Sandstorm Gold Ltd. (SNDXF.PK)

Q2 2012 Earnings Call

July 27, 2012 11:30 am ET

Executives

Denver Harris - IR

Nolan Watson - President & CEO

Erfan Kazemi - CFO

David Awram - EVP

Analysts

Heiko Ihle - Euro Pacific Capital

Shane Nagel - National Bank Financial

Presentation

Operator

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Good morning and welcome to Sandstorm Gold Q2 conference call. This call is being recorded. I would now like to turn the call over to Mr. Denver Harris. Sir, please go ahead.

Denver Harris

Good morning everyone. I want to thank you all for being part of today's Q2 conference call. With me I have Nolan Watson, Sandstorm’s President and Chief Executive Officer; Erfan Kazemi, Chief Financial Officer and David Awram, Executive Vice President.

Before we get started, I would like to bring to your attention that some of the commentary on today's call may contain forward-looking statements. There could be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Lastly, it’s worth noting that any discussion of financial figures is in US dollars.

I will now turn things over to Nolan for a second quarter summary.

Nolan Watson

Thank you Denver and thank you ladies and gentlemen for participating in today's conference call. On this morning’s call, I am going to provide a high level company update and then Erfan Kazemi our CFO, will provide a summary of the financial results and then David Awram will provide an operational update.

The second quarter marked our ninth consecutive record quarter of gold sales with our 9,200 ounces sold and as our cash costs were under $300 an ounce, we recognized record operating cash flow of $11.3 million and production is continuing to ramp up at our producing mines. But I should note that during the quarter, Rambler began commissioning its copper flotation circuit which is a good thing at its Ming Mine.

And as a result, they have currently transferred the mining focus from 1806 gold zone to the 1807 zone, which is higher in copper grade and lower in gold grade. Having said that, there is significant upside to the 1806 gold zone which we believe will bear fruit in the future and David Awram will provide a more detailed update on that in a few minutes.

With respect to our 2012 gold sales guidance, we have narrowed our guidance range to 28,000 to 33,000 ounces of gold for the year, increasing to over 50,000 ounces per year by 2015. And as I mentioned on the last quarter’s conference call, that guidance of over 50,000 ounces per year assumes that Luna Gold never ramps up its Aurizona mine beyond 100,000 ounces a year, assuming that SilverCrest does not build an underground mine and assuming that Rambler does not produce from it’s 1806 gold zone and we believe that all three of those things could happen. So we believe there is upside potential to this guidance.

In terms of corporate development update, during the quarter, we acquired two NSR royalties from Magellan Minerals and one from Solitario Exploration. In addition to the upside of these royalties, we also ensured that in each case we received a right of first refusal on potential future gold streams on the project. So in effect, through these royalty acquisitions, we’re attempting to build then sources of potential future growth for portfolio of gold streams.

In addition, as many of you are aware during the quarter the equity capital and debt markets continue to deteriorate and as a result we are getting a lot of inbound calls from companies looking for capital. We are evaluating a number of opportunities now and with our $50 million undrawn revolving line of credit we have the capital available to take advantage of those opportunities although we are going to proceed in a selective manner.

While we’re continuing to grow the company, we’re also continuing to complete an NYSE market listing in the US. We have given previous guidance on last quarter’s call that we anticipate having that completed by the end of Q3 and we believe we are on track to accomplish that and it’s our anticipation that in the few weeks to come we’ll have more detailed guidance on the exact date of that listing.

And with that I am going to hand it over to Erfan Kazemi.

Erfan Kazemi

Thank you, Nolan. As Nolan mentioned, we had record gold sales of over 9,200 ounces, an increase of 17% from Q1 2012 and over a 150% increase from Q2 2011. When comparing the results from Q1 2012 to Q2 2012, the main driver of the increase was an 84% increase in the gold sales attributed to the Santa Elena Mine, primarily related to the sale of 660 ounces which were held in inventory at the end of the first quarter of 2012 and a 28% increase in deliveries relating to the Ming Mine as Rambler continued mining and processing ore from the high grade gold 1806 zone.

Breaking down our production of gold sales by mine, Aurizona had another great quarter whereby Sandstorm sold 2,215 ounces. From Black Fox Mine, we had just over 2,000 ounces, an 11% increase over Q1 2012 reflecting the continued ramp-up of operation.

Although, we indicated during the last conference call that attributable ounces from the Ming Mine will decrease in the second quarter, we actually saw 28% to increase over 2,500 ounces from Ming. Rambler had recently announced a production of the first copper concentrate and thus expected declines in gold productions that we spoke of will likely be realized in the third quarter. We sold close to 2,400 ounces from Santa Elena due to carryover of inventory from last quarter.

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