DEEPER
into Canada’s portfolio superpower
Mining the opportunities in flow-through investing
in precious metals and in the critical minerals necessary for advancing technology and imagining a greener future.
Already a global powerhouse in the sourcing and exporting of these minerals, Canada depends on further exploration and innovation for its future.
This is why the government is investing in metal and mineral exploration — and incentivizing outside investment with flow-through investing.
So, why is it called flow-through?
Because tax deductions and credits given to mining companies for exploration “flow through” to the investor, delivering sizable tax advantages.
Canada’s metal and mineral potential:
Creating a strong, strategic, scalable supply
Canada’s energy independence and exporting economy rely on investment in discovery. The Canadian government is encouraging this in two ways:
Massive government funding to meet the growing demand for critical minerals
Tax incentives for private investors to help mining companies fund exploration
Canada’s mineral and mining industry is a global powerhouse.
$0B
in 2023
invested in mineral exploration in Canada1
$0B
in 2023
Canadian exports of raw, processed, and finished mineral and metal products1
0x
by 2040
global demand for critical minerals is expected to double within the next 15 years2
Canada’s critical minerals:
Swipe table to see more →
|
Drive our economic growth |
Contributes significantly to Canada’s GDP | Creates essential jobs | Boosts global exports | Reduces dependence on other countries |
|
Enable tech innovation worldwide |
Next-generation high-tech electronics | Semiconductors and microchips | Artificial intelligence (AI) | Data centres and communication |
|
Advance zero emission technologies |
Solar panels | Electric vehicle batteries | Wind turbines | Energy storage and power grids |
We have a wealth of minerals
vital for a greener tomorrow.
Lithium
Renewable electric vehicle batteries
Graphite
Heat-resistant lubricant, plus conductivity
Cobalt
Rechargeable batteries (smartphones)
Nickel
Energy storage systems and solar energy
Copper
Wiring and power grids
Successful exploration strengthens Canada’s status and independence in the global critical minerals sector.
How flow-through investing drives critical mineral and precious metal
exploration and the potential for a 100% tax-deductible benefit
Time for a deep dig into the details
A new resource exploration project is planned
Canada’s mining and resource companies are actively pursuing new metal and critical mineral discoveries.
The project is going to require funding
The Canadian government incentivizes or supports exploration by allowing junior mining companies to “flow through” eligible exploration expenses and credits to its investors.
Where will the money come from?
An investment management firm, such as Ninepoint Partners, creates a limited partnership (LP).
The LP pools investor capital and allocates the money to “flow-through” shares issued by mining companies in a way that the manager believes will best meet the LP’s investment objectives.
Exploration begins
Capital raised is used exclusively to cover the selected mining companies’ exploration expenses.
Investment duration is typically 12 to 24 months.
Exploration costs “flow through” to investors
In exchange for new capital, eligible exploration expenses are renounced, or "flowed through" to investors, allowing them to claim tax deductions and investment tax credits.
Up to 100% of each investor’s contribution is eligible for tax deductions in the year of investment, reducing their annual taxable income.
It’s a win-win-win for the company, investors, and Canada
Mining companies potentially find new discoveries.
An investor's after-tax return on flow-through shares is influenced by both the tax benefits and the performance of the underlying portfolio of junior mining shares, which can fluctuate based on market conditions. The ideal outcome is a combination of capital gains and the tax advantages offered.
Canada strengthens its mining sector and contributes to critical minerals globally.
Flow-through investments at maturity. 3 BIG FAQs.
So, when does this exploration start to pay off?
Flow-through shares generally reach the end of their term after 12 to 24 months.
Okay,
then what?
Funds typically roll over (tax-free!) into a corporate class mutual fund.
What about
income taxes?
Investors may deduct up to 100% of the investment against income, in addition to benefiting from applicable investment tax credits.
The funds have now rolled over into a mutual fund.
You have two options:
Sell your shares
Flow-through shares effectively convert income to capital gains.
If you opt to sell, your taxable capital gain is limited to 50% of the proceeds.
You can also reduce tax exposure by applying any capital loss carry-forwards you have.
Hold shares and sell later
Capital loss carry-forwards can offset capital gains when you redeem.
Stay invested in the resource sector while benefiting from a key tax advantage: deferring capital gains tax until you choose to sell. This gives you control over timing - like waiting to enter a lower tax bracket or using capital losses to offset any gains.
