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Exploration Licence Guidelines

Information to assist applicants for and holders of Exploration Licences under the Mineral Resources (Sustainable Development) Act 1990

Contents

Exploration Licences

1. Purpose
2. Background
3. Grant of an Exploration licence
4. Work in the first term of an Exploration Licence

  • Work program
  • Licence expenditure
  • Requirements relating to work and expenditure

5. Renewal of an Exploration Licence
6. Work in the second and subsequent terms of an Exploration Licence

  • Licence renewal expenditure
  • Requirements relating to work and expenditure for licence renewal

7. Reporting

1. Purpose

The purpose of these guidelines is to provide advice to applicants for, and holders of, exploration licences under the Mineral Resources (Sustainable Development) Act 1990 (the Act) regarding:

  • general requirements for applicants;
  • work that is required to be undertaken on an exploration licence; and
  • requirements for the maintenance and renewal of an exploration licence.

The guidelines are intended as a guide to the implementation of the Act and the Mineral Resources (Sustainable Development) (Mineral Industries) Regulations 2013 (the Regulations) to demonstrate what is expected from proponents in relation to statutory requirements. However, these guidelines do not necessarily outline the only means by which a proponent may be taken to comply. Ultimately all licensing and compliance decisions will be made on a case-by-case basis and will be subject to the Minister’s or Department Head’s discretion, where relevant. Note, references to ‘the Minister’ and ‘the Department Head’ include references to any relevant delegates within the Department of Economic Development, Jobs, Transport and Resources - Earth Resources Regulation (‘the department’).

These guidelines should be read in conjunction with the ‘Exploration Licence Application Kit’, and any other relevant departmental guidelines (including for example ‘Standard Work Plan Guidelines for Exploration’ and the ‘Code of Practice for Mineral Exploration’). Additional information may also be obtained by contacting your local office of the department (contact details and the documents referred to above are available at Earth Resources).

The guideline attempts to distinguish legal requirements (in the Act and Regulations) from other general guidance by using words such as ‘must’ and ‘required’. If there is any inconsistency between these guidelines and the Act or Regulations, the Act and Regulations will prevail. If applicants or licence holders are uncertain about any of their legal obligations they may wish to seek independent legal advice.

2. Background

Amendments to the Act passed in 2010 introduced a number of changes regarding exploration licences. The key changes include:

Exploration licences may be renewed once, for up to 5 years. A second renewal, for up to 5 years, is only allowed in exceptional circumstances and where it can be demonstrated that there is a likelihood of the licensee identifying minerals during the period of the renewal. No further renewals are permitted.

Additional relinquishments of licence areas apply at the end of years 7 and 10 of the licence (measured from the initial registration of the licence). The relinquishments that will now apply are:

  • 25% at the end of year 2;
  • a further 35% at the end of year 4;
  • a further 20% at the end of year 7 (leaving 20% of the original licence area) ; and
  • a further 10% at the end of year 10 (leaving 10% of the original licence area).

An ability for the Minister to impose licence conditions relating to work undertaken under the licence. This will allow for licence commitments, which have been confined to expenditure on the licence, to be broadened to specify the work or the type of work which must be undertaken.

Transitional arrangements apply for existing exploration licence holders. The relinquishment and renewal requirements that apply depend on the term of the exploration licence and the number of previous renewals. For example, for licences that have been renewed once – these licences will not be subject to the additional relinquishment requirements during the term of an existing licence. However, licence holders should be aware that the requirements will apply from renewal.

The above amendments came into operation on 1 February 2012.  These guidelines also include some of the other significant amendments which have come into effect since then.

3. Grant of an Exploration Licence

The provisions of the Act relating to the application for and grant of an exploration licence are largely unchanged by the amendments passed in 2010. For details of application requirements refer to the Exploration Licence Application Form and the Exploration Licence Application Kit.

Exploration licences can be granted for a term of up to 5 years. Generally, an exploration licence will be initially granted for 5 years. However, a licence may be granted for a shorter term, particularly where the licence is small in size and/or it is considered that the proposed program of work will not require 5 years to complete.

Subject to a mineral resource being identified, it is expected that the holder of an exploration licence will work towards preparation of a mineralisation report and ultimately establishing the mineral resource to at least an inferred standard within the meaning of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012).

As with other licences, the grant of an exploration licence will not of itself permit work to be undertaken. Before work, other than low impact exploration, can be undertaken the licensee must have:

  • an approved work plan;
  • entered into a rehabilitation bond;
  • obtained any other necessary consents; and
  • obtained public liability insurance.

