Rona Ambrose, the interim leader of the Conservative Party of Canada, was in Sudbury Monday to talk flow-through shares.
“I’m here to raise the alarm that the Liberal government is looking to get rid of the mineral exploration tax credit and the flow-through shares for mining and mineral investments,” she told The Star. “This is a huge concern for the mineral and mining sector, because (the flow-through shares) constitute 60 per cent of how they raise their money.
So in 2014, in a $54 billion industry, 90 per cent of the money that was raised by junior mining companies was raised by flow-through shares. … This is a huge revenue-generating investment instrument that is used by junior mining exploration companies.”
Basically, when a company drills a property, they do not accrue revenue, so can write-off expenses related to that exploration. As long as the company drills within 24 months, shareholders can claim the costs related to drilling.
Flow-through shares were devised years ago as a way to attract average investors to fund risky mining operations.
“Exploration is a high-risk, high-cost thing to do,” Ambrose said. “So junior companies won’t do that unless there’s potentially a high reward. A lot of times they lose money, but the hope is they’ll make some. If this is lost and is actually cancelled, it’ll mean massive uncertainty for this industry, which is already suffering from low commodity prices, but it also means much less investment. It would be a very difficult thing for this industry.”
According to the Price Waterhouse Coopers Canada Foundation, flow-through shares enable exploration of mineral deposits by small companies.
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