Royal Gold has bid on Sandstorm Gold

Take-overs and mergers are not limited to miners, last month we witnessed the bid of the third largest Precious metals Royalty company 'Royal Gold' on its peer Sandstorm Gold.

Royal Gold has been around for decades, establishing Gold royalties mainly among second tier mines. Have a look at the list of assets here. Royal Gold has a more mature portfolio consisting largely of producing assets, though four principal (larger) assets are mines being built.

Only Franco Nevada and Wheaton Precious Metals are larger than Royal Gold. At the prevalent high gold prices, it has been increasingly difficult to establish new profitable gold streams. This is one of the main drivers for royalty and streaming companies to look aside, checking whether a take-over of an undervalued peer might not be a more obvious choice.

Sandstorm Gold is a more recently established gold streamer. CEO Nolan Watson learned his trade at Silver Wheaton (the present Wheaton Precious Metals) where he has been the CFO until 2008. Read more on the leadership and founding of Sandstorm Gold here.

Over the course of its existence, Sandstorm Gold has been able to establish no less than 230 streaming targets, through agreements with some of the largest miners around, such as Ivanhoe Mines and Glencore. Operational revenue streams also include Equinox Gold and SSR Mining (former Standard Silver Resources).

The press release on the planned take-over can be read here on the website of Sandstorm Gold. The key phrase of the take-over by issueing new Royal Gold share is formulated as such: "Sandstorm shareholders will receive 0.0625 of a share of common stock of Royal Gold (each whole share, a “Royal Gold Share”) for each Sandstorm Share held, implying a 21% premium to the 20-day volume-weighted average price (“VWAP”) of the Sandstorm Shares for the period ended July 3, 2025, and a 17% premium to the closing price of the Sandstorm Shares on the New York Stock Exchange (the “NYSE”) on July 3, 2025. Upon closing, existing Royal Gold and Sandstorm shareholders will own approximately 77% and 23%, of the issued and outstanding Royal Gold Shares on a fully diluted basis."

Note : this implies 16 Sandstorm Gold shares for 1 new Royal Gold share.

Simultaneously, Royal Gold also has bid on Horizoncopper, in which Sandstorm Gold holds a large stake. This investment will diversify the portfolio of Royal Gold to a 9% copper interest (on a total of a 10% base metal royalties).

Stock performances

(Stockcharts graphs)

Below you find the stock performance of the target Sandstorm gold over 2025. Though Sandstorm made an intermediate high during the second half of April, as the yellow metal peaked near $3500/Oz, Sandstorm kept firming from mid May into June. At the moment of the Royal Gold bid (7th of July), the stock made a single day rally, but retraced rapidly, since the acquirer Royal Gold retreated notably. Into August, Sandstorm Gold has been firming again, after Royal Gold shareholders digested the news and saw the upside potential. At $10.77 as of today, Sandstorm Gold is up 94% year-to-date. Its current market cap stands at $3.16 Billion

Daily quote of SandStorm Gold (SAND) in USD year-to-date
(click to view at true image size)

The Royal Gold year-to-date graph over 2025 shows the stock rallying until the April gold peak, after which it dipped before mid May. Royal Gold recovered but moved more or less sideways throughout late May and June. At the takeover news, RGLD gapped lower, sliding almost 15% on the day. This dampened the enthousiasm on the take-over deal among Sandstorm shareholders. Royal Gold slumped throughout July, regaining strength only since early August. At $174 as of today, Royal Gold is up a modest 32.% year-to-date. Its market capitalization is about $11.5 Billion.

The much lower PE ratio of Royal Gold (25.5 for a $6.93 earnings per share) only reflects that the company has more producing assets in its portfolio.

For Sandstorm gold the modest $0.12 eps translates into a PE just short of 90. The vast majority of its assets are mines under construction or development projects waiting for the mining permit. There is more capital deployed which is going to generate income streams in the near future. This also is why Sandstorm has been regaining ground rapidly after a few dismal years. Royal Gold has paid the necessary premium for the earnings potential among the Sandstorm assets.

Daily quote of Royal Gold (RGLD) in USD year-to-date
(click to view at true image size)

At current stock prices Royal Gold barely quotes at a premium relative to the equivalent 16 shares of Sandstorm gold, mirroring the agreed take-over share relationship. This implies that shareholders of both companies are likely to approve the deal.