PDAC endorses new flow-through initiative

The Prospectors and Developers Association of Canada (PDAC) board of directors is endorsing an initiative to make Qualified Environmental Trust (QET) contributions that are applied to the reclamation of mine sites eligible for flow-through share treatment. The move would require an amendment to the Income Tax Act. The Mining Association of British Columbia (MABC), the Association for Mineral Exploration British Columbia (AME BC) and the B.C. and Yukon governments have all endorsed the concept.

Introduced 12 years ago, the QET program acts as a depository for funds that will be used for reclamation purposes at the end of a mine’s life. Contributions are deductible under the Income Tax Act in the year of contribution.

However, because of the complex, expensive structure required to use QETs effectively, the program has not succeeded in promoting the funding of reclamation trusts. Only one corporation has successfully raised funds for a QET from the capital market and that company reports that the vehicle is cumbersome and costly.

The matter has come to the fore with the recent acquisition by a Canadian mineral company of an abandoned mining site in the Yukon. The corporation has agreed to fund a significant portion of the clean-up costs and the Yukon government has requested that the financial contributions be deposited into a QET. The corporation has found the present QET program expensive and has proposed another model that would make QETs more useful by allowing them to be eligible for flow-through. This would increase funds for reclamation and also reduce public liabilities, since corporations would be able to turn to private investors.

In a letter endorsing the proposed model, the MABC and AME BC point to the advantages of the proposed change.

“Using the flow-through share program would encourage more widespread use of QETs, benefiting the environment and reducing the future risk of environmental liabilities to all stakeholders, including government,” the letter says.

In addition, providing an incentive for the private sector to invest in and fund reclamation security may lead to innovative reclamation solutions for sites with existing environmental degradation, the letter points out.

— The preceding is from In Brief, a quarterly publication of the Toronto-based Prospectors and Developers Association of Canada.