Explainer
Flow-through shares are a Canadian financing structure that lets a resource company pass eligible exploration expenses to investors, who can claim them as tax deductions.
A company sells flow-through shares and agrees to spend the money on qualifying exploration. It then renounces those expenses to the investors, who use them to reduce their taxable income. Because the tax benefit has value, flow-through shares are often sold at a premium to the market price of ordinary shares.
An explorer with no income gains nothing from deductions, so passing them to investors is a way to raise money on better terms than a plain share sale. A premium can mean less dilution for the same dollars raised.
The company must spend the money on eligible exploration within a set deadline, so the cash is committed to drilling rather than overhead. The tax benefit depends on your own situation, and the rules and credits change, so check current rules with a tax adviser. The shares themselves still carry full junior-exploration risk, and flow-through shares can come with resale restrictions.
A flow-through raise usually means a funded drill program. It does not say anything about whether the rock is any good. Read the use of proceeds, the premium, and the company's track record.
Commodity Ape is information and commentary, not tax or investment advice.