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Sandstorm Gold Royalties

I am buying Sandstorm Gold Royalties (SAND) at a price that I did not think I would see again. The severity of the pullback in the broad markets has created many casualties and opportunities. Sandstorm is a well managed precious metals royalty and streaming company. It is a growing cash flow machine that does very well at $1500 per ounce gold and $16 per ounce silver. It built a geographically diverse portfolio when precious metals prices were depressed. The company offers funding that is put towards mine development. In exchange, Sandstorm receives a royalty, stream or some other creative combination of remuneration when the mine generates gold and silver. Sandstorm will spin more cash as more mines come online so the company is not reliant on higher gold and silver prices so this is a great company for anyone who wants exposure to the space, but does not want the risk of needing higher precious metals prices in order to make a profit.

Sandstorm is priced lower than many other precious metals royalty companies such as Franco Nevada and Wheaton Precious Metals which provides an opportunity for a multiple reset or a takeout by one of the senior players. Its market cap is just large enough to fall on the radar of large investors that only trade $1 Billion plus enterprises.

Another reason for buying this company is its counterparty diversification which means that it is not reliant on just a few mine operators. It is partners with dozens including many of the world’s largest mining companies. These miners continue to explore these properties which are subject to Sandstorm’s royalty and streaming agreements, so Sandstorm stands to benefit in their exploration success.

The company supports its shares with a buyback program which keeps the structure reasonable. Perhaps the company’s largest risk is its largest opportunity which is the way it is supposed to be. The Hod Maden project in Turkey represents an outsize capital investment, but will be a very significant cash generator when it starts producing. Sandstorm is a major owner and active buyer of Entree Resources which is another Speculation in the Rational Speculator portfolio.

Bought tranche at $5.85 (USD).

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