Sandstorm and Colossus: A poisoned stream

Colossus Minerals said today they’re basically out of money and Sandstorm Gold/Metals & Energy announced concurrently they’re looking at writing off their $75-million investment in the “troubled” company – NR here. The poisoned Colossus stream was one of the primary reasons I dumped my shares in the Sandstorms back in August 2013 when they were trading above $6/share, which I wrote about here. Sandstorm Gold shares are trading at $4.23 on the TSE, down 7% on the day.

Colossus was attempting to build a gold/platinum/palladium mine in Brazil, and Sandstorm Gold and Metals & Energy had fronted them financing to secure gold and palladium streams, respectively. Sandstorm Gold acquired the stream for $60 million in September 2012 and Metals & Energy acquired the palladium stream for $15 million.

I wrote up Sandstorm Gold in my inaugural World of Mining post. Still like the business model, but the risk/reward profile has become skewed with some of the problematic streams for both companies. Sandstorm Gold shares move with the price of gold, and with precious metals prices under more-or-less relentless pressure, I don’t see upside anytime soon.

I ran into Sandstorm IR man Denver Harris, a stand-up guy, downtown yesterday afternoon. He obviously didn’t mention Colossus, and noted that news of the next streaming deal will be important for the companies. I agree, but don’t think it will move the needle given the “Colossal” overhang. I remain out.

Related reading from prior World of Mining posts:

Rebalancing, Part 1

Rebalancing, Part 2

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