THE FUTURE OF MINING AND

EXPLORATION IN AUSTRALIA

Bernie Hogan

Regional Manager

Association of Mining & Exploration Companies

About AMEC

• Established 32 years ago

• Over 360 company members and growing

• Members include explorers, producers, and service industries

• National coverage – offices in Brisbane, Perth and Sydney

• Policy development and advocacy

AMEC is totally committed to obtaining the best business

environment for the mining and exploration industry across

Australia

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And a new era begins…

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Australia’s challenge unchanged

• Australia is losing exploration market share

• Australia must be internationally competitive

• Costs spiralling - Governments using resource

sector as a source of additional revenue.

• Increased uncertainty and regulation

• Scarce capital – abroad and domestic

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Effect of Greenfields Exploration

• Provides the pipeline of mines of the future

• Is in serious decline in Australia – Centre for Exploration

Targeting - paper Sept 2012.

• “The progressive shift of funding from greenfield to brownfield exploration….is worrying as in the long run it will affect the metal contribution to the national resource inventory and with it the sustainability of the mining industry.”

• “It is estimated that in the absence of new significant discoveries, based on current reserve and resources, about half of Australia`s non-bulk commodities mines would be

exhausted between 7 and 18 years.”

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Estimated Remaining life for Major Australian Mines (based on all operations mining >1 Mt ore in 2010. Excludes Bulk Minerals)

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2011 2015 2020 2025 2030 2035 2040

Closure Date based on current

Reserves

Estimated Mine Lives are approximate only and are based on dividing the current

P&P Reserves and MI&I Resources by the production rate reported for 2011

Half of Australia’s existing

mines could close down

within 7 to 18 years

Closure Date based on current Resources

Source: MinEx

Consulting © August

2012

Brownfield vs Greenfield

Exploration in Australia

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Percentage of Total Metres

Drilled

% Green % BrownSource: ABS 8412.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2008 2009 2010 2011 2012 2013

Percentage

% Australian Projects % Global ProjectsSource:

To 30 June 2013

ASX raised funds

for Australian

projects

Destination of Exploration Funds

Raised on ASX

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ASX raised funds

for overseas

projects

More ASX raised

funds are heading

overseas!!

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Australia’s Share of Worldwide

Exploration Expenditure (non-ferrous)

9 Source: Metals Economics Group

Australia 12%

Canada 18%

USA 8%

Latin America 25%

Pacific/SE Asia 6%

Rest of World 16%

Africa 15%

2011 Australia

20%

Canada 14%

USA 11%

Latin America 27%

Pacific/SE Asia 11%

Rest of World 6%

Africa 11%

1996

Source: Metals Economics Group

Soaring Costs of Production

• Xstrata recently stated that in 2007 it cost $61 to produce a

tonne of thermal coal in Australia, and today it is $176 with

a global average of $106. (WEEKEND Oz 23rd Feb)

• Average C1 Gold Production Costs $1208/ oz (Deutsche Bank March 16th

2013 West). Includes Exploration. Using Goldman Sach formula Costs can be even higher

• Hard Coking Coal – 2008 - us$60/t; 2012 – us$120/t (UBS GAM)

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Soaring Costs of Production

• Cost recovery mantra from governments State, Territory

and Federal

• Cultural and Heritage Surveys (estimated at over

$1Billion)

• Infrastructure – capacity needs to build and access needs

to be assured for junior entrants.

• Productivity Commission report

Remove obstructions to exploration and development with

outcome based policy. Gov’t to focus on compliance

instead of regulation

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Certainty and Clarity

• Constant tinkering with regulation in all forms has

undermine investor confidence

• Environmental Approvals has been highest profile battle

ground

• Tax reform has been high-jacked. Need to encourage

exploration, innovation and research

Vital that workable bi-lateral agreements for approvals be

enacted and fundamental tax reform has industry consultation.

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Release Exploration Capital

• Huge issue for all explorers and emerging producers

• Government policy must be geared to getting capital

injected into drilling programs

• Security Bonds / Financial Assurance for environmental

performance can be improved across the country.

• Exploration Development Incentive (AMEC’s METC)

Pooled fund model for environmental security is working in WA

and is on the agenda in other states.

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Exploration Development Incentive

• AMEC proposal prior to the election

• Opens up another source of capital

• Investors derive a benefit through tax deduction

• Australian project, Australian investor

• In-ground expenses only

• Capped $100M, starts 1 July 2014.

AMEC will be directly consulting with the Australian

Government on the implementation

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THANK YOU

Visit www.amec.org.au for more information

Bernie Hogan

Bernie.hogan@amec.org.au