Value Microcaps Junior Miners

[Bobwins]

OR-wt.a.to Here's an article about Osisko Gold warrants from Dudley Baker, who runs the common stock warrants website.

By Dudley Pierce Baker
Monday, May 23, 2016 3:57 AM EDT
As the bull market in precious metals stocks heats up investors will be looking for new opportunities and ideas to assist with their decisions as to which companies to invest.

One of the big name newsletter’s in the PM sector is recommending subscribers buy the shares of Osisko Gold Royalties (OR.TO) (OKSKF).

What they do not tell you is that there are stock warrants trading on Osisko, not one warrant but two warrants.

Before I tell you which of the two warrants you should consider, allow me to tell you about the company.

Osisko Gold Royalties Ltd. was created following the friendly $4.3B acquisition of Osisko Mining Corporation by Agnico Eagle and Yamana Gold in June 2014. The Canadian Malartic Mine lies at the heart of Osisko’s history, having been its cornerstone asset through the company’s growth from an exploration company to a mid-tier gold producer. Osisko can also rely on another world-class asset, the Éléonore royalty, acquired following the business combination between Osisko and Virginia in February 2015.

Based in Montreal, Québec, Osisko Gold Royalties Ltd primary business focus is as an intermediate mining royalty and exploration company whose cornerstone assets are a 5% NSR royalty on the Canadian Malartic Gold Mine, located in Malartic, Quebec and a sliding scale 2.0% – 3.5% NSR royalty on the Éléonore mine, located in the James Bay area in Québec. The Company is well financed and also holds a 2% NSR royalty on the Upper Beaver, Kirkland Lake and Hammond Reef gold exploration projects in Northern Ontario.

You may recall Virginia Mines (VGQ:TSX)(VGMNF)?

In November 2014, Virginia Mines and Osisko announced a business combination and the shareholders approved the transaction and it was completed in February 2015 and the shares of VGQ:TSX were delisted.

As of February 26, 2016, the company has $450 million in cash and cash equivalent’s and only $50 million in debt.

There is an incredible amount of detail on all of the properties and royalties on the OR:TSX website and we are of the opinion that investors will be well served by positioning themselves in this company, however, my preference is to buy the stock warrants instead of the common shares of OR.

There are two stock warrants currently trading on Osisko and here are the details:

Expiry Date Exercise Price Current Price
Osisko Gold Royalty Warrant (OR.WT:TSX) 2022-02-18 $36.50 $3.49
Osisko Gold Royalty Warrant A (OR.WT.A:TSX) 2019-02-26 $19.08 $3.25

What do you first see?

Obviously, I like the expiry date of the original WT but I do not like the exercise price of $36.50.
For the WTA, I like the substantially lower exercise price of $19.08 however, we have a shorter time period until the warrants expire of 2019-02-26.

Let’s do a quick hypothetical and see what happens if the common share price goes to $36.50, on or before 2019-02-26 and that there is no premium assigned to either warrant, only its intrinsic value defined as the value of the common shares less the exercise price of the warrant.

Common share profit (OR) $20.06 122%
Warrant (OR.WT) $0.01 -0- (yes, the WT is still trading but probably for no
more than a $5 premium)
Warrant A (OR.WT.A) $16.42 436%

Leverage 3.5 to 1

As with all investment decisions we must make them in real time and using real facts as above. With the WT trading at a higher price than the WTA it is not reasonable, but that is what the current price is.

Currently I see the only stock warrant to consider for purchase to be the WTA.

Our conclusion, would of course be different if the WT were currently selling at a substantially lower price than the $3.49.

The bottom line is always about making money and we see the WTA as outlined above out performing the common shares by 3.5 to 1 and the potential for the original WT to go no where.

Both of these stock warrants are very thinly traded and you must use Limit Orders ONLY as you place your orders.