Sandstorm to scoop up Gold Royalties in $5.7M all-share deal

VANCOUVER — Streaming and royalty outfit Sandstorm Gold (TSX: SSL; NYSE-MKT: SAND) has been on a bit of a dealmaking tear to start the year. The company locked down 10 new royalty agreements in West Africa and Nevada, and on Feb. 18 it announced a friendly, all-share deal for junior Gold Royalties (TSX: GRO; US-OTC: GRYCF), which adds a portfolio of 18 royalties on 13 mining projects in Canada.

Under the agreement, Gold Royalties investors would receive 0.045 of a Sandstorm share for each share held. The deal values Gold Royalties at 20¢ per share, or a 70% premium based on the company’s 20-day volume-weighted average trading price of 11.8¢ per share. The total value of the transaction is $5.7 million vis-à-vis Sandstorm’s Feb. 17 closing price.

Prior to executing the agreement, Sandstorm locked up share votes held by management and certain members of Gold Royalties’ board, who collectively hold 5.5% of the company’s outstanding equity. Gold Royalties president and CEO Ryan Kalt labelled the terms “a tremendous premium,” despite “a challenged equity market for junior mining.”

The acquisition would give Sandstorm a variety of assets across eastern Canada, including a 0.5% net smelter return royalty (NSR) on Metanor Resources’ (TSXV: MTO; US-OTC: MEAOF) Bachelor Lake gold mine, 225 km northeast of Val-d’Or, Que.

Sandstorm signed a gold sale agreement with Metanor back in 2011, which entitles Sandstorm to buy 20% of Bachelor Lake’s life-of-mine gold forUS$500 per oz. Sandstorm made a US$20-million upfront payment to acquire the stream.

Gold Royalties also holds a 1% NSR on eight claims north of Metanor’s Barry gold deposit, and a 1% NSR on 184 claims north of Eagle Hill Exploration’s (TSXV: EAG) multi-million ounce Windfall Lake gold property in Northern Quebec’s Abitibi belt.

The latest announcement follows hot on the heels of Sandstorm entering 10 royalty agreements in January. The company signed deals that could inject $9 million, including $8 million in potential financing for Orezone Gold (TSX: ORE; US-OTC: ORZCF) to advance its resource-stage Bomboré gold project in Burkina Faso.

In that agreement, Sandstorm has committed US$3 million upfront to acquire a 0.5% NSR at Bomboré, as well as US$5 million that Orezone can draw down for two years. Sandstorm can pick up another 0.3% NSR for US$2 million and a further 0.5% NSR for US$3 million. The company also has a first right of refusal on future stream financings up to 36 months following commercial production at the mine.

Gold mineralization occurs within the main Bomboré shear zone and is associated with silica, sulphide and carbonate-albite-tourmaline-biotite alteration, as well as arrays of quartz veins and veinlets. The project is the “largest undeveloped oxide gold deposit” in the West African country, and hosts 67 million tonnes of oxide and transitional material grading 0.91 gram gold per tonne for 2 million contained oz.

Sandstorm also paid $1.2 million to acquire a 1% NSR on Castle Peak Mining’s (TSXV: CAP) Akorade project in Ghana. The project consists of nine concessions in the Ashanti gold belt covering 225 sq. km near the regional mining centre of Tarkwa. In April 2013 Castle Peak released a preliminary inferred resource on Akorade’s Apankrah Shoot that totals 275,000 tonnes averaging 8.6 grams gold for 76,000 contained oz.

Castle Peak is working towards a preliminary economic assessment at Akorade, with recent delineation drill results highlighted by 7 metres of 7.05 grams gold in hole 38. The target was selected and drilled based on historic field work and artisanal miners recovering high-grade material.

Finally, Sandstorm acquired eight royalties on early stage projects from Tarsis Resources (TSXV: TCC; US-OTC: TARSF) as part of a property transaction. The royalties were considerations of an agreement wherein Sandstorm vended eight epithermal, Carlin-style assets to Tarsis.

The exploration portfolio was part of deal for Premier Royalty that Sandstorm sealed with Premier Gold Mines (TSX: PG; US-OTC: PIRGF) in 2013. The assets include: The Bellview project in White Pine County; the East Walker property in Lyon County; the Hot Pot prospect in Lander County; the Horsethief project in Lincoln County; the Fri gold asset in Nye County; the Koben project in Eureka County; the Ashby property in Mineral County; and the Columbia asset in Humboldt County.

“The additional royalties provide Sandstorm with long-term exposure to a number of high-quality assets with a relatively small capital outlay,” Sandstorm’s president and CEO Nolan Watson said in a January release. “We now have a total of 56 streams and royalties, and we are focused on deploying our available capital of over US$165 million into additional transactions that will grow our future production and cash flow.”

Sandstorm has traded within a 52-week window of $2.80 to $8.19, and closed at $4.38 per share at press time. The company has 118 million shares outstanding for a $512-million market capitalization. Based on the existing gold streams and royalties, Sandstorm has forecast an attributable gold-equivalent production of 45,000 oz. in 2014.

Meanwhile, Gold Royalties shares jumped 76% on news of the deal before closing at 18.5¢. The company has 29 million shares outstanding for a $5.3-million market capitalization.