PDAC President Breaks Down Budget Benefits

The following is a message sent to members of the Prospectors & Developers Association of Canada on Jan. 28 by the organization’s president, Jon Baird, in response to the federal government’s new budget.

As you know, our finance and taxation committee worked long and hard on behalf of our members and the exploration sector in general in the months leading up to the release of the federal government budget.

The main objective behind the proposals and recommendations that we put forward to the government in pre-budget consultations was to ensure that exploration companies survive the current economic downturn in readiness for an inevitable turnaround in the economy and a rebounding of the mineral industry.

We were optimistic. However, our optimism was tempered with the knowledge that the exploration sector was competing with myriad requests from other business sectors and demands for social spending to shore up a flagging economy.

Here is a summary of those items contained in the 2009 budget that are pertinent to the mineral industry and, more specifically, to the exploration sector.

Mineral Exploration Tax Credit (super flow-through program)

The budget will extend the program, which was due to expire this year, for one more year until March 31, 2010. Funds raised with the credit during the first three months of 2010 can support qualifying exploration until the end of 2011. The net cost of this program to the government is an estimated $55 million over the next two fiscal years.

The PDAC had requested a temporary increase of this program to 30% from the current 15% for two years. The association also advocated for a portion of an exploration company’s overhead costs to qualify as CEE.

Infrastructure

Budget 2009 will invest almost $12 billion in new infrastructure funding over two years. This includes funding for roads, bridges, and other programs. Such measures will likely increase demand for commodities.

The PDAC recommended that the government invest in transportation infrastructure such as all-weather roads and bridges, particularly in the North, pointing out that all-weather roads improve the economics of exploration projects.

Aboriginal programs

Budget 2009 will invest an additional $100 million over three years in the Aboriginal Skills and Employment Partnership to help aboriginal Canadians receive skills and employment training. A further $75 million will be targeted towards a new two-year Aboriginal Skills and Training Strategic Investment Fund to help aboriginal Canadians receive specific training for employment opportunities that become available to them.

The PDAC advocated for funding that would support training and education for aboriginal Canadians in the mineral exploration and mining sector.

Sustaining communities

Budget 2009 provides for $1 billion over two years to be invested in a Community Adjustment Fund. The intent of the fund, to be delivered nationally, is to help communities, particularly those that are dependent on natural resources, to foster economic development and diversification.

Northern development

The 2009 budget contains a number of programs aimed at stimulating investment in Northern Canada. These include: $50 million over five years for a new economic development agency for the North; $90 million over five years to renew the Strategic Investments in Northern Economic Development program; a High Arctic research station; and $85 million over two years to upgrade Arctic research facilities.

Common securities regulator

In its budget document, the federal government sets forth its plan to push forward with a common securities regulator, including the establishment and funding of an office to assist in the transition. This office will provide for the participation of nominees from willing provinces and territories and will be expected to deliver a transition plan within one year. The government also intends to table a securities act this year.

The PDAC has been advocating for a common securities regulator for some years now and has publicly expressed its satisfaction at these developments. The challenge now will be in the implementation of the regulator.

Innovation

The budget referred a number of times to the importance of innovation, and $170 million over two years was earmarked for marketing and innovation in the forestry industry. However, there was no mention of direct support for the Canadian Mining Innovation Council. This new initiative has as its objective the development and implementation of national strategies for innovation in exploration, deep mining, processing and environmental control. The PDAC intends to continue to advocate for funding for this program.