Some analysts and commentators are warning that this year (2012) could match or surpass the dire conditions experienced in 2008 with the promise of more turbulence from the Eurozone, further political wrangles over dealing with the U.S. budget deficit and a potential host of problems in emerging market countries such as a possible Chinese banking and real estate crash. [While you] should fear plummeting stock markets…there are actually some interesting ways to play the downside or hedge your portfolio. [Let me explain.] Words: 990

With a tsunami of interest in the future prospects of gold and silver mining companies (and their stock prices as a result) I have been asked to publish an updated version of my one-of-a-kind proprietary index of commodity-related companies with long-term warrants (CCWI) and its sub-category of just gold and silver companies with long-term warrants (GSWI). This article gives you some insights into the ‘secret world’ of warrants and slices and dices the make-up of both indices identifying the constituents of each for your edification.

So says Lorimer Wilson editor of both www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) in an article written on behalf of www.PreciousMetalsWarrants.com (The Authority on Warrants). 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:

The wee world of warrants is so limited that its constituents have traded under the radar of almost all investors. Indeed, in past articles I have made reference to this sector as the ”secret” world of warrants.

As of the close of business on November 30, 2011:

• there were 151 warrants listed on TSX/TSXV (98 and 53 respectively)
• 105 of those 151 warrants (i.e. 70%) are associated with commodity-related stocks, excluding funds and merchant banks
• 38 of those 105 warrants have a duration of 24+ months duration before expiry, i.e. long-term (LT), which is considered the minimum investment term 
• those 38 LT warrants are associated with 34 different companies (4 companies have two warrants each)
• 20 of those 34 companies are involved in the mining, exploration or royalty aspect of the business
• 14 of the 34 companies are involved in base metal, oil and gas and agricultural business pursuits.

Warrants: A Definition

A warrants is 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).

The Commodity Companies Warrant Index (CCWI)

The 38 LT warrants of the abovementioned 34 companies are all included in a proprietary equal dollar-weighted  Commodity Companies Warrant Index (CCWI) which I have been maintaining, primarily for personal use, over the past 6 years.

Surprisingly to most financial writers and financial advisors/planners not all warrants are associated with penny stocks – the ‘juniors’ – although they do account for 85% of the total as the breakout by market capitalization shows below:

• 4 are large-cap companies (i.e. >$2.5B);
• 1 is mid-cap (i.e. $500M – $2.5B);
• 2 are small-cap (i.e. $250 – $500M;
• 10 are micro-cap (i.e. $100M – $250M);
• 17 are nano-cap (i.e. <$100M)

In addition, while the majority of warrants are associated with companies involved in some aspect of precious metals activity (58%), other commodity-related companies also have associated warrants as shown below:

• 20 of the companies are gold and silver related (22 warrants);
• 8 are involved in base metal mining (9 warrants);
• 5 are in oil and gas operations (6 warrants);
• 1 is agriculture 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 38 warrants is as follows:

• 2 of 60+ months duration;
• 11 of 48 – 59 months duration;
• 14 of 36 – 47 months duration;
• 11 of 24 – 35 months duration

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The Gold and Silver Warrants Index (GSWI)

As a sub-component of the CCWI the LT tradable warrants of the 20 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).

Market capitalization of the 20 companies with LT warrants is as follows:

• 4 are large-cap
• 4 are mid/small-cap
• 12 are micro/nano-cap in size

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

• 11 are producers,
• 7 are explorers (i.e. juniors),
• 2 are royalty stream companies of which
• a) 1 deals exclusively in gold;
• b) 1 deals in gold and silver plus other commodities.

The breakdown of the months until expiry for each of the 22 warrants is as follows:

• 2 have 60+ months duration;
• 6 have 48 – 59 months;
• 11 have 36 – 47 months;
• 3 have 24 – 35 months

Index Constituent Companies

The constituents of the GSWI sub-component and the entire CCWI are as follows with the large cap companies underlined for easy identification:

a) Gold and Silver Warrants Index (GSWI) Constituents

1. Agnico-Eagle (warrant expires in December)
2. Armistice Resources
3. Astral Mining
4. Bridgeport Ventures
5. Brigus Gold (2)
6. Crocodile Gold
7. Dundee Precious Metals
8. Endeavour Mining
9. Franco-Nevada
10. Golden Minerals
11. Gran Colombia
12. Kinross Gold
13. Lupaka Gold
14. New Gold
15. Northquest
16. Primero Mining
17. Rio Novo Gold
18. Sandstorm Gold (2)
19. U.S. Silver
20. Vista Gold

Below are the 14 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:

b) Oil and Gas Constituents

1. Compton Petroleum
2. Manas Petroleum
3. PetroAmerica Oil (2)
4. Petromanas Energy
5. Petro Magagdalena Energy

c) Agricultural Related Constituents

1. Prima Colombia Hardwood

d) Base Metals Constituents

1. Formation Metals
2. Lipari Energy
3. Mega Uranium
4. Noront Resources
5. Oceanic Iron Ore (2)
6. Pacific Coal Resources
7. West African Iron Ore
8. Zasu Metals

For more detailed information on each of the above 34 companies and their LT warrants (38) plus the other 67 warrants of shorter duration go here.

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 34 companies and decide which company or companies are to your liking and purchase their associated warrants accordingly. (Go here and read Gold & Silver Warrants: What are They? Why Own Them? How are They Bought & Sold? 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:

1. management experience/reputation;
2. industry sector (oil and gas, precious metals, base metals, etc.);
3. specific products (gold, uranium, crude oil, etc.);
4. business emphasis (producers, developers, explorers or royalty payers);
5. market capitalization (large, mid/small, micro/nano);
6. countries of operation (world-wide, excl. Africa, excl. Venezuela, etc.);
7. stock /company fundamentals;
8. technical analysis of stock;
9. expiry date of warrant;
10. price volatility of stock/warrant;
11. degree of liquidity of stock/warrant;
12. trading depth of stock/warrant;
13. currency in which stock/warrant trades

Information on items #2, 3, 4, 5, 6, 9 and 13 are available here.

Conclusion

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 two indices of that asset class, the CCWI and GSWI. To keep informed of changes on a weekly basis go here or come back here to read my year-end report on new additions/deletions to, and the annual performance of, the two indices.

Please feel free to share the contents of this article with your financial advisor. It will be a revelation to him/her and prove to be invaluable as the commodity bull, particularly in gold and silver, unfolds in the years ahead.

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1. Gold & Silver Warrants: What are They? Why Own Them? How are They Bought & Sold?

With all the interest in physical gold, silver and other commodities these days, and the large/mid-cap companies who mine the metals and the juniors who are exploring for them, it begs the question: “Why is no one writing about the merits of investing in the long-term warrants associated with a few of those companies?” Merits? Absolutely! Here is a primer on virtually all that you need to know about warrants and how to invest in them for major profits. Words: 3278

2. What Are Warrants, Options & LEAPS?

So says Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) in an article written on behalf of www.PreciousMetalsWarrants.com (“The Authority on Warrants”). Please note that this paragraph must be included in any article reposting with a link* to the article source to avoid copyright infringement.

Who in the world is currently reading this article along with you? Click here

Wilson goes on to say:

The proprietary Gold and Silver Warrants Index (GSWI) returned 92% and generated a 60% leverage of dollars deployed in 2010. Now that I have told you why you should consider investing in warrants and no doubt have your undivided attention read on as I outline:

• what warrants actually are,
• which companies have long-term tradable warrants,
• when the warrants should be exercised by,
• where these companies have their various mines and
• how to go about buying and selling them.

It is unfortunate that almost all Americans and most Canadians (investors, brokers, financial advisors/planners and financial writers alike) are either unaware of, or not very familiar with, warrants but this article will change all that.

Why Invest in Warrants?

