Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Forget Gold Bullion! Those in the Know Own Silver and Gold Mining Stock Warrants

Commodities / Gold & Silver Stocks Feb 07, 2011 - 02:58 AM GMT

By: Lorimer_Wilson

Commodities

Best Financial Markets Analysis ArticleThe world of warrants is the undiscovered constellation in the universe of securities. Long term (LT) warrants shone brightly in 2009 - up 242% in U. S. dollar terms - and were up a further 91% in U.S. dollar terms in 2010. That's correct: 242% in 2009 followed up with a further 91% in 2010! The warrant world consists of only 135 stars (i.e. constituents) of which only 32 are associated with 29 commodity-related stocks that have sufficient brightness (i.e. 24+ months duration) to warrant (the pun is intended!) the attention of earthly investors.


Warrants have been the best kept 'secret' of the investment world (when was the last time you read an article on warrants or had your financial advisor broach the subject?) until now so pay attention to the particulars provided below, prepare with proper due diligence and enjoy the prospects of future prosperity.

Warrant: A Definition

Before going any further it is important to know that a warrant is a security which gives the holder the right, but not the obligation, to acquire the underlying security at a predetermined (i.e. exercise) price and within a specified period of time (i.e. term or duration).

The Commodity Company Warrants Index (CCWI)

The 32 LT tradable warrants of the abovementioned 29 companies (3 companies have 2 warrants each) have been gathered together into an equal dollar-weighted index called the Commodity Company Warrants Index (CCWI).

The CCWI was up 242% in U.S. dollar terms in 2009 and a further 91% in 2010!

Most financial writers and advisors are of the mistaken impression that warrants are just associated with penny stocks - the 'juniors' - but as the breakout of commodity-related companies with LT warrants by market cap below shows that is not entirely the case:

- 5 (17%) are large-cap companies (i.e. >$2.5B);
- 3 (10%) are mid-cap (i.e. $500M - $2.5B);
- 5 (17%) are small-cap (i.e. $250 - $500M); $500M);
- 9 (31%) are micro-cap (i.e. $100M - $250M);
- 7 (24%) are nano-cap (i.e. <$100M)

Also, because most investors are more interested in precious metals than other commodities, another way to look at the asset class is by the commodity produced as follows:

- 22 (76%) of the companies are gold and silver related;
- 4 (14%) are involved in base metal mining;
- 2 (7%) are in oil and gas operations;
- 1 (3%) is agricultural related

All warrants have life durations and begin to lose value as they approach their respective expiry dates. As such, only warrants with at least 24 months term before expiry are included in this analysis. The breakdown by duration of the 32 warrants is as follows:

- 2 (6%) 60+ months
- 6 (19%) 48 - 59 months
- 16 (50%) 36 - 47 months
- 8 (25%) 24 - 35 months

The Gold and Silver Warrants Index (GSWI)

As a sub-component of the CCWI, the LT tradable warrants of the 22 companies primarily involved in gold and silver mining, exploration and royalty stream endeavours, have been gathered together into an equal dollar-weighted index named the Gold and Silver Warrants Index (GSWI) consisting of 25 warrants.

The GSWI was up 140% in U.S. dollar terms in 2009 and was up a further 92% in 2010.

The performance of the GSWI compared very favourably with the:

- 55% increase in a basket of mid- and small-cap miners as represented by the GDXJ; - 33% increase in the HUI and GDX (large/mid cap gold and silver mining company stocks); - 30% increase in gold bullion and even the - 83% in physical silver.

Market capitalization of the 22 companies with LT warrants is as follows:

- 5 (23%) large-cap;
- 5 (23%) mid/small-cap;
- 12 (55%) micro/nano-cap in size

Type of activity each company is involved in is as follows:

- 18 (81%) are miners
- 4 (19%) are royalty stream companies of which
a) 1 deals exclusively in gold;
b) 2 deal exclusively in silver and
c) 1 deals in gold and silver plus other commodities.

