PDAC 2016: Whither the flow-through share?

Like several Canadian lawyers, Stikeman Elliott LLP holds a variety of seminars on mining law throughout the PDAC convention.

Stikeman’s collection of rapid-fire, “7-minute mining” seminars on Monday morning included a short presentation around the status of flow-through shares.

A company ordinarily writes off its very own business expenses. Junior exploration information mill risky ventures which are likely years away from making enough money to incur corporate income tax liabilities. Flow-through shares allow companies to “renounce” their business expenses to investors, who are able to then claim their share of these expenses as credits on their personal income taxes. You can debate their merit from a trader prospective, but they have risen hundreds of millions for Canadian exploration companies.

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Canada’s new Liberal federal government has pledged to lessen subsidies open to the fossil fuel sector. The phase out will probably begin in the fiscal year ending 2018.  As the new authorities has established that it will still allow flow-through shares in the mining industry, it’s not clear the way the new government’s policies works used. We’ll get a start looking when the new authorities unveils its first budget on March 22.

In the interim, Stikeman lawyers suggest that any organization contemplating a flow-through share offering achieve this as quickly as possible, just in case the rules change.