'I think there is going to be a lot of consolidation' - Sandstorm Gold on intermediate streamers

NEW YORK (Mar 9)  To get better valuations, Sandstorm Gold (NYSE:SAND) CEO Nolan Watson said the streaming and royalty sector could use consolidation.

Watson spoke to Kitco correspondent Paul Harris at BMO's Global Metals & Mining Conference held in Florida last week.

"I think there is going to be a lot of consolidation not necessarily because of ROIs that are in the market, but I think it's because there has been a proliferation of companies and the valuations of the intermediate size companies...is actually a lot lower than you would traditionally expect," said Watson.

Watson said senior streaming and royalty companies like Franco Nevada, Royal Gold and Wheaton Precious Metals are "...fantastic companies with great portfolios. They trade at 2- or 2.5-times NAV [net asset value], but then you look at the intermediates like Sandstorm Gold, Triple Flag Precious Metals, Nomad Royalty, Maverick Metals. We're closer to that 1- to 1.2-times NAV," said Watson.

"So I think there is an opportunity to bolt those pieces together...and build a company that investors want to pay 2-times NAV. I don't know what's going to happen. I can't predict the future, but I think...there's a business reason for some of the companies to come together."

Asked about his company's top achievement, Watson called out Sandstorm Gold lifting the average duration of mines.

"We're increasing the average life of the mine lives. So if you look at our portfolio this as opposed to last year, we have more annual production but the mine lives are longer because we are buying bigger, stronger, mine life assets as we go," said Watson. "As we grow and our cash flow grows, we are able to buy bigger, chunkier assets."

Watson also talks about converting Sandstorm's Hod Maden interest into a stream. Watson said his company didn't like holding the interest, since Sandstorm is a streaming and royalty company but the unique situation of the projects required the adjustment.

"It really did create a few awkward years, and we are not eager to do that again."

KITCO