Update: Sandstorm Gold Q2 Earnings

Aug.14.14 | About: Sandstorm Gold (SAND)

Summary

Sandstorm Gold announced second quarter 2014 results of $13.2 million revenue on 10,149 ounces of gold sold, reporting net income of $3 million and cash flow of $9.3 million.

The results are better than I expected, with higher ounces from Bachelor Lake and royalties and lower cash costs of $310 per ounce sold.

Sandstorm Gold remains a buy following the strong Q2 earnings and gold stream acquisition announced subsequent to quarter end.

Sandstorm Gold (NYSEMKT:SAND) has announced its second quarter 2014 results, which came in much better than I had expected. The company announced revenue of $13.2 million on attributable gold equivalent ounces sold of 10,149 ounces, at average cash costs per ounce of just $310. This resulted in margins of $986 per ounce, with operating cash flow of $9.4 million and net income of $3 million, or $.03 per share. The company announced a $1.7 million decrease in administration expenses as well.

In my first article on Sandstorm, I argued that the stock is one of the best ways to gain exposure to the gold market, because of the company's sound business model, strong management team and attractive assets. In the second quarter of 2014, even though some of the company's partners had issues - Luna Gold (OTCPK:LGCUF) in particular, with lower than expected production and higher costs - the company's diverse asset base of 14 cash flowing assets helped the company record impressive results regardless. Even better, the company re-affirmed its production guidance for 2014 - between 40,000 and 50,000 attributable gold equivalent ounces. This is even with lower production from Luna and a 48% decrease in ounces sold from SilverCrest Mines (NYSEMKT:SVLC) as it transitions from an open pit, heap leach operation to an underground mine and milling circuit.

In my opinion, the story is getting stronger at Sandstorm Gold. The company is on pace to record more than $40 million in operating cash flow in 2014, despite a low gold price and lower production from some of its partners. The latest gold stream transaction with True Gold looks like a pretty good deal as well. I estimate the company should have around $65 million cash, plus a $100 million undrawn line of credit, to complete more deals. Sandstorm has had some issues, but it looks like the company's worst days are behind it.

Disclosure: The author is long SAND. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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