Mining investors know Canada to host some of the most prospective gold, potash, uranium and iron ore projects in the world, but many may be missing out by not knowing about the Canadian government’s flow-through shares program.
Flow-through shares allow natural resource companies on Canadian soil to transfer qualified expenses to investors, ensuring themselves safer passage on the road to resource delineation and extraction. This includes:
- Up to 30 per cent of Canadian development expenses.
- Up to 100 per cent of Canadian exploration expenses, including work to determine the existence, location, extent or quality of a mineral or oil and gas resource, as well as bring it to production.
In exchange for accepting a higher share price to reflect the flow of these expenses, investors can reduce their taxable income by the amount invested, on top of the 15 per cent Mineral Exploration Tax Credit or 30 per cent Critical Mineral Exploration Tax Credit, in addition to numerous provincial and territorial incentives. Here are a handful from Canada’s major mining provinces:
- The 5 per cent Ontario-focused flow-through share tax credit.
- A 10 per cent deduction through Quebec’s Taxation Act.
- The 20 per cent British Columbia mining flow-through share income tax credit.
- The 30 per cent Saskatchewan mineral exploration tax credit program.
These cost-minimization opportunities can add significant leverage to an investment, driven by both capital appreciation and tax savings, should a discovery lead to a resource or value-accretive asset sale.
Only accredited investors can buy flow-through shares from companies directly, requiring someone, either alone or with a spouse, to own financial assets with a net value of more than C$1 million, or earn income exceeding C$200,000 over the past two years (C$300,000 when combined with a spouse). However, non-accredited investors can access them through limited partnerships where money is pooled and allocated into a portfolio of exploration opportunities.
This wide net resulted in an annual average of more than C$500 million in flow-through financings per year from 2014 to 2019, doubling to more than C$1 billion from 2020 to 2023, according to the Prospectors and Developers Association of Canada, with nearly 70 per cent of mineral exploration financing raised on Canadian stock exchanges originating through flow-through shares in 2023.
Flow-through shares’ potential to magnify returns makes it essential to properly evaluate the miners that issue them, taking care to invest only into those best positioned for positive outcomes. In the broadest sense, a thorough due diligence process will keep a lookout for:
- Management with a proven track record of value creation exploring, developing and/or producing its target commodities, ideally across a complete market cycle, demonstrating capital allocation skills regardless of a changing demand environment.
- Assets backed by prospective exploration results and certified studies approximating project value, including mineral resource estimates, preliminary economic assessments, pre-feasibility studies and feasibility studies.
- Commodity tailwinds that pave the way for operations paying off over the long-term, supporting attractive prices to backstop shareholder value on the road to mine development and production.
Should a mining company check these boxes, proving itself to be fundamentally sound, investors should then compare return prospects with their personal financial goals, validating that owning the stock has a good chance of contributing to the lives they want to live.
In the case of mining stocks, your time horizon will likely have to be lengthy, with a survey by S&P Global estimating that it takes about 17.8 years to progress from exploration to production. This means that, to control for risk, the money you invest in early-stage mining stocks should ideally be reserved for long-term goals, such as retirement, giving your flow-through shares the highest probability of delivering a satisfactory outcome.
Ongoing flow-through financings to consider for the 2025 tax year
Investors can increase their flow-through deal flow by checking out Stockhouse’s trending mining news page, as well as perusing notable capital raises that crossed the wire over the past week. Here’s a quartet to consider:
- Copper Quest Exploration (CSE:CQX) is offering up to 1.5 million flow-through shares with a closing date of December 22. The company’s seven-project portfolio, concentrated in BC, houses established resources, mineralized zones and a multitude of high-priority targets.
- Loyalist Exploration (CSE:PNGC) is offering up to 17 million flow-through shares with an initial closing date of December 18. Proceeds will help to advance the Tully gold property near Timmins, Ontario, whose 107,000-ounce historical resource boasts multiple avenues for expansion as the company progresses towards a planned preliminary economic assessment.
- Sun Summit Minerals (TSXV:SMN) is offering up to 50 million flow-through shares with no cited closing date. The capital would fully fund 2026 exploration, with leadership keen on delivering an initial resource estimate at its JD project, which is surrounded by well-mineralized properties, including two billion-dollar projects owned by Thesis Gold, in the Toodoggone mining district of north-central BC.
- Finally, Q Gold Resources (TSXV:QGR) is offering 5,714,285 flow-through shares until December 19 to bankroll exploration at its Mine Centre property, located 250 km northwest of Thunder Bay, Ontario, where district-scale potential is backed up by intercepts up to 53.47 grams per ton (g/t) of gold over 1.5 metres.
Should you stumble upon a company that passes your due diligence process with flying colors, proving itself worthy of an investment, go ahead and reach out to them through their official website, being mindful of deadlines and the potential for the financing to become fully subscribed, lest you miss your chance to put money to work.
Join the discussion: Find out what mining investors are saying about flow-through shares on Stockhouse’s stock forums and message boards.
Stockhouse does not provide investment advice or recommendations. All investment decisions should be made based on your own research and consultation with a registered investment professional. The issuer is solely responsible for the accuracy of the information contained herein.
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