I do not prepare tax returns or advise on public companies but let's say the paid-up capital of CUU share accounts is $100 million (shares issued from treasury on PP and IPOs etc). CUU can purchase their own shares for cancellation and treat part of the payment to shareholder as a return of capital (ROC)and another part will be a "deemed dividend". The ROC will be tax free to shareholders as it was the original after-tax investments made by shareholders. I assume the flow through shares have a lesser paid-up capital ( PUC) amount attached to them but I am not sure.

Also, if CUU sells the 75% interest to Teck, it will have to pay income taxes on the proceeds in excess of losses carried-forward and balance in the cumulative exploration accounts. Also a portion may be taxed as a capital gain (only 50% is taxable). The balance can then be used for the ROC and deemed dividend.

It's too complicated for the average C.A. so let's let KPMG's tax partners figure it out!! NO one is paying me to do the research!

"In imposing these restrictions, the Department of Finance appears to be primarily concerned about public companies distributing earnings to shareholders on a return of capital as a substitute for regular dividend payments. Accordingly, the amendment requires that, in order to avoid triggering a deemed dividend, the amounts distributed must be derived from proceeds realized by the corporation from a transaction that occurred outside the ordinary course of its business. This also extends to proceeds realized by a person or partnership in which the pubic corporation has a direct or indirect interest. The explanatory notes illustrate this requirement by referring to the sale of a business unit. As a further restriction, the corporation may pay an amount on the reduction of its paid-up capital only once in respect of each such transaction. Moreover, the payment must occur within 24 months of the transaction and the amounts distributed must be derived from the proceeds realized by the corporation"