Sandstorm Gold Ltd due diligence report.

Oto Suvari
Dec 8, 2019 · 4 min read

Hatchworks has conducted due diligence on Sandstorm Gold Ltd, a royalty company based in Canada, that focuses on acquiring gold and other precious metals. The company offers upfront payments for companies to acquire a gold stream or royalty and receives the right to purchase a percentage of a mine’s production for the life of the mine. It’s listed on the Toronto Stock Exchange under the symbol ‘’SSL’’.

Financials — Sandstorm Gold Ltd.
(Source: Marketscreener.com)

Sandstorm Gold Ltd’s current market cap is $1.21B and stock price is around $6.66.

With a predicted net-income growth of 39.6% for 2019E and 2020E, and a net income estimate for 2020E in excess of $28.9M, this points to a P/E ratio of 60.5x. Whereas competitor, Royal Gold (RGLD), shows a P/E ratio of 41.6x for 2020E.

The revenue/sales forecast is $139M for 2020E, indicating an EV/Sales ratio of 11.3x.

According to the latest quarterly results, it shows a strong operating margin of 55%.

Sandstorm Gold Ltd (SSL) isn’t a yielding equity. In contrast, competitor Franco-Nevada Corporation (FNV) is, with a yield of 1.03% for 2020E.

It’s worth noting that since their first acquisitions in 2009, Sandstorm Gold Ltd (SSL) has increased their portfolio by nearly 200 royalties.

In the event of a recession, investors might reclassify their portfolio and could take some positions in Gold which is also known as a ‘’safe haven’’ asset to reduce their risk appetite. History shows that it could be better to take positions in the commodity itself, rather than investing in mining equities or royal companies due to the high volatility risk that’s involved.

According to our analysis, Sandstorm Gold Ltd has a particularly high P/E, EV/Sales ratio, no yield and a high risk volatility equity, which doesn’t meet the investment criteria of Hatchworks and therefore, Hatchworks will not be an investor.

The Hatchscore is 4.4 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies


What is Sandstorm Gold Ltd?

The company offers upfront payments for companies to acquire a gold stream or royalty and receives the right to purchase a percentage of a mine’s production for the life of the mine at a fixed price per unit or at a fixed percentage of the spot price. It has operations in Canada, Mexico, the United States, Mongolia, Burkina Faso, Ecuador, South Africa, Ghana, Botswana, Cote D’Ivoire, Argentina, Brazil, Chile, Peru, Paraguay, Honduras, French Guiana, Turkey, Sweden, and Australia.

Big Investors:

  • Van Eck Associates Corp.
  • GLC Asset Management Group Ltd.
  • Sprott Asset Management LP.
  • CI Investments, Inc.

Advisors and Bookrunners:

  • National Bank Financial Inc.
  • BMO Capital Markets.

What are the risks?

  • Sandstorm Gold Ltd is very dependent on the production of precious metals by mining industries.
  • Precious metals can cause high volatility. If the price of a precious metal drops, it can have a negative impact for Sandstorm Gold Ltd’s share price.
  • The lack of access to capital could result in those mining companies entering bankruptcy proceedings and as a result, Sandstorm Gold Ltd may not be able to realise any value from its respective streams or royalties.

Competitors:

  • Royal Gold, Inc (RGLD).
  • Franco-Nevada Corporation (FNV).
  • Wheaton Precious Metals (WPM).

Management team:

  • Nolan Watson: CEO.
  • Erfan Kazemi: CFO.
  • David Eric de Witt: Chairman.

The Hatchwork Team

The forecast figures are based on the data of Marketscreener.com, and not from hatchworks: https://www.marketscreener.com/SANDSTORM-GOLD-LTD-6063376/financials/


Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.

Oto Suvari

Written by

Research & Development at Hatchworks & Neuchatel Ltd. Heading up the group’s R&D activities for Hatchworks, SPECTRE (www.spectre.ai) and linked projects.

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