Vancouver-based streaming firm Sandstorm Gold (TSE:SSL) has seen some impressive gains on its share price over the past week; last Monday the company was trading at less than $6 per share, by the end of the week it was more than $7.50.
The company’s 2013 results are to thank. Sandstorm reported record sales and revenue last Tuesday, the result of a “transformation” year, as CEO Nolan Watson describes it.
By the end of 2013 the company saw its investments mature, with all of its assets now in commercial production.
There were some highly-publicized bumps along the way. In December the company was forced to review its investment in Colossus Minerals after the miner halted the development of its Serra Pelada mine in Brazil due to a serious lack of cash.
Colossus has since delisted from the Toronto Stock Exchange and its bankruptcy plan was approved by the Ontario court last week.
Despite this blunder, Watson says company has had a “very, very positive year.”
“We stand here in a really strong position with lots of cash.”
In this interview with MINING.com, Watson elaborates on the lessons learned from Serra Pelada and what Sandstorm is looking for this year. He also explains why streaming agreements can benefit some miners more than traditional forms of financing.
Dr. Mark O’Dea’s True Gold Mining (TGM:TSXV) continues to drill good heap leach gold intercepts and this morning announced assay results from a recent 9 hole campaign at the Watinoma zone of the Karma gold project in Burkina Faso. The company twinned a couple previously drilled RC holes and encountered the same widths with improved grades. One of the twinned holes resulted in 70.5m of 1.91g/t gold whereas the previously drilled RC hole encountered 72m of 1.31g/t gold. New holes included 11m of 1.92g/t gold and 20m of 1.05g/t gold.
Dwayne Melrose, President and CEO of True Gold said: “we are pleased with the results of the core drilling program and our exploration work to date at Watinoma. They confirm the presence of widespread near-surface gold mineralization and strongly support our goal of adding near-surface oxide material within trucking distance of our proposed Karma project processing facility.”
The Karma project is composed of five deposits; Rambo, Nami, Kao, Goulagou I and Goulagou II, which the company anticipates processing at a central plant. They are currently working on a feasibility study to improve the economics of their PEA which was published in September 2012 and showed a low cost heap leach operation with $525 per ounce cash costs and manageable capex of $125 million. O’Dea and company were able to secure a strong strategic partner in the Boston-based Liberty Mutal group who invested $23.5 million into TGM in July 2013 for 19.95% of the company.
Nolan Watson – President, CEO and Chairman of Sandstorm Gold
Nolan Watson’s Sandstorm Gold (SSL:TSX), the junior precious metals streaming company (they make upfront payments for future gold production which they pay a fixed per ounce amount on, discounted to the spot price of the metal) announced today that it has entered into an agreement to purchase Premier Royalty (NSR:TSX) for 0.145 shares of Sandstorm. The total deal puts a value of $28.3 million on Premier with a per share purchase price equating to $0.89 per share of Premier, representing a 16% premium to the 20-day volume weighted average price.
In January 2013, Sandstorm bought 59.9% of Premier ” in order to have continued exposure to smaller stream and royalty acquisitions, while allowing Sandstorm to focus on larger transactions that are material to the company.” This may be a sign of the growing pains to come for Sandstorm and its challenge going forward; to find quality smaller scale streams and royalties which are not being absorbed by the larger streaming companies and that are not too far away from cash flowing. However, given management’s caliber and their track record of doing accretive deals, any risks associated with these types of transactions should be viewed as manageable.
Earlier this year, Premier bought a royalty package from Yamana Gold (YRI:TSX) which included cash flowing royalties on mines operated by Aura Minerals (ORA:TSX). The company also holds a 1.5% NSR on the Emigrant Springs Mine on the Carlin Trend in Nevada, operated by Newmont. Before this transaction, Sandstorm was expecting to produce between 33,000 and 40,000 ounces of attributable gold in 2013, but now they may add up to the 6,900 ounces Premier expected to produce.
Daniela Cambone of Kitco News talks with Nolan Watson of Sandstorm Gold at last week’s PDAC conference in Toronto. Of note Watson is very bullish on his recent Entree Gold transaction, saying it could go down as the best streaming deal in history. He is moderately bearish on gold for the next 18 months, saying that the US is in a lot of trouble but will fool people for a while by kicking the can down the road and printing more money. Long term, his bullishness on gold and commodities remains intact and he says he is enjoying this market because it is a great time for a company like Sandstorm to do deals.
The ability to make deals in bad markets is one of the best indicators of a strong management team. Today, Sandstorm Gold Ltd (SSL.TSX) and Premier Gold Mines (PG.TSX) made a deal which tells us a thing or two about strategy.
These two groups found a win-win that aligns business objectives. PG had none-core assets that they spun out with Bridgeport Ventures into Premier Royalty (NSR.TSX). Selling their 42% position to SSL gives them access to more cash for 2013. They can now use ~$150M in their treasury without having to sell shares, thanks to a six-month credit of $70M facilitated by SSL.
The Sandstorm group looks at over 300 deals a year and Mr. Watson’s style has indicated that everything is about material shareholder value. In addition to the nominal value of the agreement, picking up a significant interest in NSR gives Sandstorm more exposure to smaller streams and royalty acquisitions.
Strategically, both of these companies look to be ramping up for an aggressive 2013. PG has the cash for their ideas, and SSL has more access to potential deals.
Take note, it could be an interesting 2013 for both companies.
Disclaimer: As a CFA Level I Candidate, I am required to disclose the following: I own shares in Premier Gold Mines and in Sandstorm Metals and Energy, arms length to Sandstorm Gold Ltd. I am not qualified to be giving investment advice and this should not be taken as such. The contents of this article are an opinion drawn from material public information. I reserve the right to actively trade the companies named in this article without providing notice. I advise you to do your own due diligence and talk to a licensed investment advisor before buying or selling any security. All facts to be verified by the reader.
We had the opportunity to sit down with one of the youngest and most successful CEO’s in the mining business today, Nolan Watson, of the Sandstorm companies. Chosen as a Canadian “Top 40 Under 40”, Nolan has created billions in shareholder wealth beginning as a 26 year old CFO at Silver Wheaton. He currently appears to be repeating the same process at Sandstorm.
While his accomplishments are profound and deserve the highest of honors—they are merely a by-product of something deeper. It was our discovery that faith and conscience developed at a young age, are at the root, and are the secret of, Nolan’s success.
James Kwantes published some worthwhile thoughts on Sandstorm Gold today as well, see Shelter From The Storm. James is an experienced journalist and resource investor and I am pleased to introduce you to him.
Steel-eyed death? Not quite, but speculative investors are bruised and bloodied.
And Venture investors are certainly fighting to keep their portfolios warm – ie. retaining a pulse – after a near-nuclear winter that has seen the TSX Venture Exchange drop about 27% from this year’s high-water mark and plunge more than 63% from 2007 highs.
Gold, meanwhile, has bounced around between $1550 and $1650 an ounce, confounding both goptics (gold skeptics) and gogs (gold bugs).
It’s a hell of a time to be running a company with the words “storm” and “gold” in its name, but Nolan Watson is doing just fine. Shares of Sandstorm Gold (SSL), the Venture-listed gold streaming company where he is president and CEO, are up about 65% year-to-date and began trading today on the New York Stock Exchange (SAND).