The breakdown of the months until expiry for each of the 25 warrants is as follows:

- 2 (8%) 60+ months
- 5 (20%) 48 - 59 months
- 12 (48%) 36 - 47 months
- 6 (24%) 24 - 35 months

Index Constituent Companies

The constituents of the GSWI are listed below according to Company Name; market capitalization; TSX/TSXV warrant symbol; warrant expiry date; warrant CUSIP* Number and web site URL:

(* CUSIP stands for the Committee on Uniform Security Information Procedures of the American Bankers Association which established a format of unique codes for all North American stocks, bonds, puts, calls, warrants, etc. as assigned by Standard and Poor's. The CUSIP number consists of a combination of 9 characters, both letters and numbers, which act as a sort of DNA for the security uniquely identifying the company or issuer and the type of security. The first 6 characters identify the issuer and are assigned in alphabetical order; the 7th and 8th characters, which can be alphabetical or numerical, identify the type of issue; the last digit is used as a check digit. The use of such numbers is imperative for non-Canadians when placing orders with a broker to avoid any confusion related to specifically which warrant is being requested to be bought or sold.)

a) Gold and Silver Constituents

1. Agnico-Eagle; $10.6B; T.AEM.wt.U; December 2013; 008474140; www.agnico-eagle.com

2. Augen Gold; $53.8; V.GLD.wt; October 2014; 05104R120; www.augengold.ca

3. Astral Mining; $3.5M; V.AA.wt; October 2014; 046349130; www.astralmining.com

4. Bridgeport Ventures; $32M; T.BPV.wt; Oct. 2014; 108404112; www.bridgeportventures.net

5. Brigus Gold; $189.0M; www.brigusgold.com; a) T.BRD.wt; November 2014; 109490110; b) T.BRD.wt.A; November 2014; 109490136

6. Claude Resources; $170.4M; T.CRJ.wt; May 2013; 182873141; www.clauderesources.com

7. Dundee Prec. Metals; $624M; T.DPM.wt.A; Nov. 2015; 265269134; www.dundeeprecious.com

8. ECU Silver; $202.8M; T.ECU.wt; February 2014; 26830P121; www.ecu.ca

9. Endeavour Mining; $309.2M; T.EDV.wt.A; February 2014; G3040R133; www.endeavourminingcapital.com

10. Franco-Nevada; $3.6B; T.FNV.wt.A; June 2017; 351858139; Gold, Silver, Oil and Gas Royalty; www.franco-nevada.com

11. Gold Wheaton; $562.5M; T.GLW.wt; July 2013; 38075N113; $562.5M; Gold Royalty; www.goldwheaton.com

12. Gran Colombia; $283.0M; V.GCM.wt; August 2015; 38501D113; No Web site

13. Kinross Gold; $12.3B; www.kinross.com; a) T.K.wt.C; September 2013; 496902172; b) T.K.wt.D; September 2014; 496902180

14. Minera Andes; $249.6M; T.MAI.wt; August 2014; 601910184; www.minandes.com

15. New Gold; $2.5B; T.NGD.wt.A; June 2017; 644535122; www.newgoldinc.com

16. Northquest; $7.9M; V.NQ.wt; December 2014; 666676119; www.northquest.biz

17. Papuan Precious Metals; $24.2M; V.PAU.wt; July 2013; 69887W110; www.papuanpreciousmetals.com

18. Primero Mining; $455.7M; T.P.wt; July 2015; 74164W114; www.primeromining.com

19. Rio Novo Gold; $156.1M; T.RN.wt; March 2015; G75700123; www.rnovogold.com

20. Sandstorm Resources; $186.9M; www.sandstormresources.com; Silver Royalty a) V.SSL.wt; April 2014; 800132128; b) V.SSL.wt.A; October 2015; 800132136