As I mentioned above warrants associated with gold and silver mining with a duration period of 24 or more months were up 92% in 2010 and 140% in 2009 in U.S. dollar terms (see a recent article here on the subject entitled Exposed! The Unknown World of Gold, Silver and Commodity-related Company Warrants). That compares very favorably with:

• the GDXJ (a basket of mid- and small-cap miners) which was up ”only” 55%,
• the GDX and HUI index (baskets of mid- and large-cap miners) which were each up 33%,
• that “laggard” gold which was up a “paltry” 30% and
• silver which was up a whopping 83%

With returns like that isn’t it about time you became aware of this asset class and how to go about claiming “the pot of gold” or “silver spoon” for yourself – or your clients?

Investors’ ignorance (that is such a harsh word but you know what I mean) about warrants is probably due to the fact that:

• they are listed almost exclusively on the Canadian stock exchanges;
• the SEC has put some limitations on trading in them for Americans;
• they seem complicated because of their differing time durations;
• they require some specific knowledge as to how to go about buying and selling them and
• they are limited in number.

That being said, it is “oh so easy” if you know what you are doing and, again, this article will explain everything in detail.

What are Warrants?

A warrant is a security giving the holder the right, but not the obligation to acquire the underlying security at a predetermined (i.e. exercise) price and for a specified period of time (i.e. term or duration). For the difference between warrants, options and LEAPS read this article.) 

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A Breakdown of the Warrant Asset Class

1. Number of Warrants by Commodity

a) Only 135 companies have tradable warrants of which 67% are in the commodity/natural resource sector, i.e. mining or drilling, exploring and/or developing or purchasing via royalties.

b) Only 33 companies – yes, only 33 – have tradable warrants (37 in total) with an expiry date of at least 24 months duration which I consider to be the absolute minimum duration period and, as such, are included in my proprietary Commodity-related Companies Warrant Index (CCWI).

c) Of the 33 companies with long-term warrants:

• 19 companies are involved in some aspect of precious metals mining (as included in the GSWI);

• 8 are involved in base metal mining including zinc (1), uranium (1), nickel (1), coal (2), cobalt (1) and iron ore (2);
• 5 are involved in oil and gas operations and
• 1 is agricultural-related.

2. Number of Warrants by Company Market Capitalization

Everyone seems to think that warrants are only associated with penny stocks but that is simply not the case. Of the 33 companies in question:

• 4 have market caps in excess of $2.5B;
• 1 has between $500M and $1B;
• 2 are between $250M and $500M;
• 10 are between $100M and $250M while
• 16 are less than $100M.

How to Trade Warrants

Buying and selling warrants 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:

1. Buying Warrants

a) TSX/TSXV Symbols
Warrants trade exactly like the underlying common stock and, as such, they are assigned a symbol. Since most warrants are associated with Canadian companies it is easy for Canadian investors to execute orders using their Canadian symbol but less so for Americans.

b) CUSIP Numbers
For American investors the best and most accurate way to trade in warrants is to use the security’s CUSIP number which stands for the Committee on Uniform Security Information Procedures. The American Bankers Association established this 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.

c) Pink Sheet Symbols
Stocks and warrants that trade on the Pink Sheets fall into one of two categories:

1. companies that don’t meet the listing requirements of the New York, American or Nasdaq stock exchanges or
2. companies — usually foreign — that are unwilling to jump through the regulatory, legal, and accounting filings that accompany listing on the major exchanges. That is the case with most of the commodity-related companies with warrants. They are Canadian based and see no reason to create a duplicitous legal and accounting department just to be traded on the NYSE. They have already met all those legal, regulatory, and accounting requirements in their own country and feel that the burden is on YOU to read their home country filings

and consist of a 5-alpha symbol ending in ‘F’ for Foreign for the 5 warrants that fall into this category.

2. Selling Warrants

Some investors erroneously believe that you have to hold warrants until the expiration date but that is the worst thing you can do because when warrants expire they will do so without any monetary value i.e. they are worthless. Instead, investors must treat warrants as they would stocks and either sell then when the warrants have met their price objective or well before they expire.

3. Exercising Warrants

a) Leverage
The leverage of a warrant – the extent of the advantage or disadvantage of buying the warrant at its current price relative to the current price of the associated stock given the exercise price of the warrant – is a doable calculation but is better left up to those in the business to provide. www.PreciousMetalsWarrants.com is one such provider calculating the leverage of each warrant at both random stock price levels and at fixed stock price percentage increases which is ideal for comparing the leverage advantage of one warrant versus another. To my knowledge of the 3 sites that provide warrant information they are the only one that provides this unique time/price increase calculation.

It should also be noted at this juncture that www.PreciousMetalsWarrants.com is the most comprehensive site on warrants providing:

• a complete list of ALL commodity related warrants both short- and long-term;
• the Canadian and/or U.S. stock exchange or Pink Sheet trading listing symbol of every warrant;
• the CUSIP number of every warrant;
• the exercise price of every warrant;
• the conversion terms of every warrant;
• the duration (i.e. expiry date) of every warrant;
• an evaluation (under-, over- or fair-value) of every warrant;
• the product involved with every company listed
• the location of operation of every company listed
• a subscription service (see details here) containing all of the information outlined above and much more
• advise related to buy-back offers and stock exchange arrangements that present themselves
• a free weekly newsletter (sign up here) related to warrants and much more

b) When the Exercise Price is Achieved
It is important to note that if your warrants are “in the money”, i.e. the common stock is trading above the exercise price of the warrants, and the warrants are approaching the expiration date, you must take some action because, unlike call options where the value of the expired option is placed automatically into your brokerage account, that is not the case with warrants. When warrants expire they expire worth absolutely nothing!

From an American perspective you have only one viable option and that is to sell your position before the expiration date (and to do so 6 to 12 months before the expiry date is highly recommended because the value of a warrant often drops drastically during its final months of life) because, according to U.S. law, Americans cannot exercise a Canadian warrant unless its associated shares have been registered with the SEC because, should they exercise a warrant, they would be receiving a newly issued share which would be illegal.

From a Canadian perspective you have the option of either exercising the warrants (i.e. converting them into actual stock in the associated company according to the terms of the warrant) once they are “in the money” or selling them outright at any time before they expire.

Dudley Baker of www.PreciousMetalsWarrants.com has this to say on the subject:

Frequently I am asked whether warrants should be exercised if they are trading in the money…and my answer…is always the same – why bother!

For U.S. investors, to exercise or not to exercise is a non-issue because virtually all of the warrants trading on the resource shares are associated with Canadian companies and the warrants are not registered in the U.S. and, as such, while U.S. investors can buy and sell warrants, they are not allowed to exercise them.

Canadian investors could exercise the warrants, but again, why bother doing so? If you own warrants of a company you like, you will need to have your brokerage firm send the warrant certificate to the company’s transfer agent along with the exercise price at which point they would send you the common shares of the company. As I see it why not just sell the warrants in the market and if you really like the company and want to continue with them, then just purchase the common shares. Simple, clean and saves a lot of time and paperwork and you are in the exact same position.

c) When an Early Buy-Back Offer is Made
Should a company make an offer for your warrants via an early buy-back offer you have the choice of either accepting the offer or selling your warrants outright unless the company had a specific early call feature (which you should have been aware of at the time of purchase) in which case you would be legally obliged to sell.

d) When There Is a Stock Exchange Arrangement
In a stock exchange arrangement, the warrants will continue on as warrants of the acquiring company with the same expiration date and with the exercise terms adjusted to reflect the terms of the stock exchange in the merger. The owner of said warrants will want to assess the prospects of the new owner to assess the upside potential of their ‘new’ warrants and if the assessment is not positive to sell out before others come to the same conclusion.

