Seeking Alpha
Gold & precious metals, macro, research analyst, deep value
Profile| Send Message|
( followers)  

Summary

  • Sandstorm Gold reported a profit of $3 million and operating cash-flow of $9.4 million on revenues of $13.2 million.
  • Slightly lower revenues are a result of lower gold prices offset by higher attributable production despite lower production at Aurizona, Santa Elena, and Black Fox.
  • These figures don't reflect the true potential of Sandstorm's streaming assets that I have pointed out in the past.
  • Given this, and given other, more recent developments, I am positive on the stock and want to be a buyer at around $5 - $5.50.

Sandstorm Gold (NYSEMKT:SAND) has been busy over the past week or so. The company took a stake in Luna Gold (OTCQX:LGCUF), it bought a stream in TrueGold's (OTCQX:RVREF) Karma Project, and now it is reporting its second quarter earnings results. The company generated $3 million in earnings and $9.4 million in operating cash-flow on $13.2 million in revenue. The revenue figure is slightly down year over year as the gold price weakened and we saw some disappointing results come out of some of the most important mines that the company owns streams on, with Luna Gold's Aurizona Project standing out as a loser for the quarter.

But with this in mind the numbers are actually far better than they look, especially since its three largest producing streams--Aurizona, Santa Elena (SilverCrest Mines (NYSEMKT:SVLC)), and Black Fox (Primero Mining (NYSE:PPP)) all have the potential to perform better in the future as I outlined in my February aticle on the company. Furthermore, as I pointed out in my most recent article, the company has been accumulating assets that aren't going to generate near-term revenues and cash-flow, but which have a lot of potential down the line such as its equity stake in Luna Gold, its acquisition of Sandstorm Metals and Energy. and its TrueGold stream.

Going forward the company may struggle in the near-term, especially if it restructures its stream on the Aurizona Project as it hinted last week. But the company has been doing a lot to generate long-term value even if it has become riskier. With this in mind I want to be a long-term owner of Sandstorm, but I also recognize that the market might not be so forgiving. So while I like the stock at current levels I think we can continue to see the shares pullback and generate a buying opportunity for long-term investors.

Source: Update: Sandstorm Gold's Q2 Earnings