Editorial: Death of flow-through looks premature

While there is concern, there could be more smoke than fire in Queb ec Mines Minister Raymond Savoie’s statement (in a front page article in last week’s issue of this paper) that the federal government may scrap flow-through share financing for mineral exploration. Should this happen, he is also reported as saying, the Quebec government could eventually follow suit.

The report did not, as it might have been expected to do, generate all that much in the way of strong reaction, either in the market, or among members of the exploration fraternity.

In fact the general feeling of spokesmen for this group, including members of the tax committee of the Prospectors and Developers Association, is to seriously doubt that either the finance department or energy, mines and resources at Ottawa are now entertaining, or will entertain, certainly in the near future, any idea of scrapping the highly-successful flow-through share program. Since its inception in 1983, it has proved of enormous importance and benefit to the mining industry in boosting exploration activity, and the finding of potential new mines. Up to that time, exploration in Canada had been in a precipitous decline.

A current estimate — and it’s an estimate only — is that to date anywhere from $700 million to $1 billion has been generated in flow-through funds across Canada. It has helped development of such gold camps as the Casa Berardi in northwestern Quebec, and furthered such development in other gold areas right across the country.

“There have been some concerns, some fears, that flow- through may disappear, particularly with tax reforms due to be discussed in Ottawa,” says PDA tax committee chairman Robert Parsons. But, he said, there is likely no other basis for these fears than the natural human feeling that you may fall when you are riding high, as the industry has been doing in the flow-through years.

Mr Parsons, who has been and is close to the Ottawa scene, asserts that neither finance nor energy, mines have given even a hint at a flow-through pullback, and does not expect they will.

We don’t at all suggest there is no danger of it. In fact the PDA itself as a result of The Northern Miner article has already taken the precautionary step of advising its 48 directors, and its regional representatives, to write to Minister of Finance Michael Wilson stressing the importance of flow-through share financing, and its success in maintaining activity in the mining industry through some very difficult years.

It’s right to keep an eye on the smoke, to see that the fire doesn’t really take hold.