re KS.V <<<no wonder they've had to to a flow-through offering since then, and are in the middle of a second one. So much for limiting shareholder dilution.>>>
Hi a1derfulife.... there are often problems inherent with "flow through" financings that aren't generally recognized by shareholders and best expressed in this excerpt from a piece favoring amagamation written last December...
"The new trend for 2009 among emerging gold producers will be amalgamation. In spite of gold’s buoyant performance during the final quarter of 2008, investment in potentially profitable gold deposit developers continues to remain virtually non-existent.
Survival Strategies – Linear and Central Sun
The major exception to that rule is Canadian junior mining companies which are willing to (or forced to for lack of options) accept flow-through financings. Flow-through provides tax incentives for Canadian resident investors who are able to deduct the full amount invested from their income for the year. Companies receiving the investment can only use flow-through funds for “in-the-ground” expense, meaning none can be used for administrative costs.
Only companies with properties in Canada qualify. Excessive flow-though financing places downward pressure on share prices, because there is a strong incentive to blow out flow-through shares at any price, since the Adjusted Cost Base of a flow-through share is essentially $0.
Many investors don’t fully understand that Flow-through financings represent a major disadvantage to other investors in the same company who do not reside in Canada. This is why amalgamation is the only survival path available to some companies who have either already diluted their share structure excessively through flow-through offerings, or whose properties are not in Canada.
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