Following a long period of increase, there has been a reduction in exploration expenditure and activity in Australia over the past two years. During the post Second World War period, exploration was largely driven by mining companies seeking resources to satisfy an increase in world demand, while increasing their asset base as a result of mineral discoveries. In general, return on investment to shareholders was not the major driving force. With the exception of gold the mining industry has been faced with a long-term fall of metal prices in real terms. As a result the net profit return on average shareholder's funds in the Australian minerals industry has fallen from over 20 per cent in 1990 to less than five per cent today. Mining is now competing for funds with communication and finance based industries yielding high returns on shareholder investment. Shareholders and superannuation fund managers seeking a high return on short-term investments have indirectly reduced the funds available to the mining industry. Globalisation of the mining industry is leading to the rationalisation of the Australian mining industry as witnessed by mergers and acquisitions of local companies by foreign investors. The return on capital invested in the Australian mineral exploration industry must improve if the industry is to be competitive on a worldwide basis. Failure to achieve this will result in capital flowing overseas or to other industries. Relatively short-term upswings in metal prices which are generally driven by threats to the supply base (eg strikes, mine closures, increases in country risk) often lead to increased capital raisings for exploration funding. As a consequence of the time taken to raise the capital and increase exploration activity, measured exploration activity lags the metal price increases. There are also lags between commencement of exploration and discovery and ore production. In the case of gold exploration expenditure peaked six years after the price rise of 1980 Companies persevering with exploration in the current difficult period will be rewarded because they will be able to capitalise on future metal price rises and a minimised time lag.