Junior Minerals Exploration Incentive missing from Federal Budget
Junior Minerals Exploration Incentive missing from Federal Budget
The recent Australian Federal Budget has left many in the mining and exploration sector disappointed due to the lack of commitment to extend the Junior Minerals Exploration Incentive (JMEI). Despite a compelling economic impact report from BDO and the Association of Mining and Exploration Companies (AMEC), the government has chosen not to extend the JMEI, a decision seen as a missed opportunity for an industry crucial to the nation’s economic future.
The role and impact of JMEI
Introduced in 2017, the JMEI has been instrumental in supporting junior exploration companies by providing tax credits to investors. This initiative has not only encouraged investment in greenfield exploration but has also led to substantial economic benefits. According to BDO and AMEC's report, the JMEI facilitated over $400 million in exploration activities, generated $1.2 billion in capital raising, and contributed $769 million to Australia’s Gross Domestic Product (GDP). The program’s efficiency is evident, with every dollar allocated through the JMEI resulting in more than $2 spent on exploration and over $6 raised in capital markets.
The JMEI has played a pivotal role in fostering innovation and discovery within the mining sector. By reducing the financial risk for investors, it has enabled junior exploration companies to undertake ambitious projects that might otherwise have been deemed too risky. This has led to the discovery of new mineral deposits, which are essential for the future of mining and the broader economy.
The budget omission and its implications
The omission of the JMEI from the latest budget is particularly disappointing given the government’s simultaneous push for critical minerals development and green energy transition initiatives. Junior exploration companies are often the pioneers in discovering new mineral deposits, which are essential for the future of mining and the broader economy. Without the targeted support provided by the JMEI, these companies face increased financial challenges, potentially stalling exploration activities and delaying the discovery of new mineral resources.
The decision not to extend the JMEI could have long-term implications for the mining sector. Reduced exploration activity may lead to the slowed discovery of new mineral resources, which could impact the supply of critical minerals needed for various industries, including renewable energy technologies. This, in turn, could hinder the government’s efforts to transition to a green economy.
Recommendations and future prospects
Through BDO and AMEC's report, the recommendation was made to not only extend but also expand the JMEI, highlighting its success and significant impact. The report suggested increasing support to $200 million over four years and making the JMEI a permanent initiative in the Commonwealth Budget. These recommendations were based on the program’s proven track record of stimulating exploration activity and generating significant economic returns.
While the omission of the JMEI from the Budget is disappointing for the mining and exploration sector, there is hope that it may be revisited as an election commitment ahead of the forthcoming federal election. The program's proven benefits and the strong recommendations from BDO and AMEC underscore the need for its continuation and expansion.
How BDO can help
BDO’s natural resources experts combine deep industry knowledge with a global perspective to help clients effectively navigate the complexities of the natural resources sector. For more information on how we can support your needs in the natural resources sector, contact us.