In spite of Australia's strength as a resource
exporter, there are clear signs that exploration is declining,
and this is something that will significantly impact the sector
in the short, medium and long term.
The Australian Bureau of Statistics 2008 Yearbook reveals
that Australian mineral exploration expenditure in 2006-07 was
A$1.7billion – the highest in more than 30 years. But
these figures disguise the fact that Australia's share
of global aggregate exploration expenditure has been declining
since 2002 and that the discovery of new deposits in this
country, especially large, world-class deposits, has been
meagre over the past decade.
Australian miners are currently enjoying historically high
commodity prices, with the price of coal alone doubling between
2002-03 and 2005-06. These kind of prices have led to growing
profits for the whole sector. In 2005-06, for example, profits
increased by 74 per cent. Over the same period, however,
mineral exploration expenditure increased by only 24 per
Much of the current exploration spend is on brownfield
developments that expand capacity at existing sites. Across
APEC countries, brownfield exploration accounted for 41 per
cent of exploration expenditure in 2006, up from 25 per cent
five years earlier.
Greenfield exploration on the other hand seems to be
lagging. Over the past five years, greenfield expenditure
declined by 18 per cent, to account for just 40 per cent of
total exploration expenditure.
Statistics clearly show that it is Australia's major
miners who are not pulling their weight when its comes to
sufficient investment in new exploration projects –
between 2002 and 2006, junior miners increased their share of
global exploration expenditure from 26 per cent to over 50 per
cent. The majors fell from over 50 per cent to around 30 per
Where major players are benefiting from rising commodity
prices and the exploration heavy lifting is otherwise being
left to junior players, mergers and acquisitions activity is
inevitable. Recent deals such as Xstrata's A$2.9
billion acquisition of Jubilee Mines and
Zinifex/Oxiana's A$780 million quest for Allegiance
Mining have demonstrated that.
These kind of deals make sense in an environment where major
players can earn US$1 billion of cash every month because of
current commodity prices.
In aggregate terms, Australia is being out-spent on mineral
exploration by Canada, Latin America and Africa. Given the 8-12
year lead time from discovery of a new site to its development,
it is critical that the Australian resources sector face the
challenge of current under-investment in new exploration
projects. Otherwise the future is destined to be one of rapid
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It is a common misconception that the grant of mining tenure, whether it be an Exploration Permit, Mineral Development Licence or Mining Lease, will entitle the holder to access all land within it in order to explore or mine.
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