By Mark Scott

WA has lost its title as the world’s most attractive place for mining companies to invest, with the mining sector under pressure from slow bureaucracy, government policies and a drop in commodity prices.

Canada-based The Fraser Institute’s annual Survey of Mining Companies, released in February, named Finland as the world’s most attractive investment destination in 2014, with WA slipping to fifth place after claiming the top spot in 2013.

The report’s investment attractiveness index combines a mineral potential index, which rates regions based on their geological attractiveness, and a policy perception index, which measures the impact of government policy on attitudes to exploration investment.

On policy perception, WA dropped from sixth to 10th place, while on mineral potential the state slipped from second-best to eighth.

According to the report, respondents attacked the WA Government’s stance on uranium mining, the WA Supreme Court’s decision forcing Fortescue Metals Group to allow competitor Brockman Mining to use its Pilbara rail, and a time blowout on exploration approvals.

The decline in investment attractiveness was reflected in the Chamber of Minerals and Energy of WA’s (CMEWA’s) most recent Quarterly Economic Brief, which found exploration expenditure in the state fell 24.3 per cent during the September quarter of 2014, driven down by lower iron ore and petroleum spending.

Exploration expenditure on uranium dropped almost 30 per cent, while iron ore spending slid 22.1 per cent.

The report blamed the declining prices of iron ore and gold for the drop in expenditure, with companies launching cost-cutting drives and focusing on existing operations.

However CMEWA chief executive Reg Howard-Smith said there was hope that a new Federal Government exploration incentive, combined with the State Government’s existing incentive scheme, would provide a boost to the exploration sector.

The Federal Government’s Exploration Development Incentive (EDI) passed the Senate last month with bipartisan support.

The scheme will allow exploration companies to convert some of their tax losses to exploration credits paid as a refundable tax offset to their Australian resident shareholders, incentivising investment in greenfield exploration.

Minerals Council of Australia chief executive Brendan Pearson said the EDI was timely, with Australia’s attractiveness as a destination for mining investment on the decline.

“The passage of the EDI sends a strong signal to investors that the Australian government backs the mineral exploration sector for the long term and will go some way to addressing Australia’s fall in investment attractiveness,” he said.

In February, the WA Government announced round 11 of its co-funded drilling program, putting $5 million on the table for junior explorers through its Exploration Incentive Scheme (EIS).

The Fraser Institute reported South Australia as second best of the Australian regions, coming in as the 19th most attractive mining investment destination globally, followed by Queensland at 27 and the Northern Territory at 31.

All Australian jurisdictions besides NSW saw their policy perception scores decline in 2014, with political instability a key factor discouraging investment.