Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

I rise tonight to draw attention to the alarming downturn in mineral exploration in Australia and particularly in Queensland. It has often been said that Australia’s wealth grew from the sheep’s back. That is true, but it is also true that since early colonial times our mineral resources have also contributed to the wealth of this nation. The sheep has been shorn, as it were, but fortunately mining continues—at least for the moment. We have indeed been a lucky country. Since the gold rushes of the 1850s, Australia has prospered from the country’s varied and vast mineral deposits. In the last 20 years, the minerals industry has contributed something in the vicinity of $500 billion to our wealth. Today, Australia is benefiting from a robust minerals industry and mining, representing eight per cent of GDP. No wonder the standard of living in Australia ranks among the world’s highest.

That is not all. Mining has also played a key role in the development of regional prosperity. Since 1967, an estimated 26 towns, 12 ports, 25 airfields and more than 2,000 kilometres of railway line owe their creation and continued existence to mining. If I may be parochial for a moment, much of Queensland’s pre-eminence as Australia’s leading export state comes from its mineral wealth. Cities such as Mount Isa, Charters Towers and Cairns were all initially established as mining centres or mining support centres. Queensland’s mining sector today is worth more than $16 billion per annum—more than twice the value in the 1990s. About 95,000 Queenslanders owe their livelihoods to the mining industry. It is the biggest employer in regional Queensland. It contributes around $965 million in royalties to the Queensland Treasury. Without this income stream, Queensland’s Labor government’s fiscal incompetence would be more fully exposed than it is.

These figures underscore the fact that we have a substantial resources base—the third largest in the world after the United States and South Africa. We have the world’s largest reserves in zinc, lead, nickel and uranium, and Australia is in the top six for gold and copper. Queensland’s north-west is ranked as one of Australia’s most prospective exploration provinces. It has 28 per cent of known lead and zinc deposits—the richest in the world—five per cent of the world’s silver and 1.5 per cent of the world’s copper. Weipa, in the north of the state, has the world’s largest bauxite resource.

However, Queenslanders—and indeed all Australians—should not be complacent about this treasure chest. The mining industry is in danger of catastrophic decline. In the last financial year, just over $1 billion was spent on exploration. That is 25 per cent less than in 1996. In real terms, exploration expenditure throughout Australia is at its lowest level in almost 30 years.

These statistics reflect a very substantial downturn in activity. Mining companies are not fully exploiting Australia’s immense potential reserves. This country is underexplored. There have not been enough significant mine discoveries in the last six years, and there is a danger that the Olympic Dam mine in South Australia will be the only metallic mine in Australia by 2030. That is barely 24 years away. Currently, we are living off the capital of mines discovered many years ago. Even if a substantial deposit were to be found in the next few years, it would take up to 15 years for that mine to become operational. In the meantime, Australia’s share of investment in global exploration—12.6 per cent—is at a 20-year low and is down 30 per cent on the historical average. Australia has slipped from second to fifth in global mining exploration expenditure.

The unpalatable fact is that we now lag at the back of the exploration queue. Canada dominates the exploration race, but countries such as Chile and Peru in South America attract more attention. Today there are 152 mines in Queensland but, by 2030, only those digging coal and bauxite are likely to remain—unless exploration for base metals and gold is accelerated. No world-class deposit has been discovered in Queensland in 15 years. Only eight small mines have been established since 2000, and these have a life span of only about 15 years.

I have spoken before in this place about the vast resources of uranium in Queensland, which have so far, sadly, gone unexploited. The simple reality is that we need a great deal more investment to rekindle the minerals exploration sector. In 2003, the Prosser report found three major impediments to the exploration industry. First, the globalisation of the minerals industry has resulted in countries other than Australia being preferred for mining development. Second, regulatory constraints imposed by native title, cultural heritage, environmental and operational requirements add to costs and are disincentives. Third, exploration is usually left to the smaller or junior mining companies that have limited investment resources. I think it is also useful to add that the obvious resources, in accessible places, may well have been discovered, but it is the little-known areas in risky places which remain to be explored. The major mining companies, however, seem to be reluctant to spend millions of dollars on risky areas. Junior mining companies find it difficult to access capital from investors seeking higher, less risky returns for their capital.

There is an irony in our current situation. In general, the mining industry is enjoying buoyant times. It is experiencing a significant worldwide boom, and prices for mineral commodities are at 20-year highs. It is true that there is some global exploration expenditure, but Australia is attracting too few of those exploration dollars. Instead, mining companies in Australia have been relying on brownfield exploration to meet the demand of the resources boom rather than taking advantage of high commodity prices to explore more widely afield. This lacks foresight. It will not sustain us into the future.

We need to encourage mining companies to look outside the brown circle and search for sizeable exploitable deposits known to exist in the green zones. The challenge—and it is not a challenge just for Queensland but for the whole country—is to find the next generation of mines by finding new ore bodies that will supplement and replace the finite reserves of existing mines.

Australia’s position as a supplier is not under threat in the short term at least, but in the longer term the situation is more worrying. We have the opportunity to ensure Australia’s prosperity by providing incentives to go out and discover new deposits. I believe that part of the answer is to look anew at the introduction of flow-through shares schemes as an incentive. It is a simple equation: mining companies raise capital for exploration by passing on their tax deductions to the individual investors. It has proved to be of immense value to Canada, which now attracts 19 per cent of the world’s exploration capital. To obviate the challenges, Ottawa legislated a new scheme which will continue until 2007.

Flow-through shares make it easier for junior mining companies to access much-needed capital for exploration. In Australia, governments should also encourage mining companies to invest in the higher-risk greenfield exploration by providing high-quality geoscience information.

It is always something of a challenge to return to an activity which has been important in the past but which has been neglected, but the potential advantage of doing so here is clear. There is a huge danger that the cost of not doing so in these circumstances will be surely felt by every Australian. This is a tragedy that we need to avert. (Time expired)