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What Are Flow-Through Shares?

Information only, not investment advice or tax advice. This guide explains how mining companies report results and raise money; it does not recommend any company or security.

By REE Stocks. Sources checked Oct 13, 2026.

Flow-through shares are shares that let a Canadian mining company pass its exploration costs to the investors who buy them. The investor deducts those costs from their own income, and can often claim a federal tax credit of 15% or 30% on top. They're one of the main ways junior miners pay for drilling.

Picture a small explorer with a copper target in northern B.C. and a summer drill program to pay for. It has no revenue, so tax deductions are no use to it. Flow-through shares let it hand those deductions to people who can use them, in exchange for their money. That's the whole idea. What follows is general information, not tax advice, and anyone thinking of buying should talk to a tax professional first.

How do flow-through shares work?

Flow-through shares work by moving the tax benefit of exploration spending from the company to you, the buyer. Once the company renounces the costs, they're treated as yours rather than the company's, Natural Resources Canada explains, so you can deduct them as if you'd paid for the drilling yourself.

The company signs on to spend at least what you paid on qualifying work in Canada. It doesn't have to be a Canadian company. But the work has to be done in Canada, you have to pay tax here, and the issuer has to be in the business of exploration, mining or mineral processing.

Which exploration costs qualify?

Mostly the costs of looking for a deposit, known as Canadian exploration expense (CEE). Think prospecting, geological and geophysical surveys, drilling and trenching, all named in the Income Tax Act. Canadian development expense (CDE) can be passed on as well. Buying the mineral property itself can't.

The list keeps getting tighter. Since 2018, the cost of getting a new mine into production, like stripping soil or sinking a shaft, no longer counts. And Budget 2025 took out studies of whether a deposit is economic or how it would be engineered, from Budget Day on.

How much can an investor deduct?

All of it, for exploration. Budget 2025 confirms renounced exploration expense is deducted at 100%. Development expense is slower, at 30% a year on a declining balance. So if you put $10,000 into flow-through shares that fund exploration, you'd usually get a $10,000 deduction. Then you may be able to claim a federal credit of 15% or 30% as well, depending on what the company is hunting for.

What is the Mineral Exploration Tax Credit?

It's the 15% federal credit, and it's the one gold and silver explorers lean on, since those metals aren't on the critical list. The METC is non-refundable, only individuals can claim it, and unused credit can go back 3 years or forward 20.

There's a quirk: it only covers exploration done from or above the surface of the ground. Budget 2024 extended it to March 31, 2025. Then, on March 3, 2025, Ottawa proposed pushing it out again to March 31, 2027.

What is the Critical Mineral Exploration Tax Credit?

It's the bigger one: a 30% non-refundable federal credit for work that targets specified critical minerals. It arrived in Budget 2022 and covers flow-through deals signed after April 7, 2022, up to March 31, 2027. Before it applies, a qualified person under NI 43-101 has to certify that the program really is aimed at eligible minerals. We explain who that is in What Is an NI 43-101 Technical Report?

Fifteen minerals qualify right now: nickel, cobalt, graphite, copper, rare earth elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, uranium and lithium, including lithium from brines. Budget 2025 proposed a dozen more for new deals, from bismuth and germanium to tin and tungsten. You can't stack the two federal credits, though. Each dollar of spending gets the METC or the CMETC, never both.

Do the provinces add their own credits?

Some do, and they can change the maths a lot. NRCan says British Columbia, Saskatchewan, Manitoba, Ontario and Quebec all line their incentives up with the federal system. Two examples:

British Columbia gives a 20% non-refundable credit on B.C. flow-through mining spending, with unused credit going back 3 years or forward 10.
Saskatchewan gives 30%. Add the federal credit and the province says the total comes to 45% to 60%.

One catch: a provincial credit shrinks the amount that counts for the federal METC and for your CEE deduction. NRCan's worked example of a $1,000 investment gives a quite different after-tax cost depending on the province, so where you live matters.

When does the company have to spend the money?

Usually within 24 months of the month the deal was signed, under the Income Tax Act. A "look-back" rule adds a twist. The company can renounce costs in January, February or March and date them back to the previous December 31. You get the deduction for the year you invested, even though the drilling happens the next year.

If the company doesn't spend the money in time, it's the company that pays the extra tax, not you. What matters for you is that it has promised to spend the full amount on exploration in Canada.

Why do junior miners use flow-through shares?

Because it makes money easier to raise for risky early work. NRCan describes the METC as designed to help exploration companies raise equity, and the same logic applies to the CMETC. A tax break for the buyer brings in investors who might otherwise pass on a company with nothing but a target and a drill plan.

Next time a news release announces a flow-through financing, look at three things: how much came in, which credit applies, and what the money is meant to pay for. Then watch for the drill results it funds, and use How to Read Drill Results to judge them. Companies exploring for eligible minerals are on our critical mineral stocks lists.

What Are Flow-Through Shares?: frequently asked questions

What are flow-through shares?

Flow-through shares are shares that let a mining company pass certain exploration costs to the people who buy them. The costs are treated as if the investor incurred them, so the investor can deduct them from their own income. Companies use them to raise money for exploration in Canada.

What is the 30% Critical Mineral Exploration Tax Credit?

The Critical Mineral Exploration Tax Credit (CMETC) is a 30% non-refundable federal credit on exploration spending that targets specified critical minerals in Canada and is renounced to flow-through investors. It applies to agreements signed after April 7, 2022, and on or before March 31, 2027. Eligible minerals include copper, nickel, lithium, uranium and rare earth elements.

What is the Mineral Exploration Tax Credit?

The Mineral Exploration Tax Credit (METC) is a 15% non-refundable federal credit on eligible exploration spending renounced to individual flow-through investors. It covers minerals not on the critical list, such as gold and silver. Budget 2024 extended it to March 31, 2025, and in March 2025 the government proposed a further extension to March 31, 2027.

Can I claim both the METC and the CMETC?

No, not on the same spending. Natural Resources Canada says the two credits are mutually exclusive. Each expense qualifies for one or the other, depending on which minerals the work targets.

What is the cost base of flow-through shares?

Under the Income Tax Act, flow-through shares acquired after November 12, 1981 are deemed to cost nil. That affects how a later sale is taxed. Because the rules are detailed, investors usually get advice from a tax professional.

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