When can we expect the warrants attached to the units to be exercisable, and what upside potential do they provide if the stock price rises above the exercise price?
When the warrants become exercisable
The filing states that each unit consists of one common share plus one‑half of a common‑share purchase warrant. In the private‑placement prospectus (which is not reproduced in the news release) such warrants are normally issued with a standard “exercise‑window” – they can be exercised after a short lock‑up period (typically 30 – 60 days from the closing date) and remain exercisable for the life of the warrant (usually 5 years). Until that lock‑up expires the warrants are “in‑the‑money only on paper”; after the lock‑up they can be converted into full shares at the pre‑set exercise price disclosed in the prospectus.
Upside potential if the stock trades above the exercise price
Assuming the warrant’s exercise price is set at a modest premium to the $0.05 issue price (most junior‑stage junior warrants are priced in the $0.10 – $0.20 range), the economics are straightforward:
| Item | Calculation |
|---|---|
| One full warrant gives the holder the right to buy 1 share at Exercise Price (E) | |
| One unit carries ½ warrant → effective right to buy 0.5 share at E | |
| If RSG trades at price P > E, the intrinsic value per full warrant = P − E | |
| Per unit upside = 0.5 × (P − E) |
Example: If the warrant’s exercise price is C$0.15 and the stock climbs to C$0.30, the intrinsic value per full warrant is C$0.15. Each unit therefore contains 0.5 × C$0.15 = C$0.075 of “hidden” upside. That is a 150 % gain over the C$0.05 unit issue price (C$0.075 / C$0.05 = 1.5). The leverage effect becomes larger the higher the stock price moves above E.
Trading implications
- Short‑term catalyst – The lock‑up expiry (likely late September/early October) often triggers a modest price rally as investors can finally monetize the warrants. Consider buying units (or the underlying shares) ahead of that date if you anticipate a breakout.
- Long‑term leverage – The warrants give a built‑in levered exposure to any upside in RSG. If you are bullish on the junior‑gold sector, holding units is a cheaper way to gain 1.5 × the upside of the common share (0.5 warrant + the share itself) once the warrants are exercisable.
- Risk – If the stock stalls below the exercise price, the warrants expire worthless, leaving you with only the common share component (which is already heavily diluted). Keep the potential dilution and the company’s cash‑burn profile in mind when sizing the position.
Actionable take‑away – Verify the exact exercise price and lock‑up date in the prospectus, then position for a post‑lock‑up rally or use the units as a low‑cost leveraged long position on RSG, with the upside ceiling being essentially the stock price less the warrant’s exercise price (scaled by 0.5 per unit). If you’re risk‑averse, limit exposure to the common‑share portion; if you’re comfortable with the dilution risk, allocate a modest portion of your junior‑gold allocation to the units to capture the warrant‑driven upside.