RE: million ouncesFlow through shares are still being sold.However,a company sometimes offers both flow through and regular shares. Usally flow throughs are priced higher,lets say 50 cents,with the regular shares priced at say 35 cents. You pay more because of the tax saving.With a flow through you can write off 100% of the cost of the shares.So in effect ,the mining company passes on the write offs to the investor.Sometimes the regular shares will have warrants,the flow throughs -no warrants.The issuing company can price them however they wish,but either you pay more or get no warrants with the flow throughs.
Now how it works,you buy a flow through,you get a 100 % write off,your cost base goes to zero-you have written the whole investment off.Now when you sell your shares,you pay a capital gains tax- you add 50% of your gains to your income.
So if you buy shares for 10 thousand,sell for 10 thousand-you break even-with regular shares.With flow throughs,buy for 10 thousand,sell for 10 thousand,but you write off the full 10 thousand,when you sell you only add 5 thousand to your income(Capital gains-only add half your gain)so even though you break even you have gained a 5 thousand dollar write off-if your in a 50% bracket you save 2500 in taxes on a 10 thousand investment,plus you pick up the warrants for free.This type of investment works well with high income investors who can take full advantage of the write offs.
Under Canadian rules to participate in a Private Placement you must make 200,000 a year or have a million in licquid assets. I have participated in lots of them,even though I do qualify,nobody ever asks for proof,you just sign that you qualify.
Now some would say that this is not really a fair deal,which in some ways it isn,t,but this incentive was created by the government in order to finance these small companies,so that they would be able to raise cash in order to finance exploration activities in order to create mines which in turn creates jobs and new taxes for the governments.The bottom line is you pay more for a flow through -because your allowed to write off the cost of the shares.