Gold Investors Shield Their Eyes From the Sandstorm
Goldageddon 2013 continues to drag the gold equities through a barren desert, where now-forgotten gains have been scorched like unprotected skin.
In one corner of this parched landscape, a foul wind has whipped up the sand, forcing newcomers to the shares of Sandstorm Gold to shield their eyes from a painful blast. In the span of just four months, Sandstorm's stock has been sandblasted to the tune of a 40% decline from its 52-week high to touch as low as $9.14 per share Wednesday morning.
But the last thing you want to do when crossing a desert is to stop in your tracks and give in to the punishing elements. If I were caught out in a sandstorm with you, I would do everything in my power to keep you moving forward. And that's precisely what I want to do for Sandstorm investors today, by highlighting the continued strides the company has made in recent months to foster a strong long-term outlook for earnings growth. The company released 2012 earnings and announced a new gold stream transaction within the past week, and I fear investors may have averted their eyes in the midst of these howling winds.
Sandstorm achieved profit growth of 76% during 2012, enjoying a rich cash operating margin of $1,313 for each of the 33,514 gold ounces sold during the year. The fourth quarter came in a little on the light end, with gold sales of 7,243 ounces pitching in only 21.6% of the full-year total, but investors familiar with silver streamer Silver Wheaton will recall that timing of shipments and other logistical considerations will commonly yield substantial variability in production from quarter to quarter.
Like the company's recent announcement of a stream-related financing arrangement with Entrée Gold -- which gives Sandstorm some exciting exposure to the likelihood of future expansion at the Oyu Tolgoi mine in Mongolia -- Sandstorm's light production quarter could hardly have come at a less opportune moment. In the midst of an industrywide sell-off of this magnitude, the downside exposure from any unwelcome news is of course magnified. Worse yet, the market is approaching Rio Tinto's Oyu Tolgoi project with considerable caution just now, after Mongolia's president sought greater government involvement in the project.
The combined result of these recent downside catalysts -- in conjunction with the ongoing horror of this gold equity collapse that I've termed goldageddon -- is one more standout opportunity for long-term gains that truly savvy investors will be pouring into just as capitulating desert-crossers fall to their knees. To keep Sandstorm's recent collapse in its proper context, meanwhile, I encourage Fools to consider the following six-month chart. Sandstorm has still outperformed venerable gold royalty leader Royal Gold , and easily outperformed the gold mining equities as reflected in the gut-wrenching decline of the Market Vectors Gold Miners ETF . With Sandstorm's gold production expected to double over the next four years -- reaching 70,000 ounces by 2016 -- the stock's return to single-digit territory must be greeted by investors as a lush garden spring in the middle of a sand-swept desert.
To track my own ongoing coverage of Sandstorm Gold and its metal-streaming, royalty-collecting ilk, please bookmark my article list or follow me on Twitter. My Foolish colleague Dan Caplinger, meanwhile, has prepared a detailed report outlining the compelling investment thesis for Silver Wheaton, and I encourage Fools to access that special report by clicking here.
The article Gold Investors Shield Their Eyes From the Sandstorm originally appeared on Fool.com.Fool contributor Christopher Barker owns shares of Sandstorm Gold and Silver Wheaton. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.