Sandstorm Gold Ltd. (“Sandstorm Gold Royalties”, “Sandstorm” or the “Company”) (NYSE: SAND, TSX: SSL) has released its results for the third quarter ended September 30, 2022 (all figures in U.S. dollars).
Third Quarter Highlights
- Record attributable gold equivalent ounces1 of 22,606 ounces (Q3 2021—15,514 ounces);
- Record revenue of $39.0 million (Q3 2021—$27.6 million);
- Cash flows from operating activities, excluding changes in non-cash working capital1 of $31.3 million (Q3 2021—$20.8 million);
- Average cash cost per attributable gold equivalent ounce1 of $323 resulting in cash operating margins1 of $1,383 per ounce (Q3 2021—$238 per ounce and $1,541 per ounce respectively);
- Net income of $31.7 million (Q3 2021—$6.6 million); and
- Closing of Nomad and BaseCore transactions: In July 2022, Sandstorm closed its previously announced agreement to acquire nine royalties and one stream from BaseCore Metals LP (“BaseCore”). In August 2022, the Company closed its previously announced agreement to acquire all issued and outstanding common shares of Nomad Royalty Company Ltd. (“Nomad”). With the closing of both transactions, Sandstorm adds several high-quality and low-cost assets to its portfolio, which contribute meaningful increases to the Company’s production in both the near and long term.
- Sale of Hod Maden interest to Horizon Copper: In August 2022, the Company closed a component of its arrangement with Horizon Copper Corp. (“Horizon Copper”) to spin out certain assets and retain precious metals streams. In consideration for transferring Sandstorm’s 30% interest in Hod Maden and its equity interest in Entrée Resources Ltd., Sandstorm received a flagship gold stream on Hod Maden and a portion of debt and equity in Horizon Copper. The transaction further repositions Sandstorm as a pure-play precious metals royalty and streaming company.
- Upsized credit facility and financing: In August 2022, Sandstorm amended its revolving credit agreement allowing the Company to borrow up to $625 million. The credit facility maintains its sustainability-linked performance targets. Subsequent to quarter’s end, the Company completed an equity financing for aggregate gross proceeds of $92.1 million on October 4, 2022. Upon closing of the financing, the majority of net proceeds were used to reduce amounts drawn under the Company’s revolving credit facility.
Outlook
Based on the Company’s existing streams and royalties, attributable gold equivalent ounces for 2022 are forecast to be between 80,000 and 85,000 ounces. The Company is forecasting attributable gold equivalent production to be over 150,000 ounces in 2025.
Financial Results
During the three months ended September 30, 2022, the Company realized record revenue of $39.0 million compared to $27.6 million for the comparable period in 2021. The increase is attributable to a 46% increase in attributable gold equivalent ounces sold, partially offset by a 4% decrease in the average realized selling price of gold. In particular, the increase in revenue was driven in part by several new assets acquired in the Nomad and BaseCore transactions, including revenue attributable to the Antamina NPI royalty and Bonikro gold stream and an increase in revenue attributable to the Mercedes mine which commenced making deliveries in April 2022, with Sandstorm also receiving deliveries in the period from the newly acquired assets that were a part of the Nomad acquisition. Additionally, there was an increase in revenue attributable to the Vatukoula gold stream, which commenced making deliveries in December 2021 and an increase in revenue attributable to the Yamana silver stream primarily due to a 122% increase in the number of silver ounces received and sold in the period, which was partially offset by a decrease in the average realized selling price of silver. The increase in revenue for the third quarter was partially offset by a decrease in revenue attributable to the Chapada copper stream primarily due to a decrease in the average realized selling price of copper, and a decrease in the number of gold ounces sold attributable to the Relief Canyon stream primarily due to the timing of sales.
Net income was higher during the third quarter of 2022 when compared to the same period in 2021. The increase is attributable to the increase in revenue (as described above) as well as a $24.9 million gain resulting from the sale of the Company’s Hod Maden investment to Horizon Copper, a decrease in tax expense largely driven by the recognition of previously unrecognized tax attributes arising from the sale of Hod Maden, and an increase in the gains recognized on the revaluation of the Company’s investments. The increase in net income was partially offset by an increase in finance expense related to interest paid on the Company’s credit facility and an increase in depletion largely due to an increase in attributable gold ounces sold and certain one-time adjustments arising from the Nomad acquisition.
Streams & Royalties
Of the gold equivalent ounces sold by Sandstorm during the third quarter of 2022, approximately 18% were attributable to mines located in Canada, 22% from the rest of North America, 46% from South America, and 14% from other countries.
| Revenue (in millions) | Gold Equivalent Ounces | |
|---|---|---|
| Canada | $6.9 | 4,054 |
| North America excl. Canada | $8.5 | 5,001 |
| South America | $18.1 | 10,375 |
| Other | $5.5 | 3,176 |
| Total | $39.0 | 22,606 |
Canada
Streams and royalties on Canadian mines contributed 64% more gold equivalent ounces to Sandstorm when compared to the third quarter of 2021. The change is primarily due to the addition of the Highland Valley royalty and CEZinc stream acquired in the BaseCore transaction, an increase in royalty revenue from the Diavik mine in the Northwest Territories driven by diamond price increases and the timing of sales, and an increase in gold ounces received from the Black Fox mine in Ontario. The increase was partially offset by a decrease in royalty revenues from the Bracemac-McLeod mine in Québec, which is in the process of winding down operations.
North America Excluding Canada
The gold equivalent ounces sold from operations located within North America, but outside of Canada, contributed 39% more gold equivalent ounces when compared to the third quarter of 2021. The change was primarily driven by an increase in gold equivalent ounces received and sold from the Mercedes mine in Mexico, which commenced making deliveries to Sandstorm in April 2022, with Sandstorm also receiving deliveries in the period from the newly acquired Mercedes assets that were a part of the Nomad acquisition. The increase was partially offset by a decrease in gold ounces received from the Santa Elena mine driven in part by mining activity on concessions not subject to the gold stream, and a decrease in gold equivalent ounces received and sold from Relief Canyon, largely driven by the timing of sales.
South America
Operations in South America contributed 26% more gold equivalent ounces sold when compared to the third quarter of 2021. The increase was driven in part by royalty revenue attributable to the Antamina mine in Peru and the Caserones mine in Chile; both royalties were recently acquired as part of the BaseCore and Nomad transactions, respectively. The increase in revenue was also attributable to a 122% increase in the number of silver ounces received and sold from the Cerro Moro mine under the Yamana silver stream, partially offset by a decrease in the average realized selling price of silver. The increase in gold equivalent ounces was partially offset by a decrease in ounces received under the Chapada copper stream agreement primarily driven by a decrease in the average realized selling price of copper and a decrease in the number of copper pounds sold, as well as a decrease in royalty revenue attributable to the Vale royalties and the Fruta del Norte mine, partially driven by a decrease in the average realized selling price of iron and gold, respectively.
Other
Streams and royalties on mines in other countries contributed 164% more gold equivalent ounces sold when compared to the third quarter of 2021. This change is primarily due to an increase in ounces sold from the Vatukoula mine in Fiji, which commenced making deliveries to Sandstorm in December 2021 and the addition of streams on the Blyvoor mine in South Africa and the Bonikro mine in Côte d’Ivoire, both of which were acquired as part of the Nomad acquisition. The increase was partially offset by a decrease in gold equivalent ounces sold from the Karma mine in Burkina Faso.
Webcast & Conference Call Details
A conference call will be held on Tuesday, November 8, 2022 starting at 8:30am PST to further discuss the third quarter results. To participate in the conference call, use the following dial-in numbers and conference ID, or join the webcast using the link below:
International: (+1) 416-764-8688
North American Toll-Free: (+1) 888-390-0546
Conference ID: 98780754
Webcast URL: https://bit.ly/3gLkfmk
Contact Information
For more information about Sandstorm Gold Royalties, please visit our website at www.sandstormgold.com or email us at info@sandstormgold.com.
Erfan Kazemi
Chief Financial Officer
604 689 0234
Mark Klausen
Investor Relations
604 628 1164
About Sandstorm Gold
Sandstorm is a gold royalty company that provides upfront financing to gold mining companies that are looking for capital and in return, receives the right to a percentage of the gold produced from a mine, for the life of the mine. Sandstorm holds a portfolio of 250 royalties, of which 39 of the underlying mines are producing. Sandstorm plans to grow and diversify its low cost production profile through the acquisition of additional gold royalties. For more information visit: www.sandstormgold.com.
CAUTIONARY STATEMENTS TO U.S. SECURITYHOLDERS
The financial information included or incorporated by reference in this press release or the documents referenced herein has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, which differs from US generally accepted accounting principles (“US GAAP”) in certain material respects, and thus are not directly comparable to financial statements prepared in accordance with US GAAP.
This press release and the documents incorporated by reference herein, as applicable, have been prepared in accordance with Canadian standards for the reporting of mineral resource and mineral reserve estimates, which differ from the previous and current standards of the United States securities laws. In particular, and without limiting the generality of the foregoing, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “inferred mineral resources,”, “indicated mineral resources,” “measured mineral resources” and “mineral resources” used or referenced herein and the documents incorporated by reference herein, as applicable, are Canadian mineral disclosure terms as defined in accordance with Canadian National Instrument 43-101 — Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) — CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the “CIM Definition Standards”).
For United States reporting purposes, the United States Securities and Exchange Commission (the “SEC”) has adopted amendments to its disclosure rules (the “SEC Modernization Rules”) to modernize the mining property disclosure requirements for issuers whose securities are registered with the SEC under the Exchange Act, which became effective February 25, 2019. The SEC Modernization Rules more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards, including NI 43-101, and replace the historical property disclosure requirements for mining registrants that were included in SEC Industry Guide 7. Issuers were required to comply with the SEC Modernization Rules in their first fiscal year beginning on or after January 1, 2021. As a foreign private issuer that is eligible to file reports with the SEC pursuant to the multi-jurisdictional disclosure system, the Corporation is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and will continue to provide disclosure under NI 43-101 and the CIM Definition Standards. Accordingly, mineral reserve and mineral resource information contained or incorporated by reference herein may not be comparable to similar information disclosed by United States companies subject to the United States federal securities laws and the rules and regulations thereunder.
As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources.” In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding CIM Definition Standards that are required under NI 43-101. While the SEC will now recognize “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”, U.S. investors should not assume that all or any part of the mineralization in these categories will be converted into a higher category of mineral resources or into mineral reserves without further work and analysis. Mineralization described using these terms has a greater amount of uncertainty as to its existence and feasibility than mineralization that has been characterized as reserves. Accordingly, U.S. investors are cautioned not to assume that all or any measured mineral resources, indicated mineral resources, or inferred mineral resources that the Company reports are or will be economically or legally mineable without further work and analysis. Further, “inferred mineral resources” have a greater amount of uncertainty and as to whether they can be mined legally or economically. Therefore, U.S. investors are also cautioned not to assume that all or any part of inferred mineral resources will be upgraded to a higher category without further work and analysis. Under Canadian securities laws, estimates of “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies, except in rare cases. While the above terms are “substantially similar” to CIM Definitions, there are differences in the definitions under the SEC Modernization Rules and the CIM Definition Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report as “proven mineral reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules or under the prior standards of SEC Industry Guide 7.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This press release contains “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 “forward-looking information” within the meaning of applicable Canadian securities legislation, concerning the business, operations and financial performance and condition of Sandstorm Gold Royalties. Forward-looking statements include, but are not limited to, the impact of general business and economic conditions; management’s expectations regarding Sandstorm’s growth; 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. Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue”, “plans”, or similar terminology.
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 Gold Royalties 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 Gold Royalties will operate in the future, including the receipt of all required approvals, the price of gold and copper 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 or other commodity the Company 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 the Company 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 the Company 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 the Company’s annual report for the financial year ended December 31, 2021 and the section entitled “Risk Factors” contained in the Company’s annual information form dated March 31, 2022 available at www.sedar.com. Although the Company 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. The Company does not undertake to update any forward-looking statements that are contained or incorporated by reference, except in accordance with applicable securities laws.