In Canada, companies in sectors like mining and resources can deduct exploration and development expenses. They are allowed to pass on the tax deduction to investors through a special type of common share called a flow-through share. When you buy flow-through shares, your money is locked in for up to 2 years – you can’t get your money out for any reason.
Where to buy flow-through shares
You can buy flow-through shares from an investment firm or directly from the company that issues the shares. You can also buy them through limited partnerships or mutual funds, which offer a diversified portfolio of shares with professional investment management.
Ask about fees
Before you invest, find out about fees. You may have to pay a sales commission to your adviser and fees charged by the portfolio manager.
3 key risks
- Offered by new, small companies – These companies are often in the exploration stage and aren’t yet making a profit.
- Speculative investment – It can take years for a mining or resource company’s exploration work to pay off with a find – if it finds anything at all.
- Holding period – Flow-through shares have a holding period of up to 2 years. You can’t get your money out during this period, no matter how the company is doing or what you need the money for.
Flow-through shares also have similar risks to common shares. Learn more about these risks.
Warning
Flow-through shares lock in your money for up to 2 years. You can’t get your money out, no matter how the company is doing or what you need your money for.
Learn more about flow-through shares and their tax benefits from the Canada Revenue Agency.
