I've never seen this "subject to increase" clause invoked in my 8 years of jr. mine investing. It's just not that complicated to put together a prospectus for a jr. explorer.
Flow-thru financing allows a Canadian tax payer to deduct the full amount of his investment off the top of his income. Hence if your marginal tax rate is 50%, a $10,000 investment only costs $5,000 after you get your tax return back. On the other hand, when you sell the shares, your cost base is zero for capital gains purposes. So if you sell the same shares for $2,000 (an 80% loss), you actually incur capital gains on that full $2,000. The company must use the funds for exploration in Canada (i.e. not working capital, land acquisition or foreign exploration). Usually you see the flow-thru deals occurring in Nov/Dec because the taxpayer gets his refund sooner.
My opinion is that NWI didn't want the assistance of a major at this point. So far, this deposit doesn't appear to be very tricky and I don't think that the INCO experience was a good one (see post #21).
The price of the offering is not such a deep discount to market. I would rather pay $2.40 for shares that can be sold before any particular drill result, than $2 for ones that must wait for most of the story to be told. A big investor, however, can't buy $5MM worth of those $2.40 shares because he'll quickly push the price up to $4 or more. At the same time, he can't easily sell all his shares immediately prior to a drill result.
Bill. |
