In summary, Governments can create significant value from actively supporting mineral exploration.
- Growing the mining sector can create wealth and employment. Evidence of this can found in a recent detailed study by the Reserve Bank of Australia which showed that the recent boom in commodity prices was of net benefit to Australia’s economy and household wealth. It showed that the output of the Mining sector grew by 40%. While the manufacturing and agricultural sectors were adversely affected, total GDP grew by over 6% and employment by 3%. Household wealth grew by over 15%.
- As evidenced by Australia, Governments can avoid the problem of “resource curse” by having good governance and being fiscally responsible.
- However all mines have a finite life. Over the next decade an increasing number of mines will close down (and need to be replaced). The challenge is that it can take 10-20 years to convert a discovery into a mine. To avoid a supply crunch governments need to foster exploration now.
- As evidenced by recent studies, government initiative in this does have a positive payoff
- 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
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.