Canadian Federal Budget Extends Exploration Tax Credit – by Marilyn Scales

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Canadians listened hopefully as federal Minister of Finance Jim Flaherty stood in his new, steel-toed shoes to deliver the Conservative’s budget on Jan. 27. It contained a wide range of spending proposals designed to kick-start the economy and tax breaks for lower income Canadians. But getting our economic engine back in high gear comes at a cost: a federal deficit that will be $34 billion this year and as much as $542 billion in fiscal 2012-13.

The chances of delivering a plan that would please everyone were slim. Both the NDP and Bloc Quebecois said they would not support the Conservative budget. Liberal leader Michael Ignatieff gave conditional approval if the Conservatives report quarterly on the budget’s implementation and cost.

Indirectly there is a glimmer of hope for the mineral industry. The Canadian government has set aside $200 billion for the financial markets in the hope of improving access to credit. That might benefit junior companies. The government also has plans to spend on infrastructure, retraining workers, and to simplify the approval process for new construction.

The budget contained one measure specifically aimed at the mineral industry. The most beneficial proposal is a one-year extension of the temporary 15% mineral exploration tax credit. This supports the flow-through share program to encourage individual investment in exploration. It has proven most helpful to junior companies that need to raise sums for property work. Moreover, funds raised through this program in 2010 may be spent until the end of 2011.

The federal government also announced last week that it is providing a $2.2 million non-repayable contribution toward building a northern mining transit centre in Val d’Or, Que. The project involves constructing a new $6.7-million building at the airport and creation of four full-time jobs. The aim is to meet the needs of mining companies that must airlift personnel and supplies to remote sites.

No matter how much the Canadian government spends, it cannot change the global metals markets in favour of our producers. The best corporate managers will use what budget provisions are available and hunker down into survival mode.