TORONTO, March 1 (Reuters) - The Canadian government outlined plans on Sunday to extend for a year exploration tax credits offered to miners and broaden the scope of the credits, in an attempt to boost a sector that has been ravaged by falling commodity prices and a scarcity of funding.
The government said it hopes the tax credit, which is aimed at boosting exploration activity within Canada, will support hundreds of small companies.
Canada is home to the vast majority of the world's metal and mineral exploration companies, which have been hit hard as copper, gold, iron ore and other commodity prices have slumped over the last four years.
"We are extending the mineral exploration tax credit to provide junior mining companies access to the venture capital they need," said Finance Minister Joe Oliver on the sidelines of the sector's largest annual show, the Prospectors and Developers Association of Canada Convention, which got under way in Toronto on Sunday.
Canada is extending the 15 percent tax credit for investors in flow-through shares for an additional year, until March 31, 2016. Flow-through shares, which can only be issued to finance a company's exploration efforts, allow early stage miners to pass on a tax credit to investors that buy them. The government said since 2006, the credit has helped juniors raise more than C$5.5 billion ($4.4 billion) for exploration.
Even with the tax credit however, miners have struggled to raise funds. The latest data from research firm Oreninc shows that cash raised from flow-through funding fell to C$373 million in 2014 from about C$710 million in 2012, when metal prices were much stronger.
The government also said it plans to amend the law to ensure that costs associated with undertaking environmental studies and community consultations, required to obtain exploration permits, will now be eligible for treatment as exploration expenses. This would make them deductible for tax purposes and allow miners to also fund these costs via the issuance of flow-through shares.
Costly, lengthy and grueling environmental studies and community consultation processes in Canada are among the factors that have prompted many miners to bet on projects in politically risky jurisdictions overseas in recent years.
The government said it recognizes that these costs are part of doing business in Canada, and it hopes the moves enhance the attractiveness of investing in Canada. (Reporting by Euan Rocha; Editing by Cynthia Osterman)