Casey NexTen -

The Next Generation of Resource Industry Titans

 
#8
From whiz kid prodigy toyouthful CFO, to innovative CEO—that’s the Nolan Watson story. While steering the Sandstorm franchise through very volatile markets, Nolan has learned from his mistakes, and now Sandstorm Gold has C$100 million in cash, no debt, and a diversified stream of cash-flowing gold streams.

Nolan Watson

Nolan Watson is one of the smartest, most driven young men you will ever meet; that statement has been true since he graduated from the University of British Columbia at 19 years of age and headed to Deloitte & Touche. He quickly moved into the corporate finance department, performing business valuations and merger and acquisition support services. With that experience under his belt, he left the firm to join Silver Wheaton Corp. (SLW.T, SLW) as controller and as Silver Wheaton's first employee.

Within a year, Nolan was promoted to chief financial officer, making him the youngest-ever CFO of a NYSE-listed company at 26. Two years later, Nolan was part of the team that raised more than $1 billion in debt and equity to fund Silver Wheaton's acquisition needs. With him at the financial helm, guided by business legend Ian Telfer, who founded both Silver Wheaton and Gold Wheaton, SLW's market capitalization grew from C$300 million to C$3 billion.

In 2008, Nolan left Silver Wheaton with the goal of replicating that success in other parts of the mining sector. Along with another Silver Wheaton alumnus, David Awram, Nolan founded Sandstorm Gold (SSL.T, SAND), a streaming company modeled on Silver Wheaton, for gold deals. Since SSL's inception, Nolan has raised hundreds of millions of dollars and executed on many streaming deals.

Investors loved Sandstorm's low-risk royalty model—SSL provides an upfront cash payment to a company that is building a mine, in exchange for the right to purchase a percentage of its future production at a set price. The deal is good for both parties: the company building the mine gets a nice chunk of change to help with development costs, and Sandstorm gets to buy commodities at set prices over long periods, giving it exposure to commodity price and exploration upsides without any concerns about cost increases or capital expenditures.

Things went well, so in early 2010 Nolan decided to split the company into two parts. Sandstorm Metals & Energy (SND.V) focuses on streaming opportunities in the energy and base metal sectors, while Sandstorm Gold (SSL.TO) searches out gold streams.
All of that, and the guy is only 35. No wonder Nolan was recognized as one of the "Most Motivated" CFAs in the world by CFA Magazine in 2008. He's won numerous other awards from professional and charitable institutions, including the Valedictorian of the Institute of Chartered Accountants of British Columbia. Passionate about community development, he's also somehow found time, as founder and president of Nations Cry, to oversee the construction of schools for orphans in Sierra Leone, Africa.

Casey Energy Confidential and Casey Energy Report subscribers did quite well on SND. At some point, we decided to take profits and close the position as we disagreed with some of the streaming deals Nolan and his team executed on. In retrospect, it was the right thing to do, and since then, we have been diligently looking to re-enter the stock because we believe in Nolan and his team.

SND 2.0

2013 turned out to be a tough year for Nolan and the company as a whole. Some of the streaming deals have not worked out, and the share price has suffered because of it. Nolan and his team have eaten a lot of humble pie, but we know him well enough on both a personal and professional basis to know that he always bounces back. Moving forward, we think this was a great lesson for Nolan and his team, as they have survived and learned from the critical mistakes. We're calling it SND 2.0 because Nolan will do whatever it takes to make Sandstorm Metals & Energy work, and there's no doubt in our minds that he will make it work. We are watching his moves very carefully and will notify you when it's time to jump back in.

As you well know, the resource sector is very volatile and cyclical, and all of the industry titans go through the Valley of Darkness at one time or another in their career. We think Nolan has exited the valley and will be smarter, tougher, and more motivated than ever because of it. Patient and shrewd businessman that he is, he's been working diligently in the background restructuring his stream deals and preparing himself for another run, forgoing ownership of his stream projects to save cash and to maintain the advantage of no sustained capital expenditures.

His recipe for success is simple and straightforward: "I believe that one of the keys to succeeding in life, as well as in the mining industry, is to combine enthusiasm, skill, and an extraordinary work ethic. That is what we do at Sandstorm every day." Nolan is determined to make SND and SSL a success, and we're confident that he will use the volatile resource markets to increase shareholder value in both companies.