BC boosts tax credit for exploration in beetle-kill zone

Vancouver — British Columbia is using tax credits in a bid to spur mineral exploration spending in vast areas of the provincial forest that are being ravaged by an infestation of Mountain Pine Beetles.

The province hopes to attract more activity in beetle-ravaged areas by raising the credit that is currently available under B.C.’s Mining Exploration Tax Credit program to 30% from 20%.

Measures outlined in the recent provincial budget indicated that the tax credit would be available to investors in flow-through shares of companies who are engaged in grassroots mineral exploration in areas infested by the bugs.

Mountain Pine Beetles attack mature Lodgepole pine trees by laying eggs under the bark. When the eggs hatch, the larvae mine the phloem area beneath the bark and eventually cutting off the tree’s supply of nutrients and killing it.

As an estimated 92,000 sq. km of B.C. interior forest is now threatened, the province is preparing to deal with the economic consequences of a sharply reduced timber harvest in the coming years that could affect 25,000 families in 30 interior communities.

Part of the solution appears to lie in an economic diversification plan that aims to attract more mining companies into the threatened areas.

A provincial mining official welcomed the move, saying that the ravaged area covers operating mines such as Taseko Mines’ (TKO-T, TGB-X) Gibraltar copper-molybdenum operation and Teck Cominco’s (TCK.B-T, TCK-N) Highland Valley Copper mine.

Efforts to harvest timber before it loses its value have led to the construction of new roads that will benefit exploration firms.

“Any time you have new roads, it is a starting point for exploration,” says Tom Schroeter, a senior regional geologist with B.C.’s Geological Survey Branch.

However, he warns that exploration efforts in the beetle-ravaged forests will be hampered by a thick layer of overburden that has deterred prospectors in the past.

Meanwhile, eligible exploration outside the so-called beetle-kill zones will continue to qualify for the existing 20% tax credit, a government official said.

The federal government has a non-refundable 15% tax credit for specified flow-through share-financed grassroots exploration. That program expired at the end of 2005 and was renewed in the 2006 federal budget for flow-through share agreements entered into between May 1, 2006 and April 1, 2007.

Current indications are that the March 19 federal budget will not extend that program.