The local member of Canadian Parliament in Kirkland Lake is Charlie Angus, a member of the New Democratic Party. In 2008, Mr. Angus was quoted by The Timmins Press with regard to his view that he "consistently led on the issue of flow-through shares" and that it is only because of his efforts that the program was on the agenda and approved by the federal government in the first place.
On August 22, The Northern News reported on the closing of a private placement that resulted in BonTerra Resources Inc. (TSXV: BTR) selling $310,000 of "flow-through" units, along with "non flow-through" units.
The "Young and Thrifty" website details an example of how these investments work: an investor buys $10,000 worth of flow-through shares and receives a tax benefit of $4,370. However, this example assumes that an investor will be able to sell the investment for the same price it was purchased, which would result in a further tax burden of $2,185, bringing the tax benefit down to $2,185.
Personal finance author says flow-through shares "pushed"
The author of the Young and Thrifty website describes flow-through shares being "pushed" upon them by their financial adviser, yet does not seem to appreciate how these investments appear to be distributed to smaller investors. Further, the author only touches upon the poor performance of what would seem a majority of private placements in Canada..
In 2012, The Northern News reported on a private placement by the Kirkland Lake-area miner Northern Gold Mining Inc., selling flow-through shares valued at $10 million. A $5,630 after-tax purchase cost, following the above example, would have bought $10,000 worth of stock. However, from 2012 to 2015, shares of Northern Gold Mining lost more than 90 percent of their value. A $10,000 investment, purchased for $5,630, would have been worth less than $1,000 by the time Oban Mining purchased the outstanding Northern Gold shares late in 2015, for a fraction of what they traded at just a few years previous. With the capital loss, an investor who held to 2012 would have retained the majority of their tax benefit, $4,370, for a total cost of more than $9,000 -- seeming money down the toilet.
Given that private placements in thinly traded shares like Northern Gold Mining would seem to make the perfect investments for scam artists to deal in, the participation of the federal Canadian government might seem worthy of raised eyebrows.
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In August, Ontario Premier Kathleen Wynne visited Kirkland Lake with minister of Northern Development and Mines, Michael Gravelle. Gravelle told The Northern News that "10-12-15 years" is not abnormal for a mine site to be brought into production. The fate of the McGarry Mine in nearby Larder Lake, which had been expected to go into production and hire 100 workers before the shares of the company developing it, Armisitice Resources, lost most of their value, the chief executive officer stepped down, and the company changed its name to Kerr Mines Inc. (TSX: KER).
Minister Gravelle's comments seem to address the net benefit of a completed, producing mine, but not take into account the fact that there appear to be companies and penny stock distributors who are just going through the motions. Though this reporter has made the premier's office aware of unusual activity surrounding a number of junior exploration companies with publicly traded shares, a response remains elusive. It would seem that much of what junior companies and penny stock distributors state as fact is accepted by politicians at face value. Who, among these elected officials and officers of publicly traded companies, is looking out for the interests of small, mom-and-pop retail investors, remains to be seen. #Business