Federal budget gives miners goodies but no tax cuts

The tabling of Canada’s new federal budget on March 19 was the number one event affecting Canada’s miners during the week ended March 23 — the twelfth trading week of 2007.

* For over-taxed Canadians, the continued growth in federal-government spending is truly shocking, with this latest budget ringing in at $200 billion — or $5,800 for every man, woman and child in the country. Despite having a supposedly conservative party in power, projected spending for the upcoming fiscal year is up $25 billion from last year, and comes on the heels of a succession of massive budget increases since 2000.

Regrettably, there is little in the way of tax cuts in this budget, either personal or corporate, though there are a few goodies for the mining industry overall.

Most notably, some $60 million in new money is being allocated for a much-needed streamlining of environmental assessment and permitting. A new “Major Projects Management Office” is being created with a commitment to halve the regulatory review period.

For mineral explorers, the good times will keep rollin’, with the ever-popular flow-through-share scheme — the Mineral Exploration Tax Credit — being extended for another year. Money under the newly extended program must be spent on exploration by the end of calendar 2009.

On the labour front, the federal government is spending more on aboriginal job training, which will be critical to solving the staffing shortages at remote mines in Canada’s North.

The federal Aboriginal Skills and Employment Partnership (ASEP) initiative with provincial and territorial governments, aboriginal organizations and the private sector has had a budget of $85 million over six years, supporting 7,000 aboriginals in nine projects across Canada, including a training program at the Victor diamond mine in northern Ontario.

With this new budget, the federal government will provide another $105 million for ASEP over the next five years to provide skills training to an additional 9,000 aboriginals.

(On the downside at Victor, De Beers was blindsided by a proposed new 5-13% tax on diamond mining in Ontario, which would replace the current 10% rate for other mines. The new proposal was in the Ontario government’s new budget tabled on March 22.)

The federal budget has already drawn the support of the Mining Association of British Columbia and the Association of Mineral Exploration of British Columbia.

However, the Mining Association of Canada and the Prospectors and Developers Association of Canada each gave the budget mixed reviews, owing to the end of some tax breaks for oilsands development and an overall failure to expand spending on the geosciences, particularly the Cooperative Geological Mapping Strategy.

For our more charity-minded readers, the federal government is wisely removing the last of the capital-gains taxes imposed on listed stocks donated to private foundations, building on last year’s decision to remove them on stocks donated to public foundations.

Last year’s decision helped precipitate a small avalanche in charitable donations, and we expect this latest capital-gains exemption to generate very substantial donations to private foundations.

The Conservative Party’s budget is likely to pass in the spring with the support of the Bloc Quebecois party.

* The Cigar Lake uranium project in the Athabasca basin has serious ground and water problems, but operator Cameco is still sanguine about its feasibility.

Delays, because of flooding, and a 50% increase in capital costs, to accommodate changes to the mine design and the steeply rising cost of construction everywhere in Western Canada, were enough to move all of 2% of the project’s reserves back into the indicated resource category.

You could chalk that up to today’s record uranium prices, but not so: the project economics are based on uranium oxide prices between US$30-US$40. Cigar Lake’s superb grade — over 20% U3O8 — simply makes the project very hard to kill.

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