21. Silver Wheaton; $8.5B; T.SLW.wt.U; September 2013; 828336149; Silver Royalty; www.silverwheaton.com

22. U.S. Silver; $68.1M; V.USA.wt; July 2014; 90343P119; www.us-silver.com

Below are the commodity-related companies with LT warrants that are involved in oil and gas operations, agriculture and base metal mining and/or exploration which complete the full complement of constituents in the CCWI according to Company Name; market capitalization; TSX/TSXV warrant symbol; warrant expiry date; warrant CUSIP Number; commodity and web site URL:

b) Oil and Gas Constituents

1. PetroAmerica Oil; $124.0M; V.PTA.wt; October 2014; 71647B113; www.petroamericaoilcorp.com

2. Petromanas Energy; $204.0M; V.PMI.wt; February 2015; 71672A113; www.petromanas.com

c) Agricultural Related Constituents

3. Feronia Inc.; $44.7M; V.FRN.wt; September 2013; 31527R109; Farmland www.feronia.com

d) Base Metals Constituents

4. Breakwater Resources; $275.9M; T.BWR.wt.A; April 2014; 106902166; Zinc; www.breakwater.ca

5. Mega Uranium; $164.8M; MGA.wt.B; October 2014; 58516W146; Uranium; www.megauranium.com

6. Noront Resources; $212.5M; V.NOT.wt; December 2014; 65626P135; Nickel; www.norontresources.com

7. Stonegate Agricom; T.ST; $125.5M; T.ST.wt; April 2013; 86181P112; Phosphate; www.stonegateagricom.com

Which Warrants Should You Invest In?

Now that you know which companies constitute the LT warrant asset class, which commodity they are involved in, when their warrants expire and what their respective symbols and CUSIP numbers are all you need to start investing in them is to decide on your approach. Warrants perform in relationship to that of their associated stock so their purchase should not be done without considerable research on the companies' anticipated prospects.

a) Given the fact that no warrant ETFs are available to buy you could buy a basket of warrants consisting of an equal number of warrants from every company mentioned above. For example, if you were to restrict your warrants portfolio to just those of gold and silver companies, and just 100 warrants of each LT offering, it would amount to approximately $8,000 at today's prices plus commission expenses.

b) You could do your own due diligence of each on the 29 commodity-related companies and decide which company or companies are to your liking and purchase their associated warrants accordingly.

c) You could restrict your due diligence to only those companies who are in the phase of operations of interest (i.e. producers, developers, explorers or royalty streamers) or operating in the commodity or commodities of interest and purchase the warrants of those companies you think have the best future prospects. A visit to each company's web site would provide such information.

d) You could do b) or c) above and then, and only then, further restrict your purchases to those warrants that provide the best value related to their future leverage potential based on specific appreciation of their associated stock and the number of months duration remaining for the warrants under consideration.

Conclusion

Now that the 'secret' is out you can't help but agree that warrants warrant your serious consideration. Will they once again this year outperform their associated stock and the commodity involved? Time will tell but what does it matter if you don't own any. Instead of focusing on the mantra "Got gold?" I think "Got LT warrants?" would be much more meaningful.

Please note: Constituent companies of the CCWI and GSWI are deleted if, and when, their warrants no longer have a duration period of at least 24 months. In addition, companies are added if they issue a warrant with at least 24 months duration. All performance analyses are done on a strictly comparative basis. Also note that the above list of constituent companies will be kept updated on a monthly basis in this article as found in the ‘Warrants/LEAPS/Options’ section under the ‘Investing’ category.

Disclosure: Naturally, I own a variety of warrants from the above list. With returns like I have outlined above,  who wouldn’t. Having said the aforementioned, however, please do your own due diligence or seek the advice of a knowledgeable consultant.

Lorimer Wilson is Editor of www.FinancialArticleSummariesToday.com (F.A.S.T.) and www.MunKnee.com (Money, Monnee, Munknee!) and an economic analyst and financial writer. He is also a frequent contributor to this site and can be reached at editor@munknee.com."

© 2011 Copyright Lorimer Wilson- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Lorimer Wilson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules