Prime Minister Justin Trudeau’s government proposed a 30% investment tax credit for expenses related to the exploration of critical minerals in the latest budget announced last month.

This incentive also covers investors planning to buy shares in certain critical mining companies such as those in the exploration of lithium brine.

Company executives say the new measures would help bring in new equity investors who stayed away from the mining sector due to volatile capital market conditions. An early-stage exploration project typically needs between C$10 million ($7.4 million) to C$25 million, according to industry estimates.

“These provisions are going to be of huge help to attract investments,” said Mark Selby, CEO of Canada Nickel Company Inc.

Since the budget announcement, Selby said Canada Nickel’s ongoing discussions for a potential partnership with an unidentified Korean battery maker have accelerated thanks to the specific measures. The TSX Venture Metals and Mining Index is up 4% since the budget, compared with a 2.7% rise in the broader market.

Canada is trying to match the incentives announced by the United States under the Inflation Reduction Act which offers a combination of tax credits and government loans worth $40 billion to support critical mineral projects.

Canada is home to half of the world’s mining companies and is seen as a premium destination for junior miners to raise capital, according to The Toronto Stock Exchange.

Chris Doornbos, CEO of Alberta-based E3 Lithium, said the government’s proposals open up a whole new funding option for junior miners in Canada that was not available before. E3 Lithium is working on the exploration of lithium from brines in Calgary.

“So you actually get better value for the money (raised through flow-through shares) and now there’s more of that which is available,” Doornbos said.

The flow-through shares are a specific feature in the Canadian capital market, where listed mining companies raise equity at a higher price from investors for exploration projects, and investors in turn claim tax rebates. This helps attract investments in risky exploration projects, company executives say.

Several junior mining companies in western Canada are optimistic about the fund raising prospects and are in talks with banks for financing, Doornbos added.

“At Litus we are excited about how this initiative will further ignite the strategic battery metals sector,” said Ghada Nafie, CEO and Co-Founder of Litus, a Calgary-based company working on a technology to extract lithium.

TSX, Canada’s biggest stock exchange operator, sees the new budget proposals as “very positive” for the mining sector but warned that broader economic uncertainty and geo-political risks are dominating investor sentiment, Dean Mcpherson, the Head Global Mining, TSX told Reuters.

Still, the mining industry has a reason to cheer.

“These measures do level the playing and put us in a stronger position,” said Pierre Gratton, CEO of the Mining Association of Canada.