Western Australian Mines Minister Bill Johnston stirred the pot with his comments at the Australian Nickel Conference in Perth on Oct. 17 that the government's cofunded drilling program could be under review.
Industry representative the Association of Mining and Exploration Companies has urged the state government to consider the past successes of the Exploration Incentive Scheme, or EIS, before relegating it to the scrap heap.
"When considering the expenditure associated with the very successful Exploration Incentive Scheme, the government should bear in mind the past successes of the scheme," acting CEO Graham Short said in a statement emailed to S&P Global Market Intelligence.
The cofunded program offers juniors up to a 50% refund for exploration drilling and has supported more than 560,000 meters of drilling and contributed to at least 25 new discoveries.
Discoveries made under the program include Rox Resources Ltd.'s Camelwood nickel deposit at the Fisher East project, Encounter Resources Ltd.'s Yeneena copper project, Doray Minerals Ltd.'s Dusk til Dawn gold prospect at the Horse Well project and Gold Road Resources Ltd.'s Gruyere gold project.
Short said the success of the EIS was further vindicated by a government-commissioned economic impact study released early in 2015 that shows A$10.3 million of exploration activity results from every A$1 million invested in the EIS.
"It is very evident that any reduction in EIS funding would be contrary to the success of the very positive long-running initiative," he said.
The state government recently announced that it planned to continue the EIS, committing funding of A$10 million in the 2018 and 2019 financial years.
Companies that were accepted for round 15 of the EIS in August included Encounter Resources for its BM2 zinc prospect at the Yeneena project, De Grey Mining Ltd. for its King Col gold prospect at the Turner River project and Great Boulder Resources Ltd. for its Yamarna copper-nickel joint venture.
The Western Australian government is now looking at all of its options after the opposing Liberal Party voted against the proposed increase of the gold royalty rate, which would have generated about A$400 million in additional revenue to help patch the state's budget.
Encounter Resources Managing Director Will Robinson told S&P that the EIS was recently reviewed by the government and it showed that every A$1 invested by the government led to an estimated increase of about A$20 of needed exploration expenditure in Western Australia.
"The program has been highly successful and it has helped numerous new mineral discoveries in [Western Australia]," he said. "There is little doubt that there would be less greenfield exploration in [Western Australia] without it."
While Ardea Resources has not needed to use the EIS, Managing Director Matthew Painter told S&P Global Market Intelligence that the scheme is "just invaluable."
"What it's done in South Australia, what it's doing in Western Australia, it's work that wouldn't get done otherwise and it's reaping results," he said on the sidelines of the Australian Nickel Conference.
"It's a brilliant system that keeps the industry humming along in the downtime and it's leading to new discoveries that will underpin the economy of the state in years to come."
According to the Association of Mining and Exploration Companies, a report released by MinEx Consulting shows that the costs of discovering a new gold deposit are 50% higher in this decade than they were in the prior decade.
"It now takes a weighted average of 13 years to progress a deposit from discovery to an operating mine," Short said. "Given that the report predicts half of all gold production in 15 years will come from mines yet to be discovered, all government approval timelines must be made more efficient to support jobs, royalties and revenues."