The federal government allows resource companies to deduct up to 100 per cent of their eligible exploration and development expenses. However, those companies may be years away from production or revenues. Therefore, they can issue “flow-through shares” as a way to pass their government tax breaks on to investors, while raising money to fund their exploration and development.
You can buy flow-through shares directly from a Canadian resource company but typically, investors buy units of an FTLP by private placement or through a public offering. An FTLP includes a general partner that manages the operations and investments, and limited partners (the individual investors). The capital is invested in flow-through share offerings from a variety of Canadian resource companies.
There are significant tax advantages. Additionally, you gain access to professional investment management, a diversified portfolio, and opportunities that may not be available to individual investors. There’s also increased liquidity, as the assets of the FTLP are transferred on a tax-deferred basis, usually within 24 months, to a corporate class mutual fund.
Contact your financial advisor today to learn the benefits of investing in flow-through limited partnerships or to find out about Sentry’s Flow-Through Limited Partnerships.