Canadian Mining Journal

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FLOW-THROUGH SPENDING – Government broadens rule to include consultation, study costs

OTTAWA - The Canadian government has broadened its interpretation of income tax rules in a move that will benefit m...


OTTAWA – The Canadian government has broadened its interpretation of income tax rules in a move that will benefit mineral exploration in light of todays stringent regulatory climate. The CANADA REVENUE AGENCYs new guidelines say that the costs of community consultations, baseline environmental studies and feasibility studies will generally qualify as Canadian exploration expenses (CEE).

Patricia Dillon, president of the PROSPECTORS & DEVELOPERS ASSOCIATION OF CANADA (PDAC), hailed the announcement. Consulting with local communities and conducting baseline environmental studies are integral to exploration programs today. The mineral exploration industry accepts them as costs of doing business. However, because these costs have not been treated as CEE, they could not be covered by funds raised through flow-through shares. This made it difficult for junior exploration companies, most of which rely on share issuance for working capital, she said.

The change to the rules follows four years of intense lobbying efforts by the PDAC and its members. A copy of the guidelines, which were prepared in consultation with NATURAL RESOURCES CANADA and FINANCE CANADA, is available at www.pdac.ca. Click on the link in the Sept. 21, 2007 news release.


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