Financing of mineral exploration activities

Funds raised in the Québec capital market by mineral exploration companies are used to carry out numerous exploration and development projects in the province. This financing is in the form of common shares, flow-through shares or debentures.

• During the first nine months of 2004, financing raised from the Québec capital market for exploration and development projects totalled $47.1 million, compared to the $36.4 million raised during the corresponding period of 2003. Mineral exploration companies plan to use 34% of this funding for projects in Québec.
  
  
• A total of $3 million in flow-through shares were purchased directly by private investors in Québec during the first nine months of 2004. According to information filed with the Autorité des marchés financiers during the final months of the year, the proceeds of flow-through share offerings to Québec investors should total between $20 million and $25 million in 2004.
  
  
• To this amount must be added the funds raised by flow-through limited partnerships across the country (which were especially active in 2004) from Québec private investors, a portion of which goes to Québec in the form of flow-through investments in mineral exploration companies. These limited partnerships are expected to invest between $20 million and $25 million in the flow-through share offerings of mineral exploration companies in Québec.
  
  
• Sodemex and Sodemex II made equity investments amounting to nearly $4 million in 22 exploration companies, with roughly 85% of this amount being destined for projects in Québec.
  
  
• The Solidarity Fund QFL, including the regional funds of Abitibi-Témiscamingue, Nord-du-Québec and Côte-Nord, invested $2.2 million in the capital stock and debentures of 10 exploration companies.
  
  
• The Diversification of Exploration Investment Partnership (SIDEX), a partnership dedicated to the diversification of exploration investment, signed more than $6 million in investment agreements with 19 exploration companies in the first nine months of 2004.
  
  
• Flow-through and non-flow-through financing sought outside Québec by exploration companies operating in Québec should reach levels comparable to or higher than those seen in 2003.

Securities regulation

The price outlook for the key mineral commodities and the tax incentives provided in Québec are the main factors that explain the high level of financing raised in Québec for mineral exploration. Changes in the securities regulation context in 2004 likewise facilitated access to funds for a number of companies.

• Last spring, the Autorité des marchés financiers announced that it would exempt companies from the provisions of Québec Policy Statement Q-4 dealing with the distribution of securities of mining exploration and development companies operating in the primary sector. It also announced that, with a view to harmonizing procedures with other jurisdictions in Canada, it would in future grant a discretionary exemption for any financing raised from a person who qualify as accredited investors, as defined in Multilateral Instrument 45-103, Capital Raising Exemption.
  
  
• The work to simplify the securities regulation system and harmonize the regulations will continue in 2005. One of the changes envisaged is a passport model for securities regulation that would give issuers access to the capital markets of all participating provinces and territories through the securities regulator in their primary jurisdiction. To find out more, visit the Web site of the Autorité des marchés financiers.