Gold has one big advantage over Bitcoin - Sandstorm Gold's Nolan Watson

Central bank buying will favor gold over Bitcoin, said Nolan Watson, president and CEO of Sandstorm Gold.

On Thursday Watson spoke to Kitco.

Sandstorm Gold (NYSE:SAND) is a royalty and streaming company headquartered in Vancouver, B.C. In 2023 the company forecasts production of 95,000 ounces. Watson is also an executive on the World Gold Council.

Looking at the gold market, Watson said the metal is benefiting but the miners are not.

"Central banks and governments around the world are buying gold, but they're not buying gold equities," noted Watson, which is resulting in higher metal prices but not necessarily higher stock prices for the miners.

To track what's happening in the gold space, pay attention to gold ETFs, said Watson. He said that there's been net liquidation out of gold ETFs over the last 18 months due to institutional investors selling because of the high interest rate environment.

"That is about to reverse. If you actually look at the trend of net liquidation of gold ETFs it's getting smaller and smaller every month," said Watson, who expects the trend to change in the next month or two.

Gold prices hit an all-time high in early December, but cryptocurrencies have had their own run with Bitcoin doubling off lows at the start of the year. Watson said that gold has nothing to fear from Bitcoin.

"Gold is going up because governments and central banks are buying gold," said Watson. "Governments and central banks are not buying Bitcoin. The fundamental thing that is driving the gold price is separate from...what's happening in crypto. There used to be thousands of crypto coins and the total cumulative market cap was getting close to a trillion dollars in crypto. That's all evaporated except for a few core things like Bitcoin and Ethereum. As an asset class crypto has lost a huge amount of ground to gold even though the Bitcoin prices come up."

Operationally, Watson highlighted some future projects that will grow its ounces: Equinox Gold's first pour at Greenstone in 2024, Barrick Gold's Cortez Complex in 2027 and SSR Mining's Hod Maden also in 2027. Watson was most excited about the Ivanhoe Mining's Platreef production that will come online next year.

Sandstorm has been busy deal-making in the past 18 months. The company had to take on debt to fund the deals, as well as issue equity, which has weighed on the stock. Over the past year, Sandstorm is down about 8% in an up market for gold. In 2022 Sandstorm took on debt funding for acquisition of $637 million after acquiring Nomad Royalty Company, as well as nine royalties and one stream from BaseCore Metals. By the end of 2024, Sandstorm expects to nearly halve debt levels.

"Our portfolio is much bigger," said Watson. "It's much more diversified. Most of the things that we
bought—most of the value that we paid for—is very large and very low-cost. [The operations] are very long-life mines that are being built now."

Watson said production is going to increase 50% to 60% over the next few years.

"We're sort of in this awkward phase where we made all of these acquisitions. We're not getting the benefit from it yet, but the mines are being built."

0:00 - Milestones at Sandstorm Gold over the past 18 months
1:50 - Why is Sandstorm Gold stock under pressure?
5:00 - Asset mix at Sandstorm Gold
8:45 - M&A in the gold sector
10:42 - The Federal Reserve policy and the effect on gold
12:20 - Bitcoin vs. gold
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