Recent market conditions have exacted a further toll on the exploration sector and prevented the new “super” flow-through share program from performing to expectations.
Super flow-through shares are a federal initiative that provides a 15% tax credit in addition to the existing 100% deduction of eligible exploration expenditures from the federal portion of one’s taxes through regular flow-through shares.
During the first six months of 2001, total financings by Canadian junior companies for exploration projects worldwide experienced a further decline of 43%, compared with the corresponding period in 2000. As a consequence, exploration spending by juniors continues to languish at low levels, and little comfort can be derived from the fact that domestic declines have been less intense than levels outside Canada. Exploration expenditures by Canada’s top producing companies continues to decline in both Canada and abroad, with the proportions remaining at a ratio of 1:4, respectively, since 1998.
In spite of the difficult market conditions, there are some signs of positive change in financings, and these can be attributed to the super flow-through share program. Although these levels of activity are not yet sufficient to create the turnaround that is hoped for, given the circumstances, it’s encouraging such levels have occurred at all.
Building on this development, the Prospectors & Developers Association of Canada, in partnership with Natural Resources Canada, has embarked on a campaign to increase awareness of the new federal and provincial tax credits and promote their use. This campaign will be timed to coincide with the traditional fourth-quarter increase in investor activity. Since flow-through shares funds can be spent only in Canada, an anticipated strengthening of the economy, combined with a turnaround in investor confidence, would place Canada in an advantageous and competitive position.
— The preceding is an excerpt from a brief submitted by the Prospectors & Developers Association of Canada to the Energy and Mines Ministers Conference held in Quebec City in September 2001.
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