John A. Chapman Mining - using the flow-through model for space mineral exploration and development financing

1. Canadian Space Summit
November 21 - 23, 2008
Montreal, Quebec, Canada
CREATING A ROBUST CANADIAN SPACE RESEARCH, EXPLORATION & DEVELOPMENT
INDUSTRY - THE CANADIAN MINERAL INDUSTRY FLOW-THROUGH SHARE ANALOG
John Chapman, Nadeem Ghafoor, Christian Sallaberger, Frank Teti
Financing of space research, exploration and development in the past has been mainly by governments. To create
a vibrant and sustainable space program, the private sector needs to be aggressively involved, building upon the
foundation established mainly by the USA and Soviet Union governments. There is an analog that could point the
way to rapidly opening space to private enterprise – that is the Canadian flow-through tax incentive for mineral
exploration. The flow-through tax credit program in Canada has facilitated the raising of billions of dollars
annually by mineral exploration companies, mainly from wealthy individuals, and this has kept Canada in the
forefront of world mineral exploration and mine development. In addition, Canada has, through this tax incentive,
developed a large base of experts in science, technology, legal, accounting, finance, etc. for mineral exploration
and mine development world wide. Statistics from the 2005 Canadian intergovernmental working group on the
mineral industry reported:
1. Canada continues to be the foremost destination for exploration capital globally. In 2004, some 20% of
the mineral exploration programs planned by the world’s mining companies were expected to be
conducted in Canada. As for Canadian companies, they were expected to undertake 43% of all the
exploration programs in the world in 2004, a share that is by far the largest of the global mineral
exploration market.
2. In 2003, C$12.7 billion in equity financing was raised for mineral exploration and development projects
around the world. More than 45% of the new funds were raised by companies listed on Canadian stock
exchanges.
These are amazing statistics as Canada represents only 7% of the land area on Earth and only 0.5% of the world’s
population. It is important to understand the details of the tax-driven incentive that encourages the exploration
and development of Canadian natural resources. The government allows Canadian natural resource companies to
issue common shares that entitle the holder to certain tax benefits. These shares are called flow-through shares.
Canadian natural resource companies have certain expenses, known as Canadian Exploration Expenses (CEE),
which can be deducted 100% for tax purposes by the purchasers of flow-through shares. The company’s tax
deductions are “flowed through” to the investor. In addition to benefiting a taxpayer in the current taxation year,
these tax deductions can be carried back three years and carried forward seven years. There is also a 15% tax
credit available to Canadian investors for "grass roots" mining exploration expenses incurred in Canada. This
applies only to exploration for metals and minerals and not for extraction of oil and gas. For investors in every
province and territory of Canada, the tax credit is at least 15% as long as the "grass roots" mining exploration
occurs somewhere in Canada. In addition, some (but not all) of the provinces and territories have added their own
tax credit, ranging from 5% in Ontario to 20% in British Columbia. The provincial tax credit only applies if the
investor is resident in the province and the exploration occurs in the same province. In addition to benefiting a
taxpayer in the current taxation year, these tax credits can be carried back three years and carried forward 10
years. Just imagine the impact of countries such as Canada and the USA adopting a similar tax-driven incentive
for space research, exploration and development – tens of billions of private dollars could be raised annually for
space enterprises.
AUTHORS
John A. Chapman, B.Sc., P.Eng., FCIM, Principal J.A. Chapman Mining Services, is a Professional Mining
Engineer (British Columbia). He has worked for 42 years in the mining industry in mineral exploration, mine
development, operations, and engineering and as an executive. He has been involved in the financing of many
high risk mineral exploration and mine development ventures.

2. Nadeem Ghafoor, Ph.D., Manager of Planetary Exploration at MDA, Canada’s largest space company. His
background is in both planetary science and spacecraft engineering.
Christian Sallaberger, Ph.D.,Vice President & Director of Space Exploration at MDA. Previously held positions at
the European Space Agency and the Canadian Space Agency, where he initiated Canada's Space Exploration
program.
Frank Teti, P.Eng., MBA, Manager of Autonomous Robotics at MDA. His background includes the development
of manned and unmanned systems for space and terrestrial applications.

3. CREATING A ROBUST CANADIAN SPACE RESEARCH,
EXPLORATION & DEVELOPMENT INDUSTRY
THE CANADIAN MINERAL INDUSTRY FLOW‐THROUGH
SHARE ANALOG
John Chapman, Principal, J.A. Chapman Mining Services
Frank Teti, Manager of Autonomous Robotics, MDA
Nadeem Ghafoor, Manager of Planetary Exploration, MDA
Christian Sallaberger, VP and Director Space Exploration, MDA
CANADIAN SPACE SUMMIT
NOVEMBER 21 ‐ 23, 2008
MONTREAL, QUEBEC, CANADA

4. What are Flow‐Through Shares?
• The Canadian Income Tax Act allows mineral
exploration (high‐risk) to be funded by wealthy
individuals and corporations by way of flow‐
through shares that “flow” Canadian mineral
exploration expenses to the investor from the
exploring company
• The investor gets the tax write offs against any
income type and the company gives them up –
the company, like most early stage ventures,
probably has no source of income to write these
expenses off against