4. Interacting With Brokerage Firms

a) Canadian Brokers

As there are symbols for all Canadian warrants Canadians will find the placing of orders very easy to execute and, as such, convenient to use online brokerage firms if so inclined. Be that as it may, please make note in the last paragraph in this section how ‘exactly’ to go about placing your order with a broker.

b) Non-Canadian Brokers

The situation is not as straight forward for those individuals using non-Canadian brokerage houses because many online brokers are not set up with the symbols for the warrants you might wish to trade. As such, it will be necessary to deal with a broker directly and have him/her enter the order for you. Because a broker needs the correct symbol for placing the order the most important thing you can do is give the broker the actual CUSIP number for the warrant you wish to purchase and, where possible its Pink Sheet symbol, to avoid any confusion on the part of your broker.

5. Communicating with Non-Canadian Brokers

Your broker may need to be educated on how to exercise an order. As such, never ‘ask’ your broker if they will execute your order for warrants but, instead, ‘tell’ them exactly what you want them to do. If you just ‘ask’ many brokers will say they don’t trade in Canadian warrants so they can’t execute your order. However, if you ‘tell’ them exactly what you want them to do on your behalf most will be more than happy to comply – and below are exactly what instructions you should give them.

6. Placing an Order to Buy or Sell

Warrants, like many small cap stocks, often have very thin markets (i.e. demand) and, as such, usually have a big spread between the bid (the price at which you are willing to make a purchase) and ask (the price at which you are willing to sell) price. As such, it is imperative that you place only “limit orders” when buying or selling warrants associated with Canadian commodity-related stocks.

• When American investors go online and see that a warrant of interest is trading with a U.S. symbol placing an order should be problem free. However, if it has a Pink Sheet symbol the price for the most recent bid or ask price should not be used as a basis for establishing a new bid or ask price because that price will just be the last trade in the U.S. and therefore may be days, weeks or even months old compared to the bid and ask prices on the more active Canadian exchanges. In such situations you should visit here for the up-to-the-minute bid and ask prices, as quoted in Canadian dollars. You can also go here where you can access comparative charting capabilities for both the warrant and the associated stock, recent news on the company, its latest financials, 30 day price history and access to the most recent research on the company. You will also need to go to a currency conversion site to get the current U.S. dollar to Canadian dollar exchange rate because you will be buying the warrants priced in Canadian dollars.

There are two kinds of orders that can be placed when attempting to buy or sell a security:

1. Market Orders: A market order does not have a set price and is therefore executed immediately at the current ‘market’ price. Markets, especially OTC markets, can be highly volatile, and the price of execution may differ dramatically from the price at time of order entry. Those who use market orders are more concerned about the speed of the execution as opposed to the price.
2. Limit Orders: A limit order has a set price and may only be executed at the set price; however, a limit order may never get executed because the market may move away from the set price. Those who use limit orders risk not having an order executed.

a) To place an order to buy, for example, 5,000 warrants of ABC Mining Company with a CUSIP number of 123456789 and you want to limit the price you pay to $1.43 Canadian then give your broker these specific instructions:

• “I want to buy 5,000 ABC Mining Company warrants, CUSIP number – 123456789 – at a ‘limit price’ of $1.43 in Canadian dollars”. Add the words “which will be good until cancelled” if you are entering a stink bid or if you are trying to buy a very thinly traded warrant.
• Ask your broker to confirm the order by reading the order back to you and it’s done. It is as simple as that!

b) To place an order to sell 3,500 warrants of ABC Mining Company with a CUSIP number of 123456789, for example, and you don’t want to part with your warrants for less than, say, $1.69 Canadian then instruct your broker as follows:

• “I want to sell 3,500 ABC Mining Company warrants, CUSIP number – 123456789 – at an ‘ask price’ of ‘no less than’ $1.69 in Canadian dollars” and again add the words “which will be good until cancelled” or “until the close of business today” if you want the opportunity to reassess your ask price at the end of the day.
• Ask your broker to confirm the order by reading back your instructions to you and it is done. Again, it is as simple as that!

Why Bother Investing in Warrants

1. Last year a basket containing 1 each of the long-term commodity-related warrants went up 91% while their associated stocks “only” went up 57%.
2. Warrants are priced about 60% less on average than their associated stocks and, therefore, you are in an ideal position to leverage your dollars very effectively.

There’s your answer as why you should consider investing in warrants as opposed to their associated stock. Investing in warrants gives you the opportunity to earn more dollars (in percentage terms) with considerably fewer dollars at risk.

Conclusion

It warrants (pun intended!) becoming more knowledgeable as to the which, when, where, why and how aspects of buying/selling warrants – and now you are!

* http://www.munknee.com/2011/11/gold-silver-warrants-what-are-they-why-own-them-how-are-they-bought-sold/

Editor’s Note:

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3. What Are Warrants, Options & LEAPS?

 

 

Investors are always looking for ways to maximize their gains and warrants, options and LEAPS are a good way to do just that. These investment vehicles are very similar to each other except for issue of time. [Let me explain.] Words: 752

 

4. Options: The Best Way to Optimize Leverage of Your Gold Investments

 

 

 

In our quest for the best gold investment vehicle – one that exerts direct undiluted correlated returns to the gold price with added leverage that is quantifiable to a reasonable accuracy – we think that options are the best choice. Words: 690

 

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 in this article, prepare with proper due diligence and enjoy the prospects of future prosperity that a basket of long-term warrants can provide.

So says Lorimer Wilson editor of both www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and  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:

The galaxy of warrants trading on the TSX/TSXV now consists of only 135 stars (i.e. constituents) in total 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. To learn why you should buy the long-term warrants of commodity-related (and particularly gold and silver) companies and exactly how to go about doing so please read this (1) article.

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 warrants (many warrants are offered as “sweeteners” to underwriters/financial institutions and company insiders and, as such, do not trade) 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:

• 4 are large-cap companies (i.e. >$2.5B);
• 1 is mid-cap (i.e. $500M – $2.5B);
• 2 are small-cap (i.e.  $250 – $500M;
• 10 are micro-cap (i.e. $100M – $250M);
• 16 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 commodities produced by these 33 companies as follows:

• 19 of the companies are gold and silver related;
• 8 are involved in base metal mining;
• 5 are in oil and gas operations;
• 1 is agriculture 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:

• 2 of 60+ months duration;
• 11 of 48 – 59 months;
• 13 of 36 – 47 months;
• 11 of 24 – 35 months

The Gold and Silver Warrants Index (GSWI)

As a sub-component of the CCWI the LT tradable warrants of the 19 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 was up 2010 of +92% (and +140% in 2009!) in U.S. dollar terms.

This 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 19 companies with LT warrants is as follows:

• 4 are large-cap
• 4 are mid/small-cap
• 11 are micro/nano-cap in size

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

• 11 are producers,
• 6 are explorers (i.e. , juniors),
• 2 are royalty stream companies of which
• a) 1 deals exclusively in gold;
• b) 1 deals in gold and silver plus other commodities.

