Sandstorm Gold - All You Need To Know About 2015

| About: Sandstorm Gold (SAND)

Summary

Sandstorm Gold results were in-line with what I was expecting, unfortunately and reflected a poor quarter and a record low gold price.

However, SAND announced that 1Q'16 gold sold was 11 Koz which is significantly higher than the 4Q'15.

I still recommend SAND as a Hold on valuation, and I think it is prudent to take some profit now, if the price of gold cannot stay above $1,200/ Oz.

Sandstorm Gold Ltd. (NYSEMKT:SAND)

This article is an update to my preceding article on Sandstorm Gold published on November 16, 2015 about the third-quarter 2015.

Stream/Royalty Co. Mine Location Payment
Luna Gold Aurizona Brazil $17.8 millon + 1.1 m shares
Primero Mining Black Fox Ontario Canada $31.9 million
Silver Crest Mine Santa Elena Sonora Mexico $12 million + 700K shares
Metanor Resources Bachelor Lake Quebec Canada $20 million
True Gold Mining Karma Burkina Faso Africa $25 million
Rambler Metals Mining Ming Newfoundland Canada $20 million
Entre Gold Hugo North extension - Heruga Mongolia TBD
Dore Minerals Deflector Quebec Canada $6 million
Glencore XStrata Bracemack-McLeod Royalty Australia TBD
Yamana Gold Gualcamayo Argentina From Premier Royalty acquired in 2013
Newmont Mining Emigrant Spring Royalty Nevada USA From Premier Royalty acquired in 2013
AngloGold Ashanti MWS Royalty South Africa From Premier Royalty acquired in 2013
Orezone Gold Bombore Royalty Burkina Faso Africa $3 million
Solitario Exp & Royalty Mt Hamilton royalty - $10 million
Other Streams and Royalties 5 mines/37 projects -
Gold Royalty 18 Royalties/13 projects - Shares swapped
Diamond Royalty Diavik Mine A-21 Canada $56.8 million including 3 million warrants
Pacific Ridge Expl. 3 Royalties Canada $0.5 million
Alexandria Minerals Canada C$300k
Yamana Gold 5 projects - $152 million in cash/15 million warrants
Chapada Copper Stream Chapada Brazil -
Teck Royalties package 55 royalties - $19 million
Click to enlarge

2015 Financial results snapshot:

Year 2015 4Q'15 3Q'15 2Q'15 1Q'15 Year 2014 4Q'14

Revenue

in $ million

52.663 9.863 12.09 15.43 15.29 56.494 12.49
Attributable gold sold Oz 45,146 8,951 10,834 12,901 12,46 44,821 10,42

Gold sales

$ million

38.585 6.604 9.055 13.5 13.07 43,690 9.46

Royalty revenue

$ million

14.078 3.259 1.661 2.460 2.219 12,804 3.03

Operating Cash flow

$ million

30.819 4.987 8.234 9.479 8.119 35,224 8.85

Average cost per attributable

gold Oz Eq. $

300 258 307 304 323 321 308
Cash Operating margin $ 867 844 809 892 904 939 890

Gold price realized

in $/Oz

1,167 1,102 1,116 1,196 1,227 1,260 1,198

Net Income

$ million

(43.056) (24.96) (5.470) (13.451) 0.825 11.515 2.61

Cash and Cash equivalent

in $ million

5.3 5.3 46.5 51.6 38.3 90.2 90.2

EPS diluted

$/share

(0.36) (0.20) (0.05) (0.11) 0.01 0.09 0.02

Total long-term liabilities

$ million

86.779 86.779 4.768 5.316 5.341 5.892 5.892

Total shares Outstanding

in million

119.687 124.719 117.833 - - 112.853 -
Click to enlarge

1 - As of December 31, 2015, the Company had cash and cash equivalents of $5.3 million (December 31, 2014 - $90.2 million) and working capital of $1.8 million (December 31, 2014 - $89.3 million).

2 - As of March 30, 2016, the Company had 137,930,795 common shares outstanding.
As disclosed previously, the funds from the issuance of share capital have been used to finance the acquisition of Gold Streams and royalties (recent acquisitions are described earlier in greater detail), with the net proceeds of the 2015 equity financing used to reduce the balance of the Company's Revolving Loan.

3 - SandStorm announced on March 31, 2015:

is pleased to announce that the Company has sold approximately 11,000 attributable gold equivalent ounces1 during the first quarter of 2016. The attributable gold equivalent ounces were delivered to the Company from 19 producing mines, with approximately 70% of the ounces coming from operations run by major and mid-tier mining companies.

Commentary:

Sandstorm Gold results were in-line with what I was expecting unfortunately and reflected a poor quarter. Revenue was $9.863 million for 4Q'15, down 18.4% quarter over quarter, but more importantly, attributable gold sold was 8,951 Oz, down 17.4% quarter over quarter.

A quick look at the graph below is showing a company struggling to increase revenue. However, the gold production numbers for 1Q'16 at 11 K oz is quite encouraging, and entices me to be more positive for 2016?

Click to enlarge

Note: I estimated 1Q'16 revenue based on 11 Koz of gold.

Recently, the company acquired many new assets using equity as a currency. I did not like this situation at all, because It is highly dilutive to shareholders.

However, I recognize that the company has limited options available and must expand to be able to survive. The problem is that the dilution is here, with a share count of approximately 139 million as I speak, whereas the possible positive effects on the gold production and revenues, will take time to appear in the balance sheet.

The gold price is of a paramount importance when it comes to investing in SAND, the recent gold rally is showing a tight correlation between SAND and the price of gold.

Conclusion:

I still recommend SAND as a Hold on valuation this time, and I think it is prudent to take some profit now, if the price of gold cannot stay above $1,200/ Oz.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade SAND