Sandstorm Acquires Multiple Cash-Flowing Stream & Royalty Assets for $138 Million - ACQUISITION
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ACQUISITION J U LY 2 0 2 1
Sandstorm Acquires Multiple
Cash-Flowing Stream & Royalty
Assets for $138 Million
A B R I GHTER WAY TO IN VEST IN GOL D TMC AU T I O N A RY N OT E R E G A R D I N G F O R WA R D - LO O K I N G I N F O R M AT I O N A N D N O N - I F R S M E A S U R E S
Except for the statements of historical fact contained herein, the information presented constitutes “forward-looking statements”, within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, the Private
Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, concerning the business, operations and financial performance and condition of Sandstorm Gold Ltd. (“Sandstorm” or the “Company”). Forward-looking
statements include, but are not limited to, the expectation that various closing conditions of the VGML Stream will be met including but not limited to consent of the Reserve Bank of Fiji, approval from the majority of Zhongrun’s shareholders
in attendance at a special shareholders’ meeting to approve the transaction, consent from the Minister of Lands and Mineral Resources, consent from the Fiji Director of Mines., the expectation that the VGML Stream will close, the expectation
that the closing of the VGML Stream will occur in 4–6 weeks, the estimation that the Royalties will contribute US$12–$15 million in revenue over the next five years, the estimation that the Vale Royalties will contribute US $11–$12 million in
revenue in 2021, expectations that VGML Stream deliveries will grow from 2,280 ounces per year in the first 24 months to 5,430 per year for the remainder of the Fixed Delivery Period, the expectation that there is significant growth potential
at the Vatukoula Mine, VGML’s plans to expand underground operations at the Vatukoula Mine and use of proceeds from the VGML Stream, expectations of percentage of Sandstorm’s long-term revenue attributable to iron-ore, expectations
regarding increases in production capacity at Vale’s Northern System and Southern System, mine life expectations for the Serra Norte and Serra Sul mining complexes, expectations for timing of the Southern System contributing to the
Vale Production Royalties, statements regarding performance and expectations and Sandstorm’s 2021 guidance and outlook are based on public forecasts and other disclosure by the third-party owners and operators of our assets or on our
assessment thereof including certain estimates based on such information, the future price of gold, silver, copper, iron ore and other metals, the estimation of mineral reserves and resources, realization of mineral reserve estimates, the timing
and amount of estimated future production, including the increases to production guidance, the offer and sale of Common Shares under the at-the-market equity program (the “ATM Program”), including the timing and amounts thereof, the
use of any proceeds from the ATM Program, and statements with respect to Sandstorm’s proposed NCIB and the number of Common Shares that may be purchased under the normal course issuer bid.
Forward-looking statements are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performances, or achievements of Sandstorm to be materially different from future results,
performances or achievements expressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which Sandstorm will
operate in the future , including the receipt of all required approvals, the price of gold and anticipated costs. Certain important factors that could cause actual results, performances or achievements to differ materially from those in the forward-
looking statements include, amongst others, failure to receive necessary approvals, changes in business plans and strategies, market conditions, share price, best use of available cash, gold and other commodity price volatility, discrepancies
between actual and estimated production, mineral reserves and resources and metallurgical recoveries, mining operational and development risks relating to the parties which produce the gold Sandstorm will purchase, regulatory restrictions,
activities by governmental authorities (including changes in taxation), currency fluctuations, the global economic climate, dilution, share price volatility and competition. Forward-looking statements are subject to known and unknown risks,
uncertainties and other important factors that may cause the actual results, level of activity, performance or achievements of Sandstorm to be materially different from those expressed or implied by such forward-looking statements, including
but not limited to: the impact of general business and economic conditions, the absence of control over mining operations from which Sandstorm will purchase gold, other commodities or receive royalties from, and risks related to those
mining operations, including risks related to international operations, government and environmental regulation, actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans
