Peterson McVicar Blog

January 2023 Edition

The New Critical Mineral Exploration Tax Credit

The 2022 federal budget introduced a new Critical Mineral Exploration Tax Credit of 30% (“CMETC”) for eligible exploration expenses on the following specified minerals used in the production of batteries and permanent magnets: copper, nickel, lithium, cobalt, graphite, rare earth elements, scandium titanium gallium, vanadium, tellurium, magnesium, zinc, platinum group metals and uranium. The CMETC applies to expenditures renounced under eligible flow-through share agreements entered into after April 7, 2022 and on or before March 31, 2027.

For exploration expenses to be eligible for the CMETC, a “qualified person” under National Instrument 43-101 – Standards of Disclosure for Mineral Projects musts certify that the expenditures that are intended to be renounced to flow-through share investors will be incurred as part of an exploration project that targets primarily the specified minerals. The Canada Revenue Agency has prescribed a form for this certification, which is available online.

If the qualified person cannot demonstrate that there is a reasonable expectation that the minerals targeted by the exploration are primarily specified minerals, then the related exploration expenditures would not be eligible for the CMETC. Any credit provided for ineligible expenditures can be recovered from the flow-through share investor that received the credit.