(For further details refer section 43 of the Act).

4. Work in the first term of an Exploration Licence

Work program

An exploration licence application must include a program of work. Schedule 2 of the Regulations sets out requirements for an application, including the details required for the program of work, namely:

  • The nature of the program proposed (office-based activities, on-ground exploration activities, sub-surface evaluation activities);
  • As far as practicable, an indication of the location and focus of the proposed exercises with location maps;
  • A description of the nature of targets that the program seeks to delineate;
  • A description of the geological rationale behind the proposed program;
  • An estimated timing of the exploration program.

As noted above, the program of work must describe the geological rationale behind the program of work. This would be the program over the term of the licence as proposed at the time of application (the program of work and related rationale may be revised with the Minister’s approval during the life of the licence). This should cover the following elements:

  • area selection - desk-top evaluations of the geological, geochemical and geophysical data used to select areas that have potential to contain an orebody,
  • target identification - mapping/surveying within selected areas to determine whether or not there are targets,
  • target testing - sub-surface evaluation of targets using drilling and other means
  • resource delineation - determination of the size, grade, extent and mineralogy of mineral resources.

The program of work should detail the work which will be undertaken for each year of the licence. The program of work should clearly distinguish between work which is on-the-ground exploration and office-based activities, as defined further below. It is expected that, generally, the applicant would commit to target testing within the first three years of the licence and for drilling to be undertaken by the end of the third year.

The applicant for an exploration licence, on which a mineral resource has previously been identified to an inferred JORC standard (or relevant alternative – refer Retention Licence Guidelines), would be expected to provide a program of work appropriate to raising the mineral resource to an indicated JORC standard (or relevant alternative). This would be reflected in the conditions on the licence and may include, similarly to retention licences, intensive mineral exploration, mineral resource assessment and work towards establishing an indicated resource, including evaluation work towards proving economic viability.

Licence expenditure

The Regulations provide that an exploration licence application must include the estimated annual expenditure for each year of the licence. The expenditure proposed in the licence application must be consistent with the program of work.

Requirements relating to work and expenditure

Subject to the Minister’s discretion the following requirements may be included in conditions on exploration licences in their first term.

The program of work submitted with the licence application describing the work that will be undertaken must be completed. The program of work may only be varied with the agreement of the Minister.

During the term of the licence, the Minister may request updated details of the proposed work program to be provided by a specified date. The licence holder must comply with any such request.

Minimum Annual Expenditure

The expenditure condition applying to a licence will generally be the minimum annual requirements set out below, or, where the proposed expenditures submitted with the licence application are higher than the minimum requirements, the proposed expenditures.

Year of licence

Metallic* minerals ($/graticule)

Non-metallic** minerals only ($/graticule)

Fixed expenditure ($)

1

150

75

15000

2

200

120

15000

3

200

120

15000

4

200

120

15000

5

300

150

15000

The minimum expenditure for each year of the licence is (a x b) + c, where:

a = the $ amount per graticule
b = the number of graticules in the licence
c = the fixed annual amount for each licence

* eg Gold, Silver, Copper, Lead, Zinc, Antimony **eg Mineral Sands, Diatomite, Kaolin, Coal.

Expenditures on both on-the-ground exploration and office-based activities can be claimed against expenditure requirements on the licence.

Salaries and own labour costs (for individuals) should be claimed against the relevant activity being undertaken (and not claimed as a separate item). e.g. a proportion of the expenditure claimed against drilling would include any related salaries and labour costs for that drilling over the relevant period. Claims for own labour expenditure must be substantiated by records of hours worked, rates of pay and qualifications and experience.

Items that can be claimed as office-based activities include:

  • literature search
  • database compilation
  • computer modelling
  • reprocessing of data,
  • general research
  • geological and geophysical interpretation
  • pre resource/reserve calculation
  • report preparation, including the expenditure and activities return and mineralisation report.

Items that cannot be claimed as office-based activities include:

  • insurance,
  • fees and rental under the Act,
  • bonds,
  • legal expenses,
  • advertising,
  • title searches,
  • fines,
  • company expenses such as fund raising, financing costs, listing and prospectus preparation.
  • land access compensation (paid to both private land owners and traditional owners),
  • permitting expenses (such as application fees under other Acts, water studies, heritage surveys and flora and fauna surveys), and
  • tenement management.

On-the-ground exploration includes, firstly, reconnaissance activities, such as:

  • geological mapping,
  • rock and soil sampling, and related geochemistry and mineralogy,
  • ground and airborne geophysical surveys, and
  • remote sensing.

