Certain corporations in the mining, oil and gas, and renewable energy and energy conservation sectors may issue Flow-Through Shares to help finance their exploration and project development activities. The FTS must be newly issued shares that have the attributes generally attached to common shares.

Junior resource corporations, such as Trojan Gold Inc., issue Flow-Through Shares to finance their exploration and development activities as they are often in a non-taxable position and do not need to deduct their resource expenses to lower taxes.  Flow-Through Shares allow the issuer to transfer up to 100% of their resource exploration expenses to investors for this purpose.

Investor purchases FTS issued by a qualified company operating in the resource sector.

Funds raised with FTS and spent on exploration are “renounced” and the expense deduction “flows” to the investors.

Investors deduct their investments from their earned income, thereby reducing income taxes.

The “Cash” Benefit of Flow-Through Shares In the following example, an Ontario resident3 generating incremental earned income subject to the highest marginal rate of 46.41% is considering: (a) an investment of $20,000.00 in Flow-Through Shares or (b) simply paying income tax now on the incremental earned income. In this example, the Flow-Through Shares are ultimately sold at the original purchase price at some time in the future: