The urban legend surrounding "wealthy people" losing money on purpose for tax reasons is nonsense. There are occasions where money is really lost, but that has more to do with market risk than purposely losing money. When people hear the words "tax loss" they believe you actually lose money. You don't! the idea is to postpone a tax liability into another taxation year to preserve cash flow or to push the liability into a future taxation year. In the case of some of these flow through purchases the concept is to create a limited partnership which you sell to multiple high earning individuals. The proceeds are used in flow though investments (ideally near year end) so that the"expense" can be booked against income in that tax year. So if you pay 53 cents for a flow through share and you get an immediate expense to your income of 20 cents then your adjusted capital cost is .33.

You've decreased your taxes for 2010 by 20 cents and since the sp is now at 40 cents you already have a capital gain of 7 cents that is only taxable when you sell.

Now what happens in some cases is that once the pp becomes trade-able in four months, and lets say the sp is 60 cents in May 2011, the participants in the limited partnership may want to cash out because they have already taken their tax write off for last year and have an income appreciation to the 53 cents and a capital gain to 60 cents. They may look at this great tax postponement coupled with a no brainer profit and cash out. If the limited partnership didn't have a sunset clause then Dwek would have to cover redemptions. If he sees strong potential then he may cover those and take the position. If the value is fully factored then why would he? they simply begin to sell to cover the redemptions. BUT, if the company is doing GREAT why would anyone redeem? Why wouldn't Dwek cover?

The only time it is a true loss investment is if the sp drops below the .33 cents which is the adjusted cost base. No one wants that to happen on purpose when they buy into a tax postponement.......but it does happen. We see that and think these people WANT to lose money on purpose for some tax advantage........it isn't!.......No one admits it, because to do so would be to admit you invested into something stupid to save tax and you actually lost the tax and out of pocket money!.....make sense?

Believe me.......these things get dumped because the company isn't doing well or has no near term potential! ......The very same reason many of you dump any stock. The difference is that in these types of arrangements involve large amounts of money with large share floats. When they begin to dump they can have a big impact......Doesn't matter though if the company is doing great!

Stop being so scared of Dwek and Mineral Fields. You guys are right that flow throughs are often done above the trading price. Actually most are if the stock has any real potential. Where Yellowknifer is correct is that you don't often see one done without at least a half warrant.........that is indeed rare!

All in all I think this was a great piece of financial engineering and impressive. To say it is a kbec barstool deal is a little unfair to the folks on our team. I'm pretty impressed!

Management needs to be pretty confident they will have a very good story to tell in about 4 months or the only thing impressive will be the selling volume!

I'm counting on the results from the bulk sample to be our support mechanism. Frank C better be kicking some Lab CEO in the muts to make sure they meet their time commitments. I'd recommend he go Italian on them when he hands over the samples........and he doesn't hand over the cheque!

....................imo..........carry