Could Sandstorm Gold Ltd. Be the Next Silver Wheaton Corp.?

Looking for the next big gainer? Then take a closer look at Sandstorm Gold Ltd. (TSX:SSL)(NYSE:SAND).

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In recent months one of the most successful precious metals streamers Silver Wheaton Corp.’s share price has been hammered, plunging a massive 51% over the last year. This can be attributed to the company battling a range of headwinds, including sharply weaker precious metal prices, an investigation by the Canadian Revenue Agency, and now a class action law suit.

Even after this sharp sell-off, Silver Wheaton has returned a monster 338% since listing in 2004. While it may now offer an attractive investment opportunity for investors, it is unlikely to give such stellar returns in the future, with it now being a mature business.

For investors looking for such a return they need to identify a company that is still emerging, that is making all the right moves, and has the potential to be the next Silver Wheaton, and that company is Sandstorm Gold Ltd. (TSX:SSL)(NYSE:SAND). 

Now what?

Just like Silver Wheaton, Sandstorm Gold is a precious metals streaming company and, despite being only seven years old, is off to a strong start. It has amassed a globally diversified portfolio of 72 royalties and streams by targeting niche deals that are not of interest to the larger precious metal streamers like Silver Wheaton and Royal Gold Inc.

The company also has a long growth runway, with 58 of contracts comprised of development and exploration projects that will allow Sandstorm to achieve its goal of growing production to 50,000 ounces of gold annually by 2018.

By virtue of the royalty and streaming agreements, Sandstorm is able to obtain gold at prices far lower than the market price; its average cash cost per ounce for the second quarter 2015 was a mere US$304. This is well below the current market price of US$1,091 per ounce, and even if gold slides under US$1,000 per ounce as analysts are predicting, Sandstorm can still generate a solid margin.

When this is considered in conjunction with its lower operating overheads, it can remain profitable in the current harsh operating environment dominated by weak gold prices.

Unlike its much larger peer Silver Wheaton, Sandstorm generates the majority of its revenue from gold with the rest coming from a mix of diamonds and base metals. This makes it a leveraged play on the price of gold rather than silver, which means it lacks access to the long-term secular tailwinds that will drive silver prices higher, such as growing demand for solar panels. 

So what?

However, with its share price being hit hard because of the collapse in gold, which is down by a massive 55% over the last year, now is the time for the contrarian investor to consider taking a position. By virtue of its low-cost operating model and leveraged exposure to the price of gold, any slight bump in the gold price should translate into a solid appreciation in its share price.

Furthermore, as its business continues to mature and grow, its share price will increase, and given that it is far less mature than either Silver Wheaton or Royal Gold, this means it offers investors considerably more upside.

Should you invest $1,000 in Sandstorm Gold Ltd. right now?

Before you buy stock in Sandstorm Gold Ltd., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Sandstorm Gold Ltd. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

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 Matt Smith has no position in any stocks mentioned.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Metals and Mining Stocks

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

Best Stock to Buy Right Now: Barrick Gold vs Agnico Eagle?

Agnico-Eagle Mines stock continues to soar off of strong results while Barrick Gold grapples with political troubles in its African…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Stocks for Beginners

What to Know About 2 Canadian Mining Stocks for 2025

Mining stocks can be a strong investment, or a bit of a wild ride. So where do these two top…

Read more »

nugget gold
Metals and Mining Stocks

2 Gold Stocks to Consider in the Wake of Trump Tariffs

Investing in gold mining stocks such as Kinross can help you diversify your portfolio and lower overall risk.

Read more »

Metals and Mining Stocks

Value Hunters: It’s Time to Snap Up These TSX Gems

Investing in undervalued gems such as MAG Silver should help you beat the broader markets in 2024 and beyond.

Read more »

A plant grows from coins.
Stocks for Beginners

3 Top Basic Materials Sector Stocks for Canadian Investors in 2025

These three Canadian stocks certainly have a strong future ahead, and now might be time to buy the dip.

Read more »

todder holds a gold bar
Stocks for Beginners

Outlook for Barrick Gold Stock in 2025

Gold stock Barrick may have proven itself in the past, but with geopolitical issues on hand, should investors move elsewhere?

Read more »

nugget gold
Metals and Mining Stocks

Gold Stocks in 2025: Why Royalty Stocks May Outshine Miners

When gold prices surge, mining stocks are typically the better picks. But when there is uncertainty about the metal, royalty…

Read more »

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

Better Mining Stock: First Quantum vs Teck Resources?

These two mining stocks offer huge returns and income for investors. But one does seem a bit riskier than the…

Read more »