All you gold bugs out there (and budding gold bugs too!) should find this article of extreme interest. With gold about to make a major move upwards in price NOW is the time to position your gold-investment allocation to maximize your dollars deployed and returns generated. Those in the know will not be investing in physical or paper gold, or even the stocks of the miners, but in the long-term warrants of the very few mining companies that offer such an opportunity. This article provides a primer on the MAJOR advantage that long-term warrants have in a market upleg and identify the specific warrants that are available. Words: 1037
So says Lorimer Wilson editor of www.munKNEE.com (Your Key to Making Money!). 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:
This article is an updated version of my one-of-a-kind proprietary index of gold and silver companies with long-term warrants (GSWI) and gives you insights into the ‘secret world’ of warrants and identifies the constituents of each.
Before we go any further here is a definition of warrants: a security that gives the holder the right, but not the obligation, to acquire the underlying (associated) security at a predetermined (i.e. exercise or strike) price and within a specified period of time (i.e. term or duration).
As of the close of business on January 31, 2012 there were:
- 151 warrants listed on TSX/TSXV (98 and 53 respectively) of which
- 105 (i.e. 70%) are associated with commodity-related stocks, excluding funds and merchant banks, of which
- 37 have a duration of 24+ months duration before expiry, i.e. long-term (LT), which is considered the minimum investment term of which just
- 21 are involved in the mining, exploration or royalty aspect of the business.
The Gold and Silver Warrants Index (GSWI)
The 21 LT tradable warrants of the 19 companies (2 companies have 2 LT warrants each) 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 details of the index are as follows:
a) Company Size:
Surprisingly to most financial writers and financial advisors/planners not all LT warrants are associated with penny stocks – the ‘juniors’ – although they do account for 65% of the total as the breakout by market capitalization shows below:
- 3 are large-cap (Kinross, Franco-Nevada, New Gold)
- 4 are mid/small-cap (Dundee, Endeavour, Gran Colombia, Primero)
- 12 are micro/nano-cap in size
b) Type of Activity:
- 10 are producers,
- 7 are explorers (i.e. juniors),
- 2 are royalty stream companies (Franco-Nevada, Sandstorm) of which
- a) 1 deals exclusively in gold;
- b) 1 deals in gold and silver plus other commodities.
c) Warrant Duration:
- 2 have 60+ months duration; (New Gold wt. A, Franco-Nevada wt. A)
- 1 has 48 – 59 months; (Crocodile Gold)
- 6 have 36 – 47 months; (Dundee, Gran Colombia, Primero, Rio Novo, Sandstorm wt. A, Vista)
- 12 have 24 – 35 months
d) Constituent Companies:
- Armistice Resources
- Astral Mining
- Bridgeport Ventures
- Brigus Gold (2 warrants)
- Crocodile Gold
- Dundee Precious Metals
- Endeavour Mining
- Golden Minerals
- Gran Colombia
- Kinross Gold
- Lupaka Gold
- New Gold
- Primero Mining
- Rio Novo Gold
- Sandstorm Gold (2 warrants)
- U.S. Silver
- Vista Gold
For more detailed information on each of the above 19 companies and their LT warrants (21) plus the other 84 commodity-related warrants go here.
Why Invest in Warrants?
There are 2 very attractive reasons: to maximize your dollars deployed and returns generated.
- Warrants on average cost 70 – 75%% less than their associated stock allowing you to either buy more exposure to a specific company or spend less dollars for the same exposure as buying their associated stock.
- In an upleg LT warrants outperform their associated stock by as little as 50% (averaged 59.6% in the last major upleg) and occasionally by more than 300%. To be candid, however, the reverse is true in a down market.
Which Warrants Should You Invest In?
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. 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 of the 19 companies and decide which company or companies are to your liking and purchase their associated warrants accordingly. (Go here or read Interested in Buying Gold or Silver Mining Company Warrants? Here’s How to learn exactly how to go about placing orders to buy and sell warrants – and much more.)
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 payers);
- market capitalization (large, mid/small, micro/nano);
- countries of operation (world-wide, excl. Africa, excl. Venezuela, etc.);
- stock /company fundamentals;
- technical analysis of stock;
- expiry date of warrant;
- price volatility of stock/warrant;
- degree of liquidity of stock/warrant;
- trading depth of stock/warrant;
- currency in which stock/warrant trades
Now you some insights into the ‘secret world’ of warrants and those very few companies with LT warrants that make up the constituents of the GSWI.
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Buying and selling warrants associated with commodity-related companies (including those of gold and silver miners) can be very confusing if you are not aware of the unique information required to do so and understand just how to go about it. Below you will find all the information you need to know on the subject. Words: 2110