And secondly, sub-surface evaluation activities, such as

  • drilling,
  • trenching (including costeaning and ditchwitching),
  • bulk sampling,
  • underground development, and
  • related geochemistry, mineralogy and metallurgy.

For expenditure purposes, site rehabilitation is also included in sub-surface evaluation activities.

Progressive expenditure over licence term

Expenses directly incurred in on-the-ground exploration should comprise the majority of expenditure and progressively increase as a proportion of expenditure during the licence term. The nature of the on-the-ground exploration undertaken during the licence term should also progressively change. As the licence area reduces (through relinquishments) and exploration activity becomes more intense, exploration will move from reconnaissance activities, such as geological mapping and surveys, to sub-surface evaluation activities, such as drilling.

The following proportions for expenditure will generally apply:

Year of licence

*Maximum expenditure on office-based activities which is claimable (% total required expenditure)

*Minimum expenditure on sub-surface evaluation activities which is required (% total required expenditure)

1

100%

nil

2

20%

nil

3

20%

40%

4

20%

40%

5

20%

40%

* The sum of the columns will not necessarily be 100%, with the difference being expenditure on reconnaissance activities.

Compliance and enforcement

Licensees must meet the annual expenditure requirements in each year as specified in the conditions of the licence. Failure to do so will be regarded as a breach of licence conditions and may result in licence cancellation or non-renewal. Prior to the introduction of the retention licence, some exploration licence holders were allowed to hold land with minimal exploration activity. This is no longer permitted. Expenditures which do not meet requirements in any year may, with the agreement of the Minister, be offset by expenditures in excess of requirements in an earlier year or years of the licence term.

Where, for reasons beyond its control, a licensee is unable to meet an annual expenditure requirement, it may seek the Minister’s agreement for licence conditions to be varied (under section 34 of the Act) to allow the short-fall to be carried over to the next year of the licence. The Minister would consider the request in accordance with the provisions of the Act. However, total expenditures over the full term of the licence must at least meet the total expenditure requirements.

Similarly, with the agreement of the Minister, the expenditures claimable on office-based activities or required on sub-surface evaluation activities may be varied. For example, the expenditure claimable for office-based activities might be increased and the expenditure required on sub-surface evaluation activities reduced, where significant office-based expenditure is incurred in preparation of a mineralization report (required for the purposes of a retention licence or mining licence application).

5. Renewal of an Exploration Licence

Exploration licences can be renewed for up to 5 years (section 32(2) of the Act). Renewal should not be considered as automatic or as a right. Renewal applications will be considered in accordance with the Act, including on the basis of compliance with expenditure and work requirements in the first term of the licence and the program of work proposed in the term of renewal.

While a licence can be renewed for up to 5 years, the term of the renewal will be determined by the Minister, based on the period that would reasonably be required to complete the program of work and the size of the area covered by the licence.

A second renewal is only allowed in exceptional circumstances and where the Minister is satisfied that there is a likelihood of the licensee identifying minerals during the period of the renewal (section 31(6) of the Act).

The Act does not define exceptional circumstances. Whether particular circumstances are considered ‘exceptional’ for the purposes of the Act, will be determined by the Minister on a case-by-case basis. However it is expected that exceptional circumstances would generally be limited to those circumstances which:

  • are beyond the control of the licensee; and
  • the licensee could not reasonably be expected to anticipate or manage within the necessary timeframes; and
  • have significantly and directly affected the progress of work on the licence.

A person claiming exceptional circumstances should bring those circumstances to the department’s attention when those circumstances are first encountered (and not delay until the renewal application is made). Circumstances relating to failure to fund a project or being unable to secure approvals to undertake work will not normally be regarded as exceptional circumstances.

In addition to demonstrating exceptional circumstances, a second renewal requires demonstrating that there is a likelihood of the licensee identifying minerals during the period of the renewal. The licensee must have made progress in identifying and testing of a target or targets and delineating mineral resources, and therefore be likely to be able to prepare a mineralisation report during the term of the renewal. That mineralisation report should demonstrate a mineral resource to a minimum standard of an inferred resource (within the meaning of the JORC Code) or a relevant alternative as would be required for the grant of a retention licence (see ‘Retention Licence Guidelines’).

6. Work in the second and subsequent terms of an Exploration Licence

An exploration licence renewal application must include a program of work (see Schedule 10 of the Regulations). The program of work should describe the geological rationale behind the program of work and should be focussed on target testing and resource delineation. It is expected that the program of work on renewal would include preparation of a mineralisation report (as is required for the purposes of a mining or retention licence application).

