Editor’s Note THE FLOW-THROUGH JITTERS

The Canadian mine-finding fraternity is jittery. Over the past three or four years, easy money (relatively speaking) has been available, thanks in large measure to the federal government’s brilliant tax incentive scheme known popularly as flow-through financings. Now, because a part of the writeoff is being phased out, explorers will have to lure investors by some other means. And that’s what is making them so nervous. But before we bemoan the coming emasculation of flow-through, we offer a tip of the hat to those civil servants in Ottawa blessed with the brains to create such an unqualified success in the first place.

Flow-through financings in the mining industry started in 1983. One of the first companies to feast from this rich banquet was Canamax Resources (see our profile on John Hansuld in this issue). Since then, more and more money has flowed from the investing public into the coffers of junior, second-tier and some senior mining companies. Last year, the count reached an amazing $1 billion. The results, documented in our January issue, have been just as staggering — roughly 32 new mines in a 2-year period that will end this year. More mines are still in the development stage, and many of these will be brought on-stream with the last of the flow-through funds.

Prime Capital Corp., the junior mine-financing house created by Murray Pezim, could also be considered an indirect offspring of flow- through, for the vast sums that were floating about in the past few years helped establish Prime.

But without the lucrative tax incentives, it is accepted that investors won’t be as receptive to the shares of exploration companies. Hit especially hard will be grassroots explorers. (It should be noted that tax reform and its monkeying about with the capital gains tax won’t help.)

So, if the legislation the way it reads now doesn’t change or if new incentives aren’t introduced, explorationists, especially the more junior ones, will have to run that much faster just to stay in the same place. A big boost in the price of gold would help, as would a prolonged spell of relatively high base metal prices. But nobody is counting on either at this point.

As always, mining is a cycle of feast and famine.