Jason Mayer: An Explanation of Flow Through Shares
Jason discusses how flow-through shares (FSTs) work. They are similar to ordinary common shares that are issued from treasury however when a company issues these shares they agree to spend the proceeds on expiration activities. The company agrees to “flow-through” tax deductions to the purchaser of the shares. Companies usually offer the shares at a small premium to get a portion of that benefit back. This allows investors to write off 100% of the purchase price against that year’s income.
Super flow-through means a company is eligible for the federal 15% investment tax credit. This means the purchaser of super flow-through shares also gets that benefit. This further drives down your money at risk and break even proceeds.
One needs to make sure companies are sound and projects are worthwhile. There is a very rich pool of opportunities and little competition concerning securing these deals. He sees favorable pricing and terms. This could be a good year but will largely be driven by the underlying commodities performance.
Demand from clients often spikes later when individuals have an idea of their tax obligations. However, there isn’t much available late in the year as companies are required to invest those proceeds by year-end.
Currently, Jason’s mid to long-term outlook for gold is quite positive. He bases this not on economics but on historical debt levels and lower growth rates. He says we are in uncharted territory in debt, demographics, and protectionism. Gold equities currently hold excellent value.
Talking Points From This Week’s Episode
• Outlines the advantages of purchasing flow-through shares.
• The significant tax benefits and the correlating risk reduction.
• Market conditions allow for favorable terms.
• He is positive about the gold market and predicts continued structural issues with the economy.
Mr. Jason G. Mayer, CFA serves as a Portfolio Manager at Sprott Inc. Mr. Mayer is a Senior Portfolio Manager at Sprott Asset Management, LP, and was previously a Portfolio Manager since November 2012. Before this, he served as an Executive Director of Resource Group and Portfolio Manager at Middlefield Capital Corporation. Mr. Mayer had rejoined the firm in August 2011 as a Co-Head of its mutual fund business and Lead Portfolio Manager. Before joining the firm in 2002, he served as a Derivatives Analyst at TD Securities Inc. Mr. Mayer holds the Chartered Financial Analyst designation. He received an M.B.A. from the Schulich School of Business, York University.