Sandstorm Gold Ltd (SAND)
Overview of Sandstorm Gold Ltd, its upcoming purchase of Nomad Royalty, and its purchase of multiple BaseCore Metals royalties.
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Situation Summary:
· On May 2, 2022, Sandstorm announced the acquisition of Nomad Royalty Company Ltd as well as a package of royalties from BaseCore Metals LP for a combined price tag of $1.1 billion.
· This transaction is nearly the size of Sandstorms market cap and establish the company as the “largest, highest-growth and most liquid mid-tier royalty and streaming company.”
· This helps Sandstorm stand out amid the crowded precious metals royalties and streaming sector. A sector that is ripe for consolidation.
Company History:
· Sandstorm, based in Vancouver, British Columbia, was cofounded in 2008 by Nolan Watson and David Awram.
· Both men previously worked at Wheaton Precious Metals (previously Silver Wheaton Corp) where Watson was the second employee as the start of the company by Ian Telfer.
· Began as Sandstorm Resources in 2008 on the TSX Venture Exchange. Two years later the company spun out its coal and natural gas assets as Sandstorm Metals & Energy. That company didn’t last long and Sandstorm later purchased back the assets in 2014. In 2011 it changed its name to Sandstorm Gold and in 2012 it listed on the TSX and NYSE.
· Ever since Sandstorm has been acquiring other royalties companies and individual streams and royalties. Two notable acquisitions being Premier Royalty in 2013 and Mariana Resources in 2017 (Hod Maden in the Artvin Province in Turkey).
· From no royalties in 2008, Sandstorm now owns 260 with 39 currently cash-flowing.
Situation Details:
Hod Maden Transaction
· Mariana Resources in 2017
· In February 2022, Sandstorm announced a letter of intent had been signed with Royalty North Partners Ltd.
· Sandstorm agreed to sell RNP its 30% stake in Hod Maden mine in the Artvin Province in Turkey and its equity stake of 49.7 million share of Entrée Resources Ltd, as well as $10 million in cash.
· In return Sandstorm is receive a $200 million gold stream at Hod Maden and a 34% equity stake in Royalty Resource Partners, and a $95 million debenture.
· Positions Sandstorm as a pure-play precious metals royalty and streaming company.
· Concurrent to the transaction, through a reverse takeover, Royalty North Partners will become Horizon Copper.
· Sandstorm and Horizon Copper hope to become a strategic partners and collaborate on future acquisitions whereby Sandstorm purchases streams on the precious metal by-products from the copper project acquisitions made by Horizon Copper.”
Hod Maden gold stream: Sandstorm will receive 20% of all gold produced paying 50% of the gold spot price until 405,000 ounces. After 405,000, Sandstorm will receive 12% of the gold produced for the life of the mine paying 60% of the gold spot price.
Nomad Royalty Company Acquisition:
· In May 2022, Sandstorm entered into an agreement to buy all the issued and outstanding common shares of Nomad in an all-share transaction.
· Each Nomad share holder will receive 1.21 common shares of Sandstorm.
· Nomad Royalty Company Ltd has a market cap of approx. $460 million giving the implied value of the deal at the time of the announcement at $590 million.
· It owns a portfolio of 20 royalty and streaming assets of which 7 are currently producing.
· The deal is expected to close in the 2H 2022.
BaseCore Metals LP Transaction
· Sandstorm has agreed to purchase 9 royalties and 1 stream from BaseCore Metals.
· BaseCore Metals is a 50/50 Limited Partnership between Glencore and Onterio Teacher’s Pension Plan.
· The payment will be made through $425 million in cash and $100 million in common of common shares of Sandstorm.
· These 10 assets are high quality, long-life assets with 3 currently producing.
· The deal is expected to close by the end of Q3 2022.
Horizon Copper Part II
· In May, concurrent with the BaseCore transaction, Sandstorm amended the LOI to include the sale of a copper stream it received from BaseCore to Horizon Copper.
· Sandstorm will receive royalties, $50 million in cash, a $150 million debenture and $26 million worth of Horizon Copper.
· The RTO is expected to close in 2H 2022.
Summary
· In February, Sandstorm announced its intent to sell off its 30% stake in Hod Maden to Horizon Copper in exchange for a lucrative gold stream – zeroing in on being a royalty and streaming only company.
· In May, Sandstorm announced its plan to buy a combined 29 new royalties through its transactions with Nomad Royalty and BaseCore and then sell a royalty stream to Horizon Coper.
Sandstorm Extras:
· Sandstorm projects that between now and 2025 its FCF will nearly double (not counting any additional transactions) from 80-85,000 ounces in 2022 up to 155,000 ounces in 2025.
· In Q4 2021, Sandstorm initiated its inaugural dividend of $0.02 per share.
· On April 7th, renewed its normal course issuer bid (NCIB), which states SAND may purchase up to 18.9 million of its Common Shares, representing approximately 10%.
· On May 16th, Nolan Watson (CEO) purchased 12,500 shares upping his total shares held to 871,290.
Closing
· Stage of transition, streamlining, and growing becoming the leading mid-tier precious metals royalty and streaming company in a sector ripe for still more consolidation.
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