Timmins Report The end of MEDA hurts exploration

“Exploration is coming to a screeching halt,” said Robert Middleton, owner of Robert S. Middleton Exploration Services Inc. “It’s serious. It’s very serious.”

Jim Richard, president of Overburden Exploration Service Ltd., one of the leaders in last year’s fight to save the old flow-through shares program, said most of the predictions of layoffs are now coming true.

He said exploration activity is down 80% from last year.

“It’s very slow and has been for awhile,” he said. “Basically, everything’s turning out the way we saw it.”

Although an uncertain market for gold is causing some problems, Richard said, changes to the flow- through shares system can also be blamed.

The original flow-through share program offered a combined tax break of 100% with an additional depletion allowance of 33%. That meant there was a 133% tax write- off on mining exploration investment.

The federal government eliminated that program last year and replaced it with CEIP (The Canadian Exploration Incentive Program). CEIP started in January and provides 30% direct quarterly payments on investment and a tax break of up to 100%.

The old flow-through shares package officially ended at the end of February. For the past two months, investors could continue using the old flow-through shares formula or use CEIP.

But uncertainty about the government’s regulations for CEIP is said to be hurting exploration investment.

Kian Jensen, owner of Kian A. Jensen exploration and Consulting services, said the three contract workers and two employees he had were laid off in February. “I’m down to myself now,” Jensen said.

He said business is about 50% of what it was last year. He added he hopes the company will continue but if his accountant says close up, he will not argue.

“I’ll fold up,” he said. “And if I fold up, I’ll write a nice letter to the government to tell them why.”

Middleton predicted about 50% of the people working in mining exploration would be laid off.

He said one main problem is changes to other areas of taxation, such as the increased tax on capital gains. Middleton said people are afraid to invest.

He said the problem is made worse by the current drop in gold prices. Middleton said he has 35 employees but may only have half that amount soon. He said he once had as many as 55 employees.

“The real figures will become obvious in May because that’s when people should be coming back to work, when the snow’s gone,” he said.

Richard said about 80% of the employees at his service company, Overburden Exploration Service Ltd., have been laid off. He would not say how many employees that represents.

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