Exploration Licence Expenditure Policy

1 Purpose

This operational policy provides guidance to applicants for exploration licences and holders of exploration licences about how the Minister for Resources (or Ministerial Delegate) as decision maker will monitor the estimated expenditure requirements set out in the conditions of exploration licences and the circumstances under which insufficient expenditure may lead to further action being taken.

The Mineral Resources (Sustainable Development) Act 1990 (MRSDA) provides for granting exploration licences subject to a range of provisions. The Mineral Resources (Sustainable Development) (Mineral Industries) Regulations 2019 (the Regulations) specify that an exploration licence application must include the estimated annual expenditure for each year of the licence. The estimated expenditure requirements set in an exploration licence need to be consistent with the proposed program of work and rehabilitation.

This policy relates only to exploration licences and not other forms of licences such as mining, prospecting or retention licences.

1.1 Policy intent

The objectives of the MRSDA include (but are not limited to) encouraging and facilitating exploration for minerals and fostering the establishment and continuation of mining operations for the benefit of the Victorian community.

Within this context, the overall intent of this operational policy is to attract and retain competent explorers who can explore and discover mineral deposits, by actively conducting their proposed program of exploration work and site rehabilitation by the end of the licence term. This also includes providing opportunities for other explorers to enter the sector by ‘turning over’ areas otherwise held by underperforming explorers. (Legislative time limits and relinquishment requirements applicable to exploration licences also aim to enable the entry of other explorers to identify prospective mineral resources and move towards mining those resources.)

The expenditure requirements set out as conditions in exploration licences provide a proxy for whether licence holders are actively using their licence and undertaking the proposed program of exploration work and rehabilitation. It is reasonable to expect that there may be some variation from year to year in licence holders’ delivery of their proposed program of exploration work and rehabilitation and the expenditure undertaken.

Failing to make sufficient progress against the proposed program of work and rehabilitation may lead to a licence holder deciding to voluntarily relinquish part or all the licence area.

Alternatively, Earth Resources Regulation can take a range of regulatory actions, including the cancellation of licences. Any decisions regarding monitoring of agreed expenditure and the circumstances under which expenditure may lead to further action being taken will be determined on a case by case basis.

2 Legislative framework

The objectives of the MRSDA are set out in Section 2 and include encouraging and facilitating exploration for minerals and fostering the establishment and continuation of mining operations.

The relevant legislative provisions for this operational policy include:

• Section 13 of the MRSDA provides for an exploration licence to be granted for up to five years to enable the licence holder to carry out exploration on the land covered by the licence.
• Section 15(6) of the MRSDA sets out the requirements a licence holder must satisfy for the grant of an exploration licence.
• Section 26(2)(e) of the MRSDA enables the imposition of conditions on a licence, including but not limited to expenditure.
• Section 35(1) of the MRSDA states that two or more licences of the same type held by the same person may be treated as a single licence over the combined areas for the purpose of determining whether conditions of any those licences about expenditure have been complied with.
• Regulation 55 of the Regulations requires an exploration licence holder to provide information about expenditure and activities as part of their annual return.

The relevant extracts of the MRSDA and the Regulations are listed in Appendix 1.

3 Assessment of expenditure requirements

3.1 Setting expenditure requirements in exploration licence applications

Applicants should ensure that their estimated annual expenditure requirements are consistent with their proposed program of exploration work and site rehabilitation.

Earth Resources Regulation will use the minimum expenditure requirements set out in the Exploration Licence Guidelines to assess the estimated annual expenditure put forward by exploration licence applicants.

3.2 Reporting against expenditure requirements

Licence holders are required to report their expenditure on an annual basis in accordance with the categories set out in the Regulations and reflected in Resource Rights Allocation Management (RRAM) system.

Licence holders will be expected to provide explanations on an annual basis if estimated expenditure requirements are underspent by more than 20 per cent in any one year, and by more than 50 per cent on a cumulative basis across the licence term.

This expectation applies in relation to total expenditure and expenditure related specifically to the following categories, as per licence holders’ obligation to report under Regulation 55:

• airborne and remote reconnaissance activities
• ground exploration activities, and
• sub-surface exploration activities.

