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Drilling down under

During the past two years, two rulings instigated by the Labour Party of Australia have had an impact on contractors and consultants working on overseas mineral exploration projects.

The first was the change to the taxation structure relating to Australian residents working overseas. Expatriates wishing to do so, myself included, are now required to pay the significantly higher Australian tax, rather than the much lower tax they used to pay in overseas locations.

In June 2009, Ausdrill, the major Australian drilling contractor, spoke out, saying the changes would have a significant impact on cashflow at its operations, and that it would be an administrative nightmare to obtain tax receipts from countries such as Ghana, Mali and Tanzania to claim a tax credit from the Australian Taxation Office.

The second was the proposed super tax on the mining industry, put forward by Kevin Rudd’s government earlier this year. This had a profound effect on exploration projects in Australia and abroad as investors put projects on hold or moved to countries with a less restrictive tax. All geological consultants who I conferred with have been affected, with many projects becoming unfeasible.

In Zambia, where the government imposed similar restrictions on mining operations, this effect was quickly realised and the exorbitant tax was lifted after only two years, as investment had dried up when the copper belt became virtually moribund.

In my case, Sydney-based Magma Minerals retained me as their drilling advisor for onshore and offshore operations at its mineral sands project in Viti Levu, Fiji. During a recent visit I ascertained the availability of suitable drilling systems, as previous investigations using a Vibracore system gave low core recoveries and, in many instances, the rigs could not reach the maximum depth required. However, since then the looming spectre of the proposed mineral tax caused the Japanese and Korean investors, on which the project depends, to freeze funding. The project has effectively been put on hold.

I am also working on a second project to explore an extensive alluvial chromite prospect south of Hanoi in Vietnam, where conditions are extremely flat and muddy. Like the Fijian project, drilling will use a rubber-tracked sonic drill as the system offers the best possible sample recovery and speed.

Importantly, the rigs have minimal environmental impact, which was crucial for the Fijian project as it will take place in a particularly sensitive national park. Research has shown that to purchase the rigs specifically sized for each project would be the most financially rewarding option, and in each case it would require joint ventures with local organisations to satisfy taxation and political stipulations.

Both rigs will be sourced from MPI Drilling of Ontario, Canada, as I was instrumental in using that company to bring the first sonic drill head to Queensland in 2000.

The latest news regarding the Fijian mineral sands prospect is that the investors have released enough funding for a seismic survey to establish volume viability, and, along with the Fijian government’s willingness to grant extra licence areas, those two satisfactory outcomes will determine the purchase of the drill rig.

If everything goes to plan, drilling is expected to begin at both projects in 2011.
Courtesy geodrillinginternational

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