The Company's income tax expense differs from that calculated by applying statutory rates for the following reasons:

As referred to in Note 1(b), the Company must make significant estimates in respect of the composition of its future income tax asset and future income tax liability. The operations of the Company are complex, and related tax interpretations, regulations and legislation are continually changing. As a result, there are usually some tax matters in question.

Temporary differences comprising the future income tax asset (liability) are estimated as follows:

The Company expects to be able to substantially utilize its noncapital losses over the next year. The Company's assessment is that the probabilistic risk of expiry of such non-capital losses is remote.

The Company has net capital losses and such losses may only be applied against realized taxable capital gains. The Company has included a net capital loss carry-forward of $799.7 million (2005 – $645.0 million) in its Canadian income tax returns, of which $188.0 million has been recognized in the determination of its net future income tax liability as at December 31, 2006 (2005 – NIL). Of the net capital losses carried forward, as at December 31, 2006, $603.7 million have been denied on audit by the Canada Revenue Agency and the Company is considering various courses of action with a view to confirming all or a part of such net capital losses.

The Company conducts research and development activities, which are eligible to earn Investment Tax Credits. During the year ended December 31, 2006, the Company recorded Investment Tax Credits of $18.5 million (2005 – $0.4 million), $18.1 million of which was recorded as a reduction of capital (2005 – NIL) and the balance of which was recorded as a reduction of Operations expense.