Wesdome Gold Mines Completes Private Placement of Flow-Through Shares
On December 18, 2015, Wesdome Gold Mines Ltd. (TSX: WDO) announced that it completed a private placement of 1,818,182 flow-through common shares at a price of $1.65 per share. Wesdome intends to use the majority of the gross proceeds from the offering to advance its exploration programs at its Eagle River camp near Wawa, Ontario; and to a lesser extent, at its Moss Lake, Ontario property.
In the early 1980s, the Canadian government established an incentive for Canadians to invest in companies in the natural resource sector. These companies were permitted to “flow through” their Canadian exploration and development expenses to investors so that investors can deduct these expenses against their taxable income. Specifically, a mining corporation that has issued flow-through shares will forego the tax benefit of the deductibility of certain Canadian exploration and development expenses that it incurs and will “renounce” these expenditures to the benefit of the specific investors who acquired the flow-through shares (which in all other ways are just ordinary common shares). The investors purchasing the flow-through shares from the corporation are permitted to deduct the amount of the Canadian exploration and development expenses that the corporation has incurred and has renounced to them. The investors are effectively treated as if they had incurred the expenses themselves. The corporation benefits because it can issue the shares to the shareholders for a higher price than they would otherwise be willing to pay, due to the income tax benefit associated with being able to deduct the mineral exploration expenses. The investors benefit by being able to reduce their incomes for tax purposes (and pay less income tax) by virtue of claiming deductions for the renounced exploration expenses.
Wesdome is in its 28th year of continuous gold mining operations in Canada. The company is currently producing from its Eagle River and Mishi gold mines in Wawa, Ontario, which have earned consistent free cash flow even during times of low gold prices. Wesdome also owns two other gold properties, the Kiena Mine Complex in Val d’Or, Quebec and the Moss Lake gold deposit located 100 kilometres west of Thunder Bay, Ontario. These assets are being explored and evaluated to be developed in the appropriate gold price environment.
Aird & Berlis LLP advised Wesdome with a team that included Eldon Bennett (Mining), Geoff Clarke and Jonathan Tong (Corporate Finance & Mining) and Carol Burns (Tax & Mining).