Take physic, pomp

Odd things that happen in the junior miner sector from time to time, Western Copper & Gold (WRN.to) (WRN) edition

Here’s a chart of Western Copper & Gold (WRN.to) (WRN) compared to the continuous copper contract (HG00):

On the afternoon of Wednesday November 23rd, Western Copper & Gold (WRN) announced that “…Rio Tinto Canada Inc. (“Rio Tinto”) has exercised its right to extend certain rights under the investor rights agreement (the “Agreement”) between the Company and Rio Tinto dated May 28, 2021.” Part of the strategic investment agreement signed a year and a half ago was that RTZ had the right to extend the agreement on (basically) the same terms by an extra year and sure enough that’s what happened. However and once the quiet period caused by the US Thanksgiving break was done, the news caused a sell-off in the stock and I’m still trying to work out why that might have been. Ultimately, RTZ had four options:

  • Walking away
  • Extending the agreement by the year, as per the contract, without buying any more WRN
  • “Strengthening the agreement” by buying into WRN some more
  • Going straight for the jugular and buying out the company now

Obviously the first option would have been bad news for WRN, but as it didn’t happen it’s now a moot point. However, the reaction selling that greeted the news (and briefly sent WRN back under C$2.00) suggests enough of the market was disappointed by the fact RTZ didn’t buy some more WRN or even make that definitive M&A offer.

As for me, I thought the sellers early this week were mad. For one thing, WRN has all the cash it needs to execute on its 2023 plans (basically the permitting track, no more drilling required) and there’s no need for the company to sell more of its stake at current prices. For another, the WRN board would fail in its fiduciary duty if it considered a buyout offer at these levels….what would RTZ have to offer, 2x VWAP? Not going to happen. Instead, the news last week was both the most logical outcome and the optimal one for WRN and its shareholders. For RTZ, they have the right to watch and wait from a privileged position for the next 12 months as WRN starts its formal permitting track; it was part of the contract, it makes total sense to use the clause. Meanwhile, the cashed-up WRN gets to improve the share price under newly conducive market prices for copper and work on getting the share price up to a level at which a logical and mutually agreeable offer can be made. At $3.00, it would be more difficult to rebuff RTZ at $3.50 or above.

The market now seems to have worked that out and over the last two days WRN has rebounded, riding the rise in copper prices. But that makes the early week selling even more difficult to understand, one of those inefficient market oddities the market throws out every now and again. Were there so many players reading the RTZ position this badly? Not only did they leave the re-rate upside on the table, but they sold at a 10% discount. FWIW I’m long WRN and expect the rally to continue as even though it’s been on the vine for many years, it’s finally ripening.


    WRN seems baffled the MC is only C$340m but is taking it’s sweet time releasing the MET studies and drilling results. Not helping to drive competitive tension / FOMO. I threw up in my mouth a little when I saw the shelf renewal in SEDAR.


      A renewal isn’t such a big deal. Can’t blame them for renewing a shelf, they are allowed to give themselves flexibility. The met numbers are more important than those final drill holes and it is annoying not to have them yet (for us on the outside, at least). As for competitive tension, there isn’t any. RTZ has bagged the de facto ROFR and at this poker game, the only thing WRN can do is play it as cool as RTZ (hey, the address means they won’t fool anyone by “courting the Chinese”). IMO, the major negative is perception and the way the story has been around for.ev.er., it’s easy for the market to overlook it for the same reasons I used to pass years ago. But the road makes a difference, the neighbours make a difference and the grade isn’t so low compared to peers these days, either. RTZ doesn’t have a lot at stake $$wise, but equally they aren’t tire-kickers.

      Bottom line: It’s a decent risk/reward at C$2. Son mis dos centavitos, estimado señor casco oscuro.


    love when the guys break out “RTZ” make sure to say ZED.


    Im starting to notice a lot of unusual sell offs in the junior space this days. Highgold just made the best drill hole of the week and the very day it was announced it sold off heavily. Not the best days for junior investors imo.


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