Thursday 11 June 2026
Mineral exploration expenditure in Australia hit $949 million in the March 2026 quarter, up 16.3% year on year according to the Australian Bureau of Statistics. Gold exploration spending surged 53.4%. Greenfields drilling metres are climbing. Junior explorers now account for 77% of new mineral discoveries in the western world, up from 10% in 1980.
The momentum is real. The question is whether the capital structure underneath it survives the proposed changes in the 2026-27 Federal Budget.
The news in detail
The Budget proposed removing the 50% capital gains tax discount that has applied to assets held for more than 12 months since 1999. In its place: cost base indexation, which adjusts the asset's purchase price for inflation so only real gains are taxed, plus a minimum 30% tax rate on net capital gains. The changes are scheduled to take effect from 1 July 2027.
The policy is aimed primarily at residential property investment, sitting alongside proposed negative gearing reforms. But it applies broadly to all asset classes, including shares in ASX-listed mineral exploration companies.
The Association of Mining and Exploration Companies (AMEC) has stated it is "actively against" the proposed changes as they relate to mineral exploration, arguing they "damage" the investment attractiveness of the industry for retail investors. The Minerals Council of Australia (MCA) has reinforced this position, noting the reforms compound the expiry of the Junior Minerals Exploration Incentive (JMEI) in June 2025, which had encouraged retail investment in greenfields exploration companies.
The MCA's proposed solution: reinstate the JMEI as a permanent scheme, remove its annual cap, and retain the 50% CGT discount for small mineral explorers. Industry lobbying for these carve-outs is underway, with AMEC seeking support from state governments including Western Australia.
The workforce and financial consequence
The capital raising model for junior explorers is structurally different from most ASX-listed companies. Juniors do not generate revenue. They raise capital in tranches from retail shareholders, drill, report results, and repeat the cycle until a discovery reaches resource definition or attracts a larger buyer. The return for the retail investor comes entirely through capital gains on share price appreciation.
Increasing the effective tax rate on those gains, which in some scenarios nearly doubles the tax payable compared to the current discount regime, reduces the after-tax incentive to invest. For a sector that already carries high geological risk, the additional tax burden makes the risk-reward calculation materially less attractive for the retail investors who fund the discovery pipeline.
The flow-on to the workforce is mechanical. Fewer funded drilling programs means fewer field teams mobilised. Fewer field teams means geologists, field technicians, and drilling crews that would otherwise be deployed into active exploration sit without contracts. At a time when 28% of Australia's approximately 1,240 mineral exploration drill rigs are already idle due to crew shortages, a capital-side squeeze would reduce demand for both equipment and people simultaneously.
Strategic implications
The policy contradiction is difficult to overlook. The same government is investing through the Critical Minerals Strategic Reserve, the A$5 billion US-Australia financing partnership, and state-level fast-tracking legislation such as Queensland's new State Strategic Projects framework. Each of these measures is designed to accelerate Australia's critical minerals pipeline from exploration through to production.
The CGT change pulls in the opposite direction. The deposits that become tomorrow's mines are found through exploration programs funded predominantly by retail shareholders investing in junior companies. If the tax change reduces capital flows into that front end of the pipeline, the downstream policy investments have less to work with.
Exploration expenditure is running at its strongest levels in years. The discovery rate is robust. The geological pipeline is being funded. The workforce is under pressure from demand, not from lack of work. Whether that picture holds through 2027 and beyond depends in part on whether the proposed CGT changes proceed in their current form, and whether industry advocacy secures the carve-outs that AMEC and the MCA are pursuing.
At Norwest Exploration and Mining Services, we staff the drilling programs that sit at the front end of this pipeline. The programs we support depend on the capital that funds them. We are watching this closely because the exploration workforce is built on the assumption that the capital cycle continues.
The pipeline looks strong today. The capital structure underneath it may not survive the tax change unchanged.