New Canadian Budget Deemed Mixed Bag For Mining Sector

Canada's Department of Finance presented the government’s budget for 2024, leading to new opportunities and challenges for the mining sector.

What Happened: The budget promises:

• A significant reduction in project approval times — a longstanding industry request.
• A streamlined permitting processes.
• An introduction to an Indigenous loan guarantee program.

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Federal impact assessments and permitting processes for major projects now have a target of five years or less, with a two-year target for non-federal projects.

This streamlined approach could incentivize investment by boosting confidence in project timelines.

Furthermore, the budget allocates $5 billion in loan guarantees to unlock Indigenous capital for project equity ownership.

This program aims to empower Indigenous communities and advance economic reconciliation by facilitating their participation in resource projects.

The First Nations Major Projects Coalition sees this as a “transformative step” towards achieving economic self-determination.

Concerns: The industry is wary of the government’s decision to increase capital gains taxes on corporations, trusts, and high-net-worth individuals.

The Mining Association of Canada (MAC) fears this will significantly reduce the value of the Mineral Exploration Tax Credit (METC), a key incentive for investment in mineral exploration.

"We feel this is an unintended consequence by the department of finance, perhaps [from] not understanding the full impact it has on the exploration sector," MAC’s vice-president Photinie Koutsavlis said in an interview with CIM Magazine.

Lisa McDonald, executive director of the Prospectors and Developers Association of Canada (PDAC), also shared this concern with CIM.

Although she welcomed the government's renewal of METC, she suggested adjusting the capital gains tax treatment of flow-through shares, a financing mechanism for exploration companies.

This approach could potentially broaden the investor base beyond “a relatively small group” currently dominating the flow-through share market.

The budget also modifies the Clean Technology Manufacturing Investment Tax Credit (CTMITC) to address industry concerns. Initially, the CTMITC eligibility focused narrowly on specific battery metals.

However, MAC argued that this excluded many polymetallic deposits prevalent in Canada’s geology. The government has listened, expanding eligibility to projects focusing primarily on these critical minerals.

While MAC welcomes this change, Koutsavlis cautions that delays in consultations and implementation details might still discourage mining companies from making immediate capital purchases. She also suggests expanding the CTMITC to include development costs, allowing existing mines to increase critical mineral production more rapidly.

The mining industry contributed $125 billion to the national GDP and employment for 665,000 individuals directly and indirectly. It’s also the largest private sector employer of Indigenous people and a significant customer of their businesses.

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