The Canadian government’s 2018 fall economic statement (FES), released on Wednesday, contains several measures to boost the competitiveness of the mining industry, including the first multi-year renewal of the Mineral Exploration Tax Credit (METC) since its inception in 2000.
The METC, which incentivises exploration financing by providing individuals investing in companies exploring for minerals in Canada with a 15% tax credit on eligible expenditures, was renewed for five years until 2024.
The Prospectors and Developers Association of Canada (PDAC), which has long championed a multi-year extension to help combat the country’s waning competitiveness, welcomed the announcement, with president Glenn Mullan hailing the extension as a “monumental sign of support” for the mineral exploration sector.
“The METC is a critical component of our industry that helps catalyse investment in mineral exploration projects that lead to the discoveries that could become the mines of the future,” he said.
According to the PDAC, Canada’s mineral sector faces strong global competition and it has become increasingly challenging to obtain financing for exploration activities.
Mining Association of Canada (MAC) president and CEO Pierre Gratton commented that the METC extension would help Canada recapture the top global position for mineral exploration investment.
The FES, delivered by Finance Minister Bill Morneau, also included an accelerated investment incentive, which will enable miners to write off three times the eligible cost of newly acquired assets in the year the investment is made, while businesses will be allowed to immediately write off the full cost of clean energy equipment.
"The enhanced treatment of capital expenditures in the first year for mining and metal manufacturing provides an important incentive to invest in Canada at a time when the mining industry is enjoying generally stronger commodity prices and is looking at growth prospects around the world," said Gratton.
The write-off of the full cost of clean energy equipment will serve to incentivise investments in northern Canada, where access to grid power does not exist, supporting a transition to low carbon energy alternatives. We are hopeful that this will also include the transition currently under way to move towards the use of electric haul trucks, and other heavy equipment.”
MAC states that Canada's tax regime has fallen behind international competitors in recent years. The 2012 and 2013 Budgets reduced or eliminated several direct and indirect mining related tax credits. Most recently, the US Tax Cuts and Jobs Act reforms significantly reduced Canada's mining tax competitiveness vis-à-vis the US.
"Canada's tax regime is a major determinant of its attractiveness for domestic and international mining investment," said Gratton. "MAC appreciates the government's recognition of the need to improve Canada's investment competitiveness in mining."
Other measures contained in the FES include:
- An additional $800-million over five years for the Strategic Innovation Fund.
- A commitment to increase overseas exports by 50% by 2025.
- A proposed increase of $13.6-million to the Multimodal Integrated Passenger-Freight Information System.
- Bolstering the Canadian Trade Commissioners Service, including a tripling of its CanExport programme to help Canadian businesses move into new markets. The mining and mining supply sector "significantly values" the work of Trade Commissioners around the world supporting access to global markets.
- A suite of proposals to improve regulatory competitiveness, including the establishment of a dedicated External Advisory Committee on Regulatory Competitiveness.
- Accelerated national trade corridors investment of $773.9-million over the next five years.