Sandstorm Gold .(SAND) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sandstorm's revenue for Q2 2022 was approximately $36 million, representing a 36% increase compared to Q2 2021, driven by a 7% increase in attributable gold equivalent ounces sold and a 4% increase in the average selling price of gold [15][18] - Net income for the quarter was nearly $40 million, higher than the same period in 2021, primarily due to increased revenue and a $22.9 million gain from the disposal of royalty assets [18][19] - Cash flows from operating activities totaled $21.9 million, resulting in cash operating margins of $1,593 per attributable ounce [18] Business Line Data and Key Metrics Changes - Revenue comprised $23.8 million from stream assets and $12.2 million from royalty revenue, with new cash-flowing assets like the Mercedes mine and Vatukoula Gold Stream contributing to higher revenue [16] - The average cash cost per attributable ounce remained below $300, indicating high-quality and low-cost assets [17] Market Data and Key Metrics Changes - Nearly 90% of production in Q2 was attributable to operations in the Americas, with significant contributions from Cerro Moro, Chapada, Fruta del Norte, and Vale in South America, and Relief Canyon, Santa Elena, Diavik, Mercedes, and Black Fox in North America [21] Company Strategy and Development Direction - The company aims to have nearly 90% of its revenue coming from precious metals by 2025, with a focus on high-quality assets in the lowest cost quartile [10] - The recent acquisitions of BaseCore and Nomad Royalty are expected to enhance Sandstorm's attractiveness to institutional investors seeking lower-risk exposure to gold [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, anticipating record-breaking financial results due to the addition of new assets [14] - The company is optimistic about the future, expecting cash flow to increase to approximately $170 million to $180 million per year by 2025 [11] Other Important Information - The acquisition of BaseCore Royalty portfolio was successfully closed for $525 million, and the Nomad Royalty acquisition is expected to close shortly [5][6] - The company has surfaced significant shareholder value through the sale of undervalued royalties to Sandbox, contributing to net income this quarter [7] Q&A Session Summary Question: Has there been increased interest from larger investors following the Nomad and BaseCore transactions? - Management noted that there is expected interest from larger investors, which could lead to an increased trading multiple due to the transformational nature of the deals [29] Question: What is the expected breakdown of attributable assets in terms of precious versus base metals in the next five years? - Currently, approximately 20%-25% of cash flow comes from non-precious metals, but by 2025, it is expected to be 90% precious metals exposure [30] Question: How did Blyvoor and Bonikro perform in Q2? - Blyvoor has shown continued success and is expected to reach projected metrics by early next year, while Bonikro is set to ramp up production in 2023 as it completes the next phase of mining [33][34] Question: What are the effects of inflation on margins and CapEx for the silver stream on Antamina and Hod Maden? - The silver stream on Antamina is a small part of the overall royalty and is not significantly impacted, while Hod Maden is expected to remain a low-cost asset, minimizing the effects of inflation on cash flow [39][41] Question: What is the company's focus for the next six to twelve months after closing recent transactions? - The company will balance paying down debt and preparing for future growth opportunities while remaining open to potential deals [45]