Wesdome Gold Mines – Cour du Québec finds that a mine on care and maintenance was a closed mine for CEE purposes

A company (”Wesdome”) acquired the Kiena mine in Quebec, which had been put on care and maintenance when its reserves had been exhausted over a year earlier, in order that it could extend an existing mine shaft to go under a lake and drill gold targets on its own exploration property to the north. This was a success, and the purchased Kiena mining facilities started processing ore from the new finds several years later.

ARQ denied CEE deductions under the Quebec equivalent of ITA, s. 66.1(6) – Canadian exploration expense – (c)(vi), which applied to “any expense that may reasonably be related to a mine…that has come into production in reasonable commercial quantities or to an actual or potential extension of such a mine.”

In allowing the deductions, Godbout J found that when the operation had ceased to be economic, it thereupon “became a closed mine, pure and simple.” This suggests that a mine which has been put on care and maintenance because its reserves have been exhausted has ceased to be an “existing” mine for CEE purposes. Accordingly, notwithstanding that the existing shaft was used for the exploration and the existing processing facilities subsequently were put back into production, the exclusion did not apply because this work and production related to a closed rather than existing mine.

Neal Armstrong. Summary of Wesdome Gold Mines Ltd. v. ARQ, 2016 QCCQ 1504 under s. 66.1(6) – Canadian exploration expense – (c).