A Colossal Stream for Sandstorm Gold

Mere hours after I drafted this article highlighting Sandstorm Gold (NYSE: SAND  ) as one of the five juiciest picks in the gold patch, this growth-hungry gold streamer delighted investors with a new addition to its precious portfolio.

With production from Colossus Minerals' (ticker "COLUF" on the over-the-counter exchange) Serra Pelada mine in Brazil set to commence next year, Sandstorm's latest stream is remarkable for the brief time frame separating its $75 million upfront payment from the anticipated flow of revenue.

It is remarkable, also, as a first foray for Sandstorm into platinum group metals in addition to gold. Sandstorm will enjoy 1.5% of all gold produced at Serra Pelada for a purchase price of $4oo per ounce, while scooping up 35% of the mine's platinum output at a very attractive price of just $200 per ounce. Meanwhile, 35% of palladium production will divert to Sandstorm's micro-cap sister company.

Under the very capable leadership of former Silver Wheaton (NYSE: SLW  ) CFO Nolan Watson, Sandstorm Gold is steadily accumulating a very attractive portfolio of stream agreements featuring Luna Gold's soon-to-expand Aurizona mine (also in Brazil), Brigus Gold's (NYSE: BRD  ) improving Black Fox mine, and Silvercrest Mines' (NYSE: SVLC  ) Santa Elena mine in Mexico. Significantly -- because this deal with Colossus required only half of the capital raised in Sandstorm's recent $150 million financing -- the company remains in position to pursue yet another strategic acquisition in the near term.

Perhaps what I like most about Sandstorm's stream with Colossus Minerals is precisely the sort of upside potential that guided me into a long-term share position in original metal streamer Silver Wheaton prior to that stock's truly impressive run. I refer, specifically, to the exceptional likelihood that continued exploration by Colossus will grow the scale of known mineralization at Serra Pelada, and thus deliver organic growth right to Sandstorm's doorstep. Major miner Vale (NYSE: VALE  ) conducted much of the initial exploration work on the property, and Colossus has continued to hit precious pay dirt with an effective exploration campaign that continues alongside mine construction.

Just recently, in fact, Colossus successfully "closed the gap" between the deposit's Central Mineralized Zone and the nearby GT Zone with enticing high-grade intercepts including a 3.3-meter interval grading 54.48 grams per ton gold, 0.69 g/t platinum, and 5.42 g/t palladium. With a hat-tip to precious metals analyst Chris Marchese, who blogs at Motley Fool CAPS under the username speedybure, I am a delighted new shareholder of Colossus Minerals. As Serra Pelada moves toward production to commence next year, I look forward to associated gains in the shares of both Colossus Minerals and Sandstorm Gold.

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Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns no shares in the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 22, 2012, at 1:23 AM, skypilot2005 wrote:

    F. Y. I.:

    http://sandstormmetalsandenergy.com/home/

    http://sandstormmetalsandenergy.com/news/release/index.php?c...

    9/19/12

    Sandstorm Metals & Energy Ltd. (“Sandstorm Metals” or the “Company”) (TSX-V: SND) is pleased to announce that it has entered into a palladium purchase agreement with Colossus Minerals Inc. (“Colossus”) (TSX: CSI), via a back-to-back agreement with Sandstorm Gold Ltd. (“Sandstorm Gold”), to purchase an amount of palladium from the Serra Pelada Mine (“Serra Pelada”) located in Para, Brazil.

    Sandstorm Metals has agreed to purchase an amount equal to 35% of the palladium produced from Serra Pelada (the “Palladium Purchase Agreement”). Pursuant to this back-to-back agreement, Sandstorm Metals will pay an upfront cash deposit of US$15 million (the “Upfront Deposit”) to Sandstorm Gold in cash or shares, within one year’s time. Sandstorm Metals will make ongoing per ounce payments equal to the lesser of US$100 per ounce of palladium and the prevailing market price of palladium.

    “Serra Pelada is a fantastic project run by a first-class management team”, said President & CEO Nolan Watson. “We expect Serra Pelada to be producing in the near-term and the Palladium Stream will generate consistent cash flow to Sandstorm.”

    Sky

  • Report this Comment On September 22, 2012, at 1:32 AM, skypilot2005 wrote:

    http://www.marketwire.com/press-release/sandstorm-metals-ene...

    September 21, 2012 07:00 ET

    Sandstorm Metals & Energy Announces Restructuring Initiatives at Novadx

    "The proposed restructuring of Novadx puts Sandstorm in an excellent position to profit from our invested capital", said Sandstorm President and CEO Nolan Watson. "We are confident that through the recapitalization and adjustments to the management team, Novadx has the opportunity to achieve long-term success."

    As part of the restructuring initiative, Novadx intends to change its name to Blackpaw Coal Corp.

    Sky

  • Report this Comment On September 23, 2012, at 10:25 AM, speedybure wrote:

    Thanks for the Shoutout Sinch!

