Quebec boosts tax deduction for mining-firm investors

As of Jan 1, Quebec investors may claim 166.6% against their provincial taxes for each $1 invested in a mining company undertaking exploration. For Quebec investors, it is a return to the same level of deduction in mining stocks allowed earlier this decade.

It is estimated that in 1987, flow- through investment in mining companies in Quebec was worth $500-$600 million; last year that total dropped to an estimated $130 million. Funding dries up

Junior mining companies have been finding it difficult to raise exploration funding through the stock market. Two juniors active in the province, Augmitto Explorations (TSE), which is hoping to bring its Beauchastel gold project near Rouyn-Noranda into production this year, and Monique Exploration (ME), with interests in several properties, both recently announced the withdrawal of prospectus offerings.

“This retraction added to those of other companies, confirms the outstanding success of the common objective of our governments with regards to mining exploration in 1988 which was to reduce its volume in 1988 compared with 1987,” Monique President Andre Lacroix states, with well-intended irony, in a press release.

Flow-through financing peaked in 1987 when it is estimated about $1 billion was spent by mining companies across Canada on exploration work.

Last year the federal government moved to reduce the impact of flow- through investment by implementing legislation reducing the tax write-off from 133.3% to 100% for every dollar invested. A replacement scheme, the Canadian Exploration Incentive Program (CEIP), which came into effect Jan 1, was instituted by Ottawa, with the emphasis on the company.

Under CEIP, mining firms are allowed to claim 30% of their grass- roots exploration costs up to $10 million per year. The federal government has guaranteed the 30% rate for two years.

The Prospectors and Developers Association of Canada, in a statement released after Ottawa announced its new program last year, said it viewed CEIP “with cautious optimism.” The organization thought the new scheme complemented flow-through financing and its preliminary figures indicated the investment incentive was roughly equal to the 133.3% tax write-off allowed at the time.

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