Editorial: Budget 2014 – Flow-through still flowin’

The steady-as-she goes federal budget tabled by the Conservative government on Feb. 11 drew praise from Canada’s business community, which was satisfied by the status quo being maintained on taxes, and the unofficial achievement of a balanced budget.

For Canada’s exploration companies, one of the choice goodies in the federal tax code — the 15% Mineral Exploration Tax Credit (i.e., “flow-through shares”) — was extended for yet another year. After the past two and half bearish years, the extension was particularly well received.

The METC — the latest version of flow-through shares in Canadian history — was created by the Canadian government in 2000 and was set to expire after five years, but it was extended in 2006 for another two years, and has since been extended every year for only one year. (As you’d expect, the mineral exploration community has been lobbying to make the METC “permanent.”)

The federal budget has been given the thumb’s up from three of the industry’s biggest associations: the Prospectors & Developers Association of Canada, which said that it showed “continued support for growth and investment in the exploration sector”; the Mining Association of Canada, which described the return to balanced budgets as “essential to Canada preserving its long-term economic advantage”; and the Association for Mineral Exploration British Columbia, which commented that many of its members are “having difficulty raising capital in these financially challenging times, and the renewal [of the METC] is much appreciated.”

The federal government is also being supportive on two fronts of concern to miners in Canada: northern and remote infrastructure, and Aboriginal education.

The budget contains provisions to support northern development by having the federal government team with territorial governments and local municipalities to develop transportation infrastructure in the North, and providing $40 million over two years to renew the Strategic Investments in Northern Economic Development program run by the Canadian Northern Economic Development Agency.

Another mineral exploration-focused program being renewed by the federal government is its ongoing Geo-mapping for Energy and Minerals (GEM) program, which is seeing $100 million committed over seven years (2013–2020). The GEM program has the task of “advancing geological knowledge in the North to support increased exploration of natural resources and inform decisions on land use that balance conservation and responsible resource development.”

The PDAC notes that Canada’s mineral sector accounts for 20% of Canadian goods exports and 3.5% of Canada’s gross domestic product, or about $35 billion. The association asserts that “every dollar invested in basic geological mapping triggers five dollars in exploration spending by the private sector. And every dollar invested in pre-competitive geoscience leads to the discovery of in-ground resources worth between $100 and $150.”

The Mining Association of Canada is particularly encouraged by the budget’s focus on improving the education outcomes of Aboriginal youth through an agreement with the Assembly of First Nations to reform the First Nations K-12 education system through the First Nations Control of First Nations Education Act.

In a widely praised move, the federal government has committed more than $1.9 billion over three years starting in 2016 to support the Act, which the MAC notes “aims to give First Nations youth greater access to quality education and enable them to participate fully in Canada’s workforce in the future.”

With the Canadian mining industry ranking as one of the largest employers of Aboriginal people across the country, the MAC believes the “potential to increase employment is strong given the proximity of nearly 1,200 Aboriginal communities to producing and potential mining operations.”

Pierre Gratton, MAC’s president and CEO, said in a release that “getting the education system right for Aboriginal Canadians is critical, as it provides the necessary foundation for them to become full participants in Canada’s workforce.”