continue to be refined, risks in the marketability of minerals, fluctuations in the price of gold and other commodities, fluctuation in foreign exchange rates and interest rates, stock market volatility, as well as those factors discussed in the section
entitled “Risks to Sandstorm” in Sandstorm’s annual report for the financial year ended December 31, 2020 and the Company’s annual information form dated March 30, 2021 available at www.sedar.com. Although Sandstorm has attempted
to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Sandstorm does not undertake to update any forward-looking statements that are contained or incorporated by reference, except in accordance with applicable securities laws. Sandstorm has included certain performance measures in this
presentation that do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS) including average cash cost per attributable gold equivalent ounce, average realized gold price per attributable ounce,
cash operating margin, cash flows from operating activities excluding changes in non-cash working capital, and all-in sustaining cost per gold ounce on a co-product basis. Average cash cost per attributable gold equivalent ounce is calculated
by dividing the Company’s cost of sales, excluding depletion by the number of attributable gold equivalent ounces sold. The Company presents average cash cost per ounce as it believes that certain investors use this information to evaluate the
Company’s performance in comparison to other streaming companies in the precious metals mining industry who present results on a similar basis. Average realized gold price per attributable ounce is calculated by dividing the Company’s
revenue by the number of Attributable Gold Equivalent ounces sold. The Company presents average realized gold price per attributable ounce as it believes that certain investors use this information to evaluate the Company’s performance
in comparison to other streaming companies in the precious metals mining industry that present results on a similar basis. Cash operating margin is calculated by subtracting the average cash cost per attributable gold equivalent ounce from
the average realized selling price per attributable gold equivalent ounce. The Company presents cash operating margin as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other
companies in the precious metals mining industry who present results on a similar basis. The Company has also used the non-IFRS measure of cash flows from operating activities excluding changes in non-cash working capital. This measure
is calculated by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by (used in) operating activities. The Company presents cash flows from operating activities excluding
changes in non-cash working capital as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other streaming companies in the precious metals mining industry that present results on a
similar basis. The Company presents all-in sustaining cost per gold ounce on a co-product basis and all-in sustaining cost per gold ounces on a by-product basis, as it believes that certain investors use this information to evaluate the Company’s
performance in comparison to other companies in the precious metals mining industry that present results on a similar basis. Sandstorm has included attributable gold equivalent ounces as a performance measure in this press release which
does not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS).The Company’s royalty and other commodity stream revenue is converted to an attributable gold equivalent ounce basis by dividing
the royalty and other commodity stream revenue for that period by the average realized gold price per ounce from the Company’s gold streams for the same respective period. These attributable gold equivalent ounces when combined with the
gold ounces sold from the Company’s gold streams equal total attributable gold equivalent ounces sold and may be subject to change. The presentation of this non-IFRS measure is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate these non-IFRS measures differently. Note these figures have not been audited and are subject to change.
ACQUISITION Cover Photo by José Rodrigo Zermiani / Agência Vale 02ASSET SPOTLIGHT
Vatukoula 01 26koz FIXED GOLD DELIVERIES
OVER SIX YEARS, FOLLOWED
Stream & Royalty BY VARIABLE STREAM
Vatukoula Gold Mines PTE Ltd.
02 STRONG HISTORICAL GOLD
PRODUCTION OF 7+Moz
03 SIGNIFICANT EXPLORATION
UPSIDE POTENTIAL
PURCHASE PRICE
US$30M
ACQUISITION 03VATUKOULA STREAM & ROYALTY
Vatukoula Gold Mine
Immediate
Gold Deliveries
STREAM & ROYALTY TERMS
Fixed Gold Deliveries of 25,920 oz over initial 6-year VATUKOULA CLAIM MAP
period with ongoing payment of 20% of spot price1
Sandstorm Stream
2.9% Gold Stream thereafter with ongoing payment 5 km AOI
of 20% of spot price1 Sandstorm Royalty
1.0% NSR on VGML’s interest in certain prospecting 5 km AOI
licenses2 5 km
1 Stream delivery rate of 2.9% for first 100koz Au produced in a calendar year, 2.55% for the volume of production above 100koz.
