Is This Stock the Next Silver Wheaton Corp?

Sandstorm Gold Ltd (TSX:SSL)(NYSEMKT:SAND) is the best mining stock you’ve never heard of.

| More on:
The Motley Fool

Bay Street is catching on to the best mining stock you’ve never heard of.

Earlier this year, I urged readers to take a look at this resource firm. The business is growing at an extraordinary clip. Based on some cautious numbers, investors could double or triple their money over the next few years.

But since my first report, this firm was featured in the Vancouver Sun. Wall Street titan Raymond James also started covering this stock. Your window to get in is closing fast. Let me explain.

Triple your money on this gold ‘mining’ stock

People are striking it rich in a little-known investment that is rarely advertised to the public: mining royalty companies.

These firms are like the loan sharks of the resource business. They don’t actually operate any mines themselves. Rather, these firm finance new projects and earn royalties on future output. And investors who got in on the ground floor of these new businesses have made fortunes.

Take Royal Gold, Inc. and Silver Wheaton Corp for example. Imagine if you had invested $100,000 into each of these stocks back in 2001. Today, your stake would be worth $1.9 million and $4.5 million, respectively.

Needless to say, if you catch just one stock like these in your lifetime, you may never have to work again. Resource booms are like nothing else in investing. The potential gains — without leverage — are huge.

Of course, you can’t buy past returns. Today, Royal Gold and Silver Wheaton are big businesses. So if you’re looking for similar profits, you have to find the next great royalty company. And this firm could be exactly that: Sandstorm Gold Ltd. (TSX: SSL)(NYSEMKT: SAND).

Sandstorm is like the Avis Budget Group Inc. of the royalty business — ‘We’re No. 2, but we try harder’. The company has carved out a lucrative niche in the industry. By targeting deals too small for larger rivals, Sandstorm is becoming the go-to money source for miners.

And while the firm is still young, the early numbers are remarkable. Sandstorm has 14 cash flowing streams already, with many more coming online soon. Last year, the firm’s production totaled some 30,000 gold equivalent ounces. However, management expects this figure to nearly double by 2016.

Of course, a resource company is only as good as the people running it. That said, Sandstorm’s founder Nolan Watson was the second in command at Silver Wheaton. Over his seven-year tenure as Chief Financial Officer, the company’s market value grew 30-fold.

The best part — because this firm is so new, it receives little coverage from the mainstream media. That’s why, as you can see in the chart below, the stock trades at a steep discount to peers.

Company Market Capitalization 2017 EV/Cash Flow
Sandstorm Gold $0.4 billion 5.4
Osisko Gold $3.8 billion 14.5
Silver Wheaton $8.4 billion 14.7
Royal Gold $4.7 billion 15.1
Franco-Nevada $8.3 billion 16.0

Source: Sandstorm Gold Investor Presentation 

Royalty companies usually trade at 15 times cash flow. However, Sandstorm is valued at just a fraction of that. In other words, the stock would have to jump 180% just to trade in line with its peers.

The best ‘mining’ stock you’ve never heard of

However, Bay Street is catching on. A number of large hedge funds have begun building positions in the stock. And as I mentioned, investment houses are also starting to cover this firm.

Now I have to ask you… what would make the world’s biggest financial firms take notice of a small name like this? I’d say it means only one thing: they see a big move ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. The Motley Fool owns shares of Silver Wheaton. Silver Wheaton is a recommendation of Stock Advisor Canada.

More on Metals and Mining Stocks

Growth from coins
Stocks for Beginners

Prediction: These Could Be the Best-Performing Value Stocks Through 2030

These stocks should absolutely surge through 2030 and beyond, with demand rising and supply only decreasing.

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

1 Canadian Mining Stock to Buy and Hold Forever

Here’s one of the best Canadian mining stocks you can hold for years to come to benefit from its surging…

Read more »

Businessman holding AI cloud
Metals and Mining Stocks

How Materials Stocks Are Reaping the Benefits of the Artificial Intelligence (AI) Explosion

Barrick Gold (TSX:ABX), Lundin Mining (TSX:LUN), and another TSX materials sector stock could unlock long-term gains on artificial intelligence (AI)…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Should Investors Buy the Correction in Lundin Mining Stock?

Lundin (TSX:LUN) stock has fallen by 10% in the last few weeks, but so has the price of copper. Coincidence?…

Read more »

Metals and Mining Stocks

Best Stocks to Buy in May 2024: TSX Materials Sector

A TSX materials sector ETF could help investors gain cheap diversified exposure to the hot sector's stocks – so will…

Read more »

Hands protect a sprout in fertile soil.
Metals and Mining Stocks

What’s Going on With Nutrien Stock?

Nutrien (TSX:NTR) stock has seen shares rise higher as the company sees more demand for fertilizer starting up once more.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Metals and Mining Stocks

2 TSX Commodity Stocks With Massive Upside Thanks to Gold Bugs and the Battery Boom

Investing in mining stocks such as Barrick Gold and Lithium Americas can help you benefit from rising commodity prices.

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Why Shares in This Leading Mining Stock Soared 21% in May

This gold stock has risen higher on the back of gold prices, sure, but there's even more driving shares this…

Read more »