The Importance of Canadian Flow-through Share Financing and the Mineral Exploration Tax Credit – by Ross Gallinger (Toronto, Canada – November 14, 2012)

PDAC Executive Director Ross Gallinger gave this speech at the Toronto Stock Exchange on November 14, 2012.

Check Against Delivery

Thank you Minister Oliver for your remarks and for being here with us this evening. We sincerely appreciate your ongoing support of our industry. Your efforts are paramount to our success, and we thank you for your hard work.

For those of you who don’t know me, my name is Ross Gallinger and I am the Executive Director of the Prospectors & Developers Association of Canada.

For 80 years, our association has been a leading voice in representing the mineral exploration and development industry. The PDAC has more than 10,000 members, both individual and corporate, and exists to protect and promote mineral exploration and development, and to ensure a robust mining industry in Canada.

As Minister Oliver and others have noted on numerous occasions, the natural resources sector, and in particular the exploration and mining sector, are vital to Canada’s economic sovereignty. Mineral exploration and junior mining operations play a key role in driving economic development, and provide employment opportunities throughout the country—especially in: Northern, Aboriginal and remote communities.

It is fitting that today we gather here at the TSX. This Exchange drives Canada’s economic prosperity, and is a big reason why we are a preeminent resource country and global leader in mineral exploration, financing, mining and related technologies, and support services.

And the figures are impressive. In 2011, we led all countries with 18% of the world’s mineral exploration spending—roughly $3 billion dollars—and that number is expected to exceed $4 billion in 2012.

Yet despite our success, we must not overlook the fact that many of our members operate as small businesses in a hugely competitive and volatile environment. The ongoing global financial crisis, and contraction of the equity markets, have had a negative impact on the exploration sector. Even with precious metals and some base metals continuing to see relatively good pricing that are benefiting operating mines, the junior sector is currently facing an array of challenges.

One way to ensure a bright future for the junior sector is through a tax system that assists the junior mining industry in raising equity. Flow-through share financing and the Mineral Exploration Tax Credit aid tremendously in early stage exploration and the funding required to bring mines into production. These two provisions, as many here would agree, are the lifeblood of the junior mining industry.

One of our goals is to make the 15% Mineral Exploration Tax Credit a permanent feature of the federal income tax system. This would provide industry with long-term certainty to plan crucial investments in exploration programs.

As previously mentioned, most of our members are small businesses. Many have no production revenues and rely on investors willing to support the high-risk nature of exploration. A reduction in investment for junior miners results in fewer drilling programs that in turn negatively impacts regional employment and income.

We believe programs like the Mineral Exploration Tax Credit will result in our industry creating more jobs in all regions of the country, will foster new business opportunities, and will raise tax revenues that allow government to provide our citizens with the best medical, educational and social services possible.

This isn’t about tax breaks for corporations—it’s about incentives that keep jobs and investment in Canada.

Thank you for joining us this evening. It’s a true honour for me to share the stage with government representatives and industry leaders who all share the same passion for mining and mineral exploration.

Thank you.

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