Executive Summary / Key Takeaways

• Strategic Acquisition by Royal Gold: Sandstorm Gold Ltd. ($SAND) is set to be acquired by Royal Gold Inc. (RGLD) in an all-share transaction valued at approximately $3.5 billion, expected to close in Q4 2025. This merger will create an industry-leading streaming and royalty company with enhanced scale, diversification, and liquidity.
• Robust Financial Performance and Deleveraging: Sandstorm has demonstrated strong financial momentum, reporting record revenues and operating margins in Q1 and Q2 2025, driven by high gold prices. The company has significantly reduced its debt from a peak of $640 million to $315 million as of August 7, 2025, with plans to further reduce it below $300 million by mid-2025.
• Significant Growth Pipeline: The company maintains a long-term outlook of doubling production to 150,000 gold equivalent ounces (GEOs) by 2030, underpinned by key development assets like Greenstone, Platreef, MARA, and Hod Maden.
• Conservative 2025 Guidance with Upside Potential: Sandstorm's 2025 production guidance of 65,000 to 80,000 GEOs is intentionally conservative, accounting for potential commodity price fluctuations and ramp-up challenges, suggesting potential for upside surprises.
• Enhanced Competitive Positioning Post-Merger: The acquisition by Royal Gold is expected to significantly improve the combined entity's diversification, reduce asset concentration risk, and enhance its ability to compete for premium deals, attracting a broader institutional investor base.

A New Era for Sandstorm Gold: Unlocking Value Through Strategic Consolidation

Sandstorm Gold Ltd. ($SAND) has carved a distinctive niche in the precious metals sector, operating as a gold royalty and streaming company that provides upfront financing to mining companies in exchange for a percentage of future production. This business model allows Sandstorm to benefit from rising commodity prices while largely insulating it from the direct operational risks and capital expenditures inherent in traditional mining. The company's journey, from its incorporation in 2007 to its current position, has been marked by strategic acquisitions and a relentless focus on building a diversified, high-quality portfolio. This trajectory is now culminating in a transformative acquisition by Royal Gold Inc. , poised to redefine its scale and market influence.

The gold royalty and streaming sector itself represents a sophisticated financial innovation within the broader mining industry. Unlike direct mining operations, this model provides exposure to the upside of mineral production with significantly lower operating costs and capital intensity. Sandstorm's "technology" is its adept application of this model, characterized by rigorous asset selection, deal structuring, and portfolio management. This approach yields tangible benefits, including robust cash operating margins, which reached a record $2,981 per ounce in Q2 2025, and an impressive 87% cash margin on each ounce sold in Q1 2025. These metrics underscore the inherent efficiency and profitability of the royalty and streaming framework when executed effectively.

Sandstorm's strategic innovation extends to its portfolio construction, which prioritizes assets with substantial exploration upside. The company benefits from over $100 million of "free drilling" annually on its royalty grounds, as its partners invest heavily in expanding existing mines and discovering new deposits. This organic growth mechanism, where partners consistently replace or add more ounces than Sandstorm sells, is a powerful differentiator, creating value for shareholders without direct capital outlay. This strategic focus on high-quality, long-life assets with embedded growth potential is a cornerstone of Sandstorm's competitive moat.

The competitive landscape for gold royalty and streaming companies is dominated by a few major players, including Franco-Nevada Corporation (FNV), Wheaton Precious Metals (WPM), Royal Gold, Inc. (RGLD), and Osisko Gold Royalties Ltd. (OR). Sandstorm has historically been a mid-tier player, often trading at a discount to its larger peers. However, its business model, with its emphasis on diversification across jurisdictions and a portfolio of low-cost producers, provides a strong foundation. For instance, Sandstorm's top assets are often in the first quartile of the industry cost curve, a qualitative advantage that provides greater margin flexibility compared to some competitors.

A pivotal development for Sandstorm is the pending acquisition by Royal Gold, announced on July 7, 2025. This all-share transaction, valued at approximately $3.5 billion, offers Sandstorm shareholders a 21% premium to its 20-day volume-weighted average price as of July 3, 2025. The combined entity is projected to boast an industry-leading portfolio of 393 streams and royalties, with 80 cash-flowing assets, significantly enhancing diversification and reducing concentration risk. This strategic move is expected to close in Q4 2025 and is anticipated to attract a broader institutional investor base, potentially leading to a re-rating of the combined company's valuation.

Financial Strength and Growth Trajectory

Sandstorm has demonstrated robust financial performance, particularly in the first half of 2025. Total revenue for Q2 2025 reached $51.4 million, marking a 24% increase year-over-year, driven by strong realized gold prices averaging over $3,300 per ounce. This follows a record Q1 2025 revenue of $50.1 million. Despite a slight year-over-year decrease in attributable gold equivalent ounces (GEOs) sold in Q2 2025 to 15,100 GEOs, the favorable commodity price environment propelled record operating margins. Net income for Q2 2025 rose by 61% year-over-year to $16.9 million.

The company's focus on strengthening its balance sheet has been a key strategic priority. From a peak debt of $640 million, Sandstorm has made significant progress, reducing its debt to $340 million by Q1 2025 and further to $315 million as of August 7, 2025. Management expects this figure to fall below $300 million by mid-2025, a level considered comfortable for long-term stability. This deleveraging effort has been supported by strong operating cash flows, which were $37.7 million in Q2 2025 and $40.8 million in Q1 2025. The company also returned over $23 million to shareholders in Q1 2025 through share buybacks and dividends, representing approximately 57% of its operating cash flows.

Looking ahead, Sandstorm maintains a conservative yet promising outlook for 2025, forecasting attributable production between 65,000 and 80,000 GEOs. This guidance intentionally incorporates a buffer for potential commodity price fluctuations, which historically impacted 2024 GEO figures, and for the ramp-up of key assets like Greenstone. Management explicitly states they do not expect production to be at the lower end of this range, suggesting potential for upside surprises if commodity prices remain strong or operational ramp-ups exceed conservative estimates.

The long-term growth story remains compelling, with Sandstorm projecting its attributable production to more than double to 150,000 GEOs per year by 2030. This growth is underpinned by a robust pipeline of development assets. The Greenstone Gold Mine, which achieved commercial production in November 2024, is steadily ramping up, with Sandstorm expecting to receive 8,000 to 10,000 ounces per year at full capacity. The Platreef project in South Africa, a multi-phase development by Ivanhoe Mines (IVN), is scheduled for Phase 1 production in Q4 2025, with Phase 2 targeting late 2027. Platreef is poised to become one of the world's largest and lowest-cost PGM producers, with Sandstorm holding a gold stream that could yield 10,000 ounces per year at Phase 2 and 15,000 to 20,000 ounces per year at Phase 3.

Other significant growth drivers include the MARA copper-gold project in Argentina, which Glencore (GLNCY) plans to build and is considered Sandstorm's most valuable asset. The Hod Maden gold-copper project in Turkey is also advancing, with SSR Mining (SSRM) investing $60 million to $100 million in 2025 for early works and exploration, targeting first production in 2028. Additionally, the Gualcamayo Deep Carbonates Project in Argentina, with a $1 billion investment plan, aims for 120,000 ounces of gold annually for at least 17 years, with Sandstorm receiving a $30 million bullet payment upon commercial production (estimated 2029-2030) and a 2.5% NSR.

Risks and Competitive Dynamics

While Sandstorm's outlook is strong, investors should consider several risks. Commodity price volatility remains a fundamental factor, as demonstrated by the impact on 2024 GEO figures. Operational risks at underlying mines, including slower-than-expected ramp-ups (as seen with Greenstone in 2024) or unexpected challenges, could affect production. Furthermore, the success of major development assets like MARA and Hod Maden relies on the execution and timelines of operating partners, which can be subject to delays.

In the competitive landscape, the acquisition by Royal Gold is a game-changer. Prior to this, Royal Gold faced criticism for its concentration risk, with 79% of its NAV from its top 10 assets. The combined entity, however, will see this concentration drop to 61%, placing its diversification on par with Franco-Nevada (FNV) and ahead of Wheaton Precious Metals (WPM). This enhanced diversification, coupled with increased scale and liquidity, is expected to improve the combined company's ability to compete for premium streaming deals and attract a broader institutional investor base. Sandstorm has also historically outperformed peers in returning capital to shareholders, distributing US$540 per GEO in the last nine to twelve months, a trend that management aims to accelerate through increased share buybacks once debt targets are met.

Conclusion

Sandstorm Gold Ltd. stands at the precipice of a significant transformation. Its impending acquisition by Royal Gold is set to create a formidable force in the precious metals streaming and royalty sector, offering unparalleled diversification and a robust growth profile. This strategic consolidation, combined with Sandstorm's strong financial performance, disciplined debt reduction, and a pipeline of world-class development assets, positions the company for substantial long-term value creation. The inherent advantages of its royalty and streaming model, coupled with its strategic focus on high-quality, low-cost assets with exploration upside, provide a compelling investment thesis. As the company moves towards completing the Royal Gold merger and its key development projects come online, investors can anticipate a future marked by increased production, robust cash flows, and enhanced shareholder returns.