Call for three-year renewal of Canada’s exploration tax scheme to arrest signs of decline

15th August 2018 By: Mariaan Webb - Creamer Media Deputy Editor Online

Call for three-year renewal of Canada’s exploration tax scheme to arrest signs of decline

The Mineral Exploration Tax Credit (METC), which incentivises exploration financing by providing individuals investing in companies exploring for minerals in Canada with a 15% tax credit on eligible expenditures, has to be renewed for at least three years to provide greater certainty and boost confidence for investors in Canadian projects.

This is the view of the Prospectors and Developers Association of Canada (PDAC), which on Wednesday published a document containing its recommendations for the 2019 federal Budget.

Finance Minister Bill Morneau renewed the METC for one year in the 2018 federal Budget, but the PDAC feels that companies require a longer time frame as exploration programmes are carried out in stages over an extended period of time.

“Exploration companies and investors need certainty that they can finance not only the current year of their exploration programmes, but also any subsequent exploration necessary to fully scope the mineral potential of a particular property,” stated the PDAC.

The organisation pointed out that the METC catalysed investor interest in flow-through shares and that it could play an important part in arresting the decline in the country’s attractiveness as a destination for mineral investment.

According to PDAC, Canada’s domestic share of mineral exploration investment has declined by nearly one-third over the last decade, relative to the rest of the world. Other indicators of Canada’s waning mineral industry competitiveness include declining base metals reserves, increasing discovery costs and protracted timelines to move discoveries into production.

Given that the future of Canada’s mineral industry is increasingly shifting to the remote and northern regions, where it can cost up to six times more to explore for mineral deposits and the cost of building a mine doubles, the PDAC wants government to address the infrastructure deficit. It warned that without addressing the high costs of exploring for minerals in these regions, the country risked missing out on development opportunities to more competitive jurisdictions.

The association also said that the federal carbon pricing backstop and resulting output based pricing system would add additional costs to mineral projects in the northern and remote regions, further reducing the viability of these projects.

The other recommendations deal with enhancing the participation of indigenous people in the mineral industry through social investments that contribute to improved health and educational outcomes for communities, as well as targeted funds for training and entrepreneurship.  The PDAC also called for a funding mechanism for provinces and territories to support comprehensive mineral resource assessments, based on geoscientific studies, to better understand the value of their mineral potential.

The final recommendation focuses on supporting geoscience mapping and innovation in the minerals industry by increasing the funding of the Geological Survey of Canada and providing fiscal incentives or funding for mineral companies to encourage testing and adoption of innovation technologies and processes.