Thank you.
I was just at the point of talking about what's happened over the last 20 years in the metals business.
I think it's important to note that we've seen sharp declines in Canadian production of key battery metals, including nickel and cobalt. Nickel is down 60% in the last 20 years. We used to be the one of the top two producers in the world, and we're at sixth.
Our only lithium mine is Chinese-owned, though we do have projects advancing in the country. New graphite projects are advancing as well, so there is new activity.
Our copper production has also dropped by 40% in the past 20 years. We clearly need to turn this around. The tax credit could help. My members, which include global leaders in critical mineral production with Canadian operations, are readying their respective project portfolios.
I would stress to the committee that it's a tax credit, not a subsidy. ITCs function like rebates and they apply only after investments have been made. These potential investments would create jobs and economic activity to benefit employees, communities and indigenous rights holders where they operate, as well as Canadian suppliers.
We have two concerns with the CTM-ITC as proposed. First, it's too narrow in scope. It will cover certain vehicles and equipment purchases, which on average only account for 10% to 15% of new mine expenditures. You have to keep in mind that where we need to increase production in the short term is at existing mine sites. They already have fleets of equipment in place, so the benefit of this tax credit in the short term is much reduced.
We encourage the Department of Finance Canada to expand the ITC to include all costs related to mine development. Mine development expenses are not a blank cheque; they are laid out specifically in the tax code. They require the private sector, not taxpayers, to invest billions to get more critical minerals out of the ground and then get a credit for it. This will help industry in Canada turn the dial and get the necessary critical minerals into our supply chains in the short term.
Just to illustrate, one of our members has said that it has three potential new nickel project expansions that, if built, would increase its total Canadian production by 60%, which is huge. One project is likely to proceed regardless. However, the value of having an enhanced tax credit would put the second and third projects into play.
We thus welcome the decision by the finance department to continue to consult on this proposed tax credit over the course of this summer. It's an indication, we hope, of some openness to get this right and make sure that the tax credit does the job it is intended to do, which is incentivize the development of not just equipment but of new and critical mineral mines.
Our second concern was an original proposal to limit eligibility to projects containing 90% or more of critical mineral production. Canada is blessed with polymetallic deposits, which means we typically find copper with molybdenum and gold. Neither of these metals is on the list of metals eligible for the tax credit. The vast majority of copper mines and projects, including some of the most advanced, like Galore Creek in British Columbia, have less than 90% copper.
Finance has listened to us and budget 2024 has proposed a change to eligibility to 50% or more of the financial value of the output that comes from critical minerals. We welcome this news.
Last, I want to comment on the renewal of the mineral exploration tax credit, the METC.
Unfortunately, while renewed in late March, the increase in the inclusion rate for capital gains in budget 2024 significantly weakened the value of the METC. I have a feeling many of you are not aware of that. The METC raises 83% of all equity for exploration and development. Charity flow-throughs represent 89% of that 83%, or $1.2 billion in 2021, most of which was directed towards critical mineral exploration. The junior exploration sector is thus almost entirely dependent today on the METC. If the rules introduced in the budget are not changed, we estimate a significant drop, possibly as high as 75%, in exploration and development investment, starting on June 25 when this comes into effect.
We have raised these concerns with the finance department and are providing them with the information they need to conduct an analysis of the impacts and possible remedies. We believe there are solutions, and conversations have been positive. We are hopeful that finance will act on this matter very soon, so we don't compromise this year's exploration season. If not, budget 2024 will deliver a major blow to mineral exploration at a time when we and our allies are counting on us to find more mines.
I hope we can count on this committee's support for the issues I've raised today.
Thank you. I'm happy to take any questions.