Topic: How To Invest

Q: Pat, I may want to invest 10% to 15% of my portfolio into flow-through shares. It looks like a great way to buy junior resources companies at a discount. Please tell me specifically about CMP’s 2018 Flow-Through Resource Limited Partnership. Thanks.

Article Excerpt

A: Flow-through limited partnerships developed out of a Canadian government plan to encourage the exploration and development of the country’s natural resources. Under the plan, companies involved in oil and gas, mining and base metals and other natural resource industries are permitted to fully deduct specific exploration expenses known as the Canadian Exploration Expense (CEE). They can pass these deductions on to investors, through flow-through shares. In theory, that provides investors with tax refunds to lower the cost of investing in junior resource stocks. Generally, investors buy units of a limited partnership, which in turn invests in the flow-through shares of publicly traded resource companies. Most of these trade on the Toronto Exchange or the Toronto Venture Exchange. In turn, the partnership passes the Canadian Exploration Expenses through to its unitholders. Typically, initial investors in flow-through limited partnerships are able to deduct 100% or more of their investment against income by the end of the second year. This leaves the investor with…

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