5. Proposal
• Canadian government can support space exploration in
Canada without need for new funding or budget request
• Apply flow through tax credits to space exploration
• Create whole new set of world‐class industries and
capabilities in Canada
– High tech jobs
– Spinoffs
– Tax sources
– Education
• Canada is a world‐leader in mining
• Canada can be a world leader in space exploration

6. High Risk / High Reward Ventures
• Mineral Exploration is probably the riskiest business on
the planet
• At very long odds, from time to time, immense wealth is
created by a mineral deposit discovery
• The Canadian government for many years has recognized
that having a tax incentive for mineral exploration
creates great wealth for the country
• Success is related to the: project, team and financing

7. Spin‐Off Benefits
• The Canadian flow‐through policy has created a
World‐Class base, in Canada, of:
– Mineral finance institutions and stock exchanges
– A very large base of internationally respected mineral
specialists in the fields of:
• Geosciences
• Mining
• Exploration and Development Financial Analyses
• Accounting
• Legal
• Manufacturing and Supplies

8. Importance to Canada (2004 data)
• Canada has 7% of land area on Earth and 0.5%
of population
• 20% of World mineral exploration conducted
in Canada
• Canadian companies conduct 43% of the
World’s mineral exploration
• 45% of the World’s $12.7 billion raised for
exploration is via companies listed on
Canadian stock exchanges

9. REMOTE SENSING
Aerial Photography
Radiometrics
Multispectral
Hyperspectral
Synthetic Aperture Radar
Magnetic
Electromagnetic
Gravity

10. KAOLINITE (ASTER)

11. IRON OXIDE (ASTER)

12. AIRBORNE MAGNETICS
(helicopter)

13. VISIBLE COLOUR ANOMOLY

14. SURFACE EXPLORATION
Claim Staking
Prospecting
Sampling

15. SURFACE EXPLORATION
Geophysics
Geochemistry
Surveying
Trenching
Drilling

16. Example of grid drilling to define a mineral deposit

17. Space Exploration

18. Degree of Realism
• Any planetary body (Moon, asteroids)
• Already there are existing businesses involved
(Shackleton, Lunar Transporation Systems,
Jamestown Group, etc)
• MDA is involved
– Prime contractor for Odyssey Moon to deliver 5
commercial landed mission to moon
– Prime contractor to another commercial customer for
planetary mining mission concept development
• Most large space primes are involved and/or
reviewing these opportunities

19. Planetary Resources
• Use on the Moon
– Oxygen from Silicon Oxide
• for use by humans and for fuel
– Water (bring up Hydrogen)
– Methane (fuel source)
– Silicon to build solar power arrays
• Return to Earth
– He3 (use in nuclear fusion, extremely rare on Earth)
– Iron, copper
– Precious metals (platinum)

20. System Overview
Orbit & Orbital In‐situ In‐situ Surface Orbital & Human Sortie &
Surface Sampling
Transport Science & Science & Surface Exploitation & Surface Sustained
& Processing
infrastructure Prospecting Prospecting Exploration ISRU Infrastructure Presence
Robotic Site
Robotic Site
Characterisation
Characterisation
Robotic Remote
Robotic Remote
Sensing
Sensing
Shuttle & ISS
Shuttle & ISS Rendezvous
Rendezvous
Robotics
Robotics & Docking
& Docking Autonomous Surface &
Surface &
Autonomous
Robotics
Robotics Landing & Hazard
Landing & Hazard Subsurface Science
Subsurface Science
Avoidance
Avoidance Instruments
Instruments
Robotic
Robotic
Sample Acquisition &
Sample Acquisition &
Surface Mobility
Surface Mobility Sample Processing
Sample Processing
Transfer Systems
Transfer Systems
& ISRU Robotics
& ISRU Robotics
Human Surface Mobility
Human Surface Mobility Infrastructure Deployment
Infrastructure Deployment Human-Robotic Infrastructure
Human-Robotic Infrastructure
Robotic Human Field Assistance
Robotic Human Field Assistance & Assembly Robotics
& Assembly Robotics Assembly & Maintenance
Assembly & Maintenance

21. Prospecting – Remote Sensing
• Lunar & Planetary SAR
– World leading terrestrial SAR heritage:
RADARSAT‐1 & ‐2, Next‐generation SAR
constellation
– Planetary surface & subsurface mapping
– Regolith & bedrock topography for landing
site selection & resource / ISRU
• Spiral‐scanning Lidar Altimetry Instrument
(SALLI)
– Efficient generation of lunar surface
topography from polar orbiting spacecraft
– High‐resolution mapping &
reconnaissance for sortie and outpost site
selection

22. Precision Landing
Image: CSA
Image: NASA

23. Prospecting & Advance Scouting
• Remote / advance prospecting,
mapping
and resource assessment
– Autonomous field geologist
– Surface & subsurface
• Pre‐EVA tele‐op / autonomous scout
– Site survey (laser + camera)
– Operations planning
– Hazard assessment
– Time, risk conservation

24. Mobility ‐ Locomotion
• Need to ensure local soil and
environmental challenges can be
met
– Soil/wheel interaction
– Materials
– Dust mitigation
– Power

