The 2023 Canadian federal Budget proposes amendments to the Income Tax Act (Tax Act). These include the qualification of “lithium from brines” as a “mineral resource” under the Tax Act. As explained in a previous insight, without amending the definitions of “mineral resource” or “Canadian exploration expense” under the Tax Act, the 30% CMETC could only be claimed with regards to certain critical minerals if the Minister of Natural Resources issued a certification. Moreover, this certification cannot be obtained with regards to certain critical minerals (i.e., if the targeted critical mineral is not an industrial mineral contained in non-bedded deposit). An example would be lithium from brines: in a technical interpretation, Canada Revenue Agency took the position that lithium from brines does not meet the particular requirements to be considered an industrial mineral contained in a non-bedded deposit, as brines are typically found in bedded, sedimentary deposits. Thus, without this legislative proposal, lithium from brines could never have qualified as a “mineral resource,” and the 30% CMETC could never have been claimed on eligible expenses relating to this resource, despite the fact that lithium is a “critical mineral” under the Tax Act.
This proposed amendment confirms that expenses incurred for exploration targeting “critical minerals” will not necessarily qualify for the purposes of the 30% CMETC unless the “critical mineral” in question qualifies as a “mineral resource.” It also confirms our concern about the way the provisions apply to each other: unless a resource qualifies under paragraph (a) of the definition of “mineral resource ” as a base or precious metal, a resource will only qualify as a “mineral resource” if a certification is obtained from the Minister of Natural Resources in this respect.
It is important to note that the extraction of lithium from brines remains an emerging niche practice in Canada, with only a few companies currently involved in such work.
 Budget 2023 – A Made-in-Canada Plan : Strong Middle Class, Affordable Economy, Healthy Future (Federal Budget), released by the Department of Finance of Canada on March 28, 2023
 Income Tax Act, RS C 1985, c. 1 (5th Supp)
 Canada Revenue Agency, Income Tax Severed Letter External T.I. 2020-0858761E5, “Lithium Production Project” (15 December 2020)