HIGH-GRADE NI-CU-PT-PD-ZN-CR-AU-V-TI DISCOVERIES IN THE "RING OF FIRE"

NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)

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Message: Flow Through Calculations?

Flow Through Calculations?

posted on Sep 30, 2009 12:38PM

Hello - since there is not much substance going on lately on this board. I thought I would do my best at some DD. I figured a little effort may go a long way - and help us get some insight into what the BoD feel the company is worth and the institutional money that entered at the last PP. Please PM me if you have personal issues with this post or respond on the board if it is relevant to the Flow through calculations. Here goes nothing

Looking at the INK Company Insider report (can't post - don't know how), Joseph Hamilton has purchased 50,000 shares at $2.80 on August 26th (I assume these are the flow through from the PP). He sold a 56,000 shares at $2.50 on August 7th - most likely to cover the cost of his upcoming PP.

I wanted to try and figure out Joseph Hamilton's break-even point.

I found this - http://www.rev.gov.on.ca/en/bulletins/itrp/6315.html - that helped describe the Ontario flowthrough tax credit system.

It sounds like there is an immediate 15% federal credit + 5% provincial credit + 100% federal flow through deduction. Taken form the link.

"A taxpayer who makes a $1000 investment receives a 15 per cent federal credit of $150 and, in addition, a 5 per cent OFFTS tax credit of $50."

So just with the credit system - Joe Hamilton get's a credit of $28,000. Joe Hamilton's 50,000 shares can go to $2.24 and he's even.

Now how do I add the 100% federal flow through reduction on to that? I'll try below.

Here is where I begin assuming (and allow for any and all corrections) - that Joe Hamilton's initial investment is $140,000 (50,000 shares at $2.80). Assuming this $140,000 is eligible for the 100% federal flow through bonus - this amount of money would be deducted from his taxable income? If so, $140,000 at a tax bracket of at least 40% would mean a savings of $56,000. Therefore Joe Hamilton has a total of $56,000 + $28,000 = $84,000 to lose before he breaks even. If I'm doing this correctly, Joe Hamilton's shares can therefore go (I don't want to type this) - $1.12. Factor in the capital losses that he would acrue on selling below his purchase price of $2.80 and there is even more savings.

Can an accountant out there or someone more familiar with this topic help clear this up for me and the other posters/lurkers/readers?

I think it is of the utmost importance as it highlights where the smart institutional money, the BoD, and those others who bought in at the recent PP levels are standing. it may also help explain the recent price action.

All comments are welcome,

WW

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