Operators can deduct the pre-production development allowance in respect of expenses incurred after March 30, 2010, in calculating their annual profit for a fiscal year.

The maximum amount that an operator can deduct as a pre-production development allowance for a fiscal year is equal to the balance of cumulative pre-production development expenses at the end of the year.

Balance of cumulative pre-production development expenses

In general, the balance of cumulative pre-production development expenses at the end of a fiscal year includes any expenses incurred after March 30, 2010, other than those that the operator renounced under the Québec or Canadian flow-through share regime, minus the amounts that the operator deducted as a pre-production development allowance in calculating the annual profit for previous fiscal years.

Pre-production development expenses are expenses that were incurred to bring a new mine into production in reasonable commercial quantities, including expenses incurred in:

• clearing;
• removing overburden;
• stripping;
• sinking a mine shaft;
• constructing an adit or other underground entry.