Draft legislation published in December to extend by 12 months the timelines for spending capital raised by junior exploration and mining companies via flow-through shares is a welcome reprieve for companies struggling to cope with the impact of the COVID-19 pandemic, says Felix Lee, president of the Prospectors & Developers Association of Canada (PDAC).
“The Canadian mineral exploration sector has seen many junior companies and small businesses facing pandemic-imposed challenges such as voluntary shutdowns or difficulty accessing the field due to travel restrictions,” he says. “The proposed legislation provides more time to incur eligible expenses, allowing the companies to safely plan when to best continue operations and avoid penalties that would normally come from not meeting original flow-through share timelines.”
The Department of Finance says the proposed changes are aimed at protecting jobs and safe operations at junior exploration projects and for other flow-through share issuers and help them through the significant challenges many are facing as a result of the pandemic, including voluntary shutdowns or difficulty accessing the field.
“This initiative would protect the good, well-paying jobs that many Canadians depend on, including those in rural, remote, northern and Indigenous communities,” according to the government.
Mr. Lee says the response from PDAC members to the proposed changes has been very positive, although many have voiced concern about the time that elapsed between the government’s initial announcement of the proposed legislation in July last year and the draft legislation published in December.
“We recognize that ongoing travel and access restrictions, as well as heightened health, safety and hygiene requirements, will continue to have an impact on mineral exploration and mining for the foreseeable future as companies look to maintain personal distancing and increased hygiene protocols, and our members have been appreciative of the continued supports the government has put in place,” he says.
Nevertheless, adds Mr. Lee, the mineral exploration sector has always needed to be effective in working in remote and challenging environments and was therefore perhaps able to react more quickly than others when faced with health and safety, transportation and logistical challenges that have resulted from the COVID-19 pandemic.
“In fact, many companies in our industry provided direct support to communities and stakeholders and have been instrumental in adding needed resources through this pandemic,” he says.
The impact of the COVID-19 pandemic on the mining exploration sector varied across Canada in 2020, adds Mr. Lee.
“In regions with robust infrastructure such as transportation, road access and telecommunications, companies were able to return to near-normal operating levels at points during the year. As a result, current estimates suggest Canadian exploration spending dropped by less than 10 per cent in 2020 compared to 2019. However, companies operating in regions lacking such infrastructure have faced greater challenges and, as an example, exploration spending in the territories in 2020 will likely be less than half of what was put into the ground in 2019,” he says.
However, the outlook for 2021 is much rosier, adds Mr. Lee.
“With encouraging news on vaccines, and given the essential nature of our sector, we hope to see exploration activity rebound materially over the next year, particularly given sector investment was strong through the second half of 2020,” he says.
For more information, visit pdac.ca.
Advertising feature produced by Randall Anthony Communications with Prospectors & Developers Association of Canada. The Globe’s editorial department was not involved.