Chief Executive of SACOME, (South Australian Chamber of Mines and Energy), Jason Kuchel, talks to Australasian Mining Review about the future of the resources sector in the state and the urgent need for new and improved infrastructure to drive growth and investment.
What’s the general opinion amongst your members on the downturn in the Australian resources sector? Is the feeling one of doom and gloom or resignation that it’s just part of the market cycle that all sectors experience?
Our membership is quite broad and so it depends on what commodity you’re in and it also depends on where you are and whether you’re a mine developer or an explorer – it makes a big difference to your outlook.
Certainly if you’re a junior explorer and you’re trying to raise capital it can be extremely difficult at the present time which is one of the reasons why we’re fully in support of exploration tax credits, or what the Federal Government is calling the Exploration Development Incentive.
So are you feeling positive about the Exploration Development Incentive? Do you feel the scheme will pay dividends?
If the structure of it is right then it will absolutely have a positive effect. We envisage that ultimately it won’t be a cost impost on the government, but rather it will actually bring in more revenue through additional taxes. Not to mention the private investments into new projects and the jobs that would be created as a result of exploration companies being able to get on with the job of exploring…the Exploration Development Incentive would enable those junior explorers to attract investment on the share market. Essentially it would provide an effective dividend to the shareholders by passing on some of the tax credit that the junior explorer accrues, but does not have taxable income against which to offset it. It passes some of that back to the investor so they can claim it against their own tax. It’s not a case of double dipping as once it passes through, the company can no longer claim it so, although it may bring forward some expenditure for the government, ultimately once the system is in place and established, it doesn’t have an ongoing cost for the government at all.
Junior explorers are finding it tough particularly in South Australia where we probably have a higher proportion of the resources sector in the junior category than other states. South Australia stands to be assisted substantially by the incentive.
“We’re not asking the government to put their hands in their pockets. We’re asking them to find ways to reduce risk to ensure that that private sector investment is attracted to the state.”
What would you like to see both State and Federal Governments do to help the struggling resources industry in South Australia?
There are probably a number of things including access to land, aboriginal and heritage issues, cutting red tape and so forth…for these issues it’s not so much about improvement – it’s about ensuring we don’t go backwards. There are plenty of groups lobbying, particularly green groups…against mining. And governments have often pandered to minority groups.
Because the companies we’ve got (in South Australia) that have projects are small, they don’t have the balance sheets to fund some of the infrastructure that is required.
If you can imagine that you’re an iron ore explorer and you’re proposing to export 5 million tonnes per annum; you can’t build a port of your own necessarily… because the port needs to be able to export 30 to 40 million tonnes per annum to justify building it. But the reality is that there are lots of companies in the same position… however it’s very difficult for the private sector to aggregate all those companies because none of them can sign off on their own projects; none of them can get the finance they need because they’re subject to three or four other companies also getting their finance at the same time.
We really need a government who can break that deadlock and underwrite some of the risk component for the private sector in which case the private sector would have no trouble funding the infrastructure. We’re not asking the government to put their hands in their pockets. We’re asking them to find ways to reduce risk to ensure that that private sector investment is attracted to the state.
And what goes with that is not only the construction jobs to build key pieces of infrastructure – ports, powerlines, rail and so forth (and some operating jobs that are associated with that infrastructure as well) – but also a port, for example, would see some additional three to four mines built over the next five year period, and beyond that more projects would continue to be developed.
I’ve lost count of the number of times that I’ve heard of companies that aren’t interested in exploring for iron ore in South Australia because there’s no way of getting their product to market. Why would you spend your money here? It’s too hard on the infrastructure front. Not only would a port help mines get up… you’d also help attract a lot more exploration investment to the state as well.
How long do you think it will be before South Australia gets a port suitable to support an expansion of the resources sector?
When we have a state election we would hope that one side or the other, preferably both, would announce some very positive things in that regard. Both sides certainly acknowledge the need for this kind of infrastructure. The Liberal state opposition is proposing they would set up an independent body to assess what infrastructure should be a priority for the government. However they still need to state that they would underwrite any activity.
There’s been some buzz in the sector about the Great Australian Bight potentially becoming one of Australia’s most lucrative offshore oil and gas basins. What do you see the future holding for the Bight?
I would be very positive about its future. I think it’s almost only ever been a matter of time, if it’s as big as the industry says it is. People not in the industry say, well why haven’t they already developed it? Why haven’t they already explored it to a much greater extent?… Why haven’t they? Because it’s in very deep water and in a very inhospitable climate. You’ve got nothing stopping some very large waves coming through; high winds; exceptionally deep water. You only have to go back 15 years or so and the technology didn’t really exist to adequately deal with, particularly, the depth of the water that you have to go through first to get to the deposits. The industry has the technology to deal with it now and that’s why we’ve got the level of interest that we have with major companies exploring there now.
JASON KUCHEL
BEng(Hons), Grad. Dip. Mun. Eng.
Born and raised in the Adelaide Hills, Jason Kuchel is the Chief Executive of the South Australian Chamber of Mines & Energy (SACOME), a role he has held since April 2007.
Jason holds graduate and post graduate degrees in engineering with his most substantial role being that of Director of Infrastructure & Technical Services for the City of Prospect. The role also included responsibility as City Engineer from the age of 24, making him the youngest ever City Engineer in South Australia. Jason was also President of the Institute of Public Works Engineering Australia (IPWEA) SA division at 26 years of age.
Jason holds board level responsibilities on the University of South Australia’s, Australian Centre for Asian Business (ACAB), the State Government’s Resources and Energy Sector’s Infrastructure Council (RESIC) and Mining Industry Participation Office (MIPO).
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