Ottawa announces two-year extension on mineral exploration tax credit

The federal government is granting a boon to critical mineral exploration in the form of a two-year extension on the 15% mineral exploration tax credit for investors. The tax credit – popular among explorers and investors – was set to expire on March 31^st this year.

The move was part of a recent announcement by federal Natural Resources Minister Jonathan Wilkinson. The credit allows investors the credit to invest in flow-through shares of smaller mining firms. Mining industry analysts stated  in the Globe and Mail and other media the move would likely free up $110 million to help develop mining sites, primarily in the northern regions in Canada. Much of the critical mineral development in Canada is occurring in that region.

The federal government is using this capital market tool to spur investment and exploration. However, it comes on the heels of political controversies surrounding comments by U.S. President Donald Trump over Canada as well as Greenland that many believe is tied to U.S. interests in critical minerals. At present, China has maintained a stranglehold on critical mineral sites and supply chains. Canada – as well as many provinces and territories – have been racing to develop critical minerals for both economic and environmental reasons.

Mining associations – including the prominent Prospectors and Developers Association of Canada which is hosting its annual networking and promotion event in Toronto right now –  have promoted renewing and ideally making permanent the mineral exploration tax credit.

Both mining firms and industry associations – as well as mining policy analysts and experts -Bottom of Form have complained about what they see as a policy climate across Canada that is inhospitable towards mining exploration and investment. Much of this criticism tends to centre on permitting and regulation. However, some of it is directed at the fiscal competitiveness of many mining jurisdictions across Canada, including its taxation policies.

Industry observers have voiced support for these exploration credits because they say exploration is the riskiest stage in mining as most projects do not have a commercially viable deposit. Junior and intermediate explorers also lack the significant capital required for this risky venture and so tax credits on exploration help them recoup their investment.