Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canadian gold streaming firm Sandstorm Gold (TSE:SSL) gained close to 7% on its share price Tuesday after releasing its 2013 results which included record sales.
Despite the headwinds in the precious metals mining sector last year, Sandstorm reached record revenue of $59.8 million.
Sandstorm operates through purchase agreements with advanced stage development projects or operating mines. The company offers upfront payments in return for the right to purchase a percentage of the mine’s product at a fixed price per ounce.
Through its nine streaming agreements in Latin America, South Africa and across North America, Sandstorm purchased gold at an average of $420 per ounce last year. The company also has 27 royalty agreements.
“Amidst a challenging gold price environment in 2013, our streaming partners demonstrated the economic strength of their mining operations as the average all-in cost of the mines underlying our four key streams was close to $1,000 per ounce by the end of the year,” CEO Nolan Watson commented in a statement.
In a conference call with investors Tuesday, Watson said 2013 was “perhaps the most transformative year that Sandstorm has seen.”
Last year the firm’s attributable gold production totalled more than 30,000 gold equivalent ounces; they expect this figure to increase by more than 50% over the next two years, CEO Nolan Watson said in the 2013 report.
The company did however report a net loss of $74.6 million compared with net income of $21.9 million in 2012.
A big chunk of 2013’s loss comes from a non-cash impairment charge of $52.2 million in the fourth quarter related to Colossus’ Serra Pelada mine.
Reflecting on gold’s dismal year, Watson wrote:
“I believe that we are going to see the price of gold move higher over the next number of years. Gold is money and I expect that it will outperform the world’s major fiat currencies as a result of the indebtedness of government entities around the world.”
