The Western Australian State Government (State) recently announced the thirteenth round of applications for the Co-Funded Exploration Drill Program (Program), with an additional $5 million in grants available for explorative drilling programs in the 2016 / 2017 year. To date, prior Program rounds have provided funding of approximately $23 million to explorers, miners and prospectors.
The Program is the flagship program of the State-funded Exploration Investment Scheme (EIS), which promotes and supports innovative exploration drilling projects throughout Western Australia. The Program offers up to a 50% refund for innovative explorative drilling programs, subject to caps determined by whether the project is for general multi-hole drilling, single deep-hole drilling or prospecting. The EIS has resulted in multiple significant discoveries since its inception in 2009, including the Nova nickel deposit.
The State’s move to extend funding is an important response to the current economic climate and the associated impact on mining activity in Western Australia, particularly exploration. Concerning trends such as a decline in exploration spending and a narrowed focus on brownfield funding are reflective of a lack of confidence in the resources sector during a period of volatility in commodity and currency markets. Limited private investment and capital raising opportunities for junior proponents compound the issue, making it particularly difficult for junior proponents to commit to and fund meaningful exploration programs. In announcing the Program funding extension, Mines and Petroleum Minister Bill Marmion stated “There has never been a more important time to support exploration. This innovative program favours under-explored and greenfield[s] areas, helping more than 590 projects and 450,000 metres of drilling since it began in 2009.”
Sustained exploration is key to adopting a long-view of the commodities cycle. There is currently a strong focus on capital returns for projects in a low-growth environment, however given the finite nature of mining projects, a lack of exploration at this point in the commodities cycle may lead to a constrained future project pipeline.
Applications for Program funding are open until 5 April 2016, and should be made via the Western Australia Department of Mines and Petroleum website.
For further information, please contact Jay Leary, Partner, or your usual Herbert Smith Freehills contact.