Sandstorm Gold Ltd. (“Sandstorm Gold”, “Sandstorm” or the “Company”) is in the business of providing financing solutions to companies in the mining sector, principally through stream and royalty transactions, enabling resource companies to further the exploration, development and operations at a mining property. The properties over which the Company holds stream and royalty interests are owned and operated by independent mining companies and Sandstorm does not exercise control or influence over the activities of the property owners. However, Sandstorm is committed to furthering the responsible development of mineral projects and the sustainable extraction of metals through its financial investments, including with respect to environmental factors (e.g., toxic emissions and waste, carbon emissions, biodiversity and land use, water stress), social considerations (e.g., occupational health and safety, labour management) and governance issues (e.g., corruption and instability, corporate governance); collectively (“ESG”).
ESG – INDIRECT EXPOSURE
The Stream & Royalty Business Model
Sandstorm Gold provides an alternative source of capital to the mining industry in the form of stream and royalty financing arrangements. In exchange for upfront capital, Sandstorm receives a portion of the future metal or revenue generated from a mining operation but being a financier, the Company does not directly own or operate the projects and has indirect exposure to ESG issues that can arise during the life cycle of a resource project. Sandstorm’s indirect exposure to ESG risk factors are mitigated in part by the Company’s diversified portfolio of over 170 streams and royalties, over 20 of which are generating cash flow to the Company. There is no evidence of a statistical relationship or positive correlation between the ESG successes and challenges at the various mining projects within the Company’s portfolio of streams and royalties, indicating a clear diversification benefit to Sandstorm’s portfolio approach.
Sandstorm is committed to furthering sustainable development in the mining and metals industry through its investments and seeks to address ESG risks through the Company’s due diligence process that guides its investment decisions.
Investment Due Diligence
While Sandstorm does not control or influence the operations of any of the properties over which it has a stream or royalty interest, the Company recognizes that its financial investments may contribute to ESG factors. The Company’s strategy to mitigate ESG risks involves a thorough investigation and evaluation of the risk factors related to a mineral property prior to making an investment. Once a Sandstorm investment is made, the Company has no control over the project or the various ESG risks that can be associated with a mine. It is therefore the aim of Sandstorm’s due diligence process to successfully identify projects and companies that will act and operate in a responsible and sustainable manner.
Sandstorm's management team use a multi-disciplinary approach when evaluating potential transactions. In addition to relying on management's expertise, Sandstorm benefits from the experience and expertise of its Board of Directors. Board members are active in the review of potential material investments including participating in due diligence and providing technical, operational, political, financial, environmental, corporate social responsibility, and other expertise, where applicable. The due diligence team consists of professionals with experience and expertise in the fields of geology, mining, metallurgy, engineering, and finance. By conducting a robust and detailed due diligence process, Sandstorm endeavours to invest in projects with relatively low ESG risk. Where appropriate, the due diligence process involves, among other things, thorough desktop studies, the engagement of expert consultants, extensive interviews with the project management team, site visits as well as in depth deliberation. Sandstorm will determine if an investment should be made based on overall criteria, including ESG factors. The overall criteria is reviewed regularly by management and/or the Board of Directors, where applicable. Elements of Sandstorm's due diligence process related to ESG factors include, but are not limited to, the following considerations:
- Geology – is the mineralisation located in or near an environmentally sensitive or protected area?
- Biodiversity and land use – what is the proposed development footprint and how does that impact the region’s biodiversity? What offsets or mitigation measures are contemplated?
- Metallurgy – what are the risks associated with the process flow sheet including potential discharge and reagent use?
- Emissions and water usage/management – has the project’s emissions, hydrology and hydrogeology been properly studied and understood? Are there appropriate management/usage plans in place?
- Tailings management – what are the risk factors associated with the tailings management plan, both during operations and post-closure?
- Assessment – has a proper environmental and social impact assessment been completed?
- Management team – is the management team and board of directors of good repute and have they shown integrity and competency in their business?
- Community engagement – has the resource company engaged with the community where the project is located, including indigenous peoples where applicable?
- Social license – does the resource company have a social license to explore, develop and mine the property?
- Health and safety record - has the operation, or previous operations run by the management team in question, had disruptions caused by workplace accidents?
- Labour availability – is there a local workforce available? If not, what are the implications of an outside workforce? Are training programs available for local and indigenous workers?
- Labour management – has the operation, or previous operations run by the management team in question, had labour related work stoppages (e.g., strikes and lockouts)?
- Child labour – is child labour being employed? Sandstorm is firmly opposed to child labour and forced labour practices. The Company’s Code of Business Conduct & Ethics promotes compliance with Canadian governmental laws, rules and regulations which strictly condemn practices that involve child labour and forced labour.
- Compensation – how is the workforce compensated? Are the company, employee, and investor incentives aligned?
- Resettlement – are there resettlement requirements to development the project? If so, has the community been dealt with on an open and fair basis with appropriate consultation?
- Deal structure – can a stream/royalty transaction be structured in such a way as to mitigate some of the potential social risks?
- Political stability – is the asset located in a politically stable climate? Is the political climate improving or deteriorating?
- Regulatory framework – is there a developed regulatory framework for mineral exploration and mine development? Are there permitting risks related to the jurisdiction in question?
- Corruption and instability – has the management team been involved in or been accused of corruption?
- Corporate governance – does the resource company adhere to corporate governance best practices?
- Accounting – does the resource company exhibit a high degree of accounting and operational transparency?
After making an investment, Sandstorm monitors the ESG performance of its counterparties on an ongoing basis. Sandstorm’s streaming and royalty agreements typically include the following types of provisions for ongoing due diligence and to reduce exposure to ESG risks:
- Audit and inspection rights- Sandstorm may be entitled to audit the books and records of its partners on a periodic basis and may access and inspect the properties compromising the project. These rights provide Sandstorm further insight into the operations and assist in confirming compliance with the terms of the streaming and royalty agreements.
- Reporting obligations- streaming and royalty agreements typically contain a series of reporting obligations including the delivery of month and/or annual reports, updated mine plans, forecasts, and other documentation where applicable, which serve to keep Sandstorm informed of operations.
- Transfer restrictions- Sandstorm’s agreements may have restrictions that either (a) require consent for the operator of the agreement to transfer of a mine project, or (b) otherwise establish the circumstances in which such transfer is permissible. Such constraints are intended to ensure Sandstorm continues to be partnered with a quality operator over the life of the agreement.
- Security- where appropriate, Sandstorm will look to have in place suitable security arrangements, including corporate guarantees and/or other security over the mine project. This security is designed to secure Sandstorm’s investment during the term of the streaming or royalty agreement, to help mitigate the risks of insolvency or bankruptcy of the operator.
In addition to the above, Sandstorm manages ESG risks arising from current streams and royalties by undertaking ongoing due diligence where applicable, which includes but is not limited to, site visits, ongoing dialogue with the operators, and review of the corporate and social responsibility reports that are published by the Company’s partners.
Sandstorm endorses the ICMM Principals, the IFC Environmental, Health and Safety Guidelines for Mining and the e3Plus Framework for Responsible Exploration.
ESG – Third party operators
Below, Sandstorm has highlighted selected accomplishments of select operators and have provided links to the various sustainability reports or websites that they produce on a regular basis1. Sandstorm is proud of the accomplishments and the ongoing commitment to responsible production that such operators have demonstrated.
2017 Revenue: 25.0%
2017 Revenue: 10.5%
Asset: Santa Elena
2017 Revenue: 17.0%
2017 Revenue: 6.0%
Country: Burkina Faso
2017 Revenue: 10.1%
|Percentage of Total 2017 Mineral Revenue: 68.6%|
1 This information is based on the public disclosure of the Operator and has not been independently verified by Sandstorm.
ESG – DIRECT EXPOSURE
Sandstorm Gold has policies and programs in place to manage the ESG risk factors that are directly related to the Company. These policies and programs are regularly reviewed by the Company’s Corporate Social Responsibility (“CSR”) Committee, which reports directly to the CEO and CFO. The social policies and programs discussed below are reflective of the Company’s commitment to a high standard of employee management practices including a safe and inclusive workplace, competitive compensation and benefits, training and learning opportunities and channels for employee engagement. Sandstorm also seeks to incorporate industry best practices with regards to governance, is committed to conducting its business with integrity, maintaining high ethical standards and contributing to the community in which it operates.
Sandstorm’s direct environmental impact and carbon footprint is small. The Company operates in an office environment. The Company’s head office is situated in a LEED Gold certified building in Vancouver, British Columbia, Canada. The LEED Canada rating system applies a rigorous internationally-recognized standard measuring and evaluating the effectiveness of a property’s sustainable practices and policies in a range of green categories. LEED addresses whole building cleaning, general maintenance issues, recycling programs, exterior maintenance and systems upgrade or modernization.
Sandstorm occupies approximately one half of one floor in the Vancouver building. Sandstorm has a very small workforce, with extremely limited impact on the environment. Sandstorm has no Scope 1 emission activities or sources within the Company’s operational control to report. Total Scope 2 emissions for the Company include electricity usage, natural gas, and water usage. In 2016, the most recent available information, total electricity used by the Company was 70,815 kWHr, and 480 GJ of natural gas. This is equivalent to 52.7 metric tonnes of CO2E. The Company also used 2.0 million liters of water in 2016. The Company has a robust composting and recycling program that is utilized by all employees.
Social – Health & Safety, Labour Management
Health & Safety
Sandstorm has a health and safety policy in place that provides a guiding framework for ensuring a safe workplace for its employees. The aim of the policy is to ensure compliance with legal and regulatory requirements and to minimize exposure to health and safety risks. As Sandstorm’s principal activity is providing financing to other businesses in the mining industry, the Company’s exposure to health and safety risks is limited. Sandstorm’s health and safety performance is reviewed annually by the CEO. Sandstorm has had no workplace injuries, occupational diseases or work-related fatalities since it began operations.
Workplace Bullying & Harassment
Sandstorm is committed to creating and maintaining a workplace environment which fosters mutual respect, integrity and professional conduct. In keeping with this commitment, the Company has established a Workplace Bullying and Harassment Policy and a set of reporting/investigation procedures for all employees relating to the issue of workplace bullying and harassment. The Company will not tolerate bullying or harassment in the workplace and will make every reasonable effort to prevent and eliminate such conduct.
Sandstorm is committed to creating and maintaining a culture of workplace diversity. In keeping with this commitment, Sandstorm has established a diversity policy. “Diversity” is any dimension which can be used to differentiate groups and people from one another and it means the respect for and appreciation of the differences in gender, age, ethnic origin, religion, education, sexual orientation, political belief or disability.
Sandstorm recognizes the benefits arising from employee and board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent. The Company respects and values the perspectives, experiences, cultures and differences that employees possess.
Compensation and Benefits
Sandstorm offers comprehensive compensation and benefits packages and broad-based professional development and training opportunities for its employees. Sandstorm provides a fair living wage to all employees. The following principles guide the Company’s overall compensation philosophy:
- Compensation is determined on an individual basis by the need to attract and retain talented high-achievers;
- Calculating total compensation is set with reference to the market for similar jobs in similar locations;
- An appropriate portion of total compensation is variable and linked to achievements, both individual and corporate;
- Internal equity is maintained such that individuals in similar jobs are treated fairly; and
- The Company supports reasonable expenses in order that employees continuously maintain and enhance their skills.
All Sandstorm employees receive a base salary and are considered for incentive bonus compensation annually, at the board’s discretion. Stock-based compensation, extended health benefits, dental benefits and health and wellness benefits are also provided to all staff. Professional development and training opportunities that are relevant to an employee’s role are encouraged and are reimbursed by the Company. Sandstorm also encourages its employees to volunteer and support charitable causes. A charitable donation matching program has been instituted for all employees.
Governance - Corruption & Instability
Code of Business Conduct & Ethics
The Sandstorm Code of Business Conduct and Ethics is intended to document the principles of conduct to be followed by Sandstorm employees, officers, directors and contractors. Its purpose is to:
- Promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
- Promote avoidance of conflicts of interest, including disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
- Promote full, fair, accurate, timely and understandable disclosure in reports and documents that Sandstorm files with, or submits to, the securities regulators and in other public communications made by Sandstorm;
- Promote compliance with applicable governmental laws, rules and regulations;
- Promote the prompt internal reporting to an appropriate person of violations of the code;
- Promote accountability for adherence to the code;
- Provide guidance to employees, officers and directors to help them recognize and deal with ethical issues;
- Provide mechanisms to report unethical conduct; and
- Help foster Sandstorm’s culture of honesty and accountability.
Sandstorm expects its employees, officers, directors and contractors to promote honest and ethical behavior, to avoid conflicts of interest, to comply with governmental laws and applicable rules and regulations, and to help foster the Company’s culture of honesty and accountability. To this end, Sandstorm has outlined a comprehensive bribery and fraud prevention program which covers topic areas such as bribery, fraud, conflict of interest, administrative corruption, facilitation payments, breach of duty, misuse of authority and criminal activity. All employees, officers, directors and contractors are required to read and sign the policy in order to evidence that they understand and agree to conduct their work in accordance with the terms of the policy.
The Company’s whistleblower policy allows for the anonymous submission of any concerns regarding questionable accounting or auditing matters or violations of the Company’s Code of Business Conduct and Ethics. Employees may submit concerns directly to the audit committee using either the whistleblower hotline (a confidential, anonymous and toll-free telephone line available 24 hours a day, 7 days a week) or via mail or email. The audit committee reviews and investigates each complaint and takes appropriate corrective actions. No complaints were received through the Whistle Blower hotline in 2017.
Governance – Corporate Governance
Sandstorm has implemented committees, policies and programs in keeping with corporate governance best practices. An overview of the Company's corporate governance framework is outlined below.
Audit Committee Charter
The primary function of the audit committee is to assist the board of directors in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by Sandstorm to regulatory authorities and shareholders. The audit committee also oversees the Company’s systems of internal controls regarding finance and accounting, and the Company’s auditing, accounting and financial reporting processes. Consistent with this function, the audit committee will encourage continuous improvement of, and should foster adherence to, governance best practices.
Corporate Governance and Nominating Committee
The corporate governance and nominating committee is in place to provide a focus on governance that will enhance Sandstorm Gold’s performance, to assess and make recommendations regarding the board of directors effectiveness and to establish and lead the process for identifying, recruiting, appointing, re-appointing and providing ongoing development for directors.
A compensation committee has been established by the board of directors of Sandstorm to assist the board with ensuring that the Company has a compensation plan that is both motivational and competitive for executive officers and other members of senior management so that it will attract, hold and inspire performance of executive management of a quality and nature that will enhance the sustainable profit-ability and growth of the Company.
The communications and corporate disclosure policy is intended to assist Sandstorm in fulfilling its obligations to ensure that all information relevant and material to the Company’s shareholders and the market is disclosed in a timely manner.
Canadian and United States securities laws prohibit “insider trading” and impose restrictions on trading in securities while in possession of material undisclosed information. The rules and procedures outlined in the Company’s stock trading policy have been implemented in order to prevent improper trading in the securities of Sandstorm or of companies with which the Company has a significant business relationship or with which the Company is proposing to enter into a business transaction.
The board of directors of Sandstorm believes that it is in the best interest of the Company and its shareholders to align the financial interests of Sandstorm’s executives and non-employee members of the board with those of the Company’s shareholders. In this regard, the corporate governance & nominating committee of the board has recommended, and the board has adopted, guidelines for minimum stock ownership.
The board of directors of Sandstorm has adopted a clawback policy in order to maintain a culture of focused, diligent and responsible management which discourages conduct detrimental to the growth of the Company and to ensure that incentive-based compensation paid by the Company is based upon accurate financial data. The clawback policy applies in the event of a material restatement of the Company’s financial results as a result of material non-compliance with financial reporting requirements.
The objective of the anti-hedging policy is to prohibit those subject to it from directly or indirectly engaging in hedging against future declines in the market value of any securities of the Company through the purchase of financial instruments designed to offset such risk. The board of directors of Sandstorm believes that it is inappropriate for directors, officers or employees of the Company or its respective subsidiary entities or, to the extent practicable, any other person (or their associates) in a special relationship with the Company, to hedge or monetize transactions to lock in the value of holdings in the securities of the Company. Such transactions, while allowing the holder to own the Company’s securities without the full risks and rewards of ownership, potentially separate the holder’s interests from those of other stakeholders and, particularly in the case of equity securities, from the public shareholders of the Company.
Majority Voting Policy
The board of directors of Sandstorm has adopted a majority voting policy to improve corporate governance standards and to enhance transparency and improve the governance dialogue between issuers, security holders, and other stakeholders.
The board of directors of Sandstorm has developed a written role statement for the chief executive officer and the non-executive chairman of the board.