The breakdown of the months until expiry for each of the 21 warrants is as follows:

• 2 have 60+ months duration;
• 6 have 48 – 59 months;
• 10 have 36 – 47 months;
• 3 have 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; $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. Endeavour Mining; $309M; T.EDV.wt.A; February 2014; G3040R133; www.endeavourminingcapital.com
9. Franco-Nevada; $3.6B; T.FNV.wt.A; June 2017; 351858139; www.franco-nevada.com
10. Golden Minerals; $282M; T.AUM.wt; February 2014; 381119122; www.goldenminerals.com
11. Gran Colombia; $283M; T.GCM.wt; August 2015; 38501D113; www.grancolombiagold.com
12. Kinross Gold; $12.3B; T.K.wt.D; September 2014; 496902180; www.kinross.com
13. Lupaka Gold; $39M; T.LPK.wt; June 2014; 550435119; www.lupakagold.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. 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; (SNXXF.pk); April 2014; 80013R115; b) V.SSL.wt.A; (SDXXF.pk); October 2015; 80013R123; www.sandstormgold.com
19. 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; a) V.PTA.wt; October 2014; 71647B113; b) V.PTA.wt.B; May 2014; 71647B139; www.petroamericaoilcorp.com
2. Petromanas Energy; $204M; V.PMI.wt; February 2015; 71672A113; www.petromanas.com 
3. Petro Magagdalena; $239M; V.PMD.wt; February 2016; 716726127; www.petromagdalena.com
4. Manas Petroleum; $56M; V.MNP.wt; May 2014; 56176Q110; www.manaspete.com
5. Compton Petroleum; $8.5M; T.CMP.wt.A; August 2014; 204940134; www.comptonpetroleum.com

c) Agricultural Related Constituents

1. Prima Colombia Hardwood; $66M; V.PCT.wt; September 2015; 74164H117; www.primahardwood.com

d) Base Metals Constituents

1. Formation Metals; $45M; T.FCO.wt; March 2014; 34637V119; Cobalt; www.formationmetals.com
2. Lipari Energy; $3.5M; T.LIP.wt; March 2014; 536300114; Coal; www.liparienergy.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. West African Iron Ore; $13M; V.WAI.wt; March 2016; 95110P119;Iron Ore; westafricanironore.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 37 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;
• industry sector (oil and gas, precious metals, base metals, etc.);
• specific products (gold, uranium, crude oil, etc.);
• business emphasis  (producers, developers, explorers or royalty payers);
• market capitalization (large, mid/small, micro/nano);
• countries of operation (world-wide, excl. Africa, excl. Venezula, 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

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.

Conclusion

Now that the ‘secret’ has been exposed you can’t help but agree that warrants warrant your serious consideration – and now you know which ones to give consideration to and what factors should be taken into consideration before placing an order. To learn exactly how to go about placing an order go here.

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.

*http://www.munknee.com/2011/10/exposed-the-unknown-world-of-gold-silver-and-commodity-related-company-warrants/

Title and Link to Article Referenced Above:

1. Gold & Silver Company Warrants: Which, When, Why, and How to Buy Them

With all the interest in physical gold, silver and other commodities these days, andthe large/mid-cap companies who mine the metals and the juniors who are exploring for them, it begs the question: “Why has no one written about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies in 2010?” The information in this article and the links to a variety of resources will change all that and make you ready and able to reap the benefits from investing in this much misunderstood asset class. Words: 2585

With all the interest in physical gold, silver and other commodities these days, and the large/mid-cap companies who mine the metals and the juniors who are exploring for them, it begs the question: “Why has no one written about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies in 2010?” The information in this article and the links to a variety of resources will change all that and make you ready and able to reap the benefits from investing in this much misunderstood asset class.

So says Lorimer Wilson, editor of both www.FinancialArticleSummariesToday.com  (A site for sore eyes and inquisitive minds) and 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. If this article does not contain the 9 hyperlinks provided which are crucial to the full picture intended please go to the original source for access to those links.

The answer to the question  ”Why has no one written about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies in 2010?” is simple : Almost all Americans and most Canadians (investors, brokers, financial advisors/planners and financial writers alike) are either unaware of, or not very familiar with, warrants. Those few who think they are in the know unfortunately have very limited knowledgeable as to the which, when, why and how aspects of buying and selling warrants.

It is little known fact that those commodity-related warrants with a duration of 24+ months  were up 91% in U.S. dollar terms in 2010. That compares very favourably with:

• the GDXJ (a basket of mid- and small-cap miners) which was up ”only” 55%,
• the GDX and HUI index (baskets of mid- and large-cap miners) which were each up 33% and
• that “laggard” gold which was up a “paltry” 30%!

With returns like that isn’t it about time you became aware of this asset class and how to go about claiming “the pot of gold” for yourself or your clients?

Investors’ ignorance (that is such a harsh word but you know what I mean) about warrants is probably due to the fact that:

• they are listed almost exclusively on the Canadian stock exchanges;
• the SEC has put some limitations on trading in them;
• they seem complicated because of their differing time durations;
• investing in them requires some specific knowledge as to how to go about buying and selling them and
• they are limited in number.

That being said, it is “oh so easy” if you know what you are doing and, again, this article will explain everything in detail.

What are Warrants?

A warrant is a security giving the holder the right, but not the obligation to acquire the underlying security at a predetermined (i.e. exercise) price and for a specified period of time (i.e. term or duration).

A Breakdown of the Warrant Asset Class

a) Number of Warrants by Commodity
-  As of October 15th, 2011, only 135 companies have tradable warrants of which approx. 90 (67%) are in the commodity/natural resource sector, i.e. mining or drilling, exploring and/or developing or purchasing via royalties. (See here for a complete list.)
- Only 33 companies – yes, only 33 – have tradable warrants (37 in total) with an expiry date of at least 24 months duration which I consider to be the absolute minimum duration period (See here for details.)
- Of the 33 companies:

• 19 companies are involved in some aspect of precious metals mining of which 2 are royalty payment companies;
• 8 are involved in base metal mining including zinc (1), uranium (1), nickel (1), coal (2), cobalt (1) and iron ore (2);
• 5 are involved in oil and gas operations and
• 1 is agricultural-related.

b) Number of Warrants by Company Market Capitalization
Everyone seems to think that warrants are only associated with penny stocks but that is simply not the case. Of the 33 companies in question:

• 4 have market caps in excess of $2.5B;
• 1 has between $500M and $1B;
• 2 are between $250M and $500M;
• 10 are between $100M and $250M while
• 16 are less than $100M.

How to Trade Warrants

Buying and selling warrants 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:

1. Buying Warrants

a) TSX/TSXV Symbols
Because warrants trade exactly like the underlying common stock they are assigned a symbol. Since most warrants are associated with Canadian companies it is easy for Canadian investors to execute orders using their Canadian symbol but less so for Americans.

b) CUSIP Numbers
For American investors the best and most accurate way to trade in warrants is to use the security’s CUSIP number. 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. (For a complete list of stock and warrant CUSIP numbers and their related stock CUSIP numbers trading on the TSX/TSXV exchanges go here.)

c) Pink Sheet Symbols
Many U.S. brokerage firms are not willing to open a ‘foreign account’ (i.e. an account that allows a U.S. based investor to purchase Canadian securities using Canadian symbols). Using Pink Sheet symbols (a 5-alpha symbol ending in ‘F’ for Foreign) are an alternative way to go for the 5 long-term warrants that have such designations. (For a complete list of commodity-related stock and warrant Pink Sheet symbols go here.)

For the record, stocks and warrants that trade on the Pink Sheets fall into one of these two categories:

• companies that don’t meet the listing requirements of the New York, American or Nasdaq stock exchanges or
• companies — usually foreign — that are unwilling to jump through the regulatory, legal, and accounting filings that accompany listing on the major exchanges. That is the case with most of the commodity-related companies with warrants. They are Canadian based and see no reason to create a duplicitous legal and accounting department just to be traded on the NYSE. They have already met all those legal, regulatory, and accounting requirements in their own country and feel that the burden is on YOU to read their home country filings.

c) Leverage
You can calculate the leverage of a warrant – the extent of the advantage or disadvantage of buying the warrant at its current price relative to the current price of the associated stock given the exercise price of the warrant – yourself, or you can get it free here.

2. Selling Warrants

Some investors erroneously believe that you have to hold warrants until the expiration date but that is the worst thing you can do because when warrants expire they will do so without any monetary value i.e. they are worthless. Instead, investors must treat warrants as they would stocks and either sell then when the warrants have met their price objective or well before they expire.

