Provinces urge Ottawa to expand mining tax credit to cover feasibility studies

Six provinces and territories are pushing the federal government to honour a campaign pledge to expand a mining exploration tax credit. The Association for Mineral Exploration is leading a campaign for the credit to include the costs of engineering and feasibility studies for critical mineral projects. Nova Scotia, Manitoba, Saskatchewan, Alberta, British Columbia and Yukon have written letters supporting the change. They argue it would help move projects from exploration to production and assist junior miners through a financing gap called the "valley of death."

"When you're a junior mining company, you're predominantly focused on proving your assets," said Todd Stone, president of the Association for Mineral Exploration. "It means you have to poke a lot of holes, you have to do a lot of engineering work, you have to do a lot of technical analysis and feasibility assessments and so forth, none of which institutional investors really want to invest in." Stone said projects stall in this phase because companies cannot raise money for necessary technical studies. A report commissioned by his group found 2,052 Canadian projects are currently in these early, stalled stages. The Ernst & Young report said expanding the tax credit could create 14,000 to 34,000 additional jobs over ten years. It also projected the change could boost the mining sector's contribution to GDP by between $5.2 billion and $12.2 billion over a decade. Provincial and territorial mining tax credits typically follow federal eligibility rules, making the federal change crucial.

In a statement, a spokesperson for Finance Minister François-Philippe Champagne highlighted recent government support for the sector. Spokesperson John Fragos noted the last budget expanded the Critical Mineral Exploration Tax Credit to include 12 more minerals. He also pointed to the new Productivity Mega Deduction, which he said covers 65 per cent of a mine's assets and helps companies invest in equipment. "This adds to the myriad other measures and billions more in supports the government has invested in the mining sector," Fragos wrote.

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Fragos said the 2025 budget clarified that expenses for feasibility studies are not eligible under the current exploration expense rules. He argued the mega deduction still provides significant support for early development. "The mega deduction will still give junior mining companies significant breathing room in the early stages of development, and can be applied to equipment that can be used, and may be needed, later in the mine's life cycle," he said. A spokesperson for Natural Resources Minister Tim Hodgson declined to comment.

Industry officials say the existing measures do not solve the core problem. "The Canadian exploration expenses don't allow for economic assessments and feasibility studies to be put through, and those are a critical part of the process leading up to actual project approval and construction of a project," said Pierre Hebert, CEO of the Nunavut and N.W.T. Chamber of Mines. He said these studies are costly and essential for proving a project's viability. Hebert acknowledged the mega deduction helps with camp construction costs but said it does not address the "valley of death." "The fact remains that those feasibility studies, in demonstrating the viability of a mining project that are absolutely a required part of the process, are not eligible," Hebert said. B.C. Mining Minister Jagrup Brar detailed the challenge in an August letter, noting the lack of investor excitement during the permitting phase creates a difficult financing period for companies.

With files from The Canadian Press, Narcity and Toronto Star