Sandstorm Gold Ltd. (“Sandstorm” or the “Company”) (NYSE MKT: SAND, TSX: SSL) has released its results for the fourth quarter and twelve months ended December 31, 2016 (all figures in U.S. dollars).

Fourth Quarter Highlights
•Record attributable gold equivalent ounces sold1 of 13,245 ounces (Q4 2015 - 8,951 ounces);
•Revenue of $16.5 million (Q4 2015 - $9.9 million);
•Average cash cost per attributable gold equivalent ounce of $250 resulting in cash operating margins1 of $993 per ounce (Q4 2015 - $258 per ounce and $844 per ounce respectively);
•Operating cash flow of $10.1 million (Q4 2015 - $5.0 million); and
•Net loss of $0.02 million (Q4 2015 - $25.0 million loss).

Full Year Highlights
•Record attributable gold equivalent ounces sold of 49,731 ounces (FY 2015 - 45,146 ounces);
•Revenue of $62.4 million (FY 2015 - $52.7 million);
•Average cash cost per attributable gold equivalent ounce of $258 resulting in cash operating margins of $996 per ounce (FY 2015 - $300 per ounce and $867 per ounce respectively);
•Operating cash flow of $39.0 million (FY 2015 - $30.8 million);
•Net income of $25.3 million (FY 2015 - $43.1 million loss); and
•The Company acquired a royalty portfolio consisting of 52 royalties from Teck Resources Limited and its affiliates (the “Teck Royalty Package”) for consideration of $16.8 million, of which $1.4 million was paid in cash and $15.4 million in common shares of the Company. The transaction provides asset diversification; immediate cash flow and significant cash flow growth potential with estimated cash flow of over $10 million per year over the long term.

Subsequent Events
•On February 1, 2017, Luna Gold Corp. (“Luna Gold” or “Luna”) announced a merger with JDL Gold Corp. (“JDL Gold”), which if completed will create a multi-asset mining company with more than $70 million in cash. This would place the newly merged company in a position to advance the Aurizona gold project wherein Sandstorm holds a 3% to 5% sliding scale NSR royalty. Concurrent with the closing of the transaction, the term debt facility that is owed by Luna to Sandstorm, in the amount of $20 million plus accrued interest, is expected to be settled in equity, or a combination of cash and equity of the newly combined entity.
•On January 26, 2017, Orezone Gold Corporation exercised its option to repurchase the royalty on the Bomboré gold project for $3.6 million, representing a 20% premium to the original upfront payment. Sandstorm retains a right of first refusal on any future stream or royalty financings related to the Bomboré gold project.

Sandstorm’s President & CEO, Nolan Watson remarked, “The stream and royalty acquisitions that we made at the end of 2015 and during the 2016 year had a material impact on our financial results, contributing to record gold equivalent production numbers. We added 60 new royalties to the portfolio in 2016 and many of the projects are in production or are emerging as medium-term sources of cash flow growth.” Watson added, “We like the diversification in our producing assets, the expected growth profile in the coming years and the optionality contained in our 99 exploration properties, more than 30 of which have planned exploration programs in 2017. We will continue to focus our efforts on growing our stream and royalty portfolio this year.”

OUTLOOK
Based on the Company’s existing gold streams and royalties, attributable gold equivalent production for 2017 is forecast to be between 45,000 and 55,000 ounces. The Company is forecasting attributable gold equivalent production of over 65,000 ounces per annum by 2020.

FINANCIAL RESULTS

The Company reported record attributable gold equivalent production during the fourth quarter and twelve months of 2016, translating to significant growth in revenue. Revenue for the full 2016 year was up 18% when compared to 2015 and revenue during the fourth quarter increased by 67% when compared to Q4, 2015. The marked increase in Q4 was a result of a 13% rise in the average realized selling price of gold and a 48% increase in attributable gold equivalent ounces sold. Contributions from the Yamana silver stream, Chapada copper stream, Teck Royalty Package and Karma gold stream were the main drivers of the growth in gold equivalent ounces, all of which were not part of the asset mix in 2015. Precious metal streams and royalties (including diamonds) accounted for 82% of the Company’s revenue during the year, with the other 18% coming primarily from base metal projects.

For both the fourth quarter and the full year, cash flow from operations and net income were higher when compared to 2015. When reviewing the annual numbers, the main drivers for the increase in 2016 were a gain on the revaluation of the Company’s investments of $22.1 million, primarily driven by the change in fair value of the Luna convertible debenture and Luna warrants, a $7.7 million decrease in depletion expense, driven by a resetting of the number of ounces in the depletable base, and certain non-recurring items that were recognized in 2015 related to tax assets and mineral interests.

STREAMS & ROYALTIES: Q4 UPDATES

Sandstorm’s revenue was generated by 21 producing assets during the fourth quarter of 2016. Of the gold equivalent ounces delivered to Sandstorm, 73% were from operations run by major and mid-tier mining companies. Approximately 48% of the ounces were attributable to mines located in Canada, 20% from the rest of North America and 32% from South America and other countries.