3. Exercising Warrants

a) When the Exercise Price is Achieved
It is important to note that if your warrants are “in the money”, i.e. the common stock is trading above the exercise price of the warrants, and the warrants are approaching the expiration date, you must take some action because, unlike call options where the value of the expired option is placed automatically into your brokerage account, that is not the case with warrants. When warrants expire they expire worth absolutely nothing!

From an American perspective you have only one viable option and that is to sell your position before the expiration date (and to do so at least 6 months before the expiry date is highly recommended because the value of a warrant often drops drastically during its final months of life) because, according to U.S. law, Americans cannot exercise a Canadian warrant unless its associated shares have been registered with the SEC because, should they exercise a warrant, they would be receiving a newly issued share which would be illegal.

From a Canadian perspective you have the option of either exercising the warrants (i.e. converting them into actual stock in the associated company according to the term of the warrant) once they are “in the money” or selling them outright at any time before they expire.

b) When an Early Buy-Back Offer is Made
Should a company make an offer for your warrants via an early buy back offer you have the choice of either accepting the offer or selling your warrants outright unless the company had a specific early call feature (which you should have been aware of at the time of purchase) in which case you would be legally obliged to sell.

c) When There Is a Stock Exchange Arrangement
In a stock exchange arrangement, the warrants will continue on as warrants of the acquiring company with the same expiration date and with the exercise terms adjusted to reflect the terms of the stock exchange in the merger. The owner of said warrants will want to assess the prospects of the new owner to assess the upside potential of their ‘new’ warrants and if the assessment is not positive to sell out before others come to the same conclusion. (For guidance in regards to buy-back and stock exchange situations you might want to subscribe to this fee-for-service site where the well-informed editor provides advice to subscribers.)

4. Dealing With Brokerage Firms

a) Canadian brokers: As there are symbols for all Canadian warrants Canadians will find the placing of orders very easy to execute and, as such, convenient to use online brokerage firms if so inclined. Be that as it may, please make note in the last paragraph in this section how ‘exactly’ to go about placing your order with a broker.

b) Non-Canadian brokers: The situation is not as straight forward for those individuals using non-Canadian brokerage houses because many online brokers are not set up with the symbols for the warrants you wish to trade. As such, it may be necessary to deal with a broker directly and have him/her enter the order for you. Because a broker needs the correct symbol for placing the order the most important thing you can do is give the broker the actual CUSIP number for the warrant you wish to purchase and, where possible its Pink Sheet symbol, to avoid any confusion on the part of your broker.

c) Communicating with non-Canadian brokers: Your broker may need to be educated on how to exercise an order. As such, never ‘ask’ your broker if they will execute your order for warrants but, instead, ‘tell’ them exactly what you want them to do. If you just ‘ask’ many brokers will say they don’t trade in Canadian warrants so they can’t execute the order. However, if you ‘tell’ them exactly what you want them to do on your behalf most will be more than happy to comply – and below are exactly what instructions you should give them.

5. Placing an Order to Buy or Sell

Warrants, like many small cap stocks, often have very thin markets (i.e. demand) and, as such, usually have a big spread between the bid (the price at which you are willing to make a purchase) and ask (the price at which you are willing to sell) price. That being the case, it is imperative to place only “limit orders” when buying or selling warrants associated with Canadian commodity-related stocks.

When American investors go online and see that a warrant of interest is trading with a U.S. symbol placing an order should be problem free. However, if it has a Pink Sheet symbol the price for the most recent bid or ask price should not be used as a basis for establishing a bid or ask price because that price will just be the last trade in the U.S. and therefore may be days, weeks or months old compared to the bid and ask prices on the more active Canadian exchange. In such a situation you should visit here for the up-to-the-minute bid and ask prices, as quoted in Canadian dollars. You can also go here where you can access comparative charting capabilities for both the warrant and the associated stock, recent news on the company, its latest financials, 30 day price history and access to the most recent research on the company. You will also need to go to a currency conversion site to get the current U.S. dollar to Canadian dollar exchange rate because you will be buying the warrants priced in Canadian dollars.

There are two kinds orders that can be placed when attempting to buy or sell a security:

1. Market Orders: A market order does not have a set price and is therefore executed immediately at the current ‘market’ price. Markets, especially OTC markets, can be highly volatile, and the price of execution may differ dramatically from the price at time of order entry. Those who use market orders are more concerned about the speed of the execution as opposed to the price.
2. Limit Orders: A limit order has a set price and may only be executed at the set price; however, a limit order may never get executed because the market may move away from the set price. Those who use limit orders risk not having an order executed.

If you want to place an order to buy, for example, 5,000 warrants of ABC Mining Company with a CUSIP number of 123456789 and you want to limit the price you pay to $1.43 Canadian then give your broker these specific instructions:
1. “I want to buy 5,000 ABC Mining Company warrants, CUSIP number – 123456789 – at a ‘limit price’ of $1.43 in Canadian dollars”. Add the words “which will be good until cancelled” if you are entering a stink bid or if you are trying to buy a very thinly traded warrant.
2. Ask your broker to confirm the order by reading the order back to you and it’s done. It is as simple as that!

If you want to place an order to sell 3,500 warrants of ABC Mining Company with a CUSIP number of 123456789, for example, and you don’t want to part with your warrants for less than, say, $1.69 Canadian then instruct your broker as follows:
1. “I want to sell 3,500 ABC Mining Company warrants, CUSIP number – 123456789 – at an ‘ask price’ of ‘no less than’ $1.69 in Canadian dollars” and again add the words “which will be good until cancelled” or “until the close of business today” if you want the opportunity to reassess you ask price at the end of the day.
2. Ask your broker to confirm the order by reading back your instructions to you and it is done. Again, it is as simple as that!

Why Bother Investing in Warrants

1. Last year a basket of 1 each of the long-term commodity-related warrants went up 91% while their associated stocks “only” went up 57%.
2. Warrants are priced about 60% less on average than their associated stocks and, therefore, you are in an ideal position to leverage your dollars very effectively.

There’s your answer as why you should consider investing in warrants as opposed to their associated stock. Investing in warrants gives you the opportunity to earn more dollars (in percentage terms) with considerably fewer dollars at risk.

Conclusion

It warrants (pun intended!) becoming more knowledgeable as to the which, when, why and how aspects of buying/selling warrants – and now you are!

Talk about a small world we live and invest in! The galaxy of warrants trading on the TSX/TSXV consists of only 167 planets (i.e. constituents) in total of which only 40 are stars 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.

So says Lorimer Wilson (www.FinancialArticleSummariesToday.com) and 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 below to avoid copyright infringement. Wilson goes on to say:

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 Commodity Company Warrants Index (CCWI)

The 34 commodity-related companies with long-term warrants (40 in total) are included in my proprietary Commodity Company Warrants Index (CCWI) [See here (1) for details] but this article deals with the precious metals sub-component as described in detail below.

The Gold and Silver Warrants Index (GSWI)

The 19 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 22 warrants of the 19 companies (3 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 22 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;
• 4 (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 associated with just penny stocks – the ‘juniors’ – but, as the breakout of the 19 gold and silver companies with LT warrants by market cap  shows below, that is not entirely the case:

• 5 (25%) large-cap (Kinross Gold; Agnico-Eagle; Franco-Nevada; Silver Wheaton; New Gold)
• 4 (20%) mid/small-cap
• 10 (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: 

• 11 (58%) are producers
• 5 (26%) are explorers
• 3 (16%) 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 was 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 has not fared as well – to date – in 2011 but given the optimism expressed in many articles (see the “Related Articles” section below) high hopes are anticipated before the year is out for the stocks of gold and silver mining companies. The associated warrants of such companies have historically outperformed the stock of the company in an up-leg, by approx. 70% on average (+74.8% in 2010) but, conversely, have underperformed the associated stock by roughly 60% in a down-leg  as exemplified by the YTD performance of -36% vs. only -14.5% for their associated stock. Incidentally, with the exclusion of the LT warrant and stock of Agnico-Eagle, which are each down 53% YTD, the GSWI is down -26% and their associiated stock down -6.3% which is right in line with the HUI/GDX.

