PERTH, Australia - The president of the Prospectors and Developers Association of Canada (PDAC), Dr. Scott Jobin-Bevans, told the Association of Mining and Exploration Companies' (AMEC) annual convention on June 2 that Canada's flow-through tax credit is a cost-effective method of increasing domestic mineral exploration and has contributed to Canada becoming the global leader in mining. He supported the Australian industry's interest in the introduction of such a tax.
"The challenge for our industry is find a way to finance exploration, which by its nature is both high risk and expensive," said Jobin-Bevans. "That is the wisdom behind the Canadian flow-through tax credit. It helps raise exploration finance by reducing the risk borne by investors, not companies. By reducing risk to investors, companies are able to raise more capital than they would if investors, alone, carried it."
The Canadian government estimates the current average annual cost of the flow-through program at about C$250 million. If flow-through finance leads to the discovery of just one mineral deposit that becomes a mine, it more than offsets the government's cost of the program for several years, the PDAC president said.
Flow-through financing has contributed to the discovery of most of the major mineral deposits in Canada in the last 30 years, Jobin-Bevans said. It is particularly useful for early-stage exploration, grassroots and greenfields exploration, and also as a stimulus for regional economic development.
He cautioned against the introduction of the proposed resource supertax in Australia, calling it short-sighted and imprudent.
"It fails to understand the high-risk nature of raising finance for exploration and mining," Jobin-Bevans said. "Mining is a capital intensive business. As a result, policies that cause capital to take flight are counterproductive."
Canada became the top country in the world for mineral exploration spending in 2002, following the introduction of the current enhanced flow-through program. It supplanted Australia which is now number two. Exploration expenditures in Canada accounted for 16% of the world's total in 2009, compared with Australia, which accounted for 13% last year.
Dr. Jobin-Bevans' full presentation is posted on the PDAC's website at www.PDAC.ca.