Investing in Australian mining projects is expected to become even more difficult in the coming years according to a new report by Baker & McKenzie.

The fourth Global Business Challenges report by the firm includes responses from more than 300 senior industry leaders across six key mining jurisdictions - Australia, Brazil, Canada, China, Indonesia and South Africa. Of the executives commenting on Australia, 75 percent said that investing in the mining sector has become more complicated and costly due to factors such as increasing regulatory and environmental obligations, complex and uncertain project development requirements and the rising costs of mine development and operation. The Minerals Resource Rent Tax and Carbon Pricing Mechanism were viewed as discouraging investment by 76 percent and 70 percent of respondents respectively. 

The level of Commonwealth and State Government involvement in the Australian mining industry is also causing concern to investors, with 61 percent of respondents believing that the Government is too involved in the industry and 72 percent believing that sovereign risk is on the increase. 

Overall, respondents commenting on Australia were the least optimistic about the future of mining investment with 66 percent agreeing that the investment climate will be more complicated to some degree in the future. However, China is not far behind, with 63 percent of respondents for that market believing that it will be more difficult in the future.

Baker & McKenzie's global head of mining, David Ryan, said Australia needs to look much more seriously at the issues impacting the competitiveness of the industry. "Getting a project across the line in this country is now harder than it should be,” he said. “If we want to remain globally competitive and continue to attract investment in the mining industry, we need to look at reducing the complexity of mining regulation and sovereign risk, otherwise we risk companies deploying their capital elsewhere.”

Factors such as political stability and the ability to enforce contractual rights were seen as being favourable in Australia compared to other markets; however, Australia is currently seen by some investors as presenting greater sovereign risk than lower cost jurisdictions like Indonesia and South Africa. 

Of the six key mining jurisdictions Canada was cited as the easiest market to invest in as a result of its competitive tax structures, stable political landscape and well-developed capital markets. Of the executives commenting on Canada, 73 percent said there was about the right amount of government involvement in Canadian mining. Brazil, China, Indonesia and South Africa continue to face issues addressing crime and bribery and corruption.