Sandstorm Gold Royalties (TSX:SSL) Poised for Streaming Growth to Double Gold Production in 5 years

Sep 19, 2024

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Interview with Nolan Watson, President & CEO of Sandstorm Gold Royalties

Our previous interview: https://www.cruxinvestor.com/posts/sandstorm-gold-royalties-tsxssl-positioned-for-30-production-growth-debt-reduction-3933

Recording date: 17th September 2024

Sandstorm Gold Royalties, the sixth-largest gold streaming and royalty company globally, is positioning itself for significant growth in the coming years. Led by President and CEO Nolan Watson, the company has embarked on a strategic path that could potentially double its production and substantially increase its cash flow over the next five years.

Two years ago, Sandstorm made a bold move by acquiring over $1 billion worth of assets, financed through debt. While this initially raised concerns among investors, especially in a rising interest rate environment, the strategy appears to be paying off. Watson explains, "I'm a big believer that you need to buy things when nobody cares about growth and then when all of your shareholders are banging on the door for growth, that's when you should not be buying things because that's when they're very expensive."

The company's growth projection is anchored by five (among over 230 other) projects:
Greenstone (Equinox Gold)
Platreef (Ivanhoe Mines)
Robertson (Barrick Gold)
Hod Maden (SSR Mining)
MARA (Glencore)
These projects alone are expected to drive Sandstorm's production from approximately 75,000 royalty ounces today to potentially over 150,000 royalty ounces within five years. Importantly, this growth projection does not include numerous other development projects in Sandstorm's portfolio, providing potential upside beyond the company's current guidance.

Financially, Sandstorm is focused on improving its balance sheet. The company expects to reduce its debt from $640 million to $350 million by the end of this year, with plans to eliminate it entirely within three years. Once the five key projects are operational, Watson projects that Sandstorm could generate nearly $300 million in annual free cash flow at current gold prices.

Management's confidence in the company's prospects is evidenced by significant insider investment. Watson himself has borrowed $3 million to purchase additional Sandstorm shares, stating, "I'm convinced Sandstorm shares can double or triple."

While the company currently offers a modest 1% dividend yield, the focus is on debt reduction and potential share buybacks once the balance sheet is strengthened. Watson emphasizes the company's commitment to maintaining or increasing the dividend.

For investors, Sandstorm offers exposure to gold price upside without the operational risks typically associated with mining companies. The company's streaming and royalty model provides a diversified portfolio of assets operated by major mining companies, potentially reducing single-asset risk.

The investment thesis for Sandstorm is supported by broader macroeconomic factors that could benefit gold, including economic uncertainty, monetary policy decisions, currency devaluation concerns, and gold's role in portfolio diversification. However, investors should still be aware of potential risks, including gold price sensitivity, project execution risks at partner operations, geopolitical risks in some jurisdictions, and the impact of interest rates on the sector.

In conclusion, Sandstorm Gold Royalties presents an intriguing opportunity for investors seeking exposure to the gold sector. With a clear path to production growth, improving financial position, and strong management alignment, the company appears well-positioned to capitalize on its recent strategic moves. As always, investors should conduct their own due diligence and consider their risk tolerance when evaluating this investment opportunity.

View Sandstorm Gold Royalties' company profile: https://www.cruxinvestor.com/companies/sandstorm-gold-royalties