Sandstorm Gold arranges US$80 million bought deal

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Sandstorm Gold Ltd. [SSL-TSX, SAND-NYSE American] has arranged to raise US$80 million from a bought deal offering.

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.

Following the recent purchase of Nomad Royalty Co. Acquisition [NSR-TSX, NYSE] and a basket of royalties and streams from BaseCore Metals Royalty LP, its portfolio consists of 260 streams and royalties, of which 39 of the underlying assets are cash-flowing with no asset contributing more than 15% of the company’s consensus net asset value.

As a result of the acquisition, Sandstorm increased its 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.

Sandstorm said a syndicate of underwriters has agreed to buy 15.7 million Sandstorm common shares for US$5.10 per shares on a bought deal basis, a move that is expected to generate gross proceeds of US$80 million.  The company said it has granted the underwriters a green shoe option to purchase up to an additional 15% of the offering to cover overallotments. That option is exercisable for a period of 30 days after the closing date which is expected to occur on October 4, 2022.

The company said it plans to use the net proceeds of the offering for future acquisitions of streams and royalties, the repayment, from time to time, of amounts drawn under the company’s revolving credit facility, and other general working capital purposes.

News of the financing came after the close of trading on September 27, 2022, when Sandstorm shares closed at $7.62. The shares are currently trading in a 52-week range of $11.61 and $6.86.

One of Sandstorm’s key assets is a 20% gold stream on the Hod Maden project which is located in northeastern Turkey within the Eastern Pontides metallogenic belt. The project has a proven and probable reserve of 8.7 million tonnes at an average grade of 8.8 g/t gold and 1.5% copper. That amounts to 2.45 million ounces of gold and 287 million pounds of copper.

A feasibility study released in 2021 envisages an underground mine with a processing rate of 800,000 tonnes per year and a base case mine life of 13 years, with average annual production of 195,000 ounces of gold equivalent (AuEq) annually at an average grade of 11.1 g/t AuEq.

“Since announcing the transformation of our Hod Maden interest into a traditional gold stream earlier this year, we have received an overwhelmingly positive feedback from shareholders who are eager to see Sandstorm become a pure-play royalty and streaming company once again,” Sandstorm President and CEO Nolan Watson said recently.

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