Blue Light Special....Aris A series Warrants.I posted this on the Precious Metals board at Investor Village yesterday. My Weekend Chart Summary was posted there also. I'd post it here but I don't know how to post a .pdf file at Stockhouse.
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Not many investors are aware of Warrants. They are usually part of miner equity-based funding. About 20 years ago, small fry investors such as myself were able to invest into Warrants openly traded on exchanges. I made an absolute killing with Silver Wheaton and Rio Narcea Warrants back in the day.
Today, painfully few companies have exchange traded Warrants open to the public. Of the dearth of Warrants accessible to the public in the mining space, I have found only Aris Mining and Gold Royalty Warrants are what I consider to be opportunities. Some miners have Warrants with the strike price and present stock price so distant, they make no sense as an investment.
Tonight, I am bringing to the Board's attention a Blue Light Special.
I've noted to the Board I'm invested in Aris Mining via Aris A series warrants. The warrant terms are C$5.50 plus 2 warrants = 1 share of Aris Mining. They expire 10.5 months from now on July 29, 2025.
Friday created a Blue Light Special event. Aris Mining closed at C6.85 and the A series Warrants closed at C$0.75 each. That Warrant closing price is so below fair value it has opened up an opportunity to investors. The 0.75 close for the A series Warrant means if you buy 2 Warrants, your breakeven price is 5.50 + 2(0.75) = C$7.00. In other words, you are paying a time premium of 15 cents total (7.5 cents/Warrant) when the stock is as C$6.85.
The value today for an A series Warrant using its historical volatility of 40% is C$0.94 each. If the Warrant was an Option with the same strike price and time, the volatility would be 60%, resulting in a Warrant value = $1.13 each.
In my July 28 Weekend Chart Summary, I spoke about Warrants for leverage. This time I want to discuss Warrants for defense. Let's assume you own 10,000 shares of Aris.TO. Your investment tied up in the stock at the close of Friday is C$68,500. A defensive strategy would be to sell your shares and buy an equivalent amount of exposure to Aris via A series Warrants. This defensive trade would result in 20,000 A series Warrants at a cost of C$15,000. Your account would show a leftover cash balance of C$53,500.
On the upside between today and end of July 2025, the Warrants value will simply be Stock price - C$5.50 divided by 2. Hence, you enjoy the upside of the shares with a small price of the 15 cent premium you paid.
On the downside let's say Aris.TO closes at C$5.35 at the end of July 2025. The Aris A warrants value is Zero. You lose C$15,000. However, if you held onto the shares, you will have lost C$68,500 - C$53,500 = $15,000 from today's share price (the same). If the share price should go below C$5.35, your warrant loss is the same C$15,000 whereas your value loss in the shares grows higher.
There are all sorts of scenarios to play with opportunity or risk. My intent is to educate our community of their benefits and risks. Particularly with the time premium way, way below intrinsic value the A series Warrants may just fit certain investors.
While in Rome, I thought of something regarding the Anglo Ashanti purchase of Centamin (CEE.TO) for US $2.50 Billion. Centamin is a 450k produce of Gold with AISC of $1400. Aris towards mid-2026 will be producing 500k ounces with an AISC equal to that of Centamin. With the Gold price being equal, implies in a couple years the Aris market cap will be $2.50 Billion (note in June 2026 a new Colombian President will be elected). Today's Aris market cap is US $686 Million roughly 3.6X lower.