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
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
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

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Secret World of Gold and Silver Stock Warrants

Commodities / Gold and Silver 2011 Jul 12, 2011 - 01:38 AM GMT

By: Lorimer_Wilson

Commodities

Best Financial Markets Analysis ArticleI read article after article about investing in physical gold and silver, gold and silver ETFs and gold and silver mining company stocks but nary a one (other than those written by me) on the long-term warrants associated with a few of those companies. That is unfortunate because those who are in the know, and have taken advantage of the significant leverage warrants offer over any other precious metals investment alternatives, have done extremely well over the past 2 years - and they are positioned to achieve even greater returns on their dollars deployed as the gold bull continues its run. Let me take this opportunity to enlighten you on this unknown rewarding world of warrants.


The galaxy of warrants trading on the Toronto Stock Exchange and the Toronto Venture Stock Exchange currently consists of only 167 stars (i.e. constituents) in total of which only 40 are associated with 34 commodity-related stocks that have sufficient brightness (i.e. 24+ months duration) to warrant (the pun is intended!) the attention of earthly investors. They make up the entirety of my proprietary Commodity Company Warrants Index (CCWI) and you can read more about that index by visiting munKNEE.com (It's all about MONEY!). Of those 40 LT warrants only 24 are associated with just 20 gold and silver companies and they make up the entirety of my select, and proprietary, Gold and Silver Warrants Index (GSWI). No wonder no one knows anything about this type of investment when it is restricted to only 14% of all long-term warrants currently trading and just 20 companies in total!

What Are Warrants?

Warrants are securities which gives the holder the right, but not the obligation, to acquire the underlying securities at predetermined (i.e. exercise) prices and within a specified period of time (i.e. term or duration).

The Gold and Silver Warrants Index (GSWI)

The 20 companies in the equal dollar-weighted GSWI are primarily involved in gold and silver mining, exploration and royalty stream endeavours and consist of the following particulars:

1. Number of Warrants by Months of Duration Since all warrants have life durations and begin to lose value as they approach their respective expiry dates only the 24 warrants of the 20 companies (4 companies have 2 warrants each) which have at least 24 months term before expiry are included in this analysis. The breakdown by duration of the 24 warrants is as follows:

  • 3 (12%) 60+ months (Franco-Nevada wt.A, New Gold wt. A, Crocodile Gold wt.) ;
  • 5 (21%) 48 - 59 months (Dundee Precious Metals wt. A, Gran Columbia wt., Primero Mining wt., Rio Novo Gold wt., Sandstorm Gold wt.A);
  • 10 (42%) 36 - 47 months;
  • 6 (25%) 24 - 35 months

2. Number of Companies With Warrants by Market Capitalization Most financial writers and advisors are of the mistaken impression that warrants are just associated with penny stocks - the 'juniors' - but that is not entirely the case as outlined below:

  • 5 (25%) large-cap (Kinross Gold; Agnico-Eagle; Franco-Nevada; Silver Wheaton; New Gold)
  • 4 (20%) mid/small-cap
  • 11 (55%) micro/nano-cap in size

3. Type of Activity by Company with Warrants Type of activity each company is involved in is as follows:

  • 17 (85%) are miners
  • 3 (15%) are royalty stream companies of which
  • a) 1 deals exclusively in gold (Sandstorm Gold);
  • b) 1 deals exclusively in silver (Silver Wheaton) and
  • c) 1 deals in gold and silver plus other commodities (Franco-Nevada).

Comparing the Performance of the GSWI with Other Gold & Silver Alternatives

The GSWI was up +92% in 2010 (and +140% in 2009!) in U.S. dollar terms which is greater than 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.

The GSWI Constituent Company Specifics

The constituents of the GSWI are listed below with the following information presented as follows: Company Name; market capitalization; TSX/TSXV warrant symbol; (U.S. Pink Sheets** symbol); warrant expiry date; warrant CUSIP* Number; 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.

