TORONTO (miningweekly.com) – Canada’s federal government has extended the 15% Mineral Exploration Tax Credit (METC) until end-March 2018.

The METC helps junior mineral exploration companies raise capital by providing an incentive to individual investors in flow-through shares issued to finance "grassroots" mineral exploration.

This credit is in addition to the deduction provided to the investor for the exploration expenses "flowed through" from the company that issued the shares.

Natural Resources Minister Jim Carr announced the extension of the tax incentive during a media reception of the Prospectors and Developers Association of Canada’s (PDAC’s) eighty-fifth yearly convention.

“The tax credit is for early-stage explorers and supports their future prosperity. It starts with flow-through shares, which about 250 companies issued in 2015, and which about 4 000 investors bought.

The METC was scheduled to expire on March 31 under the previous budget.

The federal government advised that it estimated this measure to result in a net reduction in federal revenues of C$20-million over the 2016/17 to 2017/18 period.

The flow-through structure had been entrenched in the Canadian tax code since the late 1980s, but had existed in Canada in other iterations since the 1950s.

Under Canada’s Income Tax Act, there are two types of flow-through share investments – ‘regular,’ which entails a 100% deduction write-off for exploration expenses (net of federal and provincial credits) and ‘super,’ which is similar, but adds an additional 15% federal tax credit for grassroots exploration, as well as provincial and territorial deductions and tax credits.

Canadian rules require a company that is renouncing, or flowing through, an exploration expense to an investor, to get out in the field and spend those exploration dollars within 24 months and, in certain circumstances, forces exploration companies to get to work in the quickest timeframe.