MNDM will continue shares program.
Some northeastern Ontario business leaders feared Ottawa's decision not to renew the tax credit after its Dec. 31 expiry date would also allow the province to back out on its commitment at a time when the mining industry was enjoying its most robust up-cycles in years.
But Christine Kaszycki, Ontario's assistant deputy minister of mines and minerals, reassures junior miners and residents that the current provincial program for flow-through tax credits will continue in its present form.
"My understanding is that continuation of the program was announced in the last budget, so it's our (ministry's) expectation that it will carry on," says Kaszycki, who was posted to her position in September after previously working as Manitoba's assistant deputy mines minister.
Ontario's five-per-cent credit acts as a "top-up" to the federal 15-per-cent credit, which was rolled out in 2000.
Kaszycki says unlike tax credits in other provinces, Ontario's is not directly linked to the federal program.
She would not say what might replace Ottawa's credit, nor what further incentives the Ministry of Northern Development and Mines might be working on to keep Ontario among the top business-friendly mining jurisdictions in the world.
"We're looking at a variety of options."
The issue of the continuance of federal tax credits was raised by the Prospectors and Developers Association of Canada (PDAC) at Canada's mines ministers' annual conference in New Brunswick last September. The PDAC's recommendation received the ministers' support. They penned a letter to federal finance minister Ralph Goodale urging him to restore the credit.
Despite Ottawa posting a large surplus in November's mini-budget, there has been no indication that the Liberal government was intent on doing so. "We're not going to hear anything until after the election," says Kaszycki.
The flow-through shares program was developed and introduced in the early 1990s to encourage substantial investment in metals and mineral exploration across Canada.
Kaszycki says there must be a balance of support incentives offered for both companies and investors.
"I think flow-through shares worked extremely well over the last three or four years, coming out of that historic down-turn."
The entire program, tax credits included, has boosted equity offerings in Canada between the late 1990s and 2004 from $75 million to $450 million, and exploration spending jumping from $300 million to more than $800 million.
Residents in the Timmins-Kirkland Lake area need to look no farther on the success of the flow-through program than with their regional geoscience project, Discover Abitibi, and the multitude of gold and diamond exploration work that has rejuvenated the two northeastern Ontario mining camps.
"Timmins, Kirkland and other northeastern communities were founded on outcrop," says Timmins Economic Development Corporation chairman Dave McGirr, "and with the amount of water and swamp here, there are significant areas that are untapped from an exploration point of view.
"Northeastern Ontario is considered by many as one of the richest deposits in the world," he says, and flow-through shares are the "best possible tool" to encourage investment in the area. "Now is the time to capitalize and not take it for granted."
He calls the federal tax credit discontinuation "short-sighted" policy and says keeping those incentives in place are a valuable tool that keeps Northern Ontario "on par with the rest of the world. "If we can advance exploration, there's no doubt we'll find more mines in Sudbury, Timmins and Kirkland Lake. We've already seen the results with (Falconbridge's) Montcalm mine, (De Beers') Victor project, Tres-Or diamonds and kimberlite pipes in New Liskeard."
"We have to use every tool available to attract exploration" or risk losing exploration dollars to other global mining camps offering better incentives, says McGirr.
"In Canada, we don't have a lot of reserves earmarked," adds Timmins Chamber of Commerce president Tom Laughren. "Mining puts a great amount of money into the Canadian economy. If we don't have reserves and mines coming on stream, we'll quickly put ourselves out of business. Instead of being an economic generator, we'll be fading."
He has heard Ottawa may reexamine the flow-through tax credits in the spring budget.
"The question is do we have any bureaucrats who are pushing government for this? I would have to think probably not."
Ewan Downie, president of Thunder Bay's Wolfden Resources, a promising junior gold and base metal miner with advanced projects in Red Lake and Nunavut, expresses confidence that Ottawa's tax program will be restored.
"In reality, it's what has kept the mining industry alive."
"Last year, there was a rumour it would stop and they extended it. There hasn't been (a) mine opened up in Canada in a long time. There haven't been a whole bunch of really significant discoveries.
"Our discoveries at High Lake (in Nunavut), Bonanza and East Bay (in the Red Lake mining district) can all be attributed to flow-through financing. Without it, those discoveries would never have been made."
Ontario Mining Association president Chris Hodgson said he spent a week in Ottawa last fall lobbying to extend the federal tax credit to no avail.
The former provincial cabinet minister suggested both levels of government should consider offering incentives similar to those in Quebec, allowing junior miners to write off their exploration expenses.
"Flow-through shares allow investors to write it off. They should allow companies to write it off."
By IAN ROSS
Northern Ontario Business