These 12 critical minerals just got a tax credit boost that could spark a new wave of exploration
The federal government’s move to expand the Critical Mineral Exploration Tax Credit (CMETC) to cover a dozen additional minerals could unlock a new wave of exploration activity across Canada, says Michael Long, a tax partner at KPMG who has long advocated for the change.
The 30 per cent CMETC — first introduced in 2022 — offers investors a higher tax incentive for financing exploration of minerals considered essential to Canada’s clean energy and technology supply chains. This year’s federal budget adds bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten to the list of minerals eligible for the higher incentive.
“By including these additional 12 minerals, the government has made exploring for these critical minerals more attractive,” said Long. The expansion will encourage investment by helping junior mining companies access capital from equity markets to fund exploration of these specific minerals, he said.
Canada’s flow-through share system allows companies raising exploration capital to offer individual investors shares that not only give the buyer a tax deduction but an additional tax credit.
“An individual investor provides the funding to a mining company. The company spends that money on qualifying exploration and then renounces or passes those deductions to the investor,” Long explained.
“So, if an investor gives a mining company $100, that company spends it exploring for minerals — and the investor can deduct the $100 as an exploration expense on their personal tax return.”
The CMETC builds on this by adding a tax credit sweetener for those investors. Whereas the Mineral Exploration Tax Credit (METC) provides a 15 per cent credit for exploration spending for precious metals such as gold, the CMETC doubles that incentive for designated critical minerals.
“The effect is that those minerals will be more attractive when it comes to raising capital,” said Long. “It’s high-risk, grassroots exploration — so every bit of incentive helps attract financing.”
The Prospectors and Developers Association of Canada (PDAC) knows just how risky exploration can be . In its 2025 pre-budget submission, PDAC noted that only 0.01 per cent of mineral prospects ever become producing mines and that it takes an average of 27 years to move from discovery to mine construction due to complex permitting and regulatory processes.
The association highlighted that Canada’s flow-through share system, which underpins both the CMETC and the broader Mineral Exploration Tax Credit, has generated more than two-thirds of all domestic exploration spending over the past decade.
Long said the expanded list of eligible minerals aligns with the federal government’s critical minerals strategy, which identifies resources essential to Canada’s clean economy transition, including national defence and advanced manufacturing.
“The minerals listed help support the clean economy transition, semiconductors, and defence energy,” he said. “There’s a reason they’re on the critical minerals list — and the government is saying, ‘we want to attract more exploration for these 12 minerals.’”
While most exploration dollars flow toward gold and other traditional commodities — partly because they are better understood by investors — Long expects the enhanced credit to help level the playing field.
“If you’re competing against a gold exploration project, investors understand the gold price and potential returns,” he said. “For a molybdenum or fluorspar project, that’s not as familiar. This incentive helps bridge that gap.”
Long believes the expansion will not only encourage new exploration but could also spark renewed activity around existing mining regions.
“It could increase regional exploration around existing mines,” he said. “If you have an existing fluorspar operation, for example, the CMETC could help fund exploration for additional deposits nearby — creating more economic activity in those regions.”
That could be the case for a developing fluorspar project in Newfoundland and Labrador. The mine located in St. Lawrence — about 300 kilometres southwest of St. John’s — was shut down in 2022 but is being restarted by new owners, Singapore-based private equity firm AMED Funds. The group purchased the mine in June 2023 and plans to resume production. Fluorspar is a key material used in the production process of lithium batteries, solar panels and steel.
Long also noted the geological overlap between certain minerals, pointing out that lithium deposits often contain cesium and tantalum. Including both on the list could allow a company exploring for lithium to also target cesium in the same deposit while providing investors with the 30 per cent CMETC, Long said.
Jeff Killeen, director of policy and programs for PDAC, also thinks the newly designated critical minerals could spark fresh exploration across Canada. Molybdenum is likely to be one of the most attractive targets, he said, with known deposits in British Columbia that could see new discoveries quickly. Tungsten and manganese could drive activity in New Brunswick, Manitoba, and the Northwest Territories, while germanium showings are already known in the Yukon, B.C. and Quebec. He also notes that Canada’s only niobium mine, currently idle, is in B.C.
Adding these minerals to the incentive list “puts more pins in the cushion,” he said, broadening exploration potential across more regions of the country.
Killeen said Canada leads the world in mineral exploration, investing $4 billion a year, due in large part because of government incentives like flow-through shares and the newly expanded CMETC. “Roughly a quarter of every dollar spent in Canada comes as a result of these incentives, he said. That’s a huge component of the industry here.”
While the CMETC is designed for early-stage exploration, other federal incentives aim to move projects further along the development pipeline. “The CMETC helps make discoveries and assess deposits,” Long said. Other supports like the Clean Technology Manufacturing Investment Tax Credit help companies advance projects into production.
Together with the new $2 billion Critical Minerals Sovereign Fund, which aims to fast-track critical minerals development for clean technologies and supply chain security, these measures reflect what Long calls a coordinated approach to building Canada’s strategic mineral capacity.
“When you look at the budget, there’s a clear focus on advancing Canada’s potential as a producer of critical minerals,” he said. “The government is showing it takes seriously its role in developing this sector — and this is a great start.”
• Email: arankin@postmedia.com