25. Mobility ‐ Autonomous Navigation
Credit: MDA
Credit: MDA
• Increased rover autonomy
– Terrain assessment & global path planning
– Obstacle avoidance & local path planning
– Visual Motion Estimation & localization
(slip mitigation)
• “Visual odometry” field demonstrations
Credit: MDA

26. Autonomous Vehicles
• MDA has
successfully
developed a
software and
controls solution for
an underground
autonomous vehicle
to improve safety and
productivity

27. Advanced Vision ‐ Camera Based
• Vision‐based scene modeling
– Rapid in‐situ photo‐real scene modeling
• Handheld & vehicle‐mounted options
• Technologies being applied in mining,
forensic & security industries
– Autonomous site characterization &
prospecting
– Survey & contextual imaging (tele‐op
geology)
– 3D sample acquisition monitoring (e.g.
drilling) Credit: MDA
– Cost mapping for autonomous navigation
– Data‐storage & bandwidth efficiency
Triangular Mesh
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28. Advanced Vision ‐ Laser based
• Lidar‐based scene modeling
– Ultra‐high accuracy
– Range independent
– Lighting and contrast independent
• Applications
– Lunar shadowed region scene modelling
– Lunar shadowed region rover navigation
– Geological sample classification Credit: Optech
• Optech lidar recently utilized at Haughton Crater with
NASA Ames Human‐Robot Site Survey Project
Credit: CSA
Credit: Optech Credit: UNB / Optech Credit: Optech / NASA

29. Sample Handling & Acquisition
• MDA‐CSA Exploration Arm:
– Rover / lander mountable
– Low power, low mass, high tip load
– DOF: 4 ‐ 7
– Length: 1 ‐ 4m
– Range of end effectors (scoop shown)
– Regolith simulant tested

30. Sub‐Surface Acquisition
• Lunar & Planetary Exploration coring & drilling systems
• Collaborations
– hard‐rock mining partners
– ice‐drilling partners
• Proof of principle breadboarding
– Low mass, power, down force, rpm & comminution
– Rock‐bit interface characterisation
– Cuttings transport & core capture
• Drill architecture & control scheme trades
• Future exploration
– Autonomous lander & rover deployed systems
– Astronaut deployed systems

31. Processing and Transfer
• Sample handling design activities for
CSA, ESA & NASA missions (most recently MSR)
• Sample processing, sample transfer and sample
containment concept development
• Crusher breadboarding:
– Sample reduction investigation
– Low mass, low power
• Delivery to instruments, sample storage, inter‐
vehicle transfer, sample return transfer
Image: NASA

32. ISRU Robotics
• Prime contractor for US (DARPA) Phase A
lunar resource utilisation study
– Lunar surface prospector
– Mobile regolith processor & orbital delivery
• Sample processing systems
– Sample reduction

33. Return Minerals to Orbit
• 25 yrs of robotic deployment & assembly of
large‐scale human space infrastructure on
Shuttle & ISS
– Heavy cargo transport & deployment
– Vehicle docking & berthing
Credit: NASA

34. Orbit & Orbital In‐situ In‐situ Surface Orbital & Human Sortie &
Surface Sampling
Transport Science & Science & Surface Exploitation & Surface Sustained
& Processing
infrastructure Prospecting Prospecting Exploration ISRU Infrastructure Presence
Robotic Site
Robotic Site
Characterisation
Characterisation
Robotic Remote
Robotic Remote
Sensing
Sensing
Shuttle & ISS
Shuttle & ISS Rendezvous
Rendezvous
Robotics
Robotics & Docking
& Docking Autonomous Surface &
Surface &
Autonomous
Robotics
Robotics Landing & Hazard
Landing & Hazard Subsurface Science
Subsurface Science
Avoidance
Avoidance Instruments
Instruments
Robotic
Robotic
Sample Acquisition &
Sample Acquisition &
Surface Mobility
Surface Mobility Sample Processing
Sample Processing
Transfer Systems
Transfer Systems
& ISRU Robotics
& ISRU Robotics
Human Surface Mobility
Human Surface Mobility Infrastructure Deployment
Infrastructure Deployment Human-Robotic Infrastructure
Human-Robotic Infrastructure
Robotic Human Field Assistance
Robotic Human Field Assistance & Assembly Robotics
& Assembly Robotics Assembly & Maintenance
Assembly & Maintenance

35. Conclusion
• Robotics systems have supported sustainable human
space exploration infrastructure for 30 yrs
• Scouts, field‐scientists and prospectors for planetary
have been provided by robotic systems
• Many key technologies exist now that will form the
basis of the early human‐robotic activities on the lunar
surface

36. RECOMMENDATION
• Canada has a large and successful mineral exploration
science, technology and financial base already
established, that could be used as a solid foundation
for human lunar and planetary mineral exploration and
development
• The Canadian federal government should now extend
the mineral flow‐through financing tax incentive to
space research, exploration and development
• This tax policy would position Canada as a leader in
space research, exploration and development, with all
its spin‐off benefits, similar to those accrued from the
present Canadian mineral industry tax policy