As one can see warrants are quite volatile compared to their associated stock but if one truly believes in the future performance of precious metals equities then warrants are the place to be and now is the time to get positioned. For interest sake, the large/mid-cap gold and silver company stocks (HUI/GDX) are -5.2/7.5% YTD, the mid/small-cap miners (GDXJ) are -9.6% YTD and Rob McEwen’s index of non-producers (the McEwen Junior Gold Index) is -11.9% YTD. Incidentally, the aforementioned performances of the various indices shows that, YTD, the larger capitalized the mining companies are the better their performance. For details on the differences between the various indices please review this (2) article.

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; www.franco-nevada.com
11. Gran Colombia; $283M; T.GCM.wt; August 2015; 38501D113; www.grancolombiagold.com
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. Primero Mining; $456M; T.P.wt; July 2015; 74164W114; www.primeromining.com
16. Rio Novo Gold; $156M; T.RN.wt; March 2015; G75700123; www.rnovogold.com
17. Sandstorm Gold; $187M; a) V.SSL.wt; (SNXXF.pk); April 2014; 80013R115; b) V.SSL.wt.A; (SDXXK.pk); October 2015; 80013R123; www.sandstormgold.com
18. Silver Wheaton; $8.5B; T.SLW.wt.U; (SLVWF.pk); September 2013; 828336149; www.silverwheaton.com
19. U.S. Silver; $68M; V.USA.wt; July 2014; 90343P119; www.us-silver.com

(Please note that Kinross warrant “C” and the warrant “U” of Silver Wheaton expire in September, 2013 and, as such, will be removed from the index at the end of September as their duration will then be less than the 24 month duration index inclusion criteria.) 

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.

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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.

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. Venezula, 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

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.

To learn why you should buy the long-term warrants of commodity-related (and particularly gold and silver) companies and exactly how to go about doing so please read this (3) article.

Conclusion

Now that the ‘secret’ is out you can’t help but agree that warrants warrant your serious consideration – and now you know which ones to give consideration to and what factors should be taken into consideration before placing an order.

*

Article Titles and Links Referenced Above:

1. The “Secret” World of Gold & Silver Company Warrants  http://www.munknee.com/2011/05/the-secret-world-of-gold-silver-company-warrants/
2. Which Index is the Best to Use: the HUI, XAU or the GDX?  http://www.munknee.com/2011/06/which-index-is-the-best-to-use-the-hui-xau-or-the-gdx/
3. Buying Gold & Silver Company Warrants is Easy & Profitable – Here’s How (and Why!)  http://www.munknee.com/2011/05/buying-gold-silver-company-warrants-is-easy-profitable-%e2%80%93-here%e2%80%99s-how-and-why/

Related Articles:

1. Negative Sentiment Suggests Buying Gold & Silver Stocks NOW  http://www.munknee.com/2011/06/negative-sentiment-suggests-buying-gold-silver-stocks-now/
2.  NOW is the Best Time to Buy Gold Stocks! Here’s Why  http://www.munknee.com/2011/06/now-is-the-best-time-to-buy-gold-stocks-heres-why/
3. Gold Mining Stocks Are CHEAP Compared to Price of Gold  http://www.munknee.com/2011/06/gold-mining-stocks-are-cheap-compared-to-price-of-gold/

Editor’s Note:

• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Virtually nothing is being written these days on  the long-term warrants associated with a few gold and silver mining companies. I suppose that is to be expected given that there are only 22 such warrants and they are associated with only 19 companies in total.That is unfortunate because those who are in the know can take advantage of  the significant leverage warrants generate in a bull market over investing in physical gold and silver, precious metals company stocks and mutual/exchange traded funds. What am I talking about – and which warrants am I referring to? Let me explain. Words: 1703

So says Lorimer Wilson, editor of  www.munKNEE.com  (Your Key to Making Money!) and  (www.FinancialArticleSummariesToday.com). Please note that this paragraph must be included in any article reposting with a link to the article* source below to avoid copyright infringement. Wilson goes on to say:

Only 167 warrants were trading on the Toronto Stock Exchange ($TSX) and the Toronto Venture Stock Exchange ($CDNX) in total as of the end of July, 2011. Of those 167 only 38 (23%) were associated with 33 commodity-related stocks with the necessary 24+ months duration to be included in my proprietary Commodity Company Warrants Index (CCWI). See here (1) for details. Only 22 of the 167 warrants (13%) are of the long term variety and associated with 19 gold and silver companies which are the constituents of my proprietary Gold and Silver Warrants Index (GSWI).

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 19 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 22 warrants of the 19 companies (3 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 22 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;
• 4 (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 associated with just penny stocks – the ‘juniors’ – but, as the breakout of the 19 gold and silver companies with LT warrants by market cap  shows below, that is not entirely the case:

• 5 (25%) large-cap (Kinross Gold; Agnico-Eagle; Franco-Nevada; Silver Wheaton; New Gold)
• 4 (20%) mid/small-cap
• 10 (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: 

• 11 (58%) are producers
• 5 (26%) are explorers
• 3 (16%) 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 was 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 has not fared as well – to date – in 2011 but given the optimism expressed in many articles (see the “Related Articles” section below) high hopes are anticipated before the year is out for the stocks of gold and silver mining companies. The associated warrants of such companies have historically outperformed the stock of the company in an up-leg, by approx. 70% on average (+74.8% in 2010) but, conversely, have underperformed the associated stock by roughly 60% in a down-leg  as exemplified by the YTD performance of -36% vs. only -14.5% for their associated stock. Incidentally, with the exclusion of the LT warrant and stock of Agnico-Eagle, which are each down 53% YTD, the GSWI is down -26% and their associiated stock down -6.3% which is right in line with the HUI/GDX.

As one can see warrants are quite volatile compared to their associated stock but if one truly believes in the future performance of precious metals equities then warrants are the place to be and now is the time to get positioned. For interest sake, the large/mid-cap gold and silver company stocks (HUI/GDX) are -5.2/7.5% YTD, the mid/small-cap miners (GDXJ) are -9.6% YTD and Rob McEwen’s index of non-producers (the McEwen Junior Gold Index) is -11.9% YTD. Incidentally, the aforementioned performances of the various indices shows that, YTD, the larger capitalized the mining companies are the better their performance. For details on the differences between the various indices please review this (2) article.

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; www.franco-nevada.com
11. Gran Colombia; $283M; T.GCM.wt; August 2015; 38501D113; www.grancolombiagold.com
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. Primero Mining; $456M; T.P.wt; July 2015; 74164W114; www.primeromining.com
16. Rio Novo Gold; $156M; T.RN.wt; March 2015; G75700123; www.rnovogold.com
17. Sandstorm Gold; $187M; a) V.SSL.wt; (SNXXF.pk); April 2014; 80013R115; b) V.SSL.wt.A; (SDXXK.pk); October 2015; 80013R123; www.sandstormgold.com
18. Silver Wheaton; $8.5B; T.SLW.wt.U; (SLVWF.pk); September 2013; 828336149; www.silverwheaton.com
19. U.S. Silver; $68M; V.USA.wt; July 2014; 90343P119; www.us-silver.com

(Both Franco-Nevada’s wt.B and Papuan Precious Metals’ warrant expired during the month of July and, as such, have been removed from the GSWI. No new LT gold and/or silver mining company warrants have come to market since the last update.) 

