Flow-Through Shares (FTS)

Flow-Through Shares (FTS) & Charity Flow-Through (CFT)

A Capital Device for Investors Interested in Canadian Resource Exploration

What are Flow-Through Shares?

Flow-through shares are a unique financial instrument widely used in Canada, particularly in the mining sector. They have been a cornerstone of capital raising for resource companies, especially those engaged in mineral exploration. The model allows companies to transfer certain tax deductions related to exploration and development expenses to investors, making it an attractive option for both companies and investors.

Historical Context and Evolution

Flow-through shares were first introduced in Canada in 1954, three years before the RRSP. They have been a key financial policy instrument for junior mining companies to raise capital. In 2007, the Canadian government enhanced this model with the introduction of the charitable flow-through model, allowing investors to receive not only tax deductions but also the added benefit of charitable giving.

How Do Flow-Through Shares (FTS) Work?

Basic Structure:

Companies issue flow-through shares, allowing investors to receive a 100% tax deduction on the amount they invest.
These funds are exclusively used for exploration activities in Canada.
Investors are required to hold these shares for at least four months.
During this period, the stock price may fluctuate, posing a risk.

What is a Charity Flow-Through (CFT) Financing?

CFT is a uniquely Canadian structured financing product, that eliminates market and liquidity risk while combining two long established government tax regimes: Flow-Through Shares and Charitable Donation Tax credits.

Charity Flow-Through Financing

CFT is a uniquely Canadian structured financing product, that eliminates market and liquidity risk while combining two long established government tax regimes: (1) Flow-Through Shares and (2) Charitable Donation Tax credits.

The CFT format simultaneously benefits the Canadian charity and not-for-profit sector and the Canadian resource exploration and development sector - two critical elements of the Canadian economy. It significantly reduces a philanthropist's after-tax cost of giving, while enabling greater access to capital at reduced dilution for natural resource companies exploring and developing in Canada.

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