Income taxes

12 Months Ended

Nov. 30, 2014

Income taxes [Text Block]

9 Income taxes

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes. These differences result from the following items:

in thousands of dollars
	November 30, 2014		November 30, 2013		November 30, 2012
	$		$		$
Combined federal and provincial statutory tax rate	26.00%		25.67%		25.13%
Income taxes at statutory rate	(2,508	)	(6,261	)	(7,794	)
Difference in foreign tax rates	(580	)	(1,590	)	(2,652	)
Effect of statutory rate changes	-		(20	)	6
Expiry of net operating losses	-		-		376
Non-deductible expenditures	243		2,139		2,498
Other	(224	)	-		(39	)
Valuation allowance	3,069		5,732		7,605
Income tax expense	-		-		-

Future income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of future income tax assets and liabilities at November 30, 2014 and 2013 are as follows:

in thousands of dollars
	November 30, 2014		November 30, 2013
	$		$
Future income tax assets
Non-capital losses	48,717		45,278
Mineral property interest	14,266		14,704
Deferred interest	9,041		9,041
Property, plant and equipment	24		13
Share issuance costs	235		105
Other deductible temporary differences	699		748
Total future tax assets	72,982		69,889
Valuation allowance	(72,979	)	(69,840	)
Net future income tax assets	3		49
Future income tax liabilities
Other taxable temporary differences	3		49
Future income tax liabilities	3		49
Net future income tax assets	-		-

The Company has loss carry-forwards of approximately $123.1 million that may be available for tax purposes. Certain of these losses occurred prior to the incorporation of the Company and are accounted for in the financial statements as if they were incurred by the Company, as described in note 1. Prior to the Plan of Arrangement, the Company undertook a tax reorganization during the year in order to preserve the future deductibility of these losses for the Company, subject to the limitations below. Future tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable temporary differences for which a future tax liability is recognized can be offset. A valuation allowance has been provided against future income tax assets where it is not more likely than not that the Company will realize those benefits.

The losses expire as follows in the following jurisdictions:

in thousands of dollars
	Non-capital losses	Operating losses
	Canada	United States
	$	$
2015	-	-
2016	-	-
2017	-	-
2018	-	4,206
Thereafter	12,498	106,394
	12,498	110,600

Future use of these U.S. loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 382, which relates to a 50% change in control over a three-year period, and are further dependent upon the Company attaining profitable operations. An ownership change under Section 382 occurred on January 22, 2009 regarding losses incurred by AGC, of which the attributes of those losses were transferred to NovaCopper US with the purchase of the mineral property in October 2011. Therefore, approximately $42.6 million of the U.S. losses above are subject to limitation under Section 382. Accordingly, the Company’s ability to use these losses may be limited.

An additional change in control may have occurred after November 30, 2011 which may further limit the availability of losses prior to the date of change in control.