Canada proposes 30 percent investment tax credit for exploration of critical minerals

April 10, 2023

Canada has proposed a 30 percent investment tax credit for expenses related to the exploration of critical minerals in the latest budget. The incentive is designed to help Canada align with policies in the United States under the Inflation Reduction Act which offers a combination of tax credits and government loans worth $40 billion to support critical mineral projects in the U.S.

Reuters reported that the Canadian incentive also covers investors planning to buy shares in certain critical mining companies such as those in the exploration of lithium brine.

Company executives told Reuters that the new measures would help bring in new equity investors who stayed away from the mining sector due to volatile capital market conditions. An early-stage exploration project typically needs between C$10 million ($7.4 million) to C$25 million, according to industry estimates.

“These provisions are going to be of huge help to attract investments,” said Mark Selby, CEO of Canada Nickel Company Inc.

Since the budget announcement, Selby said Canada Nickel’s ongoing discussions for a potential partnership with an unidentified Korean battery maker have accelerated thanks to the specific measures. The TSX Venture Metals and Mining Index is up 4 percent since the budget, compared with a 2.7 percent rise in the broader market.

Canada is home to half of the world’s mining companies and is seen as a premium destination for junior miners to raise capital, according to The Toronto Stock Exchange.

TSX, Canada’s biggest stock exchange operator, sees the new budget proposals as “very positive” for the mining sector but warned that broader economic uncertainty and geo-political risks are dominating investor sentiment, Dean Mcpherson, the Head Global Mining, TSX told Reuters.
Still, the mining industry has a reason to cheer.

“These measures do level the playing and put us in a stronger position,” said Pierre Gratton, CEO of the Mining Association of Canada.



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