Although things have been very quiet on the precious metal royalty front thus far in 2011, Sandstorm (SNDXF.PK) has started to undergo a transformation which should put them up with the likes of Royal Gold (RGLD), Franco-Nevada (FNNVF.PK) and Silver Wheaton (SLW) over the next five years. While Sandstorm is unlikely to become one of the top three royalty companies, I expect them to come close due to the quality of their management team, which could very well be the best in this niche within the mining industry. While only trading as a public company for about 2.5 years, Sandstorm has managed to overcome the many obstacles that stood in the way.
- Sandstorm was able to raise money during a time when the credit markets were frozen and financing was incredibly hard to obtain.
- With the limited financing Sandstorm was able to obtain, which was far less than desirable, it didn't prevent Sandstorm from embarking on an acquisition spree.
- With limited capital availability (up until recently as 4 of 6 streams are now cash flow positive), Sandstorm's eye for quality and exploration has started to show through.
Sandstorm In 2011
At the end of 2010, Sandstorm's production schedule was as follows.
click to enlarge
2011:
- Acquisition of Bachelor Lake stream from Mentanor for 20,000,000 up-front and an on-going per ounce cost of $500, for the life of the mine. This initially added approximately 12,000 ounces annually, starting in 2013. Mentanor recently released a study showing this production target was achievable running at just 65% capacity. Increased production guidance will most likely follow the next resource update. Production could potentially increase up to approximately 90,000- 100,000 (the latter a possibility if recovery rates increase). Taking the conservative approach, I think assuming annual production of 75,000-80,000 is satisfactory.
- St. Elena 4 phase expansion - 1) Increase throughput to 2,500 tpd or 40,000 ounces annually. 2) Further increase tonnage w/ new processing facility (2012-2013) to 3,500 tpd or approximately 55,000 - 60,000 oz annually. 3) Develop St. Elena U/G mine - production estimates still unknown. Assuming 5,000-10,000, which is fairly conservative will bring production anywhere from 60,000 - 70,000 annually
- Brigus announced mill expansion at Black Fox- This will be a 2 phase expansion. 1) Mill Optimization to 2,200 tpd or approx 120,000-125,000 annually. 2) Mill expansion - Though not publicly announced yet, this will be a logical step given surrounding deposits in close proximity. Phase 2 would expand the mill to 3,500 tpd or between 175,000 - 185,000 ounces annually. (Sandstorm also has a 10% stream on the Black Fox extension).
As you can see, Sandstorm, though still in its infancy, is starting to reap the fruit of making quality acquisitions, courtesy of its second to none management team. Having recently talked with the company, Sandstorm still retains its aggressive growth strategy going forward, targeting 1-2 acquisitions for the remainder of 2011 and 1-3 in FY 2012.
