Sandstorm Gold: It Could Have Been Better

Introduction

Vancouver-based Sandstorm Gold Ltd. (SAND) launched its third quarter 2023 outcomes on November 6, 2023.

Notice: My earlier articles on Sandstorm Gold, which have been launched on August 14 and October 9, 2023, have been up to date on this article. Since 2015, I’ve been recurrently following SAND quarterly outcomes.

With roughly 250 streams and royalties as of September 30, 2023, 39 of the underlying property in Sandstorm’s portfolio are cash-flowing, and no asset contributes greater than 15% to the corporate’s consensus web asset worth.

1–3Q23 Outcomes Snapshot

It was an honest quarter with a big gold equal manufacturing of 21,123 Au Eq. Oz (22,606 Au Eq. Oz final 12 months) and revenues of $41.32 million, with $22.50 million in gross sales and $18.83 million in royalty.

The common GEO worth elevated this quarter from $1,706 per ounce in 3Q22 to $1,919 per ounce.

The common money prices for the three months ended September 30, 2023, have been $220 per attributable gold equal ounce.

Web loss was $0.24 million, or $0.00 per share, in 3Q23, in comparison with an earnings of $31.88 million within the comparable quarter a 12 months in the past.

SAND Quarterly Gold Equal Manufacturing per Mine: 2Q23 versus 3Q23

As we will see, Cerro Moro, Fruta Del Norte, and Mercedes, amongst others, have been down sequentially.

2: Funding Thesis

As a result of I disagree with the administration’s acquisition strategy over the previous few years, I’ve at all times been reluctant to completely put money into Sandstorm. Though enlargement appears nice for the corporate, the stockholders haven’t benefited a lot from it.

However, the inventory is now fairly enticing, nicely under $4.6, and I’m accumulating. I imagine the gold trade is about to show bullish.

The value of an oz of gold is at present between $1,950 and $2,020, enabling SAND to generate good free money stream, however the market remains to be reluctant to help this sector. Nonetheless, issues are bettering. The market is ready for the FED to make it apparent that rates of interest will pause early in 2024.

In case you’re a brand new investor on the lookout for alternatives within the streaming and royalty area, beginning a medium-term SAND place proper now could be affordable. The inventory is forming a very good help round $4.50, and it’s time to accumulate. Nonetheless, I strongly suggest buying and selling LIFO for about 60% of your complete place.

3: Inventory Efficiency: Nonetheless lagging its friends.

Sandstorm Gold remains to be lagging behind its friends and is down 13% on a one-year foundation. The market seems unconvinced by SAND’s enlargement technique and is ready for a elementary turnaround, which isn’t taking place now.

Sandstorm Gold: Monetary Outcomes historical past Snapshot ending 3Q23: The Uncooked Numbers

Notice: All numbers are in US {dollars}.

Click on to enlarge

Supply: Company report evaluation by Enjoyable Buying and selling (knowledge can be found since 2015 just for subscribers).

* $10.0 million in contractual earnings from stream, royalty, and different pursuits resulting from a contractual cost referring to the Mt. Hamilton royalty through the three months ended March 31, 2023.

Half I: Steadiness Sheet Particulars

1: Quarterly Revenues and Traits: Complete Revenues of $41.324 Million in 3Q23

For the three months that ended on September 30, 2023, Sandstorm Gold reported revenues of $41.32 million, up from $38.95 million throughout the identical interval in 2022. The corporate barely missed analysts’ expectations.

Compared to the earnings of $31.88 million, or $0.13 per diluted share, in the identical quarter final 12 months, the web loss in 3Q23 was $0.24 million, or $0.00 per diluted share.

As a result of lower in money prices per ounce to $220, the third quarter’s money working income got here in at $1,699 per ounce. Glorious enchancment this quarter in distinction to 3Q22’s $323 per ounce.

2: Free Money Circulate was $29.20 Million in 3Q23

Notice: Working money stream much less capital expenditures is named generic free money stream.

Within the third quarter of 2023, free money stream was $29.20 million; over the earlier 12 months, it was $33.71 million.

The quarterly dividend stays unchanged at $0.015 per share, or a dividend yield of 1.28%.

3: Complete shares excellent and diluted are nonetheless excessive.

4: The money place was $13.79 million with a debt of $456 million on the finish of September 2023.

The entire money contains the money and money equal and short-term investments of $13.79 million, whereas financial institution debt is now $456 million.

The corporate expects to repay the debt by 2027 or 2028. Nonetheless, SAND wrote within the press launch:

De-levering the Firm’s steadiness sheet stays a high precedence for Sandstorm’s administration. To expedite this reimbursement schedule, the Firm is present process a course of to monetize between $40—$100 million of non-core, non-cash flowing property by the tip of 2024, with proceeds from any gross sales directed to debt reimbursement. Accordingly, in October 2023, Sandstorm reached an settlement to promote the El Pilar and Blackwater Royalties for complete consideration of $25.0 million comprised of money and customary shares.

Moreover, CEO Nolan Watson mentioned within the convention name:

It’s our objective to get financial institution debt under $350 million by the tip of subsequent 12 months, the mix of money stream from operations, in addition to continued money from non-core asset gross sales. We’re going to be engaged on non-core asset gross sales all through the rest of subsequent 12 months.

Half 2: Gold Manufacturing Particulars and 2023 Steerage

In comparison with the identical quarter a 12 months in the past, the full price of gross sales decreased to $20.9 million from $25.3 million. The online revenue elevated to $20.3 million, a 49.6% annual enhance. Compared to the identical quarter final 12 months, when the gross margin was 35%, it was 49.4% within the third quarter.

The third-quarter manufacturing per mine is proven under:

2023 Steerage

Sandstorm Gold nonetheless expects 90K to 100K GEOs in 2023.

Technical Evaluation and Commentary

Notice: The graph is adjusted for dividends.

SAND kinds a symmetrical wedge/triangle sample, with resistance at $4.84 and help at $4.50.

The Symmetrical Triangle Chart Pattern signifies an ongoing interval of worth consolidation earlier than the costs break. A bullish symmetrical triangle is a bullish continuation chart sample, the motion previous the triangle’s formation have to be bullish. However, A bearish symmetrical triangle is a bearish continuation chart sample, the motion previous the triangle’s formation have to be bearish. The symmetrical triangle sample is totally different from a descending or ascending triangle sample as each triangles’ decrease and higher pattern traces slope in the direction of the centre level.

Sustaining a core long-term place and utilizing roughly 60% to commerce LIFO as you wait in your core place to achieve a better goal worth is the final technique that I steadily suggest.

Promoting SAND in a resistance vary of $4.80 to $5, with a better stage of resistance at $5.28, is the buying and selling technique. However, it is sensible to purchase and accumulate between $4.55 and $4.35, with a potential decrease help at $4.25.

Watch gold like a hawk.

Warning: The TA chart have to be up to date steadily to be related. The chart above has a potential validity of a few week. Keep in mind, the TA chart is a software solely that will help you undertake the correct technique. It isn’t a approach to foresee the longer term. Nobody and nothing can.