Flow-Through Shares: A Valuable Tool For Financing Mining Exploration

Mining exploration requires a great deal of capital and many small or mid-sized corporations struggle to fund their exploration activities. There may be a unique tax-assisted financing tool available to such companies, called flow-through shares (FTS). Essentially, a mining company can issue new FTS to investors at a higher price than it would receive for "normal" shares, making it easier to raise money for exploration and development.

When a mining company (let's call it Mineco) spends money on exploration in Canada, for tax purposes these amounts are accumulated in "pools," which can be deducted against income earned in determining Mineco's taxable income and tax payable. The normal rule is that only Mineco can use tax deductions from its expenditures.