Let’s explore the cash flow from a $10K investment*
Swipe table to see more →
| Year 1 | Year 2 | Net 2-year cash flow | |||
| Flow-through LP investment | ($10,000) | ($10,000) | |||
| Tax savingsa | $5,350 | $5,350 | |||
| Investment redemptionb | $10,000 | $10,000 | |||
| Capital gains tax payablec | ($2,675) | ($2,675) | |||
| After-tax cash flow | ($4,650) | PLUS | $7,325 | EQUALS | $2,675 |
| After-tax returnd | 57% |
a Assumes highest marginal tax rate in Ontario of 53.5%. Tax rates will vary by province.
b Assumes no net gain or loss at the end of the term. On redemption, in exchange for favourable tax treatment, full value of investment is treated as capital gains.
c Assumes a 53.53% marginal tax rate x 50% Capital Gains inclusion rate x $10,000 = $2,675
d After-tax cost of investment is $4,650. After-tax return calculated as: $2,675/$4,650 = 57%
* For illustrative purposes only. Does not include fees, commissions, or other costs associated with investing.
For the purposes of simplifying the illustration, we’re assuming the starting and ending NAV are the same.
The ending NAV of the flow-through shares will be dependent on the success of the manager’s investment in the underlying mining companies. The ending NAV could be higher or lower than the starting NAV, which speaks to the potential risks involved in this sort of investment.
PLUS
Potential eligibility for additional 15% OR 30% tax credits
Discover how the federal government is providing additional tax credits for critical minerals exploration.
Calculate the potential tax savings based on the following:
- Annual Gross Income
- Flow-through Investment Amount
- Province
What are the risks of flow-through investing?
Like most investments, a flow-through LP presents unique risks, including the following:
Share Price Fluctuations
Underlying investments may include early-stage exploration equities. Values can fluctuate.
Liquidity
Liquidity is limited until the LP’s rollover period (typically 12 to 24 months).
Taxation
Tax treatment varies by individual. Investors should always consult a qualified tax professional.
An investment
in Canada
Investors get portfolio diversification while supporting exportation and reducing reliance on outside metal and mineral sources.
An intelligent
tax-planning strategy
Flow-through investing is one of the few remaining advanced tax-planning strategies in Canada.
Flow-through shares are
an established opportunity
growing in popularity.
70+
years
Flow-through shares have been available to Canadian investors since 1954.3
~$1B+
invested annually
Canadian investment in flow-through shares is on the rise.4
Generating billions in GDP + tens of thousands of jobs
About Ninepoint Partners
Ninepoint Partners manages innovative investment solutions that offer investors the benefits of better diversification.
As a team, we have a long track record of innovation in developing unique investment strategies.
We offer investment strategies that are uncorrelated to traditional asset classes.
We pride ourselves on developing added-value portfolio solutions and raising the bar on our industry.
Have the flow-through
investing conversation today.
Discover more about Ninepoint Partners and our offering.
Visit ninepoint.com Visit Ninepoint Partners’ Flow-Through Investing homepage
1 Government of Canada: Minerals and Metals Facts
2 Natural Resources Canada — News Release March 3, 2025: Investing to Make Canada a Global Critical Minerals Superpower
3 Report on Federal Tax Expenditures — Concepts, Estimates and Evaluations 2020: part 5
4 PDAC: Mineral Finance 2023: Shifting tides within the mineral industry
Ninepoint Partners LP is the investment manager to a number of funds (collectively, the “Funds”). Important information about these Funds, including their investment objectives and strategies, purchase options, and applicable management fees, performance fees (if any), and expenses, is contained in their prospectus. Please read the prospectus carefully before investing. There are ongoing fees and expenses associated with owning units of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.
The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: Speculative Investments; Sector Risks; Lack of Operating History of the Partnership; Changes in Net Asset Values; Valuation and Liquidity of Resource Issuers; Global Economic Downturn; Tax Related Risks; Lack of Liquidity of Units; Flow-Through Share Premiums; Reliance on the Manager and/or Sub-Advisor; Conflicts of Interest; Possibility that Limited Partners may Receive Illiquid Securities on Dissolution; Financial Resources of the General Partner; Transferability of the Units; Resale Restrictions on Portfolio Securities; Short Sales; Derivatives; Lack of Suitable Investments; Cybersecurity Risk; Possible Loss of Limited Liability; Loan Facility.
The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not a resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.
The income tax considerations applicable to an investor will vary depending on a number of factors, including whether units of flow-through funds are characterized as capital property, the province or territory in which he or she resides, carries on business, or has a permanent establishment, the amount that would be his or her taxable income but for the interest in the flow-through fund, and the legal characterization of the investor as an individual, corporation, trust, or partnership. Ninepoint Partners LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. The information should not be regarded by recipients as a substitute for the exercise of their own judgment or for the advice of legal and tax advisors.
