How a Gold Royalty Works
A gold royalty is a contract that gives the owner (a gold royalty company) the right to a percentage of gold production or revenue in exchange for an upfront payment.Learn More
Different Ways to Invest in Gold
Physical gold is just one of the various ways an investor can gain exposure to the upside of gold.Learn More
Why You Need Gold in Your Portfolio
People have been investing in gold for thousands of years. But why do investors love the shiny metal so much?Learn More
Sandstorm is a gold royalty company. Unlike mining companies, we don’t operate mines. Rather, we own a large portfolio of streams and royalties on mines around the world. When a mine reaches production, Sandstorm receives either a percentage of revenue (in the case of a royalty) or metal production (in the case of a “stream”) from the mining operator. This business model reduces many of the operational risks to Sandstorm that many mining companies face.
A gold royalty is a contract that gives the owner (a gold royalty company) the right to a percentage of gold production or revenue in exchange for an upfront payment. Gold royalty companies use these contracts as a way to finance mining companies in need of capital. This alternative form of mine financing is often more attractive than traditional debt or issuing equity. Gold royalty companies will also purchase pre-existing royalties as a way to build a diversified portfolio of royalty assets. Since royalties typically cover the life of a mine, gold royalty companies benefit from the exploration upside that may extend the life of the mine and thus increase the amount of gold (or revenue) they receive from the mining company at no additional cost.
Gold royalties and gold streams are very similar contracts. The primary difference is what the owner of the contract (the royalty company) receives in return for the upfront capital invested. In a royalty contract, the owner receives a percentage of revenue, called a Net Smelter Returns royalty (NSR), or a percentage of profit, called a Net Profit Interest royalty (NPI). In a streaming contract, the owner receives a percentage of the gold (or other by-product) produced from the mine. The royalty company then sells the gold at the current spot price in the open market to make a profit.
Investors may purchase shares of Sandstorm Gold Ltd. on either the New York Stock Exchange (NYSE) under the ticker symbol SAND, or the Toronto Stock Exchange (TSX) under the ticker symbol SSL.
Investors in Sandstorm own shares of the company, but not the actual royalties. The streaming and royalty contracts are between Sandstorm Gold Ltd. and the mining company that is developing or operating the mine.
Sandstorm declared its first quarterly cash dividend in December 2021. Sandstorm will issue a press release at the time each future quarterly dividend is declared. The declaration, timing, amount, and payment of all future dividends will be subject to the discretion of the Board of Directors. For details regarding Sandstorm’s current dividend declaration, refer to the Shareholders page of our website.
There are four common ways to invest in gold:
- Purchase physical gold in the form of gold bars or coin (referred to as gold bullion)
- Buy shares of a gold Exchange Traded Fund (ETF) or a mining stock ETF
- Buy shares of a gold mining company
- Buy shares in a gold royalty company like Sandstorm
For more information on the pros and cons of each investment, download the infographic or watch the following video.Watch the Video
Mining is a tough business and investing in operating companies can bring a lot of risk. Getting a gold mine into production requires enormous amounts of capital and many years. Once a mine is in production, there are also numerous operational risks that companies face. These include timing delays, mine shutdowns, and other environmental or social issues. Understanding and predicting which mine projects will make it into production and become profitable can be very difficult for the average investor.
With a gold royalty company, investors gain access to a large diversified mining portfolio that has been vetted by experienced geologists and mining engineers. This means that even if some projects never make it into production, a royalty company’s cash flow typically remains strong, even in a market downturn.
For more information about the benefits of gold royalty companies, check out our comparison of gold investments.Comparing Gold Investments
While the royalty business model has been around for decades in other industries like music and oil & gas, the model has only been applied to the precious metals industry within the last 15 years. One of the first precious metal streaming companies was Wheaton Precious Metals (formerly Silver Wheaton), where Sandstorm’s President & CEO, Nolan Watson, was CFO and the first employee. In fact, it was at Wheaton where Nolan met Sandstorm’s co-founder, David Awram, and forged a business partnership that would go on to be the foundation of Sandstorm.
Due diligence is the process of evaluating the geotechnical aspects and economics of a mining project. It is an essential process that requires expertise at the highest level to ensure a particular project is a viable investment. Sandstorm has one of the largest technical teams of any gold streaming and royalty company in the world. Our geologists and mining engineers evaluate hundreds of projects each year in search of the best opportunities.