Eligible operators can deduct the allowance for the development of critical and strategic minerals in calculating their annual profit for a fiscal year that ends after March 25, 2021, for expenses incurred after that date.

Maximum allowance

The maximum amount that an eligible operator can deduct for a fiscal year as an allowance for critical and strategic mineral development is equal to the lesser of the following amounts:

• the eligible operator's cumulative critical and strategic mineral development expenses at the end of the fiscal year;
• the balance of the eligible operator's ceiling on critical and strategic mineral development expenses at the end of the fiscal year.

Cumulative critical and strategic mineral development expenses

An eligible operator's cumulative critical and strategic mineral development expenses at the end of a fiscal year correspond to the critical and strategic mineral development expenses incurred after March 25, 2021, and no later than the end of the fiscal year, minus the amounts the eligible operator deducted as an allowance for critical and strategic mineral development in calculating its annual profit for the previous fiscal years.

Critical and strategic mineral development expenses

Critical and strategic mineral development expenses are expenses an eligible operator incurs with a person with whom it deals at arm's length. The expenses must be primarily attributable to one or more critical and strategic minerals and relate to one of the following:

• bulk sampling, the purpose of which is to determine the effective grade, perform grinding tests and determine whether a separation process meets minimum quality specifications, in order to evaluate the optimal treatment processing method for the mineral substance;
• testing of ore and host rock stability and mechanical properties;
• tests on ore dilution;
• metallurgical grinding tests on core or bulk samples to determine ore quality or recovery rate;
• process engineering studies (detailed separation process flow sheets, schedules for bringing the ore to marketable product stage);
• studies to determine the type of ore to be treated, the type of process to be used and the economic potential of the finished product;
• tests for hydrometallurgical and pyrometallurgical processes for the purpose of developing value-added products with regard to the ore.

The expenses must be incurred in respect of the period that begins immediately after the preliminary sampling and ends immediately before the time it can reasonably be considered that the decision to bring a new mine for a mineral substance into production in reasonable commercial quantities has been made.

Expenses that relate to an old mine that has already reached the reasonable commercial quantity production stage, that has been abandoned or that is in maintenance, will not be eligible as critical and strategic mineral development expenses.

Balance of the ceiling on critical and strategic mineral development expenses

An eligible operator's ceiling on critical and strategic mineral development expenses is $31.25 million. As a result, the balance of the ceiling on critical and strategic mineral development expenses at the end of a fiscal year cannot be more than $31.25 million minus the amount of expenses incurred after March 25, 2021, that the eligible operator deducted as an allowance for critical and strategic mineral development in calculating its annual profit for the previous fiscal years.