Ben Kramer-Miller
Gold & precious metals, macro, research analyst, deep value

Why Sandstorm Gold's Purchase Of Sandstorm Metals And Energy Makes Sense

Recently we learned that Sandstorm Gold (NYSEMKT:SAND) is planning to acquire its sister company Sandstorm Metals and Energy (OTCPK:STTYF) (SME, hereon). Shareholders in the latter company will receive 0.178 shares of Sandstorm Gold and C$0.35 ($0.32). On the news SME shares rose about 30% and they are now valued at $44 million. While this is a nice premium to the pre-acquisition valuation it is substantially lower than where the company's shares traded several months ago.

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Given SME's depressed valuation it appears that Sandstorm Gold made an accretive acquisition. A DCF valuation analysis of SME's assets supports this point.

Furthermore there are synergies between the two companies, which share several executives; by merging the...

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