Flow-through • Issues & Advocacy

Toronto, October 20, 2000 - The Prospectors and Developers Association of Canada (PDAC) is very encouraged with the announcement in the recent federal mini-budget of a temporary 15% income tax credit related to flow-through shares.

The tax credit is designed to re-stimulate investor interest in the Canadian junior mining exploration sector which has been hard hit by a deep and protracted down cycle that began in 1997. Contributing factors included a decrease in the demand for metals worldwide, persistent weakness in the price of gold and an overwhelming dominance of the risk capital markets recently by the information technology sector.

Junior companies are relied upon to conduct initial stage, grassroots exploration leading to new mineral discoveries and hopefully new mines. This is a high risk venture and is wholly dependent on access to capital supplied by interested investors. A continued lack of activity in grassroots exploration activity has placed Canada's world leading exploration sector and the discovery of future new mines at risk. This in turn could have very negative impacts on the economy of rural and northern regions in Canada, including approximately 115 communities.

According to PDAC President John Steele, " Natural Resources Minister Ralph Goodale and Finance Minister Paul Martin have been concerned about the economy of rural and northern Canada and have been attentive to the PDAC's representations about the crisis in mine exploration. It appears that they have responded in a positive and creative manner."

While details about the new tax credit are not yet available, the PDAC estimates that this initiative, in combination with the decrease in the inclusion rate for capital gains tax to 50%, also included in the mini-budget, will make a significant difference to the investor's bottom line.

The federal government has also invited their provincial counterparts to introduce their own tax credits related to flow-through shares, in order to make exploration investments in their respective jurisdictions attractive and competitive.

As stated by Steele, "Provincial and territorial mines and finance ministers were very supportive of the PDAC position and we certainly hope that they will seriously consider implementing their own tax credit. The combination of a federal and provincial tax credit, together with the decrease in capital gains tax, might just do the trick in attracting investors back to mineral exploration and provide Canada with a competitive edge."

Steele stated in conclusion that the PDAC is looking forward to working with government officials and junior companies to make investors aware of the exciting new opportunities.

For further details contact Dave Comba, tel 416 362 1969, ext. 233

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