Sandstorm Gold: FCF Enables Investments and Buybacks

This post is excerpted from a letter by MOI Global instructor Jim Roumell, partner and portfolio manager of Roumell Asset Management, based in Chevy Chase, Maryland.

Sandstorm Gold reported very strong fourth quarter results. SAND sold 14,182 gold equivalent ounces in the fourth quarter, an increase of 18% from the prior year. Revenue for the quarter came in at $17.5 million, an increase of 14% from the prior year. Cash flows from operating activities (excluding non-cash working capital) for the quarter came in at $10.9 million, an increase of 14% from the prior year. Of the gold equivalent ounces sold by SAND during the fourth quarter of 2018, approximately 32% were attributable to mines located in Canada, 25% from the rest of North America and 43% from South America and other countries.

In addition to the very strong fourth quarter, SAND delivered record full year 2018 gold equivalent ounces sold and revenue. For 2018, SAND’s average cash cost per gold equivalent ounce was only $278 per ounce. This resulted in impressive cash operating margins of $991 per ounce. The combination of the increased sales and strong operating margins resulted in full year operating cash flow of $48.1 million, an increase of 9.3% from 2017.

SAND’s strong cash flow generation has provided ample liquidity to make investments and repurchase shares when the company deems the stock to be undervalued. During the fourth quarter, SAND’s Board of Directors approved the purchase of up to 18.3 million of its common shares by the end of 2019, subject to Toronto Stock Exchange approval. This 18.3 million share repurchase approximates 10% of the total shares outstanding.

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