Kevin Lin Presentation SND

8/2/2019 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)

Documents

Kevin Lin Presentation SND