Three months ended Dec. 31, 2016

Year ended Dec. 31, 2016
Revenue (in millions)Gold Equivalent Ounces
Revenue (in millions)Gold Equivalent Ounces

Canada $ 7.9 6,352 $ 28.3 22,541
North America excl. Canada $ 3.3 2,669 $ 18.0 14,410
South America & Other $ 5.3 4,224 $ 16.1 12,780
Total $ 16.5 13,245 $ 62.4 49,731

Canada

Streams and royalties on Canadian mines contributed 22% more gold equivalent ounces to Sandstorm when compared to the fourth quarter of 2015. The change is attributable to an increase in production from the Bachelor Lake mine in Quebec (“Bachelor Lake”), operated by Metanor Resources Inc. (“Metanor”), and from royalties on Canadian projects that were acquired as part of the Teck Royalty Package.

North America excl. Canada

When compared to Q4, 2015, gold equivalent ounces coming from North America, excluding Canada, increased by 14% during the fourth quarter of 2016. The change was driven by increases in gold equivalent ounces attributable to the Emigrant mine in the USA and the San Andres mine in Honduras, offset by a 21% decrease in ounces sold from the Santa Elena mine in Mexico (“Santa Elena”) due to timing of shipments.

At Santa Elena, First Majestic Silver Corp. is continuing the development of the new San Salvador ramp. Once completed, the transportation of ore via trucks is expected to reduce haulage bottlenecks and increase underground production capacity. For more information refer to www.firstmajestic.com.

South America & Other

Operations in South America and other countries contributed 4,224 attributable gold equivalent ounces during the fourth quarter of 2016. The attributable ounces were significantly higher than the 1,419 ounces reported in the same period in 2015 primarily due to an additional 2,441 ounces sold from the recently acquired Yamana silver stream and Chapada copper stream and 833 ounces from the Karma mine in Burkina Faso, offset by a decrease in ounces from the Aurizona mine in Brazil, as the mine ceased mining operations in 2015.

Yamana Silver Stream
The Yamana silver stream delivered ounces to Sandstorm from the Minera Florida mine in Chile and the Chapada mine in Brazil (“Chapada”) during the 2016 year and beginning in 2019 Sandstorm will begin to purchase silver from the Cerro Moro mine in Argentina (“Cerro Moro”). Cerro Moro is a high-grade gold and silver deposit currently in construction and development by Yamana Gold Inc. (“Yamana”). Yamana is forecasting first production for early 2018.

During the fourth quarter of 2016, Yamana completed the planned underground mine development and the ramp-up of site construction and engineering was reported to be ahead of schedule. Structural steel, mechanical, and tailings dam construction contracts have been awarded which will allow mobilization to take place in the first quarter of 2017. Mechanical completion of the process plant and mine infrastructure is scheduled for the fourth quarter of 2017 in preparation for the start of commissioning in early 2018.

The updated mine plan at Cerro Moro shows partial production in 2018 and the 2019 silver production is estimated to be approximately 9,900,000 ounces at an average feed grade of 920 grams per tonne (“g/t”). For more information refer to www.yamana.com

Chapada Copper Stream
The Chapada operation produced 115.5 million pounds of copper in 2016 and Yamana has forecasted 120 million pounds of copper production for the 2017, 2018 and the 2019 years. Yamana is focused on improving operational performance at the asset, with targets to increase recoveries and throughput. A processing optimization initiative undertaken during the fourth quarter is showing good results with increasing recoveries and mill throughput stability. The project should be completed during the first quarter of 2017 with the commissioning of a fully integrated processing control system.

Following the evaluation of further processing improvement opportunities at Chapada, mine management expanded the cleaning circuit by installing additional flotation cells by retrofitting some key components of the existing cleaner circuit. The main objective is to increase gold and copper recovery by increasing the solution residency time during the flotation process. The cleaning circuit expansion should be commissioned during the fourth quarter of 2017. For more information refer to www.yamana.com.

Karma Gold Stream
During the fourth quarter of 2016, Endeavour announced that commercial production at the Karma Mine had been achieved and that capacity at the processing plant is expected to increase to 4 million tonnes per annum by the second half of 2017. A 60,000 metre exploration drilling program at Kao North was completed in 2016, the results of which are expected to be compiled and released in early 2017. A further 30,000 metre drill program is planned in 2017 to drill near-mill targets such as Rambo West and Yabonsgo.

Endeavour has projected 100,000 to 110,000 ounces of gold production from the Karma mine in 2017. For more information refer to www.endeavourmining.com.

Aurizona Royalty
Earlier this month, Luna Gold announced a merger with JDL Gold, which if completed will create a multi-asset mining company with more than $70 million in cash. This would place the newly merged company in a position to advance the Aurizona gold project wherein Sandstorm holds a 3% to 5% sliding scale NSR. Concurrent with the closing of the transaction, the term debt facility that is owed by Luna to Sandstorm, in the amount of $20 million plus accrued interest, is expected to be settled in equity, or a combination of cash and equity of the newly combined entity. Sandstorm will continue to hold the $30 million convertible debt facility that is due from Luna Gold.

A Pre-feasibility Study for the Aurizona project, completed in September 2016, has projected 150,000 ounces of gold per year for the first five years, with an initial 6.5-year mine life. Completion of a feasibility study for Aurizona is expected around the end of Q1-2017 followed by an 18-month construction period, with the first gold pour targeted for year-end 2018. For more information refer to www.lunagold.com