** Pink Sheets is the registered name for a privately owned company that operates a centralized quotation service that collects and distributes market maker quotations for securities traded in the over-the-counter market. The service is named for the color of the sheets on which the National Quotation Bureau originally distributed bid and ask quotations for OTC securities. In 1999 Pink Sheets introduced its Electronic Quotation Service, which provides real-time quotes for OTC equities and bonds. The .pk behind a stock simply means the stock in question is traded on the pink sheets. It is a 5-alpha symbol ending in 'F' for Foreign.

  1. Agnico-Eagle; $11B; T.AEM.wt.U; December 2013; 008474140; www.agnico-eagle.com
  2. Augen Gold; $54M; 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; October 2014; 108404112; www.bridgeportventures.net
  5. Brigus Gold; $189M; a) T.BRD.wt; November 2014; 109490110; b) T.BRD.wt.A; November 2014; 109490136; www.brigusgold.com
  6. Crocodile Gold; 24M; T.CRK.wt; March 2016; N/A; www.crocgold.com
  7. Dundee Precious Metals; $623M; T.DPM.wt.A; (DNPMF.pk); November 2015; 265269134; www.dundeeprecious.com
  8. ECU Silver; $203M; T.ECU.wt; February 2014; 26830P121; www.ecu.ca
  9. Endeavour Mining; $309M; T.EDV.wt.A; February 2014; G3040R133; www.endeavourminingcapital.com
  10. Franco-Nevada; $3.6B; a) T.FNV.wt.A; June 2017; 351858139; b) T.FNV.wt.B; July 2013; 35185814; www.franco-nevada.com
  11. Gran Colombia; $283M; T.GCM.wt; August 2015; 38501D113; No Web site
  12. Kinross Gold; $12.3B; a) T.K.wt.C; (KNRSF.pk); September 2013; 496902172; b) T.K.wt.D; September 2014; 496902180; www.kinross.com
  13. New Gold; $2.5B; T.NGD.wt.A; (NGDAF.pk); June 2017; 644535122; www.newgoldinc.com
  14. Northquest; $8M; V.NQ.wt; December 2014; 666676119; www.northquest.biz
  15. Papuan Precious Metals; $24M; V.PAU.wt; July 2013; 69887W110; www.papuanpreciousmetals.com
  16. Primero Mining; $456M; T.P.wt; July 2015; 74164W114; www.primeromining.com
  17. Rio Novo Gold; $156M; T.RN.wt; March 2015; G75700123; www.rnovogold.com
  18. Sandstorm Gold; $187M; a) V.SSL.wt; April 2014; 800132128; b) V.SSL.wt.A; October 2015; 800132136; www.sandstormresources.com
  19. Silver Wheaton; $8.5B; T.SLW.wt.U; (SLVWF.pk); September 2013; 828336149; www.silverwheaton.com
  20. U.S. Silver; $68M; V.USA.wt; July 2014; 90343P119; www.us-silver.com

Which Warrants Should You Invest In?

Now that you know which companies constitute the LT warrant asset class, 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 more or less (more in an up-leg, less in a down-leg) in relationship to that of their associated stock so their purchase should not be done without considerable research.

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. If, for example, 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 of the 20 companies and decide which company or companies are to your liking and purchase their associated warrants accordingly.

c) You could restrict your selection of companies early on by:

  • management experience/reputation;
  • specific products (gold or silver);
  • business emphasis (producers, developers, explorers or royalty streamers);
  • market capitalization (large, mid/small, micro/nano);
  • countries of operation (world-wide, excl. Africa, excl. Venezuela, etc.);
  • stock /company fundamentals;
  • technical analysis of stock;
  • length of duration left on warrant;
  • price volatility of stock/warrant;
  • degree of liquidity of stock/warrant;
  • trading depth of stock/warrant;
  • currency in which stock/warrant trades.

d) You could do b) or c) above and then, and only then if your primary intent is to hopefully be in a position to exercise your warrants and acquire their associated stock at some future date, finally 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 which I refer to as the "leverage-time factor".

To learn exactly how to go about the above please visit my site and read the article aptly titled: "Buying Gold and Silver Company Warrants is Easy & Profitable: Here's How (and Why!)"

Conclusion

Now that the 'secret' is out I'm sure you can't help but agree that warrants warrant your serious consideration. Now that you know which ones to give consideration to and what factors should be taken into consideration before placing an order, what are you waiting for?

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