With mining industry on its knees, increased flow-through benefits could fuel recovery – by Henry Lazenby (MiningWeekly.com – February 12, 2016)


TORONTO (miningweekly.com) – Proponents of Canada’s long-standing flow-through share tax incentive programme, which is available to mineral exploration companies to raise funds to look for new deposits, say that increased benefits could help resuscitate the domestic industry, even though signs are pointing towards a possible trough being reached in what has been one of the worst commodity price downturns in decades.

“Our number one priority, as we have been doing for the last decade now, is to get in front of the new Liberal government, to understand what their priorities are and to explain the value of the flow-through share programme to ensure that the framework is maintained – that’s the critical starting point.

We’ve done the cost-benefit analysis, and we need to make sure that everybody understands the importance of the flow-through regime,” PearTree Securities president Trent Mell told Mining Weekly Online in an interview.

The flow-through structure has been entrenched in the Canadian tax code since the late 1980s, but had existed in Canada in other iterations since the 1950s.

Under Canada’s Income Tax Act, there were two types of flow-through share investments – ‘regular,’ which entailed a 100% deduction write-off for exploration expenses (net of federal and provincial credits) and ‘super,’ which was similar, but added an additional 15% federal tax credit for grassroots exploration, as well as provincial and territorial deductions and tax credits.

Canadian rules required a company that was renouncing, or flowing through, an exploration expense to an investor, to get out in the field and spend those exploration dollars within 24 months and, in certain circumstances, forcing exploration companies to get to work in the quickest timeframe.

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