Sandstorm gold time to buy – sandstorm gold ltd. (nysemkt sand) seeking alpha wd gaster cosplay


Sandstorm’s earnings are fairly predictable, because to figure out how Sandstorm will perform, you really just need to follow its partners. For example, Sandstorm owns a copper stream on the Chapada mine owned by Yamana ( AUY), and Yamana had previously reported strong results from that mine in its earnings report, as well as start-up of production at Cerro Moro, where Sandstorm owns a large silver stream.

Sandstorm was previously listed as my #10 overall gold stock pick for 2018 so I expect good things from the company this year. As I stated in December, I think Sandstorm was in a strong position entering the year, but outside of positive updates at its Hot Maden mine, I didn’t see many other catalysts. I feel that earnings reports are less of a catalyst for Sandstorm than mining companies, as Sandstorm’s earnings typically don’t come with many surprises.

– The headline news is record quarterly revenue, which came in at $19.5 million, up from $18.8 million in Q1 2017. This is attributed mainly to higher realized gold prices of $1,326 per ounce (10% increase), while attributable gold ounces sold fell 6% from last year to 14,685 ounces.

So, I do think it does have some firepower to complete additional deals here, although larger deals like Hounde may not be in the cards. Instead, I would expect more smaller optionality type of deals in the near term. For example, a small explorer called Aton Resources recently announced a $2.1 million financing with Sandstorm, which includes equity and a 1% royalty.

This was a strong earnings report. But I think the stock’s biggest catalyst remains the upcoming completion of the Hot Maden (now called "Hod" Maden, by the way, as Lidya changed the name), pre-feasibility study and ongoing exploration at that project. I look forward to release of that study and will provide coverage to subscribers of The Gold Bull Portfolio. Dividend, Hot Maden PFS, Exploration and other Notes

The board is actively analyzing the topic and by the end of the year, and it will make a decision about a potential 2019 dividend, according to Watson. But he confirmed that if they do, it will be a small one to start that, and it expects to increase over time.

Personally, I don’t think Sandstorm should pay a dividend for at least a few years (2020 the earliest), and I personally prefer share buybacks (only when the stock has sold off and is undervalued). But I can see why some investors might want a dividend, as it provides income and several other royalty/streaming peers already pay one, although those companies are larger in size.

The Hod Maden pre-feasibility study is at an advanced stage and they expect to release it later in the quarter, and once this is complete, the mine will move into the permitting phase and undergo technical work, including feasibility-study work, according to Watson. It doesn’t look like the initial production guidance forecast of end-2021 has changed at all.

On general exploration upside, the company is bullish on its development and exploration projects. I don’t think anything new was announced here, although the company touched upon its HM claim royalty, which it thinks will return several times its initial investment, and the Black Fox stream, which will see more exploration efforts from the new operator, McEwen Mining ( MUX).

Also, the company remains bullish on its Hugo North Extension and Heruga streams. While it says it won’t receive cash flow from these streams for approximately 7-8 years from now (2026 is the target date), Watson said the cash flow will likely be quite substantial ($500 million-plus attributable cash flow to Sandstorm is a possibility over the life of the streams, he noted on the call).

In conclusion, I thought this was a pretty positive earnings report from Sandstorm, and I’m happy to see the company repay its debt in full and now have full capacity on its revolver. I don’t think these earnings will move Sandstorm’s stock much, however, as the positive earnings were not a big surprise. The Hot Maden PFS will be a bigger catalyst in my view.

This article was available first to subscribers of The Gold Bull Portfolio. Subscribers get access to my full top gold stocks of 2018 list, as well as a full list of my real-life holdings and weightings via article updates. I also indicate which stocks I plan on buying and selling in posts and in the live chat, and I’m available to discuss positions over email.