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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Alex who wrote (35656)	6/21/1999 5:41:00 PM
From: goldsnow	Respond to of 116823

Exploration spending undermined By Sean Aylmer The Australian mining sector sank further into trouble during the March quarter with a seventh successive fall in exploration expenditure, led by a drop in spending on gold seeking, which fell to its lowest point since 1993. Exploration spending has fallen so low that the long-term viability of many companies in the mining industry is coming under question. The drop in demand and falling prices of commodities, triggered by the Asian crisis, has meant cuts in exploration budgets. Adding to the woes in the local industry are concerns surrounding the native title issue in Australia, a stronger local dollar and relatively attractive opportunities overseas. Minerals Council of Australia chief executive, Mr Dick Wells, said lower commodity prices alongside a rising Australia dollar had meant less exploration. "Companies have to cut expenditure where they can and one area of discretionary spending is exploration. But in the long term they need to explore to survive. [The actions] are understandable but if it continues for much longer it will harm the viability of the industry." Much exploration is viewed as a short-term investment, depending on the cash flow of a company. Since 1997, cash flow in many companies has dried up following the onset of the Asian crisis. During the first three months of 1999, total exploration expenditure dropped by 17 per cent to $193 million and was 40 per cent below two years ago, according to the Australian Bureau of Statistics. Gold, diamonds, uranium and iron ore led the fall. Gold dominates mineral exploration expenditure in Australia, but quarterly spending during the March quarter fell to $98 million, less than half the level of two years earlier. The gold industry has suffered during the past two years, in part because central banks have sold gold reserves. The decision in May by the Bank of England to sell 415 tonnes of gold pushed prices even lower, to an average of $US277 an ounce during the month - the lowest price in 20 years. However, there are some positive signs with increased economic growth expected in key consumer markets including India, Europe, the Middle East and Asia. Commodities provide around $65 billion each year in export income to the Australian economy, almost three times the level of farm exports, underpinning the Australian economy. Commodity prices also provide a guide for the local dollar. Dresdner Kleinwort Benson chief economist, Mr Rob Henderson, said over half the mining companies he has spoken to in recent months have been concerned about exploration. Low prices, excess supply in some sectors and external factors such as the native title debate are the main concerns. Mr Henderson said miners were looking to use current exploration sites better, rather than looking for new mineral deposits. "And they are looking offshore in places like Africa, Asia and South America. That's a potential negative, not necessarily for the companies, but for Australian exports." He said the native title issue was harming longer term decisions, though some companies were bypassing government, negotiating directly with Aboriginal Australians. "They are talking directly to traditional owners and are more progessive in terms of providing [incentives in terms of] equity, schools, training and better infrastructure. I'm very encouraged by that," Mr Henderson said. afr.com.au