from the financial year.

The ATO would then advise the participating companies of the proportion they would be able to provide as exploration credits to shareholders. The explorer would then have discretion to choose from a number of options on how to apply these credits.

The EDI would be reviewed in 2016, after which the federal government would consider whether the initiative would be further extended.

“We are committed to a vibrant resource industry because we know it delivers prosperity for Australia. Make no mistake, the industry has great prospects and reports of the decline of mining in Australia are greatly exaggerated,” Macfarlane said.

Amec CEO Simon Bennison on Wednesday welcomed the launch of the EDI, saying it recognised the need to develop long-term investment strategies to discover the mines of the future, generate future revenue streams and create employment.

“The EDI should go a long way towards addressing low discovery rates of new mines. It should help to reverse the ongoing reduction in the global share of Australian greenfield exploration activities and the low number of initial public offerings for mineral projects in Australia,” Bennison said