Kevin Lin Presentation SND
Transcript of Kevin Lin Presentation SND
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Sandstormmetals&energy
STTYF.PK
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Whatis
Sandstorm
Metals
&
Energy?
Aroyaltystreamscompanythatessentially
investsin
the
last
leg
of
financing
required
for
productiontostart.Inreturn,theCompanygetstopurchaseproductionforthelifeoftheassetatanagreeduponcost Thunderbird:
$1
/mcf of
natural
gas
Donner:$.85/onelb ofCopper
NovaDx:$75/onetonofmetcoal
Terrex:
$15
+
taxes
/
boe of
oil RoyalCoal:$55/onetonofthermalcoal(Ceased
operationsin1Q2012duetoplummetingprices)
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BookValuation
Aspartoftheagreement,Sandstormbecomes
seniorsecured
on
assets
of
the
company,
and
is
promisedguaranteedcashflowsthatwillrepaytheprinciplein~56years
Currently,with
$40
million
in
cash,
$80
million
in
guaranteedcashflows,and$xamountfromRoyalCoal(whichstoppedoperationsfromcollapsingthermalcoalprices),thestockistradingatroughly~$125mm,oralmostequivalenttocash+guarantees
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FutureValuation
Theupsideistremendous ifwefollowtheplans
laidout
by
management
of
the
respective
companies,cashflowwillreach$1520millionin
2013,and$25millionin2014onwards,justfrom
the$80
million
invested
in
projects
alone
EstablishedComparables (SilverWheaton,Royal
Gold,FrancoNevada,SandstormGold)alltrade
at~15x
forward
cash
flow
(Sandstorm
Gold
at
~10x)
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Risks? Theupsideistremendous.Butwhataboutthe
downside? Wewishwecouldsaydownsideisjustareturnon
guaranteedcashflows(0%IRRatcurrentmarketprice)
RoyalCoal
shutdown
reflects
potential
for
significant
downside,pendingconclusionoftherestructuring
SohowprotectedareSandstormsinvestmentsfromabalancesheetperspective,andfromanoperational
perspectiveof
its
junior
miners
(if
we
can
get
ajunior
minertoproduceatbreakeven,thentheywoulddosotokeepfromeventsofdefaultwithsandstorm)
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Presentation Letsbrieflyexploreeachofthecashstreams
What
are
my
concluding
thoughts? Sandstormisgenerallypositionedinsuchawaythatthey
shouldseeamajorityoftheirloanspaidbackunderliquidityscenarios,eveninthecaseofRoyalCoal(anyannouncementonrecoveryshouldsendthestockupasanacknowledgementof
thebusiness
model)
Terrex andThunderbirdlookvulnerable Terrex needsmorecapital,Thunderbirdwontdrilluntilgasprices
becomeeconomical
However,DonnerandNovaDx lookparticularlystrong,and
accountfor
more
then
70%
of
projected
cash
flows
in
2013/2014.EvenwithabustofTerrex andThunderbird,cashflowsshouldstillbein~$20millionin2014.
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NOVADX
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ALook
at
NovaDx
FromaBalanceSheetPerspective,is
Sandstormsafe
in
the
capital
structure?
ArecoalpricesgoingtobreakNovaDxs
operating
profitability? HowcomfortablecanwegetwithNovaDx as
angoingconcern?Andmoreimportant,a
profitableand
expanding
one?
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LatestFinancials
Forthe3monthsended Forthe6monthsended
2011 2010 2011 2010
Revenues $1,973 $1,122 $2,597 $1,122
COGS (3,845) (1,060) (5,146) (2,424)
MiningMargin ($1,872) $62 ($2,549) ($1,302)
GeneralExpenses ($1,248) ($772) ($2,402) ($1,397)
InterestExpense (175) (419) (381) (550)
TotalExpenses ($1,423) ($1,192) ($2,783) ($1,947)
OperatingLoss ($3,295) ($1,130) ($5,332) ($3,249)
Other (2,441) (2,388) (1,317) (787)
NetLoss ($5,736) ($3,518) ($6,650) ($4,036)
WSO 79 57 79 55
EPS ($0.07) ($0.06) ($0.08) ($0.07)
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LatestFinancials
Atfirstglance,looksprettydistressful
Mining
Margin
includes
a
one
time
inventory
charge
of
$1.6
millionfor
latest
quarter,
bringing
normalized
cost
to
~$2.2
million,stillputtingminingoperationsinthenegative
However,addingbackDepletionandAmortizationof$673million,Rosaisalreadyoperatingatacashprofitdespiteonly
ramping
Rosa
midway
through
Q4
However,however,otherexpensesof~1.4millionputthecompanyataoperatingcashburnof~$1million,similartoCFOshownof$844million
CONCLUSION:NOVADX
NEEDS
TO
RAMP
PRODUCTION
UP
TOCOVERINCREMENTAL$1MILLIONDOLLARBURNTOBREAKEVENASAGOINGCONCERN.
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LatestFinancials
12/31/2011 % 12/31/2010
Revenues: $1,973 76% $1,122
COGS: (3,845) 263% (1,060)
(Loss)FromMiningOps ($1,872) $62
NormalizedforInventoryAdjustment: 1,600 0
(Loss)FromMiningOps ($272) $62
ExtractingNonCashCosts: 673 175
CashFromMiningOperations $401 70% $236
GeneralExpenses ($1,248) ($772)
InterestExpense (175) (419)
CalculatedCashBurn ($1,022) ($955)
vsCFO ($844) ($1,142)
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ADig
Question
Howdo
we
approximate
costs
as
Rosa
ramps?
Canwedothisconservatively?
Solution
Lookingat
incremental
differences
in
production
betweenthisquarterandlastquarter,alongwithdisclosuresincostincreases,wecantrytofigure
outhow
much
each
additional
ton
cost
Wecanusethatasaconservativeassumption,assumingnoeconomiesofscaleinproduction
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IncrementalCosts
COGSEscalator: Inc.Costs Inc.Cash
2010COGS ($1,060) /Ton Less: /Ton
Depletion (190) < NonCashCost ($32) $32 $0
Wages (160) < ScalingCost ($27) ($27)
Fuel (130) < ScalingCost ($22) ($22)
Equipment
&
Parts (110)