The Santa Elena Mine is operated by First Majestic Silver Corp. (TSX:FR) and is located in northern Mexico approximately 150 kilometres northeast of Hermosillo in Sonora State. Santa Elena is classified as a high level, low sulphidation epithermal system and further exploration of the mine is focused on a single, relatively wide vein with increasing grades as it plunges. Santa Elena began as an open pit, heap leach operation and transitioned to underground mining in early 2014. First Majestic has projected Santa Elena to produce 4.6 to 5.1 million AgEq ounces in 2016.
Sandstorm has a gold stream agreement to purchase 20% of the life of mine gold production from Santa Elena for a per ounce cash payment equal to the lesser of US$357 and the then prevailing market price of gold. Sandstorm made an upfront payment of US$12 million in cash and 700,000 common shares (3.5 million pre-consolidation) to acquire the stream from SilverCrest Mines Inc. in May 2009. First Majestic acquired SilverCrest in October 2015.
In February 2014, Sandstorm exercised its underground mine option with SilverCrest, allowing the company to purchase 20% of the payable gold from underground. For consideration, Sandstorm made a $10 million payment and will continue to make on-going per ounce payments equal to US$357 until 50,000 ounces of gold have been delivered to Sandstorm (inclusive of ounces already received from open-pit production), at which time the on-going per ounce payments will increase to US$450.