Sandstorm Gold: An eventful week and plenty of dry powder

by James Kwantes

Lots of action this week for Sandstorm Gold (SSL), a gold streaming company I wrote about in my first blog post. On Monday, CEO Nolan Watson rang the opening bell as shares of Venture-listed Sandstorm opened on the New York Stock Exchange under the ticker SAND.

Shares had closed at $9.73 the previous Friday in Toronto and closed at $10.24 Monday before charging up to the $10.75 level Tuesday, where they stayed until the Wednesday close. That’s when Sandstorm announced a $75-million bought deal financing that was increased to $130 million the next morning. As the market digested the terms of the financing — units priced at $10, including one share and one-third of a warrant — the stock crashed down to the $9.60 level ($9.67 close today).

It may not have felt like it for shareholders this week, but the financing is great news. Combined with its $50M line of credit and $25M in cash, Sandstorm’s coffers are now bulging with more than $200M in dry powder that management will likely put to good use. (Perspective: By my calculations, the company’s entire market cap was about $200M in the summer of 2010.) The coming weeks could be interesting for news flow.

In my Monday post, I suggested it might be wise for existing shareholders to take some profits after this year’s 75% appreciation in the share price: Existing shareholders who have profited from SSL’s rise may want to take a page from Watson’s book and consider moving some capital over to SND, which is an earlier-stage, riskier play in the same streaming business. Sandstorm Gold shares are trading at 52-week highs, but the stock’s chart shows that pullbacks typically follow price spikes.

Shareholders who did that now have the opportunity to pick up shares at a $1 discount. And I suspect that new shareholders who bought in the $10s and have some patience will also be rewarded.

Below are links to a couple of TV interviews Nolan Watson did this week. I don’t think he’s building the company to flip it, but one detail from the BNN segment that I found quite interesting was that larger competitor Franco-Nevada owns shares of Sandstorm Gold. I also liked his reply to the question about a TSX listing (Take that, Toronto!).
On Fox Business
On BNN

Finally, the gold price went on a run this week after bouncing around between $1,550 and $1,650 since early May. The yellow metal closed at $1,671 US an ounce.

Disclosure: I own shares in Sandstorm Gold and Sandstorm Metals & Energy.

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