FOR INVESTORS: You may now invest in qualifying super flow-through shares extended until March 31, 2013.

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1 What s New FOR INVESTORS: You may now invest in qualifying super flow-through shares extended until March 31, FOR ISSUERS: Funds raised with the credit can support eligible exploration until the end of Super flowthrough shares Mineral Exploration Tax Credit [METC] What they are What they mean for investors The Mineral Exploration Tax Credit program is a boon to Canada s economy. Since its introduction in October 2000, the federal tax credit program has helped keep investment in Canada and has provided an incentive for Canadian investors to put money into one of this country s most important resource industries. The METC has helped Canada capture and maintain its position as the number one country in the world for mineral exploration spending. January 2013

2 Flow-through shares are: a type of common share that permits the initial purchaser to claim a deduction, up to the amount of the share subscription price against any income, in respect of resource expenses renounced by a publicly-traded issuer. There are two types of flow-through share investments: REGULAR 100% deduction write-off for exploration (net of federal and provincial credits) SUPER as above, plus an additional 15% federal tax credits for grassroots exploration plus provincial and territorial deductions and tax credits Super Flow-through continues The federal government has again extended the super flow-through tax credit, a 15% non-refundable tax credit applicable to eligible grassroots exploration in Canada. The credit is deductible from federal income taxes payable and is in addition to the existing 100% deduction of eligible exploration expenditures through the regular flow-through. Under current legislation, an investor must subscribe for the flow-through shares before April 1, 2013 to be eligible for the super flow-through tax credit. In addition, the issuer of the shares, if it qualifies for the look-back rules, must spend the proceeds on qualifying exploration activities before January 1, 2015.

3 For taxpayers at the highest marginal tax rate: The federal 15% non-refundable tax credit, when added to the regular and ongoing 100% deduction, is equivalent to a 137% exploration expense deduction for federal tax purposes. Additional provincial tax incentives British Columbia, Saskatchewan, Manitoba and Ontario offer additional tax credits that apply to the provincial portion of income tax relating to eligible expenses. The effect of these incentives varies depending on the jurisdiction as shown on the accompanying table. British Columbia (20%), Saskatchewan (10%), Manitoba (30%), and Ontario (5%) offer harmonizing tax credits. The Ontario tax credits are refundable; the other tax credits are non-refundable. The British Columbia and Manitoba credits apply even after the proposed federal deadline. Quebec allows a deduction to investors of up to 150% of the cost of certain qualifying exploration expenses in certain locations for provincial tax purposes.

4 Facts for Income tax benefits to individual investors will vary, depending on the taxpayer s jurisdiction of residence and marginal tax rate for income tax purposes. At present, Quebec offers the largest potential tax savings for flow-through share investments, followed by Manitoba. The deductions and tax credits apply only to eligible expenditures in the applicable province and territory and are only available to taxpayers residing within, or otherwise taxable in, the jurisdiction where the exploration is taking place. Tax deductions vs tax credits Under tax legislation governing flow-through shares, eligible exploration expenditures have been 100% deductible from income from any source for more than three decades. These deductions effectively reduce or shelter before-tax income. Tax credits apply directly to reduce taxes payable. A non-refundable tax credit reduces taxes to the extent of taxes payable. A refundable tax credit reduces taxes payable and then, if there is an excess, results in a cash refund. The federal tax credit is non-refundable (the taxpayer has to pay taxes in order to use the claim). However, it can be carried back and applied against taxes paid in the previous three years. Unused tax credits may also be carried forward for a period of twenty years. Most taxpayers can deduct the full amount of renounced expenses in the year incurred, but the tax credits claimed are effectively taxed as income in the following year. For example, an investor resident in B.C. would add $320, being $200 (provincial) and $120 (federal) in 2013 for every eligible $1,000 invested in 2012.

5 investors: Flow-through tax incentives work Canada has ranked number one in the world for mineral exploration spending since 2002, according to the Metals Economics Group (MEG). In 2011, 18% of total world exploration expenditures were for projects in Canada. The flow-through share program and the Mineral Exploration Tax Credit are unique to Canada and encourage investors and companies to focus on Canadian-based projects. Features of the 15% federal Mineral Exploration Tax Credit Super Flow-Through Shares: For investors: Allows unused tax credits to be carried back three years or forward 20 years Is available the year the investment is made Is non-refundable (reduces tax payable but no cash refund) Is taxable in the year following the claim For companies issuing flow-through shares: Expenses eligible for the tax credit are more restricted than those for regular flow-through share issues Can be applied under the current program to eligible expenditures incurred by December 31, 2014

6 After-Tax Cost of a $1,000 Investment by an Individua Combined federal/provincial tax rate Federal tax rate Provincial tax rate Federal tax credit Provincial tax credit Amount of investment Less: tax benefit of deduction of flow-through investment feder Less: tax benefit of deduction of flow-through investment prov subtotal Less: 15% non-refundable federal investment tax credit Less: provincial tax credit Add: income tax on inclusion of federal tax credit Add: income tax on inclusion of provincial tax credit Net cost of $1,000 investment in flow-through shares Notes (1) The province of Quebec deduction is 150%. (2) The federal government allows a credit of 15% of qualifying expenditures incurred (or deemed incurred under the look-back rule) before January 1, However, flowthrough share subscription agreements must be signed before April 1, (3) Provincial tax credits reduce the amount of expenditures qualifying for the federal tax credit. (4) In the case of Quebec, the formula is GxB since the federal investment tax credit is not taxed in Quebec.

7 Super Flow-through Shares l Investor by Province in 2012 Notes Quebec Manitoba B.C. A 48.22% 46.40% 43.70% B 24.22% 29.00% 29.00% C 24.00% 17.40% 14.70% D 15% 15% 15% E - 30% 20% F $ 1,000 1,000 1,000 al FxB (242) (290) (290) incial (1) FxC (360) (174) (147) (602) (464) (437) (2) G=Fx(1-E)xD (150) (105) (120) (3) H=ExF - (300) (200) (4) GxA HxA (716) (680) (618) (5),(6) $ (5) Capital gains tax applicable when the shares are sold is ignored in this analysis. (6) Alternative minimum tax is ignored in this analysis.

8 Nova Ontario Scotia Sask. P.E.I. Brunswick 47.97% 50.00% 44.00% 47.37% 43.30% 29.00% 29.00% 29.00% 29.00% 29.00% 18.97% 21.00% 15.00% 18.37% 14.30% 15% 15% 15% 15% 15% 5% - 10% - - 1,000 1,000 1,000 1,000 1,000 (290) (290) (290) (290) (290) (190) (210) (150) (184) (143) (480) (500) (440) (474) (433) (143) (150) (135) (150) (150) (50) - (100) (580) (575) (572) (553) (518) Assumptions Taxpayers are subject to income taxes at top marginal rates. Canadian exploration expenses are 100% eligible for federal and provincial tax credits. Available tax deductions are taken in full. Exploration expenditures are made in the applicable province and the taxpayer is a resident of that province for tax purposes.

9 New Northwest Nfld. & Territories Yukon Labrador Nunavut Alta % 42.40% 42.30% 40.50% 39.00% 29.00% 29.00% 29.00% 29.00% 29.00% 14.05% 13.40% 13.30% 11.50% 10.00% 15% 15% 15% 15% 15% ,000 1,000 1,000 1,000 1,000 (290) (290) (290) (290) (290) (141) (134) (133) (115) (100) (431) (424) (423) (405) (390) (150) (150) (150) (150) (150) (516) (510) (510) (494) (481)

10 Discoveries made with the assistance of flowthrough financing: Diamonds at Lac de Gras, NWT, Ekati and Diavik diamond mines Gold at Hemlo, ON, Golden Giant mine Nickel/copper at Voisey s Bay, NL, Diamond Fields Resources Heavy rare earths at Thor Lake, NWT, Avalon Rare Metals Gold at Malarctic, QC, Osisko Mining Gold at Timmins, ON, Lake Shore Gold Uranium in the Athabaska Basin, SK, Hathor Exploration For further information contact Nadim Kara Senior Program Director Prospectors & Developers Association of Canada 135 King St. East Toronto, ON M5C 1G6 Tel: Ext. 230 Fax: nkara@pdac.ca Visit our website at for further details Printed on recycled paper