Gold & Silver Warrants Index (GSWI) Constituents: March Update (+2K Views)

The galaxy of warrants consists of only 135 stars (i.e. constituents) of which only 37 are associated with 33 commodity-related stocks that have sufficient brightness (i.e. 24+ months duration) to warrant (the pun is intended!) the attention of earthly investors. Words: 1579

So says Lorimer Wilson, editor of www.munKNEE.com. Please note that this paragraph must be included in any article reposting with a link* to the article source to avoid copyright infringement.

Wilson goes on to say:

Warrants have been the best kept ‘secret’ of the investment world until now. After all, when was the last time you read an article on warrants or had your financial advisor broach the subject? Pay attention to the particulars provided below, prepare with proper due diligence and enjoy the prospects of future prosperity that a basket of long-term warrants provide. Changes from previous editions of this article are identified with the use of italics.

Warrant: A Definition

Before going any further it is important to know that 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 Commodity Companies Warrant Index (CCWI)

The 37 LT tradable (many warrants are offered as “sweeteners” to underwriters/financial institutions and company insiders and, as such, do not trade) to warrants of the abovementioned 33 companies (4 companies have 2 warrants each) have been gathered together into an equal dollar-weighted proprietary index called the Commodity Companies Warrant Index (CCWI). The CCWI was up 91% in U.S. dollar terms 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 (15%) are large-cap companies (i.e. >$2.5B);
• 1 (3%)  is mid-cap (i.e. $500M – $2.5B);
• 3 (9%) are small-cap (i.e.  $250 – $500M;
• 12 (36%) are micro-cap (i.e. $100M – $250M);
• 12 (36%) are nano-cap (i.e. <$100M)

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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:

• 21 (64%) of the companies are gold and silver related
• 8 (24%) are involved in base metal mining;
• 3 (9%) are in oil and gas operations;
• 1 (3%) are 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 37 warrants is as follows:

• 4 (11%) 60+ months;
• 7 (19%) 48 – 59 months;
• 13 (35%) 36 – 47 months;
• 13 (35%) 24 – 35 months

The Gold and Silver Warrants Index (GSWI)

As a sub-component of the CCWI the LT tradable warrants of the 21 companies primarily involved in gold and silver mining, exploration and royalty stream endeavours have been gathered together into an equal dollar-weighted proprietary index named the Gold and Silver Warrants Index (GSWI).

The GSWI’s performance in 2010 of +92% (and +140% in 2009!) in U.S. dollar terms 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 21 companies with LT warrants is as follows:

• 5 (24%) large-cap
• 4 (19%) mid/small-cap
• 12 (57%) micro/nano-cap in size

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

• 18 (86%) are miners
• 3 (14%) are royalty stream companies of which
• a) 1 deals exclusively in gold;
• b) 1 deals 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 23 warrants is as follows:

• 3 (12%) 60+ months;
• 5 (21%) 48 – 59 months;
• 10 (42%) 36 – 47 months;
• 6 (25%) 24 – 35 months

Index Constituent Companies

The constituents of the GSWI are 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).

a) Gold and Silver Constituents

1. Agnico-Eagle; $11B; T.AEM.wt.U; December 2013; 008474140; www.agnico-eagle.com
2. Augen Gold; $54; 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. Claude Resources; $170M; T.CRJ.wt; May 2013; 182873141; www.clauderesources.com
7. Crocodile Gold; 24M; T.CRK.wt; March 2016; N/A; www.crocgold.com
8. Dundee Precious Metals; $623M; T.DPM.wt.A; (DNPMF.pk); November 2015; 265269134; www.dundeeprecious.com
9. ECU Silver; $203M; T.ECU.wt; February 2014; 26830P121; www.ecu.ca
10. Endeavour Mining; $309M; T.EDV.wt.A; February 2014; G3040R133; www.endeavourminingcapital.com
11. Franco-Nevada; $3.6B; T.FNV.wt.A; (FNCNF.pk); June 2017; 351858139; www.franco-nevada.com
12. Gran Colombia; $283M; T.GCM.wt; August 2015; 38501D113; No Web site
13. 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
14. New Gold; $2.5B; T.NGD.wt.A; (NGDAF.pk); June 2017; 644535122; www.newgoldinc.com
15. Northquest; $8M; V.NQ.wt; December 2014; 666676119; www.northquest.biz
16. Papuan Precious Metals; $24M; V.PAU.wt; July 2013; 69887W110; www.papuanpreciousmetals.com
17. Primero Mining; $456M; T.P.wt; July 2015; 74164W114; www.primeromining.com
18. Rio Novo Gold; $156M; T.RN.wt; March 2015; G75700123; www.rnovogold.com
19. Sandstorm Gold; $187M; a) V.SSL.wt; April 2014; 800132128; b) V.SSL.wt.A; October 2015; 800132136; www.sandstormresources.com
20. Silver Wheaton; $8.5B; T.SLW.wt.U; (SLVWF.pk); September 2013; 828336149; www.silverwheaton.com
21. U.S. Silver; $68M; 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; $124M; V.PTA.wt; October 2014; 71647B113; www.petroamericaoilcorp.com
2. Petromanas Energy; $204M; V.PMI.wt; February 2015; 71672A113; www.petromanas.com 
3. Alange Energy; $239M; V.ALE.wt; February 2016; 011625118; www.alangeenergy.com

c) Agricultural Related Constituents

1. Feronia Inc.; $45M; V.FRN.wt; September 2013; 31527R109; Farmland; www.feronia.com

d) Base Metals Constituents

1. Breakwater Resources; $276M; T.BWR.wt.A; April 2014; 106902166; Zinc; www.breakwater.ca
2. Formation Metals; $45M; T.FCO.wt; March 2014; 34637V119; Cobalt; www.formationmetals.com
3. Mega Uranium; $165M; MGA.wt.B; October 2014; 58516W146; Uranium;  www.megauranium.com
4. Noront Resources; $213M; V.NOT.wt; December 2014; 65626P135; Nickel; www.norontresources.com
5. Oceanic Iron Ore; $77M; a) V.FEO.wt.A; November 2015; 67524Q124 b) V.FEO.wt.B; November 2015; 6752Q116; Iron ore; www.oceanironore.com
6. Pacific Coal Resources; 19M; V.PAK.wt; March 2016; 694071119; Coal; web site N/A 
7. Stonegate Agricom; $126M; T.ST.wt; April 2013; 86181P112; Phosphate; www.stonegateagricom.com
8. Zasu Metals; $4M; T.ZAZ.wt; December 2013; 989197116; Zinc, Lead; www.zazumetals.com

Which Warrants Should You Invest In?

Now that you know which companies constitute the LT warrant asset class, which commodities 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.

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. As an 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 of the 30 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 payers) or operating in the commodity/commodities of interest and purchase those warrants of those companies you think have the best future prospects.

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.

Please note: Constituent companies are deleted from the various indices 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 which can be found in the ‘Warrants/LEAPS/Options’ section under the ‘Investing’ category at www.munKNEE.com.

Conclusion

Now that the ‘secret’ is out you can’t help but agree that warrants warrant your serious consideration.

Disclosure: Naturally, I own 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.

*https://www.munknee.com/2011/03/february-update-of-gold-silver-warrants-index-gswi-constituents/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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