Sandstorm Gold (TSX:SAND) announced yesterday that it had agreed to an all-share transaction worth $590 million to buy Nomad Royalty. On top of that deal, Sandstorm also agreed to acquire nine other royalties and a stream for $525 million in cash and stock from BaseCore Metals. This is part of Sandstorm’s strategic growth plan to solidify its position further to become the highest-growth, highest-liquidity mid-tier royalty and streaming company.
Nolan Watson, Sandstorm Gold’s president and chief executive, commented: “We believe that precious metals and copper are poised to materially outperform the market in the coming years, and we are excited to provide investors with exposure to long-life, high quality, and low-cost assets focused on gold, silver and copper.”
The deals represent further revenue for Sandstorm as $27 million in revenue was contributed from Nomad’s portfolio last year, representing approximately 16,000 gold equivalent ounces. The other deal involves the joint venture between Glencore and the Ontario Teachers’ Pension Plan Board known as BaseCore Metals. The company’s portfolio holds ten royalty and streaming assets. Three of the ten are for producing assets.
The royalty format involves a company paying the owner of a mineral deposit a percentage of revenue or profit in exchange for the right to mine that deposit. The streaming deal gives Sandstorm the right to purchase all or part of the future production from a mine at a set price.
Royalty and streaming deals have become more popular in the past decade as they have many benefits: they offer exposure to a commodity and diversification from the risky mining business, they can be bought through an exchange-traded fund (ETF), and they are also relatively low cost.
The expected production boost in 2022 from the transactions for Sandstorm Gold could be up to 22% to hit between 80,000 and 85,000 gold equivalent ounces. This would be an increase from previous guidance which showed estimates of 65,000 to 70,000 gold equivalent ounces. However, the main highlight is the production boost the company expects in the next three years. By 2025, the company has said that the two key acquisitions will increase production by up to 55%, to reach 155,000 ounces.