Mariana Resources Ltd. (OTC: MRLDF) is engaged in the exploration and development of mineral resources including gold, copper, and silver. It used to run major projects in South America, Argentina, Chile, and Turkey. It was working as an independent entity until Canada-based Sandstorm Gold Ltd. (NYSE: SAND) acquired the company back in 2017.
Sandstorm- Mariana Deal
Sandstorm first announced the deal to acquire Mariana in April 2016. The board of directors of the two companies approved the merger soon after the deal was announced. The merger led to the creation of a dominant mid-tier streaming player. At that time, the combined company had a wide portfolio of around 155 streams and royalties. Out of those, 23 were in the development phase, 20 were in the production stage, 26 were in the advance exploration phase, while 86 were in the exploration stage at that time.
Speaking on the deal, Sandstorm’s CEO Nolan Watson said in a statement back then, “We believe that, by combining Mariana and Sandstorm and converting the Hot Maden JV interest into a gold stream, we can unlock the inherent value of Hot Maden and deliver the optimal outcome for shareholders without incurring further equity dilution to finance the interest in Hot Maden.”
Mariana's senior management also welcomed the deal at that time, saying the merger with Sandstorm will decrease the risks Mariana was facing as a single development-production firm, besides offering it a strong platform and funds needed for the development of precious minerals discovered at Hot Maden in Turkey.
Sandstorm already had a stake of 7 percent in Mariana before it announced the acquisition. Sandstorm’s offer price for Mariana represented a premium of about 84 percent as compared to the trading price of Mariana at that time. Mariana became a completely owned subsidiary of Sandstorm after the formal completion of the deal in July 2017.
Sandstorm Financial Performance
Sandstorm last announced its quarterly financial report at the end of October. Its third-quarter performance was not up to the mark mainly due to the operational disruptions it experienced because of the Covid-19 pandemic.
The company reported revenue of $23.3 million for the three-month period ended September 30, slightly down from $25.8 million in the comparable period of 2019. A significant decline in the gold equivalent ounces (GEOs) sold during the third quarterly weighed on revenue. However, the 29 percent increase in the average selling price of gold saved the company from a deeper revenue decline.
Earnings rose to $6.5 million, as compared to $6.2 million in the same quarter last year. The rise in quarterly profit was mainly driven by a $2.3 million drop in depletion costs.
Gold equivalent ounces sold during the quarter decreased to 12,068 ounces, as compared to 17,289 ounces in the comparable period of 2019. The drop was partly attributed to the negative effects of shutdowns due to the pandemic.
On the bright side, Sandstorm ended the previous quarter with a strong balance sheet of more than $70 million in cash. The company believes it has significant cash required for the next growth phase.
Moreover, the company withdrew its production outlook for 2020, citing the uncertain operating environment due to the pandemic.
Most research firms stayed bullish on Sandstorm this year, with the majority of them recommending investors to “Buy” the stock. The consensus price target set for the company is $10.44, translating to a surge of more than 43 percent from the stock’s closing price in the previous trading session. The high price target estimate for the stock is $14.25 per share, while the lowest estimate it has received in recent months is $8 per share.
Sandstorm stock stayed almost flat in terms of price change in 2020. Its share price has decreased around 2 percent on a year-to-date basis. The 52-week range of the stock is $3.32-$10.63. The company’s market value is approx. $1.422 billion, as per the current trading price, while its P/E ratio stands at 155.11. Moreover, the daily average volume of the stock is around 1.41 million shares.