Early Birthday Present - Buying Sandstorm... Buying warrants/shares at this level today was a real nice gift. Whether it be the drop in gold to $1600 or the initial reaction to the Entree deal, the bullishness I have for the company remains very strong.
Buying SSL below $10 is a great entry point for several reasons.
#1 - First, ounces delivered to SSL is expected to double to over 60K ounces in 2016 and higher in 2017 WITHOUT any more deals and the Entree deal aside. It's clear to me after listening to the conference call that this deal was really a one time opportunity that they felt was worth the risk. I expect the new couple of deals to be in either Canada/Mexico, Brazi Australia, etc. and I also expect them to be deals that bring in NEAR-TERM cash flow. I also expect the Solitario deal and perhaps even the Magellan deal to be converted to streams which bring in more ounces.
#2 - Sandstorm still has something like $50 million in cash and the $100 million credit facility to do more deals and I fully expect at least 2 more deals in 2013. Like I said I really expect something very near term in Cash flow and perhaps even an already producing asset. (My suggestion for the company is to take a hard look at Claude Resources which operates the currently producing Sebeaa gold mine and has two exploration projects worthy of a look. I also like the Monterde project owned by Kimber Resources (est. production 2015-16) but this is just stream speculation...the deals always tend to surprise me.
#3 - I see a buyout of Premier Royalty likely anytime before 2015-16 (we own 60+ percent). Premier is forecasting 6,900 ounces in 2013 after a new deal they just signed. Buying them out in the future will add immediate cash flow/ounces to Sandstorm. So with an already forecasted ounces of 70K in 2017 (which might be conservative as it is), the possible buyout of Premier and new deals... this number could actually be higher than 80K.
And finally... perhaps the biggest reason why Sandstorm is a buy... the price of gold WILL go higher.
*Besides all the fundamental reasons to own gold (which haven't changed) the major mining companies are cutting back on new projects as costs begin to escalate. THIS IS BULLISH FOR THE PRICE OF GOLD. Demand will rise as central banks continue to buy gold, but even demand stays the same, I don't see much more supply hitting the market because of this reality for the mining companies.
So with a super conservative long term price target for gold of $2,000 an ounce... and a somewhat converservative estimate of 80,000 attributal ounces to Sandstorm in 2017... we are looking at potential revenues of $160 million or $40 million a quarter which would lead to Sandstorm being above $30 a share, which is my long term price target for the stock.
I am long SAND and the '14 and '17 warrants. To see just how far this company has come read this article I wrote on Sandstorm way back in 2012. This will end up being the best call I'll probably ever make - https://caps.fool.com/Blogs/a-sandstorm-is-coming/474992
Best of luck.