The first quarter results for Sandstorm Gold are in and the focus for analysts is on the agreement to acquire Mariana Resources.
In a May 8 announcement, Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT) released its first quarter results with "record attributable gold equivalent ounces sold of 15,558," which is up from 11,381 ounces sold in Q1/16. Sandstorm also acquired 22 royalties for $1.9 million during the first quarter, which, according to the company, "adds exploration potential in stable jurisdictions while increasing the optionality with the Company's stream and royalty portfolio." Sandstorm also highlighted the April 26 agreement to acquire all the "issued and ordinary share capital of Mariana Resources Ltd. (MARL:LSE)."
Sandstorm President and CEO Nolan Watson stated that "the record production numbers and strong operating cash flow helped grow our cash balance to more than $32 million by quarter-end, enabling us to add a number of new streams and royalties to the portfolio and agree to terms on the proposed combination with Mariana announced in late April." Watson also stated that he believes the Mariana transaction "will transform Sandstorm into a leading mid-tier streaming and royalty company."
Andrew Kaip of BMO Capital Markets wrote in a May 8 report that "guidance for 2017 was maintained, and Q1/17 gold eq. deliveries were pre-announced. Looking ahead, we expect investors will focus on the recently announced Mariana Resources acquisition and that this will drive investor sentiment regarding SAND for the foreseeable future."
Kaip points out that Sandstorm "has embarked upon an ambitious plan to build a core gold stream on the Hot Maden project through the acquisition of Mariana Resources. We see the transaction as accretive, but recognize it will take time for investors to understand the opportunity given the uncertain time frame to realize the opportunity."
In a May 9 report CIBC analyst Cosmos Chiu rated Sandstorm as an "Outperformer," with a target price of $6.00. The shares are currently trading around $4.85.
Chiu stated that "Q1/17 attributable production has provided Sandstorm Gold with a good start towards meeting its 2017 attributable production guidance of 45,000-55,000 GEO" and that "management indicated it expects to be debt-free after close of the Mariana transaction."
Chiu noted that "the Mariana transaction continues to be a focus, with the preproduction Hot Maden project accounting for ~33% of our NAV for the company. We reiterate our initial view of the transaction: success depends on Sandstorm Gold's ability to convert its equity participation in the JV to a gold stream."
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Additional disclosures about the sources cited in this article
Disclosures from BMO Capital Markets, Sandstorm Gold, May 8, 2017
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures:
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to Sandstorm Gold within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Sandstorm Gold within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to Sandstorm Gold within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Sandstorm Gold within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Sandstorm Gold.
Disclosure 6A: Sandstorm Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 6C: Sandstorm Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Sandstorm Gold.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Sandstorm Gold.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of Sandstorm Gold.
Disclosures from CIBC, Sandstorm Gold, May 9, 2017
Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.
Important Disclosure Footnotes for Sandstorm Gold Ltd. (SSL):
Sandstorm Gold Ltd. is a client for which a CIBC World Markets company has performed investment banking services in the past 12 months.
CIBC World Markets Inc. has managed or co-managed a public offering of securities for Sandstorm Gold Ltd. in the past 12 months.
CIBC World Markets Inc. has received compensation for investment banking services from Sandstorm Gold Ltd. in the past 12 months.
CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Sandstorm Gold Ltd. in the next 3 months.
