Sandstorm Metals & Energy

  • Reference: IVEY-9B13N014-E

  • Year: 2013

  • Number of pages: 12

  • Geographic Setting: Canada

  • Publication Date: Jun 4, 2013

  • Fecha de edición: Jun 4, 2013

  • Source: Ivey Business School (Canada)

  • Type of Document: Case

  • Industry Setting: Mining, Quarrying, and Oil and Gas Extraction;

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Description

A buy-side analyst for an investment company that has a company-specific, fundamentals-based investing philosophy is considering whether to include a small-cap Canadian company engaged in commodity streaming contracts in the mining sector as a significant investment. The analyst must first learn what commodity streaming involves to better understand whether the company has a viable business model. He also has to research the copper and natural gas industry outlooks. He must then develop a net asset value model to determine an appropriate valuation for the company.

Learning Objective

·To provide details on commodity streaming contracts (novel financing tools in the mining sector) and to examine these contracts using option theory. ·To discuss the pros and cons of different contracts, including consideration of moral hazard effects. ·To determine how a net asset value (discounted cash flow) firm valuation can be obtained.

Keywords

canada mining streaming Valuation