11	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, 2016 $			November 30, 2015 $			November 30, 2014 $
Combined federal and provincial statutory tax rate		26.00	%		26.00	%		26.00	%
Income taxes at statutory rate		(1,264)			(2,479)			(2,508)
Difference in foreign tax rates		(750)			(680)			(580)
Effect of foreign exchange changes		(339)			2,264			-
Non-taxable gain on the sale of Sunward Investments		(545)			-			-
Non-deductible expenditures		175			239			243
Return to provision adjustments		(510)			(102)			(224)
Other		(68)			-			-
Disposition of Sunward Investments		7,051			-			-
Valuation allowance		(3,750)			758			3,069
Income tax expense		-			-			-

Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at November 30, 2016 and 2015 are as follows:

in thousands of dollars

	November 30, 2016 $		November 30, 2015 $
Deferred income tax assets
Non-capital losses		58,204		63,397
Mineral property interest		14,491		14,116
Deferred interest		9,040		9,040
Property, plant and equipment		47		61
Share issuance costs		126		198
Other deductible temporary differences		450		575
Total deferred tax assets		82,358		87,387
Valuation allowance		(82,344)		(86,094)
Net deferred income tax assets		14		1,293
Deferred income tax liabilities
Mineral property interest		-		(1,109)
Other taxable temporary differences		(14)		(184)
Deferred income tax liabilities		(14)		(1,293)
Net deferred income tax assets		-		-

The Company has loss carry-forwards of approximately $153.1 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 NovaGold Arrangement, the Company undertook a tax reorganization in order to preserve the future deductibility of these losses for the Company, subject to the limitations below. Deferred 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 deferred tax liability is recognized can be offset. A valuation allowance has been provided against deferred 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 Canada $		Operating losses United States $
2017		-		-
2018		-		4,206
2019		-		975
2020		-		830
Thereafter		31,262		115,797
		31,262		121,808

Future use of 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 $39.4 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.

On June 19, 2015, we completed the Sunward acquisition which resulted in an acquisition of control of Sunward Resources ULC under of the Income Tax Act in Canada. Therefore, the Company’s ability to use approximately $15.2 million of losses in Canada may be limited.