The presentation discusses:
- The benefits to governments supporting the mining sector. This includes (1) increased wealth and employment, (2) diversification of the economy and (3) the opportunity for downstream processing and service industries.
- However, there are costs as well. This includes (1) financial support to kick-start exploration and/or support the industry during downtimes, (2) The income generated can be highly variable/uncertain and (3), if not properly managed, there is the risk of the “resource-curse” … where other sectors of the economy are adversely affected
- With regard to the last point, the resource-curse can be managed/overcome by better governance and fiscal responsibility. Countries like Australia, Canada, Botswana and Norway have also prospered from their resources.
- Recent modelling work by the Reserve Bank of Australia shows that the recent mining boom had an overall net benefit to Australia’s economy and household wealth.
- The presentation summarised the economic analysis of four separate case studies (from Australia and Canada) of the value proposition for governments in supporting nurturing the exploration sector. In all cases there was a net positive benefit.
- A review of South Australia’s exploration (PACE) program found that every dollar spent subsequently led to $20 of spending by industry on exploration and $44 worth of extra mining revenues.
- A review of Western Australia’s exploration incentive scheme found that every dollar spent created ~$24 of net benefit to the State
- Modelling work by MinEx Consulting confirms these numbers. Sensitivity studies indicate that each additional dollar spent on gold exploration generates an extra $11.40 in revenue in the longer term.
In summary – a well-constructed program to support exploration can create significant value to the State and be of net benefit to the overall economy