A new research report from the Australian Bureau of Agricultural and Resource Economics (ABARE) focuses on the Asia Pacific Economic Co-operation (APEC) member economies – Mineral Exploration in APEC economies – a framework for investment. These economies are significant producers and consumers of mineral commodities and are among the major destinations for global mineral exploration expenditure.
“As well as prices and geological prospectivity, the decision to invest in mineral exploration is strongly influenced by the regulatory and institutional framework of an economy, as this determines the environment in which companies operate. While almost every economy has specific mining legislation, the regulatory and institutional frameworks for mineral exploration and extraction vary widely across APEC.”
The study aims to contribute to mineral policy making in the region by analysing the existing regulatory and institutional frameworks for exploration, and recommending actions to facilitate ongoing investment in the sector.
Improving incentives to invest can help APEC economies further expand their mineral sectors. To achieve this, the report suggest APEC economies should aim for a nondiscriminatory economic environment that facilitates foreign direct investment and trade. They should also promote a regulatory and legislative framework that encourages:
- An efficient and simple approval process
- Transparency within legislative and regulatory bodies
- Predictability and certainty for investors over the life of a mining project
- The promotion of environmentally and socially sustainable mineral development
- A strengthening of institutional and human capacities in the sector.
The areas to focus on can be economywide, such as good governance, openness to foreign investment and ensuring competitive neutrality, as well as minerals sector specific, such as ensuring access to basic geological information, and ensuring regulatory certainty, transparency of process, and security of tenure.
The price of mineral commodities is typically the most important factor affecting expenditure on mineral exploration, as it influences perceptions of the likely returns from conducting exploration. Between 1996 and 2006, mineral exploration in APEC closely followed prices of mineral commodities. In general, exploration expenditure lagged commodity prices by around a year or more.
Between 1996 and 2006, APEC economies accounted for more than two-thirds of global expenditure on mineral exploration. Furthermore, in 2006, mineral exploration expenditure on gold, base metals and other metallic minerals in APEC economies was $4.1 billion. Of the top ten destinations for mineral exploration expenditure in 2006, eight were APEC economies – Canada, Australia, the USA, Mexico, the Russian Federation, Peru, Chile and China (fi gure B).
Given the current resource endowment of many APEC economies and the geological prospectivity of the region, there is significant potential for high levels of mineral exploration in APEC economies to continue. www.abareconomics.com