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Capital Crisis

Canada’s mineral exploration sector faces capital crisis

In the midst of ongoing economy uncertainty, the risk tolerance of investors has dropped, drying up the sources of capital upon which junior mineral exploration companies depend. This capital crisis is particularly pronounced for companies engaged in high-risk grassroots exploration.
In 2012 expenditures on exploration dropped by $700,000 to $2.2 billion compared to $2.9 billion 2011 and are projected to decline further to $1.8 billion in 2013 – an almost 40 per cent drop. The number of junior financings in 2013 has fallen by approximately 25 per cent from 2012 levels, reaching the lowest level in 15 years, while the value of financings has decreased by nearly 60 per cent.

 Nearly half of junior explorers have working capital balances of less than $200,000 while more than 340 have less than $50,000. Mineral exploration is the lifeblood of the mining industry and sustained exploration is required to discover new deposits; financial health must be restored to the junior sector to ensure the future viability of Canada’s mining industry, an industry that accounts for 3.9 per cent of the economy and employs 320,000 Canadians.

Renew the Mineral Exploration Tax Credit

The mineral exploration tax credit (METC) which will expire in March 2014, has encouraged Canadian investors to invest in exploration, and has helped Canada become the top global destination for mineral exploration since its inception in 2000. Its renewal will help sustain capital flows for exploration.

Create a targeted METC for remote/northern regions

Exploration projects in northern and remote regions can be a tough sell to investors due in part to facing costs that can be several times higher than for comparable activities in southern Canada. PDAC is proposing a targeted METC for these areas (25% instead of 15%), to attract investors to these projects and sustain economic benefits to remote/northern communities.

Create a $500M venture capital fund for grassroots exploration

On a cost-shared basis with industry, this fund would help to sustain grassroots exploration in Canada. An example is Quebec’s Sidex Fund, with capital of $50M over five years.

Revision of flow-through (FT) regulations

Junior companies are struggling to maintain their public company status. PDAC suggests allowing companies to apply 15% of annual FT funds to general/administrative expenses, to a maximum allowance of $100,000 per year.

The Mineral Exploration Tax Credit & the Future of the Mining Industry in Canada

Letters of Support

Click here to view the Letter of Support from The Honourable Peter Taptuna, Deputy Premier Minister Responsible for Mines, Government of Nunavut.

Click here to view the letter of support from The Honourable Scott Kent, Minister of Energy, Mines and Resources, Government of Yukon.

Click here to view the letter of support from The Honourable Tim McMillian, Minister Responsible for Energy and Resources, Government of Saskatchewan.

Click here to view the letter of support from The Honourable Michael Gravelle, Minister of Northern Development and Mines, Government of Ontario.