Evolve is a private battery and energy transition royalty company backed and led by Joseph de la Plante and Vincent Metcalfe, both formerly of Nomad Royalty Company Ltd
(Credit: Dominik Vanyi on Unsplash)
Sandstorm Gold Ltd. (“Sandstorm Gold Royalties”, “Sandstorm” or the “Company”) (NYSE: SAND, TSX: SSL) is pleased to announce that the Company has signed a definitive asset purchase agreement to sell a collection of non-core, non-precious metals royalties for cash proceeds of $21.0 million plus the retention of the next $10 million in proceeds from the Copper Mountain Royalty (as defined below). In conjunction with accelerated deleveraging driven by recent non-core asset sales and the current commodity price environment, Sandstorm’s Board of Directors has approved the use of the renewed Normal Course Issuer Bid (“NCIB”) allowing the Company to purchase its common shares from time to time when management believes the common shares are undervalued by the market (further details below). All dollar figures are in US dollars unless otherwise stated.
Sandstorm has signed a definitive asset purchase agreement with Evolve Strategic Element Royalties Ltd. (“Evolve”) for the sale of eight royalties for cash consideration of $21.0 million (the “Cash Purchase Price”) plus the retention of the next $10 million in proceeds from the Copper Mountain Royalty (the “Transaction”). The Transaction is part of the Company’s previously announced plan to monetize certain non-core assets to expedite debt repayment. Upon completion of the Transaction, Sandstorm will have sold over $50 million of non-core royalty and equity investments since the third quarter of 2023, including approximately $40 million in cash consideration. While further monetization of the Company’s investment portfolio is possible, subject to market conditions, the Company does not intend to monetize further royalty or stream assets. Sandstorm continues to focus on de-leveraging its balance sheet while also accelerating investment in higher-returning initiatives including the repurchase of undervalued Sandstorm shares via the renewed NCIB.
Royalties purchased from Sandstorm by Evolve (the “Royalty Package”) include:
Highland Valley Copper: a 0.5% net profits interest (“NPI”) on Teck Resources Ltd.’s Highland Valley Copper project in British Columbia, Canada (the “HVC Royalty”).
Copper Mountain North Pit: a 2.5–5.0% net smelter returns (“NSR”) royalty on the North Pit at the Copper Mountain mine in British Columbia, Canada (the “Copper Mountain Royalty”). Sandstorm maintains near-term exposure to the Copper Mountain North Pit via the retention of $10 million in royalty revenue (the “Retained Copper Mountain Royalty”). Based on Hudbay Minerals Inc.’s current Mineral Reserves, royalty revenues at Copper Mountain are limited to the North Pit. These reserves are expected to be largely mined over the next 24 months with royalty payments expected to be similar to the Retained Copper Mountain Royalty. Since acquiring the Copper Mountain Royalty in 2015, Sandstorm has recognized royalty revenues of approximately $5.2 million, including approximately $4 million within the last 12 months.
Seymour Lake: a 1.5% NSR royalty on Green Technology Metals Limited’s (“Green Technology Metals”) Seymour Lake lithium development project in Ontario, Canada. The royalty covers the Seymour deposit but does not cover Green Technology Metals’ Root project.
Obalski: a 1.0–1.5% NSR royalty on TomaGold Corp’s Obalski copper-zinc project in Québec, Canada (the “Obalski Royalty”).
Scott Lake: a payment upon commercial production on Yorbeau Resources Inc.’s Scott Lake project in Québec, Canada ranging from C$1–$4 million depending on the size of Scott Lake reserves at the time of commercial production (the “Scott Lake Payment”).
Saints-Leinster & Scotia: a 2.5% NSR royalty on the Saints-Leinster and Scotia nickel development projects owned by Future Battery Metals Ltd. and Shine Resources Pty Ltd. in Western Australia.
Sandstorm will receive the Cash Purchase Price in the second quarter of 2024 upon completion of customary closing conditions including the expiry of certain preemptive rights held by project operators. Evolve has secured financing commitments in excess of the Cash Purchase Price.
Based on the analyst consensus net asset value (“NAV”) of the Royalty Package, the Transaction concluded at approximately 1.0x street consensus NAV based on the Cash Purchase Price excluding proceeds from the Retained Copper Mountain Royalty. Relative to Sandstorm’s invested capital for the Royalty Package, the Company will realize an internal rate of return exceeding 20% on the Royalty Package, including cash received to date, the Cash Purchase Price, and the Retained Copper Mountain Royalty. RBC Capital Markets served as financial advisor for the Transaction.
The Transaction is not expected to materially impact Sandstorm’s near or long-term production guidance given the expected cash flows from the Retained Copper Mountain Royalty and the early-stage nature of several assets in the Royalty Package. The Company maintains its 2024 production guidance of between 75,000–90,000 gold equivalent ounces, expected to increase to approximately 125,000 ounces within the next five years.
Source: Company Press Release