Federal budget good news for city, so so for mines

The new federal budget is good news for Whitehorse and a bit of a toss-up for Yukon's mining companies.

The new federal budget is good news for Whitehorse and a bit of a toss-up for Yukon’s mining companies.

The preservation of the gas tax fund is a big relief for Yukon’s municipalities because it makes up a big portion of their budgets. The federal government committed to protecting the gas tax fund in the 2012 budget, and this year they’ve decided to peg it permanently to the rate of inflation.

That means municipalities now know the funding is safe, and they have a much better idea of how much they’ll get each year.

“It’s good news that the federal government is providing two things: ongoing funding of existing programs, and that level of certainty to focus their planning efforts,” said Whitehorse’s director of corporate services, Robert Fendrick.

“It’s very exciting for us, and good for the local taxpayer. The other options would be to build up taxes, but whenever we get external funding, we don’t have to do that as much,” said Fendrick.

The money from the gas tax fund could be used to bolster other funding like the Build Canada Fund, or to help bail out Mt. Sima.

“It would allow possible freeing up of funds for recreational facilities. The immediate plan for Sima is to work with council to discuss what our options are going forward. There’s no real direct tie and this point, though it is an allowable use,” Fendrick said.

On the industry side, things aren’t quite so rosy.

“It’s a bit of a mixed bag,” said Mike Kokiw, executive director of the Yukon Chamber of Mines. “There is the continuation of the mineral exploration tax credit for flow-through shares for investors. Basically what that means is there are certain expenses that are tax deductible on behalf of the company or mining organization. By selling those shares, they pass that tax benefit on to the shareholder, or the investor. That investor is now able to use that tax credit.”

But two important tax credits for the mining sector are being scaled back, Kokiw explained.

The first is the accelerated cost of capital allowance, which gives companies breaks on the costs of manufacturing. It will be phased out by 2020.

“While it doesn’t have much of an impact right now, it does affect companies that are in that pre-feasibility phase. It will affect some of their tax benefits, basically,” Kokiw said.

“And the one that’s really pretty drastic is the Canadian exploration expense. That’s the one that could have an impact on the Yukon,” he said.

The exploration expense helps with the costs of building new mines and sinking mine shafts. Its loss could have an impact on future mines like Victoria Gold Corp.‘s Eagle project and North American Tungsten’s Mactung project.

“Basically, it allows expenses for removing overburden or sinking mine shafts, all the kinds of expenses associated with pre-production mines, and that’s where a lot of our stuff falls. It was 100-per-cent deductible before, and it’s now moving to 30-per-cent deductible. Some of those changes could have an impact on companies that are starting construction in the next year or two,” said Kokiw.

Kokiw was also optimistic about the federal government’s focus on developing a stronger skilled labour workforce, and the promise to help fund Yukon College’s mine training programs.

Contact Jesse Winter at

jessew@yukon-news.com

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