Sandstorm Gold - All You Have To Know About Q2 2016

| About: Sandstorm Gold (SAND)

Summary

Sandstorm Gold released its 2Q'16 on August 3, 2016. It was a solid quarter overall, helped by a realized gold price at $1,255/Oz.

The share dilution is still an important concern in my book. The shares outstanding are now nearly 151 million and increased basically 27% in a year.

The stock is approaching a multi-year resistance at $6.50-$6.75, which means that SAND is now a sell on valuation.

Sandstorm Gold Ltd. (NYSEMKT:SAND)

This article is an update to my preceding article on Sandstorm Gold published on May 9, 2016 about the first-quarter 2016.

Stream/Royalty Co. Mine Location Payment
Luna Gold (OTCPK:LGCUF)
Aurizona Brazil $17.8 million + 1.1 m shares
Primero Mining (NYSE:PPP)
Black Fox Ontario Canada $31.9 million
SilverCrest Mines (NYSEMKT:SVLC)
Santa Elena Sonora Mexico $12 million + 700K shares
Metanor Resources (OTCPK:MEAOF)
Bachelor Lake Quebec Canada $20 million
True Gold Mining (OTCQX:RVREF)
Karma Burkina Faso Africa $25 million
Rambler Metals & Mining (OTC:RBMTF)
Ming Newfoundland Canada $20 million
Entree Gold (NYSEMKT:EGI)
Hugo North extension - Heruga Mongolia TBD
Doray Minerals Deflector Quebec Canada $6 million
Glencore (OTCPK:GLCNF)
Bracemac-McLeod Royalty Australia TBD
Yamana Gold (NYSE:AUY)
Gualcamayo Argentina From Premier Royalty acquired in 2013
Newmont Mining (NYSE:NEM)
Emigrant Springs
Nevada USA From Premier Royalty acquired in 2013
AngloGold Ashanti (NYSE:AU)
MWS Royalty South Africa From Premier Royalty acquired in 2013
Orezone Gold (OTCPK:ORZCF)
Bombore Royalty Burkina Faso Africa $3 million
Solitario Exp & Royalty (NYSEMKT:XPL)
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. (OTC:PEXZF)
3 Royalties Canada $0.5 million
Alexandria Minerals (OTCPK:ALXDF)
Canada C$300k
Yamana Gold 5 projects - $152 million in cash/15 million warrants
Chapada Copper Stream Chapada Brazil -
Teck (TCK) Royalties package 55 royalties - $19 million
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2Q'16 Financial results snapshot

2Q'16 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 4Q'14

Revenue

in $ million

15.709 13.384 9.863 12.09 15.43 15.29 12.49
Attributable gold sold Oz 12,517 11,381 8,951 10,834 12,901 12,46 10,42

Gold sales

$ million

10,858 8.504 6.604 9.055 13.5 13.07 9.46

Royalty revenue

$ million

4,851 4.880 3.259 1.661 2.460 2.219 3.03

Operating cash flow

$ million

8.935 9.685 4.987 8.234 9.479 8.119 8.85

Average cost per attributable

gold Oz Eq. $

261 267 258 307 304 323 308
Cash operating margin $ 994 909 844 809 892 904 890

Gold price realized

in $/Oz

1,255 1,176 1,102 1,116 1,196 1,227 1,198

Net income

$ million

5.199 13.159 (24.96) (5.470) (13.451) 0.825 2.61

Cash and cash equivalent

in $ million

3.114 5.316 5.3 46.5 51.6 38.3 90.2

EPS diluted

$/share

0.04 0.10 (0.20) (0.05) (0.11) 0.01 0.02

Total long-term liabilities

Bank debt

$ million

62.854

59.5/0 as of July 6.

80.130

77.0

86.779

83.5

4.768 5.316 5.341 5.892

Total shares outstanding (diluted)

in million

140.438 137,931 128.880 117.833 118.102 - -
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SAND explained in a few graphs

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Recent financial news

On June 1, 2016, Sandstorm amended its revolving credit facility, extending the term to four years (maturing in July 2020). The revolving credit facility allows the Company to borrow up to $110 million for acquisition purposes, from a syndicate of banks including The Bank of Nova Scotia, Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce.

On July 6, 2016, the Company completed an equity financing for aggregate gross proceeds of $57.5 million. Upon closing of the financing, the majority of the net proceeds were used to reduce the balance of the Company's revolving credit facility. As a result, the Company currently has no bank debt and the entire $110 million revolving credit facility remains available for acquisition purposes

Commentary

Sandstorm Gold released its 2Q'16 on August 3, 2016. It was a solid quarter overall, helped by a realized gold price at $1,255/Oz. I was glad to see that the company passed again the 12K level in gold production, which is up nearly 10% quarter over quarter.

Everything was not perfect, and we could eventually talk about the disappointing production from Chapada mine owned by Yamana, or the ongoing problem with Luna Gold, which is not contributing to production.

Sandstorm posted a good operating cash flow again this quarter of $8.935 million; however, it was down 7.7% quarter over quarter. Same comment for the net income which was $5.199 million, but down from $13.159 million the preceding quarter.

The share dilution is still an important concern in my book. The shares outstanding are now nearly 151 million and increased basically 27% in a year. Yes, the debt has been repaid and the company has a brand new $110 million credit facility to use for another round of eventual acquisitions.

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The stock price has increased from $2 in January to nearly $6 now. This is really an exceptional recovery, and I am sure SAND shareholders are extremely happy. However, the actual stock valuation requires some pretty high production numbers, and I sincerely do not see it in the last quarter results, albeit they can be considered as very solid.

The combination of increased production and bullish gold price has been fueling SAND momentum. I must admit, it took me by surprise.

Gold prices are now stabilizing and may eventually re-test $1,275/Oz.

Sincerely, I do not see a huge upside from here, and a multi-year resistance is around $6.50-$6.75, which means SAND is now a sell on valuation. The stock has gone too far too fast.

Important note: Do not forget to be one of my followers on SAND and the gold sector in general. Thank you.

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.