Canada's Prime Minister Mark Carney has unveiled radical policy changes at the inaugural Canada Investment Summit. Dubbed the "Productivity Mega Deduction," the measures immediately widen across industries, including mining, oil and gas, computer equipment, research and development, and rail track.
Ottawa is also making immediate expensing permanent, pushing Canada's marginal effective tax rate on new business investment from about 13% to 6.4% — the lowest of any major economy and less than half the U.S. rate.
"This is one of the most significant changes to Canada's business tax system in half a century," Finance Minister François-Philippe Champagne said, calling it the foundation for "an investment supercycle."
While the government targets $1 trillion in new investment, the policy rewrites capital economics for mining producers at a moment when TD Cowen sees immediate opportunities across precious-metal miners.
From Talk to Action
The scope and size of the changes have immediately driven reactions from the investment community. Michael Gentile, co-founder of Bastion Asset Management, acknowledged it as a "concrete action to stimulate investments in Canada."
Historically, miners recouped only 5% to 10% of capital spending in year one. Under the new regime, a $1 billion mine build returns $250 million to $300 million in first-year tax savings.
"If they put a billion dollars of capital to work, they would get immediately $250 million off that year in cash off their taxes," Gentile said.
"So, you have basically given any mining company in the world who wants to build a project in Canada that has taxable income in Canada a 25% off deal on capital going in the ground."
For large producers paying billions in Canadian taxes, the shield instantly offsets liabilities and lifts project-level IRRs. Gentile expects this to accelerate an "M&A frenzy," since juniors are still cheap while seniors post record profits.
"If you're a major mining company thinking about buying a junior today, you like it 25, 30, 40% more," he explained.
TD Cowen's Top Picks
According to TD Cowen's "Canada Best Ideas" report, the mining sector offers notable opportunities. The bank singled out Barrick Mining Corporation (NYSE:B) and Equinox Gold Corp. (NYSE:EQX) among the top 24 ideas for the next few quarters.
Barrick has recently lagged its peers mainly owing to its geopolitical risk, an issue the upcoming asset spinout plans to solve.
It currently trades at a 25% discount to large-cap North American peers. TD Cowen's $59 (82.60 Canadian dollars) target implies a 38% return. The miner should generate about $8 billion in free cash flow over the next year, an 11% yield, with gold output forecast to rise 16% to 3.7 million oz. in 2027 and copper up 7% to 225,000 tons.
"Barrick offers an attractive combination of improving operational execution, strong free cash flow generation and near-term IPO catalysts," analyst Steven Green said.
Meanwhile, Equinox trades at a 20% net asset value (NAV) discount. Analyst Wayne Lam's 20 Canadian dollars ($14.29) target implies 17% upside, and he sees the stock able "to serve as a core holding for investors" following the Orla Mining acquisition, which adds three Canadian flagship assets and a "robust" North American pipeline.