  • Report this Comment On September 24, 2012, at 1:32 AM, clbjblk wrote:

    I am glad to see that you have caught wind of this company, I wrote to you a while back when they where still just on the ca exchange and the otc and let you know they would be on the AMEX (NYSE) before the end of the year ,made me feel good that my due diligence paid off when the Fools got involved. Nolan and his whole 15 team players have a chemistry that is second to none and they do not waver from it. In my talks with them I was amazed at how much they expect the energy and metals to grow and that the gold was a great eye catcher, so of coarse I played them both and will continue to add, I could say a lot more but the key in my mind was the integrity ,honesty, professionalism, they do the due diligence like no other and they do not burn bridges,my word about them is management management management, there will be dividends in two years or less and I am really hedging a lot on them especially there small end will quietly grow in the states and they will clean up and cherry pick after the Chinese overspend on there follow the leader buying spree which should push the JR ETF SECTOR up for a year and then when the dreams do not come true for the ASIA PLAYERS , SANDSTORM will build a big castle and the nat gas end will finally start getting into the game which politics have kept them out of for so long. There is still a great friendship with SLV so the budget we see on the books right now looks great but they have a real relationship with others they have dealt with before. They truly are a 5 star outfit and I can not believe they stayed under the big boy radar so far, that is gone what a great chess players move. This is a Fool company for keeps, GREAT REPORTING!

  • Report this Comment On September 24, 2012, at 1:56 AM, ESP09 wrote:

    Hey Christoper,

    I haven't heard much from you about Brigus Gold in the past month or so and wanted to know if you could shed some of your recent thoughts about the company. Because of your insights over the past several months, I have done my research on the company, been impressed with the prospects, and acquired significant holdings in the company.

    I noticed some firms have downgraded the company to "Hold" recently. Any idea why they would do this? Their recent news about converting 350K ounces to indicated resources at 147/contact and a new gold discovery at Grey Fox South Zone is fantastic news.

    The stock has done well over the past month (25%), but trading seems to be very erratic still -- for example, last Fri the shares went from 1.07-1.09-.1.01 by day end (with someone shedding 550K shares at the last moment). I am in for the long term, but am wondering if you had any thoughts about this? How do you see this stock faring against some of your other favorite mining companies over the next year?

    Thanks for everything,

    Eric

  • Report this Comment On September 24, 2012, at 2:47 PM, hdotmom wrote:

    First, as always thanks for all you do! :) Don't know why I noticed but just thought you should read your disclosure on this one. I know you haven't given up on SLW or BRG and have just gotten into SAND. But others may not.

    Rose

  • Report this Comment On September 24, 2012, at 2:49 PM, hdotmom wrote:

    That is BRD. :O

  • Report this Comment On September 24, 2012, at 9:54 PM, skypilot2005 wrote:

    http://finance.yahoo.com/news/silver-outgained-other-top-com...

    9/21/12

    Silver Has Outgained All Other Top Commodities Over the Past Decade

    " Silver stocks have been on a tremendous run in recent weeks on the announcement of stimulus measures from central banks across the globe. Both the Global X Silver Miners ETF (SIL) and the iShares Silver Trust (SLV) have gained nearly 25 percent in the last month, more than 10 times the gain of the Dow Jones Industrial Average over the same period. Five Star Equities examines the outlook for companies in the Silver Industry and provides equity research on First Majestic Silver Corp. ( NYSE : AG ) and the iShares Silver Trust ETF ( NYSE : SLV "

    "Silver have outgained all other top commodities over the past decade. Silver prices over the last ten years have gained 572 percent compared to gold's gain of 428 percent according to a league table compiled by Lloyds TSB Private Banking."

    Sky

  • Report this Comment On September 28, 2012, at 6:10 AM, skypilot2005 wrote:

    9/27/12

    “SAN FRANCISCO (MarketWatch) -- Gold futures on Thursday ended at seven-month high, rebounding strongly from dips earlier in the week and as gold prices in euros and swiss francs hit a record.

    Gold for December delivery (US:gcz2) rose $26.90, or 1.5%, to settle at $1,780.50 an ounce on the Comex division of the New York Mercantile Exchange. That was gold's highest settlement since late February.”

    Sky

  • Report this Comment On September 30, 2012, at 4:34 PM, XMFSinchiruna wrote:

    Quite right, hdotmom... Thanks for pointing that out! I do own shares of every stock mentioned in the article, and I was remiss to overlook the disclosure in this rare instance. I will send the change through, and appreciate the heads-up.

  • Report this Comment On October 05, 2012, at 4:39 PM, Matt1344 wrote:

    Nice write up Christopher. I bought my first 3 lots of Colossus in early 2009, $1.09 - $1.69 and have added 6 more lots along the way, two at prices higher than today. It's the third largest holding in my portfolio behind GORO (#1) and CEF (#2).

    I also started buying Sandstorm Gold(#8) in July/August of 2009 at $1.97 & $2.07 and have added 3 more lots in the $9+ range.

    I like both companies, along with Argonaugt,(#4) First Majestic(#5), Pretium(#6), SilverCrest(#11) and a number of others that occupy a place in my holdings :-)

    God bless, Ken

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