Flow-through • Issues & Advocacy

June 6, 2002

Hon. John Manley, P.C., M.P.
Minister of Finance
140 O’Connor Street
Ottawa, ON K1A 0G5 FAX: 995-5176

Dear Minister:

At the outset on behalf of the Prospectors and Developers Association of Canada (PDAC), the Association des prospecteurs du Quebec and the British Columbia & Yukon Chamber of Mines (BCYCM), we would like to congratulate you on your appointment as Finance Minister. We wish you success in your new role and feel confident you will execute your responsibilities in a manner similar to your accomplishments at Industry Canada.

The reason for this letter is to make you aware of 4 minor changes our associations would like the Government to consider to the Investment Tax Credit for Exploration in Canada (ITCE) a temporary flow-through share program that was announced in October 2000 and ends December 31, 2003. These changes have been communicated to your predecessor and departmental officials over the past several months and it is our hope that these changes may be announced in the next Economic Statement or Technical Budget by the Government.

We have kept officials informed of how the program is working, which is well but not as well as everyone had hoped. We currently believe $160 million was raised in 2001, a little more than half the amount budgeted.

We believe the following changes to the eligibility rules will make the program more attractive to investors:

• extend the “buy” period from December 31 to the end of February to coincide with the traditional RRSP season potential investors are familiar with;

• designate between 10% - 15% of money raised to be eligible to pay for “hard dollar” costs such as prospectuses, offering memorandums, broker sponsorship fees, listing and disclosure costs;

• presently on the buy side only individuals can participate. Our associations would like to extend this to include bona fide mining companies in order to access significant pools of potential investment capital.

• extend the “spending” period in the final year of the program from December 31, 2003 to December 2004. Having to spend the money shortly after it is raised was one of the major problems of the previous Mineral Exploration Depletion Allowance (MEDA) program from 1983-1987. The government subsequently eliminated this fault by extending the spending period to the end of the following year. The overheating and non- compliance problems of the MEDA years were overcome. The PDAC is aware that many issuers are unaware that the current ITCE program is reverting in its final year to the old original format with the money raising and spending period ending on December 31, 2003. Since much of the money for this type of program is traditionally raised in the fourth quarter, we think the spending period should not coincide with the final days of financing.

The members of our associations remain hopeful that investors will start to look again at the resource sector as a viable investment area now that some of the shine has gone off the dot.com companies. Unfortunately, over the past several years the large brokerage houses have let go most of their experienced mining investment specialists, so there is much education to cover with these houses, all to be condensed into the remaining year of the program.

We welcome any suggestions you and your officials might have as to how we might further promote this very important program. We remain grateful for the opportunity the Government provided junior mine exploration companies by announcing this program, and we will continue to work hard and in conjunction with Natural Resources Canada and Canada Customs and Revenue Agency to attract the investment dollars needed to grow our industry.

Yours sincerely,

Bill Mercer, President PDAC
Shari Gardiner, President BCYCM
Anne Slivitzky, president du a.p.q.

Cc Reginald Belair, MP Guy St. Julien, MP
Benoit Serre, MP Ray Bonin, MP
Hon. Herb Dhaliwal, P.C., M.P.

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