Sandstorm acquires US$1.1 billion asset package

Sandstorm Gold Ltd. [SSL-TSX, SAND-NYSE American] said Monday unveiled a US$1.1 billion portfolio transformation that includes the purchase of Nomad Royalty Co. Acquisition [NSR-TSX, NYSE] and a basket of royalties and streams from BaseCore Metals Royalty LP.

Sandstorm shares were active on the news, easing 10% or 96 cents to $8.60 on volume of 637,434. The shares are currently trading in a 52-week range of $11.61 and $6.86.

Sandstorm Gold is a gold royalty company that provides upfront financing to gold mining companies that are looking for capital. In return it receives the right to a percentage of the gold production from a mine, for the life of the mine.

Prior to Monday’s announcement, the company had previously acquired a portfolio of 229 royalties, of which 28 of the underlying mines are in production. On completion of the latest transactions, Sandstorm’s resulting portfolio will total 260 streams and royalties, of which 39 of the underlying assets will be cash-flowing with no asset contributing more than 15% of the company’s consensus net asset value.

It will also increase Sandstorm’s 2022 production guidance by approximately 22% from 65,000 to 70,000 gold equivalent ounces (GEO) to 80,000 to 85,000 Geo, while increasing long-term production guidance by 55% from 100,000 GEOs to 155,000 Geos 2025.

“These transactions mark the next step in the strategic growth plans for Sandstorm,” said Sandstorm President and CEO Nolan Watson. “Today’s announcement propels the company forward in both size and scale while solidifying Sandstorm’s position amongst its peers as the highest-growth streaming company.”

On Monday, Sandstorm said it is acquiring all the issued and outstanding shares of Nomad Royalty. The implied value of the transaction is US$590 million. Nomad holds a portfolio of 20 royalty streams, of which seven are currently producing mines. In 2021, the portfolio contributed $27 million in revenue and approximately 16,000 GEOs. Sandstorm expects Nomad’s production to grow by approximately 40,000 GEO by 2025

Sandstorm is also acquiring nine royalties and one stream from BaseCore Metals for US$525 million, an amount that is payable in cash ($425 million) and shares ($100 million).

BaseCore is a company owned equally by affiliates of Glencore Plc and Ontario Teachers’ Pension Plan Board. Its royalty package includes a 1.66% net profits interest in the Antamina copper mine in Peru, a 1.0% stream on production from CEZinc (Valleyfield, Que.), a 2.0% net smelter return royalty on the Horne 5 gold project (Rouyn-Noranda, Que.) and an 0.5% NPI on Highland Valley Copper (British Columbia).

Concurrent with the BaseCore transaction, Sandstorm has partnered with Royal North Partners Ltd. to sell a portion of a copper royalty acquired in the BaseCore Transaction and retain a silver stream on the asset. This is a reference to an agreement that will see Sandstorm selling the 1.66% Antamina NPI to Horizon Copper. However, Sandstorm will retain a long-life silver stream on the Antamina mine.