2024-03-07 14:57:16 ET
Summary
- Sandstorm Gold has a diverse portfolio of streams and royalties, with Hod Maden accounting for only 12% of its net asset value (NAV).
- The company's long-term production outlook is strong, with the potential for record GEOs in the coming years, even without Hod Maden.
- Sandstorm is undervalued compared to its peers, trading at a much lower multiple of NAV, presenting a compelling investment opportunity.
In this article on Sandstorm Gold ( SAND ), I will:
1) Provide an in-depth analysis of the company's assets, financial position, and outlook, focusing on strengths and identifying weaknesses.
2) Show how SAND is substantially undervalued on both a relative and absolute basis.
Investors can then decide if they agree or disagree with the bullish thesis.
I will not waste any more "ink" on an intro, so without further ado, let's dive in.
From Zero To ~100,000 Gold Equivalent Ounces
Sandstorm is a precious metals streaming and royalty company that got its start back in the late 2000s.
2010 was the first year the company realized gold equivalent ounces (GEOs) sold, with three streaming assets producing 2,322 GEOs for the company at the time and five streams/royalties in total. SAND today looks nothing like it did ~15 years ago, as the company now owns ~250 streams and royalties at various stages — including over 40 producing assets — and had another record year in 2023 with 97,245 GEOs sold. Sandstorm has a long track record of continually growing its portfolio and production. 2020 was the only year where SAND didn't see a YoY increase in GEOs sold, as COVID-19 disrupted many mines in the sector.
2022 was the most transformational year for the company, as it acquired $1.1 billion of assets via the Nomad Royalty and BaseCore Metals acquisitions. The chart below perfectly visualizes how impactful these two transactions were for Sandstorm, with its total assets increasing by over 200% to almost $2 billion after it closed the deals.
A Review Of The Portfolio And Key Assets
Below is a list of Sandstorm's producing streams and royalties, which I believe also provides a good visual for the number of cash-generating assets and the diversification of the company's portfolio. It drives the point home without needing to review every single one. However, later in this article, I will provide a deeper analysis of the key assets, as I believe it's important to show that this story is much more than just Hod Maden. I will also identify any critical risk there is for any asset.
In addition to the above producing streams and royalties, SAND has over 200 other royalties at various stages, including 30 assets that are in development, most of which are gold-producing.
In 2023, the largest contributors to GEOs sold were the Cerro Moro silver stream and the Mercedes gold and silver streams. However, these won't be the two top GEO assets in 2024, and they aren't even the most valuable streams in the portfolio. The Mercedes streams were restructured at the beginning of this year, and there will be a notable drop-off in contribution from Mercedes in 2024. Cerro Moro has limited reserves remaining, and the stream is quickly approaching a step-down next year, as SAND currently receives 20% of all silver production from Cerro Moro up to a maximum of 1.2 million ounces of silver annually until 7.0 Mozs are delivered. After that threshold is hit — which will likely occur in 2025 — SAND will receive 9% of the silver produced for the life of the mine. Cerro Moro could still vie for the top spot this year, but Mercedes won't be there with it, and next year, Cerro Moro will drop down....
Read the full article on Seeking Alpha
For further details see:
Sandstorm Gold: A Deep Dive Into The Company And Undervaluation