Sandstorm Gold Ltd. [SSL-TSX; SAND-NYSE MKT] reports that its scheme of arrangement to acquire Mariana Resources Ltd. has become effective in accordance with its terms, following the sanction of the scheme by the Guernsey Court on June 26, 2017, and the delivery of the sanction court order to the Guernsey Registry. Accordingly, the acquisition has been completed and Mariana has become a wholly-owned subsidiary of Sandstorm.
Under the terms of the scheme, scheme shareholders on the register at the scheme record time, being 5 p.m. London time on June 28, 2017, will receive 0.2573 Sandstorm shares and 28.75 pence in cash for each scheme share held, subject to rounding for fractional entitlements.
Sandstorm has made applications to the TSX and NYSE MKT for the new Sandstorm shares to be admitted to trading and such admission is expected to occur within 14 days. The total consideration paid was approximately US $175 million, including 32,832,813 new Sandstorm shares issued under the scheme (at a price of US $3.87 as of the close of trading on June 30, 2017) and cash consideration of approximately US $48 million.
100% increase in production for 19% dilution:
- Hot Maden anchor asset in Turkey is expected to increase the company’s attributable gold equivalent ounces to more than 135,000 by 2022, increasing operating cash flow to more than US $100 million (based on a US $1,250/oz gold price).
Hot Maden is a high-grade, low-cost asset with significant exploration upside:
- A preliminary economic assessment (effective date of March 1, 2017) projects an after-tax NPV (net present value) and IRR (internal rate of return) of US $1.37 billion and 153%, respectively (100% basis), with estimated all-in sustaining costs of less than $400 per gold equivalent ounce.
- The indicated mineral resource of 3.43 million gold equivalent ounces (7.1 million tonnes at 12.2 g/t gold and 2.3% copper) is based on approximately 15,000 metres of drilling from 52 drill holes using a 0.2 g/t gold equivalent cut-off. More than 60 drill holes have been completed subsequent to the release of the indicated resource estimate, with many assay results returning significant mineralization.
- The total land package is 74 km2 in size with the current focus being a seven-kilometre alternation zone. The majority of the exploration drilling has been over one kilometre of the alteration zone and several exploration targets have been identified along strike and parallel to the identified orebody.
Majority operator Lidya Madencilik Sanayi ve Ticaret AS is a strong local partner with experience exploring, developing, permitting and operating projects in Turkey:
- Lidya is part of a large Turkish conglomerate called Calik Holding and is currently partnered with Alacer Gold Corp. on several projects in Turkey including the producing Copler mine and the development-stage Gediktepe and Kartaltepe projects.
- Acquisition of Mariana includes exploration properties in Ivory Coast, Turkey and Argentina. Sandstorm has begun the process to spin out the exploration properties into a separate public company and will retain net smelter return royalties as well as equity in the spinout. The spinout process is expected to be completed within six to 12 months and has the potential to add incremental value to the acquisition.
Sandstorm’s President and CEO, Nolan Watson, remarked, “Today is an exciting day for Sandstorm shareholders as this deal is truly transformative for the company. Hot Maden is one of the highest-grade undeveloped projects in the world and will add high-margin ounces to Sandstorm’s production profile. Opportunities to acquire anchor assets like Hot Maden are rare and with the exploration potential that we see on the property, we anticipate that our 30% interest will continue to grow in value over time.”
Watson added, “Now that the transaction is closed and we are no longer under the marketing restrictions imposed by the United Kingdom takeover code, we are glad to be able to speak more candidly about Hot Maden and the impact that it will have on Sandstorm’s future growth. Encouragingly, a number of high-profile institutional investors have been building positions in the company including multibillion-dollar asset managers like Blackrock, Fidelity, MAN GLG and Setanta Asset Management.
“We are fortunate to be in a strong financial position with no debt, cash on the balance sheet and an undrawn $110 million credit facility available to us. In the short term we intend to buy back our shares but we are also working on a number of acquisition opportunities in order to continue to grow the company. I encourage all of you to join our upcoming webcast as we will be providing a thorough review of the acquisition rationale and Sandstorm’s plans to continue building shareholder value.”
In a related development, Sandstorm reported drilling results from Hot Maden. Hole HTD-111 is a step-out core hole drilled along the southwest side of the southern zone and HTD-128 is an infill core hole drilled within the Main Zone. Highlights from these drill results include:
- HTD-111: 26.0 meters of 4.4 g/t gold and 0.57% copper
- HTD-128: 105.5 meters of 17.4 g/t gold and 2.34% copper
As of July 3, 2017, the total amount of drilling for the year stood at 14,286 metres completed in 40 holes, with three additional holes in progress.