Sandstorm Gold (SAND), a royalty company with diversified gold mining royalties from over 250 mining projects worldwide, recently beat top-and-bottom-line expectations and is well-positioned to enjoy ongoing cash flows and promising upside growth. Furthermore, Sandstorm remains a prospective beneficiary of the current economic cycle with multiple expansion opportunities and leveraged exposure to gold prices. The stock is up over 17% year-to-date, with room to run. Investors interested in adding gold exposure to their portfolio might find this an appealing option.
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Sandstorm’s Growing Royalty Stream
Sandstorm Gold is a royalty company that procures gold (plus other metals) royalties agreements from companies possessing advanced-stage mining operations. It acquires these agreements in exchange for providing mining companies access to capital. In return, it receives the right to purchase a percentage of a mine’s production during its lifespan.
The company boasts a portfolio of over 250 streams and royalties, out of which over 40 are generating cash flow while the remainder is still under development, with a vast global operation that spans countries such as Canada, the United States, Ecuador, Brazil, Egypt, South Africa, and Australia.
The company’s key focus is predominantly on gold, accounting for nearly 70%- 80% of its revenue from precious metals. Recently, the company announced the first gold pour at the Greenstone gold mine in Ontario, Canada. This entitles Sandstorm to purchase 2.375% of gold produced at the mine until 120,333 ounces are delivered, after which it will receive 1.583% of gold produced. The ramp-up of gold deliveries from the mine for Sandstorm is expected through the second half of 2024.
Sandstorm’s Recent Financial Results & Outlook
The company recently released financial results for the second quarter of 2024. Revenue of $41.37 million beat analysts’ expectations of $41 million. However, it decreased from $49.8 million in the same period in 2023. This reduction in revenue is linked to a 29% decrease in attributable gold equivalent ounces sold. However, Sandstorm experienced a rise in cash flows from operating activities, which came in at $34.4 million, along with a net income of $10.5 million, an improvement from the $2.7 million recorded in 2023. Earnings per share (EPS) of $0.03 exceed consensus projections of $0.02.
The company repaid $27 million in the second quarter, lowering the outstanding balance on its revolving credit facility to $383 million. The company also returned capital to shareholders, purchasing 457,125 common shares worth $2.5 million and declaring a C$0.02 per share dividend in June 2024.
Following second-quarter results, SAND’s management has issued guidance for FY2024, predicting the production of 75,000 and 85,000 ounces of attributable gold equivalent. This production level is anticipated to increase significantly within the next five years, with the expectation of reaching approximately 125,000 attributable gold equivalent ounces.
What Is the Price Target for SAND Stock?
The stock has been somewhat range-bound over the past few years, with the lion’s share of positive results coming since March, as it climbed over 31%. It trades at the high end of its 52-week price range of $3.96 – $6.07 while demonstrating positive price momentum by trading above its 20-day (5.66) and 50-day (5.57) moving averages. The company’s P/B ratio of 1.2x is reasonably in line with the Gold industry average of 1.9x, suggesting the stock is relatively fairly valued.
Analysts following the company have been bullish on SAND stock. For example, H.C. Wainwright analyst Heiko Ihle recently reiterated a Buy rating on the shares while increasing the price target to $11.50 (from $11.00), noting the company’s solid financial performance and the robust gold price environment. He also commented on the company’s steps to strengthen its balance sheet by actively reducing its debt, contributing to a positive outlook on the stock.
Overall, Sandstorm Gold is rated a Strong Buy based on eight analysts’ recommendations and price targets issued. The average price target for SAND stock is $8.17, representing a potential 39.42% upside from current levels.
Sandstorm in Summary
With its diversified gold mining royalties from over 250 global projects, Sandstorm Gold’s exposure to gold prices positions it as a likely beneficiary of the current economic swing. Despite a slight drop in revenue for Q2 2024, the company has maintained a stable financial footing with a rise in operating cash flow. A diversified collection of gold royalties worldwide, a rising cash flow stream, and a strong balance sheet make SAND a robust option for investors desiring gold exposure.
