© Reuters. FILE PHOTO: Canada’s Prime Minister Justin Trudeau applauds as Canada’s Deputy Prime Minister and Finance Minister Chrystia Freeland presents the federal government’s budget for fiscal year 2023-24 in the House of Commons on Parliament Hill in Ottawa, the
By Divya Rajagopal
TORONTO (Reuters) – Canada’s decision to expand the investment tax credit for mining companies to align it with U.S. policies is speeding up financing negotiations for critical miners, company executives told Reuters.
Prime Minister Justin Trudeau’s government proposed a 30% investment tax credit for spending related to critical mineral exploration in the latest budget announced last month. This incentive also covers investors who plan to buy shares in certain critical mining companies, such as those exploring lithium brine.
Company executives say the new measures would help attract new equity investors who have 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) and C$25 million, according to industry estimates.
“These provisions will go a long way in attracting investment,” said Mark Selby, chief executive officer of Canada Nickel Company Inc.
Since the budget announcement, Selby said that Canada Nickel’s ongoing discussions for a possible partnership with an unnamed Korean battery maker have accelerated thanks to the targeted measures. The TSX Venture Metals and Mining Index is up 4% since budget, compared with a 2.7% rise in the broader market.
Canada is trying to match the incentives announced by 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.
Canada is home to half of the world’s mining companies and is seen as a prime destination for junior miners to raise capital, according to the Toronto Stock Exchange.
Chris Doornbos, chief executive of Alberta-based E3 Lithium, said the government’s proposals open up a whole new financing option for junior miners in Canada that wasn’t available before. E3 Lithium is working on brine lithium exploration in Calgary.
“So you actually get better value for money (earned through direct flow shares) and there’s more of that available now,” Doornbos said.
Flow-through shares are a specific feature of the Canadian capital market, where publicly traded mining companies raise capital at a higher price from investors for exploration projects, and investors in turn claim tax rebates. This helps attract investment in risky exploration projects, company executives say.
Several junior mining companies in western Canada are optimistic about the prospects for fundraising and are in talks with banks for financing, Doornbos added.
“We at Litus are excited about how this initiative will further boost the strategic battery metals sector,” said Ghada Nafie, CEO and co-founder of Litus, a Calgary-based company working on technology to extract lithium. .
TSX, Canada’s largest stock exchange, sees the new budget proposals as “very positive” for the mining sector, but warned that broader economic uncertainty and geopolitical risks are dominating investor sentiment, Dean told Reuters. Mcpherson, Head Global Mining, TSX.
Still, the mining industry has reason to rejoice.
“These measures level the game and put us in a stronger position,” said Pierre Gratton, executive director of the Mining Association of Canada. ($1 = 1.3488 Canadian dollars)