Flow-through shares offer lacklustre results, take toll on taxpayers – by Ian McGugan (Globe and Mail – April 4, 2016)

http://www.theglobeandmail.com/

The chief executive of a junior mining company was frank when we recently discussed the merits of flow-through shares.

He has depended for years on peddling these shares as a way to fund his fledgling enterprises. There’s nothing unusual about that: Flow-throughs offer tempting tax breaks to brave investors, and they have long been a favourite way for early-stage oil and mining companies to raise capital.

But I had never grasped one of the additional reasons why resource entrepreneurs have become so fond of the program. “It’s quiet money,” the miner told me. “I get funding and I just about never hear from these people again. What could be better than that?”

Quite a few things, actually. At the moment, flow-through shares cost Ottawa a substantial amount of money, while encouraging investors to pour their savings into companies they barely know – and probably don’t even bother to follow closely if the experience of my miner friend is typical.

A report earlier this year by Vijay Jog, a professor of finance at Carleton University in Ottawa, underlines the inefficiencies built into the system and should be required reading for anyone who is attracted by the tax breaks offered by flow-through shares.

For the rest of this article, click here: http://www.theglobeandmail.com/globe-investor/inside-the-market/flow-through-shares-offer-lacklustre-results-take-toll-on-taxpayers/article29505532/

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