Post by
tobinator01 on May 10, 2024 1:43pm
Atttention Warrant Holders, No Acceleration Clause
A couple of weeks ago, I described how the A series warrants had an acceleration clause. The terms of the acceleration clause are once the stock trades 20 days over $5.50, Aris can issue an acceleration trigger. I emailed Aris in December 2022 and the gal there said there was no intention to amend the warrants to remove the acceleration clause.
Fast forward to last night. I was looking at the Aris May 2024 presentation. On Slide 17 in the foot notes there was this note:
"2. Two Aris Mining Holdings Corp. warrants can be exercised to acquire one Aris Mining common share for an aggregate exercise price of C$5.50 per Aris common share. The acceleration terms were removed pursuant to the terms of the Third Supplemental Warrant Indenture made as of the 26th day of September, 2022."
I went to the Aris website and under Financial Reports & Filings section it shows the first two Indentures but not the third. Going to Sedar I found the third and right there in black and white, everything relating to the Acceleration of A series warrants was removed.
The person I emailed Dec. 2022 obviously did not know about the thrid indenture and the modification of the warrants. Here I was trying to assess risk of them accelerating the warrants etc. and I am glad I'm wrong!
Apparently the market has the concern that come May 22nd, Aris will accelerate the warrants. There is absolutely no possibility of that happening. Aris A series warrants expire July 29, 2025.
At today's stock price of C$5.91 and 14.6 months until expiry, the present day volatility is a tiny 22% to get what the last trade was of $0.50. I've held Aris warrants nearly 2 years and the average volatility is 42%. The very conservative fair value today with 42% volatility is $0.72, which means buying the warrants today you are buying them at a 30% discount.
Folks wonder why anyone would pay for a warrant as it adds to the next cost per share to exercise. For instance, today you buy at $0.50 for one warrant so for two is $1.00. This means a year from the end of July, you pay your $5.50 and get 1 share but your all in cost is $6.50 for that 1 share. If you are bullish on a company and its stock, warrants offer you a huge amount of leverage.
Let's say the stock today is an even C$6.00. You have C$6000 in cash and you buy 1000 shares. August 1st, 2025, the stock is C$12.00. You have realized a profit of C$6000.
Instead of the common stock, you use that C$6000 and buy warrants at C$0.50. Now you own 12,000 warrants. The stock is the same price of C$12.00 on August 1st, 2025. The warrants are in the money by $12.00 - $5.50 = C$6.50. The warrants realize a profit of 12,000*$6.50 / 2 = C$39,000. You may say, "well I don't have the money to exercise all the warrants." That may be true if you are a small potatoes like everyone on this board (me included). What happens months prior to the expiry is the bid for the warrants will follow the difference between stock price and strike price (divided by two). You can just sell the warrants for their worth and not have to exercise.
Realize that if Aris's stock closes below C$6.50 by the end of July 2025, you will realize a net loss on your warrant investment. I believe strongly that Gold will be higher than today next year and the additonal production of 100,0000 ounces per year from Segovia is not fully priced into the stock. So I accept the risk.
My personal intent is to exercise my warrants next year. I believe Aris will be a $20+ stock at the end of 2026 easily. Why? 1) Aris will be producing at a rate of 500,000 ounces per year. 2) Continued active drilling today will prove up millions more ounces on their properties. 3) Colombia's President Petro will be out of office.
Comment by
joar8888 on May 10, 2024 3:14pm
Good food for thought thank you