Will $100M mining dataset bonanza spur exploration?

Published at May 4, 2016, in Features

The Australian government has done a bit of its own counter-cyclical investment and budgeted in $100 million over four years to find the next great mineral resources.

It outlined a program in last night’s budget whereby it would Geoscience Australia $100 million over four years to come up with a pre-competitive dataset on frontier mineral and hydrocarbon basins.

An outline of the four-year funding

The government said that 80% of Australia’s land mass remains “under-explored” – and the new datasets would focus on the Northern Territory, Queensland, Western Australia, and South Australia.

The government has been talking about this initiative for a while now – but exactly how much money would be attributed to the program was up until last night somewhat of a mystery.

As expected, the government was talking up the potential economic return on its investment.

It pointed to a $3 million investment into analysis of the Browse Basin – which it said helped identify the Ichthys field, which is slated to produce $70 billion in export earnings over the next 40 years.

It also pointed to a $350,000 investment back in the 1960’s which it said helped identify the initial Olympic Dam resource.

The Minerals Council of Australia was even more bullish, saying in a press release that “by some estimates” the rate of return for every dollar invested in pre-competitive programs had a multiplier of more than 20 times.

It also said Australia was the second-most effective country at turning exploration into mineral discoveries.

In any case, it’s firmly in the counter-cyclical camp of investment, with commodity prices currently riding low.

There are, however, rays of sunshine in the area.

Former Rio Tinto boss Tom Albanese recently called the bottom of the commodities cycle – as dangerous as a prediction like that is to make.

“I believe with what we’ve witnessed early in 2016 will be the trough for the commodity markets,” Albanese was quoted as saying by Bloomberg on a conference call after Vedanta reported quarterly earnings.

“Commodity prices have improved materially in the last couple of months, and investor sentiment has started to turn cautiously positive on the resources sector.”

Bloomberg’s commodities index backs up the bullish sentiment – with it saying its basket of commodities has rebounded by 7.9% towards the back-end of April.

With the Australian dollar expected to climb lower on the back of rate cuts from the Reserve Bank of Australia, exploration companies willing to ride out the current volatility in commodity sentiment could be in a position to benefit.

Australian greenfield assets could very well become attractive at the right price point for foreign companies dealing in US currency – and should Geoscience Australia be able to produce compelling data with the $100 million this could be the start of something.

Nothing’s certain in life and even less is certain in commodities though.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Thanks for subscribing!