2012 Federal Budget to Reduce Mining ITCs

Much of the economic potential of Canada's North lies beneath the ground, in the form of vast natural resources. Discovering and developing these resources in some of the world's most challenging terrain is a daunting undertaking, requiring considerable investment of time, capital and expertise. Exploring for and developing natural resources is a risky activity where success often occurs (if at all) after many failures, and the costs involved (especially in Canada's North) make financing this high-risk activity very difficult.

For many years the income tax system has provided a valuable incentive to Canadian mining companies engaged in what is commonly referred to as "pre-production mining" activities. Qualifying expenditures made by a company on these activities entitle it to an "investment tax credit" or "ITC", which is very valuable because each dollar of ITC reduces the amount of the company's income tax payable by $1. Thus, unlike an expenditure that is simply