TORONTO (miningweekly.com) – The Canadian government will extend the 15% mineral exploration tax credit for an additional year, to March 31, 2011, according to the federal budget presented on Thursday by Finance Minister Jim Flaherty.

The net cost of the extension is estimated at C$65-million over the next two fiscal years.

“Canada’s rich mineral resources represent significant economic opportunities,” the budget document said.

“Promoting the exploration and development of these resources offers important benefits in terms of employment, investment and infrastructure, especially for rural and remote communities.”

Canada's flow-through system allows junior companies to 'flow through' their exploration expenses  in Canada to Canadian investors, and the investors can in turn use these expenses to offset their income and reduce their income taxes.

This serves as an incentive for investors to buy the shares of companies that would otherwise struggle to raise exploration funding.

The tax credit was extended last year from April 1 2009, to March 31, 2010.

The budget also included plans to reduce tarriffs on a range of manufacturing inputs and machinery and equipment.

The measures "will give Canada the status of being the first G20 country to become a tariff-free zone for manufacturers", Flaherty said in his budget speech.

The tarriff elimination is expected to provide $300-million in annual duty savings to Canadian business.

A day earlier, the conservative government indicated it plans to remove some restrictions on foreign ownership of the country's uranium sector.