Six provinces and Yukon are calling on the federal government to expand tax incentives for mineral exploration, arguing that smaller mining companies need additional financial support to turn promising discoveries into operating mines.
The appeal comes as the mining industry presses Prime Minister Mark Carney’s Liberal government to honour its 2025 election promise to broaden eligibility for the Canadian Exploration Expense (CEE) tax category. The proposed change would allow companies to use flow-through financing for engineering work, economic assessments and feasibility studies required before a mining project can proceed to construction. Nova Scotia, Manitoba, Saskatchewan, Alberta, British Columbia and Yukon have written to Ottawa in support of the proposal. Their request comes ahead of the federal government’s upcoming budget, as the industry seeks measures to strengthen Canada’s position in the global critical minerals market. The Association for Mineral Exploration (AME), which represents companies involved in mineral exploration, has led the campaign. Its president, Todd Stone, said junior mining companies face significant difficulties raising money during the transition from discovering a mineral deposit to determining whether it can be developed commercially. Mining projects typically require extensive technical work after an initial discovery. Companies must conduct engineering assessments, examine environmental conditions, estimate construction costs and determine whether a deposit can be mined profitably. These studies can be expensive, yet smaller exploration companies often struggle to attract traditional investors to finance them. Industry representatives refer to this period as the “valley of death,” when a potentially valuable discovery can remain undeveloped because the company cannot secure sufficient funding to complete the studies required for a final investment decision.
Under the existing system, flow-through shares allow eligible exploration companies to transfer certain qualifying expenses to investors, who can claim tax deductions. However, engineering and feasibility studies needed to advance projects generally fall outside the eligible exploration expenses covered by the proposed rules. The industry wants Ottawa to broaden the definition of eligible expenses to include preliminary economic assessments, pre-feasibility studies, engineering work, geotechnical investigations and environmental baseline studies. If the government does not expand the existing rules, the association has proposed creating a separate Mineral Project Advancement Tax Credit to support this stage of development. A report commissioned by the Association for Mineral Exploration from Ernst & Young estimates that expanding eligibility could help generate between 14,000 and 34,000 additional jobs over 10 years. The report also estimates that increased investment could add between $5.2 billion and $12.2 billion to Canada’s gross domestic product over the same period. These figures are projections based on potential investment scenarios, rather than guaranteed economic outcomes. The proposal has attracted support from companies and industry organisations that argue Canada needs to develop its mineral resources more quickly. Critical minerals such as nickel, lithium, copper, graphite and other materials are important to electric vehicles, battery manufacturing, renewable energy infrastructure, electronics and defence technologies. Industry representatives say Canada risks losing investment to other jurisdictions if promising projects cannot secure the financing needed to move beyond exploration. They argue that making technical studies eligible for tax incentives could help more projects reach construction and eventually generate jobs, export revenues and government tax income. British Columbia has highlighted the financing challenges faced by mining projects in the later stages of permitting. In a letter to federal ministers, B.C. Mining Minister Jagrup Brar said projects can struggle to attract investment while completing the extensive technical assessments required before development. The lack of visible progress during this period can make investors reluctant to commit additional funds. Ottawa, however, has pointed to other measures intended to support the mining sector. The federal government recently expanded eligibility for the Critical Mineral Exploration Tax Credit to include 12 additional critical minerals. Finance Minister François-Philippe Champagne’s office has also highlighted the new Productivity Mega Deduction, which is intended to encourage businesses to invest in equipment and expand operations. The government has argued that existing and recently announced measures provide substantial support for mining projects. Finance Canada has also raised concerns about the potential revenue cost of expanding eligible expenses, with estimates varying between government and industry analyses. The debate centres on how best to allocate public support while ensuring that taxpayers receive meaningful economic benefits. Industry groups argue that a targeted incentive could help private companies finance technical studies without requiring governments to fund individual projects directly. Critics of broader tax incentives may question whether the additional investment and employment generated would justify the reduction in federal tax revenue.
The request comes at a time when Canada is seeking to strengthen domestic supply chains and reduce reliance on foreign sources of critical minerals. Expanding mineral production could support manufacturing, energy transition projects and economic development in resource-dependent regions, including northern communities. For Alberta and other resource-producing provinces, the proposed changes could help mining companies secure investment and advance projects that might otherwise remain stalled. However, the ultimate impact would depend on the federal government’s decision, the eligibility rules adopted and whether companies can demonstrate that their projects are commercially and environmentally viable. With the federal budget approaching, provincial governments and mining industry representatives are urging Ottawa to clarify its position. They say expanding the tax credit would help bridge the funding gap between mineral discovery and mine development, potentially allowing more Canadian projects to move forward.