Sandstorm Metals & Energy Ltd STTYF

SND's Potential return on Entree Gold

[gjervis]

Since Nolan said that a 55M investment in Entree Gold could yield 1.2Billion in return, i posed the following question to Denver.

 

Hi Denver,

 

Since we can’t discuss SND in SSL CC, what’s the risk/reward investment for SND in entrée gold? For SSL its 55M risk for 1.2Billion reward or more. Just curious what SND’s return is.

 

Regards,

Graham Jervis, M.Sc., P.E.
 

Answer

 

Hi Graham,

 

For Sandstorm Metals & Energy it is a $5 million in shares for cash flow somewhere around $120 million - $130 million.

 

 

Have a great afternoon.

[elmothefearless]

I did the calc's and came up with the exact same number, but he is looking only at HNE I believe, if you include Heruga (not in the mine plan), it is up to $240 million, and to be totally honest, these deposits are NOT defined, and our return is probably over $240 million on an undiscounted NPV basis.   I owned shares in LCC (Lumina) at $6.00 when they had an 8 billion lb resource, it is

[elmothefearless]

I remember 3-4 months ago when we were over $0.60 a bunch of people saying if this ever retraces to under $0.40 they were going to load up.   Well, I bought more!     The ETG deal was vastly different for us, compared to SSL.  We issued 10,000,000 shares.  A little bit of dilution.  Before the deal we were trading at $0.48 or so, today we are at $0.39, that is a 20

[House.of.steve]

I said we'd be at $0.39 and here we are!  I sold half of my position at $0.48 and will buy it back at $0.35 and I will continue to add if the stock price is below $0.35.  It looks like, from here to mid summer, we will be re-testing the past low of $0.245.    

[elmothefearless]

No comment about the $0.35 call in the near term but I think you are dead wrong about re-testing $0.245.  We'll have cash flow of $15 - $17 million at that point and $0.245 values us at $80 million.  Considering most streamers trade between 18 and 22x cash flows, trading at 4x cash flows seems.. unlikely.

[House.of.steve]

Emo, we just hit $0.36...

[House.of.steve]

Emo, we just hit $0.35...

[elmothefearless]

lol ya I saw

[stmatt]

Good times... yeah I started buying at .45, double down here and double down again if we hit 0.25.  Same for SSL at 9, 6... maybe 3?

[Kewl2]

Elmo -- would appreciate it if you could elaborate on how you reached this forecast -- "We'll have cash flow of $15 - $17 million at that point"  -- I believe you are referring to mid-year 2013 ...........    thanks  

[elmothefearless]

SND management estimates 21 million lb's of copper production, we have a 24.5% interest, call it 25%, that is ~5 million lb's net to us, copper is at $3.60, I think we get $3.60 - $0.80 = $2.80 which is about $14 million.   TBD has drilled I believe about 20 wells and is due to drill 30 more.  20 wells x $2.00 net back per mcf x 450 mcf x 350 operating days x 35% interest = $2

[elmothefearless]

well ok if im going to post that i have to follow up with valuations.   ssl was previously valued as high as $1.2 billion.  they earned $37.5 million cash flow, thats under $40 million, but call it $40 million.  that is 30x cash flow.   fnv trades at a similarly ridiculous multiple, they are earning about $250-$275 million and are worth over $7 billion.  to be fair ,they

[maypeters]

Thank you Elmo for all your contributions.   >>> i'm going to donate all my money to charity :]   That is exactly why Nolan has said he wants to be a one stop shop and hence has a charity in place where you can donate your money seamlessly :-)

[edflanders]

Thanks for your posts in the SND board, and in particular your mention of Alaris Royalty. I hadn't heard of them, but like what I'm seeing. (I'm a fan of the royalty/streaming business model, but less of a fan of commodities).  

[edflanders]

durrr.. that was supposed to be a private message. Sorry.

[cashistrash]

I wish you were right but it is crystal clear NW did NOT get the nessage as he DID the Entree deal AFTER throwing away money on Terrex, Novadex and Royal Coal. You are right that the market's confidence in his judgement is severely shaken but I see no evidence to suggest he learned much after the three deals referenced above.     

[cashistrash]

Nice post Elmo. As much as I admire NW he has made some serious screw-ups. It is refreshing to see some others acknowledge the damage bad deals do to our investment. I will wait to add to SME until I see positive developments. Sure I'll pay a higher share price but as you say there is a real chance this goes bust. One more bad deal probaly kills this baby.  I have used the recent selloff