2 VGML currently holds a 45% interest in these licenses, for an effective 0.45% NSR on a 195 km2 land package.
Any production within both the royalty and stream AOI will be subject only to the stream.
ACQUISITION 04ASSET SPOTLIGHT
Vale Royalty 01 ESTIMATED 2021 ANNUAL
REVENUE OF $11–12 MILLION 1
Package
02 ASSET DIVERSIFICATION
Vale S.A.
03 30 + YEAR MINE LIFE FROM
FIRST COST QUARTILE ASSETS
04 AVERAGE ANNUAL LONG-TERM
REVENUE OF $6.5 MILLION
(AT $75/t)
NET PURCHASE PRICE
US$108M
José Rodrigo Zermiani / Agência Vale
ACQUISITION 1 Based on consensus iron ore prices and Vale 2021 production guidance. 05VALE ROYALTY PACKAGE
Northern
Total Royalty
System Land Package
of 15,564 km
Serra Sul (S11D Mine)
Serra Norte 2
Serra Leste
ROYALTY TERMS
Sossego
0.04% net sales royalty on iron ore sales from:
Brazil
Northern System
Portion of Southeastern System
Southeastern (after threshold is met, expected in 2024)
System
0.03% net sales royalty on the copper-gold
Itabira
Sossego mine
Minas Centrais
Mariana
0.02–0.06% net sales royalty on certain
other assets
ACQUISITION 06VALE ROYALTY PACKAGE
First Cost Quartile
Operator Production Cost Quartile (%)
125
25% 50% 75% 100%
Vale is the world's largest iron
Total Cash Cost ($/dmt)
100
ore producer, comprising the
majority of the first cost quartile. 75
50
2021 PRODUCTION BY TOTAL CASH COST
25
Vale
0
Source: S&P Global Market Intelligence.
Total Cash Cost (CFR), Consolidated Iron Products Production.
ACQUISITION 07PORTFOLIO IMPACT
Future Gold
130
125
Production1
(ounces in 000’s) 70
80
65
Vale + Vatukoula
14%
2021
Increase
20
22
20
20
20
20
21
23
24
25
1 Gold equivalent production and other related contractual cash flows.
ACQUISITION 08PORTFOLIO IMPACT
SANDSTORM
67%
Lowest
WHEATON
36%
FRANCO-NEVADA
29%
Cost Mines
ALL IN SUSTAINING COST PROFILE
OSISKO (TOP 10 ASSETS BY QUARTILE)
20% 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
ROYAL GOLD
13%
Source: BMO Capital Markets Equity Research at street consensus pricing, S&P Global Market Intelligence, Wood Mackenzie.
Weighted by BMO Capital Markets Equity Research model NPV estimates at street consensus pricing and excludes oil & gas and diamond assets.
ACQUISITION 09PORTFOLIO IMPACT
Diversified
Portfolio 60%
68% 69% 69%
72%
MINERAL PROPERTY VALUE CONTRIBUTION
Top 5 Assets Assets 6–10 Other
FRANCO-NEVADA OSISKO SANDSTORM ROYAL GOLD WHEATON
Source: BMO Capital Markets Equity Research asset NPV estimates.
ACQUISITION 10PORTFOLIO IMPACT
Precious Metals
Focused
80%+ of Sandstorm’s long-term
revenue will be derived from
precious metals.
SANDSTORM ESTIMATED REVENUE BY METAL
Precious Metals Copper Iron Ore Other
2021 2024
Price Assumptions: $1,800/oz Au; $22/oz Ag; $3/lb Cu; $145/t Fe (2021), $75/t Fe (2024)
ACQUISITION 11You can also read
