Sandstorm withdraws 2020 production forecasts

Yamana Gold’s Cerro Moro gold-silver mine is southern Argentina, which has one of Sandstorm’s many streaming agreements. Source: Sandstorm Gold Ltd.

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Sandstorm Gold Ltd. [SSL-TSX; SAND-NYSE American] on Friday March 20 said it is withdrawing its previously announced production forecasts for 2020. It attributed the decision to the unknown long-term effects of the current global health pandemic.

“Although Sandstorm has not received any direct notifications of closures at any partner mine site, we believe it is reasonable to expect that actions taken reduce the spread of COVID-19 will affect global mining production levels during 2020,” the company said in a press release.

Sandstorm shares eased 6.7% or 49 cents to $6.80 on Friday. The shares are currently trading in a 52-week range of $4.64 and $10.50.

Sandstorm is a royalty financing company that seeks to acquire gold and other metals purchase agreements and royalties from companies that have advanced stage projects or operating mines.

In return for making upfront payments to acquire a gold stream, Sandstorm receives the right to purchase, at a fixed price per ounce, or at a fixed percentage of the spot price, a percentage of the mine’s gold, silver and other commodity production for the life of the mine.

The company has a portfolio of over 190 royalties, producing cash flow from 23 producing mines.

Contributions from the Yamana Gold Inc. [YRI-TSX, AUY-NYSE] silver stream was the main driver of growth in the number of ounces sold during 2019. Sandstorm also received its first delivery from Yamana’s Cerro Moro Mine in Argentina during the second quarter of 2019. Cerro Morro was expected to produce 6.0 million ounces of silver and 130,000 ounces of gold in 2019.

Sandstorm’s decision to withdraw its 2020 production forecasts follows an announced lockdown by the Argentina government that does not appear to provide an exemption for mines. In an investment report, Scotiabank points out the Cerro Moro gold-silver mine is the largest source of Sandstorm’s 2020 revenue estimates at 21%.

Following the mandatory social isolation declaration issued by the government of Argentina in the late evening of March 19, 2020, and after consultation with employees, various government agencies and other stakeholders, Yamana said it will be implementing a temporary, partial demobilization of its workforce at Cerro Moro.

To protect the health and well-being of Sandstorm shareholders, the company said it has decided to hold its annual meeting on a virtual electronic basis. It said the annual meeting will still be held on April 15, 2020, at 10:00 a.m. (PDT).

During the fourth quarter of 2018, Sandstorm announced a share buyback program to purchase up to 18.3 million common shares of the company. Since the announcement, Sandstorm said it has purchased approximately 14.6 million shares. Of that amount, 3.7 million were purchased in March 2020.

The company recently said its revolving credit facility was amended allowing the company to borrow up to $225 million with an additional uncommitted accordion of up to $75 million, for a total facility of $300 million for acquisitions and general corporate purposes. The tenure of the facility is four years and is extendable by mutual consent of Sandstorm and the banking syndicate.

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