Sandstorm Gold CEO Nolan Watson spoke with the Investing News Network at the Sprott Natural Resource Symposium in Vancouver in late July to talk royalties and the gold price.
Speaking with the Investing News Network at the Sprott Natural Resource Symposium, CEO of Sandstorm Gold (TSX:SSL) Nolan Watson said the gold price was looking bullish to him despite global headlines.
He said that given the trade war and a hike in exchange rates, he would have expected the gold price to be between US$900 and US$1,000 an ounce.
“We’re sitting here, over US$1,200 an ounce despite the fact that those two things are happening, which to me is a very bullish sign,” he said.
“I’m actually pretty excited because those two things, both of them are temporary. I don’t think either of them are sustainable for more than a year or two. And I think the price of gold’s going to shine a couple of years from now.”
Watson has plenty to be excited about with his company’s portfolio of 188 gold royalties around the world, which he told INN was a business model that eliminated risk for investors.
“We get to diversify risk associated with types of deposits and types of companies and counter-parties, and so that diversification is incredible. It’s like investing in 188 different companies, but all in one.”
When asked what Sandstorm looked at in a project to partner with for royalties, he said that Sandstorm looked for projects with exploration upside atop the traditional characteristics of a safe investment.
“What we really want to do is find situations for investors where we have paid for a certain mine life, and then the mine life would be doubled, tripled, quadrupled, maybe ten times more than what we actually paid for. And all of that exploration upside comes for free.”
Watch the interview in the video above, or scroll down for the full transcript below.
INN: To start off, can you tell me a little bit about yourself and Sandstorm Gold?
NW: I’m the President CEO of the company called Sandstorm, as you mentioned. And we’re a gold royalty company, it’s a very simple business model. What it means is, we get a percentage of companies’ production and a percentage of the revenue and we do that all over the world. So we have a 188 royalties around the world, so we’re getting checks from all corners of the Earth. And we redeploy that to continue to grow, and buy new royalties.
INN: And can you explain to me why investing in royalties would be a better decision than say, investing in just mining?
NW: I could talk about that for hours, I won’t. But the key thesis is it eliminates a number of risks that are typically inherent in mining. There’s jurisdiction risk, political risk, we get to diversify. We’re not focused on one or two or three mines, we’ve got 188 assets around the world. We get to diversify risk associated with types of deposits and types of companies and counter-parties, and so that diversification is incredible. It’s like investing in 188 different companies, but all in one and we’re specifically selecting those. You also get lower risk associated with cost overruns, low risk associated with inflation, and a whole host of other things.
INN: If you’ve acquired 188, what’s the future of Sandstorm? Is it just to keep acquiring more?
NW: Well, at some point in time once you’ve built a company and we have done that, we’re very proud of it. You have to start returning the capital to shareholders and something that we’re excited to be doing. Right now, we’re doing in the form of share buyback, so we’re continuing to grow Sandstorm. We are a growth company, continuing to add streams and royalties, and we’re buying back shares at the exact same time. And so the goal is add shareholder value. So if we can shrink our share float, and increase our royalties every year, I think that’ll be a good model.
INN: Could you just run me through what Sandstorm looks for in a royalty. What do you look for in a project?
NW: So one of the areas where we differentiate ourselves significantly is that we’re very, very focused on assets with significant exploration upside. So, we’re obviously looking for the clear obvious things like good counter-parties, reasonable political jurisdictions, and low risk on the technical execution, and good grade deposits, and all those things. But what we really want to do or find situations for investors where we have paid for a certain mine life, and then the mine life would be doubled, tripled, quadrupled, maybe ten times more than what we actually paid for. And all of that exploration upside comes for free, and that’s we really where we get the high returns for investors.
INN: So with 188 and as Director and CEO, I’ll just assume that you’ve got intimate knowledge of every single one of them. Can you tell me, do you have a favorite? Is there one that has the best story or the most potential?
NW: Well there’s lots of different ones that we like. We have a number of large ones with lots of exploration upside. We did a silver stream on an asset called Cerro Moro, its got 2000 sq.km of area of interest for future exploration upside as an asset that Yamana (TSX:YRI) that has just built and it’s up and running. We’ve got one of the world’s best undeveloped assets and we have a 30 percent profits interest of–and that’s an asset called Hot Maden, it’s in Turkey, it’s operated by Lidya Madencilik which is a multi-billion-dollar national conglomerate. It’s basically a 40-meter-wide ore body that has about 13 grams of gold equivalent the entire way and it comes right at the surface, it’s incredible. But some of my favorites too are some of the times where we pay very little for a small royalty and it becomes worth a lot. We purchase royalties for $100,000, $200,000 and end up being, worth several million dollars. And so, some of those are my favorites too.
INN: Fantastic. And so just talking about prices, in the last few days, gold’s been continuing down and I believe today it’s at $1,225. Can you tell me a little bit about what you make of that?
NW: I think right now, if you would actually go back a year or two ago, and you are talking to me and you would tell me that we would be in a situation where there would be an active international trade war started by the US which creates a strong US dollar and hurts of gold. The Fed would have been able to hike short term exchange rates 2 percent and we’re on a path to continuing both of the trajectory, it’ll be 3, 3.5 percent by next year. And if you would’ve told me just those two things alone and ask me to guess the price of gold, I would have said something like $900 or $1,000. We’re sitting here, over $1,200 an ounce despite the fact that those two things are happening, which to me is a very bullish sign. I’m actually pretty excited because those two things, both of them are temporary. I don’t think either of them are sustainable for more than a year or two. And I think the price of gold’s going to shine a couple of years from now.
INN: So, is it the time to buy now or wait?
NW: Well that’s certainly what we’re doing. At Sandstorm, we’re continuing to acquire royalties. We’re getting incredible deals right now because companies are really desperate for capital, it’s hard to raise money if you’re a gold mining company right now. And so, we’re getting incredible value for our shareholders, so it’s fantastic. At the same time, our share price is we’ve been able to use this period of time to buyback our shares, so it’s also good for us for that period of time. So despite the fact that the rest of the industry is coming off, our share price hasn’t been and so we’re continuing to buy back shares and grow the company.
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Securities Disclosure: I, Scott Tibballs hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.