Fall Economic Statement full of goodies for Canadian miners

In an unprecedented move long sought by mineral explorers, Canada’s federal government has extended the mineral exploration tax credit (METC) for five years.

The news came in November as part of the government’s Fall Economic Statement, which included a $17.6 billion suite of business-friendly tax measures and investments which should benefit firms in the mineral sector.

The METC allows qualifying explorers (which don’t generate revenue from which to deduct expenses) to pass deductions on to investors by selling them flow-through shares. Investors also get an additional 15% tax credit when investing in what are now known as super flow-through shares.

The measure was set to expire on March 31, 2019

The government estimates the METC extension will reduce its revenues by $365 million over the 5-year period.

Between from 2010 to 2016 companies raised an average of $505 million each year under the METC, according to the government.

The Prospectors and Developers Association of Canada (PDAC) notes this marks the first multi-year extension of the METC since its first iteration was introduced in 2000. It was subsequently renewed annually by successive governments.

“We are pleased that the government has heard our concerns about Canada’s waning competitiveness and adopted our recommendation,” says Lisa McDonald, PDAC Interim Executive Director and COO.

The Mining Association of Canada (MAC) also lauded the government for announcing two other tax measures which should help miners and metal producers by permitting firms to write-off three times the eligible costs of newly-purchased assets in the year of acquisition and 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,” says MAC head Pierre Gratton. “The write-off of the full cost of clean energy equipment will serve to incentivize investments in northern Canada where access to grid power does not exist, supporting a transition to low carbon energy alternatives.”

Gratton adds that he hopes miners will be able to write-off costs associated with switching to electric haul trucks and other equipment.

MAC welcomed several other measures in the government announcement: an additional $800 million over five years for the Strategic-Innovation Fund; a commitment to boost 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; a suite of proposals to improve regulatory competitiveness; and accelerated investment of $773.9 million over the next five years of national, trade-corridors funding.

MAC notes these moves will help Canada compete for investment in light of the recent tax changes in the United States.