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As new budgets announced, Canadian mineral exploration gets some government support

by Greg Klein | March 10, 2017

The exploration industry had a good week for government incentives from Ottawa, the Northwest Territories and, going back a bit farther, British Columbia. Federal Minister of Natural Resources Jim Carr helped kick off PDAC by announcing a one-year renewal of the 15% mineral exploration tax credit, along with his government’s maintenance of the flow-through credit. The announcement incorporates key PDAC submissions for the federal budget, expected to be delivered later this month.

As new budgets announced, Canadian mineral exploration gets some government support

Citing estimates from Finance Canada, the Association for Mineral Exploration said the flow-through credit stimulates $3 in exploration for every $1 in tax saving.

On March 3 the NWT announced an increase in the territory’s mining incentive program from $400,000 to $1 million. Last year five companies received grants for six projects ranging from $34,575 to $85,000. Five prospectors got amounts ranging from $11,952 to $15,000.

The NWT also extended its work credit program for another two years and boosted the incentive by making it easier to keep claims active. Exploration spending will now be assessed at one and a half times its value.

NWT and Nunavut Chamber of Mines president Gary Vivian called the budget adjustments “the right action to help the NWT grow the lower-than-expected exploration investment recently projected by Natural Resources Canada.” The federal agency predicts a 3% spending reduction on the territory’s exploration and deposit appraisals, to $64.4 million this year.

“Furthermore, the GNWT’s actions are well aligned with the NWT Minerals Development Strategy, which is critical for the sustainability of the minerals industry in the north and the valuable socio-economic activity this industry brings to the governments and people of the NWT,” Vivian added.

A week earlier, B.C. tabled a budget confirming Premier Christy Clark’s announcement at AME’s Roundup conference in January. The province extended its flow-through credit to the end of the year and expanded eligibility for the mining exploration tax credit to include costs of environmental studies and community consultations. Further encouragement came from a two-year, $10-million grant to Geoscience BC.

Additionally, the province’s Ministry of Energy and Mines gets an extra $18 million over three years to help support permitting, compliance and enforcement.

The industry’s buoyant mood, noticed in the latter part of 2016 and evident at VRIC 2017, Roundup and PDAC, follows a particularly bad year for B.C. According to a report from the provincial ministry, AME and EY, exploration spending in the province declined through four consecutive years, dropping last year to $205 million from exploration companies and $1.8 million from prospectors. That represented a 25% decline over 2015 and the lowest level since 2009.

(Natural Resources Canada reports a 2016 B.C. low of $220.4 million.)

Released March 7, the British Columbia Mineral and Coal Exploration Survey 2016 said the province had come to the end of a 10- to 15-year mine development cycle, returning to a cycle focusing on grassroots and early-stage exploration.

“Notwithstanding the current downturn, the industry remained an important source of jobs and was, and continues to be, an economic contributor to communities throughout the province,” the report stated.

Natural Resources Canada forecasts about $237.5 million being spent on B.C. exploration and deposit appraisals in 2017, more than 7.7% above the agency’s 2016 total. For the country overall, NRC predicts an 18% increase this year, to $1.844 billion.

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