Consistent with application requirements for retention and mining licences, a mineralisation report prepared under an exploration licence should be prepared by a competent person (as prescribed in the Regulations) and set out the following exploration results in relation to the mineral resource:

  • the type(s) of mineral identified;
  • the location, depth, quantity and extent of the mineral(s); and
  • the method by which that extent has been determined, and
  • analytical results obtained from samples of those minerals.

The program of work should detail the work which will be undertaken in each of the first two years of the term of the renewal, and outline the work that is proposed in the subsequent years of the renewal. The program of work must clearly distinguish between work which is on-the-ground exploration and office-based activities.

Licence renewal expenditure

An exploration licence renewal application must include the estimated expenditures for the next five years. The expenditure proposed in the licence renewal application must be consistent with the program of work.

Requirements relating to work and expenditure for licence renewal

Subject to the Minister’s discretion the following requirements may be included in conditions on exploration licences in their second and any subsequent term.

The program of work submitted with the licence renewal application describing the work which will be undertaken must be completed. The program of work may only be varied with the agreement of the Minister.

During the term of the licence, the Minister may request updated details of the proposed work program to be provided by a specified date. The licence holder must comply with any such request.

Minimum annual expenditure

The expenditure condition applying to a licence renewal will normally be the proposed expenditures submitted with the licence renewal application which should reflect the work program. The minimum annual requirements set out below will generally apply where the proposed expenditures in the application are not considered adequate.

Year of licence

Metallic minerals ($/graticule)

Non-metallic minerals ($/graticule)

Fixed expenditure ($)

6

500

250

15000

7

500

250

15000

8

500

250

15000

9

500

250

15000

10

500

250

15000

11 plus

1000

500

15000

The minimum expenditure for each year of the licence is (a x b) + c, where

a = the $ amount per graticule
b = the number of graticules in the licence
c = the fixed annual amount for each licence

The claimable matters will be as for the initial term of the licence (please see details under 'Minimum Annual Expenditure').

The following requirements apply:

Year of licence

*Maximum expenditure on office-based activities which is claimable (% total required expenditure)

*Minimum expenditure on sub-surface evaluation activities which is required (% total required expenditure)

6

20%

60%

7

20%

60%

8

20%

70%

9

20%

70%

10

20%

70%

11 plus

20%

70%

* The sum of the columns will not necessarily be 100%, with the difference being expenditure on reconnaissance activities.

The applicant for renewal of an exploration licence, on which a mineral resource has previously been identified to an inferred JORC standard (or relevant alternative – refer Retention Licence Guidelines), would be expected to provide a program of work appropriate to raising the mineral resource to an indicated JORC standard (or relevant alternative). This would be reflected in the conditions on the licence and may include, similarly to retention licences, intensive mineral exploration, mineral resource assessment and work towards establishing an indicated resource, including evaluation work towards proving economic viability.

Compliance and enforcement

Compliance and enforcement matters relating to exploration licence renewals will be as for the initial licence term - refer 'Requirements relating to work and expenditure' for further details.

7. Reporting

Reporting of work on exploration licences must be undertaken in accordance with the Act, Regulations and Exploration Reporting Guidelines. Two reports are required:

(1) Annual Expenditure and Activities Report: This details expenditure on exploration activities undertaken on the licence, including (see Schedule 18 of the Regulations):

  • office-based activities
  • on-the-ground reconnaissance activities
  • remote sensing
  • ground exploration
  • sub-surface evaluation
  • development studies
  • rehabilitation

(2) Annual Technical Report: This details the exploration work undertaken on the licence (see Schedule 22 of the Regulations).

Data must be submitted in electronic form, in accordance with an industry standard as established in the Exploration Reporting Guidelines.

In the second and subsequent terms of an exploration licence, the Annual Technical Report should also describe:

  • progress on preparation of a mineralisation report,
  • an assessment of the likelihood that a mineralisation report will be completed in the term of the licence renewal, and
  • details of any additional work or acceleration of work that will be undertaken to complete the mineralisation report in the term of the licence renewal.

 

If you would like to receive this information/publication in an accessible format (such as large print or audio) please call the Customer Service Centre on 136 186, TTY 1800 122 969

Published by The Department of Economic Development, Jobs, Transport and Resources
Earth Resources Regulation, October 2015

© The State of Victoria.

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For more information contact the Customer Service Centre on 136 186.