Sponsored Q&A: AME urges Ottawa to expand exploration tax breaks

Canada is pushing to develop more critical mineral projects, but the Association for Mineral Exploration (AME) says current tax rules leave a financing gap as discoveries move towards becoming mines.  

The Northern Miner’s Devan Murugan spoke with AME president and CEO Todd Stone about why the group says a much-needed change could help move more Canadian exploration projects towards development. Watch a video of the chat.

Devan Murugan: Let’s start with the basics. What exactly is the Canadian Exploration Expense, and why do you believe it no longer reflects how modern mineral exploration projects are financed?

Todd Stone: The Canadian Exploration Expense does exist today. It is in place, and the sector certainly appreciates that it’s one of a series of tools.

The problem is that the current version, or iteration, of the Canadian Exploration Expense — CEE, if we can call it that for short — does not include technical, engineering and feasibility costs as eligible expenses for the calculation of the benefit that is provided to investors. These are some of the largest costs that are incurred by those companies.

Wider scope

So, if you’re an investor, whether you’re a Canadian investor or an investor from somewhere else in the world, you do get a tax benefit for investing in a Canadian mining exploration opportunity.

But the scope and scale of the benefit that you receive is much less than it would otherwise be if the technical, feasibility and engineering costs were included as eligible expenses in the calculation for the Canadian Exploration Expense.

So that’s our ask of government. We’re saying to the federal government: We need you to expand the scope of those eligible expenses so that it’s fully inclusive of those core costs.

And if you do that, you’re going to see, almost immediately, a huge number of mining opportunities that will be added to the pipeline of opportunities, which is ultimately how we’re going to achieve our ambition to become a world superpower in critical minerals.

171 projects

DM: Your proposal is to expand the CEE to include engineering, technical studies and feasibility work. Where does the current system fall short, and what projects are getting stuck because of it?

TS: At the moment, just to put a very specific number on it, as we’re talking here today, there are about 171 advanced exploration projects across the country.

We didn’t just come up with that number ourselves at AME. That’s a collection of projects that provinces have identified across the country, from coast to coast to coast, as advanced projects that have significant geological potential. They’ve got good, strong management teams. They’ve presumably got good relationships with the local First Nations and so forth.

The problem is the pipeline of opportunity is nowhere near full. Those 171 projects aren’t in what we would call the near-term or even mid-term opportunity pipeline because there is such a tremendous amount of time, effort and risk, frankly, that goes into raising the capital you need to fund these technical, engineering and feasibility costs.

It’s often referred to as the “valley of death” in the mining sector. It’s this place where your entire reason for being is to prove the deposit that you have, but you need a lot of capital in order to fund that added exploration.

You’re only going to get the capital if you’re doing the technical, engineering and feasibility work to show investors that there is a tremendous opportunity in that particular location.

Few advance

So, since 2022, even though there are 171 projects that have been identified across the country as great candidates for future mines in our country, only one has actually moved to production since 2022.

That’s not a very good track record. It’s not to say we don’t have a tremendous amount of opportunity out there. We’re just not incentivizing, to anywhere near the extent that we need to, those companies — any of those 171 companies. Frankly, there are probably more being added by the week.

We’re not creating the environment in which we’re filling up that opportunity pipeline more rapidly and helping move those companies through the pipeline.

Really, the goal is that we want to see, on a sustainable and annual basis, net new mines being announced across the country — not just for the next five to seven years, which is basically where we’re at today.

We want this to be truly what the prime minister refers to as a multi-generational opportunity, where we see new mines being announced across Canada every single year for the next 30, 40 or 50 years.

Industry backing

DM: You’ve now attracted support from well over 120 organizations, along with provincial governments including Alberta, British Columbia and Saskatchewan. Why has this issue united so much of the industry?

TS: I think we’re realizing tremendous success in building this national campaign because it’s frankly a no-brainer.

