There is some speculation that the federal government could hike the capital gains tax in its upcoming budget. Trent Mell thinks that could have a devastating effect on the junior mining sector.
“You could decimate an industry that’s already on its knees,” the president of PearTree Securities said in an interview.
His view is that a capital gains hike could crush the market for flow-through shares, which has been a key source of capital for the junior mining sector for more than three decades. It’s a unique type of stock issue that allows companies to pass on (or literally “flow through”) greenfield exploration expenses to primarily high net worth investors, who can deduct them against taxable income.
If the tax goes up, these shares could become far less appealing to those investors, Mell said.
“We just hope the government is truly informed on this issue,” he added.
PearTree is involved in a unique type of flow-through share issuance in which the shares are donated to charity.
