Sandstorm Gold: Warning or opportunity?

By Stanley Barton
Seeking Alpha

Investors in Sandstorm Gold, the aggressive gold-streaming company, have been in shock over the precipitous drop in the share price over the past 30 days. In that time period, the price of gold has dropped 6%, but SAND has lost 30% of its value. This is in addition to a 20% plunge from its high of $15 only last fall.

On February 19, 2013, Sandstorm Gold announced its full year 2012 results and conducted a conference call. Shareholders were not soothed, as the stock fell 8% on five times the normal trading volume that day alone. This article is to explain our view on the reasons for the recent weakness in this stock, and if this is an omen of worse things to come or a great buying opportunity.

For those not familiar with Sandstorm Gold, it became a public company in 2010, and it focuses on completing gold purchase agreements with junior gold mining companies that have advanced stage development projects or operating mines. SAND provides alternative cash financing to gold mining companies in search of capital, and in exchange receives the right to purchase a percentage of the gold produced for the life of the mine at a fixed price per ounce. Usually the price is between $350 and $500 an ounce.

Continue reading . . .