When you have the Prime Minister of Canada, provincial premiers in almost every jurisdiction across the country, First Nations leaders, industry leaders and the public in every province across this country supporting getting our resources out of the ground faster and off to a more diversified market, you have all of those voices basically saying that, against the backdrop of increasingly uncertain geopolitical realities in the world — not the least of which is a pretty unpredictable southern neighbour in the United States these days — if we truly want to stand on our own two legs and bolster our own industrial and national sovereignty, we want to be in charge of our future as Canadians.

We also want to be a reliable ally within NATO and our partnerships around the world.

While we’re not going to have the largest navy, army or air force in the world tomorrow, what we can offer ourselves and our allies is a reliable source of critical minerals and rare earth metals for industrial and defence purposes.

So that’s why I think this message, this call to action, has resonated so well. We’re actually, as of literally the taping of this interview, over 130 organizations now across the country.

And I’ll predict that there’ll be several more provinces signing on in the next week to two weeks as we continue to hypercharge this campaign from coast to coast to coast.

Geopolitics

DM: Governments have been talking about economic sovereignty, supply-chain resilience and reducing dependence on foreign sources of critical minerals. Do current global trade tensions, including tariffs, make the case for accelerating Canadian exploration even stronger?

TS: There is no question that the uncertainty of the current geopolitical realities in the world — and there’s perhaps no finer point on that than the tariff uncertainty, the trade war, if we can call it that, between Canada and the United States that we are in the middle of at the moment — is probably a reality that is going to be with us for a while. Nobody really sees this coming to an end next week or next month.

The best strategy in these kinds of circumstances is a strategy of offence, not just to rely on being defensive. We have to be offensive here, and that means you have to leverage the tools and the advantages that we have as Canadians.

Resources

We were granted a bounty of resources in this country. For the size of the population we are, we are lucky that we have the resources that we do in metals and minerals, energy, oil and gas. It’s all beneath our feet.

But it’s incumbent upon us to seize the opportunity, to realize that opportunity. Ambition is great, but action is what it takes to actually realize the ambition.

And so we’re saying to the federal government, building on the range of very positive investments, policy changes and regulatory changes that the federal government has already made in the mining sector in just the last year, the next most important thing that the government could do to fill up the opportunity pipeline from a critical minerals perspective, to enable Canada to truly achieve its own industrial and economic sovereignty and prosperity for generations and be a great, reliable ally on the international stage, is to fill up this opportunity pipeline much more rapidly and move those projects through much more rapidly.

There’s no other measure that the federal government could take that would have as profound and immediate an impact in doing all of the above than expanding the eligibility criteria of the Canadian Exploration Expense.

Benefits

DM: Critics might ask whether this is simply another tax incentive for mining companies. What’s the economic return for Canadians if Ottawa adopts your proposal?

TS: We’re undertaking our own economic analysis on that at the moment with a reputable, large consulting firm. We will provide that data in the weeks ahead.

But the analysis that has been done by other organizations to this point shows that there’s a very, very strong return on investment, somewhere in the range of 10 to 20 times.

It’s a very, very strong measure that actually will generate net revenues for the federal government because you’re talking about moving these projects, getting them into the pipeline faster and moving them through faster.

What does that mean? It means these companies are hiring more people. That means more wages, which means more taxes are being paid to governments. It means these companies are purchasing machinery and equipment, and that means more tax revenue for government.

But it ultimately means that we’re moving these projects through the pipeline faster and actually extracting those critical minerals and rare earth metals for our own stockpiles, for our own industrial and defence requirements.

But, again, it also means that Canada can truly step up and fulfil its commitments as a reliable partner within NATO, the European Union and the Asia-Pacific region as well.

This is how Canada stands on its own two legs and ensures that we have a bright, prosperous future, and one that’s as secure as we can possibly make it.

DM: Todd Stone, president and CEO of the Association for Mineral Exploration, thanks very much for talking to us.

TS: Thank you for your time today, Devan.

This sponsored article is PROMOTED CONTENT paid for the Association for Mineral Exploratioin and produced in co-operation with The Northern Miner. Visit https://amebc.ca/ for more information.