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.

Who in the world is currently reading this article along with you? Click here to find out.

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.

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. Venezula, 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

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.

To learn why you should buy the long-term warrants of commodity-related (and particularly gold and silver) companies and exactly how to go about doing so please read this (3) article.

Conclusion

Now that the ‘secret’ is out you can’t help but agree that warrants warrant your serious consideration – and now you know which ones to give consideration to and what factors should be taken into consideration before placing an order.

*http://www.munknee.com/2011/07/july-update-gold-silver-warrants-index-gswi/

Article Titles and Links Referenced Above:

1. The “Secret” World of Gold & Silver Company Warrants  http://www.munknee.com/2011/05/the-secret-world-of-gold-silver-company-warrants/
2. Which Index is the Best to Use: the HUI, XAU or the GDX?  http://www.munknee.com/2011/06/which-index-is-the-best-to-use-the-hui-xau-or-the-gdx/
3. Buying Gold & Silver Company Warrants is Easy & Profitable – Here’s How (and Why!)  http://www.munknee.com/2011/05/buying-gold-silver-company-warrants-is-easy-profitable-%e2%80%93-here%e2%80%99s-how-and-why/

Related Articles:

1. Negative Sentiment Suggests Buying Gold & Silver Stocks NOW  http://www.munknee.com/2011/06/negative-sentiment-suggests-buying-gold-silver-stocks-now/
2.  NOW is the Best Time to Buy Gold Stocks! Here’s Why  http://www.munknee.com/2011/06/now-is-the-best-time-to-buy-gold-stocks-heres-why/
3. Gold Mining Stocks Are CHEAP Compared to Price of Gold  http://www.munknee.com/2011/06/gold-mining-stocks-are-cheap-compared-to-price-of-gold/

Editor’s Note:

• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

I read article after article on 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 are positioned to achieve even greater returns on their dollars deployed here in 2011. Let me take this opportunity to enlighten you on the wonderful rewarding world of warrants. Words: 1569

So says Lorimer Wilson (www.FinancialArticleSummariesToday.com) and editor of  www.munKNEE.com  (It’s all about Money!). Please note that this paragraph must be included in any article reposting with a link to the article* source below to avoid copyright infringement. Wilson goes on to say:

The galaxy of warrants trading on the Toronto Stock Exchange ($TSX) and the Toronto Venture Stock Exchange ($CDNX) consists of only 167 stars (i.e. constituents) in total as of May 31st,2011 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 and make up the entirety of my proprietary Commodity Company Warrants Index (CCWI). See here (1) for details. 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, as the breakout of gold and silver companies with LT warrants by market cap  shows below, that is not entirely the case:

• 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 was 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.)

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(** 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; 80013R115; b) V.SSL.wt.A; October 2015; 80013R123; 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, 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.

Who in the world is currently reading this article along with you? Click here to find out.

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 payers); 
• market capitalization (large, mid/small, micro/nano);  
• countries of operation (world-wide, excl. Africa, excl. Venezula, 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

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.

To learn why you should buy the long-term warrants of commodity-related (and particularly gold and silver) companies and exactly how to go about doing so please read this (2) article.

Conclusion

Now that the ‘secret’ is out you can’t help but agree that warrants warrant your serious consideration – and now you know which ones to give consideration to and what factors should be taken into consideration before placing an order.

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.

*Original Source: http://www.munknee.com/2011/06/gold-silver-warrants-index-gswi-update/

Article Titles and Links Referenced Above:

1. The “Secret” World of Gold & Silver Company Warrants  http://www.munknee.com/2011/05/the-secret-world-of-gold-silver-company-warrants/
2. Buying Gold & Silver Company Warrants is Easy & Profitable – Here’s How (and Why!)  http://www.munknee.com/2011/05/buying-gold-silver-company-warrants-is-easy-profitable-%e2%80%93-here%e2%80%99s-how-and-why/

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.
• Sign up to receive every article posted via Twitter, Facebook, RSS Feed or our FREE Weekly Newsletter.

Warrants

With all the interest in physical gold, silver and other commodities these days, and the large/mid-cap companies who mine the metals and the juniors who are exploring for them, it begs the question: “Why has no one written about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies in 2010?” The information in this article and the links to a variety of resources will change all that and make you ready and able to reap the benefits from investing in this much misunderstood asset class. Words: 2585

So says Lorimer Wilson, editor of both www.FinancialArticleSummariesToday.com  (A site for sore eyes and inquisitive minds) and 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. If this article does not contain the 9 hyperlinks provided which are crucial to the full picture intended please go to the original source for access to those links.

The answer to the question  ”Why has no one written about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies in 2010?” is simple : Almost all Americans and most Canadians (investors, brokers, financial advisors/planners and financial writers alike) are either unaware of, or not very familiar with, warrants. Those few who think they are in the know unfortunately have very limited knowledgeable as to the which, when, why and how aspects of buying and selling warrants.

It is little known fact that those commodity-related warrants with a duration of 24+ months  were up 91% in U.S. dollar terms in 2010. That compares very favourably with:

• the GDXJ (a basket of mid- and small-cap miners) which was up ”only” 55%, 
• the GDX and HUI index (baskets of mid- and large-cap miners) which were each up 33% and  
• that “laggard” gold which was up a “paltry” 30%!

With returns like that isn’t it about time you became aware of this asset class and how to go about claiming “the pot of gold” for yourself or your clients? 

Investors’ ignorance (that is such a harsh word but you know what I mean) about warrants is probably due to the fact that:

• they are listed almost exclusively on the Canadian stock exchanges;
• the SEC has put some limitations on trading in them;
• they seem complicated because of their differing time durations;
• investing in them requires some specific knowledge as to how to go about buying and selling them and
• they are limited in number.

That being said, it is “oh so easy” if you know what you are doing and, again, this article will explain everything in detail.

What are Warrants?

A warrant is a security giving the holder the right, but not the obligation to acquire the underlying security at a predetermined (i.e. exercise) price and for a specified period of time (i.e. term or duration).

A Breakdown of the Warrant Asset Class

a) Number of Warrants by Commodity
-  As of October 15th, 2011, only 135 companies have tradable warrants of which approx. 90 (67%) are in the commodity/natural resource sector, i.e. mining or drilling, exploring and/or developing or purchasing via royalties. (See here for a complete list.)
- Only 34 companies – yes, only 34 – have tradable warrants (38 in total) with an expiry date of at least 24 months duration which I consider to be the absolute minimum duration period (See here for details.)
- Of the 34 companies:

• 19 companies are involved in some aspect of precious metals mining of which 2 are royalty payment companies; 
• 9 are involved in base metal mining including zinc (2), uranium (1), nickel (1), coal (2), cobalt (1) and iron ore (2); 
• 5 are involved in oil and gas operations and
• 1 is agricultural-related.

b) Number of Warrants by Company Market Capitalization
Everyone seems to think that warrants are only associated with penny stocks but that is simply not the case. Of the 34 companies in question: 

• 4 have market caps in excess of $2.5B; 
• 1 has between $500M and $1B; 
• 3 are between $250M and $500M;
• 10 are between $100M and $250M while 
• 16 are less than $100M.

How to Trade Warrants

Buying and selling warrants 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:

1. Buying Warrants

a) TSX/TSXV Symbols
Because warrants trade exactly like the underlying common stock they are assigned a symbol. Since most warrants are associated with Canadian companies it is easy for Canadian investors to execute orders using their Canadian symbol but less so for Americans.

b) CUSIP Numbers
For American investors the best and most accurate way to trade in warrants is to use the security’s CUSIP number. 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. (For a complete list of stock and warrant CUSIP numbers and their related stock CUSIP numbers trading on the TSX/TSXV exchanges go here.) 

c) Pink Sheet Symbols
Many U.S. brokerage firms are not willing to open a ‘foreign account’ (i.e. an account that allows a U.S. based investor to purchase Canadian securities using Canadian symbols). Using Pink Sheet symbols (a 5-alpha symbol ending in ‘F’ for Foreign) are an alternative way to go for the 5 long-term warrants that have such designations. (For a complete list of commodity-related stock and warrant Pink Sheet symbols go here.)

