AIG President, Wayne Spilsbury, was quoted in RFC Ambrian‘s Metals, Mining, Oil and Gas newsletter of 9 June 2014, observing ““The mining boom is gone and the downturn is now in full swing, our members are increasingly jobless as a result and now we see confirmed officially that the exploration spend itself has suffered a dramatic decline.”

Giving further credence to the AIG’s comments, the Association of Mining and Exploration Companies pointed to the fact that it took an average of seven years to convert a discovery into an operating mine. Clearly something must be done to keep the supply of mining projects ongoing. Without exploration dollars being spent, existing resources will become more and more depleted and more expensive to mine, thereby driving up costs. Thus, falling supply and the resultant rising costs should lead to increased commodity prices (assuming continued demand). Given the time lag between the exploration and development of a mine, replacement supply could come too late if companies are unable to spend on exploration now.

The Australian Government’s ‘Exploration Development Incentive’, which will allow investors to deduct a proportion of the eligible exploration expenditure against their personal taxable income,  is proposed to start next month (July 2014).

There could also be a possible repeal of some carbon and mining taxes.

There are genuine fears that these moves might not be sufficient to drive a rapid turnaround and the AIG believes that “state governments need to seriously attack the issue of their slow and expensive regulatory systems, which divert money that could otherwise be spent productively on the ground”.