I've been wanting to contribute something to the hub after being able to read so many great posts on a.....well...let's just say I check this site waaay to often. I bought some Flow-Through Shares today and thought it would interesting to share my experience. I have not previously bought Flow Through Shares - so keep this in mind as to my level of understanding.

There are in fact 2M worth of Flow Through Shares still available according to Wellington West. I purchased some through my TD Webbroker acct - not too difficult at all once you know who to call.

They are 2.80 per share.

There is a 4 month hold period.

There is no option to cancel once you have committed to the trade.

They close on August...uhh...not sure but in something like 10 days or so.

Minimum 25k investment.

No commission.

You need to have the $$ in your account to process the trade.

Now for some analysis....

Flow through shares (FTS) are specific to the mining and natural resource industry. They are 100% deductible from your taxes! Think of an RRSP - same kind of idea. As a bonus, the fed gives a further 15% credit and certain provinces give credit as well. Ontario is 5% Quebec is 15%.

All in all, it's a pretty amazing deal. I have heard on this blog that the net cost of a 2.80 FTS is 1.60. By looking on various website and running my own numbers it appears to be closer to 1.20, and I've calculated lower - assuming you are in the highest income bracket.

Here's a great chart that does a really good job summarizing all numbers. According to this, in Ontario a $1000 investment's cost is net $432. Or net cost $1.19 for the NOT 2.80 FTS.

http://www.flow-throughshares.com/i/flowthroughbrochure.pdf

$1.19 for a NOT share?! Sign me up.

Okay, now here's the rub.

The adjusted base cost of your investment of when you sell is ZERO. So, that means that when you sell your NOT FTS your capital gain starts from ZERO. If you were to buy today for example, some regular shares your base cost would be 2.27. So....whatever your capital gains will be when you sell your shares, guys like me who now own FTS will be paying capital gains tax on the entire amount. People who own regular shares (like me also) will pay the capital gains on the difference of what they've paid and what price they sold them at. Point goes towards regular shareholders!

I kept running numbers over the past 24 hours to see if it is in fact worth it buy the FTS or the regular (once I found out there were some available) shares - particularly when they were 2 bucks yesterday. The answer is...it totally depends on the share price at the moment you buy them, and the share price which you intend to sell them.

The difference comes down to the basic principle that with a 100k investment you will get 35714 FTS of NOT. If you were to invest the same amount in regular shares of NOT, the amount of shares would completely depend on the price that you paid for them. For 100k @$2 share you could have had 50000 shares of NOT. Then when it goes to $10 you would have $500k and you would have to pay capital gains on the $400k profit (25% = 100k). Me as a FTSholder would only have $357140 and would have to the entire amount as capital gains. (357140@25%=$89285). Whadda loser! Should have bought the regular shares.

Ah...but not so fast. If NOT actually drops, I can still benefit from my tax write offs. If NOT goes to say...$5, the FTSholders come out ahead - by about 15k (I've added my tax savings onto the amount of roughly 60k). So, basically as the stock continues to rise the FTS appear to be less of a smart decision. They do however, appear to be certainly more fiscally responsible and less risky. If NOT tanks, I can probably still keep my head above water at $1.20ish (and I am totally speculating - -this is all I know at this point).

Where you could really make an impact with FTS is if you could take the money you saved on taxes and reinvest in regular NOT stock - then it's a clear winner - but it's a 'non'refundable benefit' which I believe means that you won't ever get cash back from the gov't, you can just pay them less...or something like that. So you won't have the cashback to delve into more NOT shares...damn.

Some other tidbits. FTS are designed for individuals (and maybe Limited Partnerships?). We looked at putting some through our business but our accountant set us straight. It's a much lesser benefit for a corp than an individual.

The guy who deals with it is named Jameson in the Toronto office at Wellington West. Said there was $2M left at 445pm this aft. Number is on their website.

I purchased mine through webbroker and know the contact there. If anyone wants it, PM me and I'll get her number to you - might save you a bunch of phone calls - Jameson sent me to the wrong person at TD.

I hope that the reason that it filled up so quickly was that all the 'insiders' had their friends and family buy it up - as it would be amazing to find $25M so quickly from individuals - but then again I'm not sure how this all works. I think Wellington books the amount and then shops it to its clients?

Keep in mind that I tried to ingest this in the last 36 hours, it's meant to be a discussion point and I am far from an expert at FTS. However I also appear dumb enough to throw at least 25k at something I don't know much about!

I'll probably end up broke, because after today I am officially going for it.

If anyone's at all interested I would make sure at the very least that you are in the highest income tax bracket, you are an accredited investor, and you have the risk tolerance - and nobody would ever be reading this is they thought they didn't have that.

There's my 2 cents, loving the posts and please feel free to discuss, comment or correct me.

BMack