Licence holders may be asked to provide additional supporting documentation to verify the expenditure being reported.

3.3 Monitoring performance against expenditure requirements

Earth Resources Regulation will monitor reported annual expenditure against estimated expenditure requirements set out in the conditions of exploration licences. This includes reported total expenditure as well as expenditure reported more specifically for sub-surface exploration activities, as set out in the conditions of their licence.

Earth Resources Regulation’s review of expenditure will consider both:

• performance against annual expenditure requirements, and
• performance against cumulative expenditure requirements from the commencement of the licence term.

For example, assessing expenditure in Year 3 will take into consideration performance against expenditure in Year 3 as well as performance from Years 1 to 3.

The review of expenditure may consider the expenditure undertaken in relation to:

• each licence, or
• the aggregated expenditure across licences held by the same entity, in cases where two or more licences of the same type held by the same person are treated as a single licence.

3.4 Consequences of underspend

Earth Resources Regulation may also examine whether licence holders have made suitable progress against their proposed program of exploration work and site rehabilitation, irrespective of whether they have over spent or under spent their estimated expenditure requirements as set out in the conditions of their licence.

If a licence holder has substantially underspent against the estimated expenditure requirements set out in the conditions of their licence, Earth Resources Regulation may ask the licence holder to demonstrate their progress against the proposed program of exploration work and site rehabilitation and conditions in the licence:

• If the licence holder has not made progress against their proposed program of work and rehabilitation, the licence holder may be asked to demonstrate their ongoing ability to meet the following requirements specified in section 15(6), (b), (ba), (c), (d) of the MRSDA, namely that:
  • they genuinely intend to undertake the work set out in their proposed program or work and rehabilitation
  • they intend to comply with the MRSDA
  • they are likely to be able to finance the proposed program of work and rehabilitation.
• If the licence holder can demonstrate the above requirements, then Earth Resources Regulation is unlikely to take any further action.
• If the licence holder is unable to demonstrate the above requirements, then Earth Resources Regulation may consider further compliance action, including licence cancellation.

3.5 Acceptable circumstances to seek a variation

Licence holders do not need to seek a variation under Section 34 of the MRSDA to carryover expenditure requirements from one year to another in their licence term.

3.6 Renewal of licences

A licence holder’s failure to meet the expenditure requirements set out in the conditions of their licence and/or to complete the proposed exploration work program by the end of the licence term will be considered when assessing any application for renewal of the exploration licence against the requirements under Section 31 of the MRSDA, and may result in the renewal application being refused.

Licence holders can make a request to Earth Resources Regulation for a variation to the expenditure condition. Requests for variation of conditions must be made before the licence renewal date.

4 General procedures

4.1 Procedural fairness

A Notice of Intent will be issued with respect to any decision to refuse a licence application or licence renewal or a decision to cancel a licence, including the reasons for the decision.

Licence applicants and licence holders will be provided 28 days to respond in writing to further explain any relevant matter and provide supporting evidence.

The response will be taken into account in making a final decision.

Decisions to refuse a licence are subject to judicial review.

4.2 Provision of accurate information

Licence holders must submit current and accurate information about their exploration expenditure and program of exploration work and site rehabilitation.

An application may be refused or a licence cancelled if a licence holders fails to provide sufficient information to enable the assessment of their exploration expenditure and program of exploration work and site rehabilitation.  A negative inference will not be drawn from any failure to provide further requested information. However, the assessment may result in an unfavourable determination in circumstances where the available information is assessed on incomplete or insufficient.

Earth Resources Regulation will consider the provision of any false information with respect to an applicant’s status as fit and proper to hold any minerals licence in Victoria, in accordance with the Fit and Proper Person Policy.

4.3 Rights of appeal

Licensing decisions may be judicially reviewed by the Supreme Court of Victoria.

A dispute may also be brought to the Mining Warden for resolution. The Mining Warden is an independent statutory office holder appointed by the Governor in Council under the Mineral Resources (Sustainable Development Act) 1990 who investigates and attempts to resolve disputes by mediation, conciliation or arbitration, including between a licensee or an applicant for a licence and the department.

5 Transitional arrangements

This operational policy applies to all existing exploration licences, effective 5 April 2022.

Earth Resources Regulation will contact existing applicants seeking an exploration licence or renewal of their exploration licence to provide them with an opportunity to submit any additional information to support their applications in line with this operational policy.

6 Other relevant policies

Other policies and guidelines of relevance to this operational policy include:

• Exploration Licence Guidelines.

Appendix 1: Relevant sections of the legislation

Mineral Resources (Sustainable Development) Act 1990

Section 13 - Exploration licences

1. The holder of an exploration licence is, subject to section 43(1), entitled to carry out exploration on the land covered by the licence.
2. An exploration licence must describe the land by reference to graticular sections (whether whole or part), unless the Minister decides otherwise.
3. An exploration licence:
   1. is current for the time specified in the licence (unless it is surrendered or cancelled earlier or unless this Act otherwise provides); and
   2. may be renewed in accordance with the provisions of this Part; and
   3. applies to the area, not less than 1 nor more than 500 graticular sections, specified in the licence, unless the Minister decides otherwise.
4. In issuing an exploration licence, the Minister may specify on the licence that it is to remain current for a period of up to 5 years from the date on which it is registered.
5. For the purposes of section 8(1)(k) of the Personal Property Securities Act 2009 of the Commonwealth, an exploration licence is declared not to be personal property.

Section 15 - Application of a licence

6. An applicant for a licence must satisfy the Minister that the applicant:
   1. is a fit and proper person to hold the licence; and
   2. intends to comply with this Act; and (ba) subject to subsection (6A), genuinely intends to do work; and
   3. subject to subsection (6A), has an appropriate program of work; and
   4. is likely to be able to finance the proposed work and rehabilitation of the land.

Section 26 - Grant of licence

2. The Minister may impose conditions to which a licence is subject, including but not limited to conditions about: ...
   5. expenditure.

Section 35 - Combined conditions

1. The Minister may treat 2 or more licences of the same type held by the same person as a single licence over the combined areas covered by the licences for the purpose of determining whether conditions of any of those licences about expenditure have been complied with.

Mineral Resources (Sustainable Development) (Mineral Industries) Regulations 2019

Regulation 55 - Additional information requirements for the annual return of expenditure and activities — exploration licences and retention licences

1. For the purposes of regulation 54(d)(i) and (ii), the information is:
   1. expenditure during the reporting period on:
      1. wages and salaries; and
      2. office-based activities; and
      3. equipment, plant or machinery; and
      4. administration and consumables; and
      5. rehabilitation; and
   2. expenditure during the reporting period on, and details of the nature and extent of, airborne or remote reconnaissance activities including:
      1. airborne exploration and surveys; and
      2. remote sensing; and
   3. expenditure during the reporting period on, and details of the nature and extent of, ground exploration activities including:
      1. geological mapping; and
      2. ground geophysics; and
      3. geochemical surveying and sample collection; and
      4. preparation, geochemistry, mineralogy and petrology of surface samples; and
   4. expenditure during the reporting period on, and details of the nature and extent of, subsurface exploration activities including:
      1. drilling; and
      2. well logging and other downhole geophysics; and
      3. preparation, geochemistry, mineralogy and petrology of drill samples; and
      4. costeaning or ditchwitching and related subsurface mapping and sampling; and
      5. bulk sampling and related subsurface mapping and sampling; and
      6. shaft restoration or other underground development and related subsurface mapping and sampling; and
      7. preparation, geochemistry, mineralogy and petrology of subsurface samples; and
      8. subsurface geophysical surveys; and
      9. bulk sample processing, testing and analysis; and
      10. mineral processing testing.
2. For the purposes of regulation 54(d)(ii), the information is:
   1. expenditure on, and details of, any technical and economic studies undertaken under the licence during the reporting period related to:
      1. the development of the mineral resource in accordance with the principles of sustainable development; and
      2. demonstrating the economic viability of the mineral resource; and
   2. progress against key milestones achieved during the reporting period under the program of work to be carried out under the licence.

Page last updated: 13 Dec 2022