Flow-Through Shares
Flow-through shares are a Canadian tax-incentive financing in which a mining or exploration company renounces its exploration-expense tax deductions to the investors who buy the shares — letting those investors claim the deductions themselves, usually in exchange for paying a premium price.
What are flow-through shares?
Under the Income Tax Act, a junior resource company that can't yet use its Canadian Exploration Expense (CEE) deductions (because it isn't profitable) can "flow through" those deductions to shareholders. Investors buy flow-through shares and deduct the renounced expenses against their own income.
Because of the tax benefit, flow-through shares are typically priced at a premium to the market and are a common way for junior miners and explorers to fund drilling programs. They're usually sold by private placement and carry a hold period.
For investors reading insider and financing activity, flow-through deals are worth distinguishing from ordinary open-market buying: the buyer's motivation includes a tax benefit, so the purchase is weaker evidence of pure conviction than an open-market buy. Form55 flags flow-through financings where the data identifies them.