For the record, stocks and warrants that trade on the Pink Sheets fall into one of these two categories:

• companies that don’t meet the listing requirements of the New York, American or Nasdaq stock exchanges or
• companies — usually foreign — that are unwilling to jump through the regulatory, legal, and accounting filings that accompany listing on the major exchanges. That is the case with most of the commodity-related companies with warrants. They are Canadian based and see no reason to create a duplicitous legal and accounting department just to be traded on the NYSE. They have already met all those legal, regulatory, and accounting requirements in their own country and feel that the burden is on YOU to read their home country filings.

c) Leverage
You can calculate the leverage of a warrant – the extent of the advantage or disadvantage of buying the warrant at its current price relative to the current price of the associated stock given the exercise price of the warrant – yourself, or you can get it free here.

2. Selling Warrants

Some investors erroneously believe that you have to hold warrants until the expiration date but that is the worst thing you can do because when warrants expire they will do so without any monetary value i.e. they are worthless. Instead, investors must treat warrants as they would stocks and either sell then when the warrants have met their price objective or well before they expire.

3. Exercising Warrants

a) When the Exercise Price is Achieved
It is important to note that if your warrants are “in the money”, i.e. the common stock is trading above the exercise price of the warrants, and the warrants are approaching the expiration date, you must take some action because, unlike call options where the value of the expired option is placed automatically into your brokerage account, that is not the case with warrants. When warrants expire they expire worth absolutely nothing!

From an American perspective you have only one viable option and that is to sell your position before the expiration date (and to do so at least 6 months before the expiry date is highly recommended because the value of a warrant often drops drastically during its final months of life) because, according to U.S. law, Americans cannot exercise a Canadian warrant unless its associated shares have been registered with the SEC because, should they exercise a warrant, they would be receiving a newly issued share which would be illegal.

From a Canadian perspective you have the option of either exercising the warrants (i.e. converting them into actual stock in the associated company according to the term of the warrant) once they are “in the money” or selling them outright at any time before they expire.

b) When an Early Buy-Back Offer is Made
Should a company make an offer for your warrants via an early buy back offer you have the choice of either accepting the offer or selling your warrants outright unless the company had a specific early call feature (which you should have been aware of at the time of purchase) in which case you would be legally obliged to sell.

c) When There Is a Stock Exchange Arrangement
In a stock exchange arrangement, the warrants will continue on as warrants of the acquiring company with the same expiration date and with the exercise terms adjusted to reflect the terms of the stock exchange in the merger. The owner of said warrants will want to assess the prospects of the new owner to assess the upside potential of their ‘new’ warrants and if the assessment is not positive to sell out before others come to the same conclusion. (For guidance in regards to buy-back and stock exchange situations you might want to subscribe to this fee-for-service site where the well-informed editor provides advice to subscribers.)

4. Dealing With Brokerage Firms

a) Canadian brokers: As there are symbols for all Canadian warrants Canadians will find the placing of orders very easy to execute and, as such, convenient to use online brokerage firms if so inclined. Be that as it may, please make note in the last paragraph in this section how ‘exactly’ to go about placing your order with a broker.

b) Non-Canadian brokers: The situation is not as straight forward for those individuals using non-Canadian brokerage houses because many online brokers are not set up with the symbols for the warrants you wish to trade. As such, it may be necessary to deal with a broker directly and have him/her enter the order for you. Because a broker needs the correct symbol for placing the order the most important thing you can do is give the broker the actual CUSIP number for the warrant you wish to purchase and, where possible its Pink Sheet symbol, to avoid any confusion on the part of your broker.

c) Communicating with non-Canadian brokers: Your broker may need to be educated on how to exercise an order. As such, never ‘ask’ your broker if they will execute your order for warrants but, instead, ‘tell’ them exactly what you want them to do. If you just ‘ask’ many brokers will say they don’t trade in Canadian warrants so they can’t execute the order. However, if you ‘tell’ them exactly what you want them to do on your behalf most will be more than happy to comply – and below are exactly what instructions you should give them.

5. Placing an Order to Buy or Sell

Warrants, like many small cap stocks, often have very thin markets (i.e. demand) and, as such, usually have a big spread between the bid (the price at which you are willing to make a purchase) and ask (the price at which you are willing to sell) price. That being the case, it is imperative to place only “limit orders” when buying or selling warrants associated with Canadian commodity-related stocks.

When American investors go online and see that a warrant of interest is trading with a U.S. symbol placing an order should be problem free. However, if it has a Pink Sheet symbol the price for the most recent bid or ask price should not be used as a basis for establishing a bid or ask price because that price will just be the last trade in the U.S. and therefore may be days, weeks or months old compared to the bid and ask prices on the more active Canadian exchange. In such a situation you should visit here for the up-to-the-minute bid and ask prices, as quoted in Canadian dollars. You can also go here where you can access comparative charting capabilities for both the warrant and the associated stock, recent news on the company, its latest financials, 30 day price history and access to the most recent research on the company. You will also need to go to a currency conversion site to get the current U.S. dollar to Canadian dollar exchange rate because you will be buying the warrants priced in Canadian dollars.

There are two kinds orders that can be placed when attempting to buy or sell a security:

1. Market Orders: A market order does not have a set price and is therefore executed immediately at the current ‘market’ price. Markets, especially OTC markets, can be highly volatile, and the price of execution may differ dramatically from the price at time of order entry. Those who use market orders are more concerned about the speed of the execution as opposed to the price.
2. Limit Orders: A limit order has a set price and may only be executed at the set price; however, a limit order may never get executed because the market may move away from the set price. Those who use limit orders risk not having an order executed.

If you want to place an order to buy, for example, 5,000 warrants of ABC Mining Company with a CUSIP number of 123456789 and you want to limit the price you pay to $1.43 Canadian then give your broker these specific instructions:
1. “I want to buy 5,000 ABC Mining Company warrants, CUSIP number – 123456789 – at a ‘limit price’ of $1.43 in Canadian dollars”. Add the words “which will be good until cancelled” if you are entering a stink bid or if you are trying to buy a very thinly traded warrant.
2. Ask your broker to confirm the order by reading the order back to you and it’s done. It is as simple as that!

If you want to place an order to sell 3,500 warrants of ABC Mining Company with a CUSIP number of 123456789, for example, and you don’t want to part with your warrants for less than, say, $1.69 Canadian then instruct your broker as follows:
1. “I want to sell 3,500 ABC Mining Company warrants, CUSIP number – 123456789 – at an ‘ask price’ of ‘no less than’ $1.69 in Canadian dollars” and again add the words “which will be good until cancelled” or “until the close of business today” if you want the opportunity to reassess you ask price at the end of the day.
2. Ask your broker to confirm the order by reading back your instructions to you and it is done. Again, it is as simple as that!

Why Bother Investing in Warrants

1. Last year a basket of 1 each of the long-term commodity-related warrants went up 91% while their associated stocks “only” went up 57%. 
2. Warrants are priced about 60% less on average than their associated stocks and, therefore, you are in an ideal position to leverage your dollars very effectively.

There’s your answer as why you should consider investing in warrants as opposed to their associated stock. Investing in warrants gives you the opportunity to earn more dollars (in percentage terms) with considerably fewer dollars at risk.

Conclusion

It warrants (pun intended!) becoming more knowledgeable as to the which, when, why and how aspects of buying/selling warrants – and now you are!