British Columbia Supports Mining Industry with Two Permanent Tax Incentives

Edward Kim  |

Mining and mineral exploration produced nearly CAD 10 billion (USD 7.5 billion) for British Columbia's economy in 2017, employing over 30,000 people directly and thousands more indirectly. The BC Mining Jobs Task Force was established in February 2018 by Michelle Mungall, BC's Minister of Energy, Mines and Petroleum Resources, to review and identify ways to strengthen this key industry. The Task Force worked closely with Indigenous peoples, labor, educators, the mining industry, communities and other concerned constituencies to develop recommendations on federal actions that would grow the industry and foster sustainable job creation.

The Task Force's final report was submitted in December 2018 and contained 25 recommendations to the government on measures to make British Columbia the most attractive jurisdiction for investment in Canada. One of the critical areas of focus for these recommendations was to enhance the province's fiscal and regulatory competitiveness. To this end, BC Premier John Horgan announced earlier this week at the 36th annual Association of Mineral Exploration (AME) Roundup conference that two critical tax credits, that previously were subject to an annual renewal process, would now become permanent as recommended by the Task Force, providing investors with incentives to invest in exploration and mining.

Click to enlarge

Source: Citizen News Service, photo by Nelson Bennett

British Columbia Mining Flow-Through Share Program

Flow-through shares are generally common shares issued by a corporation, pursuant to which the corporation agrees to incur exploration expenses in an amount equal to the consideration received from the investors for the shares issued. The investors can then deduct qualifying Canadian Exploration Expenses (CEE) for income tax purposes. Since 2001, British Columbia has provided a non-refundable 20% tax credit to investors who purchase flow-through shares offered by a company conducting grassroots mineral exploration in the province. While this was indeed welcome, the program's annual renewal provision created uncertainty in longer term planning and increased the risk of stranded investments. British Columbia is now making this tax credit a permanent feature, eliminating the historical annual uncertainty.

British Columbia Mining Exploration Tax Credit

This program provides a refundable tax credit equal to 20% of qualified mining exploration expenses minus any assistance received or receivable. If the exploration expenditures are incurred in prescribed areas affected by the mountain pine beetle, the credit is increased to 30%. As with the Flow-Through Share Program tax credit, this exploration tax credit was historically subject to the burden of an annual renewal process. Premier Horgan announced that the mining exploration tax credit would now also become a permanent incentive for mining investors.

BC competes with the world for investment, and BC producers of raw materials are price-takers, not price makers in the international marketplace. Competitive regulatory and tax structures must be in place to ensure the industry can grow jobs and sustain communities in the province.

- British Columbia Mining Jobs Task Force Final Report

These permanent tax credits will provide stability for exploration companies, increasing the opportunity for multi-year exploration program funding and enabling better longer-term planning.

This is vital for exploration programs, as mineral deposits are carried out in stages over an extended period of time. Exploration companies and investors depend on some level of certainty to finance not only the current year of their exploration programs, but also any subsequent exploration necessary to fully scope the mineral potential of a particular property.

- British Columbia Mining Jobs Task Force Final Report

Premier Horgan also committed that the BC government would devote CAD 1 million to develop a road map for mining innovation in conjunction with industry, and an additional CAD 1 million to continuing and expanding the Regional Mining Alliance, which promotes industry partnerships with Indigenous communities. Premier Horgan said he would also add staff at the Ministry of Energy, Mines and Petroleum Resources to increase efficiency and facilitate faster processing of permitting applications.

We're encouraged by Premier Horgan's initial steps following the Task Force's report, as the permanent tax credits are purely a positive development for the mining and exploration companies of British Columbia. We hope to see additional Task Force recommendations adopted as well, particularly in the areas of promoting a healthy and diverse work force, investment in supporting mining communities and fostering innovation.

Click to enlarge

Source: British Columbia Mining Jobs Task Force Final Report


Please email us at content@equities.com to see our Case Studies and Testimonials.

Please click here for information on our trading platform.

Please click here to see our daily newsletter.

DISCLOSURE: The author holds no positions or any other beneficial interest in, and has not received any compensation from, the companies mentioned in this article.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     

INTERVIEW: CEO Jorge Fernandez - iBlades

Equities.com's Sam Mitchell interview iBlades CEO, Jorge Fernandez