Can't believe so many people are still fixated on https://seekingalpha.com/article/1204881-sandstorm-gold-s-ceo-discusses-q4-2012-results-earnings-call-transcript
Above is a transcript from the latest converence call. Nolan Watson clarifies that the deal with Entree Gold was a one off as the economics of the deal were in their opinion too good to pass up. They realize there was country risk but the investment was small relative to SSLs market cap and the rewards could be enormous. He clearly articulates that this type of stream is not a change in direction. Here is the question by Don MacLean and followed by Nolan's answer
Don MacLean - Paradigm Capital
Good morning guys. Maybe just if you could give us a bit more color on the risk side of Oyu Tolgoi and the Mongolian risk. Nolan, you had mentioned 10% versus 20%. In many ways, this is reminiscent of, I guess, when Franco acquired there, original royalties on gold strike for, get things compared where they turned out to be, but it was quite a while before they delivered.
This is a shift in strategy for you guys, it looks like for a lot of us. So maybe touch on the risk side, but also the context of your strategy you’ve talked about with closer term production of which the deviation you are going to make in the future?
Nolan Watson - President and CEO
Yeah. That’s a good point. When we were actually deciding at the board level whether or not we wanted to do Entrée transaction to generally characterize the decision that we made and the issues that we had, we knew that anytime you can try to tie down potentially billion dollars of potential cash flow for a very, very small upfront payment that it was worth doing that especially if we are building the company for the long-term, which we are.
At the same time, we were concerned though that investors might see this transaction and think, they are going to start doing a whole bunch of long data transactions and they are changing their philosophy and changing their ideal target deal. And so I just want to be very clear with everyone nothing has changed. This was a one-off that was just too good to pass up.
We don’t have any deals in our pipeline and that literally mean us to maybe 60 things we are looking at to 100 things, zero of them are like this. And so we felt that this was an important thing to do for shareholders for the long-term. But it will not be something that shareholders see us do regularly. And we certainly won’t be doing it again anytime soon.
With respect to the risk that we have tried to mitigate in our contract, we believe that the risk here is not that the asset gets appropriated. I don’t -- even the Mongolian governments is not asking for that. All they are asking for is the ability to vend into various entities, joint ventures. And what we are trying to illustrate to our shareholders is that even if that happens, this is still a very, very good deal for us. And we have structured our contracts that automatically adjust for that.
So we’ve never overpaid and then lost something. And so we view this as being able to get all of the upside without having many of the downside risks associated with this country risk. And it’s actually interesting, we -- despite the fact that we aren’t taking on the same country risk as the company is directly operating in Mongolia, we do recognize that some investors will have a tough time rapping their heads around the fact that just the word Mongolia will scare them off, even though we are not taking a Mongolian risk.
So at the same time, we felt that it was important to not put more than say 4% or 5% of our company in one country that would give any one investor cause for concerns. So, just to be clear, we haven’t had a shift in our approach. We are looking for near-term cash flow things in the vast majority of the deals in our pipeline right now. Our traditional normal streams was closer term cash flow.