Federal Budget 2016 Extends Mineral Exploration Tax Credit

Canada's Liberal party released their first Federal Budget on March 22, 2016 since taking office last year. Despite projecting a staggering deficit of approximately $30 billion, the Budget contains welcome news to issuers of "flowthrough shares" and their investors as it proposes to extend the availability of the Federal Mineral Exploration Tax Credit ("METC") another year. The METC generally provides investors the ability to claim a 15% tax credit in respect of certain "grassroots" mineral exploration expenses incurred by the issuer of the flowthrough shares and renounced to the investor pursuant to specific rules in the Federal Tax Act. The METC is in addition to the ability of the investor to personally deduct the expenses renounced to them on their flowthrough shares. The METC thus provides a significant incentive to investment in the capital-intensive industry of grassroots Canadian mineral exploration and the renewal of the credit demonstrates a continued strong level of governmental support for the Canadian mining industry in today's challenging environment. The METC was to otherwise expire on March 31, 2016 and has historically been renewed annually by the Canadian federal government in its spring Budget.