[font=arial, sans-serif]Sandstorm Gold (SSL : TSX-V : C$1.52) - Speculative Buy - Target:C$1.90
Primed for growth; raising peak gold price to US$1,750/oz
We maintain our SPECULATIVE BUY recommendation and are raising our target price to C$1.90 per share, up from C$1.55 previously. Investment highlights New Gold Forecasts: Our new gold estimates are as follows: US$1,575/oz (from US$1,525/oz) in 2011; US$1,650/oz (from US$1,525/oz) in 2012; US$1,500/oz (from US$1,400/oz) in 2013; US$1,400/oz (from US$1250/oz) in 2014; US$1,300/oz (from US$1,100/oz) in 2015, US$1,200/oz (from US$1,000/oz) in 2016 and US$1,100 long term (2017 and beyond) from US$1,000/oz. Our peak gold price increases to US$1750/oz Au (from US$1,600/oz).[/font]
[font=arial, sans-serif]With higher gold prices we expect to see expanded exploration budgets, growing resources and extended mine lives at Sandstorm's gold stream operations. We have adjusted our valuation of Sandstorm Gold to reflect our upwardly revised gold price forecasts. With higher gold prices, we expect to see expanded exploration budgets, growing resources and mine life extensions for Sandstorm's gold streams. Therefore, we have factored in a 1.5-year mine life extension to the Bachelor Lake mine and, for the first time, we have incorporated a 75,000-ounce potential resource to account for exploration upside potential at Sandstorm's stream operations. The net impact is an increase in our peak gold estimate of NAVPS (5%, spot) to C$1.41, up from C$1.14 previously. [/font]
[font=arial, sans-serif]Given its growth, its unique position in the royalty space and the potential for it to attract an acquisition bid, we continue to apply a 1.35x multiple to our peak gold price estimate of NAVPS.
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