CEIP seminars aimed to educate skeptics

To educate the industry about a program that it has so far been unwilling to embrace, EMR has been holding seminars in every major city across the country.

While about 1,500 accountants, brokers, and mining personnel will have attended the seminars by the time they wrap up in New Brunswick Nov 6, skepticism still exists.

On Oct 6, the dollar value of the flow-through share agreements filed with CEIP by companies involved in exploration was $263.9 million. If the current trend continues, money invested in flow- through shares is expected to be down substantially from $850 million in 1988.

“In any investment vehicle, when there is a high level of uncertainty, investors won’t play,” said Nuinsco Resources President Douglas Hume, who claims that the old mineral exploration depletion allowance (MEDA), which CEIP has replaced, should not have been removed.

The new system was established to offer a payment equal to 30% of funds spent by companies looking for minerals, oil and gas. But unlike MEDA, which offered a tax writeoff of $133.33 on every $100 invested in flow-through shares, CEIP is paid in cash rather than through the tax system. “If something isn’t broke, why fix it?,” said Hume.

Not all of the expected decrease in flow-through investment, however, can be attributed to investors’ uncertainty about CEIP, according to Toronto tax adviser Barry Dent.

“The reduction in venture capital raised for exploration using flow-through shares is also partly due to a general lack of exploration excitement prior to the Eskay Creek gold discovery,” said Dent. “If you look at it economically, CEIP is just as good as MEDA,” he said.

“The skepticism won’t dissipate until we have gone through the first full year of taking applications,” added Chanel Boucher, director general of Incentive Programs in EMR’s Mineral Policy group. At that point, he expects to pay out around $150 million under a program that will cost just under $10 million this year to administer.

“As with any new program, we are having teething pains,” said Boucher. “Applications have been a little slow in coming and there are adjustments that need to be made.”

However, he expects the number of applications to accelerate before the year-end and that there will be no major changes in the budget unless the level of exploration picks up.

Making sure that mining companies abide by the rules of the program are 30 inspectors who will visit all of the sites for which applications are made. “The inspectors were also hired to provide any assistance that applicants may need,” said Bouchard.

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