Flow-through shares

Share donations help charities, miners and investors alike

By Chris Freimond, Managing Editor

Junior mining companies have long relied on flow-through shares to raise capital, but in the current tight equity market, a variation on the traditional formula has become a lifesaver for some firms seeking funds to keep their heads above water.

Flow-through share donations allow major gift donors to purchase shares and then give them to a charity, which then immediately sells the shares to a pre-identified institutional or strategic investor. The charity issues the donor a tax-deductible receipt for the full proceeds of the sale.

Since 2007, Toronto-based PearTree Financial Services has facilitated more than $500 million in structured flow-through share subscriptions, while at the same time incenting much greater philanthropy by saving donors significantly in after-tax costs, says Norman Brownstein, president of PearTree Securities Inc.

“We facilitate the entire transaction, working with the brokerage community to arrange the immediate sale of the shares by the charity, which issues the donor a receipt for the amount of the share sale,” says Mr. Brownstein.

He says the format meets the needs of all parties involved in the transaction.
Anthony Makuch, president and CEO of Lake Shore Gold Corp., says flow-through shares have helped finance his company’s activities.

Working with PearTree, Lake Shore has raised over $40 million to advance key exploration properties while placing its equity with global strategic investors.

“We recognized as early as 2008 that PearTree offered a less dilutive approach than other capital sources and would therefore provide a nice supplement to working with our traditional bankers for the bulk of our financing,” adds Mr. Makuch.

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