Gold, Royalties and Brazilian Credit Cards
by Travis Johnson, Stock Gumshoe | November 2, 2012 11:23 pm
A look at new and old royalty companies and a checkup on some old ideas for the Irregulars
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Source URL: https://www.stockgumshoe.com/2012/11/gold-royalties-and-brazilian-credit-cards/
A salty and critical blog about Aberdeen.
http://incakolanews.blogspot.com/2012/11/more-on-why-you-should-never-invest-in.html
and Bharti in particular.
http://incakolanews.blogspot.com/2012/10/sulliden-sueto-in-which-ikn-explains.html
Thanks — and yep, companies don’t usually trade at a fraction of book value without some pretty compelling reasons. I haven’t looked into their stuff in that detail yet, but those notes are pretty damning — a company this size can get away with a lot of shenanigans before folks take notice.
As usual a great streaming analysis, thanks.
Have you looked at Eurasian Minerals (EMXX)? It’s been touted lately by the Wall Street Daily guys as a European streamer to watch.
Hadn’t noticed that Eurasian had gotten a NY listing, to be honest — they’ve been touted as a “prospect generator” in the past and were teased back in 2008, if memory serves, on some kind of gold discovery (Haiti, I think?). Maybe worth another look, they’re still small and still an exploration company but do have a wide portfolio of early stage exploration projects and joint ventures that could generate income or royalties, and their recent acquisition of Bullion Monarch means they’ll have some royalty cash flow. Don’t know if I like the valuation, for that I’d need to do a lot more work, but it’s an interesting company.
Too late to buy Sandstorm?
Well, it’s better now than it was a few days ago — Jim Cramer gave them a lot of attention about six weeks ago and just took it back, calling it a “sell” in a recent comment, which helped the stock fall a bit further today.
I don’t think it’s too late to buy, and they’re smaller and nimbler than their big competitors — but it’s no longer a shocking bargain compared to those guys (Royal Gold or Franco-Nevada), so you don’t get the advantage of the valuation catching up to boost returns, and Royal Gold, for one, is also growing nicely right now. If you think gold is going to remain well above $1,200 an ounce for the next five years, Sandstorm will be very profitable and grow nicely, with substantial boosts if gold spikes in value. Sandstorm still represents the majority of my exposure to gold in my personal portfolio and is my largest holding, but if I were opening a royalty/streaming position today I might spread it out between SAND and RGLD and look for dips in the gold price to build my holdings. Or, of course, sniffing around for little players who might grow into larger royalty owners over time.
Sandstorm just bought the almost-controlling interest in Premier Royalty from the founding partner Premier Gold, it looks like they’re planning to use them as a junior partner to buy tiny royalties that aren’t worth the time of Nolan Watson and the gang (Premier has jumped up since getting officially formed last month, but is still a tenth the size of Sandstorm Gold). I’m thinking of nibbling at some Premier warrants (NSR.WT in Canada), I think the Sandstorm relationship will be good for Premier’s funding prospects as they grow … but the warrants are only good for another 20 months or so and are pretty pricey right now, in my opinion. The “arrangement warrants”, which look like they might end up being the NSR.WT.A warrants, aren’t trading as far as I can tell. Perhaps they will eventually. This would be extremely speculative and it’s still tough to get a handle on the valuation. Ticker for Premier is now NSR in Toronto.
Here’s the announcement from Premier Gold: http://finance.yahoo.com/news/premier-gold-announces-sale-shares-140000879.html
And from Sandstorm: http://finance.yahoo.com/news/sandstorm-gold-announces-acquisition-common-140000105.html
This ends up being about a $70 million investment from Sandstorm, which gets them some cash-flowing royalties and a “farm team” of little royalties and relationships that can be built. I can’t help but still thinking that Premier’s a little expensive, but, as we’ve seen from Sandstorm’s meteoric growth over a few years, little guys can grow fast if they make good deals and a few of their deals work out very well … and, of course, if gold goes up in price nicely. Should be interesting to keep an eye on them.