Canada's budget measures brighten funding prospects for critical miners

E3 Lithium

10/04/2023 11:00

(Repeats story from April 9 with no addition to text)
    By Divya Rajagopal
       TORONTO, April 9 (Reuters) - Canada's move to expand the
investment tax credit for mining companies to align it with
policies in the United States is accelerating funding talks for
critical miners, company executives told Reuters.
    Prime Minister Justin Trudeau's government proposed a 30%
investment tax credit for expenses related to the exploration of
critical minerals in the latest budget announced last month.
This incentive also covers investors planning to buy shares in
certain critical mining companies such as those in the
exploration of lithium brine.
    Company executives say the new measures would help bring in
new equity investors who stayed away from the mining sector due
to volatile capital market conditions. An early-stage
exploration project typically needs between C$10 million ($7.4
million) to C$25 million, according to industry estimates.
    "These provisions are going to be of huge help to attract
investments," said Mark Selby, CEO of Canada Nickel Company Inc
 CNC.V .
    Since the budget announcement, Selby said Canada Nickel's
ongoing discussions for a potential partnership with an
unidentified Korean battery maker have accelerated thanks to the
specific measures. The TSX Venture Metals and Mining Index is up
 4%  .GSPJX151040  since the budget, compared with a 2.7% rise
in the broader market  .GSPTSE .
    Canada is trying to match the incentives announced by the
United States under the Inflation Reduction Act which offers a
combination of tax credits and government loans worth $40
billion to support critical mineral projects.
    Canada is home to half of the world's mining companies and
is seen as a premium destination for junior miners to raise
capital, according to The Toronto Stock Exchange.
    Chris Doornbos, CEO of Alberta-based E3 Lithium  ETL.V ,
said the government's proposals open up a whole new funding
option for junior miners in Canada that was not available
before. E3 Lithium is working on the exploration of lithium from
brines in Calgary.
    "So you actually get better value for the money (raised
through flow-through shares) and now there's more of that which
is available," Doornbos said. 
    The flow-through shares are a specific feature in the
Canadian capital market, where listed mining companies raise
equity at a higher price from investors for exploration
projects, and investors in turn claim tax rebates. This helps
attract investments in risky exploration projects, company
executives say.
    Several junior mining companies in western Canada are
optimistic about the fund raising prospects and are in talks
with banks for financing, Doornbos added.
    "At Litus we are excited about how this initiative will
further ignite the strategic battery metals sector," said Ghada
Nafie, CEO and Co-Founder of Litus, a Calgary-based company
working on a technology to extract lithium.
    TSX, Canada's biggest stock exchange operator, sees the new
budget proposals as "very positive" for the mining sector but
warned that broader economic uncertainty and geo-political risks
are dominating investor sentiment, Dean Mcpherson, the Head
Global Mining, TSX told Reuters.
    Still, the mining industry has a reason to cheer.
    "These measures do level the playing and put us in a
stronger position," said Pierre Gratton, CEO of the Mining
Association of Canada.
 ($1 = 1.3488 Canadian dollars)

 (Reporting by Divya Rajagopal
Editing by Alistair Bell)
 ((divya.rajagopal@thomsonreuters.com;))