Sandstorm Gold Ltd. (“Sandstorm Gold Royalties”, “Sandstorm” or the “Company”) (NYSE American: SAND, TSX: SSL) has released its results for the second quarter ended June 30, 2019 (all figures in U.S. dollars).
SECOND QUARTER HIGHLIGHTS
•Record attributable gold equivalent ounces sold1 of 16,356 ounces (Q2 2018: 14,465 ounces);
•Record revenue of $21.5 million (Q2 2018: $18.9 million);
•Cash flows from operating activities, excluding changes in non-cash working capital1 of $13.8 million (Q2 2018: $12.3 million);
•Average cash cost per attributable gold equivalent ounce1 of $301 resulting in cash operating margins1 of $1,013 per ounce (Q2 2018: $296 per ounce and $1,013 per ounce respectively);
•Net income of $2.4 million (Q2 2018: $0.7 million);
•Normal Course Issuer Bid: Under Sandstorm’s normal course issuer bid, the Company purchased and cancelled approximately 2.5 million shares during the second quarter of 2019;
•Other notable events: ?In April 2019, the Company announced that it had entered into a $42.5 million financing package with Americas Silver Corporation which includes a $25 million precious metals stream and NSR royalty on the Relief Canyon gold project in Nevada, USA, a $10 million convertible debenture and a $7.5 million private placement. Under the terms of the precious metals stream, Sandstorm is entitled to receive 32,022 ounces of gold over a 5.5 year period, after which, the Company will purchase 4% of the gold and silver produced from the Relief Canyon project for ongoing per ounce cash payments equal to 30% - 65% of the spot price of gold or silver. In addition, Sandstorm will also receive a 1.4% - 2.8% NSR royalty on the area surrounding the Relief Canyon mine. For more information on this acquisition, see Sandstorm’s press release dated April 3rd, 2019.
?In June 2019, the Company sold approximately $17 million of its non-core equity investments, representing a continuation of the Company’s strategy to monetize non-core assets. Proceeds from the sale were largely used to pay down debt drawn on the Company’s revolving credit facility.
Based on the Company’s existing royalties, attributable gold equivalent ounces sold for 2019 is forecasted to be between 63,000 and 70,000 ounces. The Company is forecasting attributable gold equivalent production of over 140,000 ounces in 2023.
Sandstorm’s revenue during the second quarter of 2019 was a record for the company. Revenue was $2.6 million higher than in the second quarter of 2018, driven by a 13% increase in attributable gold equivalent ounces sold.
Net income was higher when compared to the same period in 2018 partly due to a $1.9 million increase on the gains recognized on the revaluation of the Company’s investments; whereby a gain of $1.4 million was recognized during the second quarter of 2019 largely driven by the change in fair value of the Americas Silver convertible debenture. The increase in net income was partially offset by a $0.6 million increase in finance expense related to the Company drawing on its revolving credit facility during the second quarter of 2019.
STREAMS & ROYALTIES: Q2 UPDATES
Of the gold equivalent ounces sold by Sandstorm during the second quarter of 2019, approximately 29% were attributable to mines located in Canada, 16% from the rest of North America, 36% from South America and 19% from other countries.
Three Months Ended June 30, 2019
Revenue (in millions) Gold Equivalent Ounces
Canada $6.3 4,790
North America excl. Canada $3.4 2,579
South America $7.7 5,887
Other $4.1 3,100
Total $21.5 16,356
Streams and royalties on Canadian mines contributed 4,790 of the attributable gold equivalent ounces sold during the second quarter of 2019, a 16% increase compared to the second quarter of 2018. The change is primarily due to increases in gold equivalent ounces sold from the Ming mine in Newfoundland and the Bachelor Lake mine in Québec. The increases were partially offset by decreases in gold equivalent ounces sold from the Black Fox mine in Ontario and in royalty revenue from the Bracemac-McLeod mine in Québec.
North America Excluding Canada
The attributable gold equivalent ounces sold from operations located within North America, but outside of Canada, decreased by 24% compared to the second quarter in 2018. The changes were driven primarily by decreases in gold equivalent ounces sold from the Santa Elena mine in Mexico and in royalty revenue from the San Andres mine in Honduras.
Operations in South America contributed 68% more gold equivalent ounces when compared to the second quarter of 2018. The change was driven by the addition of gold equivalent ounces from the Cerro Moro mine in Argentina. In April 2019, Sandstorm received its first silver delivery from the Cerro Moro mine. This delivery, which amounted to 300,000 silver ounces, represented the maximum quarterly amount under the stream agreement.
Equinox Gold Corp. announced that the Aurizona Gold mine in Brazil reached commercial production on July 1, 2019. Production from Aurizona in 2019 is expected to be between 75,000 - 90,000 ounces of gold. In July 2019, Sandstorm received its first royalty payment from the Aurizona mine.
For more information refer to www.equinoxgold.com and see the press releases dated July 2, 2019 and August 1, 2019. Sandstorm has a 3.0% - 5.0% sliding scale NSR royalty on the Aurizona project. At gold prices less than or equal to US$1,500 per ounce, the royalty is a 3.0% NSR. At gold prices between $1,500 and $2,000 per ounce, the royalty is a 4.0% NSR. In addition, Sandstorm holds a 2.0% NSR royalty on the Aurizona Greenfields property, a package of exploration ground adjacent to the Aurizona project.
Streams and royalties on mines in other countries contributed 10% less gold equivalent ounces sold when compared to the second quarter of 2018. The change is primarily due to a decrease in gold equivalent ounces sold from the Karma mine in Burkina Faso. This decrease is largely related to the timing of sales.
Endeavour Mining (“Endeavour”) has provided guidance that the Karma mine is expected to have stronger performance in the second half of the year due to the stacked oxide ore from the Kao North pit. Karma is on track to meeting the 2019 production guidance of 105,000 - 115,000 ounces of gold.
An exploration program at Karma totaling approximately 27,000 metres is planned for 2019, focusing on the extension of the North Kao deposit and along strike and northern plunge extension of the Yabonsgo deposit.
For more information refer to www.endeavourmining.com and see the press release dated August 1, 2019. Sandstorm has a gold stream agreement to purchase 25,000 ounces of gold over five years and 1.625% of the gold produced thereafter from the Karma project. Sandstorm will make ongoing payments of 20% of the spot price of gold for each ounce purchased from Endeavour.
WEBCAST & CONFERENCE CALL DETAILS
A conference call will be held on Tuesday, August 13, 2019 starting at 8:30am PDT to further discuss the second 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) 201 389 0899
North American Toll-Free: (+1) 877 407 0312
Conference ID: 13692951
Sandstorm Gold Q2/19 first look: Cerro Moro deliveries begin (SSL-CN, BUY, C$10.50 target, Carey MacRury)