A guide to transition from exploration to development and production
A deep dive into the accounting, tax and finance implications as you transition from exploration through development and ultimately, production.
Industry snapshot
- Growing demand from export markets and an increase in domestic production from iron ore mining has boosted industry revenue. Earnings are expected to rise a further 8 per cent to $334bn in 2021-22, and then fall back to around $300bn in 2022-23
- Mining entities with a strong Environmental, Social ad Corporate Governance (ESG) plan experienced a 10 per cent higher than average market index with a total shareholder return of 34 per cent over the past three years.
- The 2022 Federal Budget has committed $250 million to the critical minerals sector to become more globally competitive.
- The Australian mining industry generated $29.7bn in wages from 2017-2022.
Guiding you through the stages of the mining life cycle
The transition from exploration to production is an exciting journey however, it can be extremely challenging. For each company the challenges are unique, and the circumstances can vary significantly depending on where you are in the journey. The Transition to Production guidebook has been created to help Australian mining companies navigate the myriad of accounting, tax and financing challenges that will present themselves along the journey. This guide focuses on the development and production stages of the mining lifecycle and highlights the primary accounting, tax and finance challenges that companies face during these stages.
Development activities
In the Development phase, activities and expenditures grow at an ever increasing rate. Your organisation has determined its mineral reserves and resources have value, but you initially need a plan to commercialise them. Once completed and approved, you commence building your project to extract, gather, treat, transport and store the minerals.
You may also face a raft of financial challenges ranging from feasibility studies, permitting, funding, investment decision making through to building the project. It’s crucial for your organisation to have a firm understanding of financial reporting, taxation, financing and cash flow opportunities and issues at every stage of your development.
Moving into production
As organisations progress from development to production, mining projects become more transactional in nature with the objective to optimise profitability. This will involve proactive management of your commodity sales contracts, mine plan, resource management, and operating model. Given the inherent variability of commodity prices and operating costs organisations need to efficiently manage their operations inconjunction with a broad understanding of accounting, tax, financing and cash